[kevinl4270]

Hello to all,

I am a contractor working in the Middle East and am domiciled in Pennsylvania. I meet all the requirements for a nonresident for state taxes in PA and for federal taxes.
After two and a half years my employer, based in Alaska, has changed my status to "resident" of PA and started withholding PA state taxes from my earnings.
I think this is an error, but can not get anyone to listen to me. According to the PA department of revenue's website as long as I meet three requirements, I can claim non resident status, but when I call them, they say if I am not a resident of PA, I have to be a resident of some state, or a citizen of another country. I have not been able to get this in writing from anyone. ( I am a legal resident of another country)
Can someone point me in the right direction? I have always been under the impression that you can claim PA as your domicile state for voting and drivers licensing, but still be a non resident for tax purposes.
Any help in this matter will be greatly appreciated.

[AtlantaTaxExpert]

Actually, your employer has it right In my opinion. You have to be domiciled in another state or another country to "lose" domicile in Pennsylvania.

[taxesforaliens]

A lot of states consider you a resident if you have any connection to the state (drivers license, bank account, house etc) while living abroad

[kevinl4270]

And that is my point. For all tax purposes Kuwait is my tax home. I file the 2555 with my Federal taxes without incident each year.

This is directly from the PA dept. of revenue website:

F you are a U.S. citizen, you must have a state of domicile. Generally it is considered to be the state where you live, or if you are in college or in military service, etc. the state of which you were a resident before you went to college or abroad. If you are domiciled in Pennsylvania, you are considered to be a resident for tax purposes, unless you meet all three of the following conditions:

1. You did not maintain a permanent abode in Pennsylvania for yourself or your family; and
2. You did maintain a permanent abode outside Pennsylvania throughout the entire taxable year; and
3. You did not spend in the aggregate more than 30 days of the taxable year in Pennsylvania.

If you are a resident, your income from all sources inside and outside of Pennsylvania is taxable and reportable. If you are a nonresident, only your income from a Pennsylvania source is taxable and reportable.

If I am reading that right as long as I meet the three requirements ,and I do, my income is neither reportable or taxable to the state of Pennsylvania as my income comes from an Alaskan based company for work done abroad.

[AtlantaTaxExpert]

You CAN try to convince PA tax authorities that you are domiciled in Kuwait using the above arguments, but you do not have a Kuwaiti drivers license, nor have you filed a Kuwaiti tax return, so you might find them skeptical.

[kevinl4270]

I do have a Kuwaiti driver's license and the only reason I pay no tax in Kuwait is because they don't have an income tax.
The only reason I maintain a PA drivers license is that is it a condition of my employment set by my employer.

I am not really sure what I am missing in all of this. It seems to me if I am reading all of this correctly that yes in fact I can be domiciled in PA but as long as my income does not come from a PA source, my income is neither reportable nor taxable.

[taxesforaliens]

The only way for you is probably to file a PA return claiming non-resident status and claiming a refund of withheld taxes. You would need to prove that you fulfil all the requirements. Some states are difficult to convince (so having a PA drivers license might be a problem). CA proves to be difficult, I have no experience for PA.
Your employer might just want to cover their bases as theoretically you do not fulfil those requirements until end of November each year. Once you file your return and PA approves your non-resident status, you might be able to convince your employer to not withhold PA taxes anymore

[AtlantaTaxExpert]

Taxforaliens raises good points.

I know Kuwait has no income tax, but that fact does not help you convince PA that you have xhanged domicilme

[IntlTax]

Sounds like you are domiciled in PA but not a resident of PA. File a tax return to claim the refund. Attach a statement describing your circumstances and quote from the website as you have done above.