Claiming part-year residency could get you audited

On Behalf of | Dec 20, 2019 | Tax Audits

It’s no secret that he tax rate in Connecticut is high. It makes sense that those who choose to live part of the year in another state would want to limit how much they have to pay in taxes here, so they claim part-year residency. The problem with that is doing so may get one audited.

Snowbirds, those who migrate to warmer states when the cold takes over Connecticut, often pick states with lower tax rates as their primary home, while claiming only part-year residency here. They mistakenly believe that living in each state for so many months or days qualifies them for part-year residency, which would decrease or eliminate the need to pay taxes to the state of Connecticut. The truth is, it is far more complicated than that.

A lot goes into proving one has changed his or her primary domicile. Those who claim part-year residency may be required to produce receipts, plane tickets, bank statements and other personal information to prove that Connecticut is no longer their permanent home. Why does one have to go through all these hoops? Connecticut depends on its taxpayers, particularly those who are high earners, as it brings in more taxes from individual taxpayers than it does from businesses. As many people have been leaving the state over the past decade, the Department of Revenue has increased the number of audits it is performing, trying to keep those claiming part-year residency from skimping out on paying their taxes.

There are certain forms part-year residents have to fill out for tax purposes. Anytime a change in domicile is reported, chances are the DOR will take a close look at one’s tax filing. Those who find themselves being audited due to their residency status can turn to legal counsel to help them through the audit process. Better yet, Connecticut residents who are considering a change of domicile can speak to legal counsel before doing so to make sure they have all their ducks in a row.