State & Federal Taxes

[Larryst 7]

Since the year is coming to a end and tax season is around the corner. How do most of you living in Thailand, file your federal & state returns?

[irishman 0]

I have always scheduled a trip back to the States sometime between February and April. Do them there.

 

Cheers

[BigDUSA 71]

Since the year is coming to a end and tax season is around the corner. How do most of you living in Thailand, file your federal & state returns?

When I move, I plan on filing on line with trubo tax. Just like I do in the US.

[Owen` 2]

Heads up, guys. It is state tax that slips by. You can increase your pension or interest/capital gains income by about 5-7% by simply establishing residence in one of the 0 income tax states (TX, FL, WY, AK, WA, NV, NH) before moving to LOS.

 

I say 5-7% because that would be typical if you made your big move from, say, Missouri. You would not be paying that tax anymore if you establish residency elsewhere first, even if you still own property in the original state.

[winner 0]

I use TuboTax here. Easy to use and good instructions. Tennessee also has no income tax. Even though I am OK on the State, I would not file in any state if I was going to live here for a long time.

[Rex7777 0]

Isn't it true that if you're actually living in Thailand 12 months a year then you really wouldn't have any state tax to pay no matter where you used to live?

 

Rex

[redwood13 56]

Isn't it true that if you're actually living in Thailand 12 months a year then you really wouldn't have any state tax to pay no matter where you used to live?

 

Rex

Interesting that this hasn't draw any response.

 

Through doing a bit of Net research for a friend of mine who's retired and lives in Bangkok, I found that ending one's state residency for tax purposes can be a real minefield.

 

Here's an example of one man's opinon:

 

Avoiding U.S. State Taxes

 

"Do not assume just because you moved out of the U.S. that your previous state of residence has no claim on taxing your income. Many states such as California, Virginia, New Mexico and South Carolina make it very difficult to give up your "tax domicile" in the state and require that you file state income tax returns (and pay the tax) even if you do not move back until years later. Some of the criteria that a state looks at to determine if you are a resident for state income tax purposes includes your driver license, if you register to vote there, if you maintain an address there, the location of your bank accounts, if you own or rent real property there, the license plates on your cars, and if you still receive utility bills in that state. There are many other factors used by state taxing agencies to determine if you are a resident, but they are too numerous to mention here. You must be careful to reduce or eliminate all indices of residency or your previous state of residency in the U.S. will come after you for state income taxes. You must carefully plan your departure from your previous home state both reviewing the laws and taking the actual steps necessary to prove to that state you no longer have a "tax domicile" there after you move abroad. If you do not, the taxes, penalties and interest later assessed by that state can be huge.

 

You do have to continue to pay taxes in a state if you receive rental income there or receive income from a trade or business located there, even if you are no longer a resident. Investment income such as from stock sales, dividends, and interest are not subject to state tax unless you live there. Pensions are no longer taxable in the state in which you earned the pension if you permanently leave that state.

 

What About Returns Which Were not Filed for Years You Lived Abroad?

 

Though not required to by law, the IRS currently allows an expatriate to file past tax returns which were erroneously not previously filed and claim the foreign earned income exclusion and foreign tax credits as if the returns had been filed on a timely basis. That usually means most delinquent expatriates who file past returns owe little taxes or interest after claiming those benefits. It can easily be determined if returns are owed for past years by ordering a transcript from the IRS. This can be done by a tax professional without triggering any inquiry from the IRS concerning the taxpayer."

 

See:

 

http://www.taxmeless.com/page4.html

 

Your may also find this "real life" thread on another board of interest:

 

http://tinyurl.com/6sgor

 

-redwood

[Owen` 2]

Avoiding U.S. State Taxes

 

"Do not assume just because you moved out of the U.S. that your previous state of residence has no claim on taxing your income.

 

Bingo. You need to play this smart. You must establish residency in a zero income tax state FIRST, before you move. This involves changing your drivers license, renting a place or buying something (maybe a trailer), registering to vote . . . just do lots of things to have available as evidence. Hell, to play it safe you may even want to live there for 3 months before the move.

 

Keep in mind this is not an unusual thing. Many many politicians and staffers in Washington DC who live in Maryland or Virginia retain residency in their home state by simply owning some $25K condo that they never stay in. This is a pretty typical thing. There are lots of maneuvers used by many different people to claim residency in a state they don't "live" in.

 

The important thing is Do Not Think You Can Stop Paying State Tax Just Because You Moved Overseas. And don't think you can just be defiant. A state that decides you are in arrears will confiscate assets and they can also put out a warrant for your arrest anywhere in the US.

 

Tax issues are powerful stuff. Don't try to finesse it. Do it right. Move to another state and jump through the hoops. Then leave the country.

[travlling 0]

I filed my taxes last year when I was in Iraq and used H&R block free through the IRS.gov website. I plan to do the same when I move to LOS in Jan 2007.

 

 

travlling...........

[cnkbud 0]

Hi Guys,

As one who plans to permanently live in the LOS, or elsewhere outside the US, did a little research on this subj and not easy to come up with a standard answer as like others have said here, it varies from state to state, and each state legislature can change to ground rules at their whim. I found that it is fairly easy to establish a permament address in Nevada by using one of the mail forwarding services up there, they will give you a street address for that purpose, and I believe those that live in the RV's permanently and just move around the country use their services extensively so worthwhile looking into before you leave the country. In my particular case not wanting to rely on friends or family to forward my mail to me this seem the way to go, just make sure the one you select is well establshed has been in business for a long time and plans to stay in business. I don't know how all you guys who live there permanently and file your taxes from there get all your tax documents together necessary for filing and that would be interesting to learn. I did check with the Arizona state tax people and asked them would I be subject to state tax if I lived overseas permanently and still maintained a residence here; their ruling was that that I would NOT but would still of course have to pay property taxes on it, and state income tax on any funds I received from renting it out which makes sense; I also asked them if I would be subj to state tax on any interest I earned from an Arizona based bank account and they said NO. Hope this helps, it's a very complicated subj and you got to do your research first, and hope you get the right answers to your questions. Have a good one and enjoy. Old Bud

[Owen` 2]

Bud,

 

Your investigations sound thorough, but I am astonished at the response you got from Arizona. As a matter of principle, no revenue department will give you any favorable answer to a gray area.

 

At first glance I am surprised that they told you that interest on an Arizona bank account will not be Arizona state taxed. At second glance, maybe this is not suprising. After all, our stock and mutual fund portfolios are held by companies very unlikely to be our state of residence. For example, if you hold Fidelity funds and they generate capital gains and interest, and you don't live in Massachussets (Fidelity's home), you don't pay MA state tax on those earnings.

 

So excellent data -- though it is surprising Arizona told you that -- and yes, even if that's their rule it could change. I think what goes on here is that when someone moves from one state to another, it can be called "permenant" and the old state doesn't tax your income anymore. The new state does. Moving overseas and retaining property in the current state of residence simply does not look permenant to most states and since the people interpreting the rules are paid out of your taxes, it's in their interest to say that you must keep paying those taxes because that property suggests the move it not permanent and you are coming back.

 

The Nevada mail forwarding service I looked into and my investigation says it is not enough. You need to change your drivers license and get a library card and maybe even register to vote. These actions take time but do not take much money. Leasing a trailer in a trailer park for $2000 per year or something would settle the issue, but it's possible this won't be necessary. The drivers license, library card and voter registration plus spending a few weeks there looks a lot better to any challenge than just a mail forwarding service.

 

Point being, this issue is not new and the revenue people know the game we're playing, so we have to play it well or face approx 5% loss of our income each year.

[Rex7777 0]

Moving to a state without income taxes before I move to the LOS is about the last thing I want to do. But if I have to, I will. I suppose Las Vegas would be fun.

 

Rex

[Shilo 371]

There might be at least 2 or 3 other things to keep in mind before picking a new state home...

 

How does the state choose their legal jury pools? I think that here in my current home state they pull for the voter registrations. It would suck to have to come "home" for jury duty and I don't think that it's a given that the court would give you a pass.

 

How does the new state treat common law marriages? I know that this might be a long shot of turning into a problem, but what if you get a longterm live-in, bring her back to the states, things turn to crap and she ends up talking to the wrong lawyer....

 

And what happens when you die? What effect would your new "home" state have on your estate...

 

Just a couple of thoughts.

[cnkbud 0]

Hi guys,

OWEN: You made a very good analysis of my offerings and thoughts on this subj.

I'm far from being an expert on it but when I contacted the AZ dept of revenue on my question about interest on a bank account I leave on record here the 1st agent I contacted said YES to the question, it would be taxable; after thinking it over like you did, I called back and asked the agent that answered to speak to her superviser who told me otherwise, it would not be taxable. I asked him to send me and email confirming this and to cite the revenue code, he did so. Living here in AZ, it would be a short trip to get up to Nevada for obtaining a drivers license, library card, etc., as proof of residence there by giving them the street address provided by the mail forwarding service there, at least that's what they told me. It can really get sticky and they don't make it easy for you do they. As for keeping property here I suspose that could, and probably would make it more complicated and I would like to know from permanent residents there in the LOS what their experiences have been by keeping property in the state they moved from. Also, I would like to know again, how those living there permanently and have no one they can trust in the US to forward mail to them, get their documents necessary for filing federal income tax. I will have some so called friends, and family members left here in the USA, but I sure don't want to depend on them, or get them involved in forwarding mail to me. Thanks guys, you have a good one and enjoy.

Old Bud

[Owen` 2]

The gentleman above who spoke of jury duty . . . that one is worrisome. Research required.

 

But . . . let's think carefully here. We do not need to be a resident of the state. The drivers license can expire, the library card never used, etc. The idea is to have the zero income tax state be the LAST state of residence. You don't live there anymore and they won't object to you not living there anymore. It doesn't have to be your state of residence. You just need to have lived there for some period of time (or pretended to) so that it becomes your LAST state of residence.

 

Now that I think about this, it probably addresses the jury duty question. You reside outside the country. You are no longer a resident of that state. It was your last state of residence, but is no longer your residence.

 

I think that does the trick of insulating from other states' taxes.

[Rex7777 0]

One thing that happens is that the states perform a cross-check with federal tax returns. For example, you live in Arizona and have been filing Arizona taxes every year. Then you stop because you move to Texas and start filing your federal returns there. When AZ wonders where their state taxes are, the check the address on the federal return and see that you've moved to Texas. That should usually be the end of the story. I can't imagine they have the resources to follow people around, unless of course, you're a billionaire.

 

Rex

[Sa-teef 44]

"Isn't it true that if you're actually living in Thailand 12 months a year then you really wouldn't have any state tax to pay no matter where you used to live?"

 

As your subsequent discussion shows, it really doesn't matter if you live in a state to be paying state income taxes there. Servicemen joining up will pay state income taxes at their point of enlistment for their entire military career except under very special circumstances. Your physical location 12 time zones away is irrelevent. Residency and physical locale are two completely different matters.

 

The foreign earned income exclusion discussed in that article won't apply to you unless you are working in Thailand and meet other requirements.

 

After a career in tax accounting there are many twists and turns which individual states will take that might adversely affect your situation. I would not personally rely on an e-mail from a supervisor alone to base my decision upon. But you are correct in that Arizona (unlike most states) is relatively easy about expat taxation of non-rental passive income. Don't count on that in other states. Mnay states (at tax time anyway!) love to keep you unless you have met their requirements, which vary from state to state about changing that residency.

 

When I move to LOS I will be establishing residency in Wyoming first, getting a drivers license, transferring vehicle registration, car insurance, voter registration and moving a minimal amount of personal goods to a physical location there. It sounds corny, but being there long enough to get a fishing license is also strong evidentiary matter with a judge later. It puts the prior state on notice that a legal authority there has accepted you as a legal resident. In almost any state, it is far easieir to get a drivers license or a library card than a fishing or hunting license. I have family there as well, so I have that advantage. But the above is the MINIMUM I would consider adequate to establishing residence in any state. And yes, I will be maintaining that residency for the rest of my life, filing an absentee vote, etc even though I may only visit the States once a year.

 

If you keep rental property in your former state, you will continue to file non-resident tax returns in that former state until you dispose of it. Real estate is very much sitis in nature. You could buy real estate in Maine, never visit or live there and still pay state income tax on the earnings while you owned it or profit from the sale of that Maine real estate. Don't think for a minute you can avoid that. There are far too many reporting requirements with real estate on both the state and local level. Any of you with a state funded pension also have some serious matters to investigate and don't believe what you might read on the web. Get some professional local advice.

 

As far as jury duty, how hard would it be to get a physician in Thailand to draft a letter saying the travel to your old state would adversely affect your health? Most can read and write english BTW. Inconvenience or economic hardship seldom pulls much weight i.e. jury duty. Health issues will.

 

This is the first, and likely the last time I ever post anything about taxes on the web. It's just too individually and locally specific to make broad characterizations.

If there is even a shred of doubt, your former state of residence will try to keep you, so you have to be pro-active about this.

 

If you can afford to retire to LOS you can afford competent local professional advice. "Go get you some" as the that country western song would say.....

 

~Sa-teef

[Owen` 2]

Wyoming and fishing do go hand in hand and the fishing license ploy looks excellent to me. Never thought of it. Probably true of the other zero tax states too. Hunting or fishing licenses would be solid legal rebuttal to any challenge.

 

The zero tax states are . . .

 

WY, AK, NV, TX, FL, SD, WA

 

http://taxes.yahoo.com/statereport.html

 

TN is often mentioned as one too, but that only applies to earned income, not passive. Ditto NH. Your investment income will be taxed in either.

 

FYI, for military folks, everyone knows the maneuver in the military. You join and you pay taxes in your original state of residency wherever you are assigned. BUT. If you are ever stationed in one of the zero tax states above, you can change your residency to that state and vote in it etc. Then if you are transferred again, you can retain that state (zero tax) of residency for tax purposes the rest of your military career.

 

This is why military folks try to get an assignment in one of those states early in their career, as soon as they are briefed on this. They then hold onto that state until retirement.

[Sa-teef 44]

Wyoming and fishing do go hand in hand and the fishing license ploy looks excellent to me. Never thought of it. Probably true of the other zero tax states too. Hunting or fishing licenses would be solid legal rebuttal to any challenge.

 

There is some solid litigation behind that. A test case here in Wisconsin where the retiree moved to FL and did every right....except he still had substantial land holdings in Wisconsin and applied for and received a RESIDENT license.

The affadavit on that application was prima facia evidence to dis-allow his change of residence.

His "savings" of $50-60 cost him tens of thousands of dollars in state tax.

 

FYI, for military folks, everyone knows the maneuver in the military. You join and you pay taxes in your original state of residency wherever you are assigned. BUT. If you are ever stationed in one of the zero tax states above, you can change your residency to that state and vote in it etc.

 

This is why military folks try to get an assignment in one of those states early in their career, as soon as they are briefed on this. They then hold onto that state until retirement.

 

Again, lots can go wrong with that as well. Family arrangements, housing and all the other matters discussed above.

You may think that just no longer filing in that home state ends the matter. But remember, while most states have a five year window on changing a return, there is no statute of limitations for failure to file a return. Plan ahead because you don't want that state to have any grounds for going back through your 20 year military career (and it DOES HAPPEN!).

 

Not trying to scare anyone. But do your homework, make the effort and don't believe anything you read on the web is the final word on anything. It's like advice in a bar or coffee shop; sometimes it's right on the mark and sometimes it's worth exactly what you paid for it!

 

~Sa-teef

[travlling 0]

FYI, for military folks, everyone knows the maneuver in the military. You join and you pay taxes in your original state of residency wherever you are assigned. BUT. If you are ever stationed in one of the zero tax states above, you can change your residency to that state and vote in it etc.

 

This is why military folks try to get an assignment in one of those states early in their career, as soon as they are briefed on this. They then hold onto that state until retirement.

This is exactly what I did and just prior to retiring next year, I will change all my addresses over to a relatives address, i.e., drivers license, etc. and also set-up a mailbox to have certain other documents sent to, so that way my military retirement won't be taxed

 

 

 

travlling.....

[eltib 54]

This is exactly what I did and just prior to retiring next year, I will change all my addresses over to a relatives address, i.e., drivers license, etc. and also set-up a mailbox to have certain other documents sent to, so that way my military retirement won't be taxed

 

 

 

travlling.....

I'm wondering if setting up a P.O. box in a non-tax state would qualify?

[Owen` 2]

I'm wondering if setting up a P.O. box in a non-tax state would qualify?

 

 

The thread makes pretty clear that this is not a casual, low intensity thing. There are no short cuts. You have to get yourself fully configured to make your claim beyond reproach.

 

Assume you will be challenged, because the odds are pretty good you will be. If you leave a taxed state and they send you your annual income tax form and you don't file, the state is going to cross reference your federal return to find out why they didn't get money from you. When they see your new address is a PO Box in a zero tax state, do you really think they have not encountered this before?

 

Make life easy for yourself. Move To A Zero Tax State At Least Briefly. Do it like you mean it. Go through the hassle. It won't cost much. It just will consume your time. Rent something cheap for a few months. Change everything you have to the new state. Drivers license. Library card. Voters registration. And SaTeef's truly powerful idea above . . . get a resident's hunting or fishing license using your local address. You want to really play it safe? Get a part time job for a few weeks or months, too.

 

Once that state is your LAST state of residence before moving to LOS you're in good shape. The rental lease of 3 mos can expire. Your drivers' license can expire. The library card can expire. The fishing license can expire. Have your mail forwarding service be based in that state. Keep voting in that state by absentee. Keep a copy of the expired stuff. You will clearly be an expatriate whose last state of residence before moving to LOS was a no tax state.

 

Why are you doing this hassle? Because if you have income of . . . say . . . $50K from whatever source that you want to live on for 20 years, and you're from a taxing state that grabs about 7%, you are chopping, in addition to federal tax, $3500 per year for 20 yrs out of your life (and that ignores inflation). That's $70K you're paying for state services at your old state that you will NEVER benefit from.

 

Is it a hassle. Yes. Is it worth it. Almost certainly.

[travlling 0]

There are mail boxes that are legal for residence puposes even without a solid address to back it up......I will have a physical address through relatives also for the drivers license, taxes, etc. So, I'll be good, especially since the military has been listing on their roles as a residence of Fl for quite a few years now

[Larryst 7]

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Edited January 20, 2006 by Larryst

[Larryst 7]

I went through my state tax web site today. For free filing. I picked out TurboTax for online filing. I went through the instructions on the screen and it was pretty easy to follow. Within 20 minutes my federal & state filing was done and filed. It was also FREE.