Yes, you can. Expatriates do it all the time.
It is a real physical address and you can use it to get a driver’s license and bank account. That’s how many expats maintain US bank accounts and drivers licenses while living exclusively outside the country.
Thank you for the detailed insight, its much appreciated!
This has been my line of thinking, and my plan, based on research here and some expat forums. I am a guy in my mid-30s (with wife and young children), so I want to have an ‘airtight’ setup. I will, of course, contact a reputable CPA that does mariners’ taxes.
Discussing this subject here, with guys who have decades more experience then me, gives me a starting point, though, so that I have a rough idea of what to pursue and know the right questions to ask.
Thank you!!
States and banks know that the street addresses and unit numbers provided by commercial mail box services are commercial addresses. It shows up as a red flag on credit reports too.
However, these services are still very useful (especially the scan and email your mail) and I have used one for 30 years.
A guy told me that the way Maine caught him in Maine over 180 days a year (which triggers state income tax) was through his cell phone records.
With Digital Nomads and Remote Work from home or Covid refuges state tax conflicts are getting a lot worse and t hi nags are changing fast.
I think a CPA that does expat taxes would be more appropriate.
That may be the case and it may invite extra scrutiny but expats use the system successfully all the time with no issues.
He was trying to evade taxes, that’s not the case here.
If you’re looking for a tax haven with cheap land, low property tax and possibly few neighbors that doesn’t attract the attention of the tax man then that’s a great place - unless you carry large capital gains or buy expensive toys.
Every time I see a Florida, Washington or Nevada license plate I think ‘tax cheat.’ Every time I see Tennessee I think ‘redneck.’
For thousands of out of state mariners who have worked decades out of Louisiana you recieving a phone call is weird because many don’t even get that. There’s no rhyme or reason for these tax bureaucrats as far as I can tell. Glad it worked out for both of us.
Advising a person to just get a mail box & quit paying the state of California a tax is really out of character for you, I disagree with you on this one. These tax people don’t fool around & it ain’t like a simple disagreement with a NMC employee. These people mean business when it comes to taxes.
It was a letter, if that matters.
I’m not sure you’re understanding the issue. He is not now and, as far as he’s told us, has never been a California state resident. He wants to live full time in a foreign country (other then when he’s on the ship) and not have to continue paying any state taxes. What I advised is perfectly legal in his case and how most modern expatriates handle things.
Perhaps.
The issue I’m talking about is what happens when a state sends you a letter demanding back taxes? Remember, you are guilty until proven innocent. If all you have is a mailbox receipt and a drivers license you are unlikely to win. The cost will be much more than the taxes owed.
Anyone going the route of tax minimization must make a convincing case as a defense. Research the laws. Plan ahead. Be meticulous. Owning property, severing any and all ties to the former state no matter how minor, and having a folder of proof showing intent to reside, actions to reside and residence is an ounce of prevention.
I’m in an unusual tax situation. I’ve been threatened three times by two states. Each time I threw a wall of documents at them. Each time not only did they get nothing from me, twice they ended up paying me a refund for something I overlooked in my favor (depreciation on real property - oops). I didn’t use a lawyer because I was prepared.
So here are his options as I see it: 1. Plan for the worst 2. Hope for the best. I vote #1 because #2 sounds real expensive.
If you don’t have any ties to the state making the claim, no property in that state, no car registered there, no bank accounts there, etc they have no justification to claim back taxes because you don’t live there. You can show via your driver’s license and bank accounts that your legal residence is in South Dakota (or whichever state you choose) so there’s nothing they can do. If you file your federal taxes with the South Dakota address then no other state will even know you’re alive earning money (except the state the company you’re working for is based out of). Expats do this all the time legally and successfully.
Don’t know if they still do it but states (including Louisiana) used to garnish your federal income tax return if they thought you owed them money.
I can say for certain Virginia will take money from your bank accounts and whole life insurance. They will do this after sending letters to your home (while you are at sea). If you don’t respond after a few months (because you are at sea) they will vacuum up your liquid assets until you return home to prove you are not involved in tax evasion.
Thankfully I was prepared. Resolution took months. Hardest part was getting my assets back - without interest! If all I had was a mailbox rental receipt I’d be fucked.
True, if all you had was a PO box receipt you’d be fucked. It’s a good thing that expats actually make their legal address the address they rent including their drivers license and bank accounts. That’s not “just a mailbox receipt” like your keep dismissively referring to it, it’s actually a legally established residency.
What was their reason to think you owed them money?
They would have to have grounds for thinking that and go through other processes first (like notifying you). The IRS notifies states when you file earnings from a company within that state, which is how Louisiana found and contacted me. Once I explained that I worked offshore I never heard from them again because I’m outside their tax jurisdiction. They had no other grounds to accuse me of owing then taxes other than the fact that I was paid by a Louisiana company. (If I had been working shore-side in Louisiana and living outside the state then they would have been correct.)
Pay attention to this in how to deal with California. If you let the company withhold California state taxes you’ll likely never see it again or the cost to recover it will exceed the taxes withheld.
Once you establish your US residence in South Dakota with drivers license and bank accounts and cut all ties to Guam (sell any real property and vehicles, etc) then they will both 1) have no claim to any taxes from you and 2) they’ll no longer even be concerned with you or ever contact you again.
I amended a federal tax return that was a few years old. (I worry that an inaccurate tax return could threaten my security clearance.) The effect on the federal amount owed was a few hundred owed to the feds. That seemed to alert Virginia. None of the income that was amended in the federal return was taxable in Virginia. However, Virginia still sent a notice that I owed them tax based on my entire taxable federal income including income taxable in other states.
After several notices over several month (while I was overseas) Virginia emptied my checking and savings accounts and tried to take a whole life insurance policy which I had cashed out between the initial tax filing and the amending of the federal return.
I returned to the United States to a pile of Virginia mail. I responded with a pile of documents. I had an accountant review my returns. (She found where I omitted depreciation on a Virginia property which reduced my Virginia tax liability and earned me a partial refund.) Virginia paid the partial refund but didn’t automatically return the funds they took. That took months.
The following year Virginia did the exact same thing! Idiots. I responded the same way. I had the same accountant review all my returns and she found I repeated my depreciation omission on the same property that year as well. Another refund from Virginia.
I was waiting for them to try again but they have not. However, I am ready if they do. (I no longer do my own taxes. That accountant has been doing it.)
So you have property and income in Virgina?
That’s a way more complicated issue than what this guy is asking about.
I have property and income in several states. That’s not the point.
My point is anytime someone steps away from a simple tax situation to a more complex situation (like moving overseas) then it is imperative they do their research, plan for greedy states coming for them at a future date, have a bulwark of documents to prove they are innocent, to have no loose ends a state can use against them.
I want to point this out: the cost to Virginia to accuse me and a thousand other people of tax fraud was what? A few dollars in paper and stamps? It’s low cost and high return. They only have to snag one evader out of a thousand falsely accused for it to be profitable. Heck, they don’t have to snag an evader - just someone who is innocent but ill prepared.
So be ready. That is my point.
I would remind anyone thinking of being an expat that if you open a bank account in another country that bank reports any assets over $10,000 to the USA, they collect information to do so when you open your account. So do not think you can hide money in your name in an overseas account. Additionally, if you work for a salary or wages the IRS already knows how much you are paid so you cannot hide anywhere. That same wage information is available to any state that wants to look for it.
If you have a business or live off investments there are ways to avoid taxes legally. The tax scheme is structured in such a way as to guarantee wage earners pay their due. Corporations, LLCs, investors etc, are given many legal ways to not pay taxes.
Therefore,if you work for wages/salary establish a legal residency in a territory or a state with low or no taxes.
Most companies I have experience with will deposit your check in a foreign bank account which saves wire transfer fees to your resident country from a US bank.
