What do I need to know about NY’s residency requirements?

On Behalf of | Jul 6, 2021 | Tax Collection

Taxpayers generally have to worry about two bills: the federal bill to the Internal Revenue Service (IRS) and the state bill to the state taxing authority in the state they call home. But, in recent years, this generally clear-cut rule has gotten complicated. In the past, it was not uncommon for some business leaders to have tax bills from doing business in multiple states, but it was nowhere near as commonplace as it has become in recent years. Add in the pandemic and the fact that many people find themselves working outside of their office, sometimes in other states, and figuring out which tax bill a taxpayer owes for which state has gotten a whole lot more complex.

How do taxpayer’s find the answer to this question?

The answer will vary depending on the state. The New York State Department of Taxation and Finance (DTF), for example, generally looks at two different tests to find this answer. First, the domicile test. Authorities use this test to determine if the taxpayer lives in New York. The DTF will look at five different pieces of evidence to answer this question. These are the taxpayer’s home, where they do the majority of their active business, where they spend their time, where they keep items that are “near and dear” like a family pet or prized collection, and where family connections spend most of their time such as spouse and minor children. The DTF may fight for taxes to apply even if these are not all met. If this does not work, the DTF could move forward and attempt to establish a tax obligation using the next test.

The state refers to this second test as the statutory residence test. The DTF will claim this test is satisfied when the taxpayer spends more than 183 days in the state and has a “place of abode,” or another residence, within the state.

What should a taxpayer do if they get a surprise tax bill?

Those who find themselves dealing with an unexpected tax bill from New York or another state have options. You do not need to simply accept the bill and move on. You can fight back. It is also important to note that taxpayers who think there is a possibility another state will attempt to send them tax bill can act to reduce this risk. In either situation, the attorneys at Goldburd McCone have experience negotiating with tax authorities and can review your tax obligations. They can discuss your options and help to better ensure your interests are protected.