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I have a single US employer. I believe they are already withholding my state taxes at this point as I submitted a w-9 with my address being in the US. I would prefer that not to be the case because my residency isn't really in the state of North Carolina anymore. I will be out of the country for at least 6 months, on tourist VISAs. Maybe even a year. Also, would I be subject to lower federal taxes (any credits)? All of my income has been earned in Thailand, none of it has been earned while I was in NC. I own no property there, have no vehicles or ID maintained there. I have a Drivers License from Maryland. The only connection I currently have is that I maintain an address there (my Mom's address) as mine.

The employer is not of NC, they are of another state.

Note: This is not freelance work, it is done on a W-9 with 1 company only.

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    More details are needed in order to give an answer besides broad hints, or the simple advice see a tax professional with a expertise in international taxes. It appears that some income was earned while living in North Caroline or some other state; some might be earned in other countries while on tourist visas. Does the use of a tourist visa complicate the issue?
    – mhoran_psprep
    Dec 31, 2012 at 12:52
  • I think the simple answer to this question is the best one: see a tax professional, and in your case a very competent one.
    – C. Ross
    Jan 1, 2013 at 12:34

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Since I attacked the other answer as incorrect, let me answer your question in a better way. (IMHO, of course, and keep in mind than neither CQM nor me are tax professionals and you'll have to talk to one eventually).

  1. State taxes: while you may be considered as non-resident by North Carolina (since your absence is short term, you might still be considered resident, consult a local professional), you still have to pay state taxes on the earnings in the state. In your case - your salary paid by the NC employer is subject to NC taxes (regardless of your residency status - see here).

  2. Foreign income exclusion is only relevant to you if you can show bona fide residency in the other country, which in your case may or may not be relevant. I attacked CQM on this because he was definitive on this point, without knowing the details. But assuming you're only US citizen, and everywhere you stay - you stay on a temporary resident visa (as a tourist) - CQM is right, and it will be irrelevant for you. Foreign taxes credit however is very much relevant. If you happen to pay income taxes in foreign lands, you can (under certain conditions) credit them against your US tax liability.

  3. If you're a US citizen or permanent resident, tax treaties are generally not applicable to you (with very specific exclusions that without knowing the details we won't be able to address. Your professional tax adviser can help you on that).

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1) you aren't earning in that state so you don't have to pay that state's income taxes. this is pretty universal, as usually smaller jurisdictions don't even try to pass legislation about collecting "worldwide income" because they dont have the resources to enforce it like the federal government might.

This might make doing taxes complicated - if you let a robot or computer do it - but these things aren't based on your address, its based on where the income was actually earned since we are talking about state income taxes.

2) federal credits for earning abroad usually require you spending more time abroad. like the foreign earned income credit which exempts over $90,000 of your income from us federal taxes. but since you won't qualify with just 6 months, you'll need to pay both us taxes and the local taxes wherever you are.

3) there might be a favorable tax treaty with the usa and whatever country you are in.

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  • @littleadv - Comments were deleted. State your best case, cite as specifically as you can, and let the votes happen. A discussion about how to make the answer better should happen in the chat. Remember the best outcome for this answer to make the Internet a better place =) You are both smart people, and a fine grained nuanced answer is best. The comment on the question indicates it might not be answerable. (I am no tax expert, so I can't say)
    – MrChrister
    Dec 31, 2012 at 18:17
  • @MrChrister its not about the question (which is a usual attempt to spare some $$ on a proper tax advice), its about the answer. As I have shown in my answer above, CQM's is incorrect on almost all accounts.
    – littleadv
    Dec 31, 2012 at 20:12
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    @littleadv going forward can you just provide sources that that counter my knowledge of the subject matters, I'm quite content that we won't agree but I would be open to official sources on your opinions
    – CQM
    Dec 31, 2012 at 21:53
  • earned income abroad is for foreign earned income, not if your employer is state side. I think since teleworking is a relatively new there isn't much tax literature about it.
    – Zombies
    Jan 10, 2013 at 4:45

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