Virginia-Pennsylvania Preparers

[S T]

Need some assistance - If you don't want to post on the Board, please PM me

Have a Taxpayer that has been a VA resident for more than 10 years, owned a home, worked there, etc. She sold VA home in January 2011 - her job transferred to another area of VA and she rented until July 2011 when she was able to obtain her full retirement and permanently moved to PA (although she was showing that as permanent residence for 2011)

When she knew the house was selling in Jan 2011 - she changed all of her residency status to PA - she has a house there in PA - so she changed her Mail, Drivers License, Voting, etc as well as notify Employer of change.

Question for 2011 - resides and works in VA until July 2011 - moves to PA for remainder of year - I had thought part year each, but T/P is saying she has worked with co-workers that do similar and have claimed PA resident rather than VA.

Any thoughts?

Thanks for taking time to review

Sandy

[BP.]

resides and works in VA until July 2011 - moves to PA for remainder of year - I had thought part year each

Based on your facts, I would treat as part year resident of each state.

People often ask me, 'If I change my mailing address (or license, or whatever) can I . . . ?" No, that doesn't change where you physically resided.

When she knew the house was selling in Jan 2011 - she changed all of her residency status to PA

Probably can only accomplish this by actually moving to PA, which was done mid-way through 2011.

Your client would probably like full year residency in PA because we generally don't tax retirement income here.

[Burke]

Question for 2011 - resides and works in VA until July 2011 - moves to PA for remainder of year - I had thought part year each, but T/P is saying she has worked with co-workers that do similar and have claimed PA resident rather than VA.Any thoughts?Thanks for taking time to review.Sandy

Virginia will consider her a part-year resident and she should file a VA 760PY. She became a PA resident when she moved, but not until then. PA also uses a part-year resident status -- regardless of what her co-workers do or say, the part-year is the correct way to file. 2 States.

[S T]

Thanks for your information.

What you outlined is what I had thought the proper way to file, but the T/P has another thought.

T/P believes that she is a "Resident" of PA for the following:

from T/P ---I own a home there (PA) – as of Jan 31, I do not own a home in Virginia.
I pay all the taxes, utilities, phone, etc at the home in Pa. I do not pay those here in VA.

Although, I am renting an apartment in Virginia, I am only there part time and consider my actual domicile to be in Pennsylvania. I do not receive mail at the apartment; all mail goes to PA.

My driver’s license, car registration, car insurance are in PA (I just changed those on Jan 19).

I belong to a Catholic Church in PA.

I spend the week days in VA but the weekends in PA.

T/P as well as myself have looked at the PA reciprocal agreements, and she feels that she is a PA resident - Actually wants to be a PA resident. I do have an issue for Jan for sure which is when the VA house sold.

Other issue we discussed was the 183 days - T/P believes they do not have to be consecutive days, and if she adds up from Jan thru July with a basic 4 day work week in VA and taking some other vacation days, she will be under the 183 days. (Keep in mind though T/P is only counting the work days - no weekends, vacation days.)

Any thoughts on how to convince her (or am I wrong) that it should be a PY VA Jan-July and then PY PA Aug - Dec - Not quite understanding why T/P is giving me such grief for the PY VA and PY PA - I do understand about the Retirement portion - but that does not commence until August so would be on the PA return.

Thanks

Sandy

[Burke]

Other issue we discussed was the 183 days - T/P believes they do not have to be consecutive days, and if she adds up from Jan thru July with a basic 4 day work week in VA and taking some other vacation days, she will be under the 183 days. (Keep in mind though T/P is only counting the work days - no weekends, vacation days.)

Any thoughts on how to convince her (or am I wrong) that it should be a PY VA Jan-July and then PY PA Aug - Dec - Not quite understanding why T/P is giving me such grief for the PY VA and PY PA - I do understand about the Retirement portion - but that does not commence until August so would be on the PA return.Thanks
Sandy

Is she saying she worked in VA four days a week, and then returned to PA every weekend and holiday? Sorry, if she did not actually do that, that won't fly. And you say she rented a house in VA the entire time. Keep in mind that her principal place of business/employment is considered her tax home for the IRS, so no travel expense would be deductible. And the state would use the same interpretation. Why don't you ask her why she wants to be a PA resident for the entire year. After all, she would still owe VA tax on a non-resident return for the income earned in this state. It would make a difference in her deductions/exemptions and possibly involve OSC. So I would be suspicious. If she files as a full-yr resident of PA, will they also tax her VA earned income? PA being a cheaper tax rate may be where she is coming from, but the OSC would obviate that.

[S T]

Burke and BP -

Please help if you can

This t/p wants to use the "reciprocal" agreement that PA acknowledges for PA residents working in Va. ??

I see some "pitfalls" in that she is not really commuting on a daily basis- owned a primary residence (VA) in January before it closed escrow -- then is renting another "apt/abode" for the period of time" until employment ends (In VA).

I have assured her that the period of time when retirement commences - she is a PA resident and that will not be taxed to VA - just this period while she is employed in Va Jan-July.

So how does the "reciprocal" PA -VA agreement work?? What do I need to point out for that "reciprocal" agreement to fail for Va filing/tax purposes??

I know PA would welcome the tax revenue on those wages

Thanks

Sandy

[BP.]

The PA-VA reciprocity is probably like other states' reciprocal agreements. Employees pay state income tax to their state of residence, not their state of employment.

Sounds like your client wants to pay tax to PA, not VA, for period of employment in the first half of the year. You mention all the steps your client took to establish a PA residency, including notifying employer. Which state income tax did they withhold?

[S T]

State Withholding is Virginia.

Sandy