The Foreign Service Journal, January-February 2023

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2023 69 qualified organization (e.g., a Section 501(c)(3) nonprofit organized in the U.S.). Taxpayers are required to retain docu- mentary evidence (e.g., canceled checks or written commu- nication from the charity) for all cash contributions. Non- cash contributions require a receipt regardless of the value of the contribution. For cash and non-cash contributions of $250 or more, the charity must provide an official tax receipt along with an additional acknowledgment stating whether any goods or services were given in return for the donation. If any goods or services are received, the acknowledgment should provide a description and a good faith estimate of the goods or services received by the donor. Taxpayers must have the complete official tax receipt of contributions on or before the earlier of the date a return is filed or the due date (including extensions) for filing such return. Taxpayers obtaining receipts from a charity after these dates may be denied a charitable deduction. For non-cash contributions in excess of $500, the taxpayer must complete Form 8283 (Non-cash Charitable Contributions) and attach it to their Form 1040. Contributions over $5,000 require a written appraisal. For more information, AFSA recommends Tax Topic 506, Publication 526, Publication 1771, the Schedule A and Form 1040 instructions, and IRC Section 170. As of the writing of this article, Congress did not extend the $300/$600 below the line deduction for taxpayers who do not itemize. For 2022, charitable contributions are deductible only for taxpayers who itemize. Conclusion Changes particularly due to the expiration of prior tax legisla- tion and to require itemization of wage/salary income were made to draft Form 1040 and the numbered schedules for 2022 that we reviewed when writing this article. However, there may be additional changes to the final Form 1040 when it is released for 2022 tax returns. Although there was some tax legislation affecting individuals, for the most part, few sig- nificant tax law changes will affect 2022 returns, pending any legislation passed after the writing of this article. We encourage readers to monitor significant tax law changes that may be finalized in the coming months and ret- roactively applied to 2022 tax returns. While AFSA encour- ages its members to continue their tax education by reading the Internal Revenue Code, IRS regulations, and referenced IRS publications, there is no substitute for professional help for specific questions, particularly for complex international income and assets issues. Though not comprehensive, we hope this guide provides a useful summary of the significant tax laws and updates that may have an impact on your 2022 tax returns. Best wishes for the coming tax filing season. STATE TAX PROVISIONS Liability: Every employer, including the State Department and other foreign affairs agencies, is required to withhold state taxes for the location where the employee either lives or works. Employees serving overseas, however, must maintain a state of domicile in the United States where they may be liable for income tax; the consequent tax liability that the employee faces will vary greatly from state to state. Further, the many laws on taxability of Foreign Service pensions and annuities also vary by state. This section briefly covers both those situations. (In addition, see separate box on state tax withholding for State employees, and we encourage you to read the CGFS Knowledge Base article on the Tax Guide page of the AFSA website.) Domicile and Residency Many criteria are used in determining which state is a citizen’s domicile. One of the strongest determinants is prolonged physical presence, a standard that Foreign Service personnel frequently cannot meet due to overseas service. In such cases, the states will make a determination of the individual’s income tax status based on other factors, including where the individ- ual has family ties, has been filing resident tax returns, is reg- istered to vote, has a driver’s license, owns property, or where the person has bank accounts or other financial holdings. In the case of Foreign Service employees, the domicile might be the state from which they joined the Service, where their home leave address is, or where they intend to return upon separation. For the purposes of this article, the term “domicile” refers to legal residence; some states also define it as permanent residence. “Residence” refers to physical pres- ence in the state. Foreign Service personnel must continue to pay taxes to the state of domicile (or to the District of Colum- bia) while residing outside the state, including during assign- ments abroad, unless the state of residence does not require it. Members are encouraged to review the Overseas Briefing Center’s guide to Residence and Domicile, available on AFSA’s website at www.afsa.org/domicile. Domestic Employees in the D.C. Area Foreign Service employees residing in the metropolitan Wash- ington, D.C., area are generally required to pay income tax to the District of Columbia, Maryland, or Virginia, in addition to paying tax to the state of their domicile. Virginia requires tax returns from most temporary resi- dents as well. Most states allow a credit, however, so that the taxpayer pays the higher tax rate of the two states, with each state receiving a share.