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Taxes in New York (TiNY) is a blog by the Hodgson Russ LLP State and Local Tax Practice Group. The weekly reports are intended to go out within 24 hours of the Division of Tax Appeals’ (DTA) publication of new ALJ Determinations and Tribunal Decisions. In addition to the weekly reports TiNY may provide analysis of and commentary on other developments in the world of New York tax law.  

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TiNY Report for October 17, 2019 (reporting on DTA cases issued October 3, 8, and 10)

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No ALJ determinations or Tribunal decisions were posted last week, ergo we did not waste your time sending out a TiNY Report. This week there are two new Tribunal Decisions (hooray!).  And after we started to write this edition, the DTA posted four new ALJ Determinations, three from October 3 (where were they last week?) and one from October 10.


Matter of Zheng; Division’s Rep: Peter Ostwald; Taxpayer’s Rep: Sanghoon Shon; Article 22.

Petitioner and her now-ex-husband filed a joint New York State income tax return, which reported Schedule C income and expenses from the operation of a restaurant.  Petitioner and her ex-husband were audited for the 2004-2006 tax years, but only 2006 was at issue here.  As a result of the audit, the Division issued a Notice of Deficiency to Petitioner and her ex-husband dated October 25, 2007.  The Notice assessed tax due of $53,665 for the entire audit period, and $17,765 for 2006 alone.  On May 1, 2016, Petitioner filed a request for innocent spouse relief, separation of liability, and equitable relief for the 2006 tax year.  Petitioner alleged that she didn’t speak English, couldn’t manage or have access to the couple’s money, and was a traditional  Chinese housewife.  The ALJ found that the Division properly denied the request, which we wrote about here.

The Tribunal first found that the ALJ properly denied Petitioner’s requests for innocent spouse relief and separation of liability because both have a 2-year filing limitation, and Petitioner filed almost 6 years past the deadline.

Unlike her other requests, there is not a two-year limitation for the filing of a request for equitable relief, as it is discretionary.  Unfortunately for Petitioner, the Tribunal found that Petitioner did not meet her burden of proof to show that she was entitled to relief.  This was due to the fact that Petitioner shared an address with her ex-husband, didn’t provide support that holding her liable would result in economic hardship, and didn’t show that she had no reason to know of the understatement.  Thus, the Tribunal affirmed the ALJ’s determination.

For practitioners seeking innocent-spouse-type relief for their clients, this is a must-read as the Tribunal thoroughly addresses each type of relief and how to obtain it.  It looks as if one would be wise to always request equitable relief when asserting their client is an innocent spouse.

Matter of Morth; Division’s Rep: Jennifer Hink-Brennan; Taxpayer’s Rep: pro se; Article 22.

This is a bit of an odd one for a bunch of reasons.  Petitioner filed a petition on June 13, 2018, appealing the assessment of a late filing penalty for the 2014 tax year.  But Petitioner checked the box that she was petitioning for a redetermination of a deficiency or revision of a determination and not for a refund.  Petitioner indicated that the amount that she was contesting was a $100 late-filing penalty but didn’t put this amount in parentheses as the instructions direct for refunds.  Petitioner also attached a Notice and Demand which listed a balance of tax, interest, and penalty due of $107.56 for late payment; a copy of a response to taxpayer inquiry which indicated that no tax was due; and documentation that showed that she had made a $120 payment.

Several months later, the Division submitted a stipulation of discontinue executed by Petitioner on November 29, 2018, which listed the deficiency as $217 plus interest and no penalty. The stipulation also did not indicate that Petitioner was due a refund.  Petitioner responded and objected to her case being closed because she had not received the refund of penalty with statutory interest that she believed she was due.  The Supervising ALJ then issued an order of discontinuance.  Petitioner filed an exception with the Tribunal and argued that the language of the stipulation of discontinuance indicated the case should not have been closed prior to the Comptroller having approved the refund of the $100.00 penalty, with statutory interest, and her actually receiving the refund.

The Tribunal did not entertain Petitioner’s argument because the stipulation indicated that the matter had been resolved, and it clearly did not include a refund.  The Tribunal did, however, consider Petitioner’s argument that the stipulation be vacated.  Petitioner essentially argued that the stipulation was not a written agreement under Tax Law § 171 because it wasn’t “fully executed” since it didn’t include her refund. The Tribunal ultimately rejected this argument and noted that a written agreement may be vacated by a showing of fraud, malfeasance, or misrepresentation of material fact. Because Petitioner didn’t allege or meet her burden of showing that any of these existed, the Tribunal found that there were no grounds for vacating the stipulation.

Something funky clearly went on at the Division here – it clearly didn’t pass the smell test for the Tribunal either, as evidenced by its chiding of the Division at the end.



Matter of Ohberg; Judge Law, Division’s Rep.: Stephanie Lane; Petitioner’s Rep.: pro se; Article 22.

The Division received information from the IRS suggesting that Petitioner should have filed a tax return for 2013 and paid tax to New York.  The Division wrote to Petitioner.  Petitioner did not respond.  So the Division calculated tax based on the information received from the IRS and issued a Proposed Statement of Audit Adjustment.  Petitioner responded to the Statement with ravings typical of those spewed by most tax protestors.  Then the Division issued a Notice of Deficiency dated January 26, 2018.

Petitioner filed his petition on May 2, 2018.  We don’t get it, but Judge Law found as a fact that the petition was timely even though it was dated after the 90-day time limit had expired.  In any event, the petition alleged typical tax-protestor facts (e.g. petitioner was not a taxpayer, gains from labor are not income, the tax is unconstitutional, blah, blippity, blah, blah, blah).  The Division’s answer included a general denial and a request for a frivolous filing penalty.  Thereafter, the Division moved for summary determination.

The Judge found that the Division established that there were no triable issues of fact and, therefore, that summary determination in favor of the Division was appropriate.  And the Judge imposed the maximum frivolous filing penalty of $500.  We wish it could have been more.

Matter of Estevez; Judge Maloney, Division’s Rep.: Charles Fishbaum; Petitioner’s Rep.: pro se; Article 22.

This is an earned income credit (“EIC”)/empire state child credit (“ESCC”) case.  Petitioner filed returns reporting minimal Schedule C income from two hair salons at which she provided cleaning services, reporting no tax due, and claiming the EIC and ESCC for the years 2010-2014.  The Division sent inquiry letters shortly after each of the returns was filed seeking documentation supporting the credits claimed.  According to the Division’s records, Petitioner did not respond to those inquiries until October 2015.  The Division adjusted Petitioner’s account and issued account adjustment notices after receiving the responses.  Petitioner’s response was not, however, entered into evidence.  The account adjustment notices denied Petitioner her claimed EIC on the basis that Petitioner had not proven her income, and adjusted the ESCC.

Based on the facts offered at and after the hearing, it was determined that, as a result of discrepancies between Petitioner’s claimed income and her “employer’s” reported “other expenses,” Petitioner failed to prove her income in each of the years at issue.  For 2014, the Judge reduced her claimed income to correspond with certain other expenses reported by her employer that seemed to be for payments made to Petitioner.  As a result, Petitioner was denied EICs for the 2010-2013 tax years and her 2014 EIC was reduced.  Also as a consequence, the ALJ affirmed Division’s reduction of Petitioner’s ESCCs claimed in 2010-2013 to the minimum, and Petitioner’s claimed ESCC for 2014 was reduced commensurate with the reduction in her 2014 income.

We don’t want the Division to pile-on, but we bet Petitioner did not collect and remit sales tax on the revenue from her cleaning business.  So maybe an inability to prove that income is fortuitous.

Matter of Cardenas; Judge Law, Division’s Rep.: Linda Farrington; Petitioner’s Rep.: Jhonatan Mondragon; Article 22.

This is an EIC/dependent care credit case.  Petitioner filed a return claiming a bunch of credits, the calculation of some of which were based on Petitioner having two children.  But Petitioner didn’t report any dependents on her return (hmmm).  So the Division asked for documents to support the credits claimed.  Petitioner submitted some documents, but none of them were offered into evidence.  After auditing the credits, the Division issued an account adjustment notice denying Petitioner the claimed EIC on the basis that she had not documented her income for the year.  The notice also denied Petitioner’s claimed child care credit on the basis that she had not documented her child care expenses.

At the hearing, the Division produced an affidavit of a Division employee who had investigated the situation and found that Petitioner had two children living with her but that their father (who did not live with Petitioner) had claimed them as dependents on his return.  The Division employee also found that Petitioner had $15,400 of unreported income from a Schedule C business to which Petitioner provided cleaning services.  Petitioner testified that she paid her sister-in-law $2,860 for child care services during the tax year.

The Judge analyzed the federal EIC statute to determine that Petitioner’s children were “qualifying children” under the EIC, notwithstanding that they were claimed as dependents on their father’s return.  On the other hand, Petitioner’s unreported income, when added to her reported income, raised her total income to $28,420, which significantly reduced the EIC to which she was entitled.  The Judge ordered the Division to re-compute Petitioner’s EIC based on income of $28,420 and two qualifying children.

As for the child care credit, the Judge found that Petitioner failed to satisfy her burden of proving the amount she paid for child care services due to conflicting evidence in the record.

Same sales tax issue here as in Matter of Estevez regarding sales tax.  Did Petitioner really want to prove this income?  8% sales tax on $28,420 of cleaning revenue is $2,273.60.  Just sayin’.


Matter of Holt; Judge Law, Division’s Rep.: James Passineau; Petitioner’s Rep.: pro se; Article 22 and proposed driver license suspension under Tax Law § 171-v. 

This is a timy. 

Judge Law granted the Division’s summary determination motion.  The Division was able to prove both its standard mailing practices and that they were followed when it mailed two income tax notices of deficiency to Petitioner’s last known address on September 10, 2007 (the issue of the proposed driver license suspension was mooted when the Division rescinded the 60-day notice relating to that issue).  Thus, the BCMS request filed (via facsimile) on July 15, 2017 was just a little (more than ten years) late.

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