There is a common belief that if we spend more than half of the year in one state, we can claim that state as our residence for state tax purposes. Unfortunately, tax residence in the eyes of state taxing authorities is not nearly as simple. Some states are worse than others, and New York has a notorious reputation for aggressively coming after those it believes are subject to state taxation.
What is a tax resident?
Each state has its own interpretation. In New York, a tax resident is either domiciled in the state or not. The term domicile is often used in connection with residence, but it is a bit more complicated. The state considers an individual domiciled in New York if the state is their permanent home. The taxing authority looks to how much time the individual spends in the state as well as primary and other factors to come up with this determination. Primary factors can include where the taxpayer has their home or primary place of business and others can include whether they have a state driver’s license.
Taxpayers are not necessarily free of state tax obligations if the state identifies the taxpayer as not domiciled in New York. The state can still pursue tax obligations if the taxpayer spends more than 183 days of the taxable year in state and has a permanent place of abode in New York. It is important to note that the state can build a successful case even if you do not own the property it deems is your abode. You can simply stay there, any property that is suitable for year round use can suffice.
How can I show that I no longer live in New York for tax purposes?
It helps to have evidence to back up the claim. This can include moving items that are “near and dear” like a family pet, heirloom, or collection. Finding a dentist, veterinarian, and other professionals to show that one is rooted in the new state can also help.
It is also helpful to take some action prior to the move. A proactive compliance counseling session with a New York tax professional can help to better ensure you take the steps necessary to reduce the risk of New York taxing authorities trying to claim tax obligations. The attorneys at Goldburd McCone have experience with these meetings and can also provide representation in the event of a residency audit.