Should a GC holder working outside of US pay state taxes?

[sjunkerg]

I have a GC since a couple of years back and am married to an american citizen. At the moment, we are abroad while my wife is studying for 18 months. I have got a job and making money outside of the US. I have also obtained a re-entry permit to further show the intent to move back once my wife is done with school.

For the 2004 tax return, should I file as resident in a state or not? The federal taxes are easy enough to get through and avoid double-taxation. However, I am not sure what to do on the state taxes (CA). I can file as resident for the period that I have earned money abroad but then I get double taxed (which seems weird and there in no place to deduct this tax like you can at the federal level with the foreign tax deduction). I could also file as a non-resident but I have always thought that this is a big NO-NO as far as keeping the GC.

Anyone?

[harvydonald]

Federal tax - A lot of countries have a tax treaty with US, which helps avoid double taxation ( I know India does) check with your Tax advisor.

State tax - it will depend on what state your maintain your residence in....for example in Texas we do not have state income tax. But I know a GC holder from California who is working outside USA, and he his paying state income tax.

[sjunkerg]

No problem with a tax treaty. Sweden and US has one of those and I know how to apply it. I seem to be getting conflicting advice above though. The first reply says I should not file CA taxes (I moved out of this state abroad so no other form should be necessary) and the next one says I should. Hmm...

[TheRealCanadian]

Originally Posted by ****

Well, the best thing, as I say in my signature line, is to ask a lawyer...

Strictly speaking, an accountant.

[baltika12]

I am pretty much convinced - you have to file 540NR - a form for those who have been outside of the state for more then 6 months, but not less then one day for the year when you moved from CA. After that - I would not file any state tax with CA. Why? Because for the state tax board purposes - you were not physically present nor were you making for a living on the CA soil. After all - the BCIS cares if you intended to come back to US, not if you correcly filed your tax return.

[sjunkerg]

I am not sure which form the 540NR is but I am filing CA taxes as part-time resident. I think this might be the 540NR form but I am not in front of my tax papers at teh moment. I moved in August last year so I was out of CA less than six months but it does not hurt to familiarize myself with this form I guess.

As far as an accountant vs a lawyer. I have spoken to an accountant and there is no tax reason for my to pay CA taxes for 2004. Should I do this, I already know it is going to be $622 but I am wondering if I need to pay this just to be safe side with my green card.

If I do have to pay CA taxes I am more or less contemplating giving up the green card. It should cost me less than $622 to get a new one when I want to return on the grounds of that I am married to a citizen and they process an application of this kind at the US embassy in Stockholm pretty darn quickly at the moment.

But before I do anything as drastic as this I really want to know if they care whether or not I pay state taxes while outside of the US. For the federal stuff, I do a regular 1040. I guess at the moment I would assume that as long as I don't file a 1040NR I should be satisfying the filing as a resident requrirement. My GC is a contract with the federal government and what do they care about my state taxes afterall? Just a thought...

Originally Posted by baltika12

I am pretty much convinced - you have to file 540NR - a form for those who have been outside of the state for more then 6 months, but not less then one day for the year when you moved from CA. After that - I would not file any state tax with CA. Why? Because for the state tax board purposes - you were not physically present nor were you making for a living on the CA soil. After all - the BCIS cares if you intended to come back to US, not if you correcly filed your tax return.

[jetzt]

Hi
so I just wanted to understand how you deal with federal taxes to avoid double taxation:
Do you declare all your foreign income, calculate your US federal tax
and substract the foreign tax as a foreign tax credit ?
Claus

[sjunkerg]

It depends on your situation but you usually choose one of two main alternatives

1. You declare your income using the foreign earned income exclusion. There is a special form for this. It basically allows you to declare some income that should be excluded from your US income. You can only do this under some conditions.

2. As the second and generally, not as beneficial way, you can declare all your income and take a foreign tax credit. This is done on the 1116 form. It is kind of a hard form to do right but if you read enough about it, it is not that bad.

This mainly goes for your regular income. For interest, dividends, gains etc, you need to follow the tax treaty between your country and the US. The one with Sweden is 30 something pages of pretty heavy reading. It will tell you what should be taxed where. Some things are taxed in both countries but then you should be able to deduct some of the taxes in one of the countries to avoid double taxation.

Hope this helps!

[khush]

According to my thinking-

Paying or not paying State tax should not affect your GC. Federal tax should affect that, which you have already taken care of. GC is controlled by USCIS or Home Land Security and not by state of CA. So to me it sounds like moving from CA to any other state like TX or FL. In that case also you would not file for state tax in CA nd it should not affect your GC.

Khush