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Old 03-14-2013, 12:09 PM   #1
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To Change Domicile or Not? Need Your Experience

My family is getting ready for an RV full-time adventure . We plan to be on the road for about 15 months (a grand adventure with our kids), but recognize it could stretch into two to four years. We currently live in Colorado. We plan to switch our domicile to SD for several reasons -- we like SD and have traveled there before and could see it being home someday, RV tax and license is favorable, and reputable mail forwarding services are available. We have already started working with America's Mailbox (great people!).

However, we are wondering if we really only full-time for 15 months and end up coming back to Colorado, if it is worth changing domicile if we end up changing it back to Colorado. At this point, I guess our chances of stopping after 15 months as well as returning to Colorado is 50% -- even money.

Thoughts on changing domicile?
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Old 03-14-2013, 12:41 PM   #2
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All I can tell you is that the SD domicile and Americas-Mailbox works for us.

FWIW, Only you are aware of you own situation and only you can analyze it. My advice would be to sit down with a piece of paper and label two columns at the top of the page, "Advantages" and "Disadvantages". Then gather the family around the table and get everyone's input to determine what goes into each column and then write each item down. When everyone has had their say you can weigh the two columns against each other and make and educated decision.
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Old 03-14-2013, 12:53 PM   #3
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Thanks Craig - changing domcile to SD looks like a good decision. If we change back in a year or two, i hope it is as easy.
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Old 03-14-2013, 01:02 PM   #4
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I would have one major concern about changing domicile and then returning to Colorado. Some states take a change and then a subsequent return as being indicative of never having changed domiciles, and therefore, owing back taxes, penalties and interest. It all depends on how agressive the state wants to be.
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Old 03-14-2013, 01:27 PM   #5
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We have kept the state of origin for voting (request your absentee ballot in person-to be sent to S.D. address before you leave). Our drivers licenses stayed in state too. If you own a home your taxes have to be kept up.
The 17,000 new IRS agents ARE busy bees these days...we are not doing an LLC or avoiding taxes.
We too have a PMB at America's Mailbox and they are very helpful; and our CPA keeps us on track, but we may eventually become citizens of S.D. afterall.
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Old 03-14-2013, 01:54 PM   #6
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Originally Posted by wnytaxman View Post
I would have one major concern about changing domicile and then returning to Colorado. Some states take a change and then a subsequent return as being indicative of never having changed domiciles, and therefore, owing back taxes, penalties and interest. It all depends on how agressive the state wants to be.
I think the key to establishing legal domicile is to sever all financial, political and professional ties with your previous home state. Not only do you register and insure your vehicles in you new state, but you also register to vote there too. You make sure to establish your new mailing address before you leave your original state and file that change with the USPS, Credit Card companies, Medical Insurance and any other organizations that could link you back to your original home.

We did all of this about a month before we even sold our home and I officially retired. Once the home was sold we officially became SD residents in less than 60 days. We could have done it sooner but we had to wait for titles to our vehicles to come through.
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Old 03-14-2013, 02:07 PM   #7
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I think the key to establishing legal domicile is to sever all financial, political and professional ties with your previous home state. Not only do you register and insure your vehicles in you new state, but you also register to vote there too. You make sure to establish your new mailing address before you leave your original state and file that change with the USPS, Credit Card companies, Medical Insurance and any other organizations that could link you back to your original home.

We did all of this about a month before we even sold our home and I officially retired. Once the home was sold we officially became SD residents in less than 60 days. We could have done it sooner but we had to wait for titles to our vehicles to come through.
Craig,

The problem the OP is going to have is that he plans on keeping some ties to Colorado and with a 50/50 chance of returning to Colorado. Some states, such as NY, MA, CA, and MI, have taken this to mean that there was never an "intent" to leave the state, so therefore resident income taxes are still owed for the intervening periods.

We are currently fighting with NY on just such a situation. The individual left NY over four years ago and established voting, driver's license, auto registration and everything in Florida. He also started a business in Florida while keeping a business being run by his family here in NY. He has filed a non-resident return for years, but due to the success of his Florida business NY wants money as if he had never left. We will probably win, but at what cost? There are times that changing ones residency in the US is akin to getting a Soviet Union permit to travel!
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Old 03-14-2013, 02:40 PM   #8
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I would have one major concern about changing domicile and then returning to Colorado. Some states take a change and then a subsequent return as being indicative of never having changed domiciles, and therefore, owing back taxes, penalties and interest. It all depends on how agressive the state wants to be.
Hi Wyntaxman -- that is my key concern. SD is a logical choice for many people, but if we indeed come back to Colorado, I don't want to get into trouble with Colorado on taxes. I am trying to find a CO tax attorney to talk with about it.
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Old 03-14-2013, 02:42 PM   #9
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Wow -- I don't want that type of attention! Thanks for sharing the story of NYC.
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Old 03-14-2013, 02:44 PM   #10
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Chad,

See if you can find a Colorado tax attorney that is familiar with domicile issues. Perhaps your own accountant will know of one or you may have to do some research. Either way, it is good to do your research ahead of time. To paraphrase the old saying, if the fertilizer hits the ventilator, you don't want to be standing downwind!

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Old 03-14-2013, 02:51 PM   #11
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Chad,

See if you can find a Colorado tax attorney that is familiar with domicile issues. Perhaps your own accountant will know of one or you may have to do some research. Either way, it is good to do your research ahead of time. To paraphrase the old saying, if the fertilizer hits the ventilator, you don't want to be standing downwind!

Ed
Thanks Ed -- definitely want to not be downwind! I have a call into my CPA (busy time of the year to reach CPAs!) who can recommend a tax attorney. I am getting the impression that this is a gray area I do not want to play in. If I knew for sure we were not coming back to CO, it is an easy decision -- but we want to leave the door open for that option. After all, CO is a pretty cool place to both visit and live.
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Old 03-14-2013, 03:01 PM   #12
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Yep Chad, I'm buried too, but sometimes we need a break from the never ending ballad of a tax system out of control!

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Old 03-14-2013, 03:18 PM   #13
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We have kept the state of origin for voting (request your absentee ballot in person-to be sent to S.D. address before you leave). Our drivers licenses stayed in state too. If you own a home your taxes have to be kept up.
The 17,000 new IRS agents ARE busy bees these days...we are not doing an LLC or avoiding taxes.
We too have a PMB at America's Mailbox and they are very helpful; and our CPA keeps us on track, but we may eventually become citizens of S.D. afterall.
Forget the IRS- they couldn't care less what State you choose to register your vehicle in.

But State revenuers are a whole different animal.

The above sounds like a recipe for trouble to me if your home State ever gets wind of the out-of-State registration of your vehicle, which appears to be the only relationship you actually have with South Dakota.
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Old 03-14-2013, 03:47 PM   #14
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Craig,

The problem the OP is going to have is that he plans on keeping some ties to Colorado and with a 50/50 chance of returning to Colorado. Some states, such as NY, MA, CA, and MI, have taken this to mean that there was never an "intent" to leave the state, so therefore resident income taxes are still owed for the intervening periods.

We are currently fighting with NY on just such a situation. The individual left NY over four years ago and established voting, driver's license, auto registration and everything in Florida. He also started a business in Florida while keeping a business being run by his family here in NY. He has filed a non-resident return for years, but due to the success of his Florida business NY wants money as if he had never left. We will probably win, but at what cost? There are times that changing ones residency in the US is akin to getting a Soviet Union permit to travel!
Ed, I didn't see anything in Chad's OP that indicated that he and his family were going to continue to own real estate or run a business during their adventure. I got the impression they were leaving CO with the idea of possibly returning some time in the future.

That is why I stated that if they were going to take up domicile in SD that they really need to cut all financial, professional and political ties to CO back in Post #6. Being as my last two states of residence are on the list you mentioned I am only too aware of the ramifications had I overlooked anything before we left.
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