By: Rob Otto

New York State auditors leave no stone unturned in their quest to ensure that even residents who spend most of their time elsewhere still pay taxes to Albany. According to a report by Bloomberg News, these auditors employ meticulous tactics, including monitoring individuals’ travel patterns and even the whereabouts of their pets, to establish tax liability, regardless of residency.

The NY Post’s Ariel Zilber reported extensively on the NY Tax situation.

Part-time and nonresident claims are vigorously investigated, with auditors delving into the private lives of individuals. Employing what is known as a “teddy bear test,” they scrutinize where people keep their cherished possessions to corroborate claims of primary residency. Surprisingly, the state may consider someone to have spent the day within its jurisdiction even after just a brief visit, such as stopping for lunch during a drive from New Jersey to Connecticut.

Tax audits in New York are famously likened to a thorough medical examination, as Mark Klein, a tax attorney at Hodgson Russ, told the NY Post: “the tax version of a colonoscopy.” Klein recounted cases where the presence of a single pet or the relocation of a fitness bike became pivotal factors.

The criteria for New York residency are stringent, with the Department of Taxation and Finance defining a resident as anyone spending at least 184 days in the state during the taxable year while maintaining a permanent place of abode. Even those who relocate to popular destinations like Florida are not exempt from scrutiny, as illustrated by Jonathan Mariner, creator of TaxDay app, who warns that auditors may pursue individuals who filed partial returns with Albany.

Wealthy individuals, eager to minimize their tax burdens, resort to strategic measures to avoid surpassing the 184-day threshold. Some coordinate private jet landings or crossings near midnight, meticulously timing their movements to evade state taxation. Such tactics underscore the high stakes involved in navigating New York’s tax regulations.

The revenue from residency audits is substantial, amounting to approximately $1 billion collected from 15,000 audits conducted between 2013 and 2017. Recent years have witnessed a surge in audit activity, with over 756,000 audits conducted in the 2022-2023 tax year, resulting in collections exceeding $3.22 billion. This heightened enforcement reflects the state’s determination to counteract the loss of high-income earners, particularly to states with more favorable tax climates like Florida.

New York’s tax policies have come under scrutiny amid a broader demographic shift, with census data revealing a significant exodus from the state, accelerated by factors such as the COVID-19 pandemic and urban challenges like rising crime rates and soaring living costs. The departure of over half a million residents since 2020, including 65,000 from the metropolitan area alone, underscores the challenges facing New York’s fiscal landscape.

As New York grapples with a changing demographic and economic landscape, the pursuit of out-of-state residents for tax revenues remains a contentious issue. The Department of Taxation and Finance’s aggressive tactics reflect the state’s commitment to safeguarding its fiscal interests.