Father inlaw taxes: pension taxation

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BlackcatCA
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Joined: Sat Jan 20, 2018 2:55 pm

Father inlaw taxes: pension taxation

Post by BlackcatCA » Sat Jan 20, 2018 3:14 pm

I am new to the forum, but have been reading for a while and learning a lot so thank you.

Situation: My father in law used to live in CA and moved to NY a few years ago. However he uses our address for tax purposes because my husband does his father's taxes for many years, federal and CA state tax. This year I am taking over this duty, and have been doing some research. I learn that in NY state, pension income can be excluded from NY state taxes up to $20,000, whereas CA taxes the entire amount. Given that FIL's income is mostly SS and private pension, this implies that he may have overpaid taxes for a few years.

Questions:
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?

Thank you all in advance for any advice.

HJG0989
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Re: Father inlaw taxes: pension taxation

Post by HJG0989 » Sat Jan 20, 2018 4:23 pm

How would you explain you were using a false address for residency? I would think someone (your husband?) could get in trouble for falsifying information.

BlackcatCA
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Re: Father inlaw taxes: pension taxation

Post by BlackcatCA » Sat Jan 20, 2018 7:32 pm

FIL did not want to change his address to NY, for reasons unclear to me.
I want to know how to remedy the situation and do the right thing moving forward, hence this post.
Any constructive advice?

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FiveK
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Re: Father inlaw taxes: pension taxation

Post by FiveK » Sat Jan 20, 2018 7:41 pm

BlackcatCA wrote:
Sat Jan 20, 2018 3:14 pm
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?
1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed. But see #2 for whether that would be defensible.
2) Possible? Sure. But is it defensible? E.g., does FIL have a drivers license and if so from what state? Does he pay utility bills in only one state? Where is he registered to vote? Etc.

delamer
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Re: Father inlaw taxes: pension taxation

Post by delamer » Sat Jan 20, 2018 7:58 pm

BlackcatCA wrote:
Sat Jan 20, 2018 7:32 pm
FIL did not want to change his address to NY, for reasons unclear to me.
I want to know how to remedy the situation and do the right thing moving forward, hence this post.
Any constructive advice?
It isn’t a question of your FIL not wanting to change his address, but what the legal requirements are to be a resident of a state.

It seems to me that you’d be opening a hornet’s nest to go back and try to change his residency. Surely CA would not just accept at face value that he was not a resident after he filed there for certain years. And you might have to pay penalties in NY for missing filing dates for earlier years.

Nate79
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Re: Father inlaw taxes: pension taxation

Post by Nate79 » Sat Jan 20, 2018 8:29 pm

Hire a professional. Either you and your husband don't know what you are doing or you actively participate in tax fraud. Hopefully it's the former.

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celia
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Re: Father inlaw taxes: pension taxation

Post by celia » Sat Jan 20, 2018 9:41 pm

CA resident: https://www.lexisnexis.com/legalnewsroo ... poses.aspx

NY resident: https://www.tax.ny.gov/pit/file/pit_definitions.htm

Also see http://www.law.cuny.edu/admissions/tuit ... idency.pdf

Note that if FIL now lives in one of the NYC Burroughs, there is a city income tax too.

carolinaman
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Re: Father inlaw taxes: pension taxation

Post by carolinaman » Sun Jan 21, 2018 6:01 am

Nate79 wrote:
Sat Jan 20, 2018 8:29 pm
Hire a professional.
I agree you need to hire a professional in order to make sure this matter is corrected going forward and to avoid penalties. My guess is the pro would advise changing state of residency moving forward but would avoid trying to amend past returns as this would raise many questions by NY and CA which could subject your FIL to penalties and fines.

I understand that some states, especially high tax states, are aggressive in challenging changes in state residency. For that reason, your FIL needs to meet the requirements for changing of state residency and be able to prove that.

rkhusky
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Re: Father inlaw taxes: pension taxation

Post by rkhusky » Sun Jan 21, 2018 8:05 am

carolinaman wrote:
Sun Jan 21, 2018 6:01 am
I understand that some states, especially high tax states, are aggressive in challenging changes in state residency. For that reason, your FIL needs to meet the requirements for changing of state residency and be able to prove that.
+1. I've heard that CA is very aggressive about residency.

BlackcatCA
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Re: Father inlaw taxes: pension taxation

Post by BlackcatCA » Sun Jan 21, 2018 2:44 pm

Thank you all for the advice--really helps me consolidate a plan. I will definitely consider hiring a pro, and get my FIL to gather evidence of residency. He did change his driver license to NY last year (?) so that can be a start, at least for the 2017 filings.

Alan S.
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Re: Father inlaw taxes: pension taxation

Post by Alan S. » Sun Jan 21, 2018 6:28 pm

Yes, both CA and NY are very stringent in requiring departed residents to provide documentation of established residency elsewhere. In this case CA already holds these taxes, so that will further increase the burden of proof they require to issue refunds.

Therefore, I wouldn't file back tax returns in NY until refunds are secured from CA, although filing the current state return to NY should not trigger any questions from NYS regarding when residency was established.

MarkNYC
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Re: Father inlaw taxes: pension taxation

Post by MarkNYC » Sun Jan 21, 2018 7:16 pm

It's true that CA and NY can be aggressive in challenging taxpayers who have questionable residency situations. But given their limited resources, the likelihood of either state challenging a specific taxpayer's tax return is generally correlated with the amount of potential tax involved.

So, how much is the annual pension income, and how much tax was incorrectly paid to CA for 2014, 2015, and 2016? The answers will help help determine the most practical way to proceed.

Note: the mailing address listed on a tax return has no relevance in determining which state tax return(s) must be filed for that year.

MarkNYC
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Re: Father inlaw taxes: pension taxation

Post by MarkNYC » Sun Jan 21, 2018 7:26 pm

FiveK wrote:
Sat Jan 20, 2018 7:41 pm
BlackcatCA wrote:
Sat Jan 20, 2018 3:14 pm
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?
1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

delamer
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Re: Father inlaw taxes: pension taxation

Post by delamer » Sun Jan 21, 2018 8:00 pm

MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm
FiveK wrote:
Sat Jan 20, 2018 7:41 pm
BlackcatCA wrote:
Sat Jan 20, 2018 3:14 pm
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?
1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?

MarkNYC
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Joined: Mon May 05, 2008 7:58 pm

Re: Father inlaw taxes: pension taxation

Post by MarkNYC » Sun Jan 21, 2018 8:12 pm

delamer wrote:
Sun Jan 21, 2018 8:00 pm
MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm
FiveK wrote:
Sat Jan 20, 2018 7:41 pm
BlackcatCA wrote:
Sat Jan 20, 2018 3:14 pm
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?
1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?
If, for example, the taxpayer incorrectly paid $5K in CA tax in 2016 and deducted the $5K as a federal itemized deduction in 2016, then in 2018 amends the 2016 CA return and receives all $5K back as a refund, the $5K state refund received in 2018 will be taxable income in 2018 to the extent the $5K deducted in 2016 provided a federal tax benefit.

The 2016 federal return is unaffected by the 2016 CA amended return.

delamer
Posts: 3622
Joined: Tue Feb 08, 2011 6:13 pm

Re: Father inlaw taxes: pension taxation

Post by delamer » Sun Jan 21, 2018 8:20 pm

MarkNYC wrote:
Sun Jan 21, 2018 8:12 pm
delamer wrote:
Sun Jan 21, 2018 8:00 pm
MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm
FiveK wrote:
Sat Jan 20, 2018 7:41 pm
BlackcatCA wrote:
Sat Jan 20, 2018 3:14 pm
1) Is there a mechanism to get tax refund from CA, and re-file in NY?
2) For 2017, is it possible to file NY state instead of CA?
1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?
If, for example, the taxpayer incorrectly paid $5K in CA tax in 2016 and deducted the $5K as a federal itemized deduction in 2016, then in 2018 amends the 2016 CA return and receives all $5K back as a refund, the $5K state refund received in 2018 will be taxable income in 2018 to the extent the $5K deducted in 2016 provided a federal tax benefit.

The 2016 federal return is unaffected by the 2016 CA amended return.
Bit if there were multiple tax years that the OP refiled for her FIL, wouldn’t they all be affected?

MarkNYC
Posts: 1265
Joined: Mon May 05, 2008 7:58 pm

Re: Father inlaw taxes: pension taxation

Post by MarkNYC » Sun Jan 21, 2018 8:35 pm

delamer wrote:
Sun Jan 21, 2018 8:20 pm
MarkNYC wrote:
Sun Jan 21, 2018 8:12 pm
delamer wrote:
Sun Jan 21, 2018 8:00 pm
MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm
FiveK wrote:
Sat Jan 20, 2018 7:41 pm

1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?
If, for example, the taxpayer incorrectly paid $5K in CA tax in 2016 and deducted the $5K as a federal itemized deduction in 2016, then in 2018 amends the 2016 CA return and receives all $5K back as a refund, the $5K state refund received in 2018 will be taxable income in 2018 to the extent the $5K deducted in 2016 provided a federal tax benefit.

The 2016 federal return is unaffected by the 2016 CA amended return.
Bit if there were multiple tax years that the OP refiled for her FIL, wouldn’t they all be affected?
There should be no "refiling" of any prior year federal return. Every state refund received in the current year, regardless of how many different years' refunds are received, will be taxable in the year received to the extent each separate state refund provided a federal tax benefit in the year deducted.

Katietsu
Posts: 1109
Joined: Sun Sep 22, 2013 1:48 am

Re: Father inlaw taxes: pension taxation

Post by Katietsu » Sun Jan 21, 2018 10:48 pm

delamer wrote:
Sun Jan 21, 2018 8:20 pm
MarkNYC wrote:
Sun Jan 21, 2018 8:12 pm
delamer wrote:
Sun Jan 21, 2018 8:00 pm
MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm
FiveK wrote:
Sat Jan 20, 2018 7:41 pm

1) In short, you would file amended state returns. If that changes state tax amounts, and those state tax amounts were used as itemized deductions on the federal returns, amended federal returns may also need to be filed...
Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?
If, for example, the taxpayer incorrectly paid $5K in CA tax in 2016 and deducted the $5K as a federal itemized deduction in 2016, then in 2018 amends the 2016 CA return and receives all $5K back as a refund, the $5K state refund received in 2018 will be taxable income in 2018 to the extent the $5K deducted in 2016 provided a federal tax benefit.

The 2016 federal return is unaffected by the 2016 CA amended return.
Bit if there were multiple tax years that the OP refiled for her FIL, wouldn’t they all be affected?
The federal would be affected in the year those refunds and payments were made. So if 2014,2015 and 2016 returns were amended on 2018, any refunds and payments resulting would be part of the 2018 information regardless of the tax year being amended.

If FIL just got a NY drivers license in 2017, it sounds like that may be a good sign of his intent to be a permanent NY resident in 2017. Though, in NY, you can be a NY resident for tax purposes even without intending to stay depending on the circumstances.

delamer
Posts: 3622
Joined: Tue Feb 08, 2011 6:13 pm

Re: Father inlaw taxes: pension taxation

Post by delamer » Mon Jan 22, 2018 10:50 am

Katietsu wrote:
Sun Jan 21, 2018 10:48 pm
delamer wrote:
Sun Jan 21, 2018 8:20 pm
MarkNYC wrote:
Sun Jan 21, 2018 8:12 pm
delamer wrote:
Sun Jan 21, 2018 8:00 pm
MarkNYC wrote:
Sun Jan 21, 2018 7:26 pm

Amended federal tax returns would NOT need to be filed, because the amount of state taxes actually paid during the earlier years is not going to change.

But each year on your federal return you have to “true up” for under- or over-payment of your state taxes for the previous year.

So why wouldn’t the same thing apply to misreporting too?
If, for example, the taxpayer incorrectly paid $5K in CA tax in 2016 and deducted the $5K as a federal itemized deduction in 2016, then in 2018 amends the 2016 CA return and receives all $5K back as a refund, the $5K state refund received in 2018 will be taxable income in 2018 to the extent the $5K deducted in 2016 provided a federal tax benefit.

The 2016 federal return is unaffected by the 2016 CA amended return.
Bit if there were multiple tax years that the OP refiled for her FIL, wouldn’t they all be affected?
The federal would be affected in the year those refunds and payments were made. So if 2014,2015 and 2016 returns were amended on 2018, any refunds and payments resulting would be part of the 2018 information regardless of the tax year being amended.

If FIL just got a NY drivers license in 2017, it sounds like that may be a good sign of his intent to be a permanent NY resident in 2017. Though, in NY, you can be a NY resident for tax purposes even without intending to stay depending on the circumstances.
Got it, regarding the tax filings.

GreenGrowTheDollars
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Re: Father inlaw taxes: pension taxation

Post by GreenGrowTheDollars » Mon Jan 22, 2018 1:53 pm

Just to be clear: the mailing address and the state of residency are two entirely different things. My folks used my address as their mailing address because I handled their finances. Their CPA still filed using the correct state tax return.

I'd probably see a CPA/enrolled agent and get professional advice on the residency issue.

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