Owning a second home, especially in retirement, isn't unusual. Others may not want the responsibility of owning a second home and instead rent homes in Arizona to escape winter.

What many don't realize is that, even if their residency remains in another state, they may still be on the hook for paying taxes in Arizona.

That someone owns a home or spends a significant amount of time in the state doesn't automatically make them a resident for tax purposes. Instead, the Arizona Department of Revenue looks at a taxpayer's domicile and other physical presence tests.

Domicile refers to where someone makes their home. This is less about physical location and more about intent. If Arizona can show that an individual intended to make Arizona their home, that may make that individual an Arizona resident for tax purposes.

For the physical presence test, if a taxpayer spends more than 183 days in one year in Arizona, they may be considered a resident.

Snowbirds and Arizona Back Taxes

If the Arizona Department of Revenue can show that a snowbird meets either the domicile or physical presence test, that individual may be liable not only for current and future taxes but also for back taxes.

For example, Jane and Mark live in South Dakota, which doesn't have income tax. They purchased a second home in Arizona after they retired. The couple enjoys playing golf, and what was supposed to be their home for two or three months every winter is becoming more and more their primary residence. Two years ago, they spent eight months in Arizona. When the Arizona Department of Revenue notices this, the department claims that the couple owes income taxes for that tax year.

Renting won't necessarily prevent Arizona from pursuing a taxpayer for taxes. Renters can be full-time residents. If the Department of Revenue believes and can show that an individual is living in the state, renting isn't an automatic defense against paying Arizona income taxes.

Call an Experienced IRS and AZDOR Tax Attorney for Help

If you have questions about Arizona residency audits, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.