here:
I am not a VA resident because I have no intension of returning. However, as I've filled out the non-resident tax return, It appears I still have to pay taxes on my income from my company that is in VA, which is most of my income. If I was living in another state, I could pay taxes to that state and be exempted from VA taxes. But it doesn't seem liked I get exempted if I live in Canada.
Here are my thoughts. Let's see what others say:
(1) For 2010, contact the HR department of your company and tell them that you are not a Virginia resident and they must not withhold Virginia taxes. You might have to fill in a form W-4 (but I don't see that it has a field for foreign country). Your VA-4 form somehow needs to be annulled.
(2) For 2009, the damage is done. However, you should file a Virginia non resident tax return and claim all of your non Virginia source income (such as wage, interest, dividends) as a subtraction. Never seen a Virginia return before, but line 6 and 9 of form 763
here:
Well, once again, I'm late to the party. Sorry about that.
Assuming you have changed your domicile from Virginia to Canada, you are a nonresident of Virginia. It does not matter whether your domicile changed to Canada or to another state; your income from personal services is VA source income, taxable in VA, only to the extent that you went to VA to do the work. Your employer should withhold tax only on income from services you actually go to VA to perform. You should file a nonresident return with VA and get a refund of most or all of the amount that was withheld. The fact that the employer continues to cover you for unemployment tax purposes in VA does not make you a VA resident for income tax purposes.
The real issue is whether you have established a new domicile in Canada. There is a kind of rebuttable presumption that a US citizen does not establish a domicile in a foreign country, because he or she usually intends to return to the US at some point. Of course there are exceptions. The fact that you do not intend to return to Virginia doesn't necessarily mean that you have lost your VA domicile; you keep the domicile you have, even if you have severed all of your ties to it and have no intention of returning there, until you establish a new domicile in a different location. Unless you have moved to Canada with the intention of remaining there permanently, and not returning to the US to live, you are still a domiciliary resident of Virginia and taxable there on all of your income, regardless of source.
As I suggested above, you can use the Virginia regulations to help you determine whether your domicile has actually changed. The burden of proof that your domicile has changed will be on you. But if you truly have established a new domicile in Canada, Virginia cannot tax your earnings from personal services unless you performed the services in Virginia.
Katie in San Diego
Is a VA company required to pay VA unemployment tax for an employee who is a non-resident of VA? My guess is that they should only be paying FUTA tax, and the full amount of FUTA tax.
And assuming the company was not required to VA unemployment tax, is there any way for them to get a refund of that tax?
When an employee is working in a foreign country, the employer generally is required to cover that person for unemployment insurance purposes. Generally the employer should cover that person in the state where he or she would be most likely to claim benefits if he or she became unemployed -- which is usually the last state where the employee was working in the US. I have seen some employers who have a lot of expat employees report them all to the employer's headquarters state.
Whether an expatriate employee is a tax resident of the state is a different issue.
Katie in San Diego
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