# I know to file with the IRS - but what about State Tax?



## wka

I am American, living in Greece and have since 2009. I'm married to a Greek and I file every year with the IRS (I don't earn anything in either country, we live on my husband's income, but I will continue to file and report that as well as interest earnings and such). We also file (jointly) in Greece. I visited the US for a week in 2010 but not otherwise. During the time that I visited in 2010, I stayed in a hotel in Washington, DC and at my parents house in Virginia.

I will continue to file a federal return with the IRS. But what about state income taxes? I use my parents' Virginia address as an "American address" for my financial institution and a few other places, but I have no real connection to the state of Virginia. I am not registered to vote there and I don't have a driver's license or anything like that there.

So... what does one do about the state income tax issue?


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## Bevdeforges

As long as you are resident in Greece, you have no reason to worry about state taxes. You only file and pay state taxes when you are resident in that state.

You're entitled to register to vote using your last residence before you left the US - if you wish to.

You actually don't need to use a US address for any particular reason. You could, if you wish, give your financial institutions a change of address to where you are living in Greece. (Some banks have trouble fitting foreign addresses into their computer - but that's their problem.)
Cheers,
Bev


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## wka

Thanks Bev. Last year I reported to VA but didn't end up paying anything. So it will be one less hassle. I've just always had federal and state income taxes in my brain as two sides of the same coin and felt weird about doing one without the other. Thanks for the info!


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## RødGrød

Bevdeforges said:


> As long as you are resident in Greece, you have no reason to worry about state taxes. You only file and pay state taxes when you are resident in that state.
> 
> You're entitled to register to vote using your last residence before you left the US - if you wish to.
> 
> You actually don't need to use a US address for any particular reason. You could, if you wish, give your financial institutions a change of address to where you are living in Greece. (Some banks have trouble fitting foreign addresses into their computer - but that's their problem.)
> Cheers,
> Bev


It's actually not that simple. Virginia is one of the many US states that distinguishes between "residence" and "domicile". Domicile states consider you liable for state taxes if they believe you to be domiciled in that state, even if your residence is a foreign country. 

Jane Bruno has written a free, excellent .pdf guide to US taxes for expats (google "expat's guide to us taxes") with a section on state taxes for expats. I like this guide because it is written in normal-people language. The guide also gives the contact information for each state so you can find out how to "undomicile" yourself if necessary (don't own property there, don't have a drivers license there, etc.).


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## wka

RodGrod, very useful - thanks for that. I will look into it - I certainly should be able to "undomicile" myself as I have no connection to Virginia beyond using the address from time to time for convenience to avoid confusion and to combine shipments to Greece.


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## RødGrød

I was surprised to learn how different the state tax laws are from state to state. Some states let you go easily if you move abroad, while other states require you to "undomicile" yourself. If you even are required to file, some states let you use a FEIE and tax credits, while other states do not. And, of course, some states don't even have an income tax. Nice.


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## Bevdeforges

RødGrød said:


> I was surprised to learn how different the state tax laws are from state to state. Some states let you go easily if you move abroad, while other states require you to "undomicile" yourself. If you even are required to file, some states let you use a FEIE and tax credits, while other states do not. And, of course, some states don't even have an income tax. Nice.


State taxes are really all over the place. And, there are still some "disputes" about what constitutes residence/domicile between the states and between state and federal requirements. 

One thing to know, however, is that being registered to vote in a state does NOT mean you are liable for state income taxes.

There is also the rather practical issue of just what options the state would have to pursue you for state income taxes once you are resident overseas. Unless you have sources of income in the state, there's not much they can do until and unless you move back to that state.

Some people who live in certain "tri-state areas" may have to file two or even three different sets of state income tax returns - and the situation for avoiding double taxation is very similar to what you get when you're filing both US and foreign income taxes. Good training, I suppose, for moving overseas!
Cheers,
Bev


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## RødGrød

Bevdeforges said:


> There is also the rather practical issue of just what options the state would have to pursue you for state income taxes once you are resident overseas. Unless you have sources of income in the state, there's not much they can do until and unless you move back to that state.


It seems that many people like to keep the "moving back" option open (not me!), which is why I think it's a good idea for them to protect themselves by either paying their state taxes or making sure their domicile is somewhere else. For example, my home state doesn't give any exemptions or credits for foreign income. So if I had moved here to Denmark on a temporary assignment, knowing that I would be moving back to my home state after 2-3 years, I would have had to pay the 40%+ Danish taxes plus 3-5% state taxes. Argh.

If you never move back then I agree, it's probably not an issue. Unless maybe you inherit from family in your state? I'm not sure how all that works.


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## Bevdeforges

RødGrød said:


> It seems that many people like to keep the "moving back" option open (not me!), which is why I think it's a good idea for them to protect themselves by either paying their state taxes or making sure their domicile is somewhere else. For example, my home state doesn't give any exemptions or credits for foreign income. So if I had moved here to Denmark on a temporary assignment, knowing that I would be moving back to my home state after 2-3 years, I would have had to pay the 40%+ Danish taxes plus 3-5% state taxes. Argh.
> 
> If you never move back then I agree, it's probably not an issue. Unless maybe you inherit from family in your state? I'm not sure how all that works.


I wouldn't be too quick to keep up with state taxes, even if I had thoughts of someday moving back there. In the US, when you move address from one state to another, you *don't* keep paying taxes to your old state "just in case" you ever decide to move back.

If you still have income property or other sources of income subject to state income tax, I'd switch as soon as possible to filing a "non-resident" form for the state and make sure I was filing my US federal returns from my foreign residential address. But if you aren't hanging onto a home or business back there, I'd cut my ties as quickly as I could. 

You can inherit from family anywhere in the US without ever having been resident in the state they were in. It's usually the estate that pays the taxes before the assets and/or cash can be distributed to the heirs - and plenty of people have heirs out of state or out of the country.
Cheers,
Bev


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## RødGrød

Bevdeforges said:


> I wouldn't be too quick to keep up with state taxes, even if I had thoughts of someday moving back there. In the US, when you move address from one state to another, you *don't* keep paying taxes to your old state "just in case" you ever decide to move back.


While logical, this unfortunately does not apply for domicile states. Domicile states consider you a domiciled resident even if you move to a foreign country. If you move to a different state, then there are no problems. It even applies to foreign service and military personnel. Insane, but true:

_•A resident of Virginia who accepts employment in another country is a domiciliary resident, unless appropriate steps are taken to abandon Virginia as the state of domicile._ (from Virginia's own tax site, Residency Status -- Commonwealth of Virginia Department of Taxation)

So yeah, the way to play it safe is to cut all property ties, etc and talk to your state and make sure you've done it right. I know lots of Americans who keep a US drivers license using a family address in the States. I wouldn't do that. And don't vote for state representatives:

_Voting for candidates for federal offices does not affect your federal or state tax liability. Voting for candidates for state or local offices could affect your state tax liability._ (from the US state department website for overseas voters).





Bevdeforges said:


> You can inherit from family anywhere in the US without ever having been resident in the state they were in. It's usually the estate that pays the taxes before the assets and/or cash can be distributed to the heirs - and plenty of people have heirs out of state or out of the country.
> Cheers,
> Bev


What I meant was, that if a state consideres you domiciled and you haven't been filing your state taxes, then inheriting something in that state could be one way for them to get at the money they think you owe. I don't know if this could happen, but I would rather avoid the hassle. That is why I recommend that people get themselves properly undomiciled even if they are never moving back.


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## Bevdeforges

Do you have any sort of listing of "domicile states"? Because apparently I've never lived in one. It's not the "usual" standard, in any event.

The thing about keeping a driver's license from the States is also important to think through. There are other problems you can have other than the tax domicile issue.

As far as voting is concerned, from overseas you are supposed to vote from the last residence you had before you left the US. And you can only vote (as a foreign resident) for federal offices - which means President, US Senate and the US Congressional representative for the district in which your last US residence is.

With all the fuss over there about requiring picture i.d.'s for voting, I can't believe they haven't thought of cracking down on voting from overseas (by absentee ballot that you mail in) because that has to be pretty easy to mess with. But if they do that, they have to find another way for the troops to vote from overseas.
Cheers,
Bev


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## RødGrød

Bevdeforges said:


> Do you have any sort of listing of "domicile states"? Because apparently I've never lived in one. It's not the "usual" standard, in any event.


There are 28 states that use some definition of domicile. Some of them make it easier to break domicile than others. Like I wrote, it's not an issue when you move from state to state, so you may have lived in one without realizing it. It's not the sort of thing most people have to think about when living in the US.

Jane Bruno's "The Expat's Guide to US taxes" from 2009 has an excellent section on state tax laws *with information for every state and DC*. I like Jane Bruno because she doesn't scare-monger and she presents the facts clearly. She occasionally writes tax articles for the ACA.

I don't know if I'm allowed to link to the guide, but if I google "The Expat's Guide to US taxes" her .pdf is the first link.


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## byline

RødGrød said:


> It's actually not that simple. Virginia is one of the many US states that distinguishes between "residence" and "domicile". Domicile states consider you liable for state taxes if they believe you to be domiciled in that state, even if your residence is a foreign country.
> 
> Jane Bruno has written a free, excellent .pdf guide to US taxes for expats (google "expat's guide to us taxes") with a section on state taxes for expats. I like this guide because it is written in normal-people language. The guide also gives the contact information for each state so you can find out how to "undomicile" yourself if necessary (don't own property there, don't have a drivers license there, etc.).


Thanks for this information. It's a very comprehensive, well-written guide!


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## Poser

RødGrød said:


> There are 28 states that use some definition of domicile. Some of them make it easier to break domicile than others. Like I wrote, it's not an issue when you move from state to state, so you may have lived in one without realizing it. It's not the sort of thing most people have to think about when living in the US.
> 
> Jane Bruno's "The Expat's Guide to US taxes" from 2009 has an excellent section on state tax laws *with information for every state and DC*. I like Jane Bruno because she doesn't scare-monger and she presents the facts clearly. She occasionally writes tax articles for the ACA.
> 
> I don't know if I'm allowed to link to the guide, but if I google "The Expat's Guide to US taxes" her .pdf is the first link.


Why wouldn't you be able to link to it. The there is like this link button write above the text screen. Jane Bruno's Guide by googling it. 

May be you thought it was against the rules? Maybe. There seem to be a lot of rules to follow around here. But then why is there the link button? Funny.

Any case, I'll have a look at the guide. It may be useful. Thanks.


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## Bevdeforges

I've skimmed over the Jane Bruno guide - at least the part on state taxes - and I'd just be careful about taking things too literally. The idea of remaining "domiciled" in a state seems to be related to leaving property or business interests behind and may or may not apply if you have legitimately up and moved to another country.

I know that California is notorious for trying to hang onto its tax residents. But the year I moved, I filed a "part-year" state return (covering the year up to the date I left the state for Europe). They have a strange way of making you partition your income for that year but otherwise it's pretty straight-forward.

I didn't sell my house until the following year, so had to file a non-resident return for California for that year to pay the taxes on the sale of the house. (This was back before you could exclude gains on the sale of a personal residence - but I think California handles this differently from the feds anyhow.)

And then I was done! All I can say is that if you're not leaving any property or business interests behind, and you aren't trying to maintain some form of residence back in the US for some reason, look into the "correct" way to file your final state income tax return (usually either a part-year return or some variation of an NR non-resident return) so as to indicate that you're "outta there."
Cheers,
Bev


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## wka

After some further thought, I'm leaning towards maintaining my domicile in Virginia - I believe it may come in handy if my Greek husband ever needs to apply for a green card to live & work in US. It costs me nothing to file every year; as long as I continue to file, I suppose I should have no problems.


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## Poser

Apparently, I read somewhere but I can't really remember where, that if the IRS audits an overseas American guy, you have to go to the nearest office in Washington DC in person with all your paperwerk, not to the nearest state. I supose that's pretty conventient for me, cauze I live in Toronto and that's only about 12 hours by car. But that would be a bummer deal for someone living in BC. I guess they'd have to fly, but I suppose the cost would be justified, since it is our great privilege to have US citizenship.


I think that means that for tax purposes, overseas people are considered residents of Washington DC. That would explain why they don't have representation in Congress because Washington residents only have a delegate not representative. So that means we don't have the privilege anymore of State citizenship, just Federal citizenship; and we are happy because the United States will let us go back their and live if we keep up with our taxes.

Suppose I left California to go to Nevada. Do I still have to pay California State Tax? Or does Nevada have the right to tax my income? If Nevada says I don't have to pay any taxes on income, shouldn't CaLEEfornia (new name since Arnie took over) have the right to tax my income, especially if I was born in California, I'd be a Califronian for life. So I suppose it works the same if I am in Ontario. The United States has the right to tax me in Ontario because I now live really in Washington DC for tax purposes. I was born in the United States so I always have the right to return to the US.


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## SteveOdem

Poser said:


> Apparently, I read somewhere but I can't really remember where, that if the IRS audits an overseas American guy, you have to go to the nearest office in Washington DC in person with all your paperwerk, not to the nearest state. I supose that's pretty conventient for me, cauze I live in Toronto and that's only about 12 hours by car. But that would be a bummer deal for someone living in BC. I guess they'd have to fly, but I suppose the cost would be justified, since it is our great privilege to have US citizenship.
> 
> 
> I think that means that for tax purposes, overseas people are considered residents of Washington DC. That would explain why they don't have representation in Congress because Washington residents only have a delegate not representative. So that means we don't have the privilege anymore of State citizenship, just Federal citizenship; and we are happy because the United States will let us go back their and live if we keep up with our taxes.
> 
> Suppose I left California to go to Nevada. Do I still have to pay California State Tax? Or does Nevada have the right to tax my income? If Nevada says I don't have to pay any taxes on income, shouldn't CaLEEfornia (new name since Arnie took over) have the right to tax my income, especially if I was born in California, I'd be a Califronian for life. So I suppose it works the same if I am in Ontario. The United States has the right to tax me in Ontario because I now live really in Washington DC for tax purposes. I was born in the United States so I always have the right to return to the US.



Virtually all exams of an individual who happens to be resident outside the US can be handled by an authorized IRS Enrolled Agent, CPA or attorney, who will either handle it all by moving it to his office or by mail, fax and phone with the examiner.


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## Poser

SteveOdem said:


> Virtually all exams of an individual who happens to be resident outside the US can be handled by an authorized IRS Enrolled Agent, CPA or attorney, who will either handle it all by moving it to his office or by mail, fax and phone with the examiner.


Hi that's nice to hear. Then if you make a mistake you can just go to your mail, fax or phone. But if an in person audit is required, what happens then? Do you go to your state of residence? Not CaLEEfornia, eh? Do you go to Washington D. C. or does the Washington D. C. go to you?

Do you work for the IRS? From your signature, I'd say I better be careful what I says to you.


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## Bevdeforges

Poser said:


> Hi that's nice to hear. Then if you make a mistake you can just go to your mail, fax or phone. But if an in person audit is required, what happens then? Do you go to your state of residence? Not CaLEEfornia, eh? Do you go to Washington D. C. or does the Washington D. C. go to you?
> 
> Do you work for the IRS? From your signature, I'd say I better be careful what I says to you.


You do NOT have to go to an IRS office in the US if you are audited. It depends entirely on what the question is regarding your returns. Many queries about tax filings are handled exclusively by mail. There is also an International Taxpayer Advocate - see Publication 1546 or go to Taxpayer Advocate Service for more information.

And BTW, an IRS "enrolled agent" does not work for the IRS. It's someone who has passed tests proving their tax knowledge and then is qualified to prepare taxes and to represent their clients with the IRS.
Cheers,
Bev


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## Poser

Bevdeforges said:


> You do NOT have to go to an IRS office in the US if you are audited. It depends entirely on what the question is regarding your returns. Many queries about tax filings are handled exclusively by mail. There is also an International Taxpayer Advocate - see Publication 1546 or go to Taxpayer Advocate Service for more information.
> 
> And BTW, an IRS "enrolled agent" does not work for the IRS. It's someone who has passed tests proving their tax knowledge and then is qualified to prepare taxes and to represent their clients with the IRS.
> Cheers,
> Bev


Thanks for that answer Bev. But I've heard that some audits take place in Washington DC. Have you never heard of that? You say that many inquiries are handled by mail. But you don't say that they all are? So does that mean that no one ever gets audited in Washington DC? When did the IRS stop requiring that people show up there for an in-person audit?

I was wondering if you are an "enrolled agent". You seem very knowledgable.


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## Bevdeforges

Poser said:


> Thanks for that answer Bev. But I've heard that some audits take place in Washington DC. Have you never heard of that? You say that many inquiries are handled by mail. But you don't say that they all are? So does that mean that no one ever gets audited in Washington DC? When did the IRS stop requiring that people show up there for an in-person audit?
> 
> I was wondering if you are an "enrolled agent". You seem very knowledgable.


No doubt "some" audits do take place in DC. But I've never heard of anyone being summoned to DC from a foreign residence. IRS Audits if you're curious. This page references a slew of other information, from videos to factsheets regarding audits.

Do note this part:



> An audit may be conducted by mail or through an in-person interview and review of the taxpayer's records. The interview may be at an IRS office (office audit) or at the taxpayer's home, place of business, or accountant's office (field audit).


Cheers,
Bev

PS No, I'm not an enrolled agent. Nor do I play one on television. I am an accountant by trade, and used to work for one of the big CPA firms in the US. Technically, I'm a CPA back in the US, certified, but not licensed. (Kind of like "shaken, not stirred.")


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## SteveOdem

Poser said:


> Hi that's nice to hear. Then if you make a mistake you can just go to your mail, fax or phone. But if an in person audit is required, what happens then? Do you go to your state of residence? Not CaLEEfornia, eh? Do you go to Washington D. C. or does the Washington D. C. go to you?
> 
> Do you work for the IRS? From your signature, I'd say I better be careful what I says to you.



Hehehe we ALL work for IRS, but no, by an Act of Congress, I represent taxpayers to IRS and all 50 states. I'm not on their payroll.

I have many clients whose have no US residence.

The vast majority of individual audits do not require the taxpayer presence. IRS must jump through several hoops to get to such a point, and we may resist it.


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## SteveOdem

Poser said:


> Thanks for that answer Bev. But I've heard that some audits take place in Washington DC. Have you never heard of that? You say that many inquiries are handled by mail. But you don't say that they all are? So does that mean that no one ever gets audited in Washington DC? When did the IRS stop requiring that people show up there for an in-person audit?
> 
> I was wondering if you are an "enrolled agent". You seem very knowledgable.


IRS has roughly 100,000 employees. The vast majority are spread all over the US and there are several foreign offices. 

Correspondence audits are all by mail, there are a lot of them. The ones I see here in Florida typically come out of the Cincinnati IRS campus. 

Other audits originate in the field offices, based on computer data and referrals.

For an audit to take place it DC it must either originate there as a local field office or get moved there from another office. National office has more "big picture" things to do.

A taxpayer in a foreign country who is selected for audit (I know of one in Israel, for example) would receive correspondence asking for specific documents. The correspondence would typically say either "mail to ...." or bring it to our office at ___, on date and time. The taxpayer should then engage competent representation, provide the representative with the letter and discuss the documents, and so on. 

There should be no problem with moving an office audit to the representative's office.


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## Poser

So neither Steve nor Bev have ever heard of anyone ever in their entire lives ever having to go to Washington DC for an audit from overseas. So does that mean if an in-person audit is required that you get your agent to do it? So I suppose that's pretty cheap to get someone to go and represent you in a Washington, DC audit, probably lots cheaper than flying there yourself--I mean I fly first class all the time and it only costs like $6000 to fly from a place like Hong Kong to Washington, an agent must be a hell of lot cheaper than that, eh?. So am I a resident of Ontario for tax purposes or a resident of Washington DC, in the eyes of the IRS? Or am I a resident of a state and should also pay their state taxes?


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## SteveOdem

Poser said:


> So neither Steve nor Bev have ever heard of anyone ever in their entire lives ever having to go to Washington DC for an audit from overseas. So does that mean if an in-person audit is required that you get your agent to do it? So I suppose that's pretty cheap to get someone to go and represent you in a Washington, DC audit, probably lots cheaper than flying there yourself--I mean I fly first class all the time and it only costs like $6000 to fly from a place like Hong Kong to Washington, an agent must be a hell of lot cheaper than that, eh?. So am I a resident of Ontario for tax purposes or a resident of Washington DC, in the eyes of the IRS? Or am I a resident of a state and should also pay their state taxes?



It's hard to imagine an overseas taxpayer being audited out of DC. It's hard to see how IRS would have appropriate resources there that are available for such an exam, when the resources are clearly available elsewhere. It's a matter of cost - effective use of limited resources. DC is a high-cost location compared with, say, Cincinnati, Kansas City or Salt Lake City. And if I, as a taxpayer representative, get the exam moved to the IRS office that is 5 miles from my office, it's very cost effect for them, for me and, thus, for the taxpayer.


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## Bevdeforges

No, I have never heard of anyone being summoned to DC for an audit. Have you?

Actually, since this discussion seems to be no longer about state taxes, I think it's time to close it.
Cheers,
Bev


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