New York, NY IRS & State Tax Problem Survival Guide

Yes, and this is one of the most important things for New York City taxpayers to understand. The IRS and the New York State Department of Taxation and Finance are entirely separate taxing authorities with separate assessment processes, separate collection procedures, and separate resolution programs. Owing one does not automatically mean you owe the other, but in practice, most New Yorkers who fall behind on their federal taxes also have corresponding state and city liabilities.

The strategies for resolving federal and state tax debts can differ significantly. The IRS offers installment agreements, Offers in Compromise, and Currently Not Collectible status. New York State has its own installment payment agreement program and its own Offer in Compromise process, but the criteria and procedures are different from the federal versions. New York State is also notoriously more aggressive than the IRS in its collection tactics—issuing income execution orders (wage garnishments) and filing state tax warrants that function like liens on your property and appear on your credit report.

Mike Habib, EA handles both federal and state tax resolution for New York taxpayers, coordinating the strategies so that your overall financial outcome is optimized. Negotiating with the IRS and New York State simultaneously requires experience with both systems, and Mike’s practice—which covers all 50 states—gives him the depth of multi-jurisdictional knowledge that a practitioner focused solely on one state cannot provide. His flat fee pricing covers the complete engagement, so you are not paying separate hourly bills for federal and state representation.

This is one of the most contentious and financially significant tax issues facing former New Yorkers, and it has become even more relevant in the post-pandemic era as remote work has enabled thousands of high-income professionals to relocate to states with lower or no income taxes. New York State conducts residency audits with a level of rigor and persistence that is unmatched by any other state, and the financial stakes can be enormous.

New York applies a complex set of factors to determine your tax residency, including the location of your domicile (your permanent home), the number of days you spend in New York, where your business connections are, where your family lives, and where you keep your most prized possessions. The state uses a “five primary factors” test—home, business, time, family, and near and dear items—and auditors will examine everything from cell phone records and E-ZPass data to social media activity and school enrollment records for your children.

Even if you have physically moved, maintaining a home in New York while spending more than 183 days in the state during a tax year can result in a determination that you are still a statutory resident and owe full New York income tax on all of your worldwide income. For high-income earners, this can mean six- and seven-figure assessments.

Mike Habib, EA has defended taxpayers against New York residency audits and understands the documentation and evidence needed to establish that a change of domicile is genuine and complete. His experience with multi-state tax issues across all 50 states is directly relevant, because a successful residency defense requires demonstrating not just that you left New York, but that you established a new domicile in another state. Mike handles these cases on a transparent flat fee basis, giving you cost certainty for what can be a prolonged and document-intensive process.

Quite possibly, and this is an issue that affects hundreds of thousands of workers in the post-pandemic economy. New York’s “convenience of the employer” rule is one of the most aggressive remote worker tax provisions in the country. Under this doctrine, if you work remotely for a New York-based employer and your remote work arrangement is for your own convenience rather than a necessity of the employer, New York can tax your income as if you were physically working in New York—even if you never set foot in the state during the entire tax year.

The practical result is that a software developer living in New Jersey, Connecticut, or Florida who works remotely for a Manhattan-based company may owe New York State income tax on their full salary. If they also owe income tax to their state of residence, they may receive a credit—but the credit rules vary by state, and the math does not always result in a full offset. True double taxation is a real possibility for some workers, and the amounts involved can be substantial.

Mike Habib, EA helps remote workers and their employers navigate this complex multi-state landscape. Whether you need to file amended returns to claim credits, challenge a New York tax assessment based on the convenience rule, or restructure your work arrangement to minimize multi-state tax exposure going forward, Mike’s all-50-states practice gives him the perspective to see the full picture and find the most favorable resolution.

New York City is one of the world’s great freelance economies. Graphic designers, writers, consultants, photographers, actors, musicians, rideshare drivers, and independent contractors of every description make up a huge portion of the city’s workforce. But many freelancers are shocked when they see their first full-year tax bill, because self-employment in New York City triggers a cascade of taxes that employees never see directly.

As a self-employed New Yorker, you owe federal self-employment tax of 15.3 percent on top of your federal income tax. You owe New York State income tax at rates up to 10.9 percent. You owe New York City income tax at rates up to 3.876 percent. And you owe the Metropolitan Commuter Transportation Mobility Tax of 0.34 percent on net self-employment earnings. When you add it all up, a freelancer earning $150,000 can easily face a combined effective tax rate approaching 45 to 50 percent—and if they have not been making quarterly estimated payments, the penalties and interest on top of the underlying liability can be devastating.

Mike Habib, EA works with New York City freelancers and gig workers who have fallen behind on estimated payments, accumulated multi-year tax debts, or received IRS and state notices they do not understand. He helps clients get current, negotiate manageable payment arrangements, and establish a go-forward estimated tax strategy that prevents the same problem from recurring. His flat fee approach is especially valuable for freelancers, who typically operate on tight margins and cannot afford open-ended hourly billing from a large firm.

New York State tax audits are a different animal than IRS audits, and in many ways they can be more intrusive and more aggressive. The New York Department of Taxation and Finance has a well-funded audit division that is particularly active in examining residency issues, unreported income, business tax compliance, and sales tax obligations. State auditors have broad authority to request documentation, subpoena records, and assess penalties.

One key difference is that New York State auditors often focus on issues specific to the state tax code that have no federal counterpart—residency determinations, city income tax allocations, the treatment of pass-through entity income under New York’s PTET election, and compliance with the state’s own estimated tax rules. Another difference is the appeals process: while the IRS has a well-established independent Appeals Office, New York’s administrative hearing process through the Division of Tax Appeals operates under different rules and timelines.

Mike Habib, EA represents taxpayers before both the IRS and state taxing authorities, including the New York Department of Taxation and Finance. His experience with state-level audits across multiple jurisdictions gives him a comparative understanding of how different states operate and what strategies are most effective in each. For New Yorkers facing a state audit, Mike provides the same direct personal representation he brings to federal matters—no handoffs, no junior staff, and a flat fee that covers the engagement from start to resolution.

Payroll tax delinquency is one of the most serious tax problems any business owner can face, and in New York City’s high-cost business environment, it is more common than people realize. When cash flow tightens—as it frequently does for restaurants, retail shops, construction firms, and professional service businesses in the city—the temptation to use withheld payroll taxes to cover operating expenses can be overwhelming. But the IRS treats unpaid payroll taxes as a form of theft from employees, and the consequences are severe.

The IRS can assess the Trust Fund Recovery Penalty, which makes any responsible person within the business personally liable for 100 percent of the unpaid trust fund portion of the payroll taxes. This means your personal assets—your apartment, your savings, your investment accounts—are at risk, not just the business’s assets. New York State has parallel enforcement mechanisms for state withholding taxes, creating a dual layer of personal exposure.

Mike Habib, EA has deep experience defending business owners against Trust Fund Recovery Penalty assessments and negotiating resolutions for payroll tax liabilities at both the federal and state level. His corporate finance background—including years as Controller at Xerox Corporation managing large-scale finance operations and as Director of Finance at AEG—gives him practical insight into the operational realities that lead to payroll tax problems and the financial analysis needed to mount an effective defense. For New York business owners, Mike’s combination of technical tax expertise and corporate finance experience is a rare and valuable resource.

Almost certainly yes, and the question is not whether but when. New York has been at the center of the cryptocurrency revolution—the city is home to major exchanges, crypto hedge funds, and a massive community of individual traders and investors. The IRS has made cryptocurrency enforcement a top priority, issuing John Doe summonses to major exchanges, developing sophisticated blockchain analytics capabilities, and adding a direct cryptocurrency question to the front page of Form 1040.

If you have traded cryptocurrency and have not properly reported your gains, the IRS has multiple avenues for discovering the discrepancy. Exchange-issued 1099 forms, blockchain analysis, and information sharing between exchanges and the IRS all create a data trail. The penalties for unreported cryptocurrency income include accuracy-related penalties of 20 percent, potential fraud penalties of 75 percent, and in willful cases, criminal prosecution.

Mike Habib, EA helps New York cryptocurrency traders and investors come into compliance before the IRS comes knocking. Whether you need to file amended returns to report previously unreported transactions, respond to an IRS notice about cryptocurrency, or defend an audit position involving complex DeFi, staking, or NFT transactions, Mike brings the analytical rigor needed to navigate this rapidly evolving area of tax enforcement. His flat fee structure means you can resolve the issue without worrying about hourly billing that escalates as the complexity of cryptocurrency accounting mounts.

New York City’s immigrant communities are the backbone of entire industries—restaurants, retail, transportation, construction, personal services, and import/export trade. Entrepreneurs who have built thriving businesses from the ground up sometimes find themselves in tax trouble not because of any intent to evade, but because the U.S. tax system is extraordinarily complex, language barriers make professional guidance difficult to access, and the intersection of federal, state, and city tax obligations creates traps that are easy to fall into.

Common issues include failure to make quarterly estimated tax payments, misclassification of employees as independent contractors, unreported cash income in cash-intensive businesses, failure to file FBAR and FATCA reports for foreign bank accounts, and misunderstanding of the tax implications of sending money to family members overseas. Each of these issues carries penalties that can accumulate quickly, and the IRS and New York State do not distinguish between willful noncompliance and honest mistakes when assessing the initial penalties.

Mike Habib, EA serves the diverse business communities of New York with patience, respect, and the specialized knowledge needed to untangle complex multi-year tax situations. He helps immigrant business owners get into compliance, resolve accumulated debts through installment agreements or Offers in Compromise, and establish systems to stay compliant going forward. His flat fee model is particularly important for small business owners who need to know exactly what professional representation will cost before they commit.

New York State has powerful collection tools, and in some cases, it can act more quickly than the IRS. When you owe state taxes, the Department of Taxation and Finance can issue an income execution to your employer directing them to withhold a percentage of your wages. The state can also issue a levy on your bank account, freezing and seizing funds to satisfy your debt. And unlike the IRS, which generally must send a series of notices before taking enforcement action, New York State can move relatively quickly once a tax warrant has been filed.

A state tax warrant is essentially a judgment that gives the state the legal authority to pursue collection actions. Once filed, it becomes a public record, appears on your credit report, and gives the state the ability to seize assets, garnish wages, and even suspend your professional licenses in certain cases. For New Yorkers who depend on professional licensing—real estate agents, healthcare providers, attorneys, financial advisors—this last consequence can be career-ending.

Mike Habib, EA acts quickly when clients face imminent state collection actions. He contacts the Department of Taxation and Finance directly, negotiates levy releases and wage garnishment modifications, and works to establish compliant payment arrangements that stop the enforcement actions. His experience handling state tax collections across all 50 states gives him a comparative understanding of how New York’s system operates and what arguments are most effective in securing relief.

Wall Street compensation structures—year-end bonuses, deferred compensation, restricted stock units, carried interest, partnership distributions—create a perpetual estimated tax headache. Your income in any given year is unpredictable until the final numbers come in, and the IRS underpayment penalty applies when you have not paid at least 90 percent of your current-year liability or 110 percent of your prior-year liability (for AGI over $150,000) through withholding and estimated payments by each quarterly deadline.

For high-income financial professionals, the underpayment penalty itself can be thousands or tens of thousands of dollars. And when these penalties accumulate over multiple years alongside complex investment income, partnership K-1 allocations, and the alternative minimum tax, the resulting IRS and state notices can be overwhelming.

Mike Habib, EA works with Wall Street professionals and high-income New Yorkers to resolve estimated tax penalties and establish withholding and payment strategies that prevent future exposure. His corporate finance background gives him a fluent understanding of complex compensation arrangements, and his direct personal involvement means your tax situation gets the focused attention it deserves—not the assembly-line treatment of a large firm where your case is one of hundreds.