Illinois Preparers

[Chief]

As a result of an annual review of my tax returns I have a question about a Illinois return.
A retired man who is a part time year resident of Illinois and a part time resident of Florida has income solely from banks, financial institution as interest and dividends. and capital gains with all the institutions being outside of Illinois. My question is this income based on Illinois income or not. I see that taxable SS is not Illinois income. Being as part time resident is not this income for Illinois purposes. Should this be listed on Sch M of the Illinois return thus making all of his income TE for Illinois.

[jainen]

you can correctly answer

>>a part time year resident of Illinois and a part time resident of Florida<<

I don't think you can correctly answer these questions until you clarify his residence. If he lives part of the year in one state, part in another, then goes back to the first state in an ongoing pattern, then he is a resident of only one state (probably the one he spents the most time in or the one he has the most contacts in). The other state is his vacation home.

[Chief]

Residency

Jainen, you are saying because he returns to Illinois each year (summer) he is a resident of that state. Because he returns to Fl each year that is his vacation state not part time resident. Even though the time spent in each state being equal to 6 months; he is still a resident of Illinois. He does not want to change his residency from Illinois to Florida. So he is stuck paying Illinois state income tax.

[jainen]

I did not say that

>>Jainen, you are saying because he returns to Illinois each year (summer) he is a resident of that state.<<

Chief, I did NOT say that. I said he is a resident of whichever state he spends the most time in and/or has the most contacts in. By contacts, I mean things like a homesteading and other property, closest friends and relatives, main church membership and lodge memberships, doctors and other professional providers, voting registration, and all the other incidents of a normal lifestyle.

[Chief]

Illinois

He has Illinois auto tags, voter registration. homestead, and the like. He wants to retain his Illinois residency. That in itself enogh to determine his resident state.
Thanks, Jainen.

[jainen]

We see it

>>enogh to determine his resident state<<

We see it all the time here in California where the tax rate is 9.3%. Two of our neighbors, Nevada and Washington, have no tax at all.

The clients claim to have "retired" in Seattle or gone into "business" with a Nevada corporation. But they still love the rich cultural life of the Bay Area or the great medical facilities or the big customer base in L.A. or the property value growth.

Practitioners here have to include CPE courses on non-resident issues just to stay competent.

[gkaiseril]

It is the Tax Residence

The point is the tax payer’s “tax residence” determines how the individual is treated by the states. In Illinois your tax payer could be a resident or a non-resident. But since he has personal property, homestead and voter registration, he has chosen to be an Illinois resident. This means he files an Illinois state Income tax return as a resident. Now if Florida had an income tax, which it does not, he would be eligible to get a credit on his Illinois return for the income taxes paid to another state or municipality.
As noted by others, this is seen all time. In fact I know of 2 couples that have homes in Florida and another state with income tax and the husbands work in Maine and the wives are either retired or work in Florida. They file their federal returns as MFJ and the state returns MFS, the husbands paying state income tax to Maine and the wives paying the Florida intangible tax if necessary.

Check the residency requirements for Florida, I believe one has to reside in the state for 6 months, and see if you client is agreeable to becoming a Florida resident. Florida is also a lot nicer to older drivers than Illinois is.

Recent U.S. Tax Court rulings have established that it is possible that a taxpayer my not have a tax residence other than the U.S. when there is no established permanent residence and the taxpayer is then a resident of the state where the income is earned and is not entitled to credits for taxes paid to other states.

[Davc]

Keeping his Illinois residence and returning to it on a regular basis is probably sufficient to demonstrate his Domicile is still Illinois which for most states would mean he's taxed as a resident regardless of any other states involved. I've heard mentioned at CSEA that for CA residents to establish residency elsewhere they'd better sell the CA residence or be renting at FMV, preferably to an unrelated party.