New York income tax withholding auditsWhat businesses need to know

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Foreword 04

New York income tax withholding audits: what businesses need to know 07

New York state income tax withholding requirements 09

T eleworkers and the ‘ conv enience of the emp loy er’ rule 0 9

B usiness trav elers 0 9

New York’s income tax withholding audit process 10

T he inf ormation document req uest 1 0

A udit tests 1 0

1 . M ultistate nonresident withholding f or regular wages 1 2

2 . T railing comp ensation 1 2

3 . I np atriate/ exp atriate work assignments 1 34 . I ncome tax withholding tables and withholding

allowance certificates  1 3

Measuring income tax withholding audit risk 14

What can businesses do? 16

3New York income tax withholding audits — what businesses need to know

E rnst & Young L L P ’ s emp loy ment tax and risk controv ersy p rof essionals hav e observ ed a consistent increase in income tax withholding audits initiated by the New York S tate Department of Taxation and Finance. Currently, specific industry sectors appear to be the target, in particular financial services, pharmaceuticals, and media and entertainment. Over the last three fiscal years, audit assessments have increased from $33.2 million in fiscal year 2014 to in excess of $62 million in fiscal year 2016. 

T he D ep artment has had y ears to p erf ect its techniq ues, so these audits leav e no stone unturned in identif y ing anomalies that might lead to a hef ty assessment. R esp onding to the D ep artment’ s inf ormation document req uest ( I D R ) can be daunting, and f or the inexp erienced, av oiding a costly closing agreement is imp robable.

T o help businesses understand and mitigate their risk, E rnst & Young L L P has p rep ared this comp rehensiv e sp ecial rep ort, which examines the New York income tax withholding audit p rocess, including its key areas of f ocus and comp liance gap s where assessments are most p rev alent.

T his rep ort is a must- read f or executiv es and their delegates resp onsible f or tax comp liance, gov ernance and risk assessment.

S incerely ,

R ichard F errari P artner E rnst & Young L L P

F oreword

New York income tax withholding audits — what businesses need to know4

Richard Ferrari Ernst & Young LLP Partner I ndirect T ax + 1 2 1 2 7 7 3 5 7 1 4 richard. f errari@ ey . com

Meet the authors

Peter Berard Ernst & Young LLP Senior Manager E mp loy ment T ax A dv isory + 1 2 1 2 7 7 3 4 0 8 4 p eter. berard@ ey . com

Francis Cannataro Ernst & Young LLP Staff/Assistant E mp loy ment T ax A dv isory +1 212 773 4614 f rancis. cannataro@ ey . com

New York income tax withholding audits — what businesses need to know 5

The New York State Department of Taxation and Finance reported that assessments from income tax withholding audits reached $33.2 million in fiscal year 2014, rose to $50.8 million in fiscal year 2015 and are expected to exceed $62 million in fiscal year 2016.

New York income tax withholding audits — what businesses need to know6

New York income tax withholding audits: what businesses need to know

New York continues to serve as a global capital for finance, innov ation and headq uarters f or multinational corp orations. Accordingly, it is the beneficiary of extensive executive business trav el. New York also leads the country in its p ursuit of withholding tax audit examinations, holding emp loy ers resp onsible to withhold, at source, income taxes on earnings associated with serv ices p erf ormed in the state.

New York income tax withholding audits are nothing new. I n f act, in 2 0 0 4 , the New York S tate D ep artment of T axation and F inance p ublished Withholding Tax Field Audit Guidelines to streamline and standardiz e the audit examination p rocess f or its emp loy ment tax auditors. These guidelines are lengthy and specific, providing detailed instructions f or v arious p rocedural asp ects of an income tax withholding audit.

W hat is new about New York’ s income tax withholding audits is the increase in both scop e and assessments ov er the last three y ears. T he D ep artment rep orted that assessments f rom income tax withholding audits reached $33.2 million in fiscal year 2014, rose to $50.8 million in fiscal year 2015 and are expected to exceed $62 million in fiscal year 2016. 

I n this same three- y ear time f rame, E rnst & Young L L P ’ s audit def ense p rof essionals noticed heightened f ocus by the D ep artment on the financial services sector, as well as other key industries, such as p harmaceuticals and media and entertainment.

D esp ite the f req uency with which the D ep artment initiates examinations and the v olume of current audits, nothing indicates it will turn its attention away f rom p ursuing other industry sectors.

E rnst & Young L L P ’ s audit def ense p rof essionals hav e additionally observ ed that emp loy ers already the subj ect of a New York income tax withholding audit are j ust as suscep tible to subseq uent audit selection as other businesses.

C onsidering the rev enue these audit examinations continue to generate, there is little to suggest that the D ep artment will sof ten its p osture, and the current audit trends will likely continue into the f oreseeable f uture.

E mp loy ers are no longer asking whether they should comp ly with New York state withholding tax guidelines. R ather, they are seeking sup p ort to bring their p olicies and p rocedures into comp liance with New York’ s comp lex income tax withholding rules.

When is the last time the business was subject to a state income tax withholding audit?

Four or more years ago

9%

Two to three years ago

10%

In the last year

21%

2015 Bloomberg BNA and Ernst & Young LLP multistate payroll tax compliance survey

New York income tax withholding audits — what businesses need to know 7

New York’s convenience of the employer rule expands the reach of the income tax withholding requirement much further than some employers realize.

8 New York income tax withholding audits — what businesses need to know

New York’ s withholding tax audit p rocess is sup p orted by its laws, regulations, technical documents, 1 audit guidelines and historical audit p recedents. I n p articular, the audit is p rimarily concerned with an emp loy er’ s obligation to withhold New York state ( and local) income taxes owed on wages sourced to the state.

G enerally , New York tax law req uires emp loy ers maintaining an office or transacting business within the state to deduct and withhold New York p ersonal income tax f rom taxable wages p aid to a resident or nonresident indiv idual. 2  Specifically, employers must withhold New York income tax f rom all wages p aid to residents, regardless of where they p erf orm their serv ices. H owev er, f or nonresidents, only wages p aid f or serv ices p erf ormed within the state are subj ect to income tax withholding. I n this context, New York wages subj ect to income tax withholding are those wages subj ect to f ederal income tax withholding. 3 A s a result, an emp loy er must withhold New York state tax on all taxable comp ensation, including regular wages, trailing comp ensation ( e. g. , stock op tions, restricted stock and def erred comp ensation) , bonuses and sev erance p ay ments.

E mp loy ees may also be subj ect to New York C ity and Yonkers income tax withholding, and comp liance with these req uirements is also rev iewed in a New York state withholding tax audit.

Teleworkers and the ‘convenience of the employer’ rule A lthough nonresidents are ty p ically taxed only on wages earned f rom serv ices p erf ormed within the state, some excep tions ap p ly . Of significant note, New York is one of the few states that apply the “ conv enience of the emp loy er” rule in determining when an out- of - state teleworker is subj ect to New York income tax. U nder this rule, nonresidents assigned to a p rimary work location within the state must hav e 1 0 0 % of their wages sourced to New York if their serv ices are rendered outside of the state f or the emp loy ee’ s conv enience rather than f or the necessity of the emp loy er and if the emp loy ee p erf orms some amount of serv ices within New York. A n exception applies for work performed at a bona fide employer office outside of New York, but what constitutes a bona fide employer office is subject to narrow interpretation. New York’s convenience of the emp loy er rule exp ands the reach of the income tax withholding req uirement much f urther than some emp loy ers realiz e.

Business travelers B usiness trav elers remain the key f ocus of the New York income tax withholding audit. M ost audit assessments arise f rom errors in withholding, remitting and rep orting the correct tax f rom wages p aid to nonresident emp loy ees who are not p rimarily assigned to a New York office. The rigidity of some payroll systems adds to compliance difficulties for a number of employers left with inadeq uate technology to track multistate trav el or withhold tax f rom wages and rep ort such withholding to multip le states.

New York state income tax withholding req uirements

1 T he D ep artment issues a range of inf ormational guidance, including adv isory op inions, technical memorandums and tax bulletins. A lthough the material is accurate on the date when a p ublication is issued, any subseq uent changes in laws or regulations, j udicial decisions or changes in D ep artment p olicies could af f ect the v alidity of the inf ormation p resented in such guidance.

2 New York Tax Law §675.3 2 0 NYC R R § 1 7 1 . 3 ( a) ( 1 ) ; I R C § 3 4 0 1 ( a) .

9 New York income tax withholding audits — what businesses need to know

4 B ecause of the extensiv e audit p rocedures and p otential conseq uences of a negativ e audit assessment, the D ep artment p rov ides the emp loy er with a p ower of attorney so the taxpayer can appoint a qualified representative to discuss the case.

New York’ s income tax withholding audit p rocess

T he ty p ical New York income tax withholding audit is initiated by mailing the employer a formal audit notification letter that identifies the tax p eriods under examination and the inf ormation req uired f or testing and rev iew.

The information document request T he I nf ormation D ocument R eq uest ( I D R ) generally includes a demand to rev iew books and records, a p ower of attorney f orm, 4

and a q uestionnaire tailored to identif y an emp loy er’ s landscap e, dev elop an audit p lan, and sp ot p otential gap s in an emp loy er’ s withholding p rocess, controls and comp liance.

A s p art of the I D R , the D ep artment will req uire an emp loy er to p rov ide, f or the calendar y ears under examination, an electronic payroll data file detailing, among other items, the domestic wages p aid to emp loy ees across all U S states and the taxes withheld. T he D ep artment also req uests other records, such as business trav eler p olicies and trav el exp ense reimbursement records. T hese req uests are essential to achiev ing the D ep artment’ s aim of accurately determining the identity and f req uency of emp loy ees trav eling to the state throughout the audit p eriod.

Audit testsI n the course of the audit, examiners are instructed to look at key areas where an emp loy er may be noncomp liant. T he D ep artment’ s Withholding Tax Field Audit Guidelines p rescribe ap p roximately 2 0 tests, or “ rep orts, ” of p otential comp liance issues.

F or instance, “ R ep ort 7 ” looks at all emp loy ees with a New York Z I P code, address or resident state code and z ero New York state income tax withholding. T he existence of this scenario could indicate the emp loy er f ailed to withhold income tax on New York taxable wages. “ R ep ort 2 0 - 2 ” examines F orm 1 0 9 9 - M I S C recip ients who were not emp loy ees in the current y ear but were classified by the employer as employees in at least one of the prior five years. This report assists the examiner in identifying instances where employees may have been incorrectly classified as indep endent contractors.

A s these examp les illustrate, each of the D ep artment’ s audit rep orts is narrowly f ocused. B ut, in the aggregate, they serv e its broader p urp ose: namely , whether the emp loy er is generally comp liant with the many regulations gov erning the withholding and p ay ment of New York income tax and the filing of employer tax returns. 

1 0 New York income tax withholding audits — what businesses need to know

Extract of New York information document request and test scenarios

Test samples from payroll records provided • A ll emp loy ees with no nexus to New York state/ city at the end of

the year with federal wages greater than $20,000 and New York state wages greater than $0. 

• A ll emp loy ees with no nexus to New York state, no New York state wages, and no New York state income tax withholding. T his rep ort is sorted by the taxable f ederal wage amount and includes employees having taxable federal wage amounts over $500,000. 

• A ll emp loy ees with a S ocial S ecurity Number that matches a S ocial S ecurity Number included in the New York state wage reporting database in at least one of the prior five years. 

• A ll emp loy ees with no nexus to New York state who hav e an indicator that they telecommute.

• A ll emp loy ees with a New York state/ city Z I P code, New York state address or New York resident state code and z ero New York state/city income tax withholding.

• A ll emp loy ees with a New York work state code or New York p hy sical work location code but no New York state income tax withholding, no New York Z I P code, no New York resident state code and no New York state address ( i. e. , emp loy ees who work in New York but do not liv e in New York) .

• A ll emp loy ees who ty p ically are U S citiz ens and who are working in another country p er the emp loy er’ s electronic data.

• A ll emp loy ees with a New York work state code, New York resident state code, New York work location code, New York state address or New York Z I P code who receiv ed both a F orm 1 0 9 9 -M I S C and a F orm W - 2 in the same y ear.

• E mp loy ees with New York state income tax withholding greater than z ero and hav e a New York work state code, New York resident state code, New York p hy sical work location code, New York address state or New York Z I P code and hav e combined state income tax withholding of less than 4 % of taxable f ederal wages ( i. e. , emp loy ees who liv e and/ or work in New York state and who hav e low income tax withholding) .

• E mp loy ees with New York C ity withholding greater than z ero and hav ing a New York C ity Z I P code and New York C ity withholding of less than 2 % of taxable f ederal wages.

Worker misclassification: Forms 1099 • A ll F orm 1 0 9 9 - M I S C recip ients with a S ocial S ecurity

Number that matches a S ocial S ecurity Number included in the New York state wage rep orting database in at least one of the prior five years. These workers are not employees in the current year but were classified by the employer as employees in at least one of the prior five years. 

•   An exact copy of the 1099 Miscellaneous File that was filed electronically with the I R S .

• A n extract of the emp loy er’ s p ay roll inf ormation f rom electronic or third- p arty p ay roll sy stems.

Metropolitan Commuter Transportation Mobility Tax • E stimate of p ay roll exp ense f or cov ered emp loy ees f or

M etrop olitan C ommuter T ransp ortation M obility T ax.

Compensation and benefits • T y p es of comp ensation p aid during the audit y ears f or

p rior serv ices p erf ormed in the state ( e. g. , stock op tions, bonuses, sev erance p ay ) .

• A cop y of any emp loy ee handbook and/ or “ p erk book. ”

Nonresident income tax withholding • D escrip tion of any mergers, acq uisitions and/ or sales

of  any affiliated entities.• D escrip tion of tracking sy stem f or trav el of highly comp ensated

emp loy ees based outside of New York. • M agnetic swip e or security card sy stem records f or

New York locations.• NYS F orm I T - 2 1 0 4 . 1 p rocess.• L ist of corp orate ap artments or houses located in New York.

B usinesses selected f or a New York income tax withholding audit can exp ect to receiv e an inf ormation document req uest ( I D R ) , resulting in some of the tests shown here.

1 1 New York income tax withholding audits — what businesses need to know

T hese are areas of p rimary attention in an income tax withholding examination:

1. Multistate nonresident withholding for regular wages

E mp loy ers based outside of New York may be unaware of their New York income tax withholding obligation. New York law mandates that emp loy ers withhold income tax f rom all nonresident emp loy ee wages earned in the state. 5

U nder this mandate, emp loy ers are resp onsible f or accurately monitoring when emp loy ees trav el to New York and f or ascertaining the correct income tax withholding on those wages. B usinesses emp loy ing indiv iduals who trav el f req uently to New York f or business are most at risk of audit findings. This is particularly true for business travelers who are high-wage earners because significant income tax withholding liability can accumulate q uickly , ev en if the employee doesn’t spend significant time in the state. 

M any emp loy ers and p ractitioners are f amiliar with New York’ s 1 4 - day de minimis withholding threshold, which states that, if a nonresident emp loy ee is not reasonably exp ected to surp ass 1 4 day s of serv ice in the state in a giv en calendar y ear, the emp loy er is not req uired to withhold New York income tax. W hile the D ep artment will not p enaliz e an emp loy er f or f ailing to withhold tax on wages in this case, the obligation to rep ort an emp loy ee’ s wages in Form W-2, box 16, continues to apply, and penalties can be assessed f or f ailure to comp ly . F urther, this relief f rom income tax withholding is not av ailable to emp loy ers that could hav e reasonably exp ected the emp loy ee to work in New York f or more than 1 4 day s in a calendar y ear. 6

T he D ep artment makes a substantial ef f ort to ascertain whether an emp loy er allocated and withheld the ap p rop riate income tax withholding on the wages of its nonresident emp loy ees.

2. Trailing compensationP ay ments to emp loy ees of stock op tions, def erred comp ensation, and other income that is earned and p aid ov er more than one y ear are subj ect to considerable scrutiny by audit examiners. W ages resulting f rom the p ay ment of trailing comp ensation can be material, and the rules gov erning taxability are comp lex.

E mp loy ers are obligated to withhold New York income tax on the p ortion of trailing comp ensation considered New York source income. T he time f rame an emp loy er must use to allocate this income is distinct. No longer is it simp ly the time sp ent in New York within a single y ear. R ather, an emp loy er must calculate the total time an emp loy ee p erf ormed serv ices in New York during the p eriod the trailing comp ensation was earned.

W ith regard to trailing comp ensation, the 1 4 - day excep tion does not ap p ly . A n emp loy er is obligated to withhold New York income tax starting from the first day the trailing compensation is earned in the state.7

T he resulting demands on the emp loy er to meet its income tax withholding obligations on trailing comp ensation are great. E mp loy ee work and trav el locations must be tracked and archiv ed f or as long as they are relev ant to the emp loy ee’ s comp ensation. E mp loy ers must also understand the nuance between v arious trailing comp ensation p ay ments ( e. g. , restricted stock units, restricted stock awards and non- statutory stock op tions) . T he D ep artment p rescribes rules f or allocating each ty p e of eq uity p ay ment to the state and the time p eriod in which the comp ensation is considered earned ( i. e. , the allocation p eriod) . T heref ore, an emp loy er must comp ly indep endently with each rule gov erning a specific compensation and cannot assume that each type is ap p ortioned to New York in the same manner.

E mp loy ers sometimes ov erlook that, in general, New York income tax withholding is owed on all trailing comp ensation earned in the state without concern to the emp loy ee’ s work location or residence y ears later when it is p aid. C onseq uently , they may be unp rep ared to comp ly with these req uirements and, as a result, are lef t v ulnerable to substantial conseq uences, esp ecially if the ov ersight is discov ered during a New York income tax withholding audit.

5 20 New York Codes, Rules and Regulations (NYCRR) §171.6(a).  6 T echnical M emorandum, T S B - M - 1 2 ( 5 ) I ; Withholding Tax Field Audit Guidelines

( rev . A p ril 5 , 2 0 0 5 ) . 7 I d.

E mp loy ers sometimes ov erlook that, in general, New York income tax withholding is owed on all trailing comp ensation earned in the state without concern to the emp loy ee’ s work location or residence later when it is p aid.

1 2 New York income tax withholding audits — what businesses need to know

3. Inpatriate/expatriate work assignmentsE mp loy ers should be cogniz ant of the D ep artment’ s v igilant f ocus on the p rop er withholding and rep orting of wages p aid p ursuant to a New York work assignment. T y p ically , New York audit examiners identif y emp loy ees on a work assignment in New York based on emp loy ee addresses and on discrep ancies in the wages rep orted to the D ep artment and the New York income tax withheld on those wages.

F or instance, the D ep artment closely examines whether an emp loy er p rop erly comp lied with the “ accrual rule” f or emp loy ees leav ing or entering the state on a work assignment. 8 A p p lication of the rule dep ends on the ty p e of comp ensation and the p eriod it is earned, a f act that increases the comp lexity of comp liance.

W ithout maintaining a substantiv e p olicy p reserv ing adeq uate documentation of the emp loy er’ s withholding p rocedure, an employer faces significant risk of audit assessments. For example, an emp loy ee’ s assignment letter or contract and F orm I T - 2 1 0 4 . 1 , New York State, City of New York, and City of Yonkers Certificate of Nonresidence and Allocation of Withholding Tax, delineate the time f rame an emp loy ee p erf orms work in New York and demonstrate an emp loy ee’ s good- f aith estimate of work time within the state and the resulting income tax withholding req uired on those earnings. D ocuments such as these can p rov e inv aluable to emp loy ers in ov ercoming their burden to def end income tax withholding calculations during an audit. T he emp loy er will also be req uired to show a similar good-faith effort in confirming that employee estimates of New York work time were reasonable based on the f acts and circumstances.

4. Income tax withholding tables and withholding allowance certificates

A nother area of f req uent emp hasis by the D ep artment is ascertaining whether an emp loy er utiliz ed correct New York income tax withholding tables f or a giv en time p eriod. W ithholding tables are generally reissued at the start of each y ear ( but hav e been rev ised at other times) . S imp le withholding errors are common and can occur, f or instance, when emp loy ees are p aid sup p lemental wages, such as bonuses and eq uity comp ensation.

E mp loy ers must be able to substantiate income tax withholding calculations with inf ormation contained in emp loy ees’ New York withholding allowance certificates. For instance, the employee p rov ides the marital status and p ersonal exemp tions f or New York income tax withholding p urp oses on F orm I T - 2 1 0 4 , Employee’s Withholding Allowance Certificate, and F orm I T - 2 1 0 4 - E , Certificate of Exemption from Withholding, to claim exemp tion f rom New York income tax withholding. F ailure to locate these documents ( or an electronic v ersion) could result in an assessment f or withholding shortages. 9

Frequently overlooked is the employer’s obligation to file certain withholding allowances with the Department. Specifically, if an emp loy ee elects more than 1 4 withholding allowances, the emp loy er must send a cop y of the p ap er f orm to the D ep artment f or rev iew and ap p rov al and must retain p roof of the mailing. C ircumstances triggering this resp onsibility arise f req uently , esp ecially in select industries, and f ailure to comp ly can result in significant audit consequences. 

E mp loy ers are ultimately accountable f or any withholding tax liability as a result of f ailing to retain the ap p rop riate withholding allowance certificates (or their electronic equivalents) and for failing to file copies of those wherein the employee requested more than 1 4 withholding allowances or where an emp loy ee claims exemp tion f rom withholding.

8 New York Tax Law §639(a). 9 2 0 NYC R R § 1 7 1 . 4 .

E mp loy ers are ultimately accountable f or any withholding tax liability as a result of f ailing to retain the ap p rop riate withholding allowance certificates (or their electronic equivalents) and for failing to file copies of those wherein the emp loy ee req uested more than 1 4 withholding allowances.

1 3 New York income tax withholding audits — what businesses need to know

M easuring income tax withholding audit risk

A udit rep orts allow the D ep artment to comp lete a comp rehensiv e field audit assessment. Any compliance gaps within an employer’s withholding procedures can result in a significant assessment of tax, interest and penalties. Employers (specifically, responsible officers) remain financially responsible for all assessments, including underwithheld tax.

I f the emp loy er f ailed to withhold New York state ( or local) income taxes, emp loy ees are technically obligated to p ay these taxes when filing their New York individual income tax returns. Although the emp loy ees’ p ay ment of the tax reliev es the emp loy er f rom owing the underwithheld p ortion of the tax, the reality is that emp loy ees (in particular, New York nonresidents) are likely not to file a New York tax return or p ay the tax owed. C onseq uently , emp loy ers may be saddled with the additional burden of p ay ing the underwithheld tax, as well as the additional interest and p enalties f or f ailing to rep ort and timely remit the tax to the D ep artment.

C onsidering how of ten emp loy ers are held resp onsible f or the underwithheld amount and the substantial financial consequence resulting f rom this f ailure, they should f actor this underly ing liability into their analy sis and treat it as an essential p art of the ov erall risk assessment.

I t is incumbent on emp loy ers to rev iew internal p olicies and p rocedures to assess whether rep orting gap s could exp ose them to additional tax, interest and p enalties during a New York income tax withholding audit. New York’ s income tax withholding audits are comp rehensiv e and technology - assisted, and its examiners are trained to highlight and act on all exp lained anomalies. E mp loy ers should p rep are accordingly and dep loy p rop er internal gov ernance to av oid p rev entable audit assessments.

1 4 New York income tax withholding audits — what businesses need to know

New York’s income tax withholding audits are comprehensive and technology-assisted, and its examiners are trained to highlight and act on all unexplained anomalies. Employers should prepare accordingly and deploy proper internal governance to avoid preventable audit assessments.

15

W hat can businesses do?

E mp loy ers hav e multip le remedies to self - correct gap s in their gov ernance of emp loy ment tax withholding and rep orting. F or instance, some emp loy ers may believ e that risk exists which may warrant p roactiv ely coming f orward under New York’ s V oluntary D isclosure and C omp liance P rogram to remediate historical errors. U nder the p rogram, the emp loy er sets f orth the f acts and p arameters of the disclosure to the D ep artment with the ultimate goal of satisf y ing liabilities. I f successf ul, the emp loy er can limit its exp osure, be reliev ed from penalties and maintain confidentiality. 

E mp loy ers might also consider undertaking the rigor of their own internal audit rev iews, akin to the income tax withholding audit, to identif y comp liance gap s and risks. A s p art of this p rocess, an emp loy er can look at its current withholding p olicies and determine whether to ref resh and up date them or to imp lement a more comp rehensiv e p lan to strengthen ov erall comp liance.

R egardless of what they choose and what challenges they f ace with comp liance or an audit examination, emp loy ers should alway s be p ositiv e and take step s to ev aluate current risks and p otential f uture liability. A precise road map is fact-specific and employer-dependent, but, ultimately , p re- emp tiv e action can p rov e inv aluable.

New York income tax withholding audit examination timeline

• R ev iew comp any p olicy and p rocedures

• I dentif y inf ormation sources; confirm completeness of data 

• U nderstand and document data anomalies

• Provide summary of findings 

Risk assessment

4 to 6 weeksA

udit

life

cycl

eH

ow w

e ca

n as

sist

16 New York income tax withholding audits — what businesses need to know

• S erv e as liaison with the New York auditor

• C odev elop initial resp onse to audit q uestionnaires and notices

• P rep are resp onsiv e materials to the inf ormation document req uest ( I D R ) , including p rep aration of electronic data files; gap mitigation; f ootnote excep tions; and document assessments that should not ap p ly

• P articip ate in agency conf erences

• S eek executiv e waiv ers

• R ev iew p enalty assessment accuracy

• F acilitate agency discussion of audit terms

• Review and explain final audit assessment

• C oordinate audit closing step s, including p rep aration of amended emp loy er returns

• A ssist with emp loy ee communications and tax return p rep aration

• D ev elop step s f or, and assist with, ongoing monitoring

• I dentif y p olicy changes and codev elop rev isions

• R ev iew and document up dates to p rocedures

• P rep are p rocess statement f or ongoing executiv e gov ernance

• H elp with regular comp liance rev iew

• F acilitate annual rev iew of tax and rep orting setup s f or earnings and deduction codes

Settlement Post-auditField audit

12 to 18 months6 to 12 weeks 6 to 12 weeks

Information document request

1 7 New York income tax withholding audits — what businesses need to know 1 7

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About EYE Y is a global leader in assurance, tax, transaction and adv isory serv ices. T he insights and q uality serv ices we deliv er help build trust and conf idence in the cap ital markets and in economies the world ov er. W e dev elop outstanding leaders who team to deliv er on our p romises to all of our stakeholders. I n so doing, we p lay a critical role in building a better working world f or our p eop le, f or our clients and f or our communities.

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E rnst & Young L L P is a client- serv ing member f irm of E rnst & Young G lobal L imited op erating in the U S .

E rnst & Young L L P does not bear any resp onsibility whatsoev er f or the content, accuracy or security of any links ( by way of hy p erlink or otherwise) to external websites.

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