Declaring residency in a income tax free state

[John Roust]

A coworker of mine is allowed to work remotely from home. He has recently purchased a home in Nevada and has declared permanent residency there via his employer and has gotten it approved. In reality, he lives in Sacramento, CA. So he is doing this to avoid CA income taxes and he even went further to get a Nevada drivers license and license plates. I spoke to my lawyer friend about this and he said he probably won't be caught since he is having his employer declare to the IRS on his W2 that he lives in Nevada. Has anyone heard of the IRS auditing folks for this? Is there really a risk or is my lawyer friend right?

[Dave Toelkes]

Even though your friend is working from home, I am guessing his "place of employment" is probably in CA, and thus, he will still be subject to CA state income tax and his employer will probably withhold CA state income taxes from his paycheck.