Changing State Residency for Tax Purposes: Severing Ties, Establishing Domicile, Part-Year and Nonresident Returns

A taxpayer who moves to a new state may assume he or she is a resident. Knowing whether a taxpayer has established domicile is a critical determination. It dictates the states where a return will need to be filed and a taxpayer's residency status in those states. The tax reform tax cap of $10,000 has provided additional impetus for questions and moves. Now, with a minimal federal deduction, these taxpayers suffer even more.

Clients living in California, New York, and other high tax states are asking if they can relocate to low-income or no-income tax states such as Nevada, Florida, or Texas. However, some states have various factors that the taxpayer has the burden to show have been met when changing domicile to another state. States continue to be reluctant to relinquish high-income taxpayers and aggressively audit these moves. The relocated taxpayer has the burden of proof in defending his residency. New York alone collected about $1 billion in residency audits from 2013-2017.

Merely considering the top tax rate in a state can be misleading. Some states offer credits that may be significant to clients; others allow exemptions. Still, others have high property and sales tax rates. Advisers must also consider the "jock tax," taxes charged on interest and dividends in "no" income tax states, and similar unique taxes that states impose.

Listen as our panel of experts explains the primary ways a taxpayer can defend his domicile, separate from his former state, and ensure other tax issues have not been overlooked when making a move to a new state.

1. Establishing domicile
   1. Common state methods
   2. Taxpayer steps
2. Terminating residency
3. Filing part-year and nonresident returns
4. Other state taxes
5. Other considerations when choosing a state

The panel will review these and other important issues:

• Severing ties with the old state
• Establishing residency in a new state
• Factors to consider other than the state's income tax rate
• Common state methods for determining residency

Learning Objectives

After completing this course, you will be able to:

• Distinguish among taxpayer's place of abode, residency, and domicile
• Determine how to successfully change the taxpayer's domicile for state tax purposes
• Recognize the factors that are used to determine the taxpayer's primary place of abode and domicile
• Establish how days spent in a state are calculated in determining a taxpayer's permanent place of abode
• Ascertain the factors used in determining a taxpayer's source income from a state

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.