Drivers License/State ID WARNING

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It used to be that states only went after people for "back-taxes" that were celebrities/pro athletes earning millions of dollars, and claiming residency in another state. Over the last few months, I've noticed a trend on various finance/investing forums I view, that states are now going after everyone, even people with under $100k of income.

The scam is that states are being allowed access to federal IRS data, and running them against their DMV database for State ID's and Drivers licenses. If you *ever* had a DMV-issued ID from a state, they may attempt to come after you for back-taxes. State governments are cash-strapped and seriously hurting for money so this is now a big risk.

In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

I've come up with some counter measures to avoid getting nailed with back-taxes, and would like to hear others' thoughts.

1) Document everything, and retain documents for where you lived and what income you earned from what sources. Retain these indefinitely.

2) Research the definition of "domicile" and understand how it works. Technically, you can have multiple state residencies, but only one "domicile" at any given time. There is a 3 part test to determine transfer of domicile, to include having the specific intent of transferring domicile. Thus, you cannot be forced to change your domicile. This is critical, because a state will come after you for investment income earned, if they believe you are residing in their state when the income is earned.

3) Contribute as much as possible to tax deferred accounts. This has always been a "good" idea, but now it's important to look at creative means to increase tax-sheltered space. This includes E/I-Bonds, gold bullion (in an appropriately balanced portfolio), and annuities. Thus, you have no taxable investment income for a state you previously lived in to attempt to tax.

4) Figure out if you can "turn in" a State ID for a state you no longer want anything to do with. Perhaps with a certified letter to the DMV of that state, with the ID enclosed. The letter may state something to the effect of withdrawing any position of residency within that state, and that you are physically no longer in that state.

5) Be sure to file state taxes to a prior state, even if the AGI is $0, for one last year after you move, declaring that you are no longer residing in this state. Many states have in their paperwork a location to mark a date for when you moved in your taxes.

6) Avoid high risk states such as California and New Jersey. "High Risk" should be defined by 3 factors:
a) a high tax rate within that state (because it makes seeking back-taxes more profitable to the state, and more dangerous to you)
b) a large budget shortfall within the state (because they become more desperate to unethically attack you for money)
c) a history of this behavior (i.e. California has been notorious in doing this)

7) Consider using cash-only when visiting high-risk states like California, if it's feasible to do so without too much extra work. For example, if you're going to Cali for vacation for a few days and can use cash instead of credit, then do so. There's a possibility Cali will get more desperate and eventually try to claim that you resided in Cali based on credit-card transactions. It may sound absurd now, but in 5 years, Patriot Act 3 might give states the ability to scour CC statements for terrorist activity, or perhaps to verify sales-tax payment on internet purchases. Then the States will of course use this data for other revenue-generating purposes.

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You are thinking too much on this. If you did nothing wrong, why should you worry about this?

broquer said:   There's a possibility Cali will get more desperate and eventually try to claim that you resided in Cali based on credit-card transactions. That's a pretty thin claim.... Let them go ahead and try to make it.

broquer said:   
I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

As an interstate road warrior, I've never needed a local id. Libraries and buying firearms seems a bit obscure. But I would expect a passport (for id) along with a utility bill (for residency) would be sufficient in these corner cases. Are there any more mainstream uses cases for needing a local id?

shopper711 said:   You are thinking too much on this. If you did nothing wrong, why should you worry about this?
The OP is on the right track. In information security, the OP is practicing what we call the rule of least privilege. Which means you don't expose more data than necessary. It's a good common sense approach to being street wise. And there's good reason for it. No matter how honest and accurate you are on your tax, it makes little sense to volunteer to be a highlighted for an audit. Why would you want a red flag? Why would you welcome the hassle that follows?

My tax filing is always compliant. But when a state of past residence demanded an explanation for not filing, I had the hassle of proving to them that I had no tax obligation. I had the hassle of having to take time to prove my innocence, and hope that the evidence satisfies them enough to not press further and create more wasteful hassle. Luckily, they considered my evidence sufficient and went away, but if they hadn't it could have been a bigger waste of time for both the state and myself. It was a hassle that came with no benefit.

broquer said:   



7) Consider using cash-only when visiting high-risk states like California, if it's feasible to do so without too much extra work. For example, if you're going to Cali for vacation for a few days and can use cash instead of credit, then do so. There's a possibility Cali will get more desperate and eventually try to claim that you resided in Cali based on credit-card transactions. It may sound absurd now, but in 5 years, Patriot Act 3 might give states the ability to scour CC statements for terrorist activity, or perhaps to verify sales-tax payment on internet purchases. Then the States will of course use this data for other revenue-generating purposes.

No need to do this with the multitude of prepaid cards out there, or you can just get an authorized user card of someone who doesn't care about their residency situation, you can even put a nickname on it

And instead of a state issued photo Id there are more and more alternatives available

I find the passport card useful for most non driving situations. It doesnt have an address on it and doesn't have a mag stripe, so capturing information is harder.

broquer said:   In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

Jack Reacher, are you now posting on FWF???

Traveling frequently and getting id so one can purchase firearms ... not something most folks have to work around.

Virginia is infamous for this, and has been for decades. A lot of military and government types have a residence in northern Virginia at some point in career, then move elsewhere, then at some point (5 - 10 or more years later) come back to Virginia. Virginia will then claim they owe back taxes for ALL the years they were out of the state and did not file a return, because they "never abandoned a Virginia residency". The infuriating part about this is, I know people who actually DO pay Virginia taxes each despite living overseas, and yet when their kids attended Virginia state colleges, were billed at the out of state rate!

That said it's not too hard to avoid this kind of situation, either by documenting thoroughly your new residence or staying off the radar when you return back to Virginia.

So CA nj and VA are the worst ?

Ohio doing something similar on people with option grants that weren't even cashed while they lived in the state:

link

"1) Document everything, and retain documents for where you lived and what income you earned from what sources. Retain these indefinitely."
If you can do it right, why worry about #2-7?

Kanosh said:   Virginia is infamous for this, and has been for decades. A lot of military and government types have a residence in northern Virginia at some point in career, then move elsewhere, then at some point (5 - 10 or more years later) come back to Virginia. Virginia will then claim they owe back taxes for ALL the years they were out of the state and did not file a return, because they "never abandoned a Virginia residency". The infuriating part about this is, I know people who actually DO pay Virginia taxes each despite living overseas, and yet when their kids attended Virginia state colleges, were billed at the out of state rate!

That said it's not too hard to avoid this kind of situation, either by documenting thoroughly your new residence or staying off the radar when you return back to Virginia.


This is 100% correct. VA-DOR explained that they are normally cross reference state returns to IRS data roughly 3 years in arrears (normally right when the statue will expire for those who file and pay on time.

For those who may be a part-year resident in VA, ensure you file the proper return in each state you lived in. Keep records!!!!

I had this happen to me. I filed NJ returns for several years, then filed MA returns for a few years and then back in NJ for one year and then back in MA. In all but one of the years in MA, my only income was MA income and I was a MA resident (I filed & paid appropriately each year). NJ came after me saying I owed them taxes for one of the 'gap' years. I had to fax them several years of MA tax returns and they didn't contact me again.

BTW, the NJ agents were total a**holes when I contacted them via phone. They treated me like a criminal.

New York is one of the known tax-hostile states toward former residents.

It's important for NYers to be diligent in shaking loose of their NY residency as they take up residency elsewhere (especially Florida). Sever all possible ties if you move from NY to FL.. that's what I've read.. haven't tested it myself.

sensia said:   "1) Document everything, and retain documents for where you lived and what income you earned from what sources. Retain these indefinitely."
If you can do it right, why worry about #2-7?

Why would you want to be questioned by a hostile state auditor or prosecutor?

Using the evidence is your last resort. You gather it just in case you are forced to prove your innocence. Ideally, you don't want to be in a situation of having to present it in the first place.

Virginia did this to me - if someone is tracking the states that are "notorious" for this crap Virginia should be added to the list.

I lived there for a couple years (about 10 years ago) and in the last year I was there only for a short period of time (< 1 month). When I had to file taxes for that year I did the "part-year" resident forms (as instructed) and the form said I owed no taxes (none had been withheld in VA from what I can recall) and there was no need to file - so I followed the instructions (which explicitly said not to file). Sure enough a couple years later they came after me for back taxes (while I was living in another state) and I had to then basically file the form I was instructed by them to not file - it pissed me off - I had done the work several years ago and all I had to do was put it in an envelop and slap a stamp on it, but no they wait for several years (when many people would have lost their paperwork) and then come after me in a confrontational format (demanding proof, threatening with fees/penalties, etc).

Edit to add: Lesson learned - when doing "part-year" resident tax returns, if the form says not to file, it probably is a good idea to still file it (and definitely save a copy of the relevant paperwork "indefinitely").

broquer said:   
In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

Interesting post. Please correct me if I am wrong... Doesn't your driver's license get cancelled automatically if you request a State ID from another state?

gargam3l said:   broquer said:   
I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

As an interstate road warrior, I've never needed a local id. Libraries and buying firearms seems a bit obscure. But I would expect a passport (for id) along with a utility bill (for residency) would be sufficient in these corner cases. Are there any more mainstream uses cases for needing a local id?


We had this poster who was a firearms expert...anyway, he said you can use it to get a fake address

on your license >

and it's perfectly legal. >

DWooley said:   broquer said:   
In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

Interesting post. Please correct me if I am wrong... Doesn't your driver's license get cancelled automatically if you request a State ID from another state?


I know several Canadians who own or rent property in Arizona, who have gotten State ID cards from the local DMV.

Doesn't seem to affect their citizenship in any way, but does give them various in-state and county privileges.

calwatch said:   I find the passport card useful for most non driving situations. It doesnt have an address on it and doesn't have a mag stripe, so capturing information is harder.

No mag strip, it does though have RFID on board
It does have your DOB...

I wonder what the thresholds are for the state to come after you for back taxes. if you make only 20-30k a year, it probably wouldn't make sense to go after you for back taxes.

dawhim said:   I wonder what the thresholds are for the state to come after you for back taxes. if you make only 20-30k a year, it probably wouldn't make sense to go after you for back taxes.
There's a fairness rule from what I understand. If audits were designed to maximize revenue, indeed they would only look at the wealthy (considering even a slight accidental slip on a 7+ figure income could be more significant than deliberate evasion from many low-middle class taxpayers). The state could not morally or legally justify that sort of class discrimination. As a matter of fairness, audits are supposed to hit all levels of income.. Or so that's what I hear.

Also realize that if someone is earning very little on paper, it may just be the tip of the iceberg.

gargam3l said:   dawhim said:   I wonder what the thresholds are for the state to come after you for back taxes. if you make only 20-30k a year, it probably wouldn't make sense to go after you for back taxes.
There's a fairness rule from what I understand. If audits were designed to maximize revenue, indeed they would only look at the wealthy (considering even a slight accidental slip on a 7+ figure income could be more significant than deliberate evasion from many low-middle class taxpayers). The state could not morally or legally justify that sort of class discrimination. As a matter of fairness, audits are supposed to hit all levels of income.. Or so that's what I hear.

Also realize that if someone is earning very little on paper, it may just be the tip of the iceberg.


My memory might be a little fuzzy, but it seemed at least a handful or so years ago tendency was to go after people with lower incomes more than those with higher when it cames to things like audits. This is how the media spun it anyway. More likely it seemed that the IRS was spending a fair amount of money trying to collect very little income and then started looking at offshore accounts and other "wealthier" means of tax evasions than before so it was tilted in favor of those forms of tax evasions for awhile which was also a question of fairness.

OP has gone nuts and paranoid about these. If you do not do anything wrong, you have nothing to worry and nothing to hide. The world is not that bad.

CA tried to come after me a few years ago. Neither I nor my wife were ever a legal resident there, but my wife had income from CA one year. They made the claim that since we were married and she had some taxable income there, my income for that year was fully taxable by them also. I eventually got it all straightened out, but it was a real mess. They claimed I owed them an insane amount of money based on the penalties and interest. They are desperate, and willing to try just about anything to collect some cash.

bobbyvescolives said:   gargam3l said:   broquer said:   
I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

As an interstate road warrior, I've never needed a local id. Libraries and buying firearms seems a bit obscure. But I would expect a passport (for id) along with a utility bill (for residency) would be sufficient in these corner cases. Are there any more mainstream uses cases for needing a local id?


We had this poster who was a firearms expert...anyway, he said you can use it to get a fake address

on your license >

and it's perfectly legal. >

Use what to get a fake address on your DL?

I noticed TripleB (the OP of the 2nd thread you mention) suggests putting a PO box on your DL. How is that possible? Isn't the DL strictly showing residential addresses?

During my Navy career I was stationed in San Diego for about 12 years and EVERY year they would call me and ask why I had not filed a CA tax return. I would inform them I was a native of TX (conveniently a no income tax state) and only stationed in CA. After leaving the state and selling my house they even called the next year to my house in Texas, wanting money for the sale of my house. Crafty bastards, I often wondered how many young people they screwed into paying their taxes.....

BEEFjerKAY said:   
Jack Reacher, are you now posting on FWF???

Traveling frequently and getting id so one can purchase firearms ... not something most folks have to work around.


If Reacher needed a firearm, he'd just rob a drug dealer, or if he needed something special, get it from Neagley.

dugggg said:   DWooley said:   broquer said:   
In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

Interesting post. Please correct me if I am wrong... Doesn't your driver's license get cancelled automatically if you request a State ID from another state?


I know several Canadians who own or rent property in Arizona, who have gotten State ID cards from the local DMV.

Doesn't seem to affect their citizenship in any way, but does give them various in-state and county privileges.

What privileges are you all talking about? So far only library access and firearms purchases have been mentioned. Surely there are more? Where I have lived I can get a library card with any photo ID (even out of state) plus a utility bill showing my current address. So it seems that the state IDs are only useful for firearms?
My state doesn't allow you to have both a state ID and driver's license. But I guess I could have driver's license in another state and just lie and tell them I don't have a driver's license. I think if I told my DMV I already have an out of state license they wouldn't issue a state ID, but would instead tell me I need to switch my license. But my DMV is full of a bunch of bitches who give me crap about completing legitimate transactions.
One final question to the OP, do you seriously carry around a wallet with IDs from different states? I've watched cops enough to see that this would be viewed as highly suspicious, even if it is legit.

dugggg said:   DWooley said:   broquer said:   
In the past, when I traveled frequently and lived in different states for a few months at a time, I would get a State ID from the DMV (while maintaining my drivers license in a 0% state income tax state), so that I could use the library, purchase firearms, and anything else that a local ID would provide.

Interesting post. Please correct me if I am wrong... Doesn't your driver's license get cancelled automatically if you request a State ID from another state?


I know several Canadians who own or rent property in Arizona, who have gotten State ID cards from the local DMV.

Doesn't seem to affect their citizenship in any way, but does give them various in-state and county privileges.

Like what knds of privileges?

SUCKISSTAPLES said:   dugggg said:   
I know several Canadians who own or rent property in Arizona, who have gotten State ID cards from the local DMV.

Doesn't seem to affect their citizenship in any way, but does give them various in-state and county privileges.


Like what kinds of privileges?


They originally needed the AZ IDs to qualify for a cheap rate on a cruise out of Los Angeles.

Since then they have used the IDs to get various county services, like discounted flu shots, free tire disposal, etc.

I'm not sure what other privileges the IDs by themselves confer---such as in-state tuition reduction, hunting licenses, etc.

Given Arizona's highly xenophobic political climate, I was amazed they were able to get the IDs so easily.

SUCKISSTAPLES said:   
Like what knds of privileges?


There's various community centers that residents can use for free in addition to the standard library. You might argue that if you are skirting state taxes you dont deserve to use the community center, however if you are legitimately living in a place, then you are paying sales tax, and real estate taxes (even though renting) to the community so essentially you are forgoing your ability to get your "fair share" by not having the local ID.

Also, most gyms will not let you do a free trial without a local ID. This is to combat people on vacation trying to get a free week pass. If you like to work out, you will want to sign up for a gym, but without any free trials, its hard to choose.

Some private businesses give discounts to state residents such as Disney theme parks.

Gym and theme park deals, Flu shots tire disposal and residency based cruise discounts sound like a $50-100 benefit. Is it really even worth standing in line at the DMV and paying for a state id, and the potential of tax hassles to get these minuscule discounts ?

broquer said:    Also, most gyms will not let you do a free trial without a local ID. This is to combat people on vacation trying to get a free week pass. If you like to work out, you will want to sign up for a gym, but without any free trials, its hard to choose.
Unless you were in a heavy tourist area at peak season, what gym wouldn't give you a free trial if you walked in and said I just moved here, want to try out the gym, and haven't had time to go to the DMV?

SUCKISSTAPLES said:   Gym and theme park deals, Flu shots tire disposal and residency based cruise discounts sound like a $50-100 benefit. Is it really even worth standing in line at the DMV and paying for a state id, and the potential of tax hassles to get these minuscule discounts ?

The cruise discount alone was worth nearly $1000. I mentioned possible tax ramifications but they didn't seem very concerned.

lkdeals said:   OP has gone nuts and paranoid about these. If you do not do anything wrong, you have nothing to worry and nothing to hide. The world is not that bad.
People hide behind this assinine statement. Let me tell you a story.

I moved out of CA in 1994 but make recent trips back for business and to visit friends. Nearly a decade after establishing residency in Oregon I discovered a warrant for my arrest in Hayward. Uh, wut?

Turns out a "friend" was using my previous address (and identity). This "friend" had gotten some moving violations and, of course, had no intention of showing up to court. Luckily, because I am paranoid and DO think the world is that bad, I was easily able to prove I was residing in Oregon during the time of the various citations. The judge dismissed the warrant and hopefully made a note this "friend" was using my identity.

Oh, and last week I had to prove I'm not a terrorist.

So "if you do not do anything wrong, you have nothing to worry and nothing to hide" is arguably one of the most idiotic and overused lame cliches and untruths in the english language.

Colby , how did you find out about the warrant ? Mos ppl wouldn't think to check if they had no reason to.

Were you arrested bc of it during a traffic stop? That would suck

TodPedro said:   During my Navy career I was stationed in San Diego for about 12 years and EVERY year they would call me and ask why I had not filed a CA tax return. I would inform them I was a native of TX (conveniently a no income tax state) and only stationed in CA. After leaving the state and selling my house they even called the next year to my house in Texas, wanting money for the sale of my house. Crafty bastards, I often wondered how many young people they screwed into paying their taxes.....If you owned a house in California and sold it for a taxable gain, you owed California income tax on the sale whether or not your were a California resident at any point.

Regarding driver's licenses: One important way to avoid problems with the "old" stay you are abandoning is to sever ALL ties to that state once you establish residence in the new state. You get a new driver's license, turn in the old one. A lot of people shoot themselves in the foot when they move to a new state but later on take some benefit from the old state -- could be as small as getting an in-state fishing license while on a trip back there or bigger, like paying property taxes as an owner/occupant, which gets you a hefty discount in some towns.

SUCKISSTAPLES said:   Gym and theme park deals, Flu shots tire disposal and residency based cruise discounts sound like a $50-100 benefit. Is it really even worth standing in line at the DMV and paying for a state id, and the potential of tax hassles to get these minuscule discounts ?

It's NOT worth the potential tax hassles. That's the point of this thread. Initially I thought states were only coming after heavy hitters, but now they are broke and coming after everyone. Standing in line at the DMV for 1 hour is worth saving a few hundred dollars in discounts, before the tax-issue was a concern. It's no longer worth it, thus the WARNING in the thread title.

Skipping 39 Messages...
cheapdad00 said:   taxmantoo said:   BEEFjerKAY said:   
Jack Reacher, are you now posting on FWF???

Traveling frequently and getting id so one can purchase firearms ... not something most folks have to work around.


If Reacher needed a firearm, he'd just rob a drug dealer, or if he needed something special, get it from Neagley.


Green for the Reacher reference, can't wait for the new book. I'm <100 in line at the library for that one.

A question for this firearms neophyte. Do gun permits allow you to carry across state lines? Or do you have to have a different firearm registered in each state - if you have multiple residences? Wouldn't it make more sense to just take your firearm with you?


Gun permits are only useful in the state they are issued, many states do not have them at all. You can only buy handguns in the state that you live in, you have to have a state issued ID to do so. Rifles and long guns are less restricted - you can usually buy those in any state as long as local law allows you to do so.

Every state's gun laws are different, there are some federal laws that allow limited transport of guns across states for sporting or exhibition purposes. (MA is particular about how they determine sporting purpose and how they determine you were properly run through the national NICS check -- they have permits which document it. Basically you have to either keep the documents from purchase or hold a concealed carry permit according to their legal position. This IMHO conflicts the federal law, but its still not been defeated in court.

I can carry a gun across most state lines around TX with no issues, but when you cross you have to follow that states requirements. In CA for example you have to transport weapons in a locked container and the ammo in a SEPARATE locked container. So you have to read the state laws for all states you plan to cross if you are playing by the rules.

When I drove home from ME to TX I simply packed my Walther and ammo in separate crates (among many) in the back of my SUV -- I couldn't have specifically located them if I wanted to. Unless I was stupid and gave a police officer consent to search what was obviously household goods in transit the risk was minute.

Every state I know of treats handguns and rifles and residents and non-residents as well as transients differently.



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