IRS Audit & Refund Notice Assistance for High Net Worth Individuals in New York City

Yes. After years of auditing the wealthy at low rates, the IRS has rebuilt its high-income enforcement and aimed new funding squarely at taxpayers earning over $1 million and at the large partnerships and complex returns that high earners file. As a result, audit rates on top-income returns now run several times the rate for an ordinary filer, and the gap is widening as the agency hires and trains examiners for exactly this work. The reason is partly arithmetic, a single adjustment on a large return collects far more than one on a wage earner’s 1040, so the IRS gets a better return on its examination effort by looking at wealthy taxpayers. It is also about complexity, a high net worth return carries partnership K-1s, large charitable deductions, foreign accounts, and entity structures, each of which is a place an examiner can probe. None of this means a correct return will lose an audit, it means the odds of being looked at are higher, so the return has to be built to be examined. We prepare returns that are fully supported and keep the documentation that backs every large position, so if the notice comes the answer is already on file rather than something we have to reconstruct under pressure.

Gift and estate tax returns are examined at rates far higher than income tax returns, and when one is, the fight is almost always about valuation. On a Form 709 gift tax return, the IRS typically challenges the discount you took on a transferred interest, the lack-of-control and lack-of-marketability discount on a family partnership stake, for example, arguing the gift was worth more and used more of your exemption than you claimed. On a Form 706 estate tax return, the examiner can challenge the value of nearly every illiquid asset, the closely held business, the real estate, the art, because a higher value means a higher tax. The way these are won is decided before the exam, by filing a return supported by a qualified appraisal and by making adequate disclosure of the gift, which starts the statute of limitations running so the IRS cannot come back years later and revalue it. When an examination does open, we represent you, respond to the information requests, and defend the valuations with the appraisals and documentation that back them. A well-supported number usually holds, while an unsupported one invites an adjustment plus penalties and interest, so the preparation and the defense are really the same job done at two different times.

A New York residency audit is the state’s challenge to your claim that you left, and it is one of the most aggressive audit programs in the country precisely because the income at stake is so large. New York taxes residents at a top rate of 10.9 percent, and a New York City resident adds up to 3.876 percent on top, so when a wealthy taxpayer moves to Florida or another no-tax state and stops filing as a resident, the state has a strong incentive to test the move. The audit examines two questions. Domicile, whether you genuinely changed your permanent home, weighing where you spend your time, where your family and belongings are, your home, your business ties, and your filings. And statutory residency, a separate test that can tax you as a resident regardless of domicile if you keep a place to live in New York and spend more than 183 days there, counting any part of a day as a full day. The state pulls credit card statements, cell phone records, and EZ-Pass data to count your days. Surviving it means the move was real and documented, the home sold or rented out, the days under the line, the license and registrations changed, the contemporaneous record kept. We help build that record before you move and represent you if the state challenges the change after.

The first thing to do is not respond on your own and not ignore it, because both reactions tend to make a manageable notice worse. Many notices are narrow, a question about one item, a proposed adjustment, a request for a document, and a calm, accurate, well-supported response resolves them. But a high net worth taxpayer’s notice can also be the opening of a broad examination, and what you say in the first reply can widen the inquiry or concede ground you did not need to give up. The move is to bring it to us before you answer. We read the notice to understand exactly what is being asked and what is at risk, confirm whether the agency is right or wrong on the point, and prepare a response that addresses the specific issue without volunteering information that invites a larger look. If it is a full exam, we step in under a power of attorney and deal with the examiner directly, so you are not negotiating your own audit or answering questions off the cuff. Deadlines on these notices are real and missing one can cost you appeal rights, so the sooner we see it the more options remain. The worst outcomes we see come from taxpayers who either panicked and over-responded or set the letter aside until a deadline passed.

For most audits and notices, a CPA can represent you fully before the IRS and the New York tax department, and that is the work we do. Under a power of attorney we stand in your place with the examiner, respond to information requests, present and defend your positions, and handle the back-and-forth so you are not dealing with the agency directly. That covers the large majority of high net worth exams, income tax audits, gift and estate return examinations, and residency audits, where the dispute is about facts, documentation, and valuation rather than a legal interpretation headed for court. There are situations where a tax attorney should be involved, when there is exposure to fraud or a criminal referral, when the matter is likely to be litigated, or when you need the attorney-client privilege that a CPA relationship does not fully provide. In those cases we work alongside your attorney rather than instead of them, often doing the financial and accounting analysis while the attorney handles the legal strategy and the privileged communications. We will tell you honestly which situation you are in. For the ordinary run of audits and notices, though, we can represent you start to finish, and bringing in an attorney is the exception rather than the rule.