Discussion:TP wanting to change Residency state

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Discussion Forum Index --> Basic Tax Questions --> TP wanting to change Residency state


Discussion Forum Index --> Tax Questions --> TP wanting to change Residency state

Bell (talk|edits) said:

17 March 2014
TP was NC resident and went out of country and has been gone for several years. Owned a home in NC. This year, they abandoned the home, but it has not been foreclosed on. The county still shows him as owner. Now, in 2013 he wants to claim Florida as a resident state. Parents live there. He does owe tax, but doesn't want to pay NC. Can I switch his residence?

Ckenefick (talk|edits) said:

17 March 2014
Not sure what you mean by "several." Not sure what you mean by "this year" either - 2014?

But it does sound like you're getting into a domicile issue and here's the NC Admin Code on it:

http://reports.oah.state.nc.us/ncac/title%2017%20-%20revenue/chapter%2006%20-%20individual%20income%20tax/subchapter%20b/17%20ncac%2006b%20.3901.pdf

One technical thing to note when you get these kinds of calls: The prior year NC return likely has the guy listed as a full-year resident. If we immediately switch to NC non-resident status, on 1/1 of the current year, it might raise some eyebrows. Also, if you switch to NC non-resident status on 1/1 of the current year, you likely would file no NC return at all, since your position is that you were not a resident for any part of the year. So, we'd have a full year resident prior year return and no return at all for the current year. The implication, to me, is that some after-the-fact "tax planning" is taking place.

So, how is it a guy can go from one (full year resident) to the other (complete non-resident) without being a part-year resident somewhere in between? This could only happen if the "move date" was exactly on 1/1, a Holiday. Given all of this, you might need to pick a 2013 date on which guy became a NC non-resident. But now you get into the issue of: What date do we use? On what date did he abandon his domicile? This after-the-fact conversation with the client often leads to client making something up...a date that is, quite frankly, not truthful.

Belle (talk|edits) said:

March 17, 2014
"Can I switch his residence?" Nope <w> but your client can.

I agree with Chris that the fact pattern is a bit suspicious; and "moving" to a state with no income tax makes it even more so.

If your client has been out of the country for a few years, perhaps a NC non-resident/part year resident return was in order. I'm not sure whether you can amend for that reason, or should (if the circumstances justify amending). I know California would want some concrete proof, such as voting registration, vehicle registration, church affiliation, bank accounts, kids in school, etc. in the new state of residence.

Bell (talk|edits) said:

17 March 2014
It seems to me your state residence is the state it was when you left the country. In order to change to another state, he would have to come back to the US and physically take up residence in another state. He has been overseas for 4 years. The home was abandoned in 2013. He didn't get a 1099-C,.......yet. He is fighting me about paying NC. Thank you so much.

Ckenefick (talk|edits) said:

17 March 2014
Did you read the NC Administrative Code section?

Bell (talk|edits) said:

17 March 2014
Yes, I did read the code.

d. A long standing principle in tax administration, repeatedly upheld by the courts, is that an individual can have but one domicile; and, once established, it is not legally abandoned until a new one is established.

The only thing he has done is have his mail forwarded to family in FL. I wonder if he changed his voter registration? I am reluctant to change his residency to FL merely because he had his mail forwarded there.

Doug M (talk|edits) said:

17 March 2014
I think in these kinds of situations, intent is ....

From the NC Admin Code link provided by Chris: A mere intent or desire to make a change in domicile is not enough; voluntary and positive action must be taken.

Ckenefick (talk|edits) said:

17 March 2014
I am reluctant to change his residency to FL merely because he had his mail forwarded there.

Then let him change his own residency. If he doesn't want to file in NC, so be it. Or, if he wants to file the NC return on his own and mark down part-year resident, as if he moved out at some at some point during the year, whose to stop him? If he tells you not to prepare an NC return, can you really get in trouble if you don't prepare it? I think you have exposure if you actually prepare an improper NC return or if you advise him not to file an NC return.

STG (talk|edits) said:

17 March 2014
Where is all his crap? Did he send it to FL, take it to the foreign country, or leave it in NC. Tell him to change his voting registration, drivers license, etc. and move his crap out of NC and then tell you what date that was accomplished. Use that date for the part year and go forward. Retroactively is bad, unless he already did all that stuff. If he did do all of it, find the date and start FL from that date.

It's not complicated, but it's also not magic.

Cricktaxea (talk|edits) said:

18 March 2014
I was on the phone with a guy asking about his residency and my assistant yells in the background, "Tell him his home is where he keeps his blowup doll." The whole office cracked up.

The one thing you can ask your guy is if he established a true residence in a foreign country. I had a case like that with New York. Everybody knows how tough NY is about this but they bought it when I sent proof of foreign residency. However if he doesn't have that then everything everybody is saying is correct and he's screwed with NC. Once you're in a tax state you pretty much have to prove you've established another domicile somewhere else. And a mail drop in Florida is not a residence.

Bob

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