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tideout
Joined: 12 Dec 2010
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 Posted: Mon Apr 25, 2011 10:02 am Post subject: US State taxes. The nightmare. Strategies or stories anyone? |
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Much to my surprise I've discovered that the Foreign Earned Income exemption is only an exemption on the Federal level. 
Your state is very likely indifferent to what the Feds (US government) has agreed to with SK or any other country for that matter. In short, the exemption you think you're entitled to may very well not mean anything on the State tax level.
The significant thing here is that it is state to state. There are 5 or so states that do not have any State taxes so you're safe in those states.
If you have established residency in a state your 1,2,5, 8 or more years in Korea (ir elsewhere) do not estabish you as a "non-resident" of that US state in many cases. Basically, the state's tax bill (and continuing of course) will follow you until you establish yourself in a new state. As a person trying to make a living overseas who merely had mail forwarded through the blood sucking state, I'm still in disbelief.
I got this info after talking with an attorney in the state tax office.
Maybe I'm the last to figure this out but I was really surprised by it. I'm guessing or wondering if people just don't file ever?
I'm now making plans to visit an old friend in a red state w/o taxes to start my "residency" there. The particular state is a drag to get a drivers license in w/o a utility bill so I'm likely to see money sucked out of my pocket on this deal.
Any experiences, strategies or anything on this? I'm trying not lose my sh*t over this......? |
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Bibbitybop
Joined: 22 Feb 2006
Location: Seoul
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| Posted: Mon Apr 25, 2011 12:12 pm Post subject: |
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| My state doesn't charge me if I owe 0 Federal taxes. They even told me to stop submitting paperwork if I don't have any taxable income at the federal level. |
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tideout
Joined: 12 Dec 2010
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| Posted: Mon Apr 25, 2011 1:28 pm Post subject: |
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| Bibbitybop wrote: |
| My state doesn't charge me if I owe 0 Federal taxes. They even told me to stop submitting paperwork if I don't have any taxable income at the federal level. |
That's interesting. I was told that the state cares about adjusted gross income line. It's zero on the 1040 because of the 2555 calculations. I guess your state is cool with it...mine, a mid atlantic state is dogging me like I can't believe. |
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Swampfox10mm
Joined: 24 Mar 2011
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| Posted: Mon Apr 25, 2011 3:17 pm Post subject: |
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| Bibbitybop wrote: |
| My state doesn't charge me if I owe 0 Federal taxes. They even told me to stop submitting paperwork if I don't have any taxable income at the federal level. |
Same here. Our state told us to keep the paperwork in a drawer in case it was ever needed. |
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tideout
Joined: 12 Dec 2010
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| Posted: Mon Apr 25, 2011 4:21 pm Post subject: |
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| Swampfox10mm wrote: |
| Bibbitybop wrote: |
| My state doesn't charge me if I owe 0 Federal taxes. They even told me to stop submitting paperwork if I don't have any taxable income at the federal level. |
Same here. Our state told us to keep the paperwork in a drawer in case it was ever needed. |
If you don't mind my asking - are you coming up with "0" then in your adjusted gross income on a 1040? This would be the figure after you backout any income on line 21 for the 2555 form.
Sorry if this is too detailed a question but any info may help.
Dan |
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peacemaker
Joined: 19 Sep 2006
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| Posted: Mon Apr 25, 2011 6:56 pm Post subject: |
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| After filling out the 2555, if you have not earned any money in the US, you should come up with "0" for line 22 of your 1040 (total income), as well as line 38 (adjusted gross income). |
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tideout
Joined: 12 Dec 2010
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| Posted: Tue Apr 26, 2011 4:54 am Post subject: Thanks |
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| peacemaker wrote: |
| After filling out the 2555, if you have not earned any money in the US, you should come up with "0" for line 22 of your 1040 (total income), as well as line 38 (adjusted gross income). |
Thanks for responding. If you dont mind my asking, do you live in a state that normally has state taxes?
Just curious if youre getting that break due to different state rules?
The state im in doesnt recognize the foriegn exemption of the us gov. But ill have tocheck it out again as maybe all that matters is the adjusted gross line.
Thanks for any help. Really appreciated. |
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peacemaker
Joined: 19 Sep 2006
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| Posted: Tue Apr 26, 2011 8:36 pm Post subject: Re: Thanks |
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| tideout wrote: |
| peacemaker wrote: |
| After filling out the 2555, if you have not earned any money in the US, you should come up with "0" for line 22 of your 1040 (total income), as well as line 38 (adjusted gross income). |
Thanks for responding. If you dont mind my asking, do you live in a state that normally has state taxes?
Just curious if youre getting that break due to different state rules?
The state im in doesnt recognize the foriegn exemption of the us gov. But ill have tocheck it out again as maybe all that matters is the adjusted gross line.
Thanks for any help. Really appreciated. |
I'm from Minnesota, typically considered a high-tax state. No idea whether or not MN recognizes the foreign income exclusion, but the information I gave for the 1040 is the same regardless of your state. The 2555 income is subtracted in the calculation to come up with your adjusted gross income. |
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I-am-me
Joined: 21 Feb 2006
Location: Hermit Kingdom
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| Posted: Tue Apr 26, 2011 9:37 pm Post subject: |
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| Talk to 10 people in 10 gov't agencies and you are going to get 10 different answers. Its all a beauraucratic mess. Your income is exempt, end of story. People want to make it out to be so difficult when it isnt. |
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northway
Joined: 05 Jul 2010
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| Posted: Tue Apr 26, 2011 9:45 pm Post subject: |
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| I-am-me wrote: |
| Talk to 10 people in 10 gov't agencies and you are going to get 10 different answers. Its all a beauraucratic mess. Your income is exempt, end of story. People want to make it out to be so difficult when it isnt. |
From the Massachusetts Department of Revenue:
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| Massachusetts Treatment For Massachusetts Residents Working Overseas: Pursuant to the provisions of M.G.L. Chapter 62, Section 2(a)(1)(C),Massachusetts does not allow the foreign earned income exclusion. However, Massachusetts residents who are taxed on income earned in Canada or in any of its provinces are entitled to claim credit for such taxes after accounting for any federal credit. See Income Tax Paid to Other Jurisdiction. |
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working title
Joined: 20 Apr 2010
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| Posted: Wed Apr 27, 2011 3:06 am Post subject: |
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California has one of the most stringent laws when trying to become a "non-resident" of the state
For the OP, my tax attorney told me the same when I went back and I almost s$%t myself. Luckily, I'm able to claim non-residency because I was out of the country AND state for the required amount of time. (For Federal taxes, you can only be in country for a max. of 30 days every 12 months and for CA State taxes, you can only be in state for a max. of 45 days every 18 months - as I remember, please correct me if I'm wrong).
For California, anything that ties you to the state (a driver's license, registered voter, library card, bank accounts, etc) will give the state more power to make you one of the "residents." Luckily I haven't voted in the past two cycles and have no library card  It's a big grey area, and the CA Franchise Board is a big mess.
So the OP is right, everyone needs to check their STATE laws, or else they're going to get dinged when "they enter the system" again.
WT |
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jonbowman88
Joined: 20 Jan 2009
Location: gwangju, s korea
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| Posted: Wed Apr 27, 2011 3:31 am Post subject: |
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It does depend on your state. Pennsylvania, the state I'm from, is one of the strictest. I had to pay both state and local taxes my first year here. My accountant advised me to cancel my drivers license and unregister to vote. That way the state can't come after you. Some of you might be surprised, but the state can come after you if they choose. The $90k deduction is only for federal income.
My accountant also advised me to change my address from PA, to Florida or Texas if I had a relative living there. These states do not required you to pay tax on foreign earned income. |
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tideout
Joined: 12 Dec 2010
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| Posted: Wed Apr 27, 2011 4:57 am Post subject: |
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| jonbowman88 wrote: |
It does depend on your state. Pennsylvania, the state I'm from, is one of the strictest. I had to pay both state and local taxes my first year here. My accountant advised me to cancel my drivers license and unregister to vote. That way the state can't come after you. Some of you might be surprised, but the state can come after you if they choose. The $90k deduction is only for federal income.
My accountant also advised me to change my address from PA, to Florida or Texas if I had a relative living there. These states do not required you to pay tax on foreign earned income. |
You and working title seem & Some others seem to have the same info i have. I deregistered myself from voting in my state yesterday and im cancelling my library card today. Im "moving" to my new red state home in a week. Ill try to get a new license but if its too difficult i might cancel thIs current license.
Other poster is corect - 10 different state employees=10 diff answers. |
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jonbowman88
Joined: 20 Jan 2009
Location: gwangju, s korea
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| Posted: Wed Apr 27, 2011 5:10 am Post subject: |
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| As states get deeper and deeper into debt, they might start coming after people more. There might be a lot more people like you in the future that are getting harrassed by their state, because almost everyone I talk to here belives they're not responsible for state income. It's stupid, but what are you going to do, other than take steps to get out of it. |
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northway
Joined: 05 Jul 2010
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| Posted: Wed Apr 27, 2011 5:37 am Post subject: |
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| jonbowman88 wrote: |
| As states get deeper and deeper into debt, they might start coming after people more. There might be a lot more people like you in the future that are getting harrassed by their state, because almost everyone I talk to here belives they're not responsible for state income. It's stupid, but what are you going to do, other than take steps to get out of it. |
Never move back to the state that my residency is in because I haven't actually lived there since I was 18. |
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