How Does the Timing of My Move Affect My Tax Residency Status and Filing Requirements?

How long you have lived somewhere might impact you come Tax Day, especially if you have recently moved.

The timing of your move could dictate your residency status and, by extension, tax filing requirements in the United States. Expats that move abroad will always have to file taxes with the IRS but will be eligible for perks if they pass either the bona fide residence or physical presence tests. Moving to another state will change your state filing requirements, but only if you are determined to be a resident of that state based on the amount of time you have lived there. There are additional residency status markers for those who move to the United States. After moving, you may be eligible to apply for an extension with the IRS, which could simplify determining your residency status.

For help filing your taxes, call the tax CPAs for American expatriates at US Tax Help today at (541) 362-9127.

The Timing of Your Move and Your Tax Residency Status and Filing Requirements

In the U.S., residency is generally based on the amount of time a person has lived in a specific place. For example, expats who move abroad can only benefit from certain expat-specific tax breaks if they are genuine residents of a foreign country. Tax filing requirements also differ when you move to another state within the U.S., as residency must be established before you lose your tax liability to your previous state of residence. These situations are often complicated, which is why seeking help with your tax return is important if you’ve recently moved.

Moving Abroad

Suppose you move abroad in November. When Tax Day rolls around in April, what will your tax liability be? Regardless of where you live, you will still have to report your income to the IRS if you remain an American citizen. That said, there are benefits available to expats, such as the foreign earned income exclusion (FEIE), which is based on residency. To qualify for the FEIE and similar benefits, expats must meet either the physical presence test or the bona fide residence test. Both of these tests require expats to be physically in a foreign country for the majority of a year. Depending on when you move abroad, you might not be able to claim the FEIE or the foreign tax credit. However, our tax CPAs for American expatriates can use other advantages available to expats, such as the automatic two-month filing extension and other possible extensions, to allow you to claim the FEIE and foreign tax credit and meet foreign residency requirements.

Moving to Another State

When moving to another state, it is important to consider the impact on your taxes. While your federal tax liability will remain the same, your state tax liability could differ based on where you live in the United States. Generally speaking, states consider a person to be a resident if they spend 183 days or more in that state, or about half of the year. Of course, you could theoretically spend the other half of the year in your previous state of residence, possibly making you liable for paying state taxes there. In addition to timing your move for tax implications, keeping property in your previous state of residence might cause you to have a tax liability there as well. This is also true for expatriates who move abroad and keep real estate or bank accounts in their previous state of residence.

Moving to the United States

Suppose you’ve recently moved to the United States and are unsure of your residency status for tax purposes. In that case, there is a test our tax CPAs can apply to your situation to determine whether or not you have a tax liability. First, we will use the substantial presence test. To pass this test, you must have been physically present in the United States for at least 31 days of the current tax year and 183 days of the last three years, including the current year. If you pass this test, you will have to file federal income tax in the United States, regardless of your citizenship status. Once you get a green card, residency will kick in immediately.

Can You Get a Tax Filing Extension if You Recently Moved?

With moving comes many frustrations and difficulties, and filing your taxes is most likely the last thing on your mind. Generally, filers can apply for an extension, which might make understanding their residency much easier.

The IRS allows tax filers to apply for a six-month extension. With this extension, you can file your federal tax return in October instead of April, as is the norm. Even if you get an extension, you will still have to estimate and pay your taxes on time, lest you risk incurring financial penalties from the IRS.

As previously mentioned, the IRS provides an automatic two-month filing extension for expats. In these instances, even when expats have already estimated and paid taxes, expats might be able to retroactively use credits, such as the foreign tax credit, to increase their refund while living abroad.

If you don’t actually owe any state taxes and just have to file your return, you will likely get an automatic six-month extension if you apply for an extension for your federal income tax return. That said, it is important to check with your previous state of residence and current state of residence, as making errors with reporting and filing could result in expensive penalties. Regardless of whether you are getting extensions or not, our tax accountants can verify your tax liability wherever you live, in or outside of the United States.

Call Our Tax Accountants Today

Call US Tax Help at (541) 362-9127 to learn more about your filing requirements from our tax CPAs for American expatriates.