Residence or Domicile?

[mcb39]

For  Income Tax purposes, please help clarify the difference between Residency or Domicile.  This question is from a client currently a Wisconsin resident (legally) who is doing extended construction work in Texas.  Change of Residence to Texas would only be temporary but could extend beyond a year, but not always in the same location.  I have always filed him as a WI resident, but TX does not have State Income Tax.

[mcb39]

I might add that this client has had income from up to 3 different states in the past and always has rental income from Wisconsin, which is his original State of Residency.

[Elrod]

Tax Home

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 are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a "tax home" in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.

If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work.

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-tax-home-in-foreign-country

Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. For example, you live with your family in Chicago but work in Milwaukee where you stay in a hotel and eat in restaurants. You return to Chicago every weekend. You may not deduct any of your travel, meals or lodging in Milwaukee because that's your tax home. Your travel on weekends to your family home in Chicago isn't for your work, so these expenses are also not deductible. If you regularly work in more than one place, your tax home is the general area where your main place of business or work is located.

https://www.irs.gov/taxtopics/tc511

[Medlin Software, Dennis]

No one answer.  Each tax agency can have their own nexus rules.  (Nexus is the proper term, to me, not residency or domicile.)  Some have one second nexus, some allow 30 days, etc.  Some even have a no physical pretense nexus!  (Company not in CA, has a web site also not served from CA.  Customer in CA clicks an "email us" link on said web site, business just created CA nexus!)

Once you determine nexus, you can then figure out the proper report, whether the tax agency calls it resident, NR, or whatever.

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OP.

WI resident "legally" (likely applies to WI purposes, other states do not have to honor what WI says). Likely contradicts what TX may have to say about someone present for more than half a year (or whatever TX uses as a time trigger).  DOMICILE could remain in WI, since that word ties in to where the person claims home, keeps their stuff, has their bank accounts, and plans to return to, but tax residency/nexus/residency can be different than domicile.

[mcb39]

18 hours ago, Medlin Software, Dennis said:

No one answer.  Each tax agency can have their own nexus rules.  (Nexus is the proper term, to me, not residency or domicile.)  Some have one second nexus, some allow 30 days, etc.  Some even have a no physical pretense nexus!  (Company not in CA, has a web site also not served from CA.  Customer in CA clicks an "email us" link on said web site, business just created CA nexus!)

Once you determine nexus, you can then figure out the proper report, whether the tax agency calls it resident, NR, or whatever.

---

OP.

WI resident "legally" (likely applies to WI purposes, other states do not have to honor what WI says). Likely contradicts what TX may have to say about someone present for more than half a year (or whatever TX uses as a time trigger).  DOMICILE could remain in WI, since that word ties in to where the person claims home, keeps their stuff, has their bank accounts, and plans to return to, but tax residency/nexus/residency can be different than domicile.

Therein lies the dilemma.  All of his rentals are in his home state of Wisconsin.  Texas does not have income tax.  Wisconsin would certainly frown upon him not paying income tax on his Rental Income.  He receives his mail in WI and someone forwards it to wherever he is working.  Last year he had LA, CO, TX and WI.  What bothers me is that this job in TX is predicted to last approximately 14 months.  He lives in a Camping trailer which he can move from job to job and save considerably on travel expenses.  He retains a WI Drivers license.  My strong leaning is toward WI residency, but the length of time in one state troubles me, even though he would owe no tax to that state.

[mcb39]

He pays property taxes, mortgage interest, a Rental Management Company; as well as me in Wisconsin.

[Lee B]

Sounds like a Wisconsin resident to me.

[Sara EA]

For IRS purposes, his tax home is TX because that's where he spends his time.  A quick glance at WI law says if you are domiciled in WI, you are a resident no matter where your tax home is.  Since he intends to return to WI, that's his domicile.  Even if he decides he'll stay in TX, he'll still owe tax on the rental income in WI (as a nonresident).

[Medlin Software, Dennis]

For a good insight, refer to escapees rv org docs. It is a huge issue for mobile rv folks, full and part time. Their focus is on taxation, vehicle fees, and medical insurance, but it leads to good knowledge which helps with taxation issues.

For us, more than anything, we want to keep the hmo (then their advantage plan) we have had for life, so we need to meet their eligibility requirements. Hopefully the person referenced in the op has checked into their medical coverage!

one thing for sure, when we travel, I make darn sure not to trigger nexus in another state. Some allow 30 days, some, like by, are simply do not work at all, not even an email, within their border. I’m not just personal liability, but same inattentiveness could trigger company liability (even in a no withholding tax state).

[Medlin Software, Dennis]

Edit, escapees focus is on ss and retirement fund taxation, and NY is the state I reference when referring to a one millisecond nexus. 

[mcb39]

Thank you all.  I intend to file him as a WI resident as always.  In any case, he doesn't owe TX anything and will pay WI taxes for the TX income.  Truthfully, he should be paying estimates in WI (IMO).  It is always difficult preparing these long distance returns, but he has been with me for a long time.  I have full access to his Property Management records and his banking transactions in WI.  He is deeply rooted in this state and willing to pay the tax so we will see how it goes..........again!