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Tracking Technology Proves Changing Residency Can Become Complex

A recent case about a taxpayer failing to sufficiently prove their change of domicile, or residency, is a great reminder that this can be much more involved than simply moving to a different state for a few months. This particular case involved a New York resident that was hoping to change their domicile to Florida, which is a popular destination for New Yorkers due to the weather and absence of state income tax. However, it is important to note that moving to Florida for the winter is not enough to change residency, as this taxpayer found out. This taxpayer had even obtained a Florida driver’s license, but the judge did not deem this enough to justify a change in residency.

As more New York residents are looking to change their residency, whether the reasons are tax-related or not, it is important to understand what is necessary to change residency and why it matters. In this case, the taxpayer had the right idea when they obtained a Florida driver’s license, but they failed to cut enough ties with New York. The court found that the taxpayer spent more time in New York than in Florida. This information was confirmed through cell phone GPS records, which is a feature most cell phones have, and most individuals use their cellphone as their primary means of communication. Additionally, the taxpayer had ownership ties to a business located in New York. This creates New York sourced income for the taxpayer, whether they are located in Florida or not. In the end, it was clear in this case the taxpayer had not done enough to change their residency.

It is important to understand why states, especially a state like New York, are interested in this matter. New York has a high tax rate, so each taxpayer is important. In the case of a New York resident moving to Florida, this can be seen as a way to avoid New York state income taxes, so New York wants to be sure this is a legitimate change of domicile, and not just a way to save on taxes.

When looking to change residency, start with the number of days being spent in each state. It is important to remember cell phone records are often evidence of where someone was for the day and there are apps to track this.

Other questions to consider include mail, identification, and bills. For example:

  • Where is important mail or bills being sent?
  • Is there a change of address to the new location or is the old address still listed?
  • Was the primary residence sold, or a new home purchased?
  • Has a state-issued identification card been obtained from the new state or have vehicle registrations been changed?
  • Does the individual belong to any clubs or social organizations in the new state?
  • Have their medical professionals changed?

All of these actions show a commitment to a new state, which is extremely important when proving a change in residency.

Source: In the Matter of the Petition of Boniface, N.Y. Div. of Tax Appeals, ALJ, Dkt No. 829018, 04/29/2021

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The materials contained herein are intended for educational and informational purposes only and do not constitute tax or legal advice. Readers are responsible for obtaining such advice from their tax and legal counsel.

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