Question

Returned from Abroad to a Different State

Forum|Forum|5 years ago
May 16, 2021
1 reply
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Hi,

I have a very convoluted situation. 3 years ago we moved to Spain from Minnesota. We retained a home in MN that was 100% rented out while we were abroad, and I worked remotely for an company based in Minnesota. I never had to travel for the job and did my work completely from my home in Spain. Every year we have filed State Income Taxes in MN. In September of 2020 we returned from Spain directly to Arkansas.

State taxes were withheld from my paycheck for MN up until September, after which taxes were withheld for Arkansas. After reviewing the rules, I believe that I need to pay Arkansas state income tax for the income earned during the 4 months we lived there. However, after reviewing the rules more closely it seems that perhaps I don't need to pay any MN state income tax, or maybe only tax on the rental property. Is that accurate, and how about the other years when I lived entirely in Spain?

Oh, and my wife owns a company based in MN (that files its own taxes) and worked remotely from Spain the entire time. Not sure if that changes anything.

Finally, a bit more detail -- my W2 Arkansas wages (box 16) match my W2 box 1, whereas my Minnesota wages (box 16) were 0. This seems erroneous, given that box 17 shows figures that seem reasonable if taxes were computed on the salary earned in Arkansas for 1/3 of the year, and if I'd lived in MN for the other 2/3.

Help!!

P

pk12_2

Employee

@baileyby , generally IRS considers the income to be sourced/earned where the work is actually done. So if you were in Spain but earned monies from an entity in MN but the work was done in Spain ( place of work ) then you did not have any MN sourced income. So I would strongly suggest using the services of a Tax professional familiar with international tax situations because (a) you are talking of multiple years that may have to be amended; (b) Tax Treaty between US & Spain may have to be considered -- did you pay taxes to Spain with local income or the US (?) income was the totality of it; (c) Rental income is sourced to MN; (d) your wife may be in a similar situation; (e) did you use foreign earned income exclusion or what?; (f) four months of Arkansas residency may be sourced to Arkansas -- work done in Arkansas; (g) MN residency may be questionable -- perhaps non-resident filing; (h) etc. etc.

IMHO

pk