Can you nominate month to end the US tax year when moving overseas?

[TNA21]

Hi, we left CA June 30 to relocate back overseas (Australia) permanently. However, my husband is still employed with US company until August.  Our rental contract ended June 30 as well. Can we nominate the US tax year to end on a certain date? For example, when we left on June 30 or when his overseas employment ceases in August? or is there any benefit to being taxed the full year until December 31? Please advise

[KochuK]

Hi TNA21, thank you for joining the "Ask the Experts: Moving" special forum today. I am happy to assist with your questions.

Individual taxpayers tax reporting is on a calendar year basis.

For Federal income tax, you report "worldwide income" for the whole calendar year 2021 albeit you relocated overseas on 6/30/2021.

For CA income tax reporting, you will be a CA part year resident, and report income earned and/or sourced in CA. With respect to employees, the source of income from services compensated by W-2 wages is the location where the services are performed, not the location of employer.

If you work remotely from Australia during July-August for a CA based employer, this period of income is not taxable to CA.

FTB Pub 1031 for your reference.

https://www.ftb.ca.gov/forms/2020/2020-1031-publication.pdf 

You indicated that you moved out of CA to overseas permanently on 6/30/2021, so you would not be a CA full year resident for 2021.

Hope this helps.

[drc845443]

Hello there,

In the US, individual taxpayers are generally required to file on a calendar year basis.

Corporations/businesses may file tax returns based on a short tax year basis depending on circumstances such as mergers/acquisitions, dissolution of partnerships etc.

In your case, it depends on your residence status.  If you had become US citizens or green card holders, you would need to file a full year tax return for 2021. You can then explore the possibility to either exclude some of the foreign-earned income from Australia, or to claim the credit for foreign taxes paid to Australia.

https://www.irs.gov/individuals/international-taxpayers/choosing-the-foreign-earned-income-exclusion

https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit

If you had not become a US citizens or green card holders, then you would be treated as dual-status aliens. You would be taxed in accordance with the rules of taxation of Dual status Aliens (see link below).

 https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens