It is very gratifying to have succeeded in helping dozens of people who have undergone tax audits in New York and other states.
I believe that my successful track record is due largely to my extensive experience and my knowledge of how the audit system works. I know the procedures, the documents that are necessary, and even the language to use when communicating with auditors.
Following are just a few of the cases in which I’ve been able to achieve notable results for clients.
Brian Gordon, CPA, President, State Tax Audit Representation, Inc.
OMG you are amazing!!! ”
Jed Dallek, CPA
Residency audit: $2 million savings
One case, referred to me by a New York City CPA, involved a client whose primary residence was in New Jersey but who also had a residence in New York.
When I was retained, the client already received a notice from New York State that he owed more than $2 million, most of it related to his investment income.
The client was domiciled in New Jersey. The auditor determined that the client was also a statutory resident of New York as he had a residence in the Hamptons (NYS) and he believed he had spent more than 183 days in New York.
His CPA had been working on the case for months, but the auditor kept rejecting his proposals. Knowing that I had a long history of working in the State Tax department, and that I had extensive experience handling residency audits, the CPA suggested that I take over the case.
With my knowledge of day counting rules, and after a detailed analysis of the clients personal records, I was finally able to convince the auditors that on many of the days that the auditor maintained that my client was in New York State, either he actually was not in New York, or the days did not qualify as "New York days" under the provisions of the statutory resident rules.
As a result of that extensive work, I was able to reduce the client’s liability from $2 million to $0.
Residency audit: $200,000 savings
Florida snowbird cases present some specific tax challenges. Sometimes snowbirds spend about the same number of days in each state.
In one case, referred to me by a Nassau CPA, the client was already retired and living in Florida, but he maintained a home in New York and came up from Florida from Spring to the Fall.
At the time of referral the auditor already determined that the client did not have more than 183 days in New York (not a statutory resident), but they were still domiciled in New York and issued a notification that $200,000 was due.
With an extremely thorough analysis of the domicile issue and lengthy presentation, I was able to convince the audit division that my client did change his domicile to Florida. The $200,000 statement of audit changes was cancelled.
Audits by NYS Dept. of Taxation and Finance and NYS Dept. of Labor: $65,000 savings
A business owner came to me with outstanding liabilities of $125,000. This figure represented liabilities from both the NYS Department of Taxation and Finance and the NYS Department of Labor (DOL). The amount reflected Withholding Tax returns that were filed but not fully paid, along with penalties.
To compound the business owner’s problems, she had received a notice from her bank that her account had been levied, and a withdrawal of $45,000 was about to take place.
The business owner and her CPA had requested that the penalty be removed. The state would not agree to remove the penalty; they stated that there was not sufficient reasonable cause for the failure to file and pay.
I interviewed the business owner to find out everything I could about her business and personal situation. As a result of my interview, I was able to form a credible case of reasonable cause that would warrant an abatement of the penalty.
Consequently, both NYS Tax and NYS DOL eliminated the penalty and released the levy. The client was able to pay the remaining liability to NYS Tax. She also entered into an installment payment arrangement with NYS DOL. As a result of these settlements, she was able to get her business back on track.
Bureau of Conciliation and Mediation : $145,000 savings
One interesting case was referred to me by a CPA after his client, who owned an employment agency had undergone an audit. The client received a Statement of Audit Changes. The total liability was determined be approximately $230,000.
At issue was whether the business owner should have paid “use” tax on information he had purchased from out-of-state database owners and on which he hadn’t paid sales tax.
I protested the result to the first level of appeals, which is the Bureau of Conciliation and Mediation Services (BCMS). At the BCMS conference, after detailed review of the auditor’s work papers as well as NYS Sales Tax Law and regulations, I was able to obtain a reduction of the liability to $85,000. A savings of $145,000
Pennsylvania nexus case: Estimated savings: $30,000
The client, a New Jersey distributor of lubrication products, came to me with an estimated assessment from The Commonwealth of Pennsylvania. Auditors maintained that the company had nexus–it was doing business in Pennsylvania—and should have filed corporate income tax returns for the past ten years. The claim was for roughly $30,000.
After examining the relevant factors to determine nexus, I found that the company was protected under the provisions of a largely overlooked law, P.L. 86-272.
The company was, however, liable for tax on capital that amounted to less than $100 per year, The client happily paid the tax on capital.
The tax on income would have been thousands of dollars per year, plus interest and penalties. However, the tax on capital came to less than $100.