This article is part of our new series, Currents, which examines how rapid technological advances transform our lives. Two months ago, Jeff Sheu, a private equity executive, moved from San Francisco, where he had lived for close to 20 years, to Summerlin, a Las Vegas suburb. , he realized he no longer needed to be in a city where the property was expensive, taxes were high, and his quality of life, now that he was married with a small child, had changed.
“I love California, but overgot exorbitantly high,” said Mr. Sheu. He was born and and attended the University of California, Berkeley. And with vaccinations available and business travel resuming, he could live somewhere he liked as long as he could get on a plane for work. “I grew apart from California.”.
for more space in the suburbs is a common goal. It often marks a maturation point for Americans with young children, who value well-regarded schools over a nightlife scene. But given the state Mr. Sheu had left and the high compensation from his work, he was concerned that his departure would not go smoothly.
With the May 17 tax filing deadline approaching, people who have moved to another state or are working more remotely must be extra vigilant with their tax documents. As the managing director of a private equity firm, he is precisely the type of high-earner California does not want to lose. When, the state will likely audit them to make sure they have left.
For Mr. Sheu, that involves anto track him all the time. What he is sacrificing in privacy, he is gaining peace of mind, knowing he will be able to show exactly when and where he was in a particular state, should California’s tax authority come after him. Tax-starved conditions are none too happy to taxpayers leave. Enter the need to track meticulously where you are all the time.
“As part of the move, there’s a checklist of things to do, like changing your voter registration,” Mr. Sheu said from Atlanta (having been in Tampa, Fla., and Philadelphia in the previous 36 hours, when he had been traveling for work). “Then there’s tracking your days. You can use Excel, but if it’s just in Excel, I get an inquiry from the tax board; they could argue I fat-fingered. But I’m never apart from my phone. It feels like a pretty undebatable way to track where I am.”
Tax apps like TaxBird — which Mr. Sheu uses — and TaxDay and Monaco were created years ago with a different purpose: to help predominantly affluent retirees avoid areturn to their second home in a high-tax state. But since the pandemic and, in the process, freed them from being in an office, these apps have become relevant for professionals who want to work wherever they want to live.
These apps operate on a subscription model and are modestly priced. TaxBird, for example, costs $34.99 a year. After a free 90-day trial, TaxDay charges users $9.99 a month. Monaco is geared more toward high earners and offers more options for its service, charging $99 a month or $999 a year.
“We’ve seen a fourfold increase in our app without any advertising in the past year,” said Jonathan Mariner, founder and president of TaxDay, who was himself audited when he worked for Major League Baseball in New York but lived in Florida. “When people are concerned about privacy, I say you probably have a dozen apps on your phone tracking you, and you don’t even know it.”
While each taxdocuments, they all fulfill the basic need to prove your location to a tax authority. When it to file taxes, users download reports detailing where they worked with varying degrees of specificity, from a simple day count to more detailed location information.
“Over the past year, it’s becoming a contentious issue between states,” said Chester Spatt, professor of finance at the Tepper School of Business at Carnegie Mellon University. “What does it mean to have your employment be in another state in the virtual world? In the physical office world, it was easy.”
With hundreds of millions of dollars at stake, states needing revenue will not let the money go without a fight. “This has the potential to become as messy as you can envision it,” said Dustin Grizzle, a tax partner at MGO, an accounting firm. “States are going to say, ‘Hey, you’re just using Covid to give you the ability to work remotely.'”
The center of the discussion is a magic number: 183 days — half of the year, plus a day — the amount of time most states use to determine if a person has been elsewhere for tax purposes. (There are exceptions: Ohio requires residents to live outside the state for only five months.) One thing is clear: the pandemic has, in fact, extended these types of tax debates to middle-income earners who would like to live somewhere else.
ResHowever, you must declare residency; it is not something you can establish by traveling. For many workers, the issue will be where their employer says their office is. David R. Cohen, a lawyer focused on, traveled from his home in Ohio for decades. During the pandemic, he rented a place in Naples, Fla., with his wife and realized there was no reason to return to Cleveland in the winter.
After renting, he bought a house in Naples a few months ago. “Covid proved everyone could work remotely,” said Mr. Cohen, who uses TaxBird. “At that point, I began to think about residency down here.” His incentives went well beyond the weather: He reasoned that most of his cases involved multiple jurisdictions, so he was either traveling oranyway.
That kind of shift has some states worried. A tax dispute between New Hampshire and Massachusetts could end up in the working for tax purposes when they cannot enter an office in another state?. The central question: Where are people
When the pandemic started, Massachusetts issued guidance saying if you usually worked in an office in that state, you would have to continue paying income tax there, even if you were working from home. New Hampshire challenged this by filing a lawsuit.
“There’s a strong argument that the pandemic should change things,” said Eric Bronnenkant, head of tax at Betterment, the financial advising app. “But one of the things I’m concerned about is if the Supreme Court comes down on the side of Massachusetts, other states will say the Supreme Court gave their approval. That will make remote-worker taxation more complex.”