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Atty. Jos. Endres - NYS Taxes

Apr 14, 2013|

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And so we turn to someone whose practice as a tax attorney. Concentrates on New York State taxes Joseph Anderson is here from Hodgson Russ thanks for coming on and on my pleasure Dave thanks very much for having me. During the break you and I were saying this is somewhat of a loaded question and I understand I think it helps us at the table. If you had a magic wand if if it all didn't matter. And you were given the power to just change the New York State tax system what would you do you. Will. That you know -- as we discussed that is a big question and you know it's a question that brings a whole lot of other stuff into it. Dealing with politics and it's possible. I'm but I actually think you can make -- much. Deeper and and and longer lasting impact without having to get into any of that political Mass -- Simply addressing order. Changing. The climate within the text department itself in terms of how it handles -- how it goes after. Taxpayers -- pursues taxpayers. And you can do that without having to you know cast one vote in the legislature that can come from the top from the commissioner on down -- and you know in the states. Defense that does seem like trying to go down that road. So so much of what they do that is not through Fiat and law or through through law approved through political process is -- -- us through. Administrative action. I think that -- I think that you know the laws never gonna be written clearly enough to be able to be applied to. Every situation and -- in the -- situations where you know when gray area. Comes in and you know that's when auditors have significant. -- leeway to have an article one way or the other and you know you depending on which way they decide to go -- can -- be a more simple process are really aggressive drawn out difficult process are they. Too aggressive are they in any way overstepping their bounds do you think. You know it's tough to to paint with a broad brush and I certainly don't wanna do that because there're some really great people tax department to do a phenomenal job it. Anytime you have an organization that -- with that many people you're certainly gonna him some people that they do I think a little bit too far and you know that those are situations definitely do need to be addressed how to figure out an audit. That's very interesting. One of the big things. I fly in between JFK in buffalo on a pretty regular basis and when you fly into JFK. One of the first signs that -- you -- jetBlue terminal is there's this big two story sign on tonight -- and says. IBM helping New York State text text sheets. And when idea and it is even though they developed this really sophisticated. And powerful software that gathers information from various sources whether it be you know comparing. Numbers on the sales tax return vs numbers and corporate return our federal returns vs state returns our. And you know it just basically gathers all this information from all these various sources and cross references. So for example if -- give you something that created a -- on it. Program few years ago. The EU. -- if you need if you -- practice certain professions in the state you have to have a license -- and so the the -- department cross referenced everybody that was licensed to practice. For various professions. With tax returns filed. And they said look there's a whole bunch of these professionals whether it's attorneys accountants. And believe and even need to be licensed to be tired in these people had these licenses. Didn't file tax return of the text or as a way to that the filing tax returns that license to do business now. Maybe they just weren't doing business but that's an example of how they found out -- -- on it. Another example I've seen and and I'm paraphrasing here but they will even look at things like. The size of a restaurant. And try to extrapolate if if it if it's registered somewhere with with the municipality that it can accommodate X amount of people. And it's return -- saying. Business is flat they've only had Y amount of people it'll cross. Reference things as obscure as that -- -- gets more in depth than that they now have software that lets you run a minute matter. And mini -- you know they sell some. Taxable goods for sales tax purposes so they sell. Things like paper plates and paper cups but they also sell things that are not subject to tax and you know things like bread and eggs and groceries as you're exempt from tax. So they're taxable percentage. It varies throughout the year when they have to -- to accent you know might be 50% one month but 7% the next 30% the next. While this is the text department's computers can actually track. That percentage of what there. Reporting and they know that for example many Marist and generally tend to sell more taxable goods. I'm in the summertime when people having picnics and you know buying paper plates and everything winners in the winter they sell more exempt goods like bread and cheese and stuff like that so so. Your numbers from a winter don't go up over the summer they're gonna say exactly why. Talk about mothers the local restaurant I know that was involved in the case that that made some news a couple years back against the same kind of thing where they were data mining to a degree. Well here's the thing with mothers and and I should say we we did that. You know work to the resolution on this case I wasn't involved in this case but -- When you read the decision the decision came on as a result of the litigation that record. The thing with mothers it has to do with adequate records and what the state requires a business to have inadequate records in order for it to defend an audit. Basically a business has to be able to demonstrate that it. It has to have a receipt for every single sale transaction that makes. So restaurant has to have all of that cash register tapes and I just kind of the nightly tapes and ask him a copy of every single. Transaction went through our owners wanna see guest checks from the waiters and waitresses throughout the night and if you don't have these inadequate records then the -- department can essentially estimate -- -- liability because they don't have the records to somebody. -- I'm at a -- they make it up they don't invent numbers but they say based on what we know your liability is this. You can't prove otherwise unless you show us something. Exactly they they'll they'll estimate based on the call external in DC is so you know restaurants that are in the same general area in general size report -- -- -- arms sales would you do or don't just come in. For one day -- -- -- view and then take those numbers for one or two days and extrapolated out over the course of the entire audit period. And that's how they come up with the liability. Again the problem with that is when the tax department does this the auditors have a considerable amount of leeway to do this and you know it can come -- some just incredibly aggressive results. And mothers in particular. The taxpayers end up winning because the others took a result it simply. Just really had no rational basis to it and the entire. Assessment I believe and getting canceled wasn't precedent sentence sending in terms of -- records they now have to keep her and him when alta ski. No I'm nothing like that changed is the decision was really based on the auditors methodology in and that is to simply wasn't sustainable. 8030930s. -- number we're talking about New York State taxes. I don't want this to devolved into the kind of program hears ago on other stations you probably heard. Things like we can enter service where they sit there and take advice from. Doctors and lawyers and accountants I don't want this to devolved into that is good and as wonderful as that program was excellent hosts back then too by the way. But I I don't want this to become hanging and joking coming out what your -- my taxes. But if you'd like to discuss New York State tax policy if you. Maybe have -- under an audit in the past or may be run a business we'd love to have you aboard for a couple quick phone calls Joseph Anderson is here from Hodgson Russ. On this day before taxes are filed we're talking now about New York State taxes federal reform right around the corner. It's hard line on news radio 9:30 AM and one of seven point seven FM WB and we're talking taxes today in New York State taxes this half hour Joey Anders is here from Hodgson Russ he is a tax attorney. Earlier you heard her speak a little bit about some of the audit procedures in New York State. One of the groups that seems to have a little bit of trouble maybe with audits and certainly with proving. Where they live are the snow birds to people that live in Florida half the year -- and maybe the other half up here Joseph let's talk about that a little bit room where do you see. The troubles is that when someone's trying to say no legitimately I live in Florida when in fact they are up here for. -- less than half the year. -- let me just take a quick second kind of explain. Law -- -- -- You know it's important to. Your residency status is very important to your tax liability residents pay tax on the worldwide income. Non residents only pay tax on income to sourced to New York so if your non resident tax liability typically goes down. -- significantly. Especially if the other state. -- -- claiming to live as Florida which doesn't have any personal income tax. And -- retired so. A lot of snow birds do is that is not the typical situation as you of these New Yorkers that live and build that company and career here in New York. For years and years and then eventually retire and they moved on court. And you know they they typically keep the house here in New York senate -- -- here in the house in Florida. They spend you know a bunch of time in Florida the pistols and a bunch of time here in New York. And they still usually have a lot of connections which -- and over the past thirty years here in New York so you know usually -- his children may still be in the area still have some. Connections civic organizations. And so it's tough to really know winter this person's true home as -- you can have many hoaxes but you only -- one true home 365. Days a year it's. And half we're talking 181. There are 182 if if I would want anyone in New York State and 182 in Florida I'm -- Florida resident right wouldn't that be the obvious way. That would be a simple way -- that would be ready physically it without government here folks exactly a very rarely do you see the simple things work well there's actually two tests for residents. So the first test is -- giving it previously which is the domicile Castaneda is again and you can have many houses which only one -- home homes with Curtis. So what are Asia for a family this year or previous necessary here. Correct and they basically look at five factors in the that your house -- the actual structure of the union. They look at how much time disparities location in the -- your personal property is Hamachi on -- -- -- here. The look you're business factor and your family factor. So those by effectively compared Europe vs Florida to try and determine where the center of operation. But even then if you pass that test us with them so test then there's this -- -- it is a subjective kind of Fuzzy tested it. But then there is what they try to get anymore. Objective testament medical test that is if you have a place to stay in the -- and you spend more than a 183 days in New York. -- and you considered statutory resident in the detection because you have enough of a connection -- the state. To justify the imposition of tax. So yeah the past -- those tests and to be considered non resident of the domicile test and statutory residency test while an and a lot of people get confused in the state -- 183 days and good. That's it's not that simple it doesn't sound easy. It's not clear -- these these audits invasive they get into the really nitty gritty of the persons. A day to day life and -- him and it was -- the she lost her husband during one of the used under -- and you know in order to prove that they count you've got to prove you weren't every day of the year so she literally screams -- -- -- -- funeral and -- and exact putter over the -- She is it in her case it didn't but even when you're successful on it she had to re live that experience going to anybody who that her husband knows it's just a very. Tough process to go through so yeah. It can be very difficult but. Notes when things got a deal and does New York State realize in any way. That that sounds a little heartless. Do. Do they I I hate to ask it any differently than I can hear. Do they care we'll begin yet this is probably one of the most -- things and again I'm not saying auditors atlas mrs. And saying that this is the way that the laws written other right -- the process exactly so so let's say you're in the state you know when these people that are counting your days. In let's say your husband and wife here in New York State and you're in New York. One of you -- heart attack and you have to be hospitalized after open heart surgery after a host of now now presidency really well that person is -- the person that's actually in the hospital here for medical emergency those days won't count towards that one underneath reading test. But the -- They're spending every day in her saying that you know being with their spouse nursing them back to help. Those days that there there voluntarily as within the state of the state considers it the opportunities to comfort me to test. I'm gonna take a risk here 8030930 if we can squeeze a couple calls and before Joseph west and -- we're gonna do that. Joseph Anderson is here from Hodgson Russ were talking about New York State taxes and up next after the break at 1130 we'll delve into some federal issues with the people from the Tax Foundation in Washington as well. Talk about tax credits briefly -- You know. New York State you -- you've probably seen these and the error these commercials on TV now yours is running this -- campaign called the new New York right -- the -- -- -- New York State open here -- and -- open for business and you know I love those commercials because they make you laughter that they make me laugh because it seems to imply that there's an old New York. And if the new New York is open for business that seems to acknowledge that the old New York was closed for the Dallas Dallas was problematic. And you know certainly New York State isn't isn't. Suffering from lack of effort in there. Tax credit programs in Texas and programs for just about everything I mean. They have things for cleaning -- you get tax credit -- for cleaning up contaminated site tax credits for. Preserving and restoring historic site you know the the office -- -- buffalo all the success story with the program. And then there are if you just wanna expand your business or if you're moving into -- state in the union and a certain industry there's a tax credit program. Formerly the importers and now the the technical the excelsior program. For that -- actually does have a whole bunch of these tax credit programs available to people looking to expand. But sometimes you know and often is the problem is that in the execution in the intense it's in the execution and you know typically happens with these programs you have this. This junction it is break between the into TV the agency in the state that is operating the program in the agency in the state pays up to benefit. So up it's a credit for rom. Repairing an environmental Brownfield right so you're gonna DEC is the one that look at whether you've done it. Depend on the other side you still have to deal with New York State taxation by that exactly right it's it's like that you know that can Angel. Natural tension and it happens just about every sales company with a salesman is out there anyone -- make the sale get in but then there's the service people in the organization and actually the makeup -- yeah thomas'. And you know the DC and and you know -- see their job is to -- you know clean up New York State. But when it after that -- on a new markets would get what would -- want to get that cleaned up property. Then everything is done and if you tax returns to get a tax credit after the fact. Now the -- department comes in to review that work and I can tell you they've been just several situations where just some minor. I technical. Issues with the way that these credits were cleaned. Cause the tax department to disallow they kept their sister agency and the children's you can do that right exactly and typically the DC about it when is already out of it and it's just a matter of working with the tax department although I will -- DC has been great and in certain occasions to work with what they'll come back -- and said look. You know this is what we wanted to get of this project may be some issue -- an example -- -- in one situation taxpayer. Formed a separate entity to actually -- other remediation work. But that and and that he wasn't a party to the agreement with DC and you have to connect right right to get credit. So it was just this minor technical issue in this separate entity was formed for the business reasons. In the -- department initially disclose all credits. An and that was a tough harsh thing I mean the state gets what it wants as this renovated new week it's there's a building that was newly constructed. And the state I would want it but it was just know in the ultimately. They end up to salon tax credits and it took us to come on in and fight we brought in DC and help out. And to get the thing up and running -- just you know do these programs have to be so. Difficult to administer nets that was kind of in one in my opinion when the situation where it should just sailed through. But it ends up being this long process the tax -- had been paying. You know -- representatives so it would diminish the benefit the the ultimate -- financial benefit to them. And even when we came in and and pretty much got an almost everything that they still get everything and get a credit that they think shipment to. But -- it just wasn't feasible to have let's keep arguing over it because. You know pay a sea of Peter Pace in the represented an -- you just go forward is just an economical. We started out the hour talking about the magic -- theory reform that you would make is there reform being attempted is there are there changes that percolate out there. Is there something we can look at down the horizons might appear. You know others that there's always. The legislation that legislation that's out there that's been kicking around for years I'm giving example once this thing. So we talked about that statutory residency test is Maria have a place in the American spent under an 83 days. You considered resident. -- Those two tests and connected you don't have to spend -- 183 days residents. So actually an odd to you or kind of thing exactly exe and it it was a famous case now. And too long ago where this family lived in Connecticut and Connecticut residents. But the husband worked in New York City so he was here way over -- 183 days commuted him. But he also owned a vacation home out and you know him among. And he would spend about two weeks a year it. So despite the fact that he was only is quote -- quote you know residents permanent please vote for two or three weeks two years he was considered statutory rate as it. And it was just and -- -- an -- -- -- he just comes -- and they're looking maybe to to to make it -- correct one of the fixes -- that is when -- put in this legislation that says -- permanent place of a -- has to be within certain. Square mile radius of here you work -- content works because they -- more it's looking like it could be more resident. Situation and so that's been kicking around it come up and hasn't passed yet but that would be hard to change we are at a time with his -- pleasurable c'mon man. -- Anders from Hodgson --