Culture, diversity, and a great transportation system lure many to call New York home. But what happens when the Big Apple no longer feels like home? Those who decide to move and make another state home may face more than the steep bill from a moving company after unpacking in a new state – they could find themselves facing an unexpected tax bill from the New York taxing authorities.
Why would New York send me a tax bill if I moved to a different state?
New York is known to have one of the highest tax rates in the country. As such, taxing authorities are critical of those who claim they left the state. Those who choose to call a low tax state like Florida home are likely to be recipients of an audit notice from New York taxing authorities.
Taxing authorities are motivated to win these cases. New York City Comptroller Brad Lander recently outlined the need for alternative options for funding due to uncertainty resulting from increased remote work and decreased property tax revenues. And the stakes are high. According to recent estimates tax authorities won more than half their cases and collected an average of more than $100,000 per residency audit.
What type of evidence do authorities use to build their case?
Gone are the days when taxpayers could simply count how much time they spent in each state to figure out which is their “home” state for tax purposes. Tax authorities are now looking at these cases more closely to determine what the taxpayer truly calls home. This can include a careful review of the following:
- Credit card bills
- Travel schedule
- Social media posts
- Dental visits
- Veterinarian care
There are even instances of auditors checking the content of the taxpayer’s refrigerator.
The key here is domicile, essentially the legal term for what you consider home. If home is where the heart is, auditors argue the taxpayer’s prized possessions should be in the state they claim as their domicile. This is especially tricky if you keep a second property in New York. Care for a family pet or the makings for regular meals, the auditors will argue, would not be present in a second property kept in New York unless the taxpayer viewed New York as home.
How can I better ensure I win a residency audit?
Taxpayers are wise to take a two-pronged approach. First, plan for the move. Avoiding the red flags noted above can reduce the likelihood that state taxing authorities will be able to gather evidence to build their case. Second, take notification of an audit seriously. The attorneys at Goldburd McCone LLP can advocate for your interests and work towards a more favorable resolution.