SALT TALK: Audit Burden of Proof - Where Was I and the IoT

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jan 14, 2019 11:30:00 AM
Find me on:

My regular readers are now experts in the concept of statutory residency: Have a permanent place of abode and be present in the jurisdiction for more than 183 days and you magically become a tax resident. You also know it is your burden to prove you were not in the jurisdiction and the taxing authorities are under no obligation to prove your presence.

How is it humanly possible to meet the burden of proof, you ask. Well, sometimes it is easy. You leave for Florida the day after Thanksgiving and don’t come back until July 4th. Of course, you saved your plane tickets to and from Florida. You also charged something every single day and played golf at least five times a week. Any reasonable auditor is going to agree that you have met your burden of proof and there is no doubt you weren’t in the jurisdiction.

Of course, none of my cases are this easy. Typically, they will involve a Long Island, Westchester, New Jersey, or Connecticut domiciliary, who happens to have a place in New York City. Now the fun begins. You work outside the City. You have followed our advice and kept a detailed contemporaneous calendar with third party documentation corroborating 95% of the entries on your calendar.

We present the calendar to the auditor and think that we have it covered. Not so fast, the auditor says: “I noticed that you live in Northwestern Nassau County and how do I know that you didn’t come to NYC for dinner (a movie, a show, to visit a friend, fill in your own event).” At what point I would say, “Well, Ms. Auditor, here is my client’s EZ Pass and you will notice there isn’t a single charge on any (or all) of the days you are questioning.”

This documentation usually would be enough to make most reasonable auditors go home, but not all are reasonable. I am starting to see a trend where taxing authorities are asking for affirmative proof to show that you weren’t somewhere. It’s hard to prove a negative.

We all know (at least Berdon clients) that auditors subpoena cell phone records, which provide a wealth of information as to where the caller was when the call was made. If you aren’t being forthcoming, it is going to catch up to you these days.

But what about the straight shooter who just can’t document that after a 14-hour day at his office in Great Neck, he didn’t run into NYC to have a drink with his old high school buddy? This got me thinking about IoT or “The Internet of Things.” How can we utilize technology to simplify the torturous process of verifying every minute of our existence? Coming up, we will look at some more interesting approaches.

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

Wayne 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.


About Berdon Blogs

Our experts examine the latest trends, economics, business conditions and industry issues to provide timely information you need to maximize your tax advantages and meet your financial goals.

SALT TALK: Hear an insider’s perspective on the business issues, legislative updates in state and local tax, and tax aspects behind today’s headlines.

T&E TALK: Gain insights into how changes in tax laws, shifts in the financial markets, and regulatory concerns will impact assets and affect preserving and transferring wealth.

TAX TALK: Get an all-inclusive perspective on regulatory changes, industry issues, and trends from our team of multidisciplinary tax professionals – many of whom also hold J.D. and LL.M degrees.

Subscribe to Berdon Blogs

Recent Posts