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Snowbirds, fly cautiously

By Jennie L. Phipps ·
Monday, November 11, 2013
Posted: 5 pm ET

Snowbirds who are considering fleeing a high-tax state in favor of a state where taxes for people living in retirement are lower should make sure that their move won't trigger audits by their original high-tax state.

Ron Weiner, president of RDM Financial Group with practices in New York and Florida, says that if you are moving to Florida, where there is no state income tax, or Arizona, where there is no estate tax, from states like New York and Illinois, where taxes are higher, these states often look for reasons to continue to tax you and may add interest and penalties on anything they view as a shortfall. "They can be tough as nails," Weiner says.

While rules generally say that you must live in a state more than six months out of the year to be a resident, Weiner says 183 days of residency alone isn't good enough. "They look at a whole lot of factors to decide whether you really changed your domicile."

The burden of proof is on the relocating resident, Weiner says. The higher-tax state will assume you haven't moved unless you prove it beyond doubt. Here are some retirement planning steps to take that will be persuasive.

Change your address on all your paperwork. Systematically, make sure that all your bills, your voter registration, car title, driver's license and other official documents, including things like wills, insurance policies, bank and investment accounts, clearly reflect your new residency.

Clarify your primary residence. You can't claim a primary residence for tax purposes in a state where you aren't a resident. So, even if you're just renting in Florida, you probably can't continue to pay homesteaded taxes on your New York property. And if you are a New York City resident and you own a rent-controlled property or you have a Star exemption in other parts of the state because you are older than 65, you may have to give that up. Even hanging onto a local parking sticker could be viewed as an indication that you haven't really switched your primary domicile.

Don't leave your "near and dear" behind. That can include minor children who continue to live and go to school in your original location, a spouse who continues to commute, even occasionally, and earn money there, and in the case of one of Weiner's clients, a dog that stayed behind in the original home. Any of these circumstances are enough to convince a tax-aggressive state that you didn't really change your domicile.

"They will add up your utility bills. They will check where your cellphone is and where your landline is; whether you have a Florida or a New York E-Z Pass. Don't play games. Gimmicks don't work," Weiner says.

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1 Comment
November 12, 2013 at 8:55 am

Being from the state of confusion (a/k/a Illinois) I don't think they are smart enough to figure all this stuff out. But, if there is a way to take money from my pocket, I guess they will find it.