By Melissa S. Howell, CPA, Principal
In our summer newsletter, we discussed cutting ties with New York State and highlighted the two tests used by the New York Tax Department for determining residency. We explored in some detail the first test, the Domicile Test and what steps an individual should take to support their new residency position. In this article, we will take a deeper dive into the second test, the Statutory Residency Test.
In many instances, a taxpayer may not completely sever ties with New York and continue to maintain various connections to the state. When you have a home somewhere else, but you are in New York enough for whatever reason, you could be viewed by the New York Tax Department as a “statutory resident” and taxed by New York on 100 percent of worldwide income. A statutory resident is a person that is not domiciled in New York, but maintains a permanent place of abode in the state and spends more than 183 days of the taxable year in the state.
Permanent Place of Abode
A permanent place of abode is defined as a dwelling place of a permanent nature suitable for year-round use. Unlike the question of domicile, becoming a statutory resident requires no subjective intent to make New York your permanent home. In most cases, a taxpayer may own or lease the dwelling, but you could also be considered to be maintaining an abode if you are making contributions to the household in the form of money, services or other contributions. If you maintain a place of abode that meets these characteristics and you can stay there whenever you want, you are maintaining a permanent place of abode, even if you only stay there occasionally.
183-Day Rule
If a taxpayer spends more than 183 days in New York, you can be considered a statutory resident. For purposes of the 183-day rule, any part of a day spent in New York is considered a “New York” day and will count towards your 183-day statutory total. Some states offer exceptions for medical days, but these days could be closely scrutinized in the event of a residency audit.
Keeping an accurate record of your calendar and whereabouts on any given day is especially important, as the burden of proof is on the taxpayer to prove the days they were not in New York. There are many ways of determining where a taxpayer was on a particular day. Taxpayers should maintain supporting documents, including ATM activity, credit card statements, flight records, cell phone logs, EZ Pass statements, to name a few. A detailed calendar should also be kept on a daily basis tracking your physical location. There are many apps available that can digitally log your whereabouts.
Cutting ties with New York State can be complicated. Avoiding statutory residency traps requires examining the taxpayer’s particular fact pattern, keeping comprehensive records and an understanding of the law. To discuss residency rules in greater detail, please contact us at Tronconi Segarra & Associates.