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Litigating a New York State Tax Case

A New York State tax litigation situation often begins with an audit. A taxpayer may be notified of an audit if information in his or her return or tax documentation seems to contradict other information available to the tax department. In these cases, two types of audits are possible: a desk audit or a field audit.

A desk audit takes place entirely through correspondence. A field audit requires face-to-face interviews and a visit by the auditor to a taxpayer’s home, business or both.

Taxpayers can work with a qualified attorney, tax professional, accountant or another eligible professional who can represent them during their audit. In order to be able to represent their clients, a professional must have an agreement in place, such as a power of attorney.

During an audit, the auditor will generally ask for more information and documentation to follow guidelines issued by the department, to determine whether charges should be made. If the audit proceeds smoothly, the taxpayer may get a no-charge letter, indicating no further action will be taken. In some cases, an agreement may be reached between the taxpayer and the tax authority.

In other cases, no agreement is reached and the case is closed. The taxpayer is issued a statutory notice, such as a Notice of Deficiency or Notice of Determination. If this occurs, the taxpayer has 90 days to file an appeal.

The Appeals Process

The first step of the appeals process is usually a ‘‘conciliation conference” through the New York State Department of Taxation and Finance’s Bureau of Conciliation and Mediation Services (BCMS). The goal is to reach an agreement without further formal hearings. Both sides get to present their arguments, and a series of conferences and post-conference processes may take place to allow everyone to ask questions and formulate their responses.

It is possible to skip the BCMS, and sometimes the process simply does not work. If this is the case, the division of tax appeals is the next step.

The administrative appeals process involves bringing the case before the Division of Tax Appeals and Tax Appeals Tribunal to start true litigation. The first part of the process involves an administrative hearing before an administrative law judge. Both parties submit briefs and the judge makes a determination. This determination can be appealed by filing an appeal within 30 days.

New York State Courts

If a tax case cannot be resolved before the Division of Tax Appeals and Tax Appeals Tribunal, it may go to trial. Usually, tax cases are article 78 proceedings, or special proceedings brought before a court. To begin the process, a notice of petition must be filed and all parties must be informed and given a chance to answer.

After the case works its way through the courts, taxpayers may have the option of appealing to higher courts, but it is quite rare to get an appeal for tax matters at higher courts.

Litigating New York State tax cases can be very time-consuming and, in some cases, may even take years. Working with a qualified tax attorney during the process ensures you have someone taking care of the legal details, filings, statutes of limitations and other requirements of your case. If you'd like to speak to a tax attorney about your audit or appeal, contact Hodgson Russ LLP today for a consultation.