New Yorkers who work outside the state may consider themselves nonresidents for tax purposes. A residency audit may prove otherwise.
A residency audit is a tool used by the State of New York to assess whether a taxpayer is a nonresident or actually a part-year resident. We have worked with New Yorkers who believe they do not owe city and state taxes because they worked outside of the state for more than 183 days. To the surprise of some, the criteria for determining residency during an audit depends on more factors than your physical whereabouts for a portion of the tax year.
Criteria used to evaluate residency in the State of New York can include:
- Time: Tracking times spent working or living in the state is relevant, including a comparison of time spent in New York versus time spent in your new location. Documentation is important for those who claim residency outside of the state but travel frequently to the city to work.
- Domicile: A domicile is the place a taxpayer calls “home.” This means a residence on the west coast or elsewhere will likely not qualify as your “domicile” if the New York location is “your permanent and primary residence that you intend to return to and/or remain in after being away.” A domicile is not diluted by ownership of additional residences. Establishing a new domicile means dissolving the New York domicile and successfully establishing a home elsewhere. It does not mean owing a home you visit or even work from most of the year if your heart—and your primary belongings—are still in the Big Apple.
- Active Business Involvement: If you own a business in New York and primarily run your business from outside of the state, the business can be used as a factor in determining your true domicile. The same holds true after retirement if you have an active role in your business located within New York state.
- “Near and Dear” assets and family: The location of items and assets of importance to your family in New York can be noted in a residency audit. These could be items of sentimental or financial value. The same holds true for the location of the immediate family. An audit considers where minor children and a spouse or partner are located. An audit can also consider the location of siblings and parents as a domicile factor.
New York residency audits are often conducted in person as a field audit. A former resident of New York may also receive an automatically generated letter initiating a desk audit requesting information and proof of domicile elsewhere. Field audits are more labor-intensive than desk audits. The purpose of these audits is to identify the true domicile. Residency audits are known to be cumbersome, lengthy, detailed, and frequently intrusive.
If you have questions about residency, have been contacted for a residency audit, or are interested in understanding how to prove non-residency, speak with a reputable tax attorney experienced with tax and residency audits in New York.
Work with a knowledgeable tax attorney when you have a question about a New York residence audit
The legal team at Robert J. Fedor, Esq. works with residents and non-residents of New York to respond to tax and residency audits, tax controversies, and compliance issues. When you have tax questions, call us at 800-579-0997 or contact us. We serve clients across the U.S. and abroad from offices in Cleveland and Chicago.