U.S. citizens abroad are generally required to file federal income tax returns and report their global income to the Internal Revenue Service (IRS). Failure to file a federal income tax return or report foreign assets can lead to the imposition of costly fines, and could even put you at risk for criminal prosecution. The IRS imposes similar requirements for filing a state tax return if you are a U.S. citizen abroad. If you used to live in California and now reside abroad, or if you are planning to leave California and move overseas in the near future, you should familiarize yourself with the tax requirements that may apply to you. CPAs in Roseville, CA discuss California state tax requirements for U.S. taxpayers living in foreign countries.

expat california state tax

Your State Residency While Living Abroad

One of the first steps to understanding your tax obligations is determining your state residency for tax purposes. Citizens are generally required to file taxes in the state where they reside. Therefore, you must determine whether you are considered a resident of California for tax purposes.

While some states make it relatively easy to terminate residency, there are also states where the process is more difficult – including California. To break residency, not only must you physically leave the state, but also:

  • Close the bank accounts you maintain in California.
  • Sell the property you own in California.
  • Turn over your California driver’s license, if you have one.

California imposes some of the nation’s strictest requirements for terminating residency. Even if you have moved overseas, you could still be required to file state taxes if you have any income from, or assets in, California. In addition to your financial connections to California, other factors that could have an effect on your tax obligations include your age, your filing status (single, head of household, married filing separately, married filing jointly, qualifying widower with dependent child), and whether you have any dependents.

Do U.S. Citizens Abroad Have to File California State Taxes?

U.S. citizens abroad are typically required to file state income tax returns, just as they are required to file federal income tax returns. The State of California Franchise Tax Board provides the following instructions for (1) non-residents and (2) residents who lived in California for only part of the tax year:

“File a California tax return if you have any income from California sources and your gross income… or adjusted gross income… is more than the amounts shown on the chart below for your filing status, age, and number of dependents.”

The chart referenced above is available in an instructional guide from the Franchise Tax Board. However, you should seek the help of a Roseville tax preparation service if you have any questions at all, however minor, about the filing requirements that apply to you and your spouse. Keep in mind that, in addition to filing a state (and federal) tax return, you may also be required to file additional documents you might not currently be aware of.

For example, if you have income or assets overseas, such as a checking account with a foreign bank in the country where you now reside, you may be required to file an FBAR (Report of Foreign Bank and Financial Accounts, FinCEN Form 114) if the value of the assets exceeds $10,000. Many taxpayers overseas are surprised to learn of this important requirement, even if they are already aware of their state and federal tax return requirements.

california foreign earned income exclusion

California Tax Preparation Service for U.S. Citizens Living Overseas

If you recently moved from California to another country, or are planning on relocating for work in the near future, you should consult with a trusted tax professional about the move’s effects on your income reporting requirements. An experienced Roseville tax preparer from Cook CPA Group can discuss your concerns and answer your tax law questions to make a determination about your filing requirements, giving you peace of mind that you are providing timely and appropriate documentation to the IRS.

In addition to ensuring your compliance with complex tax laws that apply to citizens abroad, we can also make sure that you get the full benefit of any deductions or tax credits you may be entitled to. For example, if you are serving overseas on military duty, you may be eligible for special tax breaks for members of the U.S. Armed Forces.

Tax laws are complex, and errors can be costly. Before you file your taxes next year, make sure you have the benefit of financial guidance you can trust. From our Roseville offices in Placer County, CA, Cook CPA Group provides California tax services for individuals all over the world, including the Bahamas, Bermuda, Canada, the Channel Islands, Costa Rica, France, Germany, Greece, the Isle of Man, Luxembourg, the Netherlands, New Zealand, Peru, Singapore, South Korea, Sweden, Switzerland, Thailand, Uruguay, and beyond. For a free consultation about IRS tax requirements for Californians overseas, call Cook CPA Group at (916) 724-1665 today.