If you move overseas to retire or for other reasons, you’ll still need to stay on top of your U.S. tax obligations. That’s because the United States uses a citizenship-based taxation regime, unlike some other countries that tax income based on where it’s earned or where you live.

Be aware of the following tax issues before you make a permanent move to an overseas location.

State Tax Issues

You may plan to leave your home-state behind for good. However,RetiremRetirement Expatriationyour state may believe that you are still a resident who needs to pay state income taxes.

Some states are more aggressive than others in seeking taxes from residents who have moved overseas or to a different state. If you still own a home or have other ties, the state will be more likely to consider you a resident.

Consider the pros and cons of maintaining these ties. If you want to keep your residence for occasional visits, understand that this may have tax consequences.

Foreign Bank Accounts

If you’re living overseas, there’s a good chance you’ll want to open up a bank account near your new home. Be aware that this could trigger a Foreign Bank Account Report (FBAR) filing requirement and other information return obligations.

If your foreign accounts total at least $10,000 at any point during the year, you need to file an FBAR, even if you don’t have any foreign income. The penalty for failing to file an FBAR is up to $10,000 for non-willful violations and much higher for willful violations.

If you should have filed an FBAR in a previous year, but didn’t, you should figure out your offshore disclosure options.

IRS Passport Actions

Think again if you thought moving overseas would help you escape from your IRS tax problems. The IRS can certify seriously delinquent tax debt to the U.S. State Department, which could cause your passport to be denied or revoked.

Tax debt may be considered seriously delinquent if you owe at least $52,000 and the IRS has attempted to take certain enforced collection actions. You can generally avoid a passport denial by entering into an installment agreement or otherwise resolving your tax debt issues.

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