If you are a US citizen now residing another country, please remember that the
United States continues to tax you on all of your worldwide income (one
of the few countries that does so for expats). Thus, as you probably
know, you have to report, and pay taxes upon, your worldwide income, as
long as you retain your US citizenship . . . even if you permanently
live abroad in a foreign country.
With respect to California, however, we
did some research on this for you. As it turns out, by moving abroad
you are are able to "abandon" your California residency (tax
domicile) for state tax purposes, unless you maintain a house,
apartment, or other personal residence there. You would therefore not
be taxed on
your US income (by the state of California) if you live all year in a foreign country; nor would you have to file a California state income tax return. Please refer to the California Franchise Tax Board Publication
1031 for details:
https://www.ftb.ca.gov/forms/2016/16_1031.pdf
In particular, the examples on Page 5, and the discussion on Page 9, are helpful and perhaps applicable to your present circumstances.
In
order to accomplish this mechanically in TurboTax -- that is to force
the program to only tax your income on a federal level -- simply
indicate that your state of residence is "Foreign or US Possession" in
the Personal Information section of the program, at the very
beginning. This way you will only need to file a federal tax return,
and not a California tax return.
When done correctly it should
look something like the screen-capture images below this text; simply
click the images to open. Note that the address of an historic central
Post Office in Mexico City was used as an example to illustrate how to enter a foreign address format in
TurboTax. The actual foreign country in which you now live can be anywhere.
Also,
please don't forget any annual foreign financial account disclosures
that you may have to file, if you keep a bank account or other financial
account outside of the US.
In
fact, there are two
separate disclosure forms that may be required for US citizens with an
account at a foreign bank; each also has different
reporting rules.
One is known as IRS Form 8938, and can be
attached to the relevant yearly Form 1040 tax return (which you could
file for free using TurboTax, if you have no taxable income).
The other is known as FinCen
Form 114, which can only be filed via the internet. The following
Internal Revenue Service webpage describes them in some detail, and provides
their dollar value reporting levels (called the "Reporting Threshold"):
https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
Form 8938 is included in
TurboTax, as indicated; whereas FinCen Form 114 is not included with TurboTax, and you would need to access that reporting
webpage separately. Note that you can get to the FinCen reporting internet site directly
through the above IRS link (a link within a link, essentially).
Thank you for asking this important question, and we hope that you enjoy living abroad.
