Ask your accounting and tax questions here

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  1. Post
    Auroraislife wrote:
    I'm wondering... How much money I have to make over patreon, to get a visit from a tax fella?
    The NZ tax system operates on a voluntary disclosure basis meaning they rely on you to honestly report your income.

    IRD only have the resources to investigate a very small number of people.

    So on that basis there is a good chance you would never be caught.

    However with their new computer system and information sharing agreements with overseas agencies it is possible that data matching could catch you out if this is an area IRD turn their focus on.

    I guess if you keep yourself anonymous enough when selling your nudes online you could still get away with it...

  2. Post
    brand wrote:
    The NZ tax system operates on a voluntary disclosure basis meaning they rely on you to honestly report your income.

    IRD only have the resources to investigate a very small number of people.

    So on that basis there is a good chance you would never be caught.

    However with their new computer system and information sharing agreements with overseas agencies it is possible that data matching could catch you out if this is an area IRD turn their focus on.

    I guess if you keep yourself anonymous enough when selling your nudes online you could still get away with it...

  3. Post
    or when your bank sends them information regarding a deposit and they send angry as **** letters threatening court, jail time, penalties, audits etc demanding to know where the deposit came from and where their tax is, those letters are fun even when you're in the right and have the documents to back it up. I can't imagine those letters would be too fun when you post on a public forum about tax evasion

  4. Post
    Haha you guys are funny, and helpful!

    I wasnt planning on selling my nudes...( not there yet )

    I made a device and I want to bring it to the market but I need donations ( haven't had much luck with investors...)

    From what I know small donations are not taxable?

    If anyones curious, the device is this: https://www.youtube.com/watch?v=Y7KOVLVnN7E

  5. Post
    Donations are not taxable income but unless you are a charity or not for profit they would not be considered donations.

    Patreon would be taxable income.

  6. Post
    brand wrote:
    Donations are not taxable income but unless you are a charity or not for profit they would not be considered donations.

    Patreon would be taxable income.
    awww shieeeet, thanks for that info

  7. Post
    If trading US shares as a trader (so capital gains apply) but not cashing out to a NZ bank account, how would you record your profits/losses in NZD terms for a tax return?

    I'm thinking the best approach would be to record your profits/losses monthly using the conversion rates found here:
    https://www.classic.ird.govt.nz/calc...-of-month.html

  8. Post
    labcat wrote:
    If trading US shares as a trader (so capital gains apply) but not cashing out to a NZ bank account, how would you record your profits/losses in NZD terms for a tax return?

    I'm thinking the best approach would be to record your profits/losses monthly using the conversion rates found here:
    https://www.classic.ird.govt.nz/calc...-of-month.html
    There is no point recording your profits and losses monthly (not for tax anyway). Tax is based on the entire year result.

    The treatment will differ depending on your circumstances and the calculation can be complex.

    US shares fall under the FIF (foreign investment fund) regime if the total cost of your overseas portfolio exceeds NZD $50k at any point during the year.

    The consequence being that you could be taxed on the total return of your portfolio (not just realised profits/losses but also unrealised profits/losses including foreign currency gains/losses) OR or 5% of your opening value plus realised profits whichever is lower.

    An overall loss on your portfolio will be "zeroed out" meaning you cannot claim a loss and it does not carry forward -the income from the portfolio will be reported as "nil" for the year.

    NOTE: That is a very, very simplified overview I am leaving a lot out.


    Aside from all of that you could also be taxed on foreign exchange gain/loss on your foreign currency bank account (depending on if you are a cash basis person or not). You will definitely be taxed on any crystalised gain/loss if you transfer out to your NZ bank account.

  9. Post
    Yeah I have read the FIF rules. It will be under $50K so that makes it a bit easier but because it is regular trading it will definitely require capital gains tax to be paid.

    The part I am not sure about is how to determine the exchange rate if the money stays in a US denomination.

    Would you average the monthly rates provided in that PDF at the link above? or just use that the rate for the end of march?

  10. Post
    Anyone have any experience with money being made in the US.

    Looking at an amazon store and want to know if we pay tax there or just declare it all on this side? There is no physical presence just the online store.

    Spoke to a US accountant and they believe I have to pay taxes there.

    Did some light reading on the tax treaty and what I took from it is that income can be taxed fully In NZ if no physical presence in the US.

    Just wanting to be 100% sure!

    Cheers

    Sent from my ANE-LX2J using Tapatalk

  11. Post
    I guess my situation is basically the same - software created here and sold worldwide. I file everything here (both IR3 and IR4). Never filed anything on the american side. As an added bonus, I am GST registered but pay almost zero GST as I basically have zero purchases from NZ. Both my stripe and paypal accounts are NZ registered (although paypal falls under australian law/management because paypal(?)).

  12. Post
    Sorry I haven't been answering because of the forum problems. I typed out an answer and then lost it because the forums timed out. I got pissed off and didn't feel like repeating myself.

    Basically "physical presence" in the digital age is a very broad concept.

    Having a US website or running off US servers could be enough to qualify you as having a physical presence.

    So yes an Amazon store could be a problem especially since they are likely sharing your information with the IRS. More than likely they probably won't bother but it is a possibility.

    NOTE: I'm not an expert in US tax and this is definitely a US issue rather than a NZ one.
    Last edited by brand; 10th October 2019 at 1:00 pm.

  13. Post
    He's going to run into the issue of

    You talk to a US attorney/accountant - they will say you pay tax there
    You talk to a NZ attorney/accountant - they will say you pay tax here

    Between the double tax agreement (although it seems to mostly cover US citizens working here - US apparently taxes you no matter where you are if you are a citizen?) and NZ stance on tax residency (183 days, strong ties to nz, blah blah) surely you pay tax here and be done with it?

  14. Post
    DTAs are about offering relief from being taxed twice on the same income. They are not the be all and end all and don't really cover digital businesses at all.

    This is more along the lines of Countries trying to get Google, Amazon etc. to pay tax even though they don't have a physical presence there. The traditional concepts don't translate well to the digital world.

    Again I'm not an expert on US tax I'm just spit balling but say your product was fulfilled by Amazon and stored in their warehouse in the States or if your products were sourced from the US and sold in the US do you escape from US tax just because you are not physically present?

    In the same way Aus and (soon) NZ passed the Netflix/Amazon tax the US may have something similar...

  15. Post
    Ah that's a good point on the fulfillment/storage of goods - that may be the tipping point as you say with the physical presence. I assume its not defined to specify between goods vs personal presence either, that would be too easy.

  16. Post
    Great points. Better to be safe!

    Sent from my ANE-LX2J using Tapatalk

  17. Post
    Hi Brand,

    i got a question about the registration fee of a new company at the companies office, can i claim this as expense? thanks

  18. Post
    KateK wrote:
    Hi Brand,

    i got a question about the registration fee of a new company at the companies office, can i claim this as expense? thanks
    Technically no -Company formation costs are considered capital and not deductible as an expense.

    However there are weird quirks e.g. if you paid a lawyer to do it and total legal fees for the year were under $10k you can expense them regardless if they were capital or not.

  19. Post
    Arha, thank you!

  20. Post
    Hi Brand,

    I'm sorting giving a loan to someone, if they pay me a number of principle + interest payments over the year, do we have to fill in IRD forms for each one, or is it just one summary one at the end of the year?

    Thanks!

  21. Post
    stacrafty wrote:
    Hi Brand,

    I'm sorting giving a loan to someone, if they pay me a number of principle + interest payments over the year, do we have to fill in IRD forms for each one, or is it just one summary one at the end of the year?

    Thanks!
    It depends . If interest is under $5,000 for the year you don't have to do anything.

    Otherwise you should register for RWT and file a return and pay RWT for each interest payment plus an overall return for the year:
    https://www.ird.govt.nz/topics/incom...ithholding-tax

  22. Post
    Other than the IRD website, are there any other websites worth looking at to understand the tax quirks of owning your own business?

  23. Post
    Gamblor wrote:
    Other than the IRD website, are there any other websites worth looking at to understand the tax quirks of owning your own business?
    I'm not aware of any but I have never needed to look.

    I may try writing one at some stage. The biggest obstacle is that it isn't a one size fits all and it is very difficult to condense technical tax stuff down into bite sized chunks.

    I've said this many times but you guys should be aware the answers I give in this thread are missing a ton of detail and in many cases I'm answering the question I think you're really asking rather than the question you typed because often a yes/no answer is more useful than a wall of text.

  24. Post
    I came across this today which is a semi-useful guide to home office claim:
    https://www.business.govt.nz/assets/...g-Expenses.pdf

    I question why they spent time and money on drawing pretty pictures though.

    Also I have never and will never ask clients how much they spent on toilet paper (or light bulbs or hand wash) -that's just ridiculous....

  25. Post
    brand wrote:
    I came across this today which is a semi-useful guide to home office claim:
    https://www.business.govt.nz/assets/...g-Expenses.pdf

    I question why they spent time and money on drawing pretty pictures though.

    Also I have never and will never ask clients how much they spent on toilet paper (or light bulbs or hand wash) -that's just ridiculous....
    The classic IRD website used to have semi useful info about business expenses.
    The new website however sucks for finding information quickly.
    They seem to have taken a leaf out of the UK's book and dumbed the site down a lot.

    It should be worth noting that the IRD have introduced a square meter home office rate for the utilties side of things for your home office costs (power/insurance/R&M etc) of $41.10 per sq mtr.
    Saves you having to keep all your power bills and things, during the year.
    This rate doesnt apply for property rates or rent/mortgage interest which is still calculated under the old method.