Current/former US expats: help me figure something out

[himher 634]

If you made a permanent move from one state to another, you are considered a "part-year resident" of each state.

[one...two...tree 2,762]

Robin,

I'd recommend consulting with a tax specialist. Then decide what to do from there.

Edited December 16, 2008 by Mister Fancypants

[Caladan 19]

Not sure if this will help. It appears the rules in CA are much different than MA:

Example: California resident receives $20,000 from a rental building in Arkansas. They report only the $20,000 on the Arkansas non-resident form and pay $2,000 in tax to Arkansas on the non-resident form. Since the person is a California resident, California also taxes the $20,000 but gives a $2,000 tax credit on the California resident form.

Part-year residents follow each state's rules. Some states separate the income, and tax only their state's income. Or a state may calculate the tax on all income as if you are a resident and then allocate the tax based on "in state sources/all sources."

http://turbotax.intuit.com/tax-tools/state...rticle#resident

That's how Connecticut works it. C. worked in three states last year, so we had to fill out the tax forms for all of the states, and then deduct them from the tax owed to Connecticut. (And on top of that, he filed as a part-year resident while I filed as a full-year resident, which was nuts. We nearly broke Turbo-Tax)

Robin, I'd check with a tax specialist, if only because you might not count as a full-year resident, or it might be the case that they require you to report foreign income but allow a deduction.

[Trompe le Monde 1,107]

Robin, I'd check with a tax specialist, if only because you might not count as a full-year resident, or it might be the case that they require you to report foreign income but allow a deduction.

I definitely will do that. I just got off the phone with Nelson, my friendly assesor from the Franchise Tax Board of CA. He seemed a little confused about the issue of foreign earned income, which makes me believe what they are doing might not possibly be right. He is checking with his supervisor for clarification!

[HAL 9000 96]

Robin, I'd check with a tax specialist, if only because you might not count as a full-year resident, or it might be the case that they require you to report foreign income but allow a deduction.

I definitely will do that. I just got off the phone with Nelson, my friendly assesor from the Franchise Tax Board of CA. He seemed a little confused about the issue of foreign earned income, which makes me believe what they are doing might not possibly be right. He is checking with his supervisor for clarification!

Totally. It seems particularly odd that they think they have a right to tax you on foreign income at the state level. Its very, very odd.

[himher 634]

http://www.its.caltech.edu/~tsa/Tax%20Retu...7_540nrlong.pdf

It appears that in california you calculate the taxes on total worldwide income, then calculate a "tax rate" by dividing those total calculated taxes by total worldwide income. You then apply that "tax rate" to (california income minus the ratio of california to total income times deductions) to calculate your actual taxes. Either way, the tax bracket is set by total worldwide income, but the bracket is only applied to the income that was made in California.

[one...two...tree 2,762]

http://www.its.caltech.edu/~tsa/Tax%20Retu...7_540nrlong.pdf

It appears that in california you calculate the taxes on total worldwide income, then calculate a "tax rate" by dividing those total calculated taxes by total worldwide income. You then apply that "tax rate" to (california income minus the ratio of california to total income times deductions) to calculate your actual taxes. Either way, the tax bracket is set by total worldwide income, but the bracket is only applied to the income that was made in California.

Holy cow, that's convoluted!

[HAL 9000 96]

Reminder to keep those millions in Switzerland...

[himher 634]

Yup, that's pretty f--ked up. The state essentially seems to be assuming Ca dollars are net dollars, applying the upper brackets and therefore over-taxing the california income based on income derived outside the state that they cannot tax.

http://www.its.caltech.edu/~tsa/Tax%20Retu...7_540nrlong.pdf

It appears that in california you calculate the taxes on total worldwide income, then calculate a "tax rate" by dividing those total calculated taxes by total worldwide income. You then apply that "tax rate" to (california income minus the ratio of california to total income times deductions) to calculate your actual taxes. Either way, the tax bracket is set by total worldwide income, but the bracket is only applied to the income that was made in California.

Holy cow, that's convoluted!

[Caladan 19]

http://www.its.caltech.edu/~tsa/Tax%20Retu...7_540nrlong.pdf

It appears that in california you calculate the taxes on total worldwide income, then calculate a "tax rate" by dividing those total calculated taxes by total worldwide income. You then apply that "tax rate" to (california income minus the ratio of california to total income times deductions) to calculate your actual taxes. Either way, the tax bracket is set by total worldwide income, but the bracket is only applied to the income that was made in California.

That's how the foreign income exemption works in the U.S., if you have income in both the U.S. and abroad, or at least how it did on our last year's tax return given the way we filed. We filed jointly and excluded shiv's income Y from our total X, but we were taxed on (X-Y) at some version of the marginal rate for X, as I understand it. (I was surprised by this because I thought we'd just look up (X-Y), but that wasn't actually the case, according to both TurboTax and the info box in the 1040.)