If you have a home in New York and another outside of it, it is essential that you understand New York residency rules to avoid a potential residency audit and a big tax bill. New York conducts residency audits to establish whether a taxpayer accurately filed a New York personal income tax return as a nonresident, part-year resident, or resident. Your residency is important because it affects how much you owe New York in taxes.
New York residents must pay state income tax on all income, regardless of where it is earned, while nonresidents pay tax only on New York source income, such as wages. Since New York has a high income tax rate, if you are found to be a resident of New York when you claimed to be a resident of a different state, you could end up owing significant back taxes, plus penalties and interest on the unpaid amount.
Residency audits most often arise when people move out of New York but decide to keep a residence in the State. Individuals underestimate what it takes to change their residency for tax purposes or they don’t realize that there are two tests for residency – the domicile test and the statutory residency test. Even if you pass one of them, the other one could land you in trouble.
The residency rules are complex and audits are difficult and personally intrusive. The State can look at your credit card and bank statements, cell phone and EZ Pass records, ATM receipts, passport records, and data from security or swipe cards to determine how much time you spent in New York.
We represent taxpayers who are subject to New York State and New York City residency audits helping them present a strong case to avoid liability or obtain the best settlement possible.
If you have received a residency questionnaire or audit notice, contact us for a free consultation.