Many taxpayers used the pandemic as incentive to move out of New York or other high tax states, like California. This can catch the state taxing authority’s attention when these moves involve an executive or other high-earning taxpayer who shifts to remote work and moves to Florida or another low/no income tax state.
Not surprisingly, the taxing authorities are fighting back. It is common for state agencies to move forward with a residency audit to argue that the taxpayer still owes their state income taxes. Anyone who is considering a move from a high to a low income tax state is wise to move mindfully to avoid this headache.
Two tips that help most taxpayers in this situation include the following.
#1: Document, document, document.
The importance of this step cannot be overstated. Make sure to have documentation to help support your filings. There are apps that can help. These apps can track where you spend your time and may be used to provide valuable data in the event of an audit. This can help to establish that you met the requisite 184 days per year or more in another state.
Review what is available and see if any of these apps or other tools work for your situation.
#2: Educate yourself.
In many cases, the best way to win a fight is to know the opponent’s strategy. When it comes to tax residency audits, it is important to know that although New York’s Department of Taxation and Finance will review the number of days spent in another state it is also going to look at more than just your residence. To determine whether you owe taxes, the state will look at your domicile.
This is a complex legal term that often comes up in tax cases. A taxpayer’s domicile is the place that they intend to return to after being away. The taxing authorities will gather various pieces of evidence to argue that New York is, in fact, the place the taxpayer views as their true home. These can include looking to see if you are registered to vote in New York or another state, where you receive your medical care, even where you take your pet to the vet. It is important to shift all these things to the state you intend to serve as your home for taxing purposes.
Although these tips are helpful, they are just the beginning. It is important for those who are dealing with this type of issue to acknowledge that the tax agency conducting the audit has incentive to win their case. Thankfully, you do not have to go up against this Goliath on your own. You can hire legal counsel to help build your case and advocate for your interests. The attorneys at Goldburd McCone are familiar with these types of disputes and can help guide you through the process, working with you to better ensure a more favorable outcome.