Blog by BR Accounting and Tax Service

Watch For The Taxman, If Trying To Be Domiciled In A New State!

  • Lewis Turner

Categories: Individual Tax Preparation , Individual Taxes , Small Business Tax Preparation , Tax Accountant , Tax Planning , Tax Preparation , Tax Preparer , Tax Professional , Tax Resolution , Tax Resolution Professional

Well hello!  We focus on resolving tax issues in Eastern Prince William County and throughout the lower Northern Virginia area.

When it comes to switching your domicile and residency to an alternative state, you should plan well enough that you’re not considered to have multiple tax states. When someone is a resident in multiple states that have an income tax, those states generally DO NOT provide a credit for tax paid to the other states. Similarly, if you move from a high tax state to a low tax state, but are unable to prove the change of domicile under audit, you can find yourself paying tax someplace that you hadn’t intended to do so. Many Taxpayers believe that they just have to keep the number of days below the threshold of “180 days”.  Just Not True – see list below.

Most states tax domiciliaries, and have a threshold at which they also tax residents (so called statutory residents) as if that person were domiciled in the state. Alternatively, most states will also NOT tax domiciliaries that are present in the state of domicile for some de minimis amount of time and/or if the person does not maintain a home in the state of domicile. States use domicile audits to make taxpayers prove that they are not statutory residents of the state. Technology may be the very thing that trips you up, with the rise of cameras on vehicles, the state may be able to obtain video of your vehicle that is registered in another state, is seen regularly within the auditing state.

Taxpayers subject to a domicile audit will be left to prove that (1) they were not a statutory resident of the auditing state and (2) that they were domiciled outside of the auditing state. State auditors will view anything indicating domicile in the audit state as important while discounting evidence that indicates domicile outside of the state. It is therefore important to have an abundance of evidence supporting your domicile outside of the auditing states. In addition to the number of days spent in state, there are another 20+ factors that a state auditor will consider in determining your domicile:

  • (A)location of domicile for prior years;
  • (B) where the individual votes or is registered to vote (casting an illegal vote does not establish domicile for income tax purposes);
  • (C) status as a student;
  • (D) location of employment;
  • (E) classification of employment as temporary or permanent; 
  • (F) location of newly acquired living quarters, whether owned or rented;
  • (G) present status of former living quarters, i.e., whether it was sold, offered for sale, rented or available for rent to another;
  • (H) whether a State’s veteran’s exemption for real or personal property tax has been claimed;
  • (I) ownership of other real property;
  • (J) jurisdiction in which a valid driver’s license was issued and type of license;
  • (K) jurisdiction from which any professional licenses were issued;
  • (L) location of the individual’s union membership;
  • (M) jurisdiction from which any motor vehicle registration was issued and the actual physical location of the vehicles;
  • (N) whether resident or nonresident fishing or hunting licenses were purchased; (O) whether an income tax return has been filed, as a resident or nonresident, with the auditing State or another jurisdiction;
  • (P) whether the individual has fulfilled the tax obligations required of a resident; (Q) location of any bank accounts, especially the location of the most active checking account;
  • (R) location of other transactions with financial institutions, including rental of a safe deposit box;
  • (S) location of the place of worship at which the individual is a member;
  • (T) location of business relationships and the place where business is transacted; (U) location of social, fraternal or athletic organizations or clubs, or a lodge or country club, in which the individual is a member;
  • (V) address where mail is received;
  • (W) percentage of time (excluding hours of employment) that the individual is physically present within the auditing State and the percentage of time (excluding hours of employment) that the individual is physically present in each jurisdiction other than the auditing State;
  • (X) location of jurisdiction from which unemployment compensation benefits are received;
  • (Y) location of schools at which the individual or the individual’s immediate family attend classes, and whether resident or nonresident tuition was charged;
  • (Z) statements made to any insurance company concerning the individual’s residence, on which the insurance is based;
  • (AA) location of most professional contacts of the individual and his or her immediate family (e.g., physicians, attorneys); and
  • (BB) location where pets are licensed.

If ever you’re feeling overburdened by your tax situation or you’d rather be doing something else with your time, just remember we’re here to help you with all of your tax preparation, resolution/representation needs.  Now and in the future. Don’t put off addressing your tax situation. Feel free to contact us or message us with any questions you may have in approaching your specific tax scenario.