Wealthy Install Location-Tracking Apps to Establish Proof-of-Residency for Tax Purposes

The New York Times shares the dilemma of Jeff Sheu, managing director of a private equity firm, who is 'exactly the type of high earner California does not want to lose. When people in his tax bracket leave, the state is likely to audit them to make sure they really have left.'

But fortunately, there's an app for that:

With the May 17 tax filing deadline approaching, people who have moved to another state or are working more remotely need to be extra vigilant with their tax documents. For Mr. Sheu, that involves an app on his smartphone that uses location services to track him all the time. What he is sacrificing in privacy, he is gaining in peace of mind, knowing he will be able to show exactly when and where he was in a particular state, should California's tax authority come after him... 'I'm never apart from my phone,' Mr. Sheu said... 'It feels to me like a pretty undebatable way to track where I am....'

Tax apps like TaxBird — which Mr. Sheu uses — and TaxDay and Monaeo were created years ago... 'We've seen a fourfold increase in our app without any advertising in the past year,' said Jonathan Mariner, founder and president of TaxDay, who was himself audited when he worked for Major League Baseball in New York but lived in Florida. 'When people are concerned about privacy, I say you probably have a dozen apps on your phone that are tracking you, and you don't even know it....' Monaeo makes a point of describing how the data is cataloged — city, state and country, but without specific locations. It also says upfront that it does not share any data. (All three of the apps are vigilant about that.) While each tax app has different levels of precision and features to upload supporting documents, they all fulfill the basic need to prove your location to a tax authority. When it comes time to file taxes, users download reports detailing where they worked with varying degrees of specificity, from a simple day count to more detailed location information...

With hundreds of millions of dollars at stake, states in need of revenue are not going to let the money go without a fight. 'This has the potential to become as messy as you can envision it,' said Dustin Grizzle, a tax partner at MGO, an accounting firm. 'States are going to say, 'Hey you're just using Covid to give you the ability to work remotely.''

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