Leaving On A Jet Plane? Not Without A Residency Audit.

Changes in the Administration, high state tax rates, and COVID-19 have all increased the spotlight on where taxpayers wish to call home. For some, a potential move means relocation to Puerto Rico, where certain tax incentives are in place to increase business and drive a new island economy. For others, it means a move out of the highest state tax jurisdictions in the country, like New York and California, to states without a personal income tax such as Texas and Florida.

But before bags are packed and a taxpayer is ready to go, very careful consideration needs to be given to what it means to change domicile and residency. The exodus from high federal and state tax jurisdictions means significant shifts in revenue collection. With potential revenue loss, the IRS and state authorities are working hard to ensure any moves are legitimate in fact and substance. The result? Taxpayers should expect any residency transition to be audited at the federal and state level.