Changing The State In Which You Reside, Can Cause Major Tax Problems

by Bruce Givner on January 12, 2012

Major Tax Problems News Update:

California and other high tax states such as New York have a large interest in making sure that you cannot easily change your residence or the state in which you reside to a low or no-tax state while retaining the benefits of living in California (or New York). The California Franchise Tax Board has been quite aggressive in auditing people who were residents in one year and then stopped filing California tax returns in the year in which they have a large income event, such as the sale of a business or a large bonus. For many this has caused Major Tax Problems. Luckily Givner & Kaye can guide you through this process.

California has enunciated a number of factors which it considers in determining your residence, such as the amount of time you spend in this state versus other states; the state which has issued your driver’s license; the state of your voter registration; the state in which your advisors, such as doctors and lawyers, are located; the state in which you belong to country clubs and other social organizations; and, of course, your job.  So, if you are claiming a change of residence, it is important to make sure you have changed these formal factors. However, those formal factors are not enough since it is easy enough to change your voter registration and driver’s license. To avoid Major Tax Problems, talk to Givner & Kaye first.

Taxpayers are often tripped up on contradictions, e.g., the alleged principal residence in Lake Tahoe is a 1500 square foot condominium but they also own a 10,000 square foot estate in Beverly Hills, and the utility bill for the Beverly Hills estate is more than the mortgage payment on the Tahoe condo.

If you are contemplating a change of residency, contact us to help guide you through this potentially dangerous tax transition. (310) 207-8008

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