State Residency Audits: Convenience of Employer Rule, Establishing Domicile, Pre-Move Considerations

This webinar will review the latest state guidelines for determining taxpayers' residency. Our panel of astute state and local income tax authorities will address how to prepare and handle a state residency audit, discuss the convenience of employer rule, and offer pre-planning advice for an impending move. They will also examine residency determinations in specific states, including California and New York.

The complexities of determining whether a taxpayer resides in a specific state continually increase. Although most states consider concrete criteria, such as where a taxpayer is registered to vote, the address of their residence, and the state on their driver's license, the requirements for residency are most often undefined and based on subjective thresholds, such as "clear and convincing" evidence.

Once an individual proves they have broken their domicile and are not a statutory resident of a state, they may still face challenges in determining what income is derived from nonresident state sources. For example, an individual who departs New York for personal reasons may still wind up subject to New York State tax on 100% of their wages under New York’s Convenience of the Employer rule.

Other incongruous state rules further complicate these determinations. New York not only has domicile guidelines but also a statutory residency test. A taxpayer can be domiciled in another state; however, if an individual has a permanent place of abode in New York State for substantially all of the year and spends more than 183 days in New York, they are considered a New York resident. SALT practitioners working with multistate taxpayers or taxpayers working in states with convenience of employer rules must be aware of the latest developments surrounding state residency audits.

Listen as our panel of SALT controversy experts explains how to prepare for state resident audits of taxpayers.