NYS and NYC wants to make sure you really moved before they let you stop paying taxes
In the last few years, we have had clients think they moved out of NYS or NYC and want to obtain the related tax savings. We even had a client move from New York to California (which one does not do to reduce taxes) and we had to prove to NYS that they actually moved. Luckily this was a real move. But the cost, time and effort of the audit was not pleasant.
Like a lot of things tax related, it isn’t as simple as having a new address. And in some cases, your employer may still need to report your wages as taxable in NY. That is the convenience of employer rule and is a topic for another posting.
In the meantime, here is what you need to know and be able to prove to NYS and NYC if your goal is not to pay state and city taxes.
## How Does NYC Determine Residency?
There are two tests under the NYC Tax Law to determine an individual’s residency:
(1) the statutory residence test AND
(2) the domicile test.
## Statutory Residence Test
The statutory residence test provides a (primarily) objective measure to determine NYC residency. It tests:
(1) whether a taxpayer maintains a permanent place of abode in New York (defined as a dwelling place maintained by the taxpayer as a residence AND
(2) whether a taxpayer spends more than 183 days of a given year in New York.
## The Domicile Test
The NYC Department of Taxation and Finance (the “Department”) provided their “Nonresident Audit Guidelines” in 2014 and defined domicile as the place “to which the individual intends to return whenever absent.” The following are the primary factors an auditor should weigh when analyzing whether an individual is domiciled in New York. The Guidelines stress that none of these primary factors should be considered, by themselves, as a “stand-alone” indicator of domicile.
The Department will weigh and balance each element against the others based on the individual’s specific facts and circumstances.
**(1) Home**
An auditor’s analysis of one’s “home” will consider the person’s individual use and maintenance of his New York residence compared to his non-New York residence.
**(2) Active Business Involvement**
**(3) Time**
Courts and auditors focus on a taxpayer’s living patterns to determine whether a new location has become their domicile.
**(4) Items Near and Dear**
In effect, this primary factor attempts to determine the location of items with significant sentimental value (e.g., family heirlooms, works of art, collection of books, personal items that enhance one’s quality of life). The guidelines stress the difference between sentimental significance and monetary value. Of course, sentimental significance is highly subjective.
**(5) Family Connection**
Given its intrusive nature, the final factor, “Family Connection,” is only taken under consideration when a domiciliary determination from the first four primary factors fails to produce intent by clear and convincing evidence.
**(6) Other Factors**
This is where a lot of clients think having the right paperwork along will make them a non-resident. If an analysis using the above factors proves indeterminate, the NYC auditors will THEN turn to “other” factors. These factors include the locale of the taxpayer’s:
- Driver’s license
- Voter registration
- Vehicle registration
- Bank accounts
- Credit card records
- Houses of worship
- Country club membership
- Library card
Once again, while none of these factors have significant clout in and of themselves, they might be used to influence a domicile analysis toward or against NY residency in case the primary factors do not provide a clear-cut resolution.
If you still have some doubts, please don't hesitate contacting us for more information.
