The Residency Audit: Why the IRS Is Targeting Athletes Who Claim Florida/Texas Residency

Every year, dozens of professional athletes make the same announcement on social media: a photo at their new Florida or Texas home with a caption like "New beginnings in the Sunshine State" or "Everything's bigger in Texas."

The implication is clear: they've moved to a state with no income tax, and they're about to save millions on their tax bill.

Except many of them haven't actually moved. They bought a house, got a driver's license, and registered to vote. But they still spend 200+ days per year in California or New York. They still have family, homes, and business ties in high-tax states.

And eventually, the IRS and state tax authorities come calling with a simple question: "Prove you actually live there."

What follows is a residency audit; an invasive, document-intensive examination of where you truly reside. The stakes? Millions in back taxes, penalties, and interest if you can't prove you legitimately moved.

I've seen athletes who thought they'd saved $2 million in California taxes end up owing $3 million after penalties and interest when their "move" to Florida was ruled a sham.

Here's what you need to know about residency, why athletes are being targeted, and how to actually establish and prove residency in a no-tax state.

The Tax Savings That Make Athletes Targets

Let's start with why athletes attempt these moves: the tax savings are enormous.

State income tax rates for high earners:

• California: 13.3% (highest in nation)
• New York: 10.9%
• New Jersey: 10.75%
• Oregon: 9.9%
• Minnesota: 9.85%

No-income-tax states:

• Florida: 0%
• Texas: 0%
• Nevada: 0%
• Washington: 0%
• Tennessee: 0%
• Wyoming: 0%
• South Dakota: 0%

The math for a high-earning athlete:

An NBA player earning $10 million annually playing for the Lakers:

California resident:

• State income tax: $10M × 13.3% = $1,330,000 annually
• Over 5-year contract: $6,650,000 in state taxes

Florida resident:

• State income tax: $10M × 0% = $0 annually
• Over 5-year contract: $0 in state taxes

Tax savings from moving to Florida: $6.65 million

That's life-changing money. It's why athletes hire advisors, establish Florida residency, and believe they've solved their tax problem.

But here's the catch: California, New York, and other high-tax states are hyper-aggressive about challenging these moves. They know exactly what athletes are doing, and they have entire departments dedicated to auditing high-income residents who claim they've left.

Why Athletes Are Specifically Targeted

State tax authorities target professional athletes for several reasons:

1. High-Value Targets

Athletes earn millions in concentrated periods. A single successful residency challenge can generate $1-3 million in recovered taxes, penalties, and interest for the state.

Compare that to auditing a doctor earning $400,000, the potential recovery is $50,000-$100,000. States deploy resources where returns are highest.

2. Public Records Make Audits Easy

Unlike executives or business owners, athletes' whereabouts are public information:

• Team schedules are published (you're at practice, games, team events)
• Social media posts are geotagged (posting from LA repeatedly undermines Florida residency claims)
• Media appearances are documented (interviews, endorsement events, public appearances)
• Property records are public (still own California home? Still a resident)

Tax authorities can build an entire case without interviewing you, just by reviewing public information.

3. Common Mistake Patterns

Athletes make predictable mistakes:

• Claiming Florida residency while spending 8 months in California
• Keeping family, homes, and businesses in high-tax states
• Maintaining gym memberships, country clubs, and doctors in old state
• Posting Instagram stories that prove they're not where they claim to be

These patterns are easy to spot and easy to challenge.

4. Political and Revenue Pressure

High-tax states are bleeding wealthy residents. California lost hundreds of billions in wealth to Florida and Texas from 2020-2024. States are under political and budgetary pressure to fight back.

Auditing high-profile athletes who claim to have left sends a message: "We're watching. If you claim you left, you better prove it."

What "Residency" Actually Means (It's Not Just Buying a House)

This is where most athletes get it wrong. They think residency is:

• Buying a house in Florida 
• Getting a Florida driver's license 
• Registering to vote in Florida 
• Registering cars in Florida

Those are helpful, but they're not sufficient. Legal residency is about where you actually live, where your life is centered.

The Legal Tests for Residency

States use different tests, but they generally focus on:

1. Domicile Test

Your domicile is your permanent home, the place you intend to return to when you're away. You can only have one domicile at a time.

Factors that determine domicile:

• Where you spend the most time
• Where your spouse and children live
• Where you own a home (especially your primary residence)
• Where you maintain professional and social ties
• Where you're registered to vote
• Where you hold a driver's license
• Your stated intent to make this your permanent home

2. Statutory Residency Test

Some states (like New York) have bright-line tests: if you maintain a "permanent place of abode" in the state AND spend more than 183 days there during the tax year, you're a statutory resident—period.

Even if you claim Florida domicile, if you spend 184 days in New York with access to a home (owned, rented, or even staying with family), you're a New York resident for tax purposes.

**3. Day-Counting Rules

Most states count any part of a day as a full day for residency purposes.

Fly into California Monday morning, leave Tuesday night? That's 2 days, not 1.5.

This is where athletes underestimate their time in high-tax states. "I was only there for games and practice" still means 100+ days if you're not careful.

The California Residency Audit: The Most Aggressive in the Nation

California is notorious for challenging residency changes. The state's Franchise Tax Board (FTB) has a dedicated unit that audits high-income individuals who claim to have left.

How California Challenges Your Move

1. They presume you're still a resident

In California audits, the burden of proof is on YOU to prove you left. California assumes you're still a resident until you prove otherwise.

2. They scrutinize every tie to California

California will examine:

• Property ownership (do you still own a home in California?)
• Family location (does your spouse or kids still live there?)
• Business ties (do you own businesses based in California?)
• Professional affiliations (California CPA, attorney, doctor?)
• Club memberships (country club, gym, social clubs in California?)
• Bank accounts (California-based banks?)
• Storage units (personal belongings stored in California?)
• Vehicles registered in California
• California professionals (accountant, attorney, financial advisor based in CA?)

Even seemingly minor ties can undermine your residency claim.

Real audit example:

An athlete claimed Florida residency but:

• Kept a home in Malibu (claimed it was "just for investment")
• His wife and children remained in California (kids in California schools)
• He maintained his California doctor, dentist, and personal trainer
• He had a California gym membership he used regularly
• Social media showed him at California restaurants, beaches, and events 150+ days per year

California's position: He never actually left. His "permanent home" remained California. His family, social life, and daily activities were centered in California. The Florida home was a vacation property.

Result: He owed California taxes on 100% of his income, plus penalties and interest. Total bill: $4.2 million.

3. They use social media against you

Tax auditors now routinely review Instagram, Twitter, and Facebook posts. Every geotagged post, every photo at a recognizable location, every story showing you at your "old" home gets documented.

Example:

Athlete claims he moved to Texas January 1, 2024, and spent the entire year there.

Auditors find:

• 47 Instagram posts geotagged in Los Angeles
• 23 posts showing him at his California home
• Multiple posts at California restaurants, beaches, and events
• A Father's Day post at his "California house"

California's argument: Your own social media proves you spent significant time in California and maintained your California home as a residence.

4. They count every day

California demands day-by-day accounting of where you were. They'll cross-reference:

• Credit card statements (purchases in California?)
• Airline records (flights into California?)
• Hotel records (stayed in California?)
• EZ-Pass/toll records (car driving in California?)
• Cell phone location data (pinging California towers?)

If you can't document where you were every single day, California assumes you were in California.

The New York "Convenience of the Employer" Rule

New York has an additional trap that catches remote workers and athletes: the "convenience of the employer" rule.

The rule:

If you work remotely from another state for your own convenience (not your employer's necessity), New York still taxes that income as if you worked in New York.

How this affects athletes:

If you play for a New York team but claim Florida residency, New York may argue:

• You're assigned to work in New York (team is based there)
• Working remotely (training in Florida during off-season) is for your convenience
• Therefore, all your income is New York-sourced

This is particularly aggressive and has been challenged in court, but New York continues to apply it.

Recent case:

A professional athlete played for a New York team but established Tennessee residency (0% state tax). He lived in Tennessee during the off-season and trained there.

New York argued that because his employer (the team) was based in New York, his off-season training in Tennessee was for his convenience, not the team's necessity. Therefore, 100% of his income was New York-sourced.

Result: The athlete ended up in litigation that cost $200,000+ in legal fees and ultimately settled by paying New York taxes on a portion of income.

How to Actually Establish Residency (And Prove It)

If you're serious about moving to a no-tax state, here's what you actually need to do:

Step 1: Cut Ties with Your Old State (The Hardest Part)

You can't establish residency in a new state until you abandon residency in your old state. That means:

Sell your old home (or rent it out and don't use it personally)

Keeping a home in your old state even as an "investment" creates a presumption you're still a resident.

If you must keep it, rent it to a third party under a legitimate lease and do NOT stay there. Even one night per year in your old home can destroy your residency claim.

Move your spouse and children

If your family stays in California while you claim Florida residency, states will argue your domicile remains where your family lives.

This is the deal-breaker for many athletes. They want tax savings but don't want to uproot kids from schools or spouses from social networks.

You can't have it both ways. If your family stays, you're likely still a resident.

Close or transfer professional relationships

Switch to professionals in your new state:

• Doctor, dentist, specialists
• CPA and financial advisors (or ensure they operate in your new state)
• Attorney
• Personal trainer, physical therapist

Every California-based professional you maintain is evidence you haven't truly left.

Cancel memberships and affiliations

• Gym memberships in old state
• Country club memberships
• Social club memberships
• Professional organization memberships tied to old state

Close old state bank accounts

Open new accounts at banks in your new state. Having California bank accounts suggests ongoing California business activity.

Move your business

If you own businesses (LLCs, S-Corps), consider:

• Redomiciling them to your new state
• Opening new entities in your new state
• Moving operational headquarters

Maintaining California-based businesses undermines residency claims.

Step 2: Establish Clear Ties to Your New State

Buy or rent a home (and actually live there)

Your new home should be:

• Your primary residence (largest, most valuable home)
• Where you spend the most time
• Fully furnished and functional (not a bare investment property)

Get a driver's license and register to vote

Do this immediately after moving. Keep your old license and voter registration as proof of when you changed.

Register vehicles in new state

All vehicles should be registered and insured in your new state.

Update all legal documents

• Estate planning documents (will, trusts, powers of attorney)
• Contracts and agreements
• Professional licenses
• Passport (update address)

Establish professional and social ties

• Open bank accounts
• Find doctors, dentists, specialists
• Join local gym, country club, or social organizations
• Attend local events and build community ties

File a Declaration of Domicile

In Florida, file a formal "Declaration of Domicile" with the county clerk. This is a sworn statement that you intend Florida to be your permanent home.

While not conclusive, it's evidence of your intent.

Step 3: Document Everything

Keep a detailed day-by-day log

Track every single day of the year:

• Where you woke up
• Where you slept
• Travel (flights, hotels, car rentals)
• Purpose of travel (work, personal, family)

This seems excessive, but in a residency audit, you'll need this documentation.

Save all supporting documentation

• Credit card statements
• Bank statements
• Utility bills (showing usage at new home)
• Cell phone bills (showing location data)
• Receipts for purchases in new state
• Medical records (doctor visits in new state)
• Gym check-in records
• Country club or social club usage logs

Be mindful of social media

• Turn off geotags on posts
• Be careful posting recognizable locations in your old state
• Don't post photos at your old home (even visiting)

Every post is evidence in a potential audit.

Step 4: Manage Your Time Carefully

The 183-day rule:

Many states use 183 days as a bright-line test. If you're in the state for 183+ days, you're a resident.

Therefore, you must:

• Spend fewer than 183 days in your old state
• Spend more than 183 days in your new state (ideally)
• Track days meticulously

Day-counting rules:

• Any part of a day counts as a full day
• Travel days often count toward the departure state (if you leave at 11 PM, that's still a full day)
• Be conservative in your counts

Strategy:

Spend significantly more than 183 days in your new state, aim for 250+ days. The more lopsided the split, the stronger your case.

Step 5: File a Final Return with Your Old State

When you move, file a part-year resident return with your old state showing:

• Income earned while a resident (January 1 - move date)
• Declaration that you're no longer a resident after [date]

This puts the state on notice that you've left and starts the clock on any challenges.

What Happens in a Residency Audit

If you're audited, here's what to expect:

1. Information Document Request (IDR)

The state will send a massive document request asking for:

• Complete day-by-day log of your whereabouts
• Credit card statements
• Bank statements
• Travel records (flights, hotels, car rentals)
• Cell phone records
• Social media posts
• Property records
• Professional affiliation documentation
• Medical records
• Utility bills
• Vehicle registration
• Insurance policies
• Family information (where spouse and children live)
• Business records

You'll have 30-60 days to respond. Failure to respond or incomplete responses result in presumptions against you.

2. Analysis of Your Ties

The auditor will analyze:

• Days spent in each state
• Strength of ties to old state vs. new state
• Family location
• Business location
• Professional and social activities
• Property ownership

They're building a case for where your "domicile" truly is.

3. Proposed Assessment

If the auditor concludes you remained a resident, they'll issue a proposed assessment:

• Back taxes on all income (as if you never left)
• Penalties (20-40% of tax owed)
• Interest (accruing from original due date)

Example:

Athlete claimed Florida residency in 2022, 2023, 2024. Earned $15 million over 3 years. Paid $0 in California taxes.

California audit in 2025 concludes he remained a California resident.

Assessment:

• Back taxes: $15M × 13.3% = $1,995,000
• Penalties (25%): $498,750
• Interest (3 years at ~6%): $360,000
• Total owed: $2,853,750

4. Appeal Process

You can appeal, but you'll need:

• An experienced tax attorney (specializing in residency disputes)
• Strong documentation proving you actually moved
• Potentially expert witnesses

Appeals take 1-3 years and cost $100,000-$500,000 in legal fees.

5. Settlement or Litigation

Most cases settle. The state agrees you were a resident for part of the year, you pay some taxes, and both sides move on.

But if you can't settle, you end up in tax court; an expensive, multi-year battle.

Real-World Horror Stories

Case 1: The Instagram Influencer Athlete

A professional athlete claimed he moved to Nevada (0% tax) in 2022. He bought a Las Vegas home, got a Nevada driver's license, and filed Nevada tax returns.

California audited in 2024.

What California found:

• His Instagram showed him in California 200+ days per year
• He posted constantly from his Malibu home
• His wife and kids remained in California (kids in California schools)
• He maintained a California gym membership and personal trainer
• Credit card records showed California purchases 250+ days

California's position: He never actually moved. Nevada was a second home. His life remained centered in California.

Result: He owed California $3.2 million in back taxes, penalties, and interest.

Case 2: The Family Man

NFL player signed with a Texas team and claimed Texas residency (0% tax).

His wife and three children remained in New Jersey (his home state) because:

• Kids were in school
• Wife's family was in New Jersey
• They didn't want to disrupt the children

He lived in Texas during the season but returned to New Jersey during the off-season (5 months).

New Jersey audited.

New Jersey's position: His domicile remained New Jersey. His permanent home where his family lived was New Jersey. Texas was temporary for work.

Result: New Jersey assessed taxes on 100% of his income as a New Jersey resident. He owed $1.8 million in back taxes and penalties.

Case 3: The Business Owner

An NBA player moved to Florida but maintained multiple businesses in California:

• A training facility in Los Angeles
• An investment LLC based in California
• A media production company in California

He visited California regularly to manage these businesses (100+ days per year).

California audited.

California's position: His businesses were in California. He spent significant time in California managing them. His economic and professional life remained centered in California.

Result: California taxed him as a resident. He ultimately settled for 70% of assessed taxes, still over $2 million.

How to Survive a Residency Audit

If you're audited, here's how to survive:

1. Hire a Specialist Immediately

Don't use your regular CPA. You need:

• A tax attorney specializing in residency disputes
• Someone who has defended residency audits in your specific states
• Experience with high-net-worth individuals and athletes

This will cost $50,000-$300,000, but it's worth it when millions are at stake.

2. Gather All Documentation

Pull together:

• Complete day-by-day logs
• Travel records
• Credit card and bank statements
• Utility bills
• Medical records
• Everything proving you lived in your new state

The more documentation, the better.

3. Be Honest About Weaknesses

Don't lie or hide information. If you spent more time in your old state than you thought, acknowledge it.

Your attorney can work with facts. They can't work with lies that unravel during the audit.

4. Consider Settlement

If your case is weak (you genuinely spent significant time in your old state), consider settling:

• Agree you were a part-year resident
• Pay some taxes
• Avoid penalties and interest through cooperation

Settlement beats a multi-year court battle you'll likely lose.

5. Fix It Going Forward

If you lose the audit, fix your residency going forward:

• Actually move (cut all ties, move family, spend 250+ days in new state)
• Or accept that you're still a resident and pay the taxes

Don't keep pretending you've moved when you haven't. The next audit will be worse.

The Bottom Line

Moving to a no-tax state can save athletes millions, but only if you actually move.