Sunday, January 31, 2010

Mysteries of the NYS Tax Department Audit Notice

The duplicate audit notices my husband and I received on Friday

A close reading of the New York State Audit Division's Notice and Demand for Payment yields some mysteries to ponder:

Mystery #1: Time is apparently not linear with the NYS Tax Department

The Notice and Demand for Payment is dated 02/04/10, but it was postage metered on 01/28/10 and it arrived 1/29/10.

However, the computer generated text of the notice helpfully points out that "The Tax Amount Assessed portion of this bill may be claimed as an itemized deduction on your 2009 federal return if payment is made during calendar year 2009."

How the taxpayer is supposed to travel back in time to 2009 in order to pay a bill the Tax Department did not issue until 2010 is among the mysteries not explained by the audit notice. As the math textbooks say, the solution to the time travel problem is "left as an exercise for the reader."

My guess is that the NYS tax department considered updating the computer-generated script to refer to 2010 tax law, but given the vicissitudes of Congress, there's no way to be entirely what 2010 federal tax law will look like, and perhaps the NYS tax department folks didn't want to go out on a limb making any predictions about the ultimate form that 2010 federal tax law may take.

Still, it's a bit annoying to be told in 2010 that you might have been able to deduct a payment on your 2009 tax return when they waited until 2010 to bother telling you that they believed you were required to make the payment. (However, this is doubly moot in our particular case, since (A) I don't believe we owe the money they are "demanding" and (B) I believe our 2009 return will once again put us among the 8% of New Yorkers subject to the Alternative Minimum Tax, which means that--at the margin--additional New York State income taxes paid in 2009 would not reduce our federal taxes.)

Mystery #2: Why did we receive two identical copies of the audit notice in two identically addressed separate envelopes?

The notice states: "A copy of this bill has been sent to you and your spouse." Well, yes, we did get two copies, but both copies were identically addressed to both of us in identical separate envelopes, and we live still live together at the same address.

It seems to me that programming the computer to send a single envelope with a single copy of the six-page audit notice to all joint return couples whose most recent address of record on file with the New York State tax authorities indicates they are still living together would save a good deal of money and trees. (For the record, my husband and I have filed New York joint returns from the same address for 20 years and hope for many more "happy returns" from our cozy upstate New York home in the future.)

I'm not at all sure what the tax department hoped to accomplish by sending two identically addressed envelopes, each of them addressed to both of us at the same address, at least from the outward appearance of the envelopes.

A careful scrutiny of the contents of the six pieces of paper in both envelopes reveals that--buried in the middle of one internal page--one copy was intended specifically for me and one copy was intended specifically for my husband, but there was nothing visible from the outside of the envelope to indicate who was intended to receive each letter.

If one of us had moved out and left a forwarding address with the PO, how would the postal carrier have known that one of the envelopes should be forwarded to the spouse who had moved away, since both names were listed in the identical order on both externally identical envelopes?

If the tax department really wanted to send each spouse their own personal copy of the notice, why not program the computer to address the envelopes so that each envelope would show the name of the particular spouse to whom it is intended to be delivered, rather than keeping that information buried on an internal page.

Sending two identically addressed envelopes to the same address each stuffed with six 8.5x11 pieces of paper plus a return envelope in each seems like a lot of wasted paper and postage for no good reason.

UPDATE: On closer scrutiny, the two envelopes aren't quite identically addressed. There's a subtle difference. Both envelopes are addressed to both of us, but one envelope lists my name on the first line and his name on the second line, while the other envelopes lists his name on the first line and mine on the second line. Still not clear why they are wasting all the paper and postage. Also, each envelope contained 8 pages of text on six pieces of paper. With better planning, they could easily have put the 8 pages of text on four pieces of paper.

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