The first reaction when you get a mailing from a taxing authority is generally one of apprehension. After all, unless you are expecting a tax refund, the news is unlikely to be good.
If the mailing is a notification of an audit, the authorities are likely looking for additional information or to set up a meeting. But what should you do? Do you send the information? Schedule the meeting? Ask additional questions? Although the exact process varies depending on the situation, one thing that is always true is that it is wise to take a moment to review the mailing. Decipher what the authorities are asking for and what they are claiming went wrong.
Once you get a better idea of the reason for the mailing, you will likely have the following questions.
Why am I the subject of an audit?
The New York Department of Taxation and Finance may conduct an audit if they believe a taxpayer has failed to file a tax return or report income. The state authorities may also initiate an audit if they believe the taxpayer took excessive credits or if the information in the filing does not match up with information held by financial institutions, the Internal Revenue Service (IRS), employers, or other businesses.
These issues often overlap with broader audit risk factors. Understanding what commonly triggers tax audits can help taxpayers better assess why they were selected and what the state may be focusing on during its review.
In New York, audits are frequently tied to residency disputes, income sourcing, and reporting discrepancies. Taxpayers who divide their time between states may face heightened scrutiny, particularly given how aggressive New York residency audits can be.
How will I know if the contact is legit?
It is wise to have some skepticism. Unfortunately, unscrupulous individuals have used these communications to gather personal information for identity theft and other nefarious purposes. Generally, state taxing authorities reach out via traditional mailing. A call, text, or email is questionable. A mailing is likely legitimate.
Taxpayers should be especially cautious if they receive unexpected electronic communications claiming to be from a tax authority. If you are unsure, it may help to review how legitimate tax agencies typically communicate before responding.
What should I do next?
The New York Department of Taxation and Finance often sends out Form DTF-948. This form is a Request for Information (RFI). Whether you received this or another form, it is important to take these three steps:
- Review the form and determine what the agency wants,
- Look carefully for deadlines, and
- Reach out to legal counsel.
You are allowed legal counsel to help guide you through these matters. It is often wise to seek legal counsel to help determine the best path when dealing with an audit. This is especially true if you believe there is a large discrepancy or the potential for allegations of tax fraud.
If an audit does not go your way, taxpayers may still have options. In certain situations, audit reconsideration may be available, depending on the circumstances and the information provided.
The attorneys at Goldburd McCone are experienced in New York state tax audits and can advocate for your interests throughout the process, helping you respond strategically and work toward the most favorable possible outcome.