Overview

State tax agencies audit residency when they suspect someone claims a different tax home to avoid state income tax (common when moving to no‑income‑tax states). Audits focus on your domicile (your primary, permanent home) and statutory residency tests (for example, days-in-state rules). In my practice advising clients who move to states like Florida or Texas, audits usually turn on objective records: where you actually live, where you spend time, and the ties that show intent to remain.

What auditors look for — evidence checklist

  • Physical presence records: calendars, travel logs, mobile-location data, and credit‑card transactions showing time in each state. Some states use the “183‑day” concept but many weigh multiple factors (see state guidance).
  • Primary residence proof: property deeds, lease agreements, closing statements, or long‑term rental contracts.
  • Government connections: state driver’s license, vehicle registration, voter registration, and state tax returns.
  • Financial ties: local bank accounts, mortgage statements, primary investment-account mailing address, and local professional advisors (attorneys, CPAs).
  • Family and social ties: spouse/children’s school records, medical provider registrations, club memberships, and local employment.
  • Routine bills and services: utility bills, homeowner association statements, and subscription addresses that show day‑to‑day life.

Documents to assemble (fast checklist)

  • Photo ID: current driver’s license or state ID
  • Voter registration card and proof of voting
  • Lease or deed and closing paperwork
  • Utility bills across several months
  • Local bank statements and cancelled checks
  • Healthcare provider records and insurance with local addresses
  • Auto registration and insurance documents
  • Employment records showing work location or remote‑work agreements
  • Travel logs or digital records proving days spent in each state

How to prepare before and during an audit

  1. Run an early residency review: before you move or when you intend to change domicile, inventory the ties you will sever and the ties you plan to build in the new state. (This proactive step is something I do with clients in relocation planning.)
  2. Create contemporaneous records: don’t rely solely on memories; keep dated documents and a calendar of your physical presence.
  3. File correct returns: file state returns that reflect your claimed residence and report income consistently. Misfiled returns create red flags.
  4. Respond promptly and professionally: audits have timelines. Provide organized documentation and a concise cover letter that explains the facts.
  5. Get representation for complex cases: hire a CPA, tax attorney, or enrolled agent experienced with residency audits to handle exchanges with the tax agency.

Timing and record retention

  • Keep residency records for at least three years after filing, and consider maintaining key documents for six years if you have complex issues or significant inter‑state travel. Statutes of limitations vary by state.
  • Preserve originals or certified copies of deeds, closing statements, and vehicle titles; keep digital backups of bills and statements.

Common mistakes that trigger or worsen audits

  • Keeping strong ties in the old state (active voter registration, driver’s license, primary bank accounts) while claiming a new domicile.
  • Failing to document where you physically spent your days.
  • Closing or changing only some ties (for example, switching bank accounts but retaining a home in the prior state without a clear rental or sale).
  • Waiting to change driver’s license or voter registration.

Real-world example (anonymized)

A client who moved from New York to Florida continued to receive New York bank statements, kept a NY driver’s license, and returned to New York frequently for work. During an audit, we compiled new Florida ties — lease, Florida driver’s license, voter registration, local physician records, and bank statements — plus a detailed travel log. The combination of contemporaneous evidence and a clear timeline resolved the audit in favor of the claimed Florida domicile.

Practical professional tips

  • Be consistent: align your home address across legal, financial, and personal records.
  • Establish local routines quickly: set up local providers, bank accounts, and memberships within months of moving.
  • Use a day-count method and keep a travel calendar with supporting receipts.
  • If you split time between states (seasonal home, work travel), draft a short residency memo that explains your living pattern and lists supporting documents.

When domicile isn’t enough: statutory residency and sourcing

Some states apply statutory residency tests (for example, being present more than a set number of days or maintaining a permanent place of abode). Even if you claim domicile elsewhere, you may still owe tax under a state’s statutory test. Learn more about how tests differ in State Residency Tests Explained: How They Impact Your Tax Return and see guidance for highly mobile workers in State Residency Audits for Digital Nomads: Documentation That Helps.

Authoritative resources

  • State tax agency websites — check the agency for the state you left and the state you moved to for specific domicile rules.
  • IRS — federal residency rules differ from state rules; the IRS site explains federal residency and filing obligations (IRS.gov).
  • Consumer Financial Protection Bureau — guidance on recordkeeping when you move (ConsumerFinance.gov).

Professional disclaimer

This article is educational and not individualized tax advice. Residency rules vary by state and can be fact‑specific. Consult a qualified tax professional or attorney for guidance tailored to your circumstances.

Sources

  • New York State Department of Taxation and Finance, domicile and statutory residency guidance.
  • IRS publications and general guidance, IRS.gov.
  • Consumer Financial Protection Bureau, moving and recordkeeping resources (ConsumerFinance.gov).