Moving to Foreign Country

[taxu2]

Client moved from Illinois to Philippians in August 2019. Only has Illinois income that was earned before the move. Is there anything different I need to do for taxes or would I figure the same as if he's still here? Haven't done any out of country before and wasn't sure. Thanks for any help. 

[BobKamman]

I had a client a while back who moved from Illinois to Texas, mid-year.  There is some property-tax credit that needs to be pro-rated, if that is being claimed.  Maybe some other deductions or credits.  I would file a part-year Illinois return.  Hope he has a US address, but not in Califronia, because they'll come after him in a few years for a state return.  

"Whatsoever things are true" (Philippians 4:8)

[sjrcpa]

File 1040 as usual. May need to file FinCen 114 and 8938 for foreign accounts and foreign assets.

[taxu2]

Okay, thank you. 

[itonewbie]

You need to fully assess your client's tax residency in IL.

Is IL your client's state of domicile?

Did the spouse and dependent(s), if any, relocate with your client?

For what purpose did your client relocate to the Philippines?

What is the intention and realistic expectation of the duration of residency in the Philippines?

What facts and documentation does your client have to support the intention and realistic expectation?

What actions have your client taken to severe social and economic ties with Illinois and establish the same in the Philippines?

These are some of the questions you should always ask your clients.  Illinois' rulings on foreign assignments are not the most favorable to domicile residents who are on foreign assignment/employment despite the presumptive rules in the regulations.  Luckily, IL does allow foreign earned income exclusion (although foreign taxes are not creditable).

[taxu2]

So my client moved there in August to retire since the cost of living is cheaper. The only income he has is from Illinois. He still owns a house here in Illinois but is in the process of selling. He anticipates to buy another house in Illinois this year and come back a few months of the year to visit family. Could I just complete taxes as normal? Could I just use his Illinois address and not do anything extra? 

[itonewbie · Accepted solution]

That only tells us the purpose of his relocation but the other questions remain unanswered.  We don't actually need the answers although you should consider those carefully as the responses would determine the tax residency of your client in IL, particularly if he plans to buy another house in IL and go back regularly.

In any case, what's the purpose of him buying another house in IL?  Will it be let out to a tenant at FMV?  Would it be left vacant for his use when he returns or during his visits?  If so, does he plan to claim homestead exemption?  These are some of the questions you should consider.

Unless your client can clearly establish, based on facts and circumstances, that the Philippines is now his domicile and there is no intention to return to IL in the foreseeable future and that his visits to IL would merely be temporary and transitory, your client would generally still be considered an IL resident.