Hi I've searched this forum and didn't come across any information. Any members have experience with this? I'm a US citizen and was living abroad for the past year. Do I have to pay state taxes on my capital gains from my futures trading? I'm unemployed and am doing this as my main source of income. I'm using a family members address as my billing address. Thanks
There isn't a cut and dry answer on this. It varies by state and the rules for if you are even a state resident vary by state. I'd call the secretary of state for the last state you lived in before you moved overseas, they usually claim you as a resident and can answer both questions for you: 1. Are you considered a resident of that state 2. Do you have to pay capital gains if you aren't living there.
You need to contact your tax accountant in the U.S. (have your family member give you the name, address and phone number of one) because the country you're residing in may have a "double taxation treaty" with the U.S. The treaty prevents you from having to pay taxes in both countries. Yet, you will have to pay taxes to one of the countries...you just don't want to pay taxes to both countries. Also, find a good tax accountant in the country you currently reside. By the way, if your futures trading is your main source of income...you're not "unemployed" especially if you're filing your tax returns in whatever country that your trading is your job. Simply, you don't want to be claiming unemployment benefits while claiming you're a profitable trader as you're main income and paying taxes in either country...that'll draw a big red flag. Taxes gets more complicated if you own property in both countries while you're claiming trading is your sole source of income. You definitely don't want to get an audit notice from either country (especially from the U.S.) while you're living abroad. P.S. Many large banks now notify the U.S. tax agency whenever certain sums of money move from one bank to another bank in another country. There's other financial institutions doing the same besides banks. I found this out a few years back because I often move money around whenever I have a favorable difference in the currency rate that allows me to make extra money when I move money from bank to another bank in another country.
Thanks for your response Who would I be employed by? I'm not paying self employment taxes. I don't have a w2 or pay taxes other then capital gains. That was always my impression. There aren't any bills under my name. I'm not paying rent or own any housing anywhere. I was living in a no capital gains tax country, Hong Kong. I'm working with my accountant now, but I wanted to find out some answers myself. Just want to double check. My accountant says, that the profits that were made while abroad won't be subject to state income tax given that I lived there for minimum 6 months. The information my accountant needs are which of the 6 months I was abroad and what my profit/loss was for each month of 2015. Since, I have long running positions, I'm not sure how to provide the profits for each month.
Your initial post said you're living abroad. I responded to that and I told you that it depends on the country involving if they have a "treaty" with the U.S. Now in your reply, you're saying Hong Kong...I know nothing about Hong Kong. Yet, I'm going to assume you've been in Hong Kong less than a year because would be strange to ask these questions now if you been living there for several years. As someone else stated about state taxes...depends on the state. Yet, you've now provided more info as to suggest your particular state (I don't know what state that is)...you're not subject to state income tax given you've lived in Hong Kong for a minimum of 6 months...info given to you by your accountant. Shouldn't you be calling your state to verify what your accountant told you and asking you questions about (e.g. which of the 6 months abroad) instead of asking anonymous people at a forum ? I'll give you the warnings again plus a few more and only listen to them if they apply: 1) Banks and other financial institutions now communicate with the IRS. Be careful if you're moving large sums of money from U.S. financial institution to another country financial institution. 2) Do not claim unemployment benefits if your accountant or you claim your occupation is a trader and that you're profitable. The U.S. have something (I don't know what its called) that if you're trading is your only income and you're not working for someone as a trader...you get listed as self-employed. 3) If you're broker is a U.S. broker...they forward your profit income to the IRS and the broker give you an end of year summary. U.S. is noisy, they just want to know. 4) If you're using someone's address in the U.S. as you're home address while living abroad, you need to be careful especially when dealing with any important state or government documents that are time sensitive. You're basically telling them that's where you're at when in reality they don't know you're in another country. I'm not sure why you're using a family members address considering the IRS, states, governments do take foreign addresses unless you just don't want them or some organization to know where you're really at or you plan on returning to the U.S. **** 5) If you're living abroad for a small duration in line with a tourist visa or something like that and you're not in that foreign country as a legal resident of that country...you have to pay taxes on your profits to the U.S. government (state). The above 5) is an important issue with the U.S. states and government. Some people think just because they live in another country while not a legal resident of that country or they've consecutively renewed their visa in that country as a "visitor"...they think they can skip out on U.S. taxes. As you can see...that's why you need to be very careful about listing the address of a family member or close friend as your home address while living in another country as a "visitor". It sends a red flag. Simply, make sure you have legal residency in Hong Kong. I remember one of the first questions I was asked in my audit...you a legal resident of this country ? If you have no income including no profits from your trading...get some state tax papers or IRS papers...easiest tax papers you'll have to fill out. Thus, file (send) them anyway even though you owe nothing and they pay you nothing as in a refund. P.S. Get a copy of your state and government tax guide books especially documentation for self-employment. Whatever you tax accountant tells you...have him verify it to you via referring to the tax documents you have. They all have a telephone hot line for U.S. citizens living abroad although usually not toll free. Specifically ask about the foreign earned income exclusion with Hong Kong and how much is that if your accountant didn't tell you anything about it or the amount. P.S.S. If your profits involves large sums of money and you're moving your money around (financial institution to financial institution)...make sure your tax accountant is certified and not some family friend you trust that's not certified as a tax accountant. You'll be surprise at how many people let someone due their taxes and that person isn't even a certified tax accountant.
Wow, as someone who has lived in several different US states my experience was that when you move state, you are no longer tax resident in that state as of the time of moving. Now I know that leaving the country is another thing altogether but I would have thought that this too means that you are leaving your state of residence. Of course federal taxes are still due because of the US's draconian non-territorial system. Even our tax-happy European cousins don't abuse their citizens by taxing them even after they leave the EU.
He's using a family member address as his home address. Thus, whatever state that is...to them (the state)...that's his home address even though he refer to it as his "billing address". Most states do not see it as a "billing address"...they see it as a home address. Some people maintain a U.S. address while living abroad for many different reasons. Also, the other issue is the "legal residency" in Hong Kong...if he has such. Thus, if Hong Kong doesn't consider him a "visitor" and instead consider him as a legal resident...a lot of U.S. taxation laws (exemptions) only applies to someone if they're a legal resident of the foreign country. There's a few famous celebrities that have gotten into tax trouble because they were U.S. citizens while living abroad in a country they don't have legal residency. A lot of loopholes were closed involving those that didn't work for someone while living abroad.
It makes sense in its own twisted way, to be a citizen of the United States you have to be the citizen of a state (or territory), its in the name after all. A lot of citizenie things are based on your state like voting, drivers licence... Since you have to be a citizen of some state, and you need more of a nexus than a borrowed mailing address to call a state your "home" state, the last one you lived in usually claims you. If that state is AK they probably aren't going to pursue you much, if its someplace like CT they may.
Yeah, every state is different and every country is different. Some countries if you want to get a drivers license (only a legal residence can get a drivers license) in that country while you have a U.S. drivers license...they require you to give them your U.S. license. They then cut it up. Other countries don't care if you hold a U.S. drivers license and a drivers license for their country. In the OP situation, I suspect he doesn't have legal residence in Hong Kong but I only say that because he said nothing is in his name (bills, rent, house). Thus, sounds like he's just a visitor there for an extended period of time living with someone.