If you open the account with a foreign passport there is no reporting requirement to the IRS.
Yes you absolutely can. Another response was totally incorrect. Go to a site/YouTube channel directed at full time RVers. They will have all the information you need about how to do it and how it works. There is one business in South Dakota that I know gets it done in 3 days and that’s if you have a vehicle to reregister. It’s simple.
Which is why when I moved, I never looked back and didn’t even go back for many years.
So put all your “tax savings” into a separate account…that way you’ll have the start of a legal fund when you get nailed.
It’s not about “tax savings” or “tax evasion.”
It’s about getting a “tax divorce” from your greedy high tax state so that they don’t keep trying to illegally tax you after you have moved to a no tax state or have moved to a foreign country to become an expat. Some of these high tax states do not want to let go.
It’s also about not being taxed in a high tax state where you have never lived or worked just because the employer is based there , you did crew change or port calls there, or the payroll is processed there.
A great many factors go into where a person chooses to live. Certainly, cost of living, including state, county, city taxes are among those factors.
Alaska, Washington, New Hampshire, Florida, and Puerto Rico are pretty nice coastal states with many attractions for a Mariner. They also do not have any state or city income taxes.
A good many Mariners enjoy living as expats in other nice coastal places, such as Bali, Thailand, Philippines, Mexico, Costa Rica, etc.
I agree with you tugsailor but @27SAFE isn’t giving bad advice about putting the tax savings money aside just in case. The first year I did it I thought the refund check was too good to be true & put it in a CD (rates were a lot better then). Eventually I used that money to pay off my first house when it matured & I wasn’t too concerned about an audit. I still keep all my evidence but I was really happy & slept better after 7 years past after that first year & after the 7th year past after my last year doing it.
Ah, the 7 year sweat. I remember that. I was out of the country for 9. Was nervous when I returned and needed to open a bank account. I will never forget the relief I felt after I asked the bank officer to run my SSN prior to me opening an account and it came back clear. Never, ever again took a chance with the IRS.
Just a couple of points to stress. You want to avoid taxes, not evade them. Evading is not paying what you owe. Avoiding to setting up a situation where they are not owed in the first place. If you wish to live in the Philippines then simply do so. There is no requirement to continue maintaining a US residence. As long as you are a US citizen you will owe Federal taxes. No way to get out of that. Being out of the country 330 days out of 365 allows you to take the income tax exclusion but if you visit longer that is the only thing you loose (if your residence is out of the country). If you want to maintain a drivers license and enjoy a few other benefits then consider a no or low cost state for token residence.
I agree with the post referring to visiting the RV forums. Learn from them that do it successfully. Don’t try evading taxes. There are too many things to trip you up and the end results are not pretty.
Thanks for the info. I never intend to avoid federal taxes, since that is impossible, as you’ve stated. My wife and I definitely intend to study how this works via the RV and expat communities, and then setup residency in South Dakota.
I appreciate the insight!
As far as the IRS is concerned, the law is the law and it pays to know it. With respect to the Foreign Earned Income Exclusion, it’s laid out pretty well in IRS Pub. 54. If you are engaged in the oil industry, and meet either of the 2 tests, you can exclude all foreign income up to the limit. If you are not in oil, and you are otherwise engaged in shipping (i.e. deep sea), it’s more complicated. You need to keep a log like airline pilots do. When you are in a foreign port or within foreign coastal waters you can exclude. When in international waters, you can not.
With respect to the OP’s question about being taxed from out-of-state, that is purely state law (California) and the interaction between states. Whether you are are in Guam, PI or any any state in the union collecting income tax, the answer is the same.
"[HOW DO STATES TAX INCOME EARNED IN OTHER JURISDICTIONS?]*(How do state and local individual income taxes work? | Tax Policy Center)
A state income tax is generally imposed by the state in which the income is earned and not the state where the earner lives. Some states, however, have entered into reciprocity agreements with other states that allow outside income to be taxed in the state of residence. For example, Maryland’s reciprocity agreement with the District of Columbia allows Maryland to tax income earned in the District by a Maryland resident. As of 2010, 15 states and the District of Columbia had adopted reciprocity agreements with specific states. Typically, these are states with major employers close to the border and large commuter flows in both directions."
*This site seems to state the law pretty well. If in a nutshell. (Louisiana seems to have an agreement with neighboring states, although I have not personally verified this.)
if you have plans to live outside why not get another passport and give up the US one as its very draconian re taxation compared to most countries.
Seems very popular for Americans out here in Asia.
Not in the case of transportation workers engaged in interstate commerce (which includes most mariners). Federal law says we are only taxed by our state of residence regardless of where we work.
How could he do that and keep his job?
State Taxation and Regulation: The Modern Law
Unfortunately, the only protection is against double taxation.
Here’s a blurb from a training class for payroll people.
Amtrak Re-authorization and Improvement Act of 1990 (Pub. L. 101-322). Railroad and motor carrier employees (i.e. operators of a commercial motor vehicle, like a tractor, trailer, or semitrailer) who work in more than one state are subject only to the state and local income tax laws of their state of residence, regardless of where they work.
Under Pub. L. 106-489, merchant mariners employed in interstate commerce are
subject to the state and local income taxes of their state of residence only.
meaning you want to fly back and work on a US flagged vessel, ok agreed you cant.
Indeed… that’s the only way to keep the big money coming in. I have thought about trying to ‘buy’ Philippine citizenship one day, making me a dual citizen, but that requires connections and/or $$$ to get a Philippine congressman to bring a resolution to the house floor for my citizenship.