The New York State Department of Taxation and Finance is aggressive when it reviews filings for a taxpayer that claims to no longer live in the state for tax purposes. The agency will use skilled income tax auditors to meticulously review filings and the movements of the taxpayer for any evidence to defeat the claim. It is important for taxpayers to keep this in mind when looking to change their domicile to another state.
Three steps that can help achieve this goal include the following.
#1: Change your “true” home
Although state taxing authorities recognize that a taxpayer can have more than one residence, they also note that a taxpayer can only have one true home. As a result, one of the first things the auditors will review is the taxpayer’s “true” home. The auditors are looking to see where the taxpayer’s heart is and can use various pieces of evidence to help make this determination. This true home will dictate which state’s taxes apply.
Examples of evidence state taxing authorities have used to build their case has included everything from where the taxpayer keeps their family heirlooms to the location of their pet’s veterinarian. Taxpayers are wise to make sure such things are shifted to the state they wish the taxing authority to deem as their true home.
#2: Watch out for the “statutory resident” test
Unfortunately, satisfying the first step is not always enough. New York state taxing authorities may also try to treat a taxpayer as a state resident for tax purposes if they pass the two-pronged statutory resident test.
The first prong: whether taxpayer has a residence in the state. The second: whether they spend more than 183 days in the state. It is best to keep these in mind when shifting a domicile to better ensure the taxing authorities cannot use this test against you during a residency audit.
#3: Adjust daily habits
If a state other than New York is now home, make sure daily actions follow suit. Simple tasks like withdrawals from an ATM and credit card use leave a trail that the auditors will find.
It is important to note that you do not need to navigate this process on your own. Legal counsel can guide you through the process and better ensure a more favorable outcome — whether in the initial planning stages or trying to determine how to deal with a notification of a residency audit after an attempt to change domicile. The attorneys at Goldburd McCone have experience throughout this process and can use this experience to advocate for your interests.