Column: Change your Zip; Change your Life
By Casey Jones
Most of us who visit the Sunshine State have been tempted to move there for a variety of reasons. Its warm climate. Greater access to outdoor recreational activities, such as golf…, tennis…. fishing…. swimming. Greater exposure to natural light that cures the “winter blues,” and leads to an overall healthier lifestyle.
Proof of Florida’s popularity is that the state’s population increases with happy new residents every single day!
There are also substantial tax advantages to be gained by permanently relocating to Florida. However, the old rule of “you only have to stay in Florida for half a year” has become more complicated and more difficult to prove to the taxman. Northeastern states are realizing significant declines in tax revenues as people move to Florida while maintaining homes in their prior states.
There is a legal difference between residence and domicile when it comes to state taxes. Domicile is a legal term and most often refers to the place someone intends to be their permanent home, while residence simply requires a physical presence in the state.
As a real-life example; if you maintain your extensive wine collection in your Connecticut home, then that is your permanent residence. For tax purposes that is considered your domicile. If your pet is living in and being cared for in your Connecticut home, that is your domicile. Its not just the 183 days a year you are in Florida that counts. Times they are a changing!
Tax professionals recommend that if you maintain a permanent residence in Connecticut but report that you are a nonresident for tax purposes, you maintain a log of the dates that you visited Connecticut. Auditors can request cell phone bills, credit card statements, bank statements, airline tickets and E-Z Pass records to confirm the # of days you were present in the state. The burden of proof is on you, the taxpayer.
Maintaining a second home in Connecticut will increase the likelihood of being audited. It also makes it easier for the state to assert that you have not permanently relocated. Other primary factors that are part of the auditor’s domicile analysis are continued active business involvement and even location of items “near and dear to your heart”.
Always seek professional advice when making these decisions.
Auditors are generally looking to examine the following four types of nonresident taxpayers:
Taxpayers who have filed a nonresident return in the current year, but who have filed a resident return in a prior year.
Taxpayers who have filed a nonresident return in the current year as well as in prior years but who have been identified as having a permanent place located in Connecticut.
Taxpayers who have filed nonresident returns in the current year and in prior years do not maintain a permanent place of abode in Connecticut but allocate a portion of their income to other states.
Taxpayers who have not filed returns, who previously filed a resident or nonresident return, or were identified as having some connection (business or personal) in Connecticut for the current year.
Be Careful out there!
Casey Jones has been a Greenwich resident for over 35 Years. He formerly operated the #1Real Estate firm in Greenwich and the largest Sotheby’s International Affiliate He can be reached for questions at cjones@BHSPalmbeach.com or on his cell at 561 440 0586.