There was a time when it seemed those who wished to change their home state for tax purposes could simply spend six months or more in another state and call it good. Those days are long gone. High tax states like New Jersey and New York no longer allow those who leave their states off so easily. These days taxing authorities are more likely to scrutinize any attempt to claim residence in another state.
How can I avoid additional scrutiny when I try to change my “home” state?
The first step is to know the rules. Some states, like New York, use statutory residency to claim an individual is still on the hook for state tax obligations. A statutory resident includes those who are domiciled in the state. This legal term, domiciled, is one that can cause conflict. It basically means that the individual intends to have the state as their home even if they claim otherwise.
How can taxing authorities establish that an individual is domiciled in their state?
In addition to how many days you spend in each state and the location of your primary residence, the state will also look at the location of business interests, family connections, and items that it deems “near and dear.” Examples can include a family pet, art collection, and family heirlooms. Even where you choose to take your doctor appointments can be part of the equation.
Is there anything I can do to better my odds of a successful relocation for tax purposes?
Keep records of where you spend your time. If you have a pet, it can help to establish a relationship with a vet office, groomer, and boarding facility in your intended state.
Taking the time to develop a plan before making the move can help to reduce the risk of a state tax audit. It will also increase the likelihood that you have the documentation you need to defend yourself in the event of an audit. The attorneys at Goldburd McCone have experience with these types of audits and can help you to prepare for the transition and mitigate the risk of an unfavorable residency audit.