Publications
Occasionally it is good to keep up with the events of what in the works for the next up coming tax seasons. We also stay focus on changes in business idea for future entreprenuers.
Trapped in New York:
SALT cap haters find moving isn’t that easy
Ben Steverman and Simone Foxman -Bloomberg News
(July 23 2018)
Among the wealthy tri-state area set, there’s more buzz than ever about fleeing south to Florida, land of mild winters and, more importantly after last year’s federal tax overhaul, zero state personal income tax. Actual action? Pretty scarce.
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High-earners are learning what tax experts have known for years: Tax collectors in states like New York make it really hard to leave. Wealth managers and tax lawyers say many of their clients are staying put after hearing about the scrupulous records they would have to keep to show they’ve really uprooted their lives and severed ties with their former states — and that it’s not as easy as just spending a few more days a month in a Florida vacation home.
Like other high-tax states, New York’s Department of Taxation and Finance will go to great lengths to keep wealthy residents on their tax lists. The states’ methods can be aggressive: Issuing subpoenas to pore through credit card statements, bank transactions or phone records to track a taxpayer’s location, and sending auditors to interview doormen or confirm doctors’ appointments.
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Overall, more than 10 percent of New Jersey residents will see a tax hike this year — in California, it’s 8.6 percent, while 8.3 percent of New Yorkers will see higher levies, according to a study from the Tax Policy Center.
Four northeastern states most affected — New York, New Jersey, Connecticut and Maryland — sued the Trump administration last week to invalidate the cap, saying it unfairly targets them. Years of litigation are likely to ensue, but some legal experts have said the states’ arguments are dubious.
SALT cap ruling challenged on appeal by four eastern states
By Erik Larson Bloomberg News
November 26, 2019, 1:17 p.m. EST​​
Four states in the eastern U.S. will attempt to revive their lawsuit challenging the Trump administration’s cap on the deduction for state and local taxes, known as SALT, after a judge dismissed the case.
New York, Connecticut, Maryland and New Jersey will take their challenge to the federal appeals court in Manhattan after a judge tossed their lawsuit in September, New York Attorney General Letitia James and the state’s governor, Andrew Cuomo, said Tuesday in a statement.
The 2017 tax law passed by Republican lawmakers capped the amount of state and local taxes that can be deducted on individual returns at $10,000. Previously, there was no limit. Democrats in Congress and some state officials said the change targeted Democratic-led states that tend to have higher taxes. Cuomo called it “economic civil war.”
New York Governor Andrew Cuomo
Albin Lohr-Jones/Bloomberg
The cap “is expected to cost New York’s taxpayers over $100 billion, which is why we will fight this senseless and unconstitutional law,” James said in the statement.
In September, U.S. District Judge J. Paul Oetken threw out a lawsuit, saying the federal government has the “exhaustive” power to impose and collect income taxes and that the states can enact their own tax policies as they wish.
Lawmakers in high-tax states have been trying to overturn the limit on SALT deductions since the law passed almost two years ago. The cap was one of the most politically contentious provisions in the 2017 tax overhaul.
New Jersey Governor Phil Murphy said in a statement that Trump is using the Internal Revenue Service “as a political weapon.” The state’s attorney general, Gurbir Grewal, called the cap “arbitrary and unprecedented.”
A media representative for the U.S. Treasury Department, which runs the IRS, didn’t immediately return a message seeking comment.
The case is State of New York v. Mnuchin, 18-cv-6427, U.S. District Court, Southern District of New York (Manhattan).
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Erik Larson Reporter, Bloomberg News Erik Larson
Tricks used for residency audit trade
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For the purpose of the 183-day test, New York is now using a whole new set of high-tech tools to track the number of days a taxpayer is present in the state. Auditors now rely heavily on cell phone tracking, which can reveal not only where calls are made and received, but in some cases track data even when you are not using your phone. EZ Pass or SunPass records, credit card statements, flight occupancy records, swipe cards, doctor’s records and even social media feeds are also used to demonstrate that a taxpayer was present in New York. Further, the tax department can subpoena many of these records.
The domicile test is more subjective than the 183-day test and leaves opportunity for the state to aggressively audit. For this test, auditors primarily look at five factors and, for example, will still want to see that the home in New York is smaller and less expensive than the home in the taxpayer’s new state, and that the taxpayer’s most prized possessions, including their artwork, jewelry, photo albums, family heirlooms and even the treasured teddy bear are in the new state. Further, in addition to looking at where minor children live and attend school, the state, for the domicile test, weighs where other family members, including grandparents and even the family dog, live.
New York wins more than half its audits. Audits can drag on for five years or more. As more high-income individuals leave the state, the number of audits is increasing.