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Washington DC part-year residency

Technical topics regarding tax preparation.
#1
Erin_EA  
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Does anyone have experience in representing taxpayers before the Washington DC Department of Revenue? I'm working with a client under audit for allocation of income during his part-year residency in 2018. I would love to pick the brain of anyone who has worked on this sort of thing before.
 

#2
Dennis2  
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DC does not recognize part year residence.
 

#3
sjrcpa  
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Maryland
Yes they do.
But they are terrible to deal with.
 

#4
Erin_EA  
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The client moved in June, so he spent more than 50% of his calendar days in DC. Would that kick him into a statutory residency status?
 

#5
sjrcpa  
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Prior to 2018 client was DC resident? And then moved out of DC in June 2018?
What are the issues you are having with the auditor about allocation of income?
Maybe I'll have a brilliant (or not) suggestion.
I butt heads with them regularly.
 

#6
Erin_EA  
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It's kind of you to take interest in my issue; thanks. Taxpayer lived in VA until moving to DC in mid-June. We prepared an allocation schedule showing each form of income and amounts assigned to DC and VA, respectively. Tied out to federal AGI to the dollar. Where info is available, we allocated the exact amount. For income where the info is unavailable (i.e. trust K-1 or capital gains on an investment account, etc), we used a pro-rated approach (#of days as a percentage of 365, times the income). We are wondering if the auditor will accept our pro-rated approach, or, in the absence of documentation, will force us to consider 100% taxable to DC. Is there precedent for a pro-rated approach? Any reciprocity with VA that could work in our favor? Thanks.
 

#7
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Chicago, IL
You may want to find out when DC considers K-1 income to be earned. For Illinois it is on the last day of the PTE's tax year. So for calendar year filers, all income is considered earned on 12/31/xx and not ratable throughout the year, nor tied to quarterly (or other scheduled) distributions.

From IL K-1 Instructions:
When is pass-through entity income earned?

Pass-through entity income is considered earned on the last day of the pass-through entity’s taxable year. Pass-through entity income is not considered received equally throughout the year. The pass-through entity’s tax year ending date is listed in the upper right corner of the Schedule K-1-P you received.


As far as capital gains and other investment income, I'd turn to the consolidated 1099 which lists all of the stock sales. It should also list the dates of when interest, dividends, and capital gain distributions were actually paid. You can be the auditor is going to want to see that info, so you may as well be prepared.
 

#8
sjrcpa  
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Pro rata allocation would only work where there is no other evidence (such as detailed 1099) or law (such as when K-1 income is treated as earned).
Although it sounds like the audit is just starting and you have no issues, yet.
 


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