Thinking of moving to a different state for tax purposes? You are not alone. New York’s soaring tax rates have led many to reconsider life in the Big Apple. Are the benefits worth the cost? More and more New Yorkers are deciding the answer is a resounding no.
Unfortunately, establishing oneself in a new state for tax purposes is not as easy as buying a new home or condo and forwarding your mail. New York taxing authorities are highly motivated to establish that any attempt to leave the state is an effort to avoid tax obligations. If successful, you could still find yourself owing New York state taxes.
This aggressive enforcement posture has led to an increase in residency audits. Understanding how aggressively New York conducts residency audits helps explain why preparation is critical.
As a result, anyone considering a move to another state—or who has recently made the move—should take steps to ensure they have the evidence needed to refute claims from state taxing authorities. Three important tips include the following:
Time matters
Where you spend your time matters. It is very helpful if you can clearly show that you spent most of your days in your intended home state. Keep a journal of where you spend your time and maintain documents to back it up. This could include receipts from restaurants, hairdressers, and auto mechanics. Tracking days carefully is especially important given New York’s strict day-count rules, which are frequently examined during residency audits, including those discussed in audits involving snowbirds and frequent travelers.
Move your things
Your car, your art, your jewelry, even your pets. Make sure you move the items you use in daily life as well as those with sentimental value to your new home state. State auditors often focus on where a taxpayer’s most “near and dear” possessions are located when determining domicile.
Go public
Do not underestimate the power of social media. Let others know that you now consider Florida—or whichever state you move to—your home. While social media alone is not decisive, it can serve as supporting evidence when combined with stronger documentation.
These are just a few of many steps that can help you build evidence to verify your move. Once you have taken these steps, it is important to organize your records carefully. Keep journals, receipts, and supporting documents readily available. If you receive a notice from the state, understanding how tax audits typically proceed can help reduce uncertainty and stress.
If you receive notification of an official residency audit, you do not have to face it alone. You have the right to legal counsel. The attorneys at Goldburd McCone have experience in this complex area of tax law and can advocate for your interests, helping ensure your rights are protected throughout the audit process.