State tax filing for citizens working oversea.

Does he live with you now (prior to moving to Shanghai)?

If so, he remains a CA resident for CA tax purposes. If he lives in another state prior to moving, getting mail sent to CA won't give him residence there. Seth

Unless your son went to China before the end of December, he must claim the foreign earned income exclusion using the physical presence rule. (You must be a bona fide resident for a full tax year before you can use that rule.) So, his exclusion will be something less than the maximum of $82,400. In any case, he must file a Federal return to take the exclusion. As to California, the need to file a tax return depends upon his residency status. If he does not intend to return to California and his actions support this, he probably does not have to file. Katie in San Diego is the resident expert on state residency here on MTM. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

While overseas he is considered a resident of whichever state he lived in prior to going overseas. If that state has a state income tax, he may need to file - check the rules for that state. This is why so many people try to establish Texas residency prior to going on an overseas work assignment or deployment.

-Crystal

Has he permanently moved out of California and into Shanghai, with no present intent to return? If not, then he's probably still considered to be "domiciled" in California and therefore subject to California taxes (assuming, of course, that he was resident in California prior to the move. If he was resident in another state, then the same analysis applies to that other state).

Well, we used to have a lot of controversy in CA over these expatriate employment situations. There is a string of State Board of Equalization decisions going back many years, some going one way, some going the other. Fortunately since

1993 we have a statutory "safe harbor" which your son may be able to meet, and therefore be considered a nonresident of California. Cal. Rev. & Tax. Code Sec. 17014(d) provides that if an individual domiciled in California (as your son is; he is not likely to establish a new domicile in Shanghai) is absent from the state on an employment- related contract for an uninterrupted period of at least 18 consecutive months, he is considered to be a nonresident for income tax purposes. For purposes of determining the duration of an uninterrupted absence, returns to California totaling in the aggregate not more than 45 days in any taxable year are disregarded. This safe harbor does not apply to an individual who has more than $200,000 of income from intangibles (interest, dividends, etc.) or if the principal purpose of the absence is tax avoidance. Ideally your son has a written contract with his employer setting out the terms and duration of his employment in Shanghai. I haven't yet seen a published case where the existence or nonexistence of a written contract (as opposed to an oral agreement or simple common-law employment) was an issue, but I wouldn't take the chance if I could help it. If he has no federal income tax filing requirement, though, his income presumably will be below California's filing thresholds as well. I suspect that he will be required to file a federal return. He may be eligible for the IRC Sec. 911 exclusion, which may offset all or most of his foreign earnings, but that doesn't mean he doesn't have to file a federal return and report his worldwide income. California does not conform to the Sec. 911 exclusion, so if he remains a resident, all of his earnings will be subject to California tax. Katie in San Diego