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Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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I want to know what I need to do to NOT be a citizen of California

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I want to know what I need to do to NOT be a citizen of California and therefore NOT pay State taxes. I live in Chile SoAmerica, own a home here, am married to a Chilean, and have applied for permanent residence (expected to receive it summer 2010).   I am retired and receive a retirement income from the City of San Jose California where I was a Fire Chief.   I continue to pay both Fed and State Taxes but since I don´t live in California, don´t own anything in Calif (neither car nor home) I feel I should not have to pay state taxes.    Please tell me what I would need to do to "prove" I live outside California. I know that I receive an income from California and will the rest of my life. Does that mean I´ll pay state taxes the rest of my life?   Awaiting with interest.   Bob Delgado   Viña Del Mar   Chile
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

The answer would depend on the purpose of determination of the residency.

Thus, for tax purposes the IRS dictates that would depend on where is your main home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Those factors include the following.
Your place of employment.
The location of your family members' main home.
Your mailing address for bills and correspondence.
The address listed on your:
--Federal and state tax returns,
--Driver's license,
--Car registration, and
--Voter registration card.
The location of the banks you use.
The location of recreational clubs and religious organizations you are a member of.

Please see IRS publication 523 for details - http://www.irs.gov/pub/irs-pdf/p523.pdf

Each state may have its own determination of residency for tax purposes. Thus for California - your residence is usually the place where you have the closest ties in compare with your ties elsewhere. In using these factors, it is the strength of your ties, not just the number of ties, that determines your residency. A partial list of the factors to consider:

  • Amount of time you spend in California versus amount of time you spend outside California;
  • Location of your spouse and children;
  • Location of your principal residence;
  • Where your driver's license was issued;
  • Where your vehicles are registered;
  • Where you maintain your professional licenses;
  • Where you are registered to vote;
  • Location of the banks where you maintain accounts;
  • Location of your doctors, dentists, accountants, and attorneys;
  • Location of the church, temple or mosque, professional associations, or social and country clubs of which you are a member;
  • Location of your real property and investments;
  • Permanence of your work assignments in California; and
  • Location of your social ties.

You may review FTB Publication 1031 - http://www.ftb.ca.gov/forms/03_forms/03_1031pub.pdf

 

Social security may send money to foreign bank - and you are not required to have a bank account at all.

See for reference - SSA Publication No. 05-10137 - http://ssa.gov/pubs/10137.pdf

 

If you reside in the foreign country - you most likely pay income tax in this country as a resident - if so - because the same income is taxed in the US and abroad - - you may claim a credit for taxes paid in foreign country - so the same income would not be taxed twice. Use the form 1116 - http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdf

 

Customer: replied 5 years ago.

I´m a bit disappointed in your response. It feels as tho it is generic and not specific to me. But I will try to respond to the points you mention.

  • Amount of time you spend in California versus amount of time you spend outside California;

I spend approx 5 weeks per year, 2 visits of about 2-3 weeks. This can be easily proven by the stamps on my passport.

  • Location of your spouse and children;

My wife is Chilean and lives here in Chile with me. My children are over 40 years of age and live 1 in Canada, and 2 in Calif.

 

  • Location of your principal residence;

My principal and ONLY residence is in Chile. I own no property in the US

  • Where your driver's license was issued;

I carry an International DL (for use here in Chile) and still have 1 year left on my Calif DL. It has the address of my son who receives mail for me.

  • Where your vehicles are registered;

I own one vehicle registered here in Chile, I own NO vehicles in the US

  • Where you maintain your professional licenses;

As a retiree I maintain NO licenses.

  • Where you are registered to vote;

I use the Absentee System to vote and continue to be registered in Santa Clara County, Calif I can not vote in Chile, therefore not reg´s in Chile.

 

Location of the banks where you maintain accounts;

 

As my retirement system will not send money outside the US, I maintain a bank account in San Jose Calif. I have had money wired to mutual funds held by Banco Chile and can easily draw out money in pesos from the local banks here.

  • Location of your doctors, dentists, accountants, and attorneys;

As my med and dental is free with my retiremenet sys, and my med and dental is NOT accepted outide the US, my doctor, dentist, accountant and attorney are in Calif

  • Location of the church, temple or mosque, professional associations, or social and country clubs of which you are a member;

I belong to a catholic church in Chile, a service club in Chile (Rotary), and a member of the bd of directors of the condo assn where I live in Chile. I have no similar affiliatations in the US

  • Location of your real property and investments;

I own NO property and have no NO investments in the US. My home, my car, and some mutual funds are all here in Chile.

  • Permanence of your work assignments in California

I am retired and have NO work assigments in the US. For a short while I had a temporary residence card and was employed in Chile as a teacher of English.

  • Location of your social ties.

The Rotary club and the condo assn and my wifes family and our friends are ALL here in Chile. I will forever be connected to my adult children and grand children who live in Canada and Calif. I have family ties in the US, but my regular on-going ´social ties are here in CHile.

 

Although Social security may send money to a foreign bank - and I am not required to have a bank account, that is NOT true for my retirement from the Fire Dept. They will not forward money outside the US. I have automatic deposits sent to a Calif bank, then as needed use an ATM to draw money out here in Chile, or have them wire money to Chile if I have a big purchase like a car.

 

You say that If I reside in a foreign country - I most likely pay income tax in that country as a resident. So far I have NOT paid an income tax, but suspect that when I recieve my permanent residence in summer 2010 I will begin to be taxed. I DO PAY property taxes on my home in Chile.

 

IN SUMMARY....... having read the above which lists all my connections with Calif should I consider 1) getting another bank which is OUTSIDE of Calif where the my retirement could be sent, 2) change my Calif drivers license, that is let it expire and only use an International DL, 3) discontinue using the absentee ballot which allows me to vote in US elections from outside the US, 4) provide receipts to show I pay property taxes here, then later receipts for income taxes I will pay here in Chile, 5) find employment here in Chile.

 

If these things or others you can suggest help, I WOULD BE WILLING to do so.

 

If in fact I did the various things to help my situation, then what?? What is the procedure to officially declare I am not living in California.

 

Bob Delgado Viña Del Mar CHILE

 

.
Expert:  Lev replied 5 years ago.

 

There is no official procedure to renounce your residency in the CA. All you should do - just establish your residency elsewhere and you will only liable to report income from CA sources and file CA tax return as a non-resident.

 

How the FTB would determine if you are a resident of not? - your residence is usually the place where you have the closest ties in compare with your ties elsewhere. In using these factors, it is the strength of your ties, not just the number of ties, that determines your residency.

In other words - your ties to the new established residence should be mush more strong than ties with California. If you ties to CA and Chile ar eabout equal - teh FTB may disagree with your determination and you will be involved in litigations.

 

I may not give you any specific recommendations what should you do - but I may say for sue that such factors as absentee ballot, drivers license, etc in CA - are evidences of your ties to CA.

Also - if you are not paying income tax in Chile - is an evidence - that you are not consider yourself as a resident. If you do pay income tax in Chile and claim a credit for thes e taxes on your federal tax return - that would be used as evidence of your ties to a new residence.

Now - you seem as a non-resident in Chile and thus - you did not change your residency from CA.

 

Fortunately or unfortunately - we should relay on the common rules and may not know your specific circumstances belong the information provided.

To address your specific situation - you could request a private letter ruling from the CA Franchise Tax Board to determine your residency status. That will eliminate possible litigations from FTB in the future.

Let me know if that helps.

 

Customer: replied 5 years ago.
You say....

There is no official procedure to renounce your residency in the CA. All you should do - just establish your residency elsewhere and you will only liable to report income from CA sources and file CA tax return as a non-resident.

 

Does that mean I would pay the same Calif taxes as I have been paying -or- are you saying that as a non-resident I would pay LESS taxes than as a resident?

 

You say...

if you are not paying income tax in Chile - is an evidence - that you are not consider yourself as a resident. If you do pay income tax in Chile and claim a credit for thes e taxes on your federal tax return - that would be used as evidence of your ties to a new residence.

Now - you seem as a non-resident in Chile and thus - you did not change your residency from CA.

 

THIS makes sense to me.... If I am NOT a permanent resident of Chile and if I am NOT paying Chilean income taxes then I am NOT a resident of Chile and must therefore be a Calif resident.

 

Soooooooo.... I have the impression that when I AM a permanent resident here, and when I AM paying income taxes here, then I have a much better claim to be a non-resident of Calif.

 

I think that´s the heart of the matter. When those two things occur, that´s when I will NOT file a Calif tax return and defend why by those two factors. Plus I´ll claim the Chilean taxes on my federal return.

 

You say...

you could request a private letter ruling from the CA Franchise Tax Board to determine your residency status.

 

I think this is the safest thing to do. Write a letter listing the factors I´ve noted, especially about having legal status as a permanent resident and paying taxes in Chile.

 

When it´s time to write that letter, I think I´ll use a Calif tax preparer. The right jargon, a tax preparer letterhead, and just maybe I´ll have a chance. I would prefer to do that than to take my chances and possibly face litigation.

 

Thanks for the info.....

Expert:  Lev replied 5 years ago.

Does that mean I would pay the same Calif taxes as I have been paying -or- are you saying that as a non-resident I would pay LESS taxes than as a resident?

Generally - yes - but that depends on income types.

As a resident - you pay CA taxes on all income regardless of its source.

If you are a non-resident - you pay taxes only on income from CA sources. For instance if you receive interest or dividend income while you are non resident - they will not be taxed in CA.

 

A private letter ruling is a request to the FTB to rule on your tax issue before taking certain action. The private letter ruling is applicable only to that tax situation and that taxpayer only. Most likely - you do not need a private letter ruling, but if there is a large amount of tax involved and a tax issue that is unclear - you might consider one.

The risk is that the private letter ruling will not be in your favor.

You definitely would need to have someone to represent you with the FTB in this case.

 

Again - your residency status determination is your responsibility. I would suggest to use the FTB Publication 1031 - I provided above and verify with the list of ties - your ties to the new established residence should be mush more strong than ties with California.

At first - you might want to changes items that ar e easier to track by FTB - driver license (that is a resident privilege) and voting registration.

Unless you do that "homework" - the right jargon, a tax preparer letterhead will not help.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23253
Experience: Taxes, Immigration, Labor Relations
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