One reason tax audits by state agencies will likely go up in 2019

As tax filing season ends, taxpayers throughout the country begin to realize the reality of tax audits. Tax experts predict tax audits by state agencies to go up this year. The main reason: the new tax law.

How would the new tax law lead to increased state tax audits?

The Tax Cuts and Jobs Act (TCJA) led to a cap on the state and local tax (SALT) deductions on federal tax returns. Taxpayers who file a return as a married couple can now only claim up to $10,000 while single filers are capped at $5,000.

In high tax states, like California and New York, this cap has led to serious frustration. Some taxpayers have even taken to changing their state of residence in an attempt to reduce their tax obligation.

How would this reduce their tax obligation?

If the New York or California resident can successfully relocate to another, lower tax state the taxpayer will likely have a lower tax obligation. The applicable state tax will decrease, potentially to a rate that qualifies for a full federal deduction instead of additional tax obligations.

Why would this trigger more audits?

Because high tax states want to get their revenue from these taxpayers. If residents are not careful, they could find themselves subject to tax in two states.

How would this happen?

State agencies have specific requirements to sign off on relocation. Unfortunately for the taxpayer, this decision is often subjective. New York courts, for example, will review the size of the home in state the taxpayer claims as their new state of residence to the size of the home in New York. The courts will review the number of days spent in New York and any business ties. Courts will dig for a connection to rebuke the claimed relocation and still attempt to collect taxes.

Although relocation is a legal way to reduce tax obligations, taxpayers are wise to do so carefully. It is often wise to seek the counsel of an attorney experienced in these matters to discuss your plan and mitigate the risk of any surprises.

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map