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HenreeHipp
Level 2

I am Amending Federal 2017 and 2018 tax years to include owed Capital Gains tax. During those years I was a resident of a no-Capital Gains tax state, but now am a Resident of a Capital Gains tax state- will this state now assume I owe them C-Gains tax?

Hello,

 

This question is actually a two-parter (it's a bit long so I apologize), and deals with the states of Florida (where I resided then during the 2017 and 2018 tax years), California (where I earned income as a Non-Resident during the 2017 and 2018 tax years), and Hawaii (where as of  2020 I now reside)...

 

So I am in the process of submitting Amended 2017 and 2018 Federal tax returns to account for Cryptocurrency transactions and taxes in the form of Capital Gains for those years (the only years I engaged in Crypto trading).  Since I did not trade that much and most trades were at a loss, the Capital Gains taxes owed, even including penalties and interest, is very small. My only concern, even if it is pretty stupid and probably just me overthinking things, is two questions involving a slight confusion regarding clarification on state taxes for my scenario...

 

During those years (2017 and 2018), I was a resident of Florida, and my "Know-Your-Customer" registration with the exchanges was also in Florida, which has no Capital Gains tax, so I'm pretty sure all is in the clear, however, I'd like to just get some clarification on two things, please...

 

-During those tax years (2017 and 2018), I was earning income from a California company as my main job and paid Non-Resident income taxes on that income.  Will these Cryptocurrency transactions then effect any state taxes with California regarding my amended Crypto taxes- even though these transactions were completed in Florida, and I was resident of Florida, for those 2017 and 2018 tax years?  Will California try and come after me for any potential state Capital Gains taxes even though these transactions were completed in, and my exchange "Know-Your-Customer" information was registered in, Florida?  Again, all income taxes for my main company job was paid to California during those years as a Non-Resident, as I was a resident of Florida, so it technically has nothing at all to do with my Cryptocurrency transactions in Florida, however I just want to make sure.

 

-As of 2020, I am a resident of Hawaii.  Needless to say, being a resident of Hawaii since 2020 has absolutely nothing to do with Crypto currency transactions completed in 2017 and 2018 in Florida, however, these Amended 2017 and 2018 tax returns will have to be submitted to the IRS branch in Honolulu, Hawaii with my current Hawaii address written on these amended tax returns.  Will having my current Hawaii address on these Amended 2017 and 2018 tax returns, and dealing with the Hawaii IRS branch, cause any potential false confusion or false flags regarding Hawaii state Capital Gains taxes for the 2017 and 2018 tax years and potentially falsely trigger Hawaii to come after me for state Capital Gains taxes that they may erroneously perceive owed for those tax years?  I was told by my tax professional that I was not allowed to put my old Florida address on those forms because the IRS needs to reach me at my current address in Hawaii, which is fair enough, but looking over the Amended 2017 and 2018 tax return forms, I see nowhere that indicates and reassures the IRS (and potentially Hawaii) that I was a Florida resident during those tax years, so this has me a bit worried (I may have missed it though, so if it is there somewhere in these forms, where may I find it?).  My tax professional assured me that everything was fine and I will not owe Capital Gains state taxes for Hawaii, which is obviously true, but still, at the same time, I don't want to receive a surprise letter from Hawaii down the road years from now and have to contend with any bureaucracy to clear the issue up.  Does the IRS have my original Florida address for those 2017 and 2018 tax years stored somewhere, and will they automatically apply it again for the Amended 2017 and 2018 tax returns, even if I am now dealing with the Hawaii branch of the IRS and have my new 2020 Hawaii address written on the Amended tax forms?  Or will they perceive this new Hawaii address written on these Amended 2017 and 2018 tax returns as an Amendment as well in of itself and then falsely assume I was a Hawaii resident for those years?  Is there any potential they may falsely submit my Amended 2017 and 2018 tax returns, with my new 2020 Hawaii address on them, to the local Hawaii state tax collection agency?  Is so, what is the fastest way to clear up this confusion before submitting these Amended 2017 and 2018 tax returns to the IRS?  Basically, what do I need to do, if anything, to reassure and/or remind them, I was a Florida resident for those 2017 and 2018 tax years?

 

Or am I just overthinking things way too much? 

 

I guess, to sum it all up, the gist of my question is, assuming the IRS and local state tax collection agencies generally share information with each other, what generally entails when Amending a Federal Tax Return for tax owed for previous years after moving to a different state?  Especially when the former state has no income tax/no Capital Gains, and your new current state does?  How much confusion may this cause for the state tax agencies, if any?  How about if you earned income from an income-tax state as a Non-Resident?  Will this Capital Gains tax Amendment make them assume   

 

Thank you and appreciate any help given regarding this situation.

 

Also, as a side note, some here may not be familiar with Cryptocurrency- and that is OK. If you feel like answering these questions, feel free to treat the questions as just involving regular Capital Gains, like in stocks, etc, as the situation is basically the same... and the fact it involves Cryptocurrency essentially makes no difference in regards to the questions being asked above. Thanks!

4 Replies
Mike9241
Level 15

I am Amending Federal 2017 and 2018 tax years to include owed Capital Gains tax. During those years I was a resident of a no-Capital Gains tax state, but now am a Resident of a Capital Gains tax state- will this state now assume I owe them C-Gains tax?

You were not domiciled in California for those years so the crypto transactions are not reportable there.  

 

Will dealing with the Hawaii IRS branch, cause any potential false confusion?  Can't say for sure but if Hawaii inquires just respond you were domiciled in Florida for those years.  Do nothing now with regard to Hawaii - if you do you may raise issues that would otherwise not have been raised.  it would be a good idea to keep your w-2s or 1099's for 2017 and 2018. they will have your Florida address.

 

 

 

HenreeHipp
Level 2

I am Amending Federal 2017 and 2018 tax years to include owed Capital Gains tax. During those years I was a resident of a no-Capital Gains tax state, but now am a Resident of a Capital Gains tax state- will this state now assume I owe them C-Gains tax?

Thanks, Mike.  I appreciate the thorough reply.

 

Do you know off hand if its typical for the IRS to report Amended Tax Return debt increases to the state of the current address of the taxpayer, even when the Amended Tax Return year has nothing to do with the current state residence?   

fanfare
Level 15

I am Amending Federal 2017 and 2018 tax years to include owed Capital Gains tax. During those years I was a resident of a no-Capital Gains tax state, but now am a Resident of a Capital Gains tax state- will this state now assume I owe them C-Gains tax?

Your question doesn't make sense.

 

Your resident / non-resident status in 2017, applicable for filing 2017 tax return, doesn't change now that it is 2021 and you have moved.

HenreeHipp
Level 2

I am Amending Federal 2017 and 2018 tax years to include owed Capital Gains tax. During those years I was a resident of a no-Capital Gains tax state, but now am a Resident of a Capital Gains tax state- will this state now assume I owe them C-Gains tax?

Very true.  I have just heard that sometimes the IRS can share information with states and notify states of taxes/changes in taxes, and I just don't want there to be any confusion if the IRS somehow falsely reports my current residency address on my Amended Return to this new state I am living in, when the state I was living in at the time of the original tax return was a different state with far different tax consequences.  I am probably just way overthinking things though.  Thank you for your reply.

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