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How to avoid a Residency audit in 8 simple steps

Planning on moving? Here’s how to avoid a Residency audit…

With the alarmingly high taxes some states are demanding, the question on the lips of many residents in such high-tax states is “how do I change my residency?

If you’re thinking about changing state residency by leaving a state with a high tax rate, it is pertinent to plan adequately to avoid getting blindsided by an unexpected residency audit.

People are changing state residency daily from high-tax states to states that offer more favorable tax rates. These states only tax nonresidents on the portion of their income that is sourced to the state. State residents, on the other hand, get taxed on all their income.

If you are a high-income earner considering changing residency, there’s a high chance that you’ll tick the suspicion of state tax authorities and of you getting audited by state taxation authorities. This is due to the fact that a tremendous amount of income is realized by these states who carry out these residency audits.

If you have plans of changing state residency anytime soon and would like to know how to avoid a residency audit, it is crucial to plan and be armed with the necessary information and tools that you need to fight back if, by any chance, you’re getting audited by state taxation authorities. The burden of proof to show that you have really moved falls solely on you, the taxpayer. One of the ways to prove this is by showing the number of days you have spent in both your old and new state. The lower the number of days you have spent in your old state, the better.

We will give you a few tips below on how to avoid a residency audit to help you avoid getting audited by state tax authorities if you plan on changing state residency. However, it is imperative to know that today’s audit climate is quite vicious and even steps as solid as selling your property immediately may still be dissected by the state and put under a microscope.

Here are a few tips on how to change your residency:

  1. Do not just focus on changing state residency, change your domicile too.
  2. Spend more days in your new domicile than your old one.
  3. Sell off your property in the old state. This will make it easier to prove your change of state residency.
  4. Avoid selling stock or distributing shares in the same month you move.
  5. Move with all your stuff.
  6. You don’t have to waste time registering to vote, changing your driver’s license, and moving your bank accounts.
  7. Avoid things that link you to the old state. Don’t leave your spouse there, or go back there to see your favorite doctor or a dentist.
  8. Keep a track record of your days spent in the new state.

There’s no one-size-fits-all approach that covers how to avoid a residency audit. Changing state residency from a high tax state to a low tax state may be enough reason to trigger suspicion, and may lead to you getting audited by state tax authorities. This is why as you take the steps and implement the tips that we have given you above, it is still important to plan for a potential residency audit, just in case your change of state residency leads to you getting audited by state authorities.


About Souri, Gazda, & Co.

We are a tax relief firm dedicated to giving you the best results with residency planning and audit assistance. Our team of qualified professionals is available round the clock to provide you with the assistance you need to successfully change your state of residence and with the help you need to face state taxation authorities just in case you’re getting audited by state authorities. Contact us now at 888-585-8629 or 617-430-4674 or send us an email at [email protected].

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