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SALT TALK: Counting Days: The Tax Consequences of Getting Sick

Posted by Wayne Berkowitz CPA, J.D., LL.M. on Sep 5, 2017 10:33:04 AM
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For those of you familiar with the comic strip Dilbert, my favorite strip ever involves Dilbert pointing out to his boss that they did an extensive research study and determined that forty percent of sick days are taken on Monday and Friday. (For those of you who don’t have similarly warped senses of humor, Monday and Friday are forty percent of the five day work week.)  While New York doesn’t care what day of the week you are sick, getting ill in New York can have serious consequences for your day count and the statutory residency test.

I’ve pointed out that there is “no shopping or dining exception” but fortunately there is a limited medical day exemption. The State’s Audit Guidelines have adopted a policy that confinement to a medical institution for any reason in New York does not constitute a day in New York. This policy is significantly more generous than the much harder stance taken by auditors in the past which essentially required the taxpayer to experience a significant medical emergency and be carted off to the hospital involuntarily.

Note however that the Guideline provides a clear out only if the taxpayer is confined to a medical institution. So if you have surgery, elective or not, and can’t leave the hospital for a week, your day count won’t be impacted. However, New York is home to many of the world’s leading medical institutions and often patients will travel here for periods of outpatient treatment. These treatments may allow them to leave the medical facility, but realistically eliminate any possibility of leaving the immediate vicinity.

A strict reading of the Guidelines doesn’t help here. Interestingly, the Guidelines do state “[a]udit recognizes that the issue of medical days spent in New York whether to receive inpatient or outpatient care is a sensitive one for the taxpayer and should be handled accordingly by the auditor in consultation with his team leader.”

This leaves the patient somewhat at the mercy of the auditor. In most cases, I have experienced a high degree of cooperation and understanding from auditors when exercising this discretion.  Being prepared in advance and knowing the rules has been the key to getting the benefit of the doubt in these cases.

If you have any questions about your day count and the New York statutory residency test, please call or email me at wberkowitz@berdonllp.com or contact your Berdon Advisor.

Wayne K. Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

Topics: SALT TALK

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