Yes, it's August. But soon enough your thoughts may turn to packing up the car and heading south to enjoy a warmer winter. If you are heading to Florida, don't just assume that you can escape Massachusetts taxes just because you put a Florida plate on your car.
One estate and financial planning issue that comes up for “snowbirds” who split their time between Massachusetts and Florida is just which state is the snowbird's legal “home,” or “domicile.” The Department of Revenue's (DOR) general rule is that the snowbird must live in Florida for at least 183 days a year and have largely severed social, business and other ties to Massachusetts to be considered a Florida domiciliary. If you try to claim that you are a Florida resident and file a non-resident income tax return, The burden will be on the snowbird to prove to DOR that you are no longer domiciled in the Commonwealth for the purpose of taxation of Massachusetts-sourced income.
To establish nonresidency, the snowbird needs to show such things as: the degree to which has the snowbird severed social and familial ties with the Commonwealth, the relocation of any business activity, changes in the registration of the car and voter registration, whether the snowbird is permanently employed in Florida, whether Massachusetts bank accounts have closed, and the degree of involvement in the new Florida community. If the snowbird cannot establish the facts of nonresidency to the satisfaction of DOR, then all “Massachusetts-source income” (including ordinary income and capital gains) will continue to be subject to income and estate taxation and the snowbird will continue to be required to file the Massachusetts resident income tax return. Failure to file the correct tax return may subject the snowbird to fees and penalties.
Similarly, the estates of Massachusetts residents are subject to graduated estate taxation if they exceed $1 million. If the personal representative of a deceased snowbird with a sizable estate incorrectly tries to claim that the decedent was a Florida resident at the time of death in the hope of avoiding estate and fiduciary income taxes, the estate could face significant additional costs, and the heirs of the estate might try to hold the personal representative personally liable for the reduced size of the inheritance.
Thus, it's a good idea for seniors who think they might want to call themselves Florida residents to avoid paying taxes to speak first with a Massachusetts CPA or tax attorney to see if they have a valid argument that they are no longer domiciled in Massachusetts. The money spent on such a consultation will be far less than the potential cost of a DOR audit.