U.S. expats and state taxes

[youbet]

If successful in having no state residency, would that mean no place to come back to for assistance from Medicaid, Unemployment Insurance, Special Education, etc., if the need arises unexpectedly and your overseas "home" country refuses to provide?

 

[ladelfina]

Resident in Italy and married to an Italian so health care is free, minus some tests and some drug co-pays, optical & dental... If I weren't married but only resident, I could buy into the public system for about €400/yr.

RE and was in a partnership in the US, so unemployment insurance isn't/wasn't on the horizon.

() might think I need Special Ed.


UPDATE: Found the definition of non-resident on the in the RI tax statutes:
"A nonresident individual is an individual who is not a resident."


They do sorta define who is a resident: "a person domiciled in the State of Rhode Island or although not domiciled here does maintain a permanent home in Rhode Island and is here for a total of more than 183 days of the taxable year."

They don't define what "domiciled" means, though.

 

[yakers]

UPDATE: Found the definition of non-resident on the in the RI tax statutes:
"A nonresident individual is an individual who is not a resident."


They do sorta define who is a resident: "a person domiciled in the State of Rhode Island or although not domiciled here does maintain a permanent home in Rhode Island and is here for a total of more than 183 days of the taxable year."

They don't define what "domiciled" means, though.

Ask Martha. Its a complicated legal proposition but you might want to understand it if RI will use their interpretation of it to ask you for back taxes. I wouldn't contact them with questions but get a plan on how to answer them or any other state so as not to get caught off guard and say the wrong thing. Like you might want to have the line: "I intend to return to the US and live in South Dakota someday" or something like that if RI contacts you.

 

[bpp]

If successful in having no state residency, would that mean no place to come back to for assistance from Medicaid, Unemployment Insurance, Special Education, etc., if the need arises unexpectedly and your overseas "home" country refuses to provide?

Why would my country of residence refuse to provide? I pay into all the equivalent social insurance programs here, have permanent residence (green card equivalent), etc. But no, I would not expect to be able to go traipsing back to the US and collect on programs into which I have not paid in many years.

Bpp

 

[ladelfina]

You're right, bpp. There are two kinds of non-residents: those who are coming back, and those who aren't.

My first move abroad was only for a year and a half, and I continued paying state taxes, kept my home (rented it out), reported rental income, etc. In that case, I would expect to have all the services in place should I have needed to return.

But this time is for good, or at least for the forseeable future. I'm not asking for anything from RI except for a mailing address and driver's license.

 

[Lancelot]

But this time is for good, or at least for the forseeable future. I'm not asking for anything from RI except for a mailing address and driver's license.

ladelfina,

Ever consider an International Driver's License? May work OK if you are not in the USA often.

Off topic, but living in Italy sounds cool. I've never been there but as a kid, there were a lot of Italians in my neighborhood; they were great people and WONDERFUL cooks.

Care to post some of your experiences?

Lance

 

[ladelfina]

Lance, I had an "international driver's license" but it was through the AAA and I had to show a valid US license to get it. It's only good for a year. Now that I've been in Italy over a year, it's not valid even if I renew it in the States.  The Italians look at the start of your residency and give you one year beyond that; I have to get an Italian license anyway 

Italian version of AAA offers this:

Si consiglia una traduzione giurata  in inglese della patente italiana ( rilasciata da un'agenzia di traduzioni) La patente internazionale accettata nel paese è conforme al modello Convenzione di Ginevra 1949, ma diversa da quella rilasciata in Italia.

"We recommend that you carry a notarized English translation of your Italian license (obtained from a translation agency). The international license accepted in the country (the US) conforms to the 1949 Geneva Convention model, but is different from that issued in Italy."

Il permesso internazionale di guida attualmente ottenibile in Italia è conforme al modello "Vienna 1968"

"The international driver's license currently issued in Italy conforms to the "Vienna 1968" model."

Who knew?

I go to the States about twice a year and it's sure handy to have the RI license.


As far as experiences, I wouldn't know where to begin! You could visit the Ex-Pats in Italy web site; there's a forum there where I and many others post questions and comments on basically every aspect of living in Italy.
http://expattalk.com/eve

 

[NYCGuy]

State taxes for expats are a serious risk. One of the Thai expat websites had a discussion in which a guy who had left California seventeen years earlier was being hounded for taxes, interest, and penalties. The advice in that discussion was to take definite steps to establish that you are no longer a state resident such as returning your driver's license. Those folks definitely believed that an expat could avoid being taxed by a state.

I don't know that answer, but when my time comes I will get legal advice as anyone with such a risk should do.

 

[free4now]

I did some serious research on this during the dotcom bubble when my employee stock options were very valuable. I was considering leaving California and moving to another state like Washington with no income tax within the 90 days I had to exercise them.

The theory was that by avoiding the 9.8% California income tax I would save a year's worth of salary.

The unfortunate reality though is that California would still consider that money taxable since it was earned in California. So even if I moved to Washington and exercised my options, I'd still owe tax to CA.

The more research I did into this, the more ridiculous I found state tax rules for nonresidents. Basically all states want to collect as much tax as they can, so they assert the right to tax any money that passes through the state no matter how tenuously. There seem to be some edge cases where a person who moves from one state to the other has their income taxed fully by both states.

 

[Jarhead*]

I did some serious research on this during the dotcom bubble when my employee stock options were very valuable.  I was considering leaving California and moving to another state like Washington with no income tax within the 90 days I had to exercise them. 

The theory was that by avoiding the 9.8% California income tax I would save a year's worth of salary.

fireme: You must have had some whopping amount of stock options, to give you a years salary on 9.8%!

In any case, I thank you, Arnold thanks you, and I'm sure that most of the households in the area of Calif. that I live in, (Average household income of $32,500) thanks you.

Stick around, Lord knows we can use the money!

 

[Honkie]

For what it's worth / out of interest, this is my experience with regard to my Government involvement in taxes etc when overseas.

I declared myself "Not Ordinarily Resident" for tax purposes by completing one form and sending it to the Tax office. This declaration meant that I intended living and working outside the country for more than 275 days in any 12 month period. At the time I gave them no overseas address (I am not required to) and I informed them that I would not be at my previous address after my advised date of departure. That was it. Never received a tax assessment, made a declration or paid any taxes to them since.

Everafter, I am not required to complete a tax return or declare my overseas income to the home country. I now voluntarily advise them of my overseas address via my local embassy or consulate for emergency contact purposes.

After nearly a decade overseas, my next step is to change my domicile such that the home Gov can't get into my dependants for inheritance taxes when I shuffle off this mortal coil.

Many friends and relatives are US citizens and have the problem of continuing to pay US domestic taxes decades after they have expatriated and as a whole are non too happy with being the only kids on the block who's Gov won't let go of them!

Cheers

Honkie

 

[BunsGettingFirm]

Few US expats I know use South Dakota as their US address. No state income taxes to worry about.

Bumping old thread. What about registering a car? I plan to move to Canada this summer, but I do want to keep my car with a U.S. license plate. Can I just pick a state with (1) no state taxes and (2) no inspection and emissions testing requirement? I mentioned inspection because my car's emissions and tags expire at the end of 2006, but I don't want to have to drive all the way back to get a stupid inspection in order to get my tags.

I'm considering getting a Mailboxes Etc. box in Delaware as my legal residence, getting a Delaware driver's license and registering the car there. Is this something that anyone has tried?

 

[sailor]

Bumping old thread. What about registering a car? I plan to move to Canada this summer, but I do want to keep my car with a U.S. license plate.
I'm considering getting a Mailboxes Etc. box in Delaware as my legal residence, getting a Delaware driver's license and registering the car there. Is this something that anyone has tried?

Don't know about Delaware, but my full in-laws (full time RVeers), are doing this in South Dakota.
I'll ask about the name of the outfit which handles their mail, registrations, driver license renewals etc.

 

[ladelfina]

Curious to know, Honkie, if "your government" is the US government. Sounds like it isn't (?)

I was led to believe that the feds want to tax your worldwide income, to the exclusion of $80,000 (or whatever the current figure is) of earned overseas income which, depending in which foreign country this is earned, would be subject to taxation by the country where it was earned. I'd read that the only way to avoid this tax assessment is to renounce your US citizenship. Lucky you if you are from a country that doesn't chase down every non-resident.

I'm resigned to the federal taxes.. they really are lower than they would be if I were to transfer my cash and investment to European accounts. The US does provide its citizens with rights and privileges that I would be loth to give up. I'm just trying to get out of the claws of the state, since I am not living there nor am I requesting any services on their part.

For anyone considering moving overseas and closing their US accounts and abandoning their US mailing address, these are some of the reasons I want to keep one financial foot in the US:

- you'd have to get used to not buying stuff online, not even for gifts sent to friends and family. Most US Internet merchants require a US credit card with a US billing address.

- you could give the IRS your foreign address, but I don't trust the foreign mails as much as I do the USPS.

- Overseas bank accounts often a complete rip-off. Huge annual costs, terrible interest rates and transaction fees. All the "expat/offshore" havens are now toeing the EU line, with a big witholding tax.

- if you ever want to come back, a PITA starting completely from scratch. No credit history. No insurance history. No drivers license. Feh!

Of course, it's not all a bed of roses, since the grey area of state taxation and wills is giving me a migraine...

For BunsOfVeal, I assume Canada has regulations for how long you can drive on your US plates. At some point, won't they want to see Canadian insurance and Canadian registration? I think it would hinge on insurance. I know trips to Canada are covered by many insurance co.s, but will you find a Delaware provider that doesn't care about your de facto Canadian residence? If you have more than one claim, I think they would start to catch on.. plus you'd probably have to show up there to deal with paperwork after your "trip."

What are your reasons for wanting to avoid the Canadian system?

 

[sailor]

BunsOfVeal,
I think my in-laws are using MyHomeAddress,Inc. in Emery, SD.
Look also here for more recommended alternatives:
http://www.rv.net/forum/index.cfm/fuseaction/thread/tid/16657819/gotomsg/16665643.cfm

 

[cute fuzzy bunny]

Note that a lot of states (and perhaps provinces in non-us countries) require that you register your vehicle locally and become licensed if you reside in that state. "residing" usually involves something pretty minor, like sleeping more than 14 nights in the state. In a town with a military base, oddball license plates wont stand out. Away from that, it appears the local police will "notice" you. I got stopped after living in california a couple of months with my MA plates. I told him I had driven out for a visit and wasnt staying when he asked about when I was going to get my local license and registration. "I've seen your car at least three times in the last couple of months. You live here. If I see you again I'm going to write you a ticket". Maybe he was bluffing me. I dont think he was.

 

[ladelfina]

Yes, they are definitely on the lookout for insurance scofflaws. It was a big thing in MA to ferret out the cars with NH plates that were actually owned by MA residents, due to the big difference in insurance rates and also sales tax.

 

[Outtahere]

It's STILL a big thing in the border towns of MA to turn in people registered in NH. Drive down any street after 5pm and you'll see every 3rd or 4th car with a NH plate and we know they ain't all visiting.

 

[Honkie]

Lucky you if you are from a country that doesn't chase down every non-resident.

As has been mentioned on other threads, I beleive the US is the ONLY country that chases down every citizen, resident or not, for taxes on worldwide income. So on that point it's "unlucky you" not "lucky me".

And nope, clearly my home Gov is not the US.

The reason for my post was to show how different countries view their citizenry. As I said, I have friends and relatives who are expatriated US citizens, and they grumble constantly that my home Gov has no right to know nor interest in where I am or what I earn when out of the country, yet theirs (the US) will never give up on extracting their pound of flesh.

 

[BunsGettingFirm]

BunsOfVeal,
I think my in-laws are using MyHomeAddress,Inc. in Emery, SD.
Look also here for more recommended alternatives:
http://www.rv.net/forum/index.cfm/fuseaction/thread/tid/16657819/gotomsg/16665643.cfm

Sailor, thanks for that link to your parents' home-address service.

In response to other posters, the reason for my wanting to avoid Canadian insurance & tags is that I have read that registering a car in Canada would involve"importing" a car into Canada, which creates a lot of red tape and fees. LOL, my POS Dodge was actually made in Ontario, but that's life.

 

[ladelfina]

If it's a POS, sell it and buy an equivalent Canadian POS?

Can you quantify those "import" fees, or are you just speculating? They may not be as onerous as you think.

Could there be a special POS category eligible for reduced tariffs?

 

[cute fuzzy bunny]

I wonder if the car models in canada have to have "eh?" added to the end of the names...

 

[chrishansenhome]

Expat taxes and residency

While I'm not a lawyer, I've lived in the UK for 14 years now and have a good practical knowledge of what's involved in living overseas and filing taxes.

Domicile means "the place where you normally live" in this context. So, my domicile changed from California to the United Kingdom when I moved here in January 1994.

For voting purposes, I vote only in Federal elections in California (including primary elections). I do not vote in state elections as this might convey to the state that I'm planning to return. For the poster who wanted to know where her child, born in Japan but a US citizen by descent, would vote: s/he should vote in the same place that you last were registered in the United States.

If you vote in state elections the state can infer that you want to come back at some point in the future. And, if you do return to the same state after a period abroad, they will likely hit you for as much back tax as they legally can along with penalties. So, if you return to the US, live in another state for a while to obviate the chance of getting soaked for back taxes.

I am unsure about the effect of keeping a driver's license in the state in which you were living when you moved overseas, as I don't drive now and my only license (from Illinois) expired 10 years ago.

The current expat tax laws have changed yet again, and not in a good way. In 2003 Congress almost removed the foreign earned income exclusion--the Senate came within one vote of doing it. It is still there, but if you live in a low tax country (Singapore, for example) you will get socked for income above the exclusion amount. Some self-employed people may get hit with the Alternative Minimum Tax, although the rules for that have changed yet again this year, I understand.

If you can, best go to a US tax accountant practicing in your country to have him or her make out your tax return. I have never done this before, but I'm going to do it this year. As the UK's tax rate is higher than the US one, I am not likely to have to pay much if anything. However, I'd rather a professional told me that than try to work it out myself.

I am also a UK citizen, and am considering renouncing my US citizenship as I don't intend to move back to the US and find the red tape of having to fill out a tax return each year a bore. There are tax implications to this as well, but I don't think that in my case (as I don't own property or have a massive amount of money) they will apply. I'm going to talk to the accountant about it when he does my taxes, though.

 

[Trek]

Here in Estonia you have to forfeit your US (or wherever you're from) drivers license when you get the Estonian one. You can't have two DL's by law. Here a DL isn't used as a general form of ID like in the States, it's solely for driving the car.

But if I ever return to the States, nothing to stop me from telling the DMV I lost it and getting a new one.

 

[Trek]

Biggest drawback to living in Italy: no cheddar cheese.

Funny, I had the hardest time finding cheddar here too. I did finally find one grocery store chain that carries one brand of cheddar.

I don't normally eat it though. I was discussing cheese with my wife and she had never had it so I just wanted her to try it.