New York state taxes are some of the highest in the nation. As such, those with the means often spend significant portions of their year in other states. Florida is a prime example. There is no income tax or estate tax in Florida. As a result, wealthy New Yorkers often winter in Florida to claim residency and save on their tax obligations.
In the past, this strategy has worked. But New York state officials are upping the ante.
New Yorkers who took advantage of this tax saving strategy would generally operate by the following rule of thumb: spend a minimum of 183 days in your Florida home to avoid NY’s high tax bill. Although a successful strategy in the past, technological advances have made it easier for auditors to dig into the minutiae of your life. Are you really living in Florida or is it a front to avoid tax obligations? Auditors can now get enough evidence to challenge your claims — even if the reported days appear to support a Florida residency.
Auditors can argue that you are not domiciled in Florida. Domicile is a term that refers to the concept of home. Auditors can challenge this claim with the following types of evidence:
- Size. Auditors will review which home is bigger or more expensive.
- Lifestyle. How do the furnishings of the two properties compare? Where do you keep your family heirlooms, photobooks or other important pieces of property? Do you see a doctor, dentist, masseuse or chiropractor in New York or Florida? Auditors will even look at your family pet. Where is the vet? What about a trainer or doggie daycare?
Although the state has not actually changed the rules used to establish residency, it now has more tools to build a case against those who claim to have a domicile in another, lower tax state. These tools have proven successful. State auditors win over half of their residency audit cases.
What should I do if I am the subject of a NY tax residency audit? Take action. Contact an attorney to begin building a case to support your claim. The lawyers with Goldburd McCone can help.