Discussion:NYS Residency Issue

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Discussion Forum Index --> Basic Tax Questions --> NYS Residency Issue


Discussion Forum Index --> Tax Questions --> NYS Residency Issue

Yanni (talk|edits) said:

23 January 2011
My client began a new job in 2010. This job required my client to relocate from NYS to TX during 2010. My client's new employment required him to complete a 6 month training program in NC. Client's wife lived with a family member in NYS and all of their personal belongings were placed in storage.

Client worked in NC from February 2010 - August 2010. Although he had no intention of remaining in NC permanently, he had no intention of returning to NYS. His employer provided him with dormitory style accomodations in NC for those 6 months.

During those 6 months, client's spouse continued to work in NYS. Both client and spouse relocated to TX in early August once client comleted training program.

Yanni (talk|edits) said:

23 January 2011
Amendment to post:

My research indicates that income earned by my client while working in NC would not be considered NYS source income.

Client ans spouse want to file MFS for NYS since client moved out of NYS effective February 2010 and spouse moved out of NYS effective August 2010.

Does this approach seem correct?

NewYorkEA (talk|edits) said:

January 23, 2011
Why can't you just file a part year resident NYS joint return? Spouse's income while she lived in NY would be reported as NY income, client's income in January would be considered NY income, the rest is not. I believe this is actually required. The only case in which they would be allowed to file separate is if one of them is a full year resident and the other one is not. Read this publication:

[1]

NYea (talk|edits) said:

24 January 2011
NewYorkEA (not to be confused with NYea  :)) writes:Spouse's income while she lived in NY would be reported as NY income, client's income in January would be considered NY income, the rest is not.

I'm not sure that is the view of the NYS Department of Taxation & Finance??? In any case, it appears that up to the time the taxpayers actually moved to Texas, their status as NY residents continued. The NYS audit tax manual requires that there must not only be an intent to change domicile but there must also be actual residence in the new location. I think I would file a non-resident NC return and take a credit for the tax paid to NC on the part-year NYS return 1/1/10-8/**/10. There would be a small amount of extra tax (due to higher NY rates) but no aggravation for you down the road with NYS.

NewYorkEA (talk|edits) said:

January 24, 2011
Not sure what you are talking about. Why would the rest of it be taxed in NY? The client started working in another state in February. Spouse left the state in August. Both the client and the spouse's income while they lived/worked in NY is NY income. Income earned while they worked/lived in other states should not be. And did the client not maintain a residence in NC while he worked there?

Death&Taxes (talk|edits) said:

24 January 2011
"His employer provided him with dormitory style accomodations in NC for those 6 months." Maintain a residence?

NewYorkEA (talk|edits) said:

January 24, 2011
Did he maintain one in NY during those 6 months if the wife moved in with relatives?

CrowCPA (talk|edits) said:

24 January 2011
I agree with NYea. Until the taxpayer established a residence in Texas, he was a NY resident. You might have to review topics like domicile, residence and tax home.

NewYorkEA (talk|edits) said:

January 24, 2011
Per NY state:

In general, your domicile is the place you intend to have as your permanent home. Your domicile is, in effect, where your permanent home is located. It is the place you intend to return to after being away (as on vacation abroad, business assignments, educational leave, or military assignment).


Did he ever intend to return to NY?

KatieJ (talk|edits) said:

24 January 2011
The New York law defines a tax resident to include every individual who is domiciled in the state. The burden is on the taxpayer to show, by clear and convincing evidence, that a change of domicile from New York has taken place. To quote the regulation:

"A domicile once established continues until the individual in question moves to a new location with the bona fide intention of making such individual's fixed and permanent home there. No change of domicile results from a removal to a new location if the intention is to remain there only for a limited time; this rule applies even though the individual may have sold or disposed of such individual's former home. The burden is upon any person asserting a change of domicile to show that the necessary intention existed." NYCRR 20 Sec. 105.20(d)(2).

Generally (not just in New York), a change of domicile for state tax purposes requires all of three conditions: (1) abandonment of the previous domicile; (2) moving to and residing in a new location; and (3) an intent to remain in the new location permanently or indefinitely.

In this case, I believe New York would argue that neither spouse changed domicile until they moved to Texas. The husband's presence in NC was intended to be temporary; the wife moved out of the previous home in NY but did not leave the state. I agree with NYea. Both spouses remained NY residents until they moved to Texas. NY will allow credit for the tax paid to NC on the husband's NC income.

Not that every state would necessarily take that position. There is some case law in Maryland, for example, that suggests that once the husband left the state with no intention of returning there to live, he had lost his domicile even though he had not settled in a new permanent location. Those were cases that had to do with individuals who went to a foreign country on a work assignment. They intended to return to the US after the foreign job ended, but did not intend to return to live in Maryland. They actually did end up back in Maryland due to unforeseen circumstances (my recollection is that they left Iran due to the revolution), but the Maryland court held they were nonresidents during their absence because they had severed all their ties with the state and had no intention, when they left, of returning there to live. Looking at the New York cases and the regs I don't think that argument would win there, although you never know what a court might do. Still, as NYea points out, the net tax difference should be relatively small due to the credit mechanism. It probably wouldn't be worth going to court over.

NewYorkEA (talk|edits) said:

January 24, 2011
Based on the above, I agree that NY would take the position that he was a resident. However, he might have to argue with NC about the nonresident status there. They state that: "In the absence of convincing proof to the contrary, an individual who is present within the State for more than 183 days during the taxable year is presumed to be a resident." Hopefully he was there for less than 183 days, because I don't know how he could argue that he was still a resident of NY when he no longer had a residence there and never returned there when he left NC.

KatieJ (talk|edits) said:

24 January 2011
North Carolina defines a resident to include any individual who is domiciled there, or who is domiciled elsewhere but is present in NC for a purpose that is not temporary or transitory. N.C. Gen. Stat. ยง 105-134.1(12). Presence for more than 183 days creates a presumption of residence, but in the OP's client's case it appears there is clear and convincing evidence that his presence was for a temporary purpose. NC might raise some questions but I don't believe it would be a serious problem; he should be able easily to document the purpose of his presence in the state and the fact that he left NC and moved to TX as he had originally planned to do.

The problem with NY's definition of a resident is that all domiciliaries are considered residents, and you do not get a new domicile until you move to a new location with the intention of remaining there permanently. He's still a NY resident during his time in NC because he has not acquired a new domicile anywhere else -- therefore he's still domiciled in NY and a tax resident by its statutory rule.

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