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Considering a Move from a High-Income Tax State? What You Need to Know Before You Go

High-earners residing in states such as California, New York, and Minnesota, known for their high income taxes, will often consider the option of relocating in order to save money. Certain p...
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BizPac Review | State slaps New Yorkers fleeing under crippling taxes with audits to punish them, make them pay

BizPac Review | March 10, 2019

Not only is New York imposing crushing taxes on its wealthier residents, it is chasing them down when they try to escape.

With a $2.3 billion budget deficit that Gov. Andrew Cuomo called “as serious as a heart attack,” the state’s tax collectors are seeking a bolder approach in capturing fleeing residents, CNBC reported.

The Democratic governor placed the blame for the hole in his state treasury on President Trump, of course, claiming the administration’s Tax Cuts and Jobs Act adversely affected his state.

“This is the flip side. Tax the rich, tax the rich, tax the rich,” Cuomo said last month. “We did. Now, God forbid, the rich leave.”

With a reduction in the state and local tax deductions allowed on annual income tax forms, New Yorkers who felt the squeeze began to leave the Empire State. And state auditors were on their heels.

CNBC reported:

But the New York State Department of Taxation and Finance is making sure that high earners who try to leave don’t escape without an audit and a bill. New York conducted about 3,000 “nonresidency” audits a year between 2010 and 2017, collecting around $1 billion, according to Monaeo, a company that sells an app for tracking and proving tax residency.

More than half of those who were audited lost their cases, and the average collected by New York State between 2015 and 2017 was $144,270 per audit, Monaeo said.

Apparently, auditors are using new high-tech tools to ensure successful investigations of tax records, “including tracking cellphone records, social media feeds, and veterinary and dentist records. Auditors are even conducting in-home inspections to look inside taxpayers’ refrigerators,” according to CNBC.

New York lost more than 48,000 residents between July 2017 and July 2018, according to data from the U.S. Census Bureau, which indicated that low-tax red states like Florida and Texas gained new residents.

“If you’re a high earner in New York and you move to Florida, your chances of a residency audit are 100 percent,” Barry Horowitz, a partner at the WithumSmith+Brown accounting firm, told CNBC. “New York has always been aggressive. But it’s getting worse.”

Cuomo argued that “even if a small number of taxpayers leave, it has a dramatic effect on this tax space,” with the top one percent of earners paying 46 percent of the New York’s income taxes. One of the areas of focus has been residents who move to Florida, or even “fake” a move to the Sunshine State which has no income tax or estate tax.

Even Rep. Alexandria Ocasio-Cortez’s mother touted her move south to Florida, saying the living is “stress free” compared to her former tax-burdened life in New York.

“I was paying $10,000 a year in real estate taxes up north. I’m paying $600 a year in Florida. It’s stress-free down here,” Blanca Ocasio-Cortez told the Daily Mail.

The aggressive approach of tax auditors in New York could backfire as it creates a hostile environment while filling the state treasury.

CNBC reported:

Auditors now check to make sure a taxpayer’s home in New York is smaller and less expensive than his or her home in Florida. Tax collectors want to see if a taxpayer’s prized artwork, wedding albums, family photos, safe-deposit box, and most cherished jewelry are also in Florida. Having a wealth manager in Florida and a country club membership there is also a must. Also, if a taxpayer’s dentist is in New York, rather than Florida, that’s a red flag for auditors.

Not only are the audits costly for the taxpayers, they are nearly always won by the state, and can drag on for years. Some taxpayers can even be subjected to audits more than once, and in consecutive years. While they can appeal the results, most just end up settling according to tax lawyers and accountants.

The audacious move by New York’s tax auditors has done more than raise eyebrows on social media.

See original article on BizPac Review at bizpacreview.com/2019/03/10/state-slaps-new-yorkers-fleeing-under-crippling-taxes-with-audits-to-punish-them-make-them-pay

Frieda Powers
Frieda Powers
Senior Staff Writer Frieda@bizpacreview.com Originally from New York, Powers graduated from New York University and eventually made her way to sunny South Florida where she has been writing for the BizPacReview team since 2015.

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