If you are an individual taxpayer who has filed a New York return for tax year 2020, do not be alarmed if you receive an audit notice from the State of New York. The State of New York has been issuing desk audit notices to taxpayers claiming a change of residency or to taxpayers that have reported less income allocated to New York than in prior years.

If you receive a notice related to a reduction in income allocated to New York, you are required to prove that any days allocated outside of New York were for the employer’s necessity. If the Department determines that the days worked outside New York were for the individual’s convenience, the Department will assess additional taxes under the Office of Convenience Rule. The Office of Convenience Rule allows New York to tax the income of remote employees of New York businesses who work out of state. These employees are considered New York employees and can be taxed as such. However, those employees could receive tax credits in their home state to prevent double taxation on their income.

Due to COVID-19, employees were forced to work from home. Unfortunately, to the State of New York this was not considered for the employer’s necessity. Instead, this was for the convenience of the employee.

In addition, if you receive a notice related to claiming a change of residency, you are required to prove that you were not a statutory resident in 2020 (statutory residency is being in a state for more than 183 days during the year) and that you were no longer domiciled in New York per their state residency definitions. The burden of proof that you are no longer a resident fall upon the taxpayer. A failure to respond to these desk audit notices within the period designated in the notice will result in additional assessment of taxes.

 

Should you have any questions or concerns regarding this, please feel free to contact us.