Currently, I am a resident of Missouri, and work for a Tennessee based company, with a local office in Missouri. My firm also has a local office in Arizona. Beginning this year, I will be living in Arizona for 5 to 7 months per year. I will be telecommuting from Arizona while residing there. I can setup my payroll to withhold either Arizona or Missouri taxes. Currently, I own a home in Missouri and have a 12-month lease for a home in Arizona. Should I pay Arizona income tax, while physically in Arizona and pay Missouri income tax while physically in Missouri? How would it affect my taxes, if I change driver's license and voter registration from Missouri to Arizona? Also, would it affect my taxes if I spent 183 or more days in Arizona?

ANSWER

The BIDaWIZ Team's Answer:

We need to gain a better understanding as to your long-term plans for maintaining a residence in Arizona. If your plans are to live there for 5-7 months only this year, then you can file a Arizona Form 140NR and report only your income sourced from Arizona during the 5-7 month period. This is supported by Arizona procedure ITP 92-1 and Arizona Revenue Statutes (A.R.S.) Section 43-104. You would continue to File as a resident in Missouri and you can actually claim a withholding tax exemption so that your employer only withholds a pro-rata share of taxes via Form MO-W-4C. In this way, withholding tax will be based on the pro-rate income generated from Arizona sources and Missouri. This may be meaningful to you as Missouri state tax rate is higher than Arizona.

Given that you're spending more than 30 days in Missouri and a permanent abode there as you domicile there, you would still be a Missouri Resident. However, if you plan to move to Arizona and change your domicile, "The place an individual intends to be his/her permanent home; a place that he/she intends to return whenever absent. A domicile, once established, continues until the individual moves to a new location with the true intention of making his/her permanent home there. An individual can only have one domicile at a time," then it's possible you can file a part-year Missouri return next year and then end your filing requirements thereafter. The more than 183 days spent in Arizona would be a factor if you plan to move there.

References: Arizona Revenue Statutes (A.R.S.) Section 43-104
State: Arizona, Missouri