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"Out of State" locality in Virginia return was available last year for a client who lives full time in UK but has stock investments in US.

Greta
Level 8

Perhaps I've done this incorrectly in prior years? This "Out of State" locality is no longer listed in Virginia. I used to file just a federal return for stock transactions. Client used a UK accountant to coordinate UK & US incomes, something I don't know how to do. Advice?

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itonewbie
Level 15

" This "Out of State" locality is no longer listed in Virginia"
VA defines tax residency based on (1) domicile and (2) place of abode maintained in the state for more than 183 days during a taxable year.  Instead of focusing on whether there is an "out of state" locality on the form, have you determined whether your client had indeed broken residency with VA and established domicile (which is different from abode) in the UK or elsewhere?

"I used to file just a federal return for stock transactions"
Is this a US person (e.g. US citizen, national, or green card holder)?  If so, worldwide income should be reportable for US tax purposes although certain certain income may be taxable at a reduced rate by means of various articles in the UK-US DTA.  Investment income is the least of your worries as there are often complications with UK pension plans (which may be subject to foreign trust reporting and PFIC tax regime) and there may be nonqualified deferred compensation (that could have 409A implications).

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itonewbie
Level 15

" This "Out of State" locality is no longer listed in Virginia"
VA defines tax residency based on (1) domicile and (2) place of abode maintained in the state for more than 183 days during a taxable year.  Instead of focusing on whether there is an "out of state" locality on the form, have you determined whether your client had indeed broken residency with VA and established domicile (which is different from abode) in the UK or elsewhere?

"I used to file just a federal return for stock transactions"
Is this a US person (e.g. US citizen, national, or green card holder)?  If so, worldwide income should be reportable for US tax purposes although certain certain income may be taxable at a reduced rate by means of various articles in the UK-US DTA.  Investment income is the least of your worries as there are often complications with UK pension plans (which may be subject to foreign trust reporting and PFIC tax regime) and there may be nonqualified deferred compensation (that could have 409A implications).

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sjrcpa
Level 15

Why do you even have VA?

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itonewbie
Level 15
Establishing domicile overseas and abandoning domicile in VA could be a relatively high bar to overcome.  Would be interested in hearing from @Greta.
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Greta
Level 8
I do feel this is way over my level of expertise. I prepared her father's taxes. When he died, he left his house in Virginia and portfolio split among three daughters. This daughter moved from VA to UK some years ago, she apparently is a US citizen still. Her portfolio has been handled by a local Virginia broker. The address was the father's house's address, she now owned 1/3 of the house. I told her I did not know how to handle international tax returns, she said she had an accountant in UK who could put the two countries' tax data together if I would just prepare the Sch B and D. The federal tax always came out to zero because of the favorable investment tax treatment. She told me she would pay taxes in UK on the portfolio income. Should I quit doing this?!
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itonewbie
Level 15
Your response does not provide sufficient information to make a determination of your client's VA tax residency but, based on the limited information you provided, you may not have prepared her US return correctly.  If you are not competent in handling international tax returns, you are bound by Circular 230 to not accept the engagement.  Your client would be well advised to consult an expatriate tax specialist.
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