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Tax Alert: New York State Issues 2012 Revised Nonresident Audit Guidelines

Tax Alert: New York State Issues 2012 Revised Nonresident Audit Guidelines The New York State Department of Taxation and Finance ("Department") recently released its 2012 Nonresident Audit Guidelines ("Guidelines"), which provide guidance addressing personal income tax residency examinations and other individual income tax matters. The revised Guidelines, which update the March 31, 2009 version issued by the Department, are used internally by the Department and are intended to serve as a reference and training manual for Department auditors. The Guidelines include legal developments over the past several years and provide taxpayers and practitioners with useful insights with respect to how the Department will be addressing certain issues.

The Guidelines set forth Department policy and incorporate recent administrative decisions that impact residency determinations and personal income tax filing positions and include two new sections (foreign domicile and resident income tax credits), as well as providing additional guidance on "statutory residence." The following revisions should be noted:

  1. A new section addressing the rules for establishing a foreign domicile. Changing domicile from New York to a foreign country presents a unique set of issues and the Guidelines cover key factors that the Department's auditors will be reviewing;
  2. Significant changes in the definition of "permanent place of abode." The Guidelines address key concepts in determining whether an individual is deemed to be maintaining a permanent place of abode with respect to the statutory resident test; and
  3. A new section addressing the calculation of resident tax credits for taxes paid to other jurisdictions. Our experience is that this area is quickly becoming a key focus of the Department in examining resident personal income tax returns.

Our recent experience indicates that there has been an increase in personal income tax audits focusing on domicile, statutory resident, wage allocation, and resident credit matters - all of which are discussed in the Guidelines. Given the current economic climate and the complexity of the rules governing these points, we expect to continue seeing these issues raised on audit.

J.H. Cohn's State and Local Tax Practice handles residency examinations and assists individuals in assessing and mitigating their risks with respect to state personal income tax residency issues.

For more information on New York's Guidelines or other New York State/City tax matters, please contact Corey L. Rosenthal, JD, director, State and Local Tax ("SALT") Practice, at or 646-625-5729, or Peter Rabinowitz, JD, director, SALT Practice, at or 646-625-5746.

Download the full PDF.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and J.H. Cohn LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Published date: 7/11/2012

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