Austin and the state of Texas have a lot of assets that add up to a great quality of life for many. To start with: theres are the food and music, the weather, the tech industry, and of course the fact that we do not pay income taxes. Many would seem to agree with this assessment, and the moving trucks seem to arrive daily, helping grow what was once a college town with the capital to a thriving and economically metropolis.
However, while some dream of moving here or have taken the plunge and done it, they need to be clear about severing ties with their previous state of residence if they plan to file taxes here in Texas this year or in the next few years. Those high-tax blue states in the Northeast, California and the Midwest will not be so happy to see you go and may find a way to keep you on the tax rolls through their nonresident audit programs, particularly when you are in the upper-income brackets.
Make a clean break of it
According to Bloomberg, it is best to make a clean break of it, or at least as clean as possible one if you are maintaining business dealings in your former state of residence. Below are some tips on steps to take when changing residency:
Pass the teddy bear test: Auditors will look at the objects that are considered when you move to a new state. One rule of thumb is the teddy bear test, which need not be a teddy bear but likely will be a cherished pet or a prized possession the taxpayer would not want to live without.
Pick the state where you work: Professional athletes’ season may be five months long, but there is a reason why they choose to live near the training facility instead of the stadium – there are many camps, required off-season training sessions, public appearances and other commitments that usually eat up enough time to claim residency in the state where they work. Conversely, be mindful of claiming to be a remote employee in another state if you come back to headquarters often and keep an office there.
Change of lifestyle: Someone who claims to have moved but not sold their home will likely be flagged. Auditors and judges will examine family ties to children and grandchildren, keeping clothes in that previous residency, keeping the same doctors, and remaining active in the community socially and economically.
Appealing this process
The states may levy a levy several years back taxes as well as fines for being in arrears, but there is an appeals process. Tax law attorneys can work with taxpayers in dispute with their state. Offering guidance to support their case that you truly do live in Texas.