Tax authorities can also claim someone is domiciled in a state based on the location of connections: selling a business, large stock holding or highly appreciated asset shortly after moving, for example, or maintaining a different state of residence than a spouse. “If you’re claiming residency in Nevada after you have moved away from California, you better change your driver’s license and voter registration to be in Nevada,” said Robert Seltzer, a CPA at Seltzer Business Management in Los Angeles.
“Owning homes in two or more tax sites like this, coupled with spending significant time in those tax sites during any year, gives higher-tax states a justification for auditing someone’s residency,” Smith said.
“A person can have numerous residences at a time but only one domicile, the place one intends to have as their permanent home and maintains social, political, financial, tax and legal connections," added Glenn DiBenedetto, director of tax planning at New England Investment and Retirement Group in North Andover, Mass. "If you maintain residences in two or more states and don’t meet the physical presence threshold in any one state, one or more states may look to tax your income.”
State tax credits might appear to head off double taxation, said Tim Speiss of the private wealth group at EisnerAmper in New York. Some states have already provided guidance that they will not enforce their state tax rules for remote workers. Others are debating similar legislation.
“The rules can be complex and we expect to see many examples in 2020,” Speiss added.