State Residency Audits: Convenience of Employer Rule, Establishing Domicile, Pre-Move Considerations

The complexities of determining whether a taxpayer resides in a specific state continually increase. Although most states consider concrete criteria, such as where a taxpayer is registered to vote, the address of their residence, and the state on their driver's license, the requirements for residency are most often undefined and based on subjective thresholds, such as "clear and convincing" evidence.

Recently, New Jersey joined other states in implementing a "convenience of the employer rule." The New Jersey convenience of the employer provision applies to nonresident employees working for a New Jersey employer who are residents of states that also impose a similar test, such as Delaware, Nebraska, and New York. The new requirement is retroactive to Jan. 1, 2023.

Other incongruous state rules further complicate these determinations. New York not only has domicile guidelines but also a statutory residency test. A taxpayer can be domiciled in another state; however, if an individual has a permanent place of abode in New York State for substantially all of the year and spends more than 183 days in New York, they are considered a New York resident. SALT practitioners working with multistate taxpayers or taxpayers working in states with convenience of employer rules must be aware of the latest developments surrounding state residency audits.

Listen as our panel of SALT controversy experts explains how to prepare for state resident audits of taxpayers.

1. Selection process
2. Determining domicile
3. Convenience of employer rule
4. Pre-move planning
5. Specific state requirements
   1. California
   2. New York
   3. Other states
6. Audit process

The panel will review these and other critical issues:

• New Jersey's new convenience of employer rule
• Preparing for a residency audit in New York
• Specific actions to take prior to moving to a new state to facilitate the residency transition
• Common state criteria to establish domicile

Learning Objectives

After completing this course, you will be able to:

• Identify how specific states determine residency status
• Determine how to prepare for a state residency audit
• Decide proactive steps taxpayers can take when moving to establish domicile
• Ascertain the difference between domicile and statutory residency in New York

• 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 SALT taxation, nexus and apportionment as it applies to multi-state businesses.

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.