Help on an Oregon Return

[WhiteOleander]

This question actually concerns a return for 2011. But, the taxpayer wants to know what will happen.

Taxpayer has lived in Oregon and filed jointly with his wife for years. He lost his job a couple of years ago. He has now been hired by a company in Indiana. So, he will be in Indiana for the entire year. His wife has a job in Oregon and will remain in Oregon with the kids. The T/P actually says he does not think he will ever return to Oregon because he figures the job market in Oregon will not turn around for his profession.

In reading TTB for States, it appears that Oregon does not have an agreement with Indiana. And Indiana has a reverse credit for Oregon.

Can anyone give me any idea how this T/P should file? His wife will probably remain in Oregon due to her job. Can they file separate for the state and joint on the Federal? Any help would be appreciated.

[Nashville]

Requirements

The T/P actually says he does not think he will ever return to Oregon because he figures the job market in Oregon will not turn around for his profession.

Oleander this is only relevant if you believe him. He may return to his wife, his wife may join him, or they could all go to Bolivia. I learned you can't hang your hat on what they say.

I believe what I would do is research the residency filing requirements for Indiana. If his filing status and residency status is dictated by Indiana, then there are no options left from which to decide. And Indiana residency forced by Indiana does not necessarily deny filing joint in Oregon, as Oregon's laws may separately determine that.

[taxmandan]

From the Oregon Pub. 17 1/2:

Change of domicile. Intent is the most important factor in determining a change of domicile. If intent relies on uncertain events, you have not changed your domicile. Once domicile is established, it is never lost until all of the following happen:
• You intend to abandon the old domicile, and
• You intend to acquire a specific new domicile, and
• You are physically present in the new domicile.
The important points are (1) physical presence at a new dwelling and (2) the intent to make the new dwelling a home.

Special-case Oregon residents (Oregon residents not living in Oregon). While domiciled in Oregon, you will be taxed as a nonresident if you meet all of the following requirements:
• You do not maintain a permanent residence in Oregon for yourself or your family during any part of the year, and
• You maintain a permanent residence outside Oregon during the entire year, and
• You spend less than 31 days of the year in Oregon.

As for the credit on taxes paid to another state, Indiana and Oregon have a reverse situation than the norm, the credit is claimed on the non-resident tax return.

Pub 17 1/2:
Are you a full-year Oregon resident? Do you have income taxed by Oregon and one or more of these states: Arizona, California, Indiana, or Virginia? If so, do not claim the credit on your Oregon return. (See Exception for Oregon resident partners and S corporation
shareholders on page 90.) You must claim the credit on the nonresident return you file with the other state. See the instructions on the other state’s tax form to figure your credit.
This credit is only for state income tax. You cannot claim the credit for any city tax, county tax, school tax, sales tax, alternative minimum tax (AMT), property tax, or other states’ taxes not based on income.
For example, the Idaho Permanent Building Fund
Tax and the Washington Business and Occupation
Tax do not qualify.

[WhiteOleander]

Thanks for the replies,
According to Indiana, he will be considered a resident of Indiana. If he does not sell his house in Oregon, and his family stays there, won't Oregon consider him a resident also? How would he file with his wife in Oregon? Not sure if he can go Nonresident in Oregon.

[taxmandan]

It sounds like he changed his domicile according to Oregon rules (he says he intends not to return) so he and his wife will file an Oregon 40N form. His income earned in Indiana will not be reported to Oregon only her income or his Oregon sourced income, if any.

[WhiteOleander]

Thanks very much. I thought that's how it might need to be done. But, as I said, this is a question for next year's filing. And the true circumstances may change before then. The client wanted to know how we would file.

[Davc]

It sounds like he changed his domicile according to Oregon rules (he says he intends not to return) .

Still a bit gray. The "bright line" test for establishing a new domicile is abandoning the old one. Which is yet to happen in this case.