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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience:  15+ years tax preparation and tax advice.
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I live in PA. NYS has decided that in 2004 since I had and ...

Customer Question

I live in PA. NYS has decided that in 2004 since I had and office in NYC I must owen state tax. I explained that at that time I worked as a management consultant and traveled 100% and was in NYC for about 5-10 days total for that year (so any tax is minimal -- I am wiling to pay 10 days worth if they want to pursue it). They are not accepting that answer and now are saying I need to go to conciliation or some sort of trial. Does it matter which I go to? Should I be hiring a tax attorney (the paperwork says this is an "adversarial process."). is the burden of proof on me to prove I was not in NYC or on them to prove I was? Any insights are appreciated. Thanks, XXXXX XXXXX Pa.
Submitted: 9 years ago.
Category: Tax
Expert:  Mic replied 9 years ago.
Hello Paul,

When a person has a residence, place of business, office for business or works for a company that is located in the state of New York, then NY requires that taxes be paid to them. They do not care that you reside in another state or that you traveled to do the business...

There is no burden of proof this case all they care about is that you had an office there and that is what they are basing their taxes on.

Customer: replied 9 years ago.
They are basing the tax on income earned while physcially in NY (they assume based on their calclation I work 100% of my work days physically in NY). That is why I was sent a form asking how many days I was physically in New York working. I also checked the nonresident tax form which is what I should have filed in 2004 (but did not realize and instead just filed my usual PA state tax return as I have done for about 15 years) and it is also looking for an allocation of days spent in NY. So this part I am sure of and understand. What I am looking for is advice in the process here.

i.e. Should I go to conciliation or ask for a trial (is conciliation just their way of trying to build a stronger case against me if I continue to refuse to pay and ask for trial), is this something that I can do easily pro se or should I be looking to hire a tax attorney. Are they just going to assume any day I can't prove I wasn't in New York I owe tax or do they need to come up with some sort of proof if I say I wasn't --- what sort of evidence is generally acceptable to prove I was not there?

I guess I need an expert that is familiar with NYS tax audit processes.

Thanks, Paul
Expert:  Mic replied 9 years ago.

Hello Paul,

I will opt out so that another expert may be able to answer that question.


Expert:  Wendy Reed replied 9 years ago.


What Michelle has told you so far regarding NYS income tax is correct. The state deems your income as "New York Source" income because your business or trade originates from the state. You have not mentioned if you are an employee or self-employed, if self-employed, you may be able to allocate based on volume. If an employee, then it is most likely that the state will insist on taxing entire income as NY source income.

You may wish to view this article, this was a recent case that established NY's "authority" to collect tax on income from a person who did most of his work in Tennessee. I believe that your case is similar.

If after reading this article and instructions in NY non-resident form on pages 19 and 55 that address this issue, you are still in disagreement with the assessment of tax on your entire income, then you should hire a tax professional to assist you in organizing your argument.

Keep in mind, you can apply for a PA credit for tax paid to other jurisdiction for taxes paid to NY.

Customer: replied 9 years ago.
Yes I did already see that case and have read the tax form. That is a teleworker case which is not the same as me.

I worked for a Delaware incorporated company with corporate headquarters in Georgia with a branch office in NY. This company employed me as a management consultant and as part of that job I worked at clients and solicited clients in locations in the US, Canada, and Europe. This is not a teleworker situation where not being in the office was a convenience --- my work was in other places. The non resident tax form supports that I only owe tax for the days I was in NY (or working at home for convenience)--- I am not disputing this or even asking about this now.

They sent me a 40K bill, I contested it, they asked me how many days I was in NY, I said 6, they don't accept that answer so now we are going to conciliation and/or trial and I guess I am gonna have to prove where I was every work day for 2004 or they will assume it was NY.

I am asking about what the audit process is going to be like and what to expect.

I can not go back to Pa and ask for money back because I have not yet paid anything to NY. Assuming Pa would agree that the money is NY's and not their's I still have an issue cause the deadline for filing an ammended Pa return is this April and I will not be done with NY by then. So I am at about 20k paid to Pa already in income tax and NY wants that 20K plus an additional 20K in interest and penalties that they managed to assess before even telling me they thought they had a claim.

If someone on here has expereince with the NY audit process, conciliation conferences, audits etc then I welcome that input. This is the type of input I have been unable to find on-line (unlike the tax forms and related court opinions).

I am not sure if this forum can get me this info or not --- just thought I would try.
Expert:  Wendy Reed replied 9 years ago.

I'm sorry we cannot be of more assistance to you. I have not personally been involved in NY audit process, but from what I have seen others go through, I agree that NY's attempts at collection are adversarial and difficult. With money like that at stake, I would definitely hire an experienced party to represent you.

You may also wish to contact PA department of revenue and see if there is a procedure or a way to ask for special permission to extend the 3 year limitation on refunds. You definitely have a basis for this. If not, you may amend your 2004 PA form now with the presumption that you are due a refund based on credit for tax paid to another jurisdication because of taxes due to NY.