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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I work on a cruise ship. My employer took out federal, but

Resolved Question:

I work on a cruise ship. My employer took out federal, but no state taxes. I really have no state of residence; when I'm not on the ship, I'm mostly traveling for leisure. I have an Illinois driver's license (I lived there years ago). Do I need to pay state taxes to Illinois? It seems a bit strange, as none of the income I earned is from an employer there (my employer is based in WA), and I didn't utilize any IL resources.

So my questions are:
1. Am I required to file a STATE income return?
2. If I must file a state return, may I file it in WA (they have no income tax, and my employer is based in WA, so could I use that as a justification?) Otherwise, if I must file in Illinois since I have an Illinois license, what is the difference between filing as a resident or non-resident (seems I may be able to file as non-resident, but I don't know the qualifications and implications). Thanks!
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello chase,

 

If you are a US resident, then one state must be your resident state. It is not necessarily based on how much time you spend there, but would be more evidenced by where you intend for your home to be. When determining your resident or domicile state, they look at things such as where your family is located, where you return to after temporary absences, where your drivers license and car are registered, where you are registered to vote, where your bank accounts are located, and things of that nature.

 

You would not pay taxes to a state based on that state being the location of your employer. You only pay state taxes to your resident state and to any state where you physically work. Since you do not physically work in any state, the only taxes you need to file will be with the state that you would deem your resident state to be based on the above factors. If that would be the state of IL, then you would file a return with IL as a resident.

 

 

Thank you chase

 

 

Customer: replied 4 years ago.

Hello. Thanks for the response. So it sounds like I'd need to file as an Illinois resident. When filing for Illinois, I am given the option to file as a resident, partial resident or non-resident. I don't know the differences between these options, or the qualifications and implications of choosing one over the other. Can you please explain?

 

Also, since I haven't paid any state taxes this year, I am apparently going to be subjected to underpayment penalties. How can I avoid this for next tax year? Thank you.

Expert:  Merlo replied 4 years ago.

Hello chase,

 

You would file as a resident of the state of IL. This is not based on how much time you actually spend there, but rather on the fact that IL would be the state you consider to be your domicile state. It is the state that you call home and the state you would return to after temporary absences.

 

You would not file as a non resident. That is for use by taxpayers who live in another state but work in IL and must pay IL tax. Part year residents mean you moved sometime during the year and changed your domicile state. You will file as a resident. The tax effect will be no different as far as what you pay.

 

Actually IL has one of the lowest state tax rates, so while it's not as good as WA at least it's not near as bad as somewhere like CA who imposes a tax rate of 9.3%.

 

In order to avoid penalties next year for underpayment of tax, you can request that your employer start withholding IL state tax from your checks. If for some reason they cannot do this, you can make quarterly estimated tax payments on your own each year to the state. You would submit your payments along with voucher form IL-1040-ES to the state department of revenue. These forms can be found on the IL state website.

 

 

Thank you chase

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 7 other Tax Specialists are ready to help you

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