Forum Moderators: LifeinAsia
I just moved from one High tax state to another (Hawaii to California). My company is still registered in Hawaii and no one, business-wise, knows that I'm in California.
Taxes are nuts here in CA. (I know you guys in Europe and Canada are laughing at that statement.) It's $800 just for the yearly LLC registration, not to mention the high state income tax of 6-9%.
I'm thinking of moving my official residence to Wyoming or some other no-tax state but really live here in CA. Since I'm internet based and have no store or "presence" in CA I think I should be OK. Wyoming seems to be the best for this all around, although it would be a pain to get there quickly if I had to show myself in the state for some reason. Nevada would only be a 5 hour drive but I'm not too hip to Nevada's rules/taxes/fees.
The tax savings would justify the expense I am pretty sure but I'm not sure of the steps that I'd need to take to do this. A real apartment? A mail forwarding address? A registered agent?
The only possible complication that I can forsee is if my wife gets a job in CA. Then we'd have to file separate income taxes for this to work and I don't know if that would throw up a red flag.
Anyone have any experience with this?
I'm not yet in the position to go offshore I don't think. (I believe that you have to be out of the country for more than a year or you have to pay federal taxes anyway.)
Thanks for any advice.
I'm thinking of moving my official residence to Wyoming or some other no-tax state but really live here in CA. Since I'm internet based and have no store or "presence" in CA I think I should be OK.
As you may or may not be aware, as a CA resident, CA taxes ALL your income, even if it's not earned in CA.
The only possible complication that I can forsee is if my wife gets a job in CA. Then we'd have to file separate income taxes for this to work and I don't know if that would throw up a red flag.
Nevada is also community property, can't remember about Wyoming.
Think again! CA is seriously cracking down on people trying to do exactly that. Will you have a phone in California? A home in California? Utility bills in CA? A car registered in CA? A bank account in CA? Any one of those would be enough justification to consider you a CA resident, especially when you really ARE a CA resident.As you may or may not be aware, as a CA resident, CA taxes ALL your income, even if it's not earned in CA.
I think there has to be some way around this as many people have second homes in different states. If your official residence is in one state but you have a "vacation" or second home or apartment in another state then as far as I know you're taxed on where your residence is. That would be where (I assume) you have your bank account, cell phone, car registered, etc. (In this case WY or wherever.)
About CA being a community property state...doesn't that only apply for divorces?
A few weeks ago I read in the wall street journal about California taxes and how it was driving so many wealthy people away. This was a story about how the actor Rob Reiner is behind an organization trying to get the taxes raised on those making over $100k essentially "for the children." (The story also mentioned how he got busted for illegally taking the money from the foundation and spending it on political ads but that's another stary.)
The article mentioned that a few years ago the original "tax on the rich" that Rob's group did get passed, ending up COSTING the state about $9 BILLION per year in lost tax revenues Why? Because so many people with money moved out of the state. Just like so many companies are doing too I might add.
Anyway just trying to figure out what's best for me to do here while I still have the option. I really hate giving more than 50% of my income away...
If your official residence is in one state but you have a "vacation" or second home or apartment in another state then as far as I know you're taxed on where your residence is.
About CA being a community property state...doesn't that only apply for divorces?
Anyway just trying to figure out what's best for me to do here while I still have the option. I really hate giving more than 50% of my income away...
You need to be careful with the wording of your question. The title asks "Where should I live." The body seems to be saying you live in CA but want to show that you are working elsewhere to pay less taxes. That looks like you are getting close to tax fraud. As others have said, taxes in CA are high but you get benefits from living there. Taxes in TN are low but you don't get beaches, supermodels, and other perks.
True, but if you spend 99% of your time at your "vacation" home, it ain't gonna fly.
That's the point that many folks overlook. It ain't where you say you're located, but where you actually are. One friend has homes in NYC and Connecticut. He refuses to fly in or out of a NY airport unless he's already planning to be in town for other reasons. Otherwise he'll fly into or out of Boston to minimize the number of days in NYC. He wants to save his NYC days for useful things, not just passing through.
Whatever you decide to do, you might have to be prepared to document where you spend your time.
If your official residence is in one state but you have a "vacation" or second home or apartment in another state then as far as I know you're taxed on where your residence is.True, but if you spend 99% of your time at your "vacation" home, it ain't gonna fly.
I get your point.
Not to disagree with you at all but for arguments sake, how would CA or any other state know where I live really? How would they have any idea that I am in their state unless I had a W-2 or somthing similar showing that I was in CA?
I don't have a storefront or anything business wise registered in CA. In a internet business you are kind of a ghost right? If my LLC is registered in WY or wherever and all of the 1099's show a WY address then how would CA be any the wiser?
They're not going to check that everyone with an apartment lease in the state is also on their tax rolls. They just don't have the manpower, systems, or technology to do that I don't think. But correct me if I am wrong.
Oh, and don't forget about the numerous Federal deductions that CA doesn't allow for your state income tax returns.
Yikes never heard about that. Care to elaborate?
The body seems to be saying you live in CA but want to show that you are working elsewhere to pay less taxes.
Yes exactly. Isn't that what Dick Cheney and tons of other big-wigs do? :-) Live in TX, FL, or WY but work in another state.
It ain't where you say you're located, but where you actually are.
As I asked above...how is the state going to know? Is there something I'm overlooking?
I know a couple of people that officially live in Texas but actually just travel all around in an RV and/or stay with friends. The only reason that they officially "live" in Texas is that they have a mail forwarding address there from a company that is set up for RV'ers. Is that so different?
Years ago I lived in one state but worked in another, as do millions of other people right? Is this really so different?
Oh, and don't forget about the numerous Federal deductions that CA doesn't allow for your state income tax returns.
Yikes never heard about that. Care to elaborate?
Good news, though! I kid you not- this is straight from the Form CA (540) instructions:
Ottoman Turkish Empire. If you received settlement payments as a person persecuted by the regime that was in control of the Ottoman Turkish Empire from 1915 until 1923, your gross income does not include those excludable settlement payments, or interest, received by you, your heirs, or estate for payments received on or after January 1, 2005.
As I asked above...how is the state going to know? Is there something I'm overlooking?
Seriously- CA has a huge budget deficit and they know that every year they lose LOTS of money from people doing exactly what you're thinking about doing. They know all the tricks that people have done and are very active in finding people trying to cheat the system. When you get found out, you'll still have to pay the original taxes, plus penalties and interest.
why are you determined to choose a state if you are an internet company? Why not the Caymans, or some other tax free country. There are several in the Caribean and they make a nice place to visit :) For tax reasons only, of course.
Making a move to another state is one thing but moving out of the country is quite another.
It would be cool to avoid both state and federal taxes if I could. However, according to the IRS you have to pay US federal taxes on income unless you are "physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months"
That means you REALLY have to live out of the country for 10 months of the year which I am not yet willing to do. I'm not making that much money yet ;-)
But then again having an extra 30-40% in my pocket would be cool...
You as an employee make only minimum wage, your US branch makes nothing and the Bermuda head office skims all the profit off. This is the trick that Stanley Tools and many others have used.
But as for another country, don't you think that Wyoming and California are different coutnries? Beside moving from one country to another is not as bad as you think. I have done it once (Can to US) and may do it one more time (US to Singapore).
I have a friend that is moving to Bali. He figures he can live for the rest of his life from what his house is worth here. We'll see...
hey if you live in CA now, might as well move to Florida. Same weather with no earthquakes, plus NO income tax.
Ya gets what ya pays for.
Plus he gets to go there a few times a year to visit his machines and his little office of 1 sys admin.
I looked into that several years ago. The main problem I found was getting the money back into the US legally. You can have all of the money sitting in an off shore account but what good does that do you? How can you spend it?
If you bring it into the US then this is considered salary and you have to pay taxes on it. I could, however, see the benefit of keeping a large portion of it offshore for your retirement or something.
It is of course possible to make various shells and LLCs owning other LLCs and the like but that gets into some serious tax-evasion issues that I'm not wanting to do. Not really interested in doing time :-)
As we now live out of the US we are looking to restructure and xfer LLC ownership to a new C-Corp so we can grow the biz.
Geez- talk to a tax attorney who knows the law.
That one line is the best advice given in this topic. I'm an LLC in California and I covered all of this with my attorney in the process of deciding whether I wanted to be an LLC.
Bottom line, if you live and do business in California, you will be paying taxes to California. If you don't, be prepared for the legal consequences after the fact. They ain't pretty!
Not only will you be paying business taxes, but you will also be paying for a business license which will be based on your gross income receipts.
Bottom line, if you live and do business in California, you will be paying taxes to California.
Geez- talk to a tax attorney who knows the law.
Just for the record...you'll notice that the first line of my original post was:
I'm going to check with my accountant on this but I just wanted to see if anyone here had any advice or tips for me.
I was obviously not going to make any business decisions based on advice from WebmasterWorld. I was just asking if anyone had any personal experience with this.
Bottom line, if you live or do business in California, you will be paying taxes to California.
I believe that's one of the best lines from this whole thread. If you're determined to live in California, then sadly you're going to suffer the consequences.
Would you consider moving? Not just your business's virtual location, but yourself? I know this goes into personal desires / issues, but I'd frankly have to wonder next: must you stay in California? Do the benefits outweigh the costs?
All points to consider.
Would you consider moving? Not just your business's virtual location, but yourself? I know this goes into personal desires / issues, but I'd frankly have to wonder next: must you stay in California? Do the benefits outweigh the costs?
That's the rub. I really like almost everything about California except the high home prices and the taxes. I like the attitude, the food, the fact that you can go to the beach, wineries, Yosemite, Tahoe, redwood forests, etc. It's all really cool.
I just moved from Hawaii where the economic situation is much worse than here, so believe it or not CA is step forward. On the other hand I grew up in Kentucky and Southern Indiana which has one of the lowest cost of livings in the country. Man, I'd be able to live like a king if I went back home. But alas, been there done that.
Like I said, when I think of where else I'd like to live I don't really know. I've been to 45 of the 50 states and they all have positives and negatives of course. Maybe I'd be best living in an RV and just driving around the country ;-)
Really the main thing that has us here now is my wife's job prospects. In her field this is a pretty good place to be. I keep telling her to get into internet marketing but so far she hasn't gone for it :-)
Tax-wise it's also kind of murky. The government is going to get their money somehow. For instance, someone told me that while Texas has no state income tax that their property taxes are much higher than in California. I read several times that while Wyoming does not have state income taxes, that overall residents pay higher taxes there than any state in the nation. Maybe that's property taxes, sales taxes, automobile taxes, I don't know. The point is, that the government gets their money somehow.
I'm not opposed to paying *personal* income taxes, but what I really hate in particular about California is how they stick it to businesses. Who do they think creates jobs and the economy? Anyway, enough ranting. It's off to the accountant...
Colorado, Florida, and Texas do not have state income taxes
I can assure you that Colorado has a state income tax (4.63%). Maybe you meant to say Wyoming.
The complete list [en.wikipedia.org]
If you live (residency) in onc state - in your case CA - and take out a mail box/corporation in another state, you WILL still be a resident of CA as far as the government is concerned. A mail box/storage bin is not, by itself, enough to establish a residency in a state according to the IRS.
Your residency will be determined by several factors, including if your wife works in CA, where your vehicles are licensed, what state your drivers license comes from, and whether the property you own in CA is the only property you have.
If you could get your vehicles licensed out of state (complete with auto insurance from the State of WY or NV), set up a residency in WY or NV by owning or renting a place (complete with utility bills), avoid having your wife work in CA, and get a WY or NV drivers license then you will be on pretty safe footing in terms of residency. CA may not like it, but not much they can do about it either.
In this case, you would have 2 residences. When it comes down to that, residency will be determined by things mentioned above - where is your drivers license issued, the auto insurance issued, etc.....
Just make sure your wife does not work in California - that would really mess up your plans.
PS - Nevada is a great place for incorporation. Wyoming is too.
I'm a Nevada resident who moved to Nevada specifically to escape the high taxes/fees of other states. As for the fees you mentioned about Nevada, which ones do you mean? It costs about $300 or so to set up a Subchapter S here in Nevada - and $125 a year to maintain it. Pretty reasonable.If you live (residency) in onc state - in your case CA - and take out a mail box/corporation in another state, you WILL still be a resident of CA as far as the government is concerned. A mail box/storage bin is not, by itself, enough to establish a residency in a state according to the IRS.
Your residency will be determined by several factors, including if your wife works in CA, where your vehicles are licensed, what state your drivers license comes from, and whether the property you own in CA is the only property you have.
If you could get your vehicles licensed out of state (complete with auto insurance from the State of WY or NV), set up a residency in WY or NV by owning or renting a place (complete with utility bills), avoid having your wife work in CA, and get a WY or NV drivers license then you will be on pretty safe footing in terms of residency. CA may not like it, but not much they can do about it either.
In this case, you would have 2 residences. When it comes down to that, residency will be determined by things mentioned above - where is your drivers license issued, the auto insurance issued, etc.....
Just make sure your wife does not work in California - that would really mess up your plans.
PS - Nevada is a great place for incorporation. Wyoming is too.
Now that's what I was looking for--real world experience. Thanks for the info!
