[t3nman]

Hi,

I would need a little advice about a matter of residency status and tax filing.
During 2006 I was living in CA, working in CA and IN plus some trips to Europe. During August 2006 I terminated my lease in CA and started renting in NY, while still working exclusively in CA and IN (traveling each week). I filed my 2006 state taxes with CA and IN, as CA resident; based on tax law, I was definitely a CA resident, didn’t spend enough time in IN to be even part-time resident there, and I spent way less than 183 days in NY. As additional info, I’ve been in USA on H1-B visa since May 2004, so I should consider my domicile to be my parents’ home there where I regularly go for short stays and where I plan to return.
Now to the question. I recently received a notice from NY tax department based on an audit where they consider that I should have paid taxes to NY for 2006, and they calculate the amount on the full year as if they were not aware of my CA residency (plus interest and penalties). Actually the amount is almost identical to the CA+IN taxes I paid, so even if I had to pay to NY as part time resident I would get credit for the CA+IN taxes and be left with a much smaller amount due to NY (and I had no NY source income in 2006). Anyway, do you think I can declare my full year CA residency status as described above and using the “less than 183 days in NY” clause? I plan on sending some bank and utility statements from CA up to July ’06, plus of course the CA and IN tax filings.

Thank you very much for your help

[t3nman]

Sorry, I did not find and "edit" button. When I speak about my H1B, I'm speaking about considering my domicile as back in Italy...

[MukatA]

Read: Your U.S. Tax Return: Working or Living in Two or More states

[AtlantaTaxExpert]

Sorry, but based on NY state tax law, every dollar you made starting the day you began renting in NY was taxable by NY state.

You may not consider it to be fair, and you may be right (though, In my opinion, fairness is always relative to one's point of view), but ALL state tax laws on this issue is pretty consistent: the day you move into ANY state is the day you become RESIDENT to that state and thus liable to that state's tax laws, be it property, income, excise or sales tax.

You should file a NY state tax return, and attach copies of the Indiana and California returns to the NY state return in order to claim a credit for the taxes paid to those other states. You may find that the result is that you owe very little to NY state.

If you find this a bit daunting, any experienced tax professional can handle it with no problem.

[t3nman]

Thank you for your reply AtlantaTaxExpert!
For now I think I will just provide the CA and IN filing and a quick note.
Per NY state residency definitions in Pub88 (rather foggy/flexible, I recognize) on pages 5 and 6, my domicile would still be Italy, where I'd go at the end of my H1B; I had a permanent place of abode in NY when I started renting in 2006, but I kept traveling to and working in CA and IN during the subsequent period and spent in NY less than the 183 days stated. For 2007 of course I filed as full year resident in NY.
If it does not work, I will go for the part-time resident NY filing as suggested, and it is true that once the credit for CA and IN is applied there would be just about $200 left due to NY...

[AtlantaTaxExpert]

Glad to help, and good luck!