They can’t be bargained with, they can’t be reasoned with, they don’t feel pity or remorse or fear, and they will not stop ever until they have your tax dollars… No, we’re not talking about the Terminator, but the New York Tax and Finance Department.
This year up to 149,000 former New York residents have received notices from the New York Tax and Finance Department asking them to provide proof of residence and personal income allocation, to see if they owe the state more than they paid. “The state is being very aggressive in going after people who are claiming to have moved out of New York,” said Alan Goldenberg, a state and local tax principal at Anchin, Block & Anchin LLP.”
This course of action isn’t just unusual for the sheer volume of letters, it is also unusual for the income bracket being targeted. “Normally, it would take $1 million a year in income to trigger heightened scrutiny, but many people who are earning far less are receiving letters.” Many of those receiving letters make only $100,000-$300,000 a year, much less than the usual recipient of these letters.
The reason for this is that many people left New York during the pandemic lockdowns, trying to take their tax dollars with them. To recoup these losses, New York needs to force these people to continue paying taxes, hence the deluge of audits.
Now, you may be wondering, how can this be legal? Doesn’t moving to another state mean you no longer owe taxes to your old one? The answer lies in the “convenience rule” for telecommuting, in which “New York state taxes the money that nonresident workers draw from in-state sources, including the income that commuters make when they choose to work from home.”
The only ways for workers in the other states to avoid this rule is to either to prove they worked remotely out of necessity (which seems feasible during the COVID-19 pandemic), rather than convenience, or prove that their employer established an office in that state.” Recently New Hampshire sued Massachusetts over that state’s collection of tax dollars from remote workers who were no longer commuting into the Boston area, but the Supreme Court rejected it, while “federal courts have ruled that states can tax nonresidents’ income when employees have a substantial link to the state doing the taxing.”
As if that wasn’t bad enough, to even prove they are nonresidents, former New Yorkers must prove five things: “The amount of time spent, the size and value of their homes, the location of valuable items like heirlooms or wedding photographs, the location of an active business, and lastly, where your family lives.” In the meantime, “The burden of proving where you were falls on you,” Chernick said. “If you can’t prove a date where you were, then the state is going to allocate that data to New York.” If they can’t prove these things, they will be taxed as if they were still living in New York.
The state’s tax agents are some of the most aggressive in the nation. They will check refrigerator contents, which doctors you go to, and where your pets are located.
New York was overtaxed and overregulated before the pandemic, but the lockdowns turned conditions from annoying to unbearable for many people. They can leave, but they can’t check out without a fight.