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, 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. And with resuming, he could live somewhere he liked as long as he could get on a plane for work. “I love California, but over Mr. Sheu. He was born and and attended the University of California, Berkeley. “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. However, given the state Mr. Sheu had left and the high compensation from his work, he was concerned that his departure would not go smoothly. As the managing director of a private equity firm, he is precisely the type of high-earner California does not want to lose. When people in his tax bracket leave, the state will likely audit them to ensure they have left.
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; for Mr. Sheu, that involves an see big taxpayers leave. Enter the need to track meticulously where you are all the time.to 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
“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 traveling for work). “Then there’s tracking your days. You can use Excel, but if I get an inquiry from the tax board, it’s just in Excel. work wherever they want to live.. But I’m never apart from my phone. It feels like a pretty undebatable way to track where I am.” Tax which Mr. Sheu uses — and TaxDay and Monaeo were created years ago with a different purpose: to help largely affluent retirees avoid a tax burden when they returned to their second home in a high-tax state. But since the pandemic sent people home and freed them from being in an office, these apps have become relevant for professionals who want to
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. Monaeo 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 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.”
“Over the past year, it’s becoming a contentious issue between states,” said Chester Spatt, professor ofat 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 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.’”
At the center of the discussion is a magic number: 183 days — issue will be where their employer says their office is. David R. Cohen, a lawyer focused on , had been traveling from his home in Ohio for decades. , 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., 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 extended these tax debates to middle-income earners who would like to live elsewhere. Residency is something you must declare; it is not something you can establish by traveling. For many workers, the
“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 in front of the . The central question: Where are cannot enter an office in another state?
When the pandemic started, Massachusetts issued guidance saying if you normallyin 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 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 gave their approval. That will make remote-worker taxation more complex.”