Statute of Limitations

There is a three-year Statute of Limitations in New York state Tax Law for additional tax assessments to be made by the Tax Department, unless the taxpayer provides a written consent to extend the limitation period. However, the Statute of Limitations does not apply if the taxpayer failed to: file a return, report changes made by the Internal Revenue Service (IRS) to a federal tax return or intentionally filed a return containing false information. A taxpayer is required to report federal changes to income, estate and corporate taxes to the state tax Department within 90 days from the final determination of the change, stating whether the change is correct or not.

Confidentiality

Disclosures of confidential information from a tax return to unauthorized persons is strictly prohibited. The information from the return is shared with the IRS and other government agencies within strict parameters of security and reciprocity. Taxpayers also have the right to know why certain information is being requested, how it will be used and any penalties for refusing to provide requested information.

Audio recording

Taxpayers are allowed to make audio recordings of their face-to-face meetings with Tax Department personnel, however, they must provide advance notice to the Tax Department of their intention to record the meeting and must provide the recording equipment at their own expense. Conversely, the Tax Department has the right to record any meetings, but must provide the taxpayer advance notice of their intention to do so. Transcripts of meetings recorded by the Tax Department can be obtained by the taxpayer upon request and with payment of a fee covering the cost to transcribe or copy the recording.

Appeals of Estate Tax Assessments

Should an estate (and its Executor) receive a “Notice of Deficiency” or a formal denial of a refund claim, the estate may protest the actions of the Tax Department by filing a “Request for Conciliation Conference” with the Bureau of Conciliation and Mediation Services. If the estate disagrees with a Conciliation order or chooses not to file a Request for Conciliation Conference, but still wants to take legal action, they must file a “Notice of Petition” and a “Verified Petition” with the court in the county having jurisdiction over the estate. The petition must be filed in writing and within the rules of the relevant statutes, list the specific Tax Department actions that are being challenged, and by the date indicated on the formal notice received by the estate. In addition to sending the petition to the appropriate court, a copy must be concurrently filed with the Commissioner of Taxation and Finance.

Additional information on such filings can be obtained from the Department of Taxation and Finance website, but estates (their Executors) should also consult with the appropriate experts, such as CPAs, tax professional tax preparers and/or lawyers specializing in estate law.

Refund Claims

Most refund claims arise from the overpayment of withholding or estimated income taxes with these overpayments normally claimed through the annual filing of a tax return. After the processing the return, the Tax Department would refund these overpayments. However, if there was an error in preparing the original tax return that resulted in an overpayment, the taxpayer would usually have to file an amended return to claim the refunds. Most often, these errors are a failure to include or miscalculation of tax credits, deductions or exemptions.

Refunds can be claimed from any type of tax, not only income taxes, but these claims must be made through submission of a refund application and documentation justifying the claim.

Taxpayers must be aware that their refund claims could be reduced by “Refund Offsets,” resulting from taxes or other debts owed to the Tax Department or any other New York State agency, another state New York City, or the Internal Revenue Service (IRS). While the Tax Department must notify the taxpayer of any refund offsets, information on offsets claimed by other state agencies, other states, NYC and the IRS should be obtained from those entities directly.

Refund Notification

Should the Tax Department determine that a refund is due to a taxpayer, they are required to notify the taxpayer, regardless of how the overpayment was determined (i.e. audit, assessment, collection, enforcement process). Once notified, the taxpayer has 120 days from the notification date to apply for the refund (or tax credit), but would normally forfeit their claim if they do not apply within the prescribed time frame.

Note: The Tax Department is not required to notify the taxpayer of a refund if the statute of limitations for the claim has already expired when discovered. The statute of limitations on refund claims related to most taxes is three years from the date the original return was filed or two years from the date the tax was actually paid, whichever is later.

The time frame for filing a refund claim can extend beyond the normal limitations noted above, if the refund claim is the result of a change or correction to federal tax codes that must be reported to New York state. In these cases, any claim of a refund for income, estate or corporate taxes can be made two years from the date the taxpayer was notified of the change or correction to the federal code.

Refund Limitation

Refund claims for income, corporation, or sales and compensating use tax made within three years form the date of the original return cannot exceed the amount of taxes paid in the three-year period prior to the filing of the claim (plus any extension of the filing time). Likewise, any refund claim within a two year period of the date the taxes were paid cannot exceed the amount of taxes paid in the two-year period prior to the filing of the claim (plus any extension of the filing time).

Refund Adjustments

The Tax Department can refund the full amount claimed by a taxpayer, revise the refund claimed (up or down) or deny the claim entirely. Payments for revised refund claims will be sent with a letter explaining the reasons(s) for the revision. Denials of claims will be sent in writing with explanations for the denial, as well as a summary of the taxpayer’s right to challenge the decision.

Challenging Claim Revisions and Denials

Taxpayers disagreeing with any revisions or denials, including receipt of a “Notice of Disallowance,” on refund claims can submit additional information to justify the claim request a conciliation conference with the Bureau of Conciliation and Mediation Services or file a petition with the Division of Tax Appeals.

Taxpayers receiving a Notice of Disallowance who then provide more information on their claim, but wish to challenge the response or have not yet received a response from the Tax Department with expiration of their rights to challenge the ruling nearing, may also file a request for a conciliation conference with the Bureau of Conciliation and Mediation Services or file a petition with the Division of Tax Appeals

In both case, the conciliation conference request or petition must be filed within the time frame stated on the notice received from the Tax Department. Different types of taxes have different time frames for filing conciliation conference requests or petitions, as outlined below:

a) Income and corporate taxes: request or petition must be filed within two years from date of the Notice of Disallowance

b) Sales and compensating use taxes: request or petition must be filed within 90 days from date claim was denied

For information on the filing time limits that apply to other tax types, contact your CPA, professional tax preparer or the Tax Department.

Penalties and interest

Taxpayers must file their returns and pay taxes due on time to avoid the assessment of penalties and interest. The most common errors leading to penalties are late filings, delinquent taxes/late payments, and underpayment of estimated tax assessments. Normally, the penalties for late filing and delinquent taxes/late payments are calculated based on the principal amount of taxes overdue, but there may also be penalties for late filing of returns, even when there is no tax liability.

The accrual of penalties and interest begins from the due date of the taxes, continuing until payment is received by the Tax Department. The interest accrual is compounded daily with the applicable interest rates found in the relevant Tax Department publications.

Taxpayers should consult with CPAs, professional tax preparers, tax lawyers and/or specialist tax consultants if they are uncertain as to their obligations under New York state tax laws to avoid the assessment of any penalties and interest on their tax bills.

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