Quick overview
When a state questions where you live for tax purposes, the goal is to show a consistent pattern of living and intent. In my 15+ years advising clients on multi‑state issues, the cases that succeed are the ones with a clear, dated paper trail and a concise timeline explaining where the taxpayer lived and why.
Why states audit residency
States audit residency to protect their tax base and to prevent double taxation. Auditors typically look for conflicting facts—different driver’s licenses, voter registration in another state, or income reported elsewhere. Some states apply a statutory-day test (often ~183 days) or examine domicile (intent to make a place your permanent home). Rules vary by state, so treat every audit as state‑specific. See our deeper guide on residency tests for context: State Income Tax Residency Tests: Domicile vs Statutory Residency.
Priority evidence auditors expect
Collect and organize documents that prove residence and intent. Prioritize these items first:
- Government ID showing address (driver’s license or state ID)
- Voter registration and voting records
- State and federal tax returns for the years in question (show where you reported residency)
- Lease or mortgage documents with dates
- Utility bills and cell‑phone bills with consistent address and billing dates
- Bank and credit‑card statements showing address and local activity
- Employment records, paystubs, payroll withholding, and remote‑work agreements
- Vehicle registration and insurance showing the state of use
Secondary supporting items:
- Property tax bills, home‑owner association statements
- Children’s school records and medical records
- Social/community memberships, professional licenses, and local subscriptions
- A contemporaneous calendar (travel logs) showing where you spent nights
- Affidavits from landlords, roommates, or neighbors (use sparingly and only to supplement hard records)
For more examples and documentation strategies for remote workers, see: State Residency Audits: How to Prove Your Domicile.
Building a clear audit response
- Assemble a timeline: list dates, primary addresses, and nights spent in each state for the audit years. A simple spreadsheet or PDF calendar is invaluable.
- Create a cover letter: summarize facts, attach an index of exhibits, and explain any conflicts (e.g., temporary job in another state).
- Produce originals or certified copies of key documents and mark them to match your index.
- Emphasize intent (domicile): talk about where you return between trips, where your family and possessions are, where you vote and have a license.
- Use payroll and employer correspondence to show where work was performed and where withholding should have occurred.
Common audit triggers and mistakes
- Relying only on recent documents (auditors want contemporaneous evidence for each audit year).
- Failing to reconcile conflicting records (e.g., voting in State A but claiming State B as domicile).
- Not keeping a travel log or calendar—many audits hinge on night counts.
If you’re a remote worker or split time between states, review our practical checklist: How State Residency Rules Affect Your Income Tax Obligations.
Responding to the audit notice
- Read the notice carefully and note deadlines. Replying late reduces negotiating leverage.
- Don’t volunteer extra information without organizing it—send the indexed packet you prepared.
- If unsure, request a brief extension in writing to gather documents.
- Consider hiring a CPA or tax attorney experienced in state audits; they can prepare legal arguments about domicile and statutory residency.
Appeal routes and next steps
If the auditor rules against you, most states offer an administrative appeal or protest process, then judicial review if needed. Appeals often require a concise statement of facts, legal arguments, and supporting exhibits. A tax attorney or CPA with audit‑appeal experience improves chances at each stage.
Real‑world cautionary example
I worked with a client who split time between NY and TX. They had a Texas lease and bank accounts but a New York driver’s license and voter registration. The audit focused on intent: where they kept most personal items and where their family was domiciled. By producing a year‑by‑year night count, lease payments, and a sworn affidavit explaining temporary work in NY, we resolved the case in the client’s favor—because the contemporaneous records showed a consistent pattern supporting their claimed domicile.
Practical checklist (what to gather now)
- Driver’s license/state ID and voter registration
- Lease/mortgage and utility bills for each audit year
- Bank/credit statements showing address and local spending
- Employer paystubs and W‑2s or 1099s, withholding records
- Vehicle registration and insurance
- Children’s school and medical records
- A dated travel calendar or phone location history
- Written explanation (cover letter) and exhibit index
Authoritative sources
- State rules vary; many refer to domicile or a day‑count test—consult your state tax agency’s residency guidance for specifics. For general principles see the IRS site on residency and domicile issues (federal guidance does not replace state rules): https://www.irs.gov/ [IRS].
- Consumer Financial Protection Bureau and state tax offices provide practical taxpayer guidance on audits and records retention: https://www.consumerfinance.gov/ [CFPB].
When to hire professional help
Contact a CPA or tax attorney if the proposed assessment is material, if multiple years are involved, or if you receive a summons for records. In my practice, an early consult often prevents missteps and generates a focused, persuasive audit packet.
Disclaimer
This article is educational and does not constitute legal or tax advice. For advice specific to your facts, consult a qualified CPA or tax attorney licensed in the relevant state.
