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US STATE Income Taxes for an American Expat in Bangkok?


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Lately, I have been contemplating and researching the implications of being an expat as it relates to state income taxes (no problem understanding federal income taxes). It seems that many states may consider someone to be domiciled in their respective state even if that individual is no longer residing in that state. If someone still has a banking relationship, and/or is still registered to vote and has a driver’s licensed issued from that state, my understanding is that the state in question could expect that individual to file and pay state income taxes (again even if they no longer live there)…. 

As no doubt every American expat understands, the United States requires every American expat to file a US federal tax return for their worldwide income (meaning including income not earned in the US). This citizen-ship based demand for tax filing is being decried by many, and is the toughest tax demand on expats of any country. Only if your annual income is less than USD $9350 (single person) or USD $18,700 (joint return) are you exempt from filing. You will not have to pay taxes on income earned outside of the US if it is $92,900 or less, but you are still required to report to the IRS what you earned even if it is very little (this is truly an over reach by the US government, but as an expat we don’t have a representative going to bat for our interests).

And most expats are aware of the FBAR rules that require expats to report any bank account or other financial assets that have an accumulative value of USD $10,000 anytime within the year.

Another question arises about STATE income taxes. Many States, like my home state of California, are very aggressive about abstracting income taxes from their residents, and often the burden of proof about residency is on the citizen. You are guilty until proven innocent, so what is the situation for an expat that used to live in the State and maintains a mailbox or friends/relatives address in the State as a connection back home?

Some states, such as Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming, have no state income tax at all. Consequently, no one that is from one of these states and maintains an address there will be required to pay any state tax at all as an expat. If a prospective expat can easily make their contact location in the US in one of these states, it is to their advantage to do so.

Some States have made it easy for expats to not owe any state tax when they have been gone for more than six months. Two states, Tennessee and New Hampshire, only collect taxes on interest and dividends earned in the State, so they also make it easy for expats to work around.

And some States have made it extremely difficult, like California, Virginia, South Carolina and New Mexico to eliminate the requirement for income taxes being filed when abroad. Understand if you are a resident of one of these states, you are considered an asset of the State (i.e., slave) and as much as possible must be taken from you before you expire. It will be difficult to shake the shackles from these States (in addition to carrying the shackles from the federal government).

If after leaving one of these 4 severe case States you intend on returning back to the State (like having a temporary assignment overseas for a year or two), understand it will be extremely difficult for you to escape the State income tax filing requirement. These States are looking for ties that suggest future residency. It is likely they will demand a return from you if they can connect you to the State with any of the following:

Telephone and/or utility bills

Voter registration

Library card

Mailing address

Association memberships

In-state dependents

Property mortgage or lease

State drivers license

State investments or bank accounts

Sound Draconian? Yes it is, and believe me when I say that California tax people (whom I have had personal experience with) go to enormous lengths to try and pin State income taxes on people. They are like bounty hunters and you are the bounty, and living full time on the other side of the Earth may not protect you.

What should you do in order to escape these tax collectors? Be ready to cut ALL ties with your former home. In my particular situation, the only connection I have with California is my daughter-in-law’s address for one bank account, and even with that I put my name “in care of” hers. I file my federal tax return using my Thai address, social security has my location in Thailand, and everything else has my Thai home address.

state taxesIf you have within one of these severe States property or dependents (both of which will probably be on your federal return), you will have great difficulty proving you are a non-resident of the State.

All other States not mentioned above in this posting make it fairly easy to prove your residency outside of the State. Most require that you have been out of their State for at least 6 months, and if you get a letter from them after not filing, you may have to supply them with copies of documents showing you live elsewhere.

In My Opinion…

It is my opinion that the associations for lawyers and accountants have lobbied hard to make dealing with State and Federal taxes difficult, thus requiring most Americans needing their services. This is what I call the “Accountant Tax”, which is the American public subsidizing one small group of professionals an almost guaranteed income just to complete the stupid forms our government requires of us. This can be hundreds of dollars per family, or even thousands for those needing complex forms. The CPA accountant association is one of the few groups, for instance, that has lobbied in support of the evil FATCO (FABAR) reporting requirements. Did you know that America spends more money each year on tax preparation than consumers in the US spend on all the new cars and trucks sold in the country? We should support those very few politicians that advocate a smaller government with fewer regulations, whether on a federal or state level.

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