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Manhattan Tax Law Blog

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.

Jailtime and loss of property: Penalties for overdue taxes

The Internal Revenue Service (IRS) can impose harsh penalties for those who fail to pay their tax obligations. Stories of the government agency sending people to jail and taking away property abound. But when can the government use these extreme measures and are these severe penalties common? This piece will answer these questions.

How often does the IRS use these more severe penalties? There agency averages two cases per month throughout the country involving a taxpayer going to jail or losing their property to the IRS.

Will NY’s increased sales tax receipts impact audit rates?

Individuals, businesses and even state governments felt the impact of the recession in recent years. States throughout the country, including New York, reported weak gains in tax revenue growth for the last two years. State government finally appear to be rebounding. Recent data shows this year is off to a much better start. Tax collections for Q2 in New York were reportedly up 18.2 percent.

What are the chances of a repeat NY tax audit?

A business or individual will likely experience frustration after receiving a notification from the New York State Department of Taxation and Finance of an impending state tax audit. One thing that can top this frustration: notification of a second audit.

How often does New York State’s Department of Taxation and Finance conduct repeat audits? The agency notes repeated audits are possible. The situation will evolve from one of two paths:

Could you be selected for sales and use tax audit in New York?

Although businesses of any size can find themselves the subject of a sales and use tax audit, some are at a higher risk than others. Common targets often include large businesses or those with complicated tax filings.

What else can trigger a sales and use tax audit? The New York Department of Taxation and Finance states that a failure to file a return, a failure to properly report sales, discrepancies when compared to federal filings and a history of audits are common reasons that trigger a state audit.

Business owners: 3 tips to help during a sales tax audit

Business owners subjected to a sales tax audit can take proactive steps to ease the process. Some tips that apply to most in this situation include:

  • Cooperate. A recent publication in the CPA Practice Advisor notes a top mistake made during a sales tax audit is giving the auditor a hard time. Although it is important to contact an attorney and have legal counsel to help better ensure your rights are protected during the process, business owners should avoid intentionally making the process difficult. Examples to avoid include providing messy, unorganized records or an intentionally uncomfortable workspace. 

Can taxpayers offer the IRS a settlement?

Not everyone can pay their tax bill. These situations can impact anyone, including some of the Hollywood elite. Famous actor Wesley Snipes provides an example. The actor attempted to make a deal with the Internal Revenue Service (IRS) after getting a $23.5 million tax bill.

He did this by offering a settlement, referred to as an offer in compromise.

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