EP.93 NY TAXES AND SNOWBIRD PLANNING – MARK KLEIN Wealth Actually

New York City residents have the highest State and City tax burden in the country (it's over 15% at the top level, recently overtaking California). It's no surprise that New Yorkers are constantly strategizing around their tax burden and potential moves to other states- especially for high earners or those looking to sell a business.







But a lot of New Yorkers suffer from 'advice by cocktail party" and many misconceptions float around as people assume that being out of NY for more than 183 days is "enough". Getting out of New York's tax grip is a lot more complicated than that.So we’re going to one of the top experts in the field, MARK KLEIN of HODGSON RUSS.Mark is Partner and Chairman of the Firm and concentrates his practice in New York State and New York City tax matters. He has more than 35 years of experience with federal, multistate, state and local taxation –He may be best known for his public speaking on tax topics. Mark splits his time between the Firm's New York City and Buffalo offices.For New Yorkers listening, you are going to learn a lot on how to arrange your affairs when for state tax purposes. We're also going to talk a little bit about the "Convenience Rule" which is impacting a lot of New Yorkers who have "relocated" due to Covid.What do New Yorkers face?-Income and Capital Gains Tax that is the highest in the nation (Over 15%)-Estate TaxWhat are the typical options when reducing the tax bill? What do you have to show?When moving to a non-tax state, what does a client have to think about?







What about the new normal with COVID? What if I'm not working in NYC anymore?







Mark and his team at HODGSON neatly sums up the issues here:







https://www.hodgsonruss.com/what-to-expect-in-a-new-york-residency-audit.html







WHAT TO EXPECT IN A RESIDENCY AUDIT







A New York State residency audit is one of the most difficult, intrusive, and document-intensive of all personal income tax audits. And the New York Tax Department has one of the most sophisticated and aggressive residency-audit programs in the country. This handbook follows a question-and-answer format that should tell you everything—ok, almost everything—you need to know about what happens in these audits. You’ll have to call us if you want to know everything!







WHAT IS A RESIDENCY AUDIT?







A residency audit is designed to determine whether you correctly filed as a nonresident or part-year resident of New York. Because New York residents are subject to tax on their worldwide income while nonresidents are subject to tax only on that portion of their income attributable to (“sourced to”) New York, the difference in tax liability can be significant, particularly if you have substantial investment income.







If there is a possibility that you were also a New York City resident, the difference in potential tax can be even more significant since New York City residents also pay tax on their worldwide income while New York City nonresidents pay no tax to the City at all, even if they work there.







The audit will generally cover three areas. First, the auditors will focus on the first residency test, called the “domicile” test. Second, the auditors will look to the alternative residency test, called “statutory residency.” And finally, even if you are able to establish nonresidency, the audit will also examine whether you properly “allocated” your sourced income to New York on your tax return.







We usually don’t see the New York auditors examining other underlying components of a tax return—such as the income and deductions reported. But in more recent years, as auditors have become better trained (and more aggressive),