There are two very disparate pursuits in which I have partaken for almost 30 years; marriage and residency audits. While the burden of proof in relationships and audits may be different, inferences drawn and conclusions reached hastily can be a disaster for both. While no one knows the rules for lasting relationships, readers of my blog know that many jurisdictions use a two-pronged approach to determining whether an individual taxpayer is a resident for state tax purposes.
First and foremost is domicile. With certain exceptions, if an individual is domiciled in a state, they will be a tax resident of a state. The so-called statutory residency test looks to whether one has a permanent place of abode in the jurisdiction and whether more than 183 days have been spent in the jurisdiction. I have blogged extensively about the intricacies of these tests and browsing through the previous blogs at http://blogs.berdonllp.com/topic/salt-talk is highly recommended.
While I would love to list some of the inferences to be drawn, conclusions (false or otherwise) reached and relationship consequences thereof, my spouse has strongly advised me to stick to what I know best. Here are some of the inferences, hasty conclusions, and traps I have heard over the years.
â€œI was in State XX for less than 183 days. Clearly, I am not a resident.â€
â€œNot only did I count my days in State XX, but I changed my license, voter registration, and car registration to Florida. I even went to the County Clerk and made a declaration of domicile so that I can get the ever-popular homestead exemption.â€
â€œOf course I changed my domicile. My dog isnâ€™t in New York City with me. He is at the Connecticut home.â€
â€œAuditors often jump to the conclusion that because a credit card charge is reflected on a certain day, the charge must have been made on that day. Therefore, the 183 days I said I was in New York now becomes 184 and I am deemed a tax resident. â€œ
â€œI swore to the auditor that I have never spent a weekend in New York, yet a telephone call was made from my NYC apartment on at least 3 weekends during the audit period. Not only did the auditor jump to the conclusion I must have been in the apartment and added to my day count, he now questions the credibility of any pattern I have attempted to establish regarding my weekend behavior.â€
I can go on forever, but I am already well over my suggested blog space limit. The morale of the story here is you need an experienced practitioner to help debunk the inferences that are going to be made by the inexperienced or worse, out to get you, auditor. We havenâ€™t seen it all, but weâ€™ve seen a lot and can help you avoid falling into the traps or false indicators that can ruin an otherwise successful audit outcome.
If you are fearful of, expecting, or just want to protect yourself from a residency audit, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.