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Curious, how does a state know if you are a resident?
Old 03-11-2016, 01:37 PM   #1
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Curious, how does a state know if you are a resident?

I retired in 2005. Later that year, I moved from NY to a friend's home in AZ. While there, I transferred my car's title, got an AZ driver license, registered to vote, even opened a few local bank accounts. Several months later, I decided to move to Thailand where I stayed for over 10 years. I continue to use my friend's home for my storage and my official US address. I have voted via overseas absentee ballot for only National candidates not local ones. During my only visit back to the states 3 years ago, I renewed my expired AZ driver license. In all that time, I never filed for a state income tax since I considered myself a Thai resident and used my Thai address on my 1040. I never got any tax notices from either NY, my working home for 35 years or AZ so I am wondering, how does a state know if you are living in their state, especially if you are retired and not earning any local income other than possible bank interest?
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Old 03-11-2016, 01:52 PM   #2
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Are you a US citizen and have you been filing US tax returns while in Thailand? (Just thinking that the IRS may know from your returns which State you are resident in).

ETA

I see that you have been putting your overseas address on your 1040.
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Old 03-11-2016, 01:59 PM   #3
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It seems to me that your Domicile may be Thailand in which case Arizona doesn't count you as a resident for tax purposes, so unless any income is reported to them via the likes of a W2 they probably don't much care.


Quote:
Residents
You are a resident of Arizona if your domicile is in Arizona.
Domicile is the place where you have your permanent home.
It is where you intend to return if you are living or working
temporarily in another state or country. If you leave Arizona
for a temporary period, you are still an Arizona resident
while gone. A resident is subject to tax on all income no
matter where the resident earns the income.
https://azdor.gov/Portals/0/ADOR-for...10177_inst.pdf
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Old 03-11-2016, 02:02 PM   #4
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It's a tricky question, because each state handles residency differently. Some are easy, others are strict. If you really want an answer, I would suggest talking to an Arizona tax professional.
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Old 03-11-2016, 02:17 PM   #5
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Quote:
Originally Posted by MJ View Post
I am wondering, how does a state know if you are living in their state, especially if you are retired and not earning any local income other than possible bank interest?
State authorities know you have an address in that state when you register (driver license, vote) or conduct some business that that requires financial reporting, such as a W-2 of 1099.

Each state defines residency and tax liability differently, so Braumeister is right, if you have concerns about your potential liability in Az (given you have a DL and use that as your financial address) a local tax specialist would be helpful.
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Old 03-11-2016, 02:17 PM   #6
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Keep in mind there are several types of residency as well for tax purposes and/or legal purposes. E.g. you can be a resident for inheritance purposes but non-resident for income tax purposes ..

As far as I know though, if there are no reasons to doubt your residency your last official register will usually be maintained indefinitely.

Sometimes doubt arises, e.g. someone else claims to be living where you do, an anonymous complaint is filed, a datamining exercise flags you, inheritance reveals foreign or undeclared accounts, .. but usually decades can go by without issues.

If there are any doubts, any evidence can be used to determine residency up to and including where your bank accounts are and how you manage them, house calls, where you spend your money, flights booked, your diaries, where mail is sent to and from, location and contact with relatives, what you put on letterheads, etc ..

Bit of a cliche, but if you have doubts about your tax status best to consult an expat professional. Hard to find a good one though.
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Old 03-11-2016, 03:31 PM   #7
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There is a form we file in the military to designate our domicile which dictates to which state we pay state tax. To prove residency, we have to have an address there, or registered a vehicle, etc. something that proves we intend to be there permanently at some point. Of course, there is no follow up so long as you pay appropriate state taxes. I live in CA, own property and pay property taxes here, register vehicles and to vote, but domicile and state taxes go to IL.
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Old 03-11-2016, 05:15 PM   #8
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I got a tax bill from a state where I owned a 2nd home and had a car registered in, about 3-4 years from when I first had both there. I spent a lot of time there, but not half. I assume they took a shot based on the house or car. I sent a letter or form back explaining it was a 2nd home. I may have offered to show proof of my primary residence, but I know I kept it short and factual and didn't go into any more details. If pressed I would've shown the dates in each state, and how I owned a house and car in the other state, had my dentist and physician there, voted regularly there, etc. All bills were sent to the other state too, and I used mail forwarding for when I spent time in the state in question.
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Old 03-12-2016, 12:01 AM   #9
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OP should be careful, as some States want a tax return (and taxes) even if you left the country. Its based on you last State of residency.
At least that is my understanding of how it works, hopefully someone else knows from experience ?
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Old 03-12-2016, 06:00 AM   #10
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Expatriate Tax Return - State Obligation Facts

Advice from Greenback Expat Tax Services
Of the 50 states, there are nine that offer favorable conditions for expatriate tax return purposes. Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no state income taxes at all.

If you last had residency in California, South Carolina, Virginia or New Mexico, you will have a much tougher time shedding their residency status. You will likely need to include a State return with your expatriate tax return.

Of the remaining 37 states that have not been listed, the conditions are neither favorable nor particularly difficult for US expats. Most of these states will consider you a non-resident after being outside of the territory for at least six months. You simply need to provide proof of residency elsewhere.

Sever as many physical ties as possible to the state you are trying to end residency with. If you have mortgages, bank accounts or bills, there may be a problem. They create a long paper trail. Even if you are not there physically, the paper trails show a plan to return.
DW & I are currently AZ. residents & have plans to live outside the U.S. after ER with occasional visits to the U.S. In preparing for our move, we consulted with an expat tax specialist. He agreed with the above information and told us the "biggies" as far as proof of residency goes - mortgages & property ownership. That goes for personal property as well that requires registration with the state (autos, boats) along with real estate & bank accounts.
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Old 03-12-2016, 06:46 AM   #11
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I would think it's difficult to completely shed your state residency even if you live overseas. So many things in the U.S. require you to declare a domestic address (health insurance, driver's licence, bank & investment accounts, etc.)

The mere act of voting, even if you're only voting in national elections, requires you to register as a voter in a specific state county. Unless that state has specific exemptions for expatriates that you qualify for, I'd think simply registering to vote is enough of a link to an address for a state to claim you as a resident.

An easy solution is to set up a domicile in a state without a state income tax. A couple of states, like TX, make it super easy to do. There are even mail-forwarding companies that provide customers with legal physical addresses. The one we use is a Texas company called Escapees.com. Even though we don't live in Texas (or anywhere for that mater) we've consolidated our legal lives at our mail forwarding address and use it for everything from getting our drivers licences to our voter registration cards.
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Old 03-12-2016, 06:49 AM   #12
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This thread (from the FAQ) has a helpful discussion on state residency and tax for ER's abroad. Planning to be an Expat
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Old 03-12-2016, 07:57 AM   #13
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Thanks for all the comments. It's been over 10 years so I am not worried. I was just "curious" about the state mechanism that determines if one is living in a particular state when one is retired and has no physical property including a car. I also only voted for congressional and the presidential candidates and not local ones. As soon as I was settled in Thailand, I changed my address to my overseas one in all financial accounts where it was allowed as well as on my 1040 return.
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Old 03-12-2016, 09:00 AM   #14
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New York is the worst when it comes to domicile/residency audits. I have read stories of people who have to log each day where they are located to protect themselves from an audit. They consider everything, not just voting or 1040s.
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