What happens if I never filed a state return for US work?
The state's claim does not lapse because the return was never sent, and in most states an unfiled year leaves the assessment period open for longer than a filed one, sometimes indefinitely. Penalties and interest are set by each state separately, on its own schedule, so the figure differs by state and has to be read there rather than estimated from the federal rules. A clean federal history is not a defence, because the state is not a party to the treaty a federal position may rest on. The practical first step is establishing which states are actually in play, from a workday and receipts record, before approaching any of them.
How much is the penalty for a late state tax return?
There is no single figure, because each state legislates its own. Some charge by reference to the tax shown on the return, some add a separate charge for the missing return itself, and interest runs on any balance under that state's own rule. An estimate made from one state's schedule, or from the federal one, is therefore worth very little in another. What we do before contacting a state is work out the tax that would have been due on each unfiled year, then read that state's own penalty and interest provisions against it, so that the figure you are given is the figure that state will charge.
Do I owe a state penalty if no state tax was due?
It depends where, and that is not an evasion of the question. In states whose charge is calculated on the tax shown, a year with nothing due produces little or nothing. In states that charge for the missing return itself the position is different, and a nil year can still cost. The two are often confused because the federal rules are the ones people have already read about. Separately, a nil year is worth filing on its own account: it starts that state's assessment clock, and it is the document that answers the state later when it asks why a wage statement names you and no return exists.
How many years of back state returns do I need to file?
As many as the state can still reach, which is not the same as the number of years you worked there. Where nothing was filed, the state's assessment period has usually not started running, so the reach can be long. Where returns were filed and something was left out of them, it is generally shorter. Some states cap the look-back if you come forward first through their own disclosure route. We size the job by listing every year with income sourced to that state and testing each year against the state's rule, rather than picking a round number of years and filing that many.
Will a state know I worked there if I never filed?
Often, yes. Wage withholding statements are filed with the state by the employer and name the employee, so the state can hold a record of you without ever hearing from you. Property records do the same for rental income. The usual sequence is a letter asking why no return exists for a year the state already holds data on, followed by an assessment built from that data if the letter goes unanswered. An assessment made this way rests on the state's own assumptions, which rarely include the deductions or the apportionment you are entitled to, and undoing it is more work than filing was.
Can I come forward before the state contacts me?
Yes, and the two routes are not the same. Many states run their own voluntary disclosure arrangements with published terms, commonly a fixed look-back in exchange for coming forward, and they close to anyone the state has already written to. Where a state has no such route the alternative is simply filing the back years and settling what its own schedule produces. Timing therefore matters more here than in most tax work, because the option that caps the look-back disappears the day a notice is issued. The first task either way is the same, establishing which years carry income sourced to that state.
How do I know whether I am a covered expatriate?
Three tests, and one is enough. Net worth of $2,000,000 or more on the day you expatriate. Average annual net income tax above an inflation-adjusted figure for the five preceding years — $206,000 for 2025. Or failure to certify on Form 8854 that you complied with all federal tax obligations for those five years. The third catches people the first two never would, which is why compliance history is the thing to fix before, not after. See covered expatriate testing.
What is Form 1042-S and what do I do with it?
The statement a US payer issues to a non-resident showing US-source income paid and tax withheld — the non-resident counterpart to a 1099. Use it two ways. In your own country it evidences the US tax paid for credit purposes. And where the rate withheld was higher than your treaty entitlement, or the income was not taxable at all, the way back to the money is a US non-resident return claiming the refund. Check the income and exemption codes before assuming the rate was right. See Form 1042-S.
