State taxes may seem like a straightforward topic for an American living abroad, but moving to another state – or even another country – doesn’t exempt a taxpayer from their obligations to either the federal or state government (at least, not automatically). Each state has its own laws and expectations regarding who must file an income tax return and how much they must pay, though a person’s current place of residence certainly has some bearing on what they might owe. If you moved away from New York sometime in the last year, or even before that, you may have to file an income tax return with the state. To find out if you have to file New York taxes if you live abroad, keep reading as the experts at U.S. Tax Help explain.
Who Has to File State Taxes in New York?
The answer to whether you need to file state taxes after leaving New York will largely depend on whether you are classified as a resident, nonresident, or part-year resident. Unfortunately, the state has some convoluted criteria for determining residency, but we’ll do our best to decipher those requirements below.
Residents of New York State
Generally speaking, those who maintain a domicile – the place you intend to be your permanent home – in New York are considered residents, as are those who maintain a living space in NY for more than 11 months out of the year and spend at least 184 days in-state. However, there are two groups of exceptions that may qualify you as a nonresident, even if you are domiciled in New York, as long as you fit all the criteria in either group.
To qualify for Group A, you cannot maintain an active residence in New York during the tax year, and you must have a residence out-of-state for the entire year as well. You also cannot spend 30 days or more in the state over the course of that year.
The criteria for Group B are more complex. To qualify, you must have spent at least 450 days out of the country over a period of 548 consecutive days. You, your spouse, and any children who are not adults can only spend 90 days or less in New York during that 548-day period, and any time spent in-state during a specific tax year must be proportional to the number of days spent outside New York in that same year. Determining that last threshold can be tricky, but a skilled accountant should be able to help.
Nonresidents of New York
If you were not a resident of New York for any part of the year or met either group of criteria listed above, you will be considered a nonresident for New York State tax purposes. That in and of itself does not absolve you of all responsibility to the state, however; you will be required to file Form IT-203, Nonresident and Part-Year Resident Income Tax Return, if you had NY-based income above a certain level, want to claim a refund or certain credits, or had a net operating loss with some bearing on your personal income taxes for the year.
Part-Year Residents of New York
Essentially, if you qualify as a resident or nonresident for only a portion of the tax year, you will be considered a part-year resident of New York. The income tax filing requirements for this type of resident are appropriately mixed: if you earned any income while a resident or had any New York-based income while not a resident, you will have to file Form IT-203. Other circumstances may require you to file a state tax return as well; a qualified professional can help you determine your state income tax obligations.
Federal Income Tax Requirements for Americans Living Overseas
It’s important for expats to remember that their obligations to the U.S. government don’t stop at the state level. Even if you live in another country, you will have to file a federal income tax return if you are still a citizen, as the U.S. taxes based on citizenship instead of location. You will also likely need to report financial assets held overseas, such as bank accounts valued at greater than $10,000.
That said, there are a few advantages to being an expat. The foreign earned income exclusion is probably the most popular of these benefits; it allows you to deduct more than $100,000 from your taxable income, as long as it is active income (e.g., money earned through employment, not rent or other passive forms of income). There are also provisions that allow you to deduct your housing costs, further reducing your tax burden. If you live outside the U.S. and would like to know more about how you can save money on your state and federal tax obligations, the experts at U.S. Tax Help are standing by to assist you.
International Tax Specialists Serving American Expats Living Abroad
Considering the many complications that come with filing taxes while living in another country, an accountant for expats can be a useful thing. Luckily, the team of international tax specialists at U.S. Tax Help has decades of experience helping expats and foreign citizens navigate the complexities of the American tax system, and we can put that knowledge to work for you, too. To learn more about the services available at U.S. Tax Help or to speak with a qualified tax professional, visit us online or call this link – get in touch today.
Expats have to deal with a whole host of tax concerns that domestic Americans don’t, not only when filing an income tax return but also when reporting assets and financial holdings. For U.S. citizens living abroad, that means a lot more paperwork – and a lot more potential for costly mistakes or oversights. This is especially true when state taxes are involved, such as for those who lived in California recently. If the Golden State considers you a target for taxation, you may owe a significant sum before you even begin to look at your federal tax burden. Whether you recently moved or left California behind long ago, you may wonder: Do I have to file California state taxes if I live abroad? Continue reading as the international tax pros at U.S. Tax Help provide an answer.
Who Has to File State Taxes in California?
The requirements for filing an income tax return for expats can vary widely from state to state. Aside from those states that don’t have an income tax, most are willing to consider you a nonresident – meaning that you would be largely exempt from state taxes – as long as you can show that you lived elsewhere for at least six months out of the tax year; unfortunately, California does not belong to either group.
California divides people into three classifications for the purpose of taxation: residents, part-year residents, and nonresidents. The first two groups almost certainly have to file a return with the state; for nonresidents, it will depend on whether you earned any income from within California. The state looks at the following criteria when determining a person’s tax status:
Resident
The label of “resident” applies to two specific groups in California – those present in California indefinitely, and those with a domicile in California but who are outside the state for a “temporary or transitory purpose.” Under the legal definition, a “domicile” is the place where you have intentionally and indefinitely established yourself and your family.
Part-Year Resident
Pert-year residents exist in the grey area between residents and nonresidents. Basically, if you were a resident of California at any point in the tax year, you are likely considered a part-year resident. This generally means that you will be taxed on worldwide income for the period in which you lived in California, plus any California-based income you might have received while living elsewhere.
Nonresident
If you’re just in California temporarily, you are probably considered a nonresident; this applies even if you come to the state for work but do not establish a domicile. Nonresidents are taxed on their California-based income, but that’s about it.
Safe Harbor Exceptions for Taxpayers Living Overseas
The above categories include general definitions that apply to most taxpayers, but determining a person’s exact tax status can be tricky in certain cases. For example, there are instances where a person with a home in California can be treated as a nonresident, provided they meet certain criteria. This is referred to as “safe harbor.”
Under the California tax code, a resident of the state can be treated as a nonresident as long as they leave for the purpose of employment and maintain a residence outside the state for at least 546 consecutive days. This applies even if a taxpayer living outside the U.S. has a domicile in California or a spouse or children who remain in the state.
One thing to note is that temporary visits home do not interfere with your 546-day count, up to a point. As long as your trips to California add up to less than 45 days in-state during the tax year, you can still qualify for the safe harbor exemption. A knowledgeable accountant can help you figure out whether you can benefit from this provision.
Federal Tax Requirements for American Expats
In addition to any state-based filings you may be expected to submit, remember that you probably owe quite a few forms to the IRS. This includes a federal income tax return for expats, as the U.S. taxes people based on citizenship and not where in the world they live. Those with accounts in a foreign bank will likely have to report those assets to the IRS as well – either through a Report of Foreign Bank and Financial Accounts (FBAR) or Form 8938, Statement of Specified Foreign Financial Assets.
If you have a financial interest in, or control over, one or more foreign bank accounts that had a combined value of $10,000 or more at any point during the tax year, you will have to submit an FBAR to the Financial Crimes Enforcement Network using FinCEN Form 114. Those with more significant financial assets totaling in the hundreds of thousands of dollars may have to also file IRS Form 8938 in compliance with the Foreign Account Tax Compliance Act (FATCA). If you are unsure whether either of these applies to you, or if you’d like to learn more about what exemptions and deductions you might qualify for as an expat, contact the specialists at U.S. Tax Help right away.
International Tax Assistance Available Today from U.S. Tax Help
Navigating the nuances of the U.S. tax code can be challenging – all the more so when you also have a state’s stringent requirements to meet. If you or someone you know lives abroad but is taxed in the U.S., or in the state of California specifically, the team of skilled accountants at U.S. Tax Help are available to provide assistance. With decades of experience in international tax preparation and planning, the team at U.S. Tax Help can make sure you stay in full compliance with the law while working to secure every deduction, exemption, exclusion, and tax credit for which you qualify. To hear more about our services or to speak with a qualified tax professional, visit us online or call this link – get in touch today.
At least some Canadians may be aware that the United States’ method of taxation is unique among all other developed nations. That is, U.S. individuals are generally taxed on the basis of their citizenship rather than on the basis of an economic nexus. Therefore, individuals with U.S. citizenship are typically liable for U.S. taxes on foreign income – even if they never set foot in the United States during the tax year.
In many cases, taxpayers are aware that they will need to file U.S. taxes to leverage provisions of international tax treaties to reduce or eliminate potential double taxation. However, when a person does not realize that he or she has U.S. citizenship, the ingredients for a potentially serious tax mistake are present. In particularly egregious cases, the individual could face tens or hundreds of thousands of dollars in back taxes and penalties.
If you are a resident of Canada or another nation and are concerned about U.S. taxes due to potential dual citizenship, Ted Kleinman and U.S. Tax Help may be able to assist.
Are You a Canadian Citizen Who is also Accidentally American?
As some Canadians may be aware, there are several ways that one can obtain U.S. citizenship. Most cases involving “accidental” Americans stem from citizenship through birth. That is, individuals who are born to a U.S. parent or have U.S. grandparents will also be a U.S. citizen at birth will also be U.S. citizens. Additionally, individuals who are born on U.S. soil receive citizenship at birth. Finally, if a parent became a naturalized U.S. citizen while a child was under the age of 18 and a green card holder, he or she may also be a citizen without realizing it.
U.S. Citizens in Canada Typically Need to file Taxes
In light of the fact that individuals can “accidentally” acquire U.S. citizenship, the United States’ unique form of taxation is an important consideration. That is, individuals who are unaware of their U.S. citizenship can incur U.S. tax obligations simply by working and earning money in Canada. In fact, the tax filing threshold is extremely modest so most people engaged in full- or even part-time employment will have an obligation to file taxes.
Taxpayers who fail to file taxes and make a tax payment to satisfy existing tax obligations due and owing by the expat tax deadline will face interest. Furthermore, these taxpayers may face additional penalties for non-filing of taxes that can further inflate the tax obligation owed.
U.S. Citizens Living Abroad May need to File FBAR and FATCA
For individuals who are U.S. citizens without realizing it, perhaps the greatest and the potentially most costly mistake is the failure to make required offshore account disclosures. The duty to disclose foreign accounts is often duplicative since taxpayers may need to file both a Foreign Account Tax Compliance Act (FATCA) disclosure and a FinCEN Report of Foreign Bank Account (FBAR). Each obligation is independent. Therefore disclosing one account via FBAR does not satisfy the duty to disclose the same or other accounts to satisfy FATCA and vice-versa.
In general, the obligation to file FBAR exists when the aggregate value of the taxpayer’s covered accounts exceeds $10,000. One’s obligation to file FATCA is dependent on both one’s tax filing status and whether the taxpayer qualifies as a foreign resident. A CPA or tax professional can help you determine if you have an obligation to file FBAR, FATCA, or both.
Generally speaking, penalties for foreign account reporting failures are harsh. Even an accidental failure to file FBAR can result in a penalty of $10,000. More serious failures can result in a penalty of the greater of 50% of the account balance or $100,000. Penalties for FATCA failures can also result in a $10,000 penalty followed by additional penalties for continued non-compliance. Due to the potential for huge fines, maintaining compliance with these obligations is essential.
Work with a CPA Experienced in International Tax Issues
At U.S. Tax Help, CPA Ted Kleinman has helped many expatriates achieve or maintain compliance with their U.S. tax obligations. If you are concerned about being an accidental American living in Canada or in other foreign nations, Ted can help you assess whether you have a tax and foreign disclosure obligation. To schedule a review of your concerns, call U.S. Tax Help at (541) 923-0903. You can also contact Ted by completing the web form in the upper right
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