An audit by the Internal Revenue Service (IRS) can be a long and cumbersome process — but the Internal Revenue Service audit is only half the battle. Following a federal tax audit, you will need to file an adjustment with New York State. You are required to report any changes resulting from an IRS audit on an amended return within 90 days of being notified by the IRS, whether or not you received a tax bill from New York State. You may also be subjected to a New York State audit. The state will then assess additional tax owed, possibly charge you with interest and penalties, and send you a bill for that amount.
Amending Your New York State Tax Return
If the IRS made any changes to your federal return, New York State requires you to amend your state return. You must also file an amended New York State tax return if you made an error when the original return was filed, you need to file a protective claim, or you must report a net operating loss carryback. You should not use the form to file an amended return if you intend to protest a paid assessment based on a statement of audit changes.
To file an amended return, the New York State Department of Taxation and Finance advises that the return should be completed as if it is the first time you are filing it. You must also send any forms that relate to the information in your amended return, even if you already filed them. This includes forms for credits you are claiming or amending, forms submitted as attachments, and wage and tax statements.
Does a Federal Audit Trigger a New York State Audit?
Following a federal audit, you will either go through a New York State audit or the state collections process. New York State will select a taxpayer for an audit based on a variety of circumstances, including:
- Differences found when comparing a return to information obtained from the IRS
- Results of previous audits
- Failure to report income or sales
- Failure to file a tax return
- Excessive credits or exclusions on a return
- Incorrect of fraudulent refund claims
- Misuse of exemption certificates
Often, the state will send a letter requesting additional information. Sometimes, the state may set up an appointment to review your records at your home or business. Generally, New York State will review information and records from the prior three years.
What Happens if You Disagree with a New York State Audit?
A New York State audit may result in a bill for additional tax, penalties, and interest. It might also result in the denial of a refund or credit. If you disagree with the findings of a state audit, you will be given the opportunity to attend a Conciliation Conference. These conferences are conducted by the Tax Department’s Bureau of Conciliation and Mediation Services and are intended to help taxpayers resolve their disputes without a formal hearing.
If you disagree with the Conciliation Order, you may ask for a hearing with the Division of Tax Appeals within ninety (90) days after the order has been issued. Sometimes, you may bypass the Conciliation Conference by filing a request for a hearing with the Division of Tax Appeals within ninety (90) days after the Notice of Determination has been issued.
Contact an Experienced New York Tax Attorney
Facing a federal or state tax audit can be stressful and overwhelming. Offering reliable representation and diligent counsel, the legal team at Brinen & Associates assists clients with a wide variety of tax matters at both the state and federal levels. Call (212) 330-8151 or send us a message to learn more about how we can assist you.