Archive for the ‘New York’ Category

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2025 Tax Foundation’s State Tax Competitiveness: Some New Winners, But the Usual Losers

Thursday, October 31st, 2024

The Tax Foundation released its 2025 State Tax Competitiveness Index (formerly the Business Tax Climate Index).  While taxes aren’t everything in where you situate a business, they’re absolutely an important factor. If I have to pay an extra 10% in tax because of state taxation, I need to charge higher prices to make the same living.  (Another vital factor are regulations; regulations are a hidden tax on businesses because of the time it takes to comply.)  This year, the top ten state tax systems are:

1. Wyoming.
2. South Dakota.
3. Alaska.
4. Florida.
5. Montana.
6. New Hampshire.
7. Texas.
8. Tennessee.
9. North Dakota.
10. Indiana.

The bottom ten are familiar names in poor taxation systems:

41. Massachusetts.
42. Hawaii.
43. Vermont.
44. Minnesota.
45. Washington.
46. Maryland.
47. Connecticut.
48. District of Columbia.
48. California.
49. New Jersey.
50. New York.

This ends up being a bottom eleven as the District of Columbia (which isn’t a state but does have taxes) would tie with California if it were a separate state.

Let’s take a look at two states, and why the Tax Foundation ranks them where they are.  First, California (which is ranked 48th out of 50 states).

California combines high tax rates with an uncompetitive tax structure, yielding one of the worst rankings on the Index. The state has a great deal going for it, with its mild climate, excellent research universities, and the ongoing agglomeration effects of Silicon Valley, but a tax code that is uncompetitive and threatens to get worse is increasingly driving jobs to other states.

I couldn’t put it better.  California ranks 41st in corporate taxation (it’s ranking this good only because other states are so bad), 49th in individual tax, and 46th in sales tax.  Do note that this index doesn’t look at regulations.  I can’t speak to regulations in New York or New Jersey (I’m not familiar with them), but regulatory activity in California is a huge factor in driving businesses to neighboring states.  Let’s compare that with Florida, a state that many are relocating to.

Florida boasts no individual income tax, a competitive 5.5 percent corporate income tax, and a sales tax rate which—despite the lack of an individual income tax—is lower than those levied in many other southern states. Unlike many of its regional competitors, Florida does not tax capital stock, and its corporate income tax largely adheres to national norms, yielding a highly competitive overall tax code.

Florida ranks first in individual taxation, 16th in corporate taxes, and 14th in sales tax.  Is it any wonder why the Sunshine State looks so good to New Yorkers?

Again, taxes are not everything, but they matter.  Today, businesses can serve customers throughout the country.  Moving a business is never fun, but it’s far easier to do today than it was ten or twenty years ago.  States with a poor tax structure are losing businesses and will continue to do so.  What’s happening in California is real, and is one of the major reasons that Nevada (which ranks 17th in the State Tax Competitiveness Index) is gaining businesses.  As long as California continues down its current path, Nevada will continue to benefit.

Posted in Alaska, California, Connecticut, District of Columbia, Florida, Maryland, Montana, Nevada, New Jersey, New York, South Dakota, Wyoming | Comments Closed

No Foolin’: New York State Not Conforming to IRS Extension for Blizzard Disaster Zones

Saturday, April 1st, 2023

The New York State Department of Taxation and Finance decided not to extend taxpayers impacted by the December blizzards to May 15th; impacted taxpayers still must either file their tax returns by April 18th or file a valid extension (meaning paying 90% of the tax due).  In order to file a New York return, you must complete your federal tax return.  Thus, the federal disaster extension is near useless for impacted taxpayers.

I’m quite surprised–but then again, maybe I shouldn’t be.  New York is not a taxpayer-friendly state, and this sure isn’t aiding in changing anyone’s mind.

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Posted in IRS, New York | Comments Closed

Certain New York Storm Victims Get an Extra Month to File with the IRS

Friday, March 24th, 2023

The IRS announced today that individuals (and businesses) in five New York counties have an extra month (to May 15th) to file and pay tax returns; this relates to the winter storm that hit between December 23rd and December 28th.  The five counties are Erie, Genesee, Niagara, St. Lawrence, and Suffolk; the primary areas impacted are Buffalo/Niagara Falls and the east end of Long Island.  This extension is automatic.

This extension includes business tax returns that were due in March and individual tax returns due in April and estimated payments due in April.

As of today, this relief is solely for federal (IRS) taxes.  While I do expect the New York Department of Taxation and Finance to conform to this, they have yet to announce that they are conforming.  UPDATE: New York state is not conforming to this extension!

The IRS announcement is here.

Posted in IRS, New York | Comments Closed

New York, California, and Illinois Lose AGI & Population Per IRS Data

Sunday, December 25th, 2022

The Tax Foundation produced a report showing the overall gain (and loss) of population and taxpayers’ Adjusted Gross Income (AGI) during the second half of 2019 through the first half of 2020.  For the most part, high tax states were the biggest losers while low tax states were the biggest winners.  While the data includes a portion of the pandemic, “These data, therefore, capture many of the interstate moves made early in the pandemic—between mid-March and mid-July 2020—but do not necessarily capture the bulk of pandemic-related moves, many of which occurred later in 2020 and even into 2021. As such, when interpreting these data, it is important to keep in mind that many of these moves happened before the even more pronounced shift away from large cities and high cost-of-living areas that occurred during the pandemic. [emphasis in original]”

Some of these losses are eye-popping.  New York (which is dead last on this list) lost $19.5 billion in AGI and 248,305 taxpayers.  California (ranking 46th) lost more in population (263,344) but “only” $17.8 billion in AGI.  Meanwhile, Florida gained $23.7 billion in AGI and 166,707 in taxpayers (ranking 4th).  Idaho topped the list with a gain of $2.1 billion in AGI and 36,655 in taxpayers.

This is one area where it’s a zero-sum game.  Every taxpayer who moves between states ends up somewhere else.  If a state loses enough population, the state is forced to make changes.  Indeed, that time is likely coming soon for New York and Illinois–their current trends are just not sustainable.  Meanwhile, the legislature in New York proposed tax increases.  (To her credit, Governor Hochul vetoed the legislation.)

For those who say it’s related to weather, sure, that’s a factor.  Yet Maine–not exactly the warmest state in the Union–ranks seventh.  Indeed, combine sound fiscal practices and great weather and you get Florida.  I’d advise politicians in California, New York, and Illinois to carefully read the study (but I doubt they will).

Here’s an image from the Tax Foundation:

Posted in California, Florida, Illinois, New York | Comments Closed

Bozo Tax Tip #9: Move Without Moving!

Tuesday, April 5th, 2022

Over ten years ago, we moved from Irvine, California to Las Vegas. The home in Irvine was sold, a home was purchased in Las Vegas, and the belongings went from the Golden State to the Silver State. Cars were re-registered, doctors changed, and no one would say that we didn’t become Las Vegas residents.

But some people like to have it both ways. Nevada’s income tax rate is a very round number (0%), while California’s maximum income tax rate is a ridiculous (in my opinion) 13.3%. That certainly could drive individuals to move in name only. California’s Franchise Tax Board (FTB) realizes that, and they (along with New York State) lead the country in residency audits.

If you really do relocate, a residency audit is a minor annoyance. But let’s say you reside in Silicon Valley, and you buy a home in Reno but keep your home in Los Altos. Did you move? Or did you just move in name?

The Bozo strategy is the latter: moving in name only. I’ll just have that little home in Reno, spend the ski season in Nevada but really continue to live in Los Altos.

In a residency audit, the FTB will look at where you’re actually spending time, where you’re spending money (if eight months of the year you’re patronizing businesses in Silicon Valley, it doesn’t look like you really moved), and a variety of other factors. (The FTB has an excellent Residency and Sourcing Manual that explains California laws on the subject.)

Given the pandemic and a possible recession later this year, state revenues may be squeezed. The one government agency where increasing employees increases revenues is the tax agency (especially employees in audit). While I expect to see states cut employees, I’ll be surprised to see anything but minor cuts in tax agencies. We’re also likely to see an increase in audits looking at telecommuting issues. In any case, if you move in name only you’re painting a target on your back for a residency audit.

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Posted in California, New York | Comments Closed

2022 State Business Tax Climate Index: Bring Me the Usual Suspects!

Friday, December 17th, 2021

Yesterday, the Tax Foundation released its list of the business tax climate in the 50 states.  Not much has changed, and for those in New York, New Jersey, and California wondering why businesses are moving to Florida and Nevada, you just need to look in the mirror.  The top 10 states are:

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Montana
  6. New Hampshire
  7. Nevada
  8. Tennessee
  9. Indiana
  10. Utah

There’s also a bottom 10:

41. Hawaii
42. Louisiana
43. Vermont
44. Arkansas
45. Minnesota
46. Maryland
47. Connecticut
48. California
49. New York
50. New Jersey

The best states either lack a major tax or levy all the major tax types with low rates on broad bases.  Meanwhile, the worst states share, “complex, nonneutral taxes with comparatively high rates.”  My state, Nevada, ranks 7th with low individual and property taxes but high sales and unemployment insurance taxes (corporate tax is ranked in the middle, 25th).  My former state, California, ranks in the bottom four in corporate taxes, individual taxes, and sales tax, in the middle for unemployment insurance, and above average for property tax.  The worst state, New Jersey, ranks in the bottom ten in all taxes except unemployment insurance (where it ranks below average, 32nd).

Yes, taxes aren’t everything but they’re a huge reason why my business left the Golden State and moved to the Silver State.

Posted in California, Florida, Nevada, New Jersey, New York | Comments Closed

Tax Relief for Hurricane Ida in New York and New Jersey

Wednesday, September 8th, 2021

Hurricane Ida created disaster conditions in Louisiana; the IRS previously granted relief for impacted taxpayers in various parishes in the state.  President Biden just declared a federal disaster area for many counties in New Jersey and New York (including New York City).  The IRS extended the same relief for those taxpayers.  Any tax deadline from September 1, 2021 onward through year-end is extended until January 3, 2022.

There are some caveats with this.  First, because 2020 tax payments were due on May 17th, that payment deadline has not been extended.  However, if you filed a valid extension and owe the late payment penalty, that penalty is suspended between September 1st and January 3, 2022.  Second, be aware that the IRS has a “down-time” for electronic filing of tax returns; this typically begins in mid to late November and lasts until late January.  During that time, all returns must be paper-filed.  It’s currently taking the IRS eight to twelve months to process paper-filed returns.  You may want to consider not waiting until January (especially if you are expecting a refund).

This relief does extend to third quarter estimated payments (due September 15th), partnership and S-Corporation returns on extension (also due on September 15th), trust/estate returns on extension (due September 30th), C-Corporation returns on extension (due October 15th), and nonprofit returns on extension (due November 15th).  Quarterly payroll and excise tax returns due on November 1st are also extended for impacted taxpayers.

New Jersey is conforming to this relief for impacted New Jersey taxpayers.  Note that if you paper-file in New Jersey, you need to write, “Presidential Disaster Relief Area, Hurricane Ida” on the top of the return or payment.  While I expect New York to conform, there has been not yet been an announcement from the New York Department of Taxation and Finance.

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Posted in IRS, Louisiana, New Jersey, New York | Comments Closed

The Trump Organization Indictments

Monday, July 5th, 2021

Unless you’ve been hiding under a rock, you know that The Trump Organization and its Chief Financial Officer, Allen Weisselberg, were indicted on 15 counts including grand larceny, conspiracy, and tax fraud.  The former President is (and has been) a very divisive figure, and the comments on this run the gamut from “witch hunt” to “justifiably deserved.”  Is this from a banana republic (as Dan McLaughlin alleged) or a “travesty of justice” (as the New York Post opined)?  The indictment can be read here.

First, note these are all allegations; no one has been found guilty.  It’s also possible that former President Trump had nothing to do with this and had no knowledge of it.  However, in a closely-held family business its usual that all senior personnel would be aware of something like this.

So are these serious charges?  Absolutely.  If we take the allegations as true, there was $556,000 in federal taxes, $107,000 in state taxes, and $238,000 in New York City taxes that were evaded.  You cannot deduct personal expenses on a business return–this is something we tell everyone.  (Do note that some businesses can take a Home Office deduction, and other similar items related to business use of home.)  I’d love it if my business could pay my mortgage, utilities, and property tax.  That would be decidedly dumb (and illegal), so I manage to pay those expenses myself.  Now, a business can pay personal expenses for an employee, but those expenses paid become additional compensation.  If we take the indictment’s allegations as true, that didn’t happen here.

Is the dollar amount involved enough to warrant criminal charges?  Yes.  This is over $900,000 in total tax evaded, and that’s more than enough to cause a criminal charge.  But are those on the right correct that the only reason there are criminal charges is Trump?  Almost certainly, yes.  The Manhattan District Attorney doesn’t like the former president, so he was a target.  In most tax investigations, if the business admits liability and agrees to pay the tax and penalties criminal indictments don’t happen.  However, if you’re a celebrity or a politician (or worse, both), the ‘normal’ rules don’t apply and you’re a target.  You need to be clean, because you will be audited.

(An interesting fact is that President Trump a few years ago noted that he had been audited almost constantly over time.  Yet the IRS didn’t come after him.  It may be that they didn’t see the information that the Manhattan D.A. saw, or it may be they didn’t find anything illegal.)

The Trump Organization’s attorney noted he’s never seen such an indictment; that when companies do things like this they normally pay a civil fine (along with the tax, penalties and interest).  Is this prosecution politically motivate?  Absolutely, and here I agree with the critics.  There’s no doubt that if it were my business accused of this we would have been offered that.

Still, the scheme (if true) is quite brazen and decidedly wrong.  It will be interesting to see how this plays out over the next year or so.

 

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Posted in New York | Comments Closed

Bozo Tax Tip #3: Move Without Moving!

Wednesday, May 12th, 2021
Nearly ten years ago, we moved from Irvine, California to Las Vegas. The home in Irvine was sold, a home was purchased in Las Vegas, and the belongings went from the Golden State to the Silver State. Cars were re-registered, doctors changed, and no one would say that we didn’t become Las Vegas residents. But some people like to have it both ways. Nevada’s income tax rate is a very round number (0%), while California’s maximum income tax rate is a ridiculous (in my opinion) 13.3%. That certainly could drive individuals to move in name only. California’s Franchise Tax Board (FTB) realizes that, and they (along with New York State) lead the country in residency audits. If you really do relocate, a residency audit is a minor annoyance. But let’s say you reside in Silicon Valley, and you buy a home in Reno but keep your home in Los Altos. Did you move? Or did you just move in name? The Bozo strategy is the latter: moving in name only. I’ll just have that little home in Reno, spend the ski season in Nevada but really continue to live in Los Altos. In a residency audit, the FTB will look at where you’re actually spending time, where you’re spending money (if eight months of the year you’re patronizing businesses in Silicon Valley, it doesn’t look like you really moved), and a variety of other factors. ( The FTB has an excellent Residency and Sourcing Manual that explains California laws on the subject.) Given the current pandemic, state revenues are being squeezed. The one government agency where increasing employees increases revenues is the tax agency (especially employees in audit). While I expect to see states cut employees, I’ll be surprised to see anything but minor cuts in tax agencies. We’re also likely to see an increase in audits looking at telecommuting issues. In any case, if you move in name only you’re painting a target on your back for a residency audit.

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Posted in California, New York | Comments Closed

Onwards and Upwards Into the 21st Century!

Thursday, September 24th, 2020

Yes, the 21st Century began 20 years ago, but today we welcome New York into the new millennium. The New York legislature passed (and Governor Cuomo signed into law) Senate Bill S8832 allowing taxpayers to electronically sign New York signature documents on tax returns. This should go live in the very near future (probably within two weeks).

New York was one of just three states (the others are the District of Columbia and Minnesota) that did not allow e-signatures. Federal e-signatures (and state e-signatures) require a taxpayer to complete “knowledge” questions (so the taxpayers can prove they are who they say they are).

During the peak of the pandemic, New York temporarily allowed e-signatures. It’s about to be permanent, and that’s a good thing for all.

Posted in New York | Comments Closed

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