The Foreign Service Journal, January-February 2021

70 JANUARY-FEBRUARY 2021 | THE FOREIGN SERVICE JOURNAL AFSA NEWS pouch zip code as your return address on your federal return because, in some cases, the D.C. and Virginia tax authorities have sought back taxes from those who have used this address. States That Have No Income Tax There are currently seven states with no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. In addition, New Hampshire and Tennessee have no tax on earned income, but do tax profits from the sale of bonds and property. States That Do Not Tax Nonresident Domiciliaries There are nine states that, under certain conditions, do not tax income earned while the taxpayer is outside the state: California, Connecticut, Idaho, Missouri, New Jersey, New York, Oregon, Pennsylvania (but see entry for Pennsylvania below) andWest Virginia. The requirements for all except California, Idaho and Oregon are that the individual should not have a per- manent “place of abode” in the state, should have a permanent “place of abode” outside the state, and should not be physically present for more than 30 days during the tax year. California allows up to 45 days in the state during a tax year. All 10 states require the filing of nonresident returns for all income earned from in-state sources. Foreign Service employ- ees should also keep in mind that states could challenge the status of overseas government housing in the future. The “State Overviews” section, below, gives brief state-by- state information on tax liability, with addresses provided for further information or tax forms. Tax rates are provided where possible. As always, members are advised to double-check with their state’s tax authorities. While AFSA makes every attempt to provide the most up-to-date information, readers with specific questions should consult a tax expert in the state in question. We provide the website address for each state’s tax authority in the state-by-state guide, and an email address or link where available. Some states do not offer email customer service. We also recommend the Tax Foundation website at www. taxfoundation.org , which provides a great deal of useful information, including a table showing tax rates for all states for 2020 at https://taxfoundation.org/publications/state- individual-income-tax-rates-and-brackets/. COVID-19 and State Tax Obligations for the Employee The employee and employer need to track all the employee’s working locations in order to make sure they comply with all state tax obligations. When taxpayers live in one state but work in another, they may have tax liability in both states. Certain tax credits are available to minimize taxation of the same income in two different states. Occasionally, neighboring states have reciprocity agreements that dramatically simplify income tax filing obligations for taxpayers. U.S. government employees who telework in a state temporarily due to COVID- 19 will most likely trigger additional state tax reporting unless the employee’s specific fact pattern does not require the employee to pay taxes in the state or the state enacted legis- lation to address COVID-19 specific teleworking or temporary stays in the state. STATE OVERVIEWS ALABAMA Individuals domiciled in Alabama are considered residents and are subject to tax on their entire income regardless of their physical presence in the state. Alabama’s individual income tax rates range from 2 percent on taxable income over $500 for single taxpayers and $1,000 for married filing jointly, to 5 percent over $3,000 for single taxpayers and $6,000 for married filing jointly. Write: Alabama Department of Revenue, 50 N. Ripley, Montgomery AL 36104. Phone: (334) 242-1170, Option #1 Website: https://revenue.alabama.gov Email: Link through the website, About Us then Email Us. ALASKA Alaska does not tax individual income or intangible or per- sonal property. It has no state sales and use, franchise or fidu- ciary tax. However, some municipalities levy sales, property and use taxes. Write: Tax Division, Alaska Department of Revenue, P.O. Box 110420, Juneau AK 99811-0420. Phone: (907) 465-2320 Website: www.tax.state.ak.us ARIZONA Individuals domiciled in Arizona are considered residents and are taxed on any income that is included in the Federal Adjusted Gross Income, regardless of their physical presence in the state. Arizona’s tax rate ranges in five brackets from a minimum of 2.59 percent to a maximum of 4.54 percent of taxable income over $318,000 married filing jointly or $159,000 for single filers. Write: Arizona Department of Revenue, Customer Care, P.O. Box 29086, Phoenix AZ 85038-9086. Phone: (602) 255-3381 Website: www.azdor.gov Email: taxpayerassistance@azdor.gov