BootsnAll Travel Community

quote:

Originally posted by Stoo:
How does it not? If travis, or anyone, establishes residency outside of the US then they are domiciled in the state the left...

...as far as that state is concerned. Of course, that state has no idea where you've moved (perhaps another state), and isn't in a position to demand that you pay state taxes. If you still have property there, of course, you'll need to pay taxes on it, but I don't see how it's relevant to the "Do I have to pay taxes on the first $80k I make overseas" question. Even if you lived in a state with income taxes, as far as the state is concerned, you made $0 income within its borders.

I guess I don't know what potential problem you're trying to get at. Have you ever gotten a letter from the state you last lived in asking for taxes? (It's entirely possible that you know something that I don't, and that there's a tax man waiting around the corner ready to pounce on me should I ever rear my ugly head in his territory.)

No problem, more of a point. States are in a position to demand that you follow their tax code, as a domiciled former resident.

It may not seem fair or practical, but that is the way it is.

This ties into how expat voting works, too, I believe.

Gimme a bit and I'll dig up the references.

EDIT: from Bruno's book The Expat's Guide to U.S. Taxes, each state has wildly different rules. From "you're gone, we don't care" to "we have our tax hooks in you, we'll pursue you anywhere in the world.

The book says the cool states are FL, WA, NV, SD, TX, WY because they have no income tax, so this is not an issue. States that loose interest in you because you have left are CA, CO, DE, ID, IL, MI, NJ, NY(with catches), OR, PE, and WV.

States that do not recognize FEIE for people living there, but working abroad: AL, MA, MS

It's 847am and I am readying about US state taxes. It is not working. All this looks more complex that I realized and I am getting confused.

quote:

Originally posted by Stoo:

Gimme a bit and I'll dig up the references.

I'd be interested to hear more. The last state I resided in before heading abroad didn't have a state income tax, so I'd still be in the clear, but I'd be interested to hear how much of a claim a state could really have over income generated by a former resident who no longer considers himself a voter/resident/business owner in that state and who now lives, as far as the federal government is concerned, in a foreign tax home.

I suppose the simplest solution would be to "move to" (get a mailing address, driver's license, and register to vote in) a state without state income taxes shortly before moving abroad.

I own property in a couple states that do have state income tax, but they can only squeeze out the income that those properties generate. Nothing else. Or so sayeth the tax attorney for the last few years.

Edit: Just so you know, Travis, none of this should be a problem for you either, as you currently reside in Washington, another state without an income tax I believe. (As I'm sure you know.)

Still, it's interesting to hear, as residents from may other states may run into the problems Stoo mentions. This is turning into a very informative thread. Now if only there was an expat forum. (Hint, hint.)

A quote from the book: "The first time you move overseas, you are almost certainly moving from some state in the US that considers you a resident to your overseas location. If the state assesses income tax, you were probably filing each year you lived there. Thus, the question arises to whether you must continue to pay income tax to that state. There are probably as many answers to that question as their are Americans moving overseas."

no shit!

It's a nice day and I need to pack for a trip to Germany. No new tax thoughts!

quote:

Originally posted by Stoo:
There are probably as many answers to that question as their are Americans moving overseas."[/i] no shit!

Again, Travis and I both lived in states without income taxes, so we're fine. Sounds like the rest of you are screwed, however. (Of course, I'm sure you're all smart enough to evade state tax authorities.)

Again, this is why we need an Expat forum. Threads like these deserve their own home on BnA.

quote:

Again, Travis and I both lived in states without income taxes, so we're fine. Sounds like the rest of you are screwed, however. (Of course, I'm sure you're all smart enough to evade state tax authorities.)

Nah...I edited an above post with a list of 'good states' and 'bad states'. the rest are in between, but mostly good. E.g.: unless you have property, they don't care, and even then they honor FEIE

Mississippi looks bad.

The state section of this book is very thin, compared to the rest of the book. And it is 5 years old. I must belatedly qualify everything I said dated, simplistic, derived, and not from a tax pro

The moral of the story is to make sure you know your state's individual rules and how they apply to your individual situation.

PS: We have an abroad forum here! We talk tax there from time to time./

quote:

Originally posted by Stoo:
PS: We have an abroad forum here! We talk tax there from time to time./

That's all about working abroad. What about those of us who just sit in the sun and sip grappa all day. Surely we deserve a place here on Bna. What happens when you move to Milan and take up a life of carousing and cafe hopping?

I've brought up the topic here, recommending changing the largely unused Beyond Backpacking forum to an Expat forum.

Well, I throw in some stuff on California. From my notes:

California is unlikely to care if you never return. However, if you do return they are going to look at the following while you were gone:

- Location of your spouse and children
- Location of your principal residence
- Where your driver’s license was issued
- Where your vehicles are registered
- Where you maintain your professional licenses
- Where you are registered to vote
- Location of the banks where you maintain accounts
- Location of your doctors, dentists, accountants, and attorneys
- Location of the church, temple or mosque, professional associations, or social and country clubs of which you are a member
- Location of your real property and investments
- permanence of your work assignments in California (for an employer-related contract; absence must exceed 546 days to be considered a not temporary and not a resident)
- Location of your social ties
- where you own or run your main business

the more of these things you've maintained in California while you were gone, the more likely they are going to determine your intention was only to leave California temporarily and owe them taxes for those years.

Now, is CA really going to call you on it. I don't know.

quote:

Holy shitstorm of info. You guys are being waaaay generous.

No kidding! I may never have to read another book on this subject! The info just keeps pouring in! Keep it up everyone!

I am an expat in NZ - very easy for English speakers to live and work here, great lifestyle as well!

Continental OP/Stoo,

Correct me if I'm wrong, but are you not only obligated to pay USA taxes if you receive money/profit from USA securities or nationals. For example you are not obligated to file taxes on Swiss Bank Accounts if the bank invests in USA stock markets. If you direct your account to 'not profit' from USA related holdings, then your money has nothing to with the USA and therefore the USA cannot tax it.

As for opening an LLC, S Corp, C Corp....again correct me if I'm wrong. Don't the rules about what the USA can tax change dramitically if you incorporate...let's say in the Caymans or Mexico? Not only is this cheaper, but it also goes a long way to showing where your tax home is....

Thoughts?

quote:

Originally posted by Slip:
As for opening an LLC, S Corp, C Corp....again correct me if I'm wrong. Don't the rules about what the USA can tax change dramitically if you incorporate...let's say in the Caymans or Mexico?

It depends. There are pros and cons to operating as a foreign corporation. They vary depending on a.) where your source of income is coming from, b.) where you are living, and c.) where your money is going.

I found working as a foreign corporation complicated things for me. I live in Italy, but most of my income comes from various sources outside of Italy. Little of it comes from the U.S.. If I was doing business in Italy as a corporation (be it Mexican or otherwise) I would need to register said business and would be subject to Italian taxes, even if I had no Italian clients and no Italian source of income. And if I was doing business in Italy as a U.S. corporation, as a U.S. citizen, I'd have to pay taxes to the U.S. on all income earned while overseas. As a self-employed contractor, however, I pay no Italian taxes. Nor do I pay U.S. taxes for the first $80k earned each year (at least half of which is stored in U.S. banks, but it remains untaxable as the U.S. considers Italy my tax home no matter where I store my money.)

The experiences of Stoo and others may differ.

Note to readers: I am not a U.S. tax authority. As Stoo and others have mentioned previously, see a professional tax attorney in your state for assistance in such matters. In the interim, regard the above post with a healthy amount of incredulity.

quote:

Originally posted by Sophie9:
I've been an expatella in Russia for 4 years and next year we're probably moving to China....

I have mixed feelings about living overseas, but surely the biggest issue with living in a foreign country are the language problems. I've gotten to where I can speak some Russian and comprehend a lot of what I see and hear, but for sure I miss A LOT of details and innuendo. I haven't seen an American newspaper in years, English language books are almost impossible to find, maps are all in a foreign language, train schedules are impossible to decipher, dentist appts. are a nightmare, bureaucratic foreign paperwork is never ending, every daily task is a struggle. It wears on you.

I can absolutely assure you that traveling to a foreign country and living in a foreign country are two entirely different things.

And after 4 years it never occurred to you to learn the damn language? I can't stand immigrants that don't know the language in the US, and I hold myself and others to the same standards.

Shameful...

Chelovek,

Please refrain from directed attacks. They are against the posting guidelines and grounds for being suspended. Please address the concept and not the person.

Thank you,
Slip

I am a dual Israeli/American so I have been living that lifestyle all my life. I currently live fulltime in the Philippines, but wish it were Cambodia, which I visit every so often.

The advantages? Money. The Philippines are the most expensive nation in SE Asia, and I am still able to live like a king.

The average wage in my part of the country is 3 dollars US (bit more with the exhcnage as it is currently) PER DAY.This country makes it conducive for expat retirement with all kinds of incentives, SS benefits are deposited directly,although for myself it is a non-issue at age 40.

Countries like Cambodia are even more attractive with Guesthouse rooms starting at 1 US dolar a day (although most are 2). Food there is less than 5 per day if you eat as a local, and so on.

Another advantage is seeing the world, learning about different lifestyles and perspectives.

Disadvatanges? Politics makes it dangerous at times. I live on Mindanao and we have 6 insurrections at the moment with one heating up 12 klicks from my home (gunships and mines, thousands of refugees).

If you look foreign, as I do, it creates real security concerns but the situation is different even in different parts of this nation, let alone in other nations.

Homesickness kicks in as well. Just trying to find dairly products in this part of the world can be maddening. Most SE Asians lack the enzyme needed to digest it and so it is not sold widely.

Healthcare is VERY dodgy to say the least. In this country, you better pray if you are in pain because that is as close to analgesia as you will get (outside of ultram or paracetemol). To even see a doctor requires a cash outlay even in dire emergencies .

Driving is hell, but that can be the cae in NYC so it is all about managing perspectives.

For me the defining issue was family. I married a local owman and we have buisnesses here so it is not much of a choice.

quote:

Originally posted by Slip:
Continental OP/Stoo,

Correct me if I'm wrong, but are you not only obligated to pay USA taxes if you receive money/profit from USA securities or nationals. For example you are not obligated to file taxes on Swiss Bank Accounts if the bank invests in USA stock markets. If you direct your account to 'not profit' from USA related holdings, then your money has nothing to with the USA and therefore the USA cannot tax it.

I am sooo sorry for being soooooo late on this. I just turned the thread notifications on, so never again

The Answer: Sorta.

If the income is a salary, then it does not matter where it comes from if you are a 2555 qualified foreign resident. If the income is non-salary, then tough cookies. 2555 plays no roll here, but there may be other little magic tax things to help you out, like the Foreign Tax Credit. The IRS defines what is salary and what is not. E.g.: Foreign unemployment benefits are not salary, and hence are taxed as capital gains. Same with rental income, profit from the sale of property, alimony, dividends, lotto, etc. All of those non-salary income streams, regardless of the nationality, are taxable and should end up on the 1040.

I've been in Peru for four years and get citizenship in Nov. I started with a bad salary, but worked my way up to a chush job at an international school.

I have pension, we just bought a flat, cash, a SUV cash as well. It depends how you plan and save.

This whole thread is a good example of "analysis paralysis". Hire a good CPA and it tends to be far simpler than you might think.

I am legally an Arizona resident though I haven't lived there since 1989. Paid taxes there only once since then, and that was when I sold a condo for a nice profit a few years back.