Webinar: Establishing Florida Residency

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Establishing Florida Residency
Should I Stay or When Should I Go?
Escaping the Northeast

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Table of Contents
Introduction
COVID-19 Issues & Current Trends
Residency Concepts and Enforcement Issues
Domicile
Statutory Residency
Income Allocation
Audit & Audit Tips
SALT Implications of Telecommunicating Employees

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Barry H. Horowitz
CPA, MST, SALT Partner &
Practice Leader
212.829.3211
bhorowitz@withum.com
Jason Rosenberg
CPA, CGMA, EA, MST, SALT
Senior Manager
347.215.0115
jrosenberg@withum.com
Zhoudi Tang
CPA, MST, SALT Manager
212.829.3237
ztang@withum.com
Monica Jalife, CFP®, MBA
Principal, Wealth Advisory,
Withum Wealth Management
212.652.3250
mjalife@withumwealth.com
Elena Ladygina, CFP®,
Wealth Advisory,
212.652.3251
eladygina@withumwealth.com
Karen Tenenbaum, ESQ., LL.M., CPA
Tax Attorney – Tax Dispute Resolution,
Tenenbaum Law
631.465.5000
ktenenbaum@litaxattorney.com
Marisa Friedrich, ESQ.
Tax Attorney – Tax Dispute
Resolution, Tenenbaum Law
631.465.5000
mfriedrich@litaxattorney.com

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Current Landscape
and Your Money

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Withum Wealth
FIDUCIARY
Client First
Approach
Conflict-Free
Advice
Straight Forward
Solutions
Wealth advisory,
multi-generational
and financial
planning services

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Current Environment
Historically volatile environment
• Fastest bear mkt decline since 1933: 16 trading days
• From 2/19 high to 3/23 low S&P500 lost -33.9%
• Between 3/23 to 6/3 strongest 50-day period since 1952 –
S&P500 up 37%
Many countries are experiencing significant contraction at the
same time – even worse than the Great Depression
• In the U.S., recession started in Feb 20 (ending largest
expansion on record @10 years 8 months)
Massive fiscal and monetary stimulus by central across the
globe, with the U.S. leading the way

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Looking Forward
Market environment
• $5 Trillion cash on the sidelines
• Growing optimism on fight against COVID-19
• Rebound driven by a narrow list
• Risk of second wave or new outbreaks
• Opportunities for rebalancing, tax loss harvesting and planning
Tax saving opportunities
• Pause required minimum distributions in 2020
• ROTH IRA conversion

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ROTH Conversion
WHAT IS IT?
Transfer all or some
traditional IRA assets to
a Roth IRA.
All future gains are
shifted to the Roth IRA
and grows tax free.
All future distributions
are tax free.
Not subject to any
future distribution
requirements (RMD's).
Opportunity: Potential to Decrease Overall
Income Tax on Retirement Assets Over the
Long Term

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ROTH Conversion
WHY NOW?
• Current low tax rate environment
• Expectations of higher tax rates in the future due to rising
government debt levels associated with COVID-19 relief
programs
• Recent decline in global equities
3 MAIN REASONS WHY
• Reduce future required minimum distributions (RMDs)
beginning at age 72
• Transfer assets to non-spouse beneficiaries (children) at death
more efficiently than a traditional IRA
• Further diversify the tax characteristics of an investment
portfolio as qualified withdrawals from the ROTH IRA are tax
free

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“It’s not how much money you make
but how much money you keep,
how hard it works for you,
and how many generations you keep it for”
~ Robert Kiyosaki

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Disclosure
Please remember that past performance may not be indicative of future results. Different types of
investments involve varying degrees of risk, and there can be no assurance that the future performance
of any specific investment, investment strategy, or product (including the investments and/or
investment strategies recommended or undertaken by Withum Wealth Management (WWM), or any
non-investment related content, made reference to directly or indirectly in this newsletter will be
profitable, equal any corresponding indicated historical performance level(s), be suitable for your
portfolio or individual situation, or prove successful. Due to various factors, including changing market
conditions and/or applicable laws, the content may no longer be reflective of current opinions or
positions. Moreover, you should not assume that any discussion or information contained in this
newsletter serves as the receipt of, or as a substitute for, personalized investment advice from WWM.
Please remember to contact WWM in writing, if there are any changes in your personal/financial
situation or investment objectives for the purpose of reviewing/evaluating/revising our previous
recommendations and/or services. WWM is neither a law firm nor a certified public accounting firm and
no portion of the newsletter content should be construed as legal or accounting advice. A copy of the
WWM current written disclosure statement discussing our advisory services and fees is available for
review upon request.

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COVID-19 Issues &
Current Trends

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Residency
Concepts and
Enforcement
Issues

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Where New Yorkers Moved to Escape
Coronavirus
 Mail forwarding
requests from
NYC in March:
56,000
 Mail forwarding
requests from
NYC in April:
81,000
 Number of
requests are
more than
double the year
prior

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The Tax Man Knows Where You Live

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Should I Stay or Should I Go?

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Determining Residency
• The states possess and exercise the power to tax their residents’
personal income, regardless of its source
• They are constitutionally restrained from taxing nonresidents’
personal income, except insofar as it is derived from sources within
the state
• The determination of a taxpayer’s residence is therefore a crucial
factor in delimiting the extent of a taxpayer’s personal income tax
liability
• Although the state statutes vary in their definition of “resident,” most
of the states rely on one or more of the following factors, either
individually or in combination with one another, in determining
whether a taxpayer is a resident of the state:
• (1) domicile in the state;
• (2) presence in the state for other than a temporary or transitory purpose;
• (3) presence in the state for a specified period; and
• (4) maintenance of a permanent place of abode in the state.

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New York Definition(s) of Residency
 New York defines a resident as an individual who
may be a resident of New York state for personal
income tax purposes, and taxable as a resident,
even though such individual would not be
deemed a resident for other purposes.
• An individual will be considered a New York resident if he or
she meets one of two tests:
– if the individual is domiciled in New York, or
– the individual maintains a permanent place of abode in New York
and, in the aggregate, spends more than 183 days of the taxable
year in New York

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Florida Definition(s) of Residency
• Florida has no individual income tax, so no comparable income
tax definitions of “residency”
• Homestead Exemption Definition (Florida Statutes, Chapter
222, HOMESTEAD AND EXEMPTIONS: Method Of Setting Apart
Homestead And Exemptions)
• 222.17 Manifesting and evidencing domicile in Florida
– Any person who shall have established a domicile in this state may manifest
and evidence the same by filing in the office of the clerk of the circuit court for
the county in which the said person shall reside, a sworn statement showing
that he or she resides in and maintains a place of abode in that county which
he or she recognizes and intends to maintain as his or her permanent home.
– Any person who shall have established a domicile in the State of Florida, but
who shall maintain another place or places of abode in some other state or
states, may manifest and evidence his or her domicile in this state by filing in
the office of the clerk of the circuit court for the county in which he or she
resides, a sworn statement that his or her place of abode in Florida constitutes
his or her predominant and principal home, and that he or she intends to
continue it permanently as such

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Florida Declaration of Domicile
• Pursuant to Florida Statute §222.17, many would-be
Florida residents file a Declaration of Domicile with
the Florida county they intend to reside in
• The statute states that a person can show intent to
maintain a Florida residence as a permanent home by
filing a sworn Declaration of Domicile with the clerk of
the circuit court
• The application is available online at any of the district
courts or at the County Recorder's Office of the
respective intended County
• Note: Upon audit, the State of New York seeks to
obtain a copy of the filed Declaration with the County

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Sample Lee County, FL
Declaration of Domicile

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Compared to Other States
 Property Tax Definition (Florida Statutes, Chapter 196, TAXATION AND FINANCE)
• Property Tax; homestead exemption - 196.015 Permanent residency
• Intention to establish a permanent residence in this state is a factual determination to be made, in the first instance, by the
property appraiser. Although any one factor is not conclusive of the establishment or nonestablishment of permanent
residence, the following are relevant factors that may be considered by the property appraiser in making his or her
determination as to the intent of a person claiming a homestead exemption to establish a permanent residence in this state:
(1) A formal declaration of domicile by the applicant recorded in the public records of the
county in which the exemption is being sought.
(2) Evidence of the location where the applicant’s dependent children are registered for school.
(3) The place of employment of the applicant.
(4) The previous permanent residency by the applicant in a state other than Florida or in another country
and the date non-Florida residency was terminated.
(5) Proof of voter registration in this state with the voter information card address of the applicant, or
other official correspondence from the supervisor of elections providing proof of voter registration,
matching the address of the physical location where the exemption is being sought.
(6) A valid Florida driver’s license issued under s. 322.18 or a valid Florida identification card issued
under s. 322.051 and evidence of relinquishment of driver’s licenses from any other states.
(7) Issuance of a Florida license tag on any motor vehicle owned by the applicant.
(8) The address as listed on federal income tax returns filed by the applicant.
(9) The location where the applicant’s bank statements and checking accounts are registered.
(10) Proof of payment for utilities at the property for which permanent residency is being claimed.

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 New Jersey
• New Jersey defines a resident as an individual is
considered a resident of New Jersey if the person is
domiciled in New Jersey or maintains a permanent place
of abode in New Jersey and, in the aggregate, spends
more than 183 days of the taxable year in New Jersey.
 Pennsylvania
• Pennsylvania defines a resident as an individual who is
domiciled in Pennsylvania and spend at least 30 days in
the state.
• Individuals who are not domiciled in Pennsylvania, but
spend over 183 days in the state, are presumed to be
residents.

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 Georgia:
• Georgia defines a resident as an individual who:
• is a legal resident of Georgia on the last day of the year;
• resided in Georgia on a more or less regular or permanent basis during
the year (i.e., the individual was not in the state on a temporary or
transitory basis) and who resides in Georgia on the last day of the year;
• on the last day of the year has been residing within Georgia for 183 days
or part-days or longer, in the aggregate, of the immediately preceding
365 day period;
• having become a resident of Georgia, is deemed to continue to be a
resident of Georgia until the person shows to the satisfaction of the
commissioner that he has become a legal resident or domiciliary of
another state; and
• becomes a resident of Georgia for the first time during the year, but was
a resident for less than 183 days, is a resident only from the date of
becoming a resident on an apportionment basis. Ga. Code Ann. §48-7-
1(10).

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Other States
State Determining Residency
CA Over 9 months
CT Over 183 days
IL Prior year resident presumed to be a
resident if present in Illinois more
days than in any other state during
year
MI At least 183 days
GA 183 days or part-days or longer
OH Over 212 contact periods
Northeastern States
MA Over 183 days
MN At least 183 days
MD 183 days or more
NJ Over 183 days
NY Over 183 days
PA Over 183 days
Retirement States
AZ Over 9 months
FL N/A
NC Over 183 days
SC Not Applicable
TX N/A
Sample of Residency Requirements
Throughout the U.S.

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2020 State Individual Income Tax Rates
 New Jersey: 1.40% to 8.97% (Over $5 Million - 10.75%)
 New York: 4% to 8.82%. (Plus NYC up to 3.876%)
 Pennsylvania: 3.07% flat rate
 Georgia: 1% to 5.75%.
 Florida: No Income Tax

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2020 State Estate Tax Rates
 New Jersey: No Estate Tax
 New York: 3.06% to 16%.
 Pennsylvania: No Estate Tax
 Georgia: No Estate Tax
 Florida: No Estate Tax

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2020 State Inheritance Tax Rates
 New Jersey: New Jersey imposes inheritance tax on the transfer of real
or personal property valued at more than $500 at graduated rates on
individuals based on their relationship to the decedent
 0 – 16%
 Pennsylvania: In Pennsylvania, transfers from the decedent's estate will
be subject to a rate of tax based upon the relationship between the
decedent and the transferee (0% to 15%):
 4.5% for transfers to direct descendants (lineal heirs)
 12% for transfers to siblings
 15% for transfers to other heirs
 New York / Georgia / Florida: Does not impose inheritance tax

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Fundamentals of Residency Determination
(NY)
 Ultimately, nearly all states determine residency
either via:
• Domicile
• Home
• Business
• Time
• Family
• Near & Dear Items
• Additional Factors
• OR Statutory Residency
• Minimum Number of Days in-state PLUS
• Permanent Place of Abode

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Domicile

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Domiciliary – A State of Mind
 The place where the taxpayer has his/her
true, fixed, permanent home.
 The principal place to which the taxpayer
intends to return whenever absent.
“Domicile”
 Maintains no permanent place of abode in
the state and has permanent place of abode.
elsewhere and spends 30 days or less in the
state
 Foreign country exception.
Two circumstances when a
domiciliary is NOT a resident of the
state:

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Domicile Defined
Under the terms of the NESTOA agreement, domicile is
determined by applying the following primary factors:
 Number
 Size
 Value
 Nature & Use
 Historical
Evidence examined:
 Diary
 Living patterns
 3rd party documentation
Considerable items:
 Pets
 Jewelry
 Art; Photos
Pattern of employment:
 Involvement w/ in-state vs. out-of-state trade
 Investments in in-state business
 Continued employment in-state
 Continued investment in-state
Evidence examined:
 Children’s school of attendance
 Location of immediate family
Home Time SpentNear & Dear ItemsActive Business Involvement
Family Connections
1 2 3
4
5
Weighted Equally
Reviewed If 1-4 Prove Inconclusive

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Additional Factors for Domicile
 Additional Factors
• Mailing address for bills, financial records, etc.
• Safe deposit box rental
• Vehicle registrations
• Driver’s License
• Voter Registration
• Telephone service
• Citations in legal documents (wills, contracts, etc.)

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Domicile Checklist
 Change car registration
 Change driver’s license
 Change voter’s registration
 Religious affiliations, such as: churches,
synagogue’s, etc.
 Moving of personal items
 Insurance policies
 File for homestead exemption, if
applicable
 Social affiliations, such as: country clubs,
dining clubs, etc.
 Execute new bank accounts and
brokerage accounts
 Parking
Exemption
 Fishing License
 Co-op Letter

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Evaluation of Domicile Factors
• “The fact of the matter is individuals
do not have to eliminate all their
contracts with New York to be
determined to be nonresidents.”
• “It must never appear that the auditor
is only looking for residual New York
presence to justify requesting
additional information.”
• “An individual who has not maintained
a diary should not be told ‘if you can’t
prove exactly where you were every
day I would hold it as a New York day.”
Secondary Domicile Factors:
• Many taxpayers have been told and
led to believe that a change in these
secondary factors will indicate a
change in domicile
• Secondary factors are merely
“window dressing” and “bonus
points.” They do not carry enough
weight to change domicile status.
Very Subjective
Determination
As much weight lies in the
presentation to the auditor
What you should do:
Remind auditors of the guidelines
frequently!
FALSE!!

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In the Matter of Gregory Blatt, DTA No.
826504 (2/2/17)
 ALJ rules that taxpayer changed his domicile from NY to
Texas in 2009 and 2010.
 Near and Dear Items: Rescue dog moved
 Home: NYC apartment owned; Dallas apartment
leased; Hamptons house.
 Time: a few more days in TX vs. NY days; Summers in
the Hamptons
 Active Business Involvement: CEO of Match in TX, but
former GC to IAC in NYC.
 Family: recent break- up with NY girlfriend, friends in
Dallas.
 EMPLOYMENT OPPORTUNITIES DICTATE TAXPAYER’S
INTENT
 CONTEMPORANEOUS EMAILS = TESTIMONY

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Matter of Stephen C. Patrick,
DTA No 82838-826839, June 15, 2017

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The Drama of Domicile
 ALJ rules that taxpayer changed his domicile
despite significant days in NY and apartment in
NY.
 Home: Apartment in NYC and apartment in Paris.
 Time: 163 days in NY in 2011 and 183 days in NY
in 2012.
 Active Business Involvement: Retired but board
meetings and audit committee in NY.
 Family: Marriage to second wife in Paris
 TESTIMONY PROVES INTENT!

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Everyone is an Expert On a Florida Golf
Course
 Taxpayers must be told (repeatedly) that
making a Florida declaration of domicile
will not make them a nonresident of New
York.
 Taxpayers must be reminded that buying
an apartment in Florida by itself, will not
change their domicile.
 If the taxpayer has a New York City
resident parking exemption:
SURRENDER IT.
Audits Reveal Your
Wealth Status
Matter of Ingle, NYS Division of Tax
Appeals
(Oct. 14, 2010)

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Statutory
Residency

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Domicile vs. Statutory Residence
 The principal distinction between domicile and
statutory residence is that domicile requires both
physical presence in the state and the intent to make
that state one’s home
 Statutory residence requires only physical presence
with some permanency, as defined by statute
 Accordingly, taxpayers who intend to return to their
homes elsewhere, and thus are domiciled in other
states, may nevertheless be residents of the states in
which they are currently living because of their
substantial connections with the state

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Statutory Residency Factors
 The factors that generally determine statutory
residency apart from domicile—presence in the
state for more than a temporary purpose or for a
specific length of time and maintenance of a
permanent abode in the state—overlap with
some of the factors that determine whether a
taxpayer is domiciled in the state, but they can
provide an independent basis for finding that a
taxpayer is a state resident.

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Why Residency Matters
Residents Non-Residents
Are taxed on 100% of your
worldwide taxable income
Worldwide income
includes EVERYTHING
Are taxed only on the
income earned in the
jurisdiction
Income Sourced to a state
includes:
• Services performed in that state
• Earnings from business entities
operating in that state
• Interest, dividends and capital
gains earned as a result of the
“business” operations in that
state
• Certain intangible incomeEstate taxes

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General Residency Rules (NY, NJ)
 The term “resident individual,” as
defined by the New York State and New
Jersey tax law, includes:
• All persons domiciled in that state
• Any individual (other than an individual
in active service in the Armed Forces of
the United States) who is not domiciled
in that state, but who maintains a
permanent place of residence for
substantially all of the taxable year in
that state and spends in aggregate more
than 183 days of the taxable year in that
state.

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Statutory Residency
 Taxpayer
 Maintains a permanent place of
abode in the state
 AND Spends more than 183 days in
the state
Matter of Robertson, NYS Tax
Appeals
Tribunal (Sept. 23, 2010)

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Maintains a Permanent Place of Abode
Defined
Maintain:
Is broadly defined:
Contributions to the place of
abode need not be in the form of
$$$. The taxpayer can provide
help with cleaning, cooking, and
groceries.
Problem Areas:
 Former spouse
 Friend’s apartment
 Children’s apt. paid for by
taxpayers
Permanent: Place of Abode:
Must contain cooking
and bathing facilities
 Problem area = hotels
The permanency
requirement gives rise to
two key exceptions under
the statutory residence
rules:
1. Taxpayer is present in the state
for the accomplishment of a
particular purpose
2. 11 month “rule:”
PPA must be maintained for
“substantially all” of the year
 House, cooperative,
rental apartment, or
condo
 Can be summer/winter
vacation home
 Must have the keys

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The Day Count
 The day count is a mathematical test
What is a “day” in the state?
 For purposes of the statutory residency test, any part of a day in
New York counts as a day
 Ten minutes in the state can count as a day
 Working days constitute a different test for New York State
purposes
Two Exceptions
 Travel exceptions
 Medical recuperation

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What Constitutes a “Day”?
 Zannetti v. NYS Tax Appeals Tribunal, 05/07/2015
• Spending more than 183 days in New York and having
a permanent place of abode qualifies you as a New
York resident under state’s income tax laws
• The regulations provide that, with certain exceptions,
presence within New York State for any part of a
calendar day (even 5 minutes) constitutes a day spent
within New York State

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Tom Hanks Plans His Time in New York
Carefully
 By October 10th of 2013, Tom Hanks had
spent roughly 149 days in New York
between rehearsing for and appearing in
the Broadway play, “Lucky Guy.” Before
the end of 2013, Hanks had to return to
the city for the opening of his film,
“Captain Phillips” on October 10, and
again in December for another film he
was starring in, “Saving Mr. Banks.”
 So, Hanks had to ration the days he spent
in NYC before midnight of December
31st, by ducking out early from the
premier festivities surrounding Captain
Phillips.

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John Gaied v. NY DTF
The NYS Tax Appeals Court Case was decided
on 12/27/12. Gaied was found to be a statutory
resident during 2001-2003.
 He owned the NY home his elderly parents
lived in.
 The telephone and utilities were under his
name at the apartment and he paid those
bills.
 He had unfettered access to the apartment
and he occasionally slept there. He did not
live there.
 He lived in NJ, but he worked in NY
everyday which means he satisfied the (more
than) 183 day rule.
 He was a registered voter in New York.

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Gaied Case Details
Gaied ALJ agreed with the Department
 Supreme Court agreed with Tribunal with dissents.
 Appeals Court again for State with dissents.
 2/18/14, the New York State Court of Appeals (the
state’s highest court) rules for Gaied, sort of (Case
remanded).
Tribunal I was
for the taxpayer
Tribunal II
reversed and
caused chaos

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Implications of the Gaied Case
Ownership by itself does
not, by itself create
residency
Application in other
parent cases
For a person to be taxed as a
statutory resident in NY, that
person must have a
residential interest in New
York living quarters
Application for vacation
home in Hamptons,
Catskills, Adirondacks for
New York City source
families

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Keeping Track of Your Travels with
Technology
Tax Day App
• Tracks and records your time spent in a state by using your cell phone’s GPS
• Additionally includes residency tax rules for all 50 states
• www.taxday.com
TaxBird App
• Utilizes location services on your phone to keep track of the number of days that you’ve spent in each
state
• www.taxbird.com
Tracking Days App
• Effortless day counting for non-residents and frequent travelers
• www.trackingdays.com
Monaeo
• Shows you exactly how many days you have spent in each of your watchlist locations and how many
days are left before you cross the threshold limit
• www.monaeo.com
Spot Marks the Tax
• A low power and secure location tracker to determine your residency for tax purposes
• www.spotmarksthetax.com

53
Cell Phone Records – Reliability
How accurate and reliable are the cell phone
records?
● Cell phone records could be helpful
● Records vary based on telephone company
● Records are not always accurate
● The records do not track Call Forwarding or Wi-Fi calling

54
Cell Phone Records – Type and Accessibility
Type and Accessibility of data depends on
carrier:
○ Verizon: Voice only; City, State location;
CDMA system may cause false positives;
DTF can get logs without taxpayer
notification
○ AT&T: Voice, SMS and Data; Highly specific
location; GSM system, less false positives
than Verizon; need taxpayer authorization
to obtain records
○ Others: Usually only keep records for two
years; requires court-ordered subpoena

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Cell Phone Records – Reliability
Multiple Connectivity Factors
○ Tower Height
○ Tower Location
○ Time of Day
○ User’s Location
○ Physical Obstructions
Cell phones connect to the strongest tower
not the closest tower; this can result in false
positives
○ Be particularly wary of false positives in
NJ/NY and CT/NY border cases

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Income Allocation

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Income Allocation
 Taxpayers with more than one employer
• Separate allocation for each employer.
 Salespersons
• Proportion that the volume of business transacted in
state bears to the total volume of business
transacted everywhere.
 Allocation of income from a business
• Allocation must be on fair and equitable basis in
accordance with approved methods of accounting.
Generally this means follow the business allocation
percentage.
Matter of Tosti, NYS Tax Appeals Tribunal (May 12,
2011)

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Income Allocation
 A nonresident taxpayer is given the opportunity to allocate income,
reporting to New York State only that income actually generated in New
York. In addition, the nonresident need only report to New York income
from intangibles which is attributable to a business, trade or profession
carried on in the state.
 Thus, significant benefits may be derived from filing as a nonresident.
 Employees
• Allocate based on the proportion of total compensation for services rendered
which the total number of days worked in New York State bears to the total
number of days worked both within and without New York State.
 Convenience of Employee
• Trap for the unwary. May result in a taxpayer who performs little or no work in
New York allocating 100% of the related wages to New York.

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Income Allocations Allowed by
Other Jurisdictions
 A jurisdiction may allow income to be allocated
when it is earned partly inside and partly outside
the state.
 For example, wages and compensation may be
allocated using a ratio of days worked in the state
over days worked everywhere.
 Since the allocation of time worked in the state
reduces the wage income taxed by the other
jurisdiction, it must be taken into consideration
when determining the income actually taxed by
the other jurisdiction.
 Business (partnerships & S corporations) allocate
or apportion income.

60
Nonresident and
Part-Year Resident
Page 1- IT-203
NYS Nonresident Income Tax Return
- Form IT-203, Page 1

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NJ Nonresident Income Tax Return
- Form NJ-1040NR, Page 1
Nonresident
Page 1- NJ-1040NR

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- Form IT-203-B
Form: IT-203-B
Nonresident and Part-Year
Resident Income Allocation and
College Tuition Itemized Deduction
Worksheet

63
- Form IT-203-F
Form: IT-203-F
Multi-Year Allocation Form

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NYS Resident
Income Tax Return
IT-201: Page 1
NYS Resident Income Tax Return
- Form IT-201, Page 1

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Form: IT–360.1
Change of City Resident
Status
NYS Resident Income Tax Return
- Form IT-360.1, Change of City Status

66
Nonresident Audit

67
withum.com
Untangling the Residency Web
What’s the Purpose of the
Nonresident Audit?
NYS Audit Guidelines
“To verify the correctness of
return filed”
“Barry’s Audit Guidelines”
To intrude on the taxpayer’s life
and to raise as much money as
possible
OR

68
The Audit: Three Key Issues
In any NYS/NYC Personal Income Tax (PIT)
or Residency Audit, the 3 key issues are:
Nonresident
Income
Allocation
Domicile
Statutory
Residency

69
The Day Count – Audit Tips
 Clients with any type of permanent place of abode in
the state should maintain a contemporaneous diary
with third party documentation such as:
 Credit card receipts
 EZ Pass records
 Telephone records
 Records related to travel
 Business expense reports

70
Income Allocation Audit Tips
 Part Days = OK
• Unlike the statutory residency test, income
allocation may be based on a partial day.
 Convenience of the Employee Test
• Requires careful planning
• A worker who never sets foot in the state can end
up with 100% allocation and a double tax
 Keep a Contemporaneous Diary
 Golf Days (may) count

71
1. Review estate plan before changing
residency.
2. “I never slept in the apartment.”
3. Inadequate records – always prepare
for the audit, review all records.
4. Keep separate counts for husband and
wife; keep separate day counts for
work and pleasure.
5. Always answer questions and
schedules on IT-203 and IT-203B.
6. Fill out mailing and permanent
addresses on tax return.
7. Work with agent, not against.
8. Keep contemporaneous records.
9. Watch travels carefully; avoid the
whipsaw effect.
10. Domicile changes are usually a “creepy
effect.”
11. Usage by one person: credit card, EX-
Pass and phone.
12. File separate state tax returns, in certain
circumstances.
13. Beware of the state residency tax
examinations.
Top Thirteen Audit Tips & Traps

72
SALT Implications
of
Telecommunicating
Employees

73
Impact of Telecommunicating Employees
 Income tax nexus (i.e., filing requirement)
 Sales/use tax nexus
 Income tax apportionment (i.e., Cost of
Performance sourcing and/or Payroll Factor rules)
 Withholding payroll tax
• Employment tax wage sourcing

74
Withholding on Nonresident Employees
 Most states source employee wages for payroll
withholding purposes to the state where the
employee performs the services
 Certain states with enacted laws that require non-
resident wages to be sourced to the office of the
state where the employee is assigned. (e.g.
Convenience of Employer rule)
 May result in a tax withholding requirement in the
office state, regardless if the employee is
telecommuting from home and working in another
state.

75
Convenience of Employer Rule (NY)
 Where the wages of telecommuting employees
continue to be sourced to the employee’s primary
office location, unless the work performed
outside the state is for the necessity of the
employer.

76
“Employer Necessity” Test
 Under new guidance, telecommuter must prove
two elements
• Telecommuting days are “normal” work days
• Telecommuter’s home office is a “bona fide employer
office”

77
Normal Work Day
 “A normal work day means any day that the
taxpayer performed the usual duties of his or her
job. For this purpose, responding to occasional
phone calls or emails, reading professional
journals or being available if needed does not
constitute performing the usual duties of his or
her job.”

78
Bona Fide Employer Office
 “In order for an office to be considered a bona
fide employer office, the office must meet either:
• The primary factor, or
• At least 4 of the secondary factors and 3 of the other
factors.”

79
Primary Factor
 “The home office contains or is near specialized
facilities. If the employee’s duties require the use
of special facilities that cannot be made available
at the employer’s place of business, but those
facilities are available at or near the employee’s
home, then the home office will meet this
factor….”

80
Secondary Factors
Four of the following factors:
 The employer requires the employee to work from home as a condition of
employment
 The employer has a bona fide business purpose for establishing an office in the
precise location where the employee lives
 The employee performs some of the core duties of his job at his home office
 The employee meets or deals with clients, patients or customers on a regular
and continuous basis at his home office
 The employer does not provide the employee with designated office space or
other regular work accommodations at one of its regular places of business
 The employer reimburses the employee for substantially all of the expenses
related to the home office; or The employer pays the employee rent for the
home office space and furnishes or reimburses the employee for substantially
all the supplies and equipment the employee uses.

81
Other Factors
Three of the following factors:
 The employer maintains a separate telephone line and a separate phone listing for the telecommuter’s
home office
 The employee’s home office address and phone number are listed on the company’s letterhead or business
cards
 The employee uses a specific area of his home, separate from the living area, exclusively for work
 The employer’s business is selling products at wholesale or retail, and the employee keeps an inventory of
the products or product samples at home to use for work
 Business records of the employer are stored at the employee’s home office
 The home office location has a sign indicating that it is a place of business of the employer
 The employer’s advertising material shows the employee’s home office as one of the employer’s places of
business
 The home office is covered by a business insurance policy or by a business rider to the employee’s
homeowner insurance policy
 The employee is entitled to and actually claims a deduction for home office expenses for federal income
tax purposes
 The employee is not an officer of the company

82
COVID-19 State Responses
 PA - Temporarily due to the COVID-19 pandemic, the
department would not consider that as a change to the
sourcing of the employee’s compensation.
 NJ - During the temporary period of the COVID-19 pandemic,
wage income will continue to be sourced as determined by the
employer in accordance with the employer’s jurisdiction.
 MA - All compensation received for personal services performed
by a non-resident who was an employee engaged in performing
such services in Massachusetts is performing such services from
a location outside Massachusetts due solely to the
Massachusetts COVID-19 state of emergency, will continue to
be treated as Massachusetts source income subject to personal
income tax
 And others…

83
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84
Barry H. Horowitz
CPA, MST, SALT Partner &
Practice Leader
212.829.3211
bhorowitz@withum.com
Jason Rosenberg
CPA, CGMA, EA, MST, SALT
Senior Manager
347.215.0115
jrosenberg@withum.com
Zhoudi Tang
CPA, MST, SALT Manager
212.829.3237
ztang@withum.com
Monica Jalife, CFP®, MBA
Principal, Wealth Advisory,
212.652.3250
mjalife@withumwealth.com
Elena Ladygina, CFP®,
Wealth Advisory,
212.652.3251
eladygina@withumwealth.com
Karen Tenenbaum, ESQ., LL.M.,
CPA
631.465.5000
ktenenbaum@litaxattorney.com
Marisa Friedrich, ESQ.
631.465.5000
mfriedrich@litaxattorney.com

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