Changing residency, and tax implications

As I have recently moved to Texas, I want to change my official residency to here (as opposed to NC, where my permanent residence was, even while I was going to school elsewhere). I assume that all I have to do to establish residency in Texas is to get a Texas driver’s license. What I’m not sure about is how this will affect my taxes.

I don’t get W2s, so that’s not an issue. However, I do receive income that gets reported on various 1099s (interest income, etc). How do I ensure that these taxes get reported to the proper state (i.e. not NC)? I would rather avoid paying NC taxes on this income, since I’m not living there… do I need to inform my financial institutions that I’m changing my official residence (all my statements, etc, already come to my Texas address)? Or will it all work out by itself?

Are you in the military? (I ask because of the beginning of your user name.) If so, you should go to your personnel office and inquire there. If you are in the military, then you will get W-2 forms every year.

In addition to getting a TX drivers license, you will also likely need to register your car in TX.

You will still need to file a return with NC for 2006 and fill out the applicable portions for a part-year resident. I assume the same will apply for TX, such that you pay a prorated amount to each state based on your time of residence.

As far as reporting your “official residence” to your financial institutions, I can’t think of any such institution asking if my place of residence was anything other than my mailing address, so I think you should be set.

Nah, not in the military. The first part of my user name is also the first part of my actual name :).

Thanks! This all sounds pretty doable…

File a change of address card, inform all of your payers. Register to Vote, asap.

State residency is often a requirement for in-state tuition at colleges and universities. A simple search should help you uncover the answer.

That was my first check. However, I’m not attending school here, and do not need residency for those purposes. This is complicated by the fact that residency requirements for qualifying for in-state tuition are often more stringent than general residency requirements. That certainly seems to be the case here; I can get a drivers license more or less as soon as I move to Texas with the intent of staying, but I wouldn’t count as a resident of Texas until I lived here for 12 months. Clearly there’s a disconnect between the two standards, but I think that for tax purposes, it’s the former, easier standard that must be met, and not the latter, more difficult standard.

Err, “… wouldn’t count as a resident of Texas [for tuition purposes] until I lived here for 12 months”

That’s not the point. State residency has to do with taxes and benefits from those taxes. More often than not, residency has something to do with tuition requirements so they are as good as any. When I checked several of the links, they all talked about 12 months domiciled in the state. Then there is actually living and working in the state for 12 months, obtaining a driver’s license, etc. It seems to me barring any specific residency standard under Texas law, the Texas Education code for residency is probably the best you will find.

Well, there aren’t state income taxes in Texas, so that’s not an issue (it’s more about not paying income taxes in NC). But it doesn’t quite make sense that the 12 months apply universally. Does that mean that every time someone moves to Texas they would be a resident of their old state for 12 months? Despite not actually living there?

I think it’s fairly common for residency requirements with respect to tuition to be stricter than general residency requirements…

If you lived in North Carolina for any part of 2006, I don’t think you can escape paying them some income tax for the year just because you no longer live there on December 31.

From here on the NC government site:

I’m sure more details are available with some more digging there, but I believe the upshot is that you’ll have to file 2006 North Carolina taxes regardless of your “official residence” at the end of the year.

Yeah, I figured I’d pay taxes in NC for 2006. I just want to avoid having to do even a part-year resident filing on '07…

ISTM that the OP is missing something: it’s not his choice, usually, which state is his legal state of residence. The state laws regarding that apply.

I agree, and perhaps I’ve phrased things oddly. Basically, if a 1099 form for 2007 gets sent to the NC Department of Revenue, then won’t they expect some taxes to be paid on it? Certainly if I was residing in one state but receiving W2s from another, I’d have to pay taxes on the wages in the latter state. I just want to make sure that won’t happen now.

You pay taxes where the income is earned, or it should be that way.

After my last interstate move I was required to complete a part-year resident tax form for the state I had left during that tax year. I had to state my income earned while I was a resident of that state. If your new state also requires you to complete a stat tax return, you may end up complete your new state’s part-year form or full year form, depending upon the law.

In any case, you may end up paying taxes to your former state for the income you earned while living there, as well as pay taxes to your new state.

Again, understood. I’m just concerned that NC will think that my 1099 income was “earned” in NC if the banks, etc, report it to the wrong state.

There’s no practical difference between a 1099 & a W2. It’s your responsibility, not the bank’s, to ensure it’s reported correctly when you file your annual tax returns.

Gotcha… I guess I’m just not sure what that entails… just calling the bank and making sure, I suppose…

Unfortunately, this is one of these matters on which you really should consult a tax professional.

State residency for tax purposes may be different that state residency for other purposes, and there may be special rules on how earned and non-earned income are be reported for residents, non-residents and part-year residents.

Any advise you get on this board will be worse than useless. Please consult a tax expert.