Driver license makes you a resident?

[ILLMAS]

Scenario

X moved to VA for work from IL in late 2017, in 2018 X met the residency test of VA and has filed as a full-year resident and files a NR for IL (rental property).  X prefers to keep his mailing address in IL since they are always traveling for work (very common for people to use another address for important things).  X receives a notice from IL informing them that they should not be filing as NR and to pay the tax on VA wages etc.... X writes a letter to IL, submits copies of the a rental lease, utility bills etc.. showing proof of residency and the claim is denied because X continues to renew their IL driver license, that they are considered a resident of IL for tax purpose.

Has anyone ever heard of this before?  

 

 

[Medlin Software, Dennis]

States have it "easy".  They can claim you are a resident, and it is up to the TP to prove otherwise.  CA and NY are the examples of the toughest bullies.  I am sure other states have claimed aboard the "tax everyone" post-Wayfair (SCOTUS) train.  Folks who legitimately want to move domicile, such as those who live full time in an RV and want to choose best for them domicile, hire experts to help.  The basic advice is "leave no trace" in your former domicile.  They talk about things like bank accounts, DL, doctors you see, etc.

Another example is online sellers can now be taxed based on the location of their web site host's machines, where their customers are located, etc.  Not jsut sales tax, but income tax.  Someone in CA clicking an email link on a site (say in NY) for a business in a third state?  The business may be liable for sales and income tax in all THREE states (plus localities)!  No more Quill protection, Wayfair ruling has opened a real can of worms.

[Lee B]

Almost all states require you to obtain a new drivers license soon after you change residency.

"As a new resident of Virginia, you have 60 days to transfer your out-of-state driver's license to the state."

I think X has a very difficult argument.

 

[Catherine]

Driver's license doesn't make you a resident, but not relinquishing the license to be re-licensed in the new state gives the t/p a big hurdle now to disprove. Your client may be able to prove non-resident status by showing number of days in IL is below the threshold to be considered a resident (alternatively, that days resident in VA preclude legal  residency in any other state). Toss in a "never realized we had to change licenses but now we have" and that might work.

[Patrick Michael]

In NY they look at a variety of factors to establish state of residency.  In addition to the normal things they look for (time spent out of state, DL, voter registration, location of medical providers, banks, etc.) they also explore the old adage "home is where the heart is" to determine where  items of personal significance were located, such as photo albums and other family keepsakes.  

[Lloyd Hudson]

I am not going to search for it, but I remembered from some years ago that the IRS said "tax home was where you earned the majority of your income. "

[jklcpa]

On 9/5/2023 at 5:25 PM, ILLMAS said:

X writes a letter to IL, submits copies of the a rental lease, utility bills etc.. showing proof of residency

Residency and domicile are two different things. Your client is domiciled in the other state, but IL still considers him a resident. There are many factors that can be used to determine residency, and only one is where the TP lives or spends time. Basically, where has the TP planted his flag so to speak: driver's license, car registration and inspection, voter registration, church, doctors, banking, where the rest of his immediate family lives, where the kids attend school, mailing address, still maintains a home in that state, social club memberships, etc.

[TexTaxToo]

On 9/8/2023 at 6:41 PM, Lloyd Hudson said:

I am not going to search for it, but I remembered from some years ago that the IRS said "tax home was where you earned the majority of your income. "

"Tax home" as used by the IRS is one factor in determining whether someone is a resident or non-resident alien.  It doesn't apply to U.S. citizens, and is not really relevant for this topic, which is state residency, but here is the definition (Pub 519):

Quote

Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work.

 

[Gail in Virginia]

On 9/10/2023 at 9:28 AM, TexTaxToo said:

"Tax home" as used by the IRS is one factor in determining whether someone is a resident or non-resident alien.  It doesn't apply to U.S. citizens, and is not really relevant for this topic, which is state residency, but here is the definition (Pub 519):

 

If I remember correctly, IRS also uses the definition of tax home when determining whether you are temporarily in a location or permanently for purposes of determining if your living expenses are reportable as income if paid by the employer, or deductible if paid by the employee.  Since employee business expenses are no longer deductible at all (at least until 2025, if then) then this is used very much but if i am not mistaken it is still a definition that applies to US citizens and might potentially have bearing on state residency for state income tax purposes.