Traveling between states for work or leisure is exciting, but it can impact your tax liability in each state. Most US states have a threshold for the number of days you are allowed to stay within their state without paying taxes. If you conduct business as a resident of a state different from your home state residence, there may be tax conditions and benefits. The same goes for owning or renting property outside your domicile location – which, comes with the risk of double taxation. What’s worse is that filing multistate residency taxes can be excruciating if you aren’t able to accurately recall the exact amount of time spent in each state for tax purposes.
Track Your Residency Tax Obligations
While having an accurate log of taxable days is essential to the smooth tax filing of a multistate resident or someone doing business in various states, it is not an easy task. Being diligent in logging your travel days per state per annum, can be a full-time job; and incorrect declarations can get you into hot water with the IRS.
Certain rules exist for determining your residency start and end dates. These differ per state and if you travel to various states per year, this can become complicated, fast. Using software that can help you track your residency days per state might help you keep a more accurate record of your days per state and aid a smoother, less complicated tax filing process.
Monaeo residency management software
In the event of an audit, the burden of proof is on the taxpayer. This means that if you travel across multiple states, the onus is on you to prove to the IRS that you aren’t liable for taxes in that state. To be able to do this you would need detailed logbooks and data that prove your location within a state to fall under the taxable bracket within that state. Manual methods fall short in that it requires constant human updating, which makes them unreliable. It is better for frequently traveling individuals to tap into the powers of residency management software, like Monaeo. Monaeo.com is designed to give you accurate data, that allows you to plan your travels and ensure tax compliance throughout the tax year. The app works in the background to log your travel time across states, in the following ways:
1. Monaeo makes use of private location capture
Once you sign up, Monaeo uses a combination of location technologies such as GPS, cell tower triangulation, and WiFi positioning to automatically and privately track your location. The information is encrypted and transmitted to secure enterprise-grade servers, leaving minimal data on the mobile device.
2. Automatic day counting
Monaeo software enables proactive planning as it transforms captured data into a real-time tally of your travel days per state. The software will prompt you to input whether your time in a specific state falls into the “work” or “personal” category. These can be changed to suit your lifestyle. The app tracks your location and other data that serve as crucial evidence to defend yourself in the event of a residency or allocation tax audit.
3. Get real-time alerts and audit-ready reports
Monaeo sends an alert when you are close to the statutory threshold in a state. You can also access a real-time count of days spent within different states from your device. This data can directly be sent off to your CPA for analysis in the event of a tax audit or when submitting residency taxes. The app offers a calendar display of your annual travels, giving you access to details on specific trips gone. It also offers warning alerts when the threshold timeframe is approaching.
Monaeo’s prominent features at a glance:
- Provides automated travel logging and recordkeeping of travel per state.
- Gives you early alerts when approaching residency thresholds.
- Provides location reports that can be accessed for years after the travel
- Offers data security
Keeping track of the time you spend in other states is imperative to filing accurate tax returns. Unreliable data can put you at risk of investigation and multistate tax penalties. If you travel between states, it is advisable to consult with an expert. This can help you manage your tax portfolio for savings and to avoid run-ins with the IRS. 
Fusion CPAs are equipped to help individuals and entities with multistate taxes. We offer financial planning, tax preparation, bookkeeping, and software solutions. With our outsourced accounting and tax services, you will know the economic outcomes and implications of traveling between states. You will also have a strategic plan around reaching the residency threshold in more than one state per annum.
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This blog article does not render legal, accounting, tax advice, or other professional services. It reflects current or proposed tax rules at the time of writing. Older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog. The same goes for the use or interpretation thereof. This website does not include all information, and you should not rely on it as comprehensive.
