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Manhattan Tax Law Blog

New tax law will likely mean more state tax audits

The Tax Cuts and Jobs Act (TCJA) has led to many changes in tax law. We are just starting to experience the full impact of these changes, as many of the new provisions went into effect for the recent tax filing for the 2018 tax year. One specific impact tax experts predict to continue to grow in coming months is an uptick in state tax audits due to a cap on the state and local taxes (SALT) deduction.

The TCJA now limits the SALT deduction to $5,000 for those filing returns as single individuals and $10,000 for married couples. This limitation has a significant impact on states with high tax rates — namely New York and California.

Does the IRS's use of PDCs leave taxpayers susceptible to scams?

In 2015 Congress passed a law that required the Internal Revenue Service (IRS) to use private collection agencies (PDCs) to collect outstanding tax bills. The Government Accountability Office (GAO) conducted a review of the IRS’ PDC program and has found some concerning problems.

Good records can be your best weapon if audited

The Internal Revenue Service (IRS) or the New York Department of Taxation and Finance may send business owners a letter requesting additional information to support tax returns. When this happens, an organized set of records can help to better ensure the process goes smoothly.

IRS reminds taxpayers to report foreign assets

Tax Day has passed, but some taxpayers may have missed an important form. In certain situations, the government requires taxpayers to file additional paperwork. One example: foreign accounts. The Internal Revenue Service (IRS) recently published an announcement reminding taxpayers that fall into this category to report foreign bank accounts and other financial interests.

Charged with a tax crime in New York? Intent matters.

New York officials recently released information on the arrest of eight individuals charged with tax crimes. The charges include filing fraudulent tax returns and failing to pay personal income taxes. The accused face financial penalties as well as potential prison time ranging from a sentence of one to 15 years.

Why the large range? The biggest reason often depends on intent.

What is the mansion tax?

New York state legislature just agreed to increase the tax bill for high value properties in the state. The law, known as the “progressive mansion tax,” requires property owners that purchase a property with a value at or above $1 million to pay a larger tax bill.

How much is the tax? The tax has two components. The first is a fee on the purchase of the property. The exact fee will depend on how much the homeowner paid for the property, hence the “progressive” nature of the tax. Any property valued between $1 and $2 million dollars will pay a 1 percent tax. If the home was $2 to $3 million, the tax goes up to a 1.25 percent of the home’s value. The law can charge the homeowner up to 4.15 percent of the home’s value.

New York taxes and residency: Is the state changing the rules?

New York state taxes are some of the highest in the nation. As such, those with the means often spend significant portions of their year in other states. Florida is a prime example. There is no income tax or estate tax in Florida. As a result, wealthy New Yorkers often winter in Florida to claim residency and save on their tax obligations.

In the past, this strategy has worked. But New York state officials are upping the ante.

New tax law, new tax bill? Options if you face tax debt.

Sweeping tax reform can be a good thing — or not. Many Americans throughout the country have found themselves facing a surprising and even unmanageable tax bill. What to do? In most cases, you should still file your tax returns. A failure to file can result in additional penalties and fees.

But what if you cannot pay your bill? There are options. Some examples include:

What can you say to the IRS or NY Department of Taxation?

Filing tax returns is difficult and often stressful. Arguably, the only thing even more stressful is getting contacted by the Internal Revenue Service (IRS) or New York Department of Taxation and Finance with questions about your return.

How will these agencies contact taxpayers? The IRS and New York Department of Taxation and Finance will generally send a correspondence through the mail requesting additional information. Although a phone call is unlike and suspect, there are cases the agency will choose to send a field agent.

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