State residency as expat??

[aa2014]

Hi - confused about state residency and state taxes.

Home state of NJ until sept 2022. Moved abroad since then.

Changed "mailing address" with some financial institutions etc to relative's home in NC.

Should I move all my addresses from NJ/NC to a virtual mailbox in FL? so i don't have to pay any state taxes for my US contract work and investment income? otherwise, tax forms like 1099 may show NJ/NC as the state.

Thanks!!

[Anonymous_]

@pk?

[TomD8]

Your state tax obligations are based on where you live and on where your income is sourced.

If you owe state taxes, you cannot avoid them by simply changing your mailing address to a PO Box in a no-income-tax state like Florida.  If that were possible, everyone would do it.

[pk]

@aa2014  not knowing all the facts and circumstances of your particular case,  and hedging my bets , I would point that during my days as an expat in Brazil, I knew of a lot of American citizens, that moved their residency  to TX or FL ( having a mail box there, and opening a bank account to show closer connection to that state).  But they were working for a multinational entity.  I don't know if they were ever challenged  by the state of their earlier residency ( MI ).   I generally agree with @TomD8  that it may or may not work --- because there is always the issue of intent ( did you change residency because of  good reasons  or just to avoid/evade state taxation while in fact retaining closer connection to your original state of residence ? ).

[TomD8]

A taxpayer who becomes domiciled in a foreign country would only owe state income tax if they had income sourced to that particular state.

For example, a taxpayer who makes a permanent move to Canada, but who owns rental property in New York State, would still owe New York State income tax on their net rental income.  Changing their mailing address to a PO Box in Florida or Texas would have no effect on their income tax obligation to New York.

I might add that the IRS does not accept a PO Box mailing address on a tax return unless "your post office doesn't deliver mail to your home."  See page 14 of the Instructions for Form 1040:

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[aa2014]

@TomD8 

Since I do not live in America right now (moved out of my last state by selling my house), nor do i have any specific state sourced income (I do some online freelancing work and can provide them any address), I was wondering if it would be better to:

Get a virtual mailbox in FL and provide that address to my work (no state taxes in FL anyway so doesn't matter what state shows up in my 1099) rather than a relative's address in NC (NC may show up in my 1099 even though I dont live there and then the onus is on me to prove it).

[aa2014]

@pk as explained to @TomD8 , I do not have any state residency right now.

In this case, is it better to keep a taxable states mailing address (and have the onus to prove non residency to them) or non-taxable states mailing address (via virtual mailbox).

[TomD8]

"nor do i have any specific state sourced income"

If your domicile is now in a foreign country, then in the Personal Info section of TT you should enter your State of Residence as "Foreign or U.S. Possession" - which is at the bottom of the State of Residence drop-down list.  

Since you moved from NJ during the tax year, you should indicate that you previously lived there.  The date of your move should be the date you began living in the foreign country.

If you had no state-sourced income after your move, then indicate that you had no "Other State Income".

Making these choices will prompt the program to generate a part-year resident NJ state return.

Your mailing address should be the address you want the IRS or state taxing agency to use in case they need to contact you about your return.  If that happens, they will contact you by physical letter.

You can use a foreign mailing address on your federal return.  See Foreign Address  on page 14 of the Form 1040 instructions for details on how to do this:

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

It is also possible to e-file with a foreign address using TT.  See this:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/electronic-filing/e-file-foreign-address...

[pk]

@aa2014 , whereas I applaud @TomD8 's complete  and very informational response to your case, at the same time I do recognize that many Expats' desire to not have to pay state taxes,  (with no active / passive income from a state ) to a state  where they resided before and to whom they have a very tenuous connection.  This is especially true   for states  taxing on world income and not recognizing even foreign tax credit.  Many have tried various ways of creating new connections   ( driver's license, bank account voter reg. , temporary  rental  etc. ) to states with no PIT  ( such as TX, FL etc. etc. ).   Fundamentally what one is trying to do is to create a "closer connection" to a new state.   How successful these strategies  are  is a open question.  There is nothing that prevents a person from doing this , especially if the Expat has no idea how  long the foreign stay is going to be and  whether  he/she would even return to the same state  at the conclusion of the foreign assignment.    And for those  Expats whom intend to be permanently abroad , this becomes even more  important.

What I am trying to get across is that there is no good/ bad/ best answer to your question, it is not a tax question and you should do what you think  meets your goals ( short  or longer term ).

Hope this helps

pk