Extension To File Your Tax Return
If you cant file your federal income tax return by the due date, you may be able to get a six-month extension from the Internal Revenue Service . This does not grant you more time to pay your taxes. To avoid possible penalties, estimate and pay the taxes you owe by the tax deadline of May 17, 2021.
Reducing Your Liabilities When Filing Canadian Taxes Abroad
You can reduce your tax liabilities in Canada with careful planning. Things worth considering and bearing in mind are:
- Are you better off being taxed as a Canadian resident or a non-resident? If you are moving to a country with lower taxes than Canada, it might be beneficial to attain non-resident status. That way, you only pay taxes to Canadian authorities on your Canadian income.
- What deductions, credits, and expenses do you qualify for? Check the list and make sure you include these on your tax return.
- What income tax has already been withheld? If youre a non-resident paying Part XIII income tax, much of this is deducted at source so you may not need to include it on your tax return unless you are claiming a refund. Also bear in mind that some forms of Canadian income are not taxed, such as gifts and lottery winnings you dont need to include these.
- Are you receiving a Canadian pension? If you are over 65 and receiving a Canadian pension, there are many ways you can defer tax payments. For example, splitting your pension eligibility with your partner or using a registered retirement savings plan . See here for more details.
- What about transferring your savings? Look into whether you can transfer any savings into an offshore account or tax-free savings account.
- Can you claim a personal tax credit? If you are a non-resident, you are eligible for a personal tax credit if you earn 90% or more of your worldwide income in Canada. This amounted to CA$12,069 in 2019.
Reporting All Your Income In Some States
A few states require that you report all your income for the year to that state if you are a resident at the end of the year. If you have to report some of that income to your old state as well, you may be worried that you are paying double state tax on that income.
But dont worry! On the tax return for your new state, you can claim a tax credit for tax paid to your old state on the same income. That tax credit will offset the extra tax on the income you had to report to both states.
Don’t Miss: How Much Tax On Unemployment Benefits
Other Frequently Asked Questions
Can I write off moving expenses?
Before 2018, individuals could deduct moving expenses if they moved for a job and met certain requirements. The Tax Cuts and Jobs Act of 2017 suspended that tax deduction, and now only active-duty military members can claim the deduction. Beginning in 2026, other individuals will once again be able to deduct moving expenses when they move for a job.
Filing Status And Dependents
1. I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?
In general, if you are a U.S. citizen or resident alien married to a nonresident alien, you are considered Married Filing Separately unless you qualify for a different filing status. If you pay more than half the cost of keeping up a home for yourself and a qualifying child or other relative, you may qualify for the head of household filing status.
If you are a U.S. citizen or resident alien married to a nonresident alien, you and your spouse can choose to have your spouse treated as a U.S. resident for all U.S. federal income tax purposes. This allows you and your spouse to file a joint return, but also subjects your nonresident alien spouses worldwide income to U.S. income tax.
For more information on the filing status requirements, see Publication 501, Exemptions, Standard Deduction, and Filing Information.
If you file a joint return, you can claim an exemption for your nonresident alien spouse. If you do not file a joint return, you can claim an exemption for your nonresident alien spouse only if your spouse has no income from sources within the United States and is not the dependent of another U.S. taxpayer. However, for tax years beginning after December 31, 2017, see Aliens Repeal of Personal Exemptions.
Cut All Possible Ties To The State Residency You Want To Abandon
If you have any intention to return to your state home, it may still be considered your domicile. So you must cut as many ties as possible by doing the following:
- Sell your old home and purchase, or lease new residence
- Get an identification card in your new state and/or country
- Move your family abroad, too
- Join associations in your new state and abroad
- Find medical and financial professionals in your resident country
- Close bank accounts with your home state, open a foreign bank account
- Register to vote in your new state as an absentee voter
- Sell your automobile or change your auto registration
There are certainly benefits of keeping a US bank account, state voter registration, and more when moving abroad. So moving to a different state before going abroad can help you avoid paying state taxes while enjoying these perks.
Expatriation: Former Citizens And Long
1. What is the purpose of Form 8854, Initial and Annual Expatriation Information Statement, and where can I get the form?
The expatriation tax provisions apply to U.S. citizens who have relinquished their citizenship and to long-term permanent residents who have ended their U.S. residency. The Form 8854 is used by individuals who have expatriated to inform the IRS of their expatriation and certify they have complied with all federal tax obligations for the 5 tax years preceding the date of their expatriation.
For more details regarding the expatriation tax provisions, see Expatriation Tax in the How Income of Aliens is Taxed section of Publication 519, U.S. Tax Guide for Aliens.
2. I terminated my U.S. resident alien status and was told that I may still need to furnish some documents to the IRS. Can you please explain?
If you are a U.S. resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. If you are a nonresident alien, you are usually subject to U.S. income tax only on U.S. source income. Under limited circumstances, certain foreign source income is subject to U.S. tax. Please refer to Publication 519, U.S. Tax Guide for Aliens.
Don’t Miss: How Are Reit Dividends Taxed
I Relocated To A New State Where Do I File Taxes If Ive Moved
In most cases, you must file a tax return in any state where you resided during the year. If you relocate to another state and earn income during the year, youll have to file a tax return in both your old and new state.
In 2015, the Supreme Court ruled that two different states couldnt tax the same income. The ruling is good news if you moved out of state because it means you wont be subject to double taxation on your earnings. But you will still have to file tax returns in each state and pay taxes on the portion of the total income you earned there.
What State Do I File If Im In The Military And Stationed Outside Of My Resident State
Military choose a legal domicile or state of legal residence . This is where you will pay state income taxes. If you are stationed somewhere other than your SLR, you are exempt from paying taxes to that state unless you are earning civilian income in addition to your military pay.
Military spouses may be allowed to claim the same state of legal residence as their partner, but they must meet certain requirements. For more information, read State Tax Filing Info for Working Military Spouses.
The information in this article is current through tax year 2021 .
Don’t Miss: What Is Deduction In Income Tax
How Reciprocal Agreements Work
Although it may begin to feel like it when you start asking questions at tax time, youre not the only one who lives in one state and works in another. Some states have planned for this and created reciprocity agreements to make your life easier. Through these agreements, you can live in one state and work in a neighboring state without paying taxes there. Instead of paying taxes where you work, you will pay taxes in your resident state, which is the state where you live.
Pennsylvania and New Jersey, for example, have such an agreement. If you live in Pennsylvania but work in New Jersey, you pay your tax to Pennsylvania where you live. New Jersey will not withhold any state money from your paycheck. They will of course continue to withhold federal taxes as required.
Seventeen different states have these types of agreements in place, so its worth asking your employer if one applies to your situation. Your companys payroll department should absolutely know about any applicable reciprocity agreements. If they dont, your states Department of Revenue office will.
Dont panic if your employer makes a mistake. Lets say you start your new job in New Jersey and file a tax exemption form because you live in Pennsylvania. Somebody made a mistake, however, and the payroll department didnt get the memo. When you get your paycheck, you see that your employer withheld New Jersey income tax from your check even though they werent supposed to.
Where Should I File State Taxes If I Moved During The Year
If you permanently moved to another state, you will be required to file two state returns: one for each state you lived in during the tax year .
You may be able to claim part-year residence, which will allow you to divide your income between the two states instead of paying taxes twice. Note that each state has its own rules for determining residency and how you should indicate your status on the tax forms. Check with the Department of Revenue in each state to learn what is required for your situation.
Don’t Miss: Where Do I Mail Tax Return
To File Or Not File A Tax Return
Youre required to file a tax return in the year you leave Canada if you have a tax balance owing or youd like to receive a tax refund. In the tax year you leave, complete the general income tax and benefit package for your province or territory of residence on the day you emigrated from Canada. Your tax filing deadline is the same youll have to file on or before April 30, or if you have a business in Canada, you have until June 15 to file your tax return.
You need to report your worldwide income earned on your tax return during the time you were a Canadian resident. Once you ceased to be a resident, you only need to pay income tax on income earned in Canada. For example, if you move to Australia and youre receiving a Canadian pension, youll still need to pay income tax on that even if youre not a resident since the income came from Canada.
State Taxes For Expats Summary
Every expats situation is different. Their reasons for moving abroad, their present and future financial circumstances when they move, their income types and sources, which country they move to, how long theyre moving abroad for, and the state where they last lived in the US, all affect whether expats are liable to file state taxes from abroad or not.
Two essential final pieces of advice: firstly, check the rules in the state where you last lived, ideally before you move abroad, but otherwise as soon as possible. Checking before moving abroad of course gives you the best possible chance of ensuring that you can minimize having to file state taxes as an expat.
Secondly, seek advice. Filing US taxes from abroad, both federal and state taxes, is more complex than filing in the states. There are additional forms to file, additional filing and reporting requirements, and often foreign currencies to convert, too, so its almost always beneficial to seek assistance from a US expat tax specialist.
Recommended Reading: What Happens If I Forgot To File Taxes
Filing Taxes When You Live In One State And Work In Another
If you work in one state and live in another, you might be required to file more than one state income tax return. This is common for remote employees, but it also applies to employees who cross a state border to get to the office. Other circumstances, like moving during the year, could also affect which state youll file in.
Here are some frequently asked questions and answers about filing in multiple states.
Can I Still File Jointly If My Spouse Worked In A Different State Than I Did
If you and your spouse worked in different states, you can still file your returns jointly. Report only your income in the state where you worked and report only your spouses income in the state where they worked. On your resident return for the state you live, you will list both of your incomes. If either of you is due credit for taxes paid in another state, it will appear on your resident return. If either of you owe tax to your resident state, it will also get calculated here.
There is no harm in filing separate state tax returns if it makes you feel better, but doing so isnt necessary. Be aware that although its legal to file jointly on your federal return but separately on your state returns, many tax preparation software programs get confused by this. There are often workarounds that you can use to get the job done, but the process may prove arduous and time-consuming. You may need to read several help and FAQ files to learn how to do this since every program is different.
Recommended Reading: How To File School District Taxes In Ohio
Dividing Income Between States
Part-year tax returns are usually prepared based on your total income from all states, and then your tax liability is pro-rated based on how much income you made in each location.
This is easy to figure out if you moved to a new state to begin a job there. You’ll receive a W-2 form from each employer, and each will tell you how much you were paid for that particular job. But it can get more complicated if you moved while you were still working for the same company, because in this case you would only receive one W-2.
The W-2 will show the total amount that your company paid you, so youll have to split the income between the states on your own. You can do this in two ways.
How To Avoid States Taxes While Living Abroad
To avoid paying state income taxes while living overseas, youll want to abandon residence in any state that levies income taxes and establish a new residence in a state without income tax.
Keep in mind that sticky states consider moving abroad as a temporary leave of absence unless you can remove your ties to the state. These states only recognize a change to another state as a change in residency. Thats why its critical to properly sever ties and set up new residency in an income tax-free state before moving abroad.
While each state is unique, taking the actions below can help ensure you wont end up paying state taxes for expats when living abroad.
Read Also: What Are The Different Tax Forms
Protect Yourself From Tax
Tax ID theft occurs when someone steals your personal information to file a tax return using your personal data. Usually, the fraudulent tax filer will use your Social Security number to file your return in order to collect a refund. To protect yourself from tax ID theft, you can obtain a six-digit Identity Protection PIN from the IRS. IP PINs are known only to you and the IRS so the IRS is able to confirm your identity when you file your return. Learn more about how the IP PIN works and how to apply.
Taxes And Remote Work In A Different State: A Scenario
Sarah ordinarily lives and works in Texas, a state that does not have a state income tax. During the pandemic, shes assigned to work remotely. Since she doesnt have family in Texas, she decides to stay with relatives in Alabama, departing just before the lockdown starts. She stays in Alabama for four months, working remotely while shes there.
Alabama does impose state income tax, even for part-year residents. Depending on her filing status and how much money Sarah earned while working remotely in Alabama, she may need to file and pay Alabama income tax as a part-year resident of that state. If she didnt update her payroll paperwork with her company to show her Alabama address, her W-2 wont reflect this. However, this does not impact whether she has a personal obligation to file and pay taxes in the state of Alabama.
Some cities, counties, and municipalities have income tax requirements above and beyond state requirements that youll need to consider.
This scenario would get even more complicated if Sarah left Alabama and worked in another state for a few months before returning to Texas. If that other state imposes state income tax, then she may also need to file and pay state income taxes in that state for the portion of her income she earned while she was there.
Don’t Miss: Do Your Own Taxes Online