Table of contents:
Voting & state tax obligations
The Uniformed and Overseas Citizens Absentee Voting Act allows citizens overseas to vote in the state where they last resided before leaving the U.S. You may continue to vote in state elections no matter how many years have elapsed, even if you no longer have a residence in that state and are uncertain whether you ever plan to return.
Voting in national elections does not affect whether you'll be required to pay state taxes. However, voting in state and local elections means that you may end up paying state and local taxes.
The U.S. Department of State confirms that residing abroad without a set date and intent to return to a particular state or the U.S. will not result in a loss of U.S. citizenship. Selecting "I am a U.S. citizen residing outside the United States, and my return is not certain" when voting will not affect your U.S. citizenship.
How can I be sure that I don't have to file?
First, we'll analyze your former state's tax residency position to verify whether you now qualify as a nonresident of your former state.
It can depend on many factors, and the requirements vary by state. Even if we confirm that you are indeed no longer a resident of your former state for tax purposes, there is still a risk that the State Tax Department will inquire about why you have not filed a state return and send you a tax assessment for the year(s) that you did not file.
Changing your state for tax purposes
Is it a good idea? The short answer is: It depends on the state.
Using a mailing address in a different state
If you want to change your state, you'll need to establish a mailing address in a different state and use it on your federal tax return. It can be the address of a family who lives in that state, or if you don't have family in the state where you want to claim residency, this service can arrange mail forwarding for you.
This measure alone may be sufficient for NY, MA, and CT states.
States with stricter requirements
States that recognize the Foreign Earned Income Exclusion but tax your unexcluded earned income require a more thorough process to cut tiesYou'llll have to change your driver's license, your voter registration, your car registration, and your bank accounts. You will also have to be able to prove to the satisfaction of the state commissioner that your move is not temporary. You do not have plans to return to that state in the future. Some of the strictest states are VA, SC, and NJ.
If you lived in California
If you lived in CA and your reasons for moving abroad are work-related, you do not have to cut ties with your state. You can keep your driver's license, voting registration, etc., in CA because you will be considered a nonresident for as long as you live and work overseas as long as your work assignment lasts more than 546 consecutive days. You spend less than 45 days in CA each calendar year.
Don't hesitate to contact your tax advisor for a state filing requirement analysis that considers your state and your tax situation.
Q: My husband and I paid income tax on our income, salaries, and income from self-employment combined. How can I separate this?
A: If you file a joint U.S. return, there is no need to split the taxes you paid because all tax on earned income (the wages and income from self-employment received by both spouses) will be counted as one amount towards the credit.
If one spouse is a U.S. person and only that spouse files, you should provide your ratio in joint earnings and report a portion of your combined income tax based on that ratio. Or, you can tell us how much each person earned, and we will determine how the tax paid should be divided between the two earners.
Q: My employment contract states that my employer pays all of my taxes owed to the local government in my country of residence, and the amount that I receive is my net pay. How do I indicate this when I fill out my Tax Questionnaire?
A: The IRS needs to know your gross pay (before any tax is withheld) and the amount of tax paid (this benefits your tax position). Your payslips, employment contract, or local tax forms should contain this information.
For example, your employment contract might state that you receive $150K in gross pay, and your employer pays $X in taxes to the local government in your country of residence. If you can provide us with the value for X, your tax position will improve.
You will be asked to report your gross pay on the Tax Questionnaire. Report the value of X in the Taxes And Deductions > Taxes Paid section.