I am moving to Europe. I will work there and also have a remote job in the Illinois. I am from Michigan, have a Michigan license, and have Michigan residency with my parents (at the moment). Where will I owe money? Would it be best to change my residency for tax purposes?
@achall , generally IRS recognizes the source of income as where the work is performed. Thus :
(a) if the work you perform for an entity in IL, with a Tax Home in say Germany, then the income is foreign sourced ( Germany ) for US purposes.
(b) Many states tax you on world income while a resident of that state. Therefore and when I was an Expat in Germany, many of my colleagues moved their residency , prior to moving to Texas or similar states with NO income tax -- just a driver's license and a PO Box. Different states deal with this situation differently.
(c) Please see the following information ( including Pub 54 ) for Expats :
U.S. citizens and resident aliens abroad | Internal Revenue Service (irs.gov)
Is there more I can do for you ?
Illinois does not tax non-resident remote workers. So you'll owe no taxes to Illinois unless you physically perform work within Illinois during the tax year..
Michigan will regard you as a resident (making all your income taxable by Michigan) unless you change your domicile to another state or country. Michigan has a form which will help you determine this:
https://www.michigan.gov/taxes/-/media/Project/Websites/taxes/Forms/All-Years/3799.pdf