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anonymous283
Level 2

NY State refuses to give NYC local tax back

I nearly died in an accident on christmas eve 2019 and had to move out of NY to MA to live with family. I continued to pay rent on my apt in Brooklyn because I wasn't sure when I'd be returning and canceling the lease came with a hefty fee. I finally did move out in August 2020. NY is refusing to give back all the NYC local taxes I paid throughout all of 2020 because I can't show them a bill with my name on it from MA and that's because I have no bills there since I live with family. I did however send them credit card statements once it had my MA address on it midway through 2020 which shows I was making purchases exclusively outside NYC. I also shared my lease which shows I did not resign in August. This is not enough information according to them. They've wasted dozens of hours of my life with this process. Worst part is, my company forgot to remove NY state taxes for the year 2021 up until a month ago when I noticed it was still being taken out. I will have to deal with this whole process again next year.

9 Replies
TomD8
Level 15

NY State refuses to give NYC local tax back

If you have abandoned your domicile in NY, and you plan to live in Massachusetts and not return to NY, two things you can do to substantiate your change of domicile are to obtain a Massachusetts drivers license and register to vote in MA.  If you own a car, you should change its registration to MA.

 

Once you establish MA as your domicile, NY can tax you only on NY-source income.

New York Source Income of Nonresident Individuals, Estates, and Trusts, and Part-Year Resident Indiv...

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
anonymous283
Level 2

NY State refuses to give NYC local tax back

Sorry I'm talking about NYC local tax. My income is from NY. I did not update my driver's license or registered to vote in MA as I was uncertain when I'd return to NY. I plan to return to NY sometime in 2022. I shouldn't have to change all these things for a temporary move.

TomD8
Level 15

NY State refuses to give NYC local tax back

"I shouldn't have to change all these things for a temporary move."

 

Correct.  As I stated, you would make those changes only if you did not plan to return to NY.

 

It sounds like NY still regards you as being domiciled in NY, and therefore subject to NY income tax.  This reference gives the details on how NY determines residency for tax purposes (NYC's rules are the same):

https://www.tax.ny.gov/pit/file/pit_definitions.htm

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
anonymous283
Level 2

NY State refuses to give NYC local tax back

I don't have a home in NY - haven't been there longer than a few days since Dec 2019. Not going to pay $3k+ yearly to a city I don't live in... I have protested the refund - just spent an hour on the phone with NY - they didn't seem to know I protested - now they see it and say they have 120 days from the day I protested to respond...

Opus 17
Level 15

NY State refuses to give NYC local tax back


@anonymous283 wrote:

I don't have a home in NY - haven't been there longer than a few days since Dec 2019. Not going to pay $3k+ yearly to a city I don't live in... I have protested the refund - just spent an hour on the phone with NY - they didn't seem to know I protested - now they see it and say they have 120 days from the day I protested to respond...


This is very long but please read the whole thing carefully. Read it twice. 

 

First of all, a phone call is not enough, you must document everything in writing, save copies, and get proof of mailing, so you can prove you met and deadlines for protest or appeal.

 

Now, we have to review the concept of domicile.  Your domicile is your permanent home.  There is no single factor that determines where your domicile is, it is based on examination of all the factors.  Things that show where your domicile is includes where you actually live, where your significant friends and social relationships are, your home church, where your significant legal and financial arrangements are (like your attorney, your doctor, dentist, and so on), and other similar factors.  You only have one domicile at a time, no matter how many homes you might own.

 

In addition, when you move, in order to establish a new domicile, you have to take active steps to abandon your prior domicile.  This would include things like canceling your lease, changing your voter and car registration, getting a new drivers license, signing a new lease, and so on.  Again, there is not one single factor or test, it depends on all facts and circumstances.

 

From everything you have said, I believe NY is correct in assessing that you did not abandon your NYC domicile until August, 2020, and therefore you owe NYC tax as a part-year resident.  You can continue to protest, but I think you have very little likelihood of succeeding.

 

Here is what NY state says,

 

Domicile

In general, your domicile is:

  • the place you intend to have as your permanent home
  • where your permanent home is located
  • the place you intend to return to after being away (as on vacation, business assignments, educational leave, or military assignment)

You can only have one domicile. Your New York domicile does not change until you can demonstrate that you have abandoned your New York domicile and established a new domicile outside New York State. For more information, see the instructions for Form IT-201 or Form IT-203.

https://www.tax.ny.gov/pit/file/pit_definitions.htm

 

Here is a blog from an attorney,

https://www.hodgsonruss.com/domicile-residency-law.html

 

 

Now, if you were domiciled in NYC until August 2020, you would only owe city tax on about 8/12th of your income, not all of it, and you would need to prepare a part-year NY state resident return, rather than a non-resident return (which you probably prepared) or a full year resident return.  If the only thing you failed to do was cancel your lease, but you did everything else to abandon NYC and establish a new domicile in MA (like changing your voter, car registration and driver's license, getting a new doctor, and so on) you might have a case, but you have to focus on the proofs that will show you abandoned your NYC domicile and set up a new MA domicile.

 

Separately, we also have to consider whether you owe income tax as a New York non-resident from September 2020 to December 2020, and including 2021.  

 

New York assesses income tax to anyone who works remotely for a NY-based employer if the reason the employee works remotely is for the employee's convenience.  If the remote work is for the employer's convenience, NY does not tax it.

 

For example, if you are a graphic designer and choose to work from home in MA, but your employer has office space for you and you could work in NY if you wanted to, you owe NY state income tax (but not city tax).  However, if you were a sales person and your territory was in MA, and your company wants you to live close to your territory, then you are working from home for your employer's requirements and you don't owe NY state income tax. 

 

For 2020 you need to determine if you are subject to the convenience of the employee rule.  If you are working remotely for your own convenience, you owe a fairly complicated 2020 tax return; it will tax you from  January to August as a NY state and NYC resident, and will tax you from September to December as a state non-resident (and no city tax after August).  You will also owe MA a part-year resident tax return for the income earned after you changed your domicile. If you pay NY state tax on income earned after August due to the convenience of the employee rule. MA will give you a credit so that you don't pay double state tax on the same money.  For 2021, if you are subject to the convenience rule, you will continue to owe NY state income tax as a non-resident.

 

If you are working from MA at the request of your company, then you owe a 2020 part-year resident return to NY that will apply NY state and city income tax to your earnings from January to August, and you owe MA a part-year resident return that pays MA tax on your earnings from September to December.

 

This is important:

If you are determined to be a NY resident for 2020, then you probably paid too much MA state income tax.  You will be able to file an amended MA state return which will credit you some or all of the NY tax you have to pay.  If you are a resident of NY up until August 2020, you can't be a full year resident of MA, and you can file an amended part-year MA resident return to get some of your MA tax back. 

 

You need professional help at this point. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

NY State refuses to give NYC local tax back


@anonymous283 wrote:

Sorry I'm talking about NYC local tax. My income is from NY. I did not update my driver's license or registered to vote in MA as I was uncertain when I'd return to NY. I plan to return to NY sometime in 2022. I shouldn't have to change all these things for a temporary move.


Further comment to my previous answer:

 

The fact that you yourself call it a "temporary move" is a strong argument that you never abandoned your NY residency, and that you are still a resident of NY even today.  You can be domiciled in one place even if you life a long time in another place.

 

Even if you are domiciled in NY, you can be assessed MA resident income tax if you have a "permanent place of abode" in MA and live in MA more than 183 days of the year.  If that is true, then you have to file a resident return in both states, which can result in double taxation.  

https://www.mass.gov/service-details/learn-about-legal-and-residency-status-in-massachusetts

 

Read these articles as well.

https://www.blog.rapidtax.com/can-resident-two-states-time/

https://www.bakertilly.com/insights/dual-state-residency-can-result-in-dual-taxation

 

To avoid double taxation, you will have to make a determination that you gave up your domicile in NY, and then prove it to NY.  If you can do that, then the date you gave up your NY domicile is the date you began your MA domicile, and you would owe part-year returns in both states instead of full year returns.  If you are still domiciled in NY, but you are a legal resident of MA (more than 183 days) you owe double state tax and there's not much legally you can do to prevent it, except hire a really good tax preparer to help you out of this mess. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
anonymous283
Level 2

NY State refuses to give NYC local tax back

Thank you for this information. I guess you could say I lived in MA out of convenience even though I couldn't care for myself for a few weeks after my accident and covid broke out and my office was closed down. I don't care about paying NY state income tax. What I only care about is paying local city tax to NYC for an entire year I wasn't there. Forget I said I planned to move back to NYC next year - I have no idea what my plans are. I continue to live in MA. The only proof I have that I left NYC on paper is my bank account statements which had their addresses changed in August and my lease which was not renewed in August. I also have bank transactions that show I lived in MA. So should I continue with awaiting NY's response and arguing my case based on the previous information or should I hire an accountant over what may amount to $1k in taxes. I will have to prove this again in 2021...

Opus 17
Level 15

NY State refuses to give NYC local tax back


@anonymous283 wrote:

Thank you for this information. I guess you could say I lived in MA out of convenience even though I couldn't care for myself for a few weeks after my accident and covid broke out and my office was closed down. I don't care about paying NY state income tax. What I only care about is paying local city tax to NYC for an entire year I wasn't there. Forget I said I planned to move back to NYC next year - I have no idea what my plans are. I continue to live in MA. The only proof I have that I left NYC on paper is my bank account statements which had their addresses changed in August and my lease which was not renewed in August. I also have bank transactions that show I lived in MA. So should I continue with awaiting NY's response and arguing my case based on the previous information or should I hire an accountant over what may amount to $1k in taxes. I will have to prove this again in 2021...


You have to make a strategic decision here.

 

One position you could defend is that you abandoned your NYC domicile in December 2019 (or whatever date you moved to MA).  Because you failed to change your car registration, drivers license and did not surrender your lease, this will be very hard to prove.

 

Another position you could defend is that you abandoned your NYC domicile no later than August 2020 when your lease was up and you did not renew it.  This would result in you owing NYC tax for 8/12th the year, but not the whole year.

 

If you defend the first position and lose, you might not be able to go back to the second position, and you either have to pay the tax or go to court.  If you defend the second option, I think you have a good chance of proving your case.

 

You also have to consider the consequences in MA.  If you take position 1 and lose, then you are a double resident of NYC and MA for all of 2020 and owe full tax in both states.  If you take position 2 and win, then you are a half-year resident of NY and a half-year resident of MA, and you can probably file an amended MA tax return to get some of your MA tax back (depending on how you filed originally).  Also, if you take position 2 and win, then there is no question that you are not an NYS or NYC resident for 2021, unless you move back later this year.

 

Personally, I would go for option 2 as this is probably the lowest tax overall (your MA refund should offset your NYC tax) and the easiest to defend.  But it's really up to you.  But I am not your hired expert, so you should review your options with a real tax expert, look for an enrolled agent, not a seasonal storefront person. 

 

It would have been much different if you surrendered your lease when you moved out and changed your car registration and drivers license. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
anonymous283
Level 2

NY State refuses to give NYC local tax back

I filed MA as a full year resident and owed no taxes due to the taxes paid to NY and my turbo tax said I was going to get almost 3k back from NY in local taxes, which NY didn't honor. So I don't think MA will ask for any taxes in either scenario

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