Receiving a Notice of Determination from the New York Department of Taxation and Finance can be alarming, especially when the assessment includes years of back taxes, penalties, and interest. However, you have the right to challenge the assessment through several levels of review.
Understanding the Assessment
A Notice of Determination is the DTF’s formal assertion that you owe additional tax. It includes:
- Tax periods covered
- Type of tax (income, sales, etc.)
- Amount of additional tax
- Penalties assessed
- Interest calculated through the assessment date
- Total amount due
Your Response Options
You have 90 days from the date of the Notice of Determination to:
- Pay the assessment (ends the matter but you lose the right to challenge)
- Request a conciliation conference (informal review)
- File a petition with the Division of Tax Appeals (formal hearing)
Missing the 90-day deadline means the assessment becomes final and you lose your right to challenge it.
Option 1: Conciliation Conference
A conciliation conference is an informal meeting with the Bureau of Conciliation and Mediation Services (BCMS). Benefits include:
- Informal process: No formal rules of evidence
- Settlement-oriented: BCMS conferees are authorized to settle cases
- Faster resolution: Typically 4-8 months
- Lower cost: Less expensive than formal hearings
- Preserves appeal rights: If unsuccessful, you can still petition the Division of Tax Appeals
How Conciliation Works:
- File Form CMS-1 (Request for Conciliation Conference) within 90 days
- Submit supporting documentation explaining why the assessment is wrong
- Attend the conference (in-person or by phone) with the BCMS conferee
- Negotiate a resolution or receive a Conciliation Order
If you disagree with the Conciliation Order, you have 90 days to petition the Division of Tax Appeals.
Option 2: Division of Tax Appeals
The Division of Tax Appeals (DTA) is an independent forum for formal hearings. This process involves:
- File Form TA-P (Petition) within 90 days of the Notice of Determination
- Discovery: Exchange of documents and information with the DTF
- Pre-hearing conference: Discuss settlement and narrow issues
- Formal hearing: Present evidence and witnesses before an Administrative Law Judge
- ALJ determination: Written decision with findings of fact and conclusions of law
- Appeal to Tax Appeals Tribunal: Either party can appeal the ALJ’s decision
Timeline: 12-24 months from petition to final determination
Grounds for Challenge
Common reasons to challenge a DTF assessment:
1. Factual Errors
- The DTF miscalculated your income
- They included income that wasn’t yours
- They failed to credit payments you made
- They applied the wrong tax rate
2. Legal Errors
- The DTF misapplied the law
- They taxed income that isn’t NY source income
- They assessed penalties without proper grounds
- They exceeded the statute of limitations
3. Procedural Errors
- The DTF didn’t provide proper notice
- They didn’t follow required audit procedures
- They denied you the right to present evidence
4. Reasonable Cause
- You had reasonable cause for any underpayment
- You relied on professional advice
- DTF guidance was unclear or incorrect
Burden of Proof
In most cases, the burden is on you to prove the assessment is wrong. The DTF’s determination is presumed correct unless you present evidence to overcome that presumption.
Exceptions: The burden shifts to the DTF if:
- The assessment is “arbitrary and capricious”
- The DTF failed to follow proper procedures
- You maintained adequate records and cooperated with the audit
Settlement Opportunities
Most cases settle before a formal hearing. Settlement negotiations may involve:
- Reducing the tax assessment based on additional evidence
- Abating penalties based on reasonable cause
- Agreeing on a payment plan for the settled amount
- Compromising on disputed legal or factual issues
What Not to Do
Common mistakes when challenging assessments:
- Ignoring the notice (the 90-day deadline is absolute)
- Paying under protest (payment generally waives your right to challenge)
- Filing incomplete petitions (missing information can result in dismissal)
- Representing yourself in complex cases (tax law and procedure are complicated)
- Missing deadlines (late filings are dismissed)
Statute of Limitations
The DTF generally has 3 years from the due date of your return to assess additional tax. However, the statute extends to:
- 6 years if you understated income by more than 25%
- Unlimited if you didn’t file a return or filed a fraudulent return
If the DTF assessed tax outside the statute of limitations, that’s a strong ground for challenge.
Interest Continues to Accrue
While you’re challenging an assessment, interest continues to accrue on any tax ultimately determined to be due. This can add thousands to your final bill if the challenge takes 12-18 months.
Our Approach
We challenge DTF assessments by:
- Analyzing the assessment for factual and legal errors
- Gathering evidence to support your position
- Determining the best forum (conciliation vs. DTA)
- Presenting compelling arguments for reduction or elimination
- Negotiating settlements when appropriate
- Representing you at hearings if necessary
Don’t accept a DTF assessment without exploring your options. Contact us within the 90-day deadline to discuss your challenge strategy.
