CNBC: Tax Collectors Chasing Rich New Yorkers
By Anupam Singhal,
Monaeo was featured in this timely piece by CNBC’s Robert Frank: Tax collectors chase rich New Yorkers moving to low-tax states. Also, please see the video below.
In the article and video, Robert clearly outlined the current domicile and residency tax trends and issues in New York, which include wealthy people increasingly leaving the state to move to low- or no-tax states, such as Florida. This, as well as other factors, are resulting in domicile and residency tax audits growing in intensity and anecdotally also in frequency. Robert included two salient quotes that underscored these trends:
“’If you’re a high earner in New York and you move to Florida, your chances of a residency audit are 100 percent,’ said Barry Horowitz, a partner at the WithumSmith+Brown accounting firm. ‘New York has always been aggressive. But it’s getting worse.’”
“Mark Klein, chairman of Hodgson Russ tax attorneys, says his office is now working on about 200 tax-residency audits and the number is growing as more wealthy New Yorkers head for the exits.”
Robert’s piece in fact cited Monaeo’s research to quantify the issue. Our data has shown, New York is quite active when it comes to residency tax audits, and it is generating a lot of revenue from them.
“But the New York State Department of Taxation and Finance is making sure that high earners who try to leave don’t escape without an audit and a bill. New York conducted about 3,000 ‘nonresidency’ audits a year between 2010 and 2017, collecting around $1 billion, according to Monaeo….”
“More than half of those who were audited lost, and the average collected by New York state between 2015 and 2017 was $144,270 per audit, Monaeo said.”
Robert also highlighted some of the methods New York State now uses to win their audits, pointing to the intrusiveness and unpleasantness of domicile tax audits. When leaving New York, most taxpayers don’t quite realize what awaits the majority of them a few years down the line when the inevitable tax audit comes their way, but these excerpts should help set expectations:
“In addition to the traditional audit methods the state uses to make sure a taxpayer isn’t gaming the system — like checking taxpayer’s credit card bills and travel schedules — New York is using a whole new set of high-tech tools, including cell phone records, social media feeds, veterinary and dentist records. Auditors are even conducting in-home inspections to look inside taxpayer’s refrigerators.”
“Auditors now check to make sure a taxpayer’s home in New York is smaller and less expensive than their home in Florida. They want to see if a taxpayer’s most prized artwork, wedding albums, family photos, safe-deposit box and most cherished jewelry is also in Florida. Having your wealth manager and country clubs in Florida is a must. And if a taxpayer’s dentist is in New York, rather than Florida, that’s a red flag for auditors.”
“Another big audit test: dogs. Klein and others recommend that clients keep their dogs in Florida along with their veterinarian. ‘Pets are considered part of your family,’ Klein said. ‘So if you want to lose a case very quickly, kennel your dog in New York when you travel.’”
“Auditors have even been known to visit people’s pied-a-terres in New York to check refrigerators and dresser drawers to make sure the taxpayer doesn’t really live there anymore. ‘I had one audit where the agent opened the refrigerator and the stuff had been sitting there for a year and a half,’ Horowitz said. ‘We won the case.’”
The article and video outline other tips and tricks regarding tax audits and cited Monaeo’s Personal Edition, given its status as the pioneering, most widely-used and advanced technology solution in this space.
“Taxpayers are coming up with their own high-tech tools. Moneao calls itself a ‘personal audit defense system’ and sells an app and web interface that allows users to easily track and log their days in and out of a state to make sure they don’t exceed the limit. Monaeo said use of its ‘Personal Edition’ app is up 51 percent in 2018 over 2017.”
The CNBC piece nicely outlines the domicile and residency tax issues that many people are currently facing. The risk is high, particularly for wealthy individuals that move out-of-state, and as we’ve said before, the burden of proof is on the taxpayer. Auditors have many legal and digital analytics tools at their disposal to get to the details of where you spend your days, while most taxpayers are still largely exposed and unprepared. We live in a time when we can gain back more control here, and Monaeo provides that control, as well as the ability to protect yourself with data that can become the proof you need to win your audit.
Nothing in this article should be considered or construed as tax advice. Monaeo does not dispense tax advice and always recommends that taxpayers consult their accountants or lawyers.