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I am a resident of the USA. I am single and I have no children.

I am a resident of...
I am a resident of the USA. I am single and I have no children. On April 12th of this year, I moved to the Philippines. I heard that my taxes (state?) will be lower on my US income since I do not reside in the USA. I have two questions. Firstly, since I did live in the US for roughly four months of the year 2013, will I still qualify for a tax reduction for the year 2013. Secondly, roughly what is the tax savings assuming my taxable payroll income is 100k per year.

Thanks
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Answered in 3 hours by:
10/20/2013
Dave CPA
Dave CPA, Accountant
Category: Tax
Satisfied Customers: 840
Experience: Vast knowledge within the accounting/tax industry
Verified
Hello,

Welcome to Just Answer,

You can exclude $97,600 for 2013. The exclusion requirements are as follows

- A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
- A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Extension of time to meet tests. You generally cannot get an extension of more than 6 months. However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension.

You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction.

Below is a link is a great IRS publication on this topic for your reference.

http://www.irs.gov/pub/irs-pdf/p54.pdf

California does not allow a foreign tax credit or a foreign earned income exclusion, but in CA you can only have one tax home at one time. You can have only one domicile at a time .

A change of domicile requires all of the following:
• Abandonment of your prior domicile .
• Physically moving to and residing in the new locality .
• Intent to remain in the new locality permanently or indefinitely as demonstrated by your actions

Please let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave
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Customer reply replied 4 years ago


I wanted my questions answered. I did not want the official tax language sent to me. Simply answer the questions. If you have to ask me more questions in order to answer my questions, than please do so.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,888
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
The income you received prior to leaving the US will not be allowed in the exclusion for foreign income. You can qualify for the exclusion for foreign earned income for 2013.
As long as you stay in a foreign country from April 12, 2013 till April 13th, 2014. You could return to the US during that time but only as long as you can still show you were in another country for the 330 days required.
California will not allow this unless you severed all ties to that state when you left. This means not having anything left in CA that still ties you to that state.
Your tax savings will be that you will not pay US federal tax on the foreign income that is excluded.
You asked "Secondly, roughly what is the tax savings assuming my taxable payroll income is 100k per year." That all depends on how much of that you earned in the foreign country. You already know that you can exclude up to $97,600 so if all the $100,000 is from abroad then you will still owe tax on the remaining amount. If you are working for a US company you will still have SS and Medicare withheld.

To give a simple answer, yes you can qualify but only if you stay in the foreign country till April 13th, 2014. You will save on federal by not paying federal tax on the first $97,600 of foreign earned income, all you earned in the US is still taxable to you, and CA does not care if you work abroad and will tax on all if you have any ties to CA what so ever.


Robin D.
Robin D., Senior Tax Advisor 4
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