VA State Taxes & Changing Residency

  • Thread starter Charles Goodman
  • Start date

C

Charles Goodman

I have a VA state tax question that I'm hoping someone can
help me with.

My wife and I lived in Florida for over 15 years until my
soon to be former company transferred us to Virginia in the
summer of 2002. All of my wife's family is still in Florida
and we maintained ties there in other ways, such as keeping
our Tampa credit union account open.

I have accepted a new job with the US Department of State
and will be going overseas after several months of training.
Our only tie to VA was through my former company and our
intention is to return to Florida when we come back from my
overseas work (at least several years...perhaps as many as
20 years). We also want to take our vacation and "home
leave" time in Florida to be close to family.

We have put our VA house up for sale and my wife is in the
process of transferring her nursing license back to Florida.
We have also changed the address on our Florida driver
licenses to my wife's parents house. Even though we turned
in our FL driver licenses when we got our VA licenses, we
haven't been here long enough for the FL licenses to expire
so they were still active; I just had to go online and give
the new address. We have also registered to vote in
Pinellas county (FL), which is where my wife's parents live.
My wife will be going down to FL in the near future to work
as a nurse and she will also register our cars down there.

My questions are about my obligations for paying, and having
withheld from my paycheck, VA state income tax. Because we
are changing our state of domicile to Florida, I do not
think I will be responsible for VA state income tax once we
are overseas. Is this correct? As I have indicated, we
have shifted everything (driver licenses, voter
registration, etc.) back to Florida. However, the training
for my new State Department job is going to be in northern
VA. Since we have shifted domicilliary residency back to
Florida, am I obligated to have VA state tax withheld from
my State Department paycheck while I'm in training in VA?
As a VA resident this year, I will have worked for my former
company through 3/16/06 (my last day). I expect that my
State Department training in northern VA will last until
August or September. If I do have to have VA tax withheld
from my State Department paycheck, I'm worried that it will
suggest I'm still a VA resident, which I do not want to be,
particularly once I'm overseas. I will have presence here
after 3/16, but I have no intention of returning here after
training.

I realize this may be a tricky question, but any info
someone can give me, even general guidance, would be very
helpful.

Best regards,
Charles Goodman
 
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K

Katie

Charles said:
I have a VA state tax question that I'm hoping someone can
help me with.

My wife and I lived in Florida for over 15 years until my
soon to be former company transferred us to Virginia in the
summer of 2002. All of my wife's family is still in Florida
and we maintained ties there in other ways, such as keeping
our Tampa credit union account open.

I have accepted a new job with the US Department of State
and will be going overseas after several months of training.
Our only tie to VA was through my former company and our
intention is to return to Florida when we come back from my
overseas work (at least several years...perhaps as many as
20 years). We also want to take our vacation and "home
leave" time in Florida to be close to family.

We have put our VA house up for sale and my wife is in the
process of transferring her nursing license back to Florida.
We have also changed the address on our Florida driver
licenses to my wife's parents house. Even though we turned
in our FL driver licenses when we got our VA licenses, we
haven't been here long enough for the FL licenses to expire
so they were still active; I just had to go online and give
the new address. We have also registered to vote in
Pinellas county (FL), which is where my wife's parents live.
My wife will be going down to FL in the near future to work
as a nurse and she will also register our cars down there.

My questions are about my obligations for paying, and having
withheld from my paycheck, VA state income tax. Because we
are changing our state of domicile to Florida, I do not
think I will be responsible for VA state income tax once we
are overseas. Is this correct? As I have indicated, we
have shifted everything (driver licenses, voter
registration, etc.) back to Florida. However, the training
for my new State Department job is going to be in northern
VA. Since we have shifted domicilliary residency back to
Florida, am I obligated to have VA state tax withheld from
my State Department paycheck while I'm in training in VA?
As a VA resident this year, I will have worked for my former
company through 3/16/06 (my last day). I expect that my
State Department training in northern VA will last until
August or September. If I do have to have VA tax withheld
from my State Department paycheck, I'm worried that it will
suggest I'm still a VA resident, which I do not want to be,
particularly once I'm overseas. I will have presence here
after 3/16, but I have no intention of returning here after
training.

I realize this may be a tricky question, but any info
someone can give me, even general guidance, would be very
helpful.
You definitely will have to have VA taxes withheld from your
State Department paycheck while you are training in VA,
because your salary is VA source income (for services
performed in VA). That has nothing to do with your tax
residence, necessarily. However, I think you will remain a
VA resident until you finish your training and leave the
state. Even if your domicile has changed back to Florida,
your presence in VA and maintenance of a place of abode
there for more than 183 days of 2006 would make you a
resident for tax purposes. If your wife goes to Florida and
works there for the rest of the year, SHE may become a
nonresident of Virginia, but you will not. From the date
she becomes a nonresident, her Florida earnings will not be
subject to Virginia tax in 2006.

Whether you can make an effective change of domicile from VA
to FL without, yourself, actually moving to and residing in
FL with no intention of leaving there for an indefinite
time, is another question. The Virginia regulations are
pretty strict on this point. I'd suggest you look at Va.
Adm. Code 23 Sec. 10-110-30(B)(3), which you can probably
access through the Virginia Department of Revenue's web
site. I would suggest you and your wife establish a place of
abode for yourselves (not staying with family) in Florida as
soon as possible, and that you spend as much time there as
you can before you go overseas. Keep a detailed,
contemporaneous calendar and document your travels, e.g. air
itineraries or gas receipts.

The simplest and cleanest way to handle this probably would
be to treat yourself and your wife as Virginia residents up
to the time you leave the state after finishing your State
Department training, and file 2006 as part-year residents of
Virginia. As long as you don't return to Virginia within
the statute of limitations on the 2006 return, it is likely
that no questions will be raised about your change of
residence. However, you should be aware that any time you
return to work in Virginia (e.g., for meetings or additional
training) you will have Virginia source income and a filing
requirement unless it is de minimis.

Katie in San Diego
 
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K

Katie

Charles said:
I have a VA state tax question that I'm hoping someone can
help me with.

My wife and I lived in Florida for over 15 years until my
soon to be former company transferred us to Virginia in the
summer of 2002. All of my wife's family is still in Florida
and we maintained ties there in other ways, such as keeping
our Tampa credit union account open.

I have accepted a new job with the US Department of State
and will be going overseas after several months of training.
Our only tie to VA was through my former company and our
intention is to return to Florida when we come back from my
overseas work (at least several years...perhaps as many as
20 years). We also want to take our vacation and "home
leave" time in Florida to be close to family.

We have put our VA house up for sale and my wife is in the
process of transferring her nursing license back to Florida.
We have also changed the address on our Florida driver
licenses to my wife's parents house. Even though we turned
in our FL driver licenses when we got our VA licenses, we
haven't been here long enough for the FL licenses to expire
so they were still active; I just had to go online and give
the new address. We have also registered to vote in
Pinellas county (FL), which is where my wife's parents live.
My wife will be going down to FL in the near future to work
as a nurse and she will also register our cars down there.

My questions are about my obligations for paying, and having
withheld from my paycheck, VA state income tax. Because we
are changing our state of domicile to Florida, I do not
think I will be responsible for VA state income tax once we
are overseas. Is this correct? As I have indicated, we
have shifted everything (driver licenses, voter
registration, etc.) back to Florida. However, the training
for my new State Department job is going to be in northern
VA. Since we have shifted domicilliary residency back to
Florida, am I obligated to have VA state tax withheld from
my State Department paycheck while I'm in training in VA?
As a VA resident this year, I will have worked for my former
company through 3/16/06 (my last day). I expect that my
State Department training in northern VA will last until
August or September. If I do have to have VA tax withheld
from my State Department paycheck, I'm worried that it will
suggest I'm still a VA resident, which I do not want to be,
particularly once I'm overseas. I will have presence here
after 3/16, but I have no intention of returning here after
training.

I realize this may be a tricky question, but any info
someone can give me, even general guidance, would be very
helpful.
You have no choice with respect to the Virginia withholding.
Your earnings will be Virginia source income and would be
taxable in Virginia whether you are a resident or not. The
State Department has no choice but to withhold Virginia tax.

Whether you can make an effective change of domicile to
Florida without actually moving there yourself with the
intent of remaining there indefinitely (rather than going
overseas or elsewhere shortly thereafter) is another
question. The Virginia regulation is pretty detailed on
change of domicile. You should look at Va. Adm. Code 23
Sec. 10-110-30(B)(3), which you can probably access through
the Virginia Department of Revenue's web site. If you can't
find the DOR site right off, you can go straight to it from
www.taxadmin.org.

Katie in San Diego
 
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Charles Goodman

Thanks a lot, Katie. Really great info. I had continued
doing research after posting my initial question and was
beginning to think that 1) I would have to pay VA taxes
while in training and 2) Filing as a PY resident for 2006
(after we've left the country) probably makes sense. Your
post definitely supports both of those points.

You mention a statute of limitations on the 2006 tax return.
Do you know how long that is or where I could find it? It
is very unlikely that I will return to VA in the next 5-6
years, but is unknown when I will return after that period
of time. I will eventually return to VA for more training;
I just don't know when (other than it not being for at least
5 years).

My wife working in FL was really intended to help us
establish FL residency. Sounds like it doesn't help and may
even complicate things. We can always change those plans.
However, I'm still wondering if her becoming a FL resident
in May/June (less than 183 days in VA) would help my case
for changing too. We'd probably have to file our 2006 VA
tax returns separately, me as a PY resident and her as a
non-resident, but since she's my wife and I would
subsequently claim domicile in FL, where she had been a
resident as of 2006, does that not help my case if VA ever
questions what I'm doing?

We really don't want to buy a house in FL until we return
(many years from now). Rental rates don't seem to have kept
pace with home price increases, so it isn't looking like a
very good investment. I also don't like the idea of being
landlords from half way around the world. I had hoped that
our family ties, long-time FL residency before moving to VA,
and maintaining things such as active driver licenses and
bank accounts would be sufficient to prove our intent to
return there (I think that is the key test of domicile). In
addition, our move to VA was only for a job transfer; we
have no other ties here. Do you think that will be
sufficient? If it not, I suppose we could buy the most
inexpensive house possible, with no intention of every
living there, just to say we own a residence in FL. Not my
first choice, but preferable to paying state taxes to a
place we don't live and never intend to return.

Again, thanks very much for your help.

Charles
 
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