Florida Elder Law & Estate Planning Blog
Breaking Up With Your High-Tax State Can Be Hard To Do
August 10, 2019
Increasing numbers of people are fleeing high tax states for lower-tax environments such as Florida. People have always moved to Florida to escape estate taxes and income taxes, of course. However, the migration has kicked into higher gear of late because of the Trump tax legislation that limits deductions for state and local taxes (SALT) to just $10,000 annually.
Just like rejecting a longtime lover for someone new, breaking off your relationship with your high-tax state can get complicated, and ugly. After all, you have been a dependable source of revenue for your state. Don’t be surprised if there is clinging and crying. If the state launches a non-residency audit, you will be required to furnish evidence that you have really and truly established your domicile in Florida, and severed ties with your former state. Without such evidence, your former state’s tax authorities can go after you.
That is just what happened to Robert Campaniello, whose case was described in a June 15, 2019 Financial Advisor article. Owner of high-end furniture showrooms in New York, Campaniello claimed that he had moved from New York and was a permanent Florida resident for tax and other purposes. New York State began a non-residency audit to investigate his claim. Campaniello told auditors that he owned a home in Florida, and noted that it was there he kept his Ferrari, a catamaran, and his prized souvenir guitars. In the end, New York didn’t buy it. The audit found that Campaniellos’s Manhattan showroom was still open and still managed by his wife. His mail was still being delivered to his New York residence. The case concluded in 2015 when New York State won a judgment and collected nearly half a million in taxes from him.
You Don’t Need To Be Wealthy To Face Scrutiny
You need not be mega-wealthy to face this kind of scrutiny by your former state. Non-residency audits are becoming more common and more rigorous. As Dan Gazzle, spokesman for the New York State Department of Tax and Finance told Financial Advisor: “Ensuring taxpayers pay their fair share is a top priority, therefore, our nonresident audit program continues to be very active.” Not only active, but aggressive: an audit can delve deep into your affairs, even procuring cell phone records to determine where and when your calls originated.
If you are thinking of moving to Florida and reaping its lower-tax advantages, you must take any and all steps necessary to demonstrate that you have established a permanent residence in Florida and made a clean break with your old state. That means more than furnishing a Florida address or parking your Ferrari in the driveway. Seemingly small, insignificant details – where your pet sees a veterinarian, for example – can bolster or belie your claim.
Steps To Take To Demonstrate Florida Residency
Among the other steps you will want to take to prove your Florida residency include:
- Change your mailing address
- Get a Florida drivers license
- Transfer your banking and brokerage accounts to Florida-based institutions
- Purchase a safe deposit box in a Florida bank
- Join civic, religious organizations based in Florida
- Establish new relationships with Florida medical providers. Transfer your medical records to your new providers.
- Spend at least 183 days of the year here
And don’t forget: document everything! That way, you’ll be prepared if the auditor comes calling.