California Residency Tax Audits/Appeals
California employs a complex system for determining residency for tax purposes, with few bright-line rules. As a result, every year, hundreds of nonresidents with vacation homes (mostly in the Palm Springs area, often called "snowbirds"), investments, deferred compensation, or other property in California get swept up into a "residency audit," an investigation by California's tax authority, the Franchise Tax Board, to determine whether the person is a resident or not under applicable law. It makes a big tax difference. If a person is a nonresident of California, he owes income taxes only on income with a source in California (and there often isn't any). If the person is a resident, California taxes his global income, from any source, anywhere in the world. So the FTB is motivated to audit and declare high-income snowbirds as residents, or to rule that people who move out-of-state for retirement or business purposes remain residents, especially if a large taxable event, such as a stock sale, follows shortly thereafter.
Sanger & Manes has a long record of success in residency audits and appeals, saving taxpayers millions of dollars in income tax assessments. The Firm also consults with clients to reduce the risk of a residency audit, to respond to FTB notices for residency information (the dreaded "4600 Notice" nonresidents often received as a prelude to a full audit), and to assist in tax planning for snowbirds with vacation homes, business people and retirees moving out-of-state, and entrepreneurs engaged in ecommerce, internet business or working remotely from out of state.
Sanger & Manes Fixed-Fee Departure Plan, Vacation Home Plan, or Remote Worker Consultation
Residency tax issues often require a thorough analysis of complex financial interests, such as deferred compensation plans, stock options, and business entity contracts.
However, many taxpayers simply need guidance in putting together a plan for changing their legal residence from California to another state in compliance with California residency law. Or they are snowbirds who want to buy a vacation home or some other single investment in California, while minimizing their risk of a residency audit. Or they wish to work remotely out of state, using ecommerce or other internet solutions, to provide services or products to California, without being deemed California residents.
For those clients, Sanger & Manes offers fixed-fee consultations, via telephone or in person. For the fixed fee, Sanger & Manes will answer unlimited residency-related questions that don't involve reviewing complex financial arrangements, and will assist in putting together a departure plan, vacation home plan or remote worker plan, including appropriate checklists, to minimize the risk of a residency audit in the future. Contact us for more details.