U.S. expats and state taxes

[ladelfina]

People have talked about paying federal taxes while working/living overseas, but I'm curious about state taxes.

The state where my bank account statements are sent (my mom's home address) is the one I used to renew my out-of-state Driver's License before leaving the US. That state has now popped up and said "where's your income tax return?". I mailed them a copy of my partial-year tax from another state, and wrote "moved out of the US" and the date of the move.

I'd like to keep a US license.. makes things like car rental easier. Plus, I don't have a license here in Europe yet.

What do folks do about being a non-resident, with no income being generated in a state, yet with a state-issued DL? Are they going to keep coming after me on this? Are they likely to be tracking the license address or the bank statement address?

Thanks in advance for any advice!

 

[Lancelot]

Interesting that you write about this...

I use my sister address in NC for my bank and cc. Because Vanguard offered free online tax filing with Turbo Tax, I used her address (the catch was that a US addres was needed to file online.)

You guessed it, eventually the nice folks at the NC Revenue Dept. sent me a substantial tax bill, penalties included.

I called them, spoke to a decent guy and agreed to send copies of my passport, verifying I'd been out of the US for about 35 of the past 36 months. They waived the bill, but it is a mutual concern of mine.

Perhaps your home state will not levy taxes if your permanent residence is abroad?

If I had to, I would try to use use my Thai driver's license to get a license in the US. In Thailand, I used my US driver's license as proof that I could drive a car and they graciously waived the (driving) test.

Good luck!

Lance

 

[wompo]

My wife and I lived overseas for a few years. Virginia was the state we were living in and we notified them we were moving and thus not paying taxes. Basically what the state said is that we would not be able move back to Virginia after we returned to the states. They have something about 'intent' in their laws. If they deem that you just moved overseas for a while with the intent of moving back to Virginia then you must pay Virginia taxes while you are overseas or when you move back they will hit you up with back taxes and penalities.

 

[Lancelot]

Basically what the state said is that we would not be able move back to Virginia after we returned to the states.  They have something about 'intent' in their laws. 

Yes, the guy in NC I spoke to asked me several times if I would "return" to NC. Since I'd never lived there and had no intension of moving there I felt that there was no tax liability. My good luck that some one agreed

Lance

 

[sailor]

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

 

[cute fuzzy bunny]

Basically what the state said is that we would not be able move back to Virginia after we returned to the states.

I'd have said "Whew, thats a relief!" and hung up the phone... :

 

[yakers]

As a simple rule I believe you are required to pay state taxes when overseas. If you want to vote, have a drivers license and have an address for US federal tax returns then you will probably get caught up in state taxes. One solution is to make a state with no income taxes your domicile.

Now if you own property in a state it will be harder to be considered out of state. The only time I was overseas with in a Navy job and special rules apply but do your research so you do not have a large tax bill following you.

 

[ladelfina]

Don't own any US property. Have been voting out of MA, where I actually lived, since that is the place in the US I was last registered; those are the guidelines. Did a PY state return for them for 2004 and have not heard anything more from them re: taxes.

Changed my bank and cc statements to mom's address in RI. When my MA license expired later in '04, I took my bank statement to get the out-of-state license converted to a RI license.

I don't know how I would/should go about changing "residence" to a state where I have no contacts, property, or any desire to go. South Dakota is a looong way from Italy. I don't know anyone in a no-tax state, and I do need to get my mail forwarded now and then, and have them help me keep a lookout for things like letters from the IRS or something. I also need to occasionally buy things online (US cc billing/shipping address) which they then send on to me.

I know MA does not tax non-resident interest/dividends. Tried to check the RI statutes but their site was not functioning earlier. My bank accounts are with a MA branch, but the bank is based in RI with RI branches, so my mom has access to one of the accounts for whatever might come up.

I could even imagine letting the driver's license lapse or returning it (no conversion here; I have to take the full exam from scratch.. and I don't drive a stick or have a stick-shift car to practice on... watch out!!). I don't want/need to vote in state elections, just Federal. I have a hard time imagining how a state could claim taxes on a non-resident who has no income generated in the state.

 

[MJ]

This thread is an eye opener.
I just did a quick test state return on turbo tax as a part time resident of NYS. It appears that even though I have a NY address, as long as I report that I did not live in NY during the tax year, I would not have to pay any state tax and would actually get a refund of $63. When I get my 2005 TT copy I will do a more thorough test.

MJ

 

[Texas Proud]

Wow... what a problem with this...

I lived overseas for a bit over a year, but am from Texas with no state income tax... It almost cost me money as my company wanted to 'equalize' me to NY... this would have cost me a pretty penny, but they relented in the end and gave me the money back..

BUT, how can a state say 'intent' and say you can not move back If I am WORKING overseas, then I do not have any income in that state!! Now, if you want to claim residence in that state for voting or other purposes, then I guess you have to pay the tax man whatever he says you owe...

 

[ladelfina]

Ok the RI site is back up and working. I found this in the NR instructions:

INCOME OF A NONRESIDENT SUBJECT
TO TAX
A nonresident is subject to tax on all items included
in his or her total federal income (including his or
her distributive share of partnership income or gain
and his or her share of estate or trust income or
gain) which are derived from or connected with
Rhode Island sources as follows:
From real or tangible personal property located in
the state.
From a business, trade, profession or occupation
carried on in the state.
From services performed in the state.
Winnings and prizes from RI lottery and pari-mutual
betting events in this state.
A nonresident is not subject to tax on the following
classes of income even though included in total federal
income:
Annuities, interest, dividends or gains from the sale
or exchange of intangible personal property unless
they are part of the income from any business,
trade, profession or occupation carried on in this
state by the nonresident taxpayer.
Compensation received for active service in the military
forces of the United States.


So things look OK for now. Sounds like if they continue to give me grief I'll just have to provide documentation like Lancelot did. Passport? Plane ticket rec't.s? Do I even still have my plane ticket rec'ts.?

It's a brave new world. Residency is sooo 20th century.. 

 

[Texas Proud]

Ladelfina...

Where do you claim residency?

This is what you put down on your federal income tax... or have a voter registration?

When I was in London and New York, I kept my LEGAL residence in Texas.. I still had to pay NY taxes when I worked there, but not when I was in London.

 

[bpp]

I don't think one needs to have a state residency to vote in Federal elections... or at least, I hope that is right! My legal residence is in Japan, but I vote for President through my last state of residence (I don't vote for any state offices, even though the presidential ballot includes all the local state ballots as well). As far as I understand this is legal and proper, without incurring any state income tax obligation -- but if that is wrong, I will certainly stop voting. Not worth the hassle, and it's always some bozo who wins anyway (whoever wins).

Bpp

 

[Martha]

Ladefina, check how Rhode Island defines residency. You might be a resident. "Resident" isn't necessarily synomynous with where you live.

My bet, with no legal knowledge on the issue, is that you have to be the resident of some state, even if you do not live in any state and live in a foreign country. I do know that a least for some states, even if you move from that state you remain a resident unless you establish residency in another state and live outside the original state for a particular time period.

I also know that it is relatively easy to establish residency in South Dakota. Many motorhomers do so and use one of a number of mail forwarding services there.

 

[cute fuzzy bunny]

I know that when I moved to california from massachestnuts, the MA folks wanted to see proof of my new residency before they'd stop hounding me for tax payments. I dont know if residency in a foreign country would have sufficed, but knowing those bastards, probably not.

 

[bpp]

Hi Martha,

My bet, with no legal knowledge on the issue, is that you have to be the resident of some state, even if you do not live in any state and live in a foreign country.

Why?

What about my child, who was born in Japan, and has never lived in the US, but is a US citizen? Does that child have to have a state of residence, too?

Bpp

 

[mikew]

I don't know why but when I renewed my passport overseas they said I had to have a US permanent address even though I had not lived in the US for 8 years. I told them the only address I had in my state was a house my parents sold 10 years before. They said that was fine.

Only a guess, but your child's state residence maybe the same as yours automatically.

Mike

 

[bpp]

Hi Mike,

Sounds like the US is trying to implement something like Japan's koseki system, with a family registry located in some town that was last lived in by some remote ancestor...

Bpp

 

[mikew]

As long as they don't try to make me move back to Toledo.

Mike

 

[bpp]

As long as they don't try to make me move back to Toledo.

You could probably seek asylum in another country if they did that.

Bpp

 

[Lancelot]

As long as they don't try to make me move back to Toledo.Mike

Could be worse Mike; Ever go to Rudy's Dog Shack (or some name like that) Great Chili dogs

 

[mikew]

And Tony Packos 

 

[Lancelot]

And Tony Packos 

Oh man, Tony Packos! I love their chili!!!

 

[ladelfina]

Biggest drawback to living in Italy: no cheddar cheese.

Found a packet of chili powder in a specialty store, whipped up a batch 'o' chili and put it on a hot dog (wurstel) and was transported back "home", albeit sans cheddar.

Just for yucks, here's a popular Italian hot dog brand:

The trucks have a 30ft. long hot dog image on them.. pretty amusing.


---
To get back to the subject at hand, AFAIK the Federal tax forms do not say anything about "residency". The mailing address I put down is the RI one, my mom's. My only income is from US investments and even if it were not, residency does not change the amt. of fed. tax owed. My erstwhile accountant said he had some clients overseas who used a US address, and some who used a foreign address; said it made no difference--a matter of choice. "Residency" for federal tax purposes seems to be an issue only for non-citizens paying tax on US income, since citizens are required to pay tax on worldwide income regardless of where they live.

Voter registration is MA (last place of registration, as bpp also noted).

Haven't renewed my passport yet, tho' I need to do so within the next month or so, by mail to the US consulate in Florence. If they ask for a US address, I'll give the RI one.

What do people do who are permanently overseas and don't maintain a US address?

I can't imagine the hassle of changing every piece of paper in my life over to South Dakota, remotely no less. Wouldn't one have to at least set foot there? I also don't feel like paying a mail service; I'd do that only if I had no other choice. Right now, I get an express mail once in a while when things pile up, and my mom opens anything urgent, like a car excise bill for a car that's now in Italy, and I can start dealing with it within a matter of hours rather than waiting for the Italian mails, where the question is less 'when' it will arrive, but 'if'.

Mikew, in the case of the child 'inheriting' the parents' former state residency.. does that mean, in your view, that a US state will then start going after the child for US state taxes once that child starts working in the foreign country of his birth??!?!?  A state he never set foot in? Hmmmm.

As long as they don't try to make me move back to Toledo.

You could probably seek asylum in another country if they did that.

Hey, with Bush's new torture policies, the CIA would hunt you down anyway, kidnap you, and take you back to Toledo. (You did know that's one of the "black sites", didn't you?)

 

[Arif]

Unfortunately I am stuck. We own property in GA so I think we'll have to pay income taxes for 2006. I'll ask my accountant in April about that when I go back to the US.