As a small business owner I am used to getting threatening letters from the New York State Department of Finance and Taxation. They usually are bills for a form that was not filed with the department. I generally call my accountant and it always turns out that either I did not have to file that form or had filled it and they were incorrect. The bills usually break down into a filing fee of a few hundred dollars and a penalty of a few thousand dollars. It's always an inconvenience but you get used to it and it is always easy to clear up.
A few weeks ago I got a very different letter. This time is was personal, to my wife and I and was a notice of a limited audit of my 2010 tax return. Specifically it related to a tax credit I took for the purchase and installation of a 4.3k photovoltaic array. When I got the letter I was surprised, first because I was sure I had the system installed before 2010 and the second reason was that I had never been personally audited before. (To add to the issue, after calling my accountant I confirmed that the system was actually installed in 2009, which was more than 3 years after filing, making the audit illegal. As it turned out, had I been wealthy and had a NYS tax due of over $5000 it would have been too late to audit me but because my NYS tax due for 2009 was less then $5000, I carried over the tax credit through 2010, making it legal).
I was very concerned for a number of reasons. The first was that when I had my system installed I used a local contractor who wanted to do business with me and gave me a ridiculous price, thousands lower than the next bid. The second concern was that I live in a location in upstate New York where we had two major rainstorms in the past few years and my basement had been flooded. That was where my records were kept.
I panicked. What to do? They had only given me 30 days or they threatened to expand the audit. I had a conversation with my wife and she gave me a suggestion that I didn't expect. "Call your legislative representatives," she suggested. I thought there was no downside to taking her suggestion so I wrote a letter to each of my representatives. (In my case Senator Cecilia Tkaczyk and Assemblyman Peter Lopez). I expected nothing.
Within 2 days I got a call from both their offices and two days after that I received a call from a very pleasant tax investigator for the NYS Department of Taxation. He informed me that they received my letter asking for an extension of time and that it had been granted and that a letter stating so had been sent to me. (As of this post I had still not recieved that extension letter). In addition, he told me about the calls he got from my representatives and wanted to help. We had a very pleasant conversation and he suggested I made an attempt at finding any proof of what the system cost using bills or cancelled check.
I told him that I would try, but asked what the state was doing as these to storms had caused literally millions of dollars of damage and I couldn’t be the only person with damaged papers. (There were two towns that were totally destroyed in one storm). The next day I went down into my basement and found a bill and cancelled check from the company I purchased the equipment from but this represented only $18,000 of the $22,500 credit I took. The balance of my papers were too destroyed to be of any purpose and the account the remaining checks were paid out of had been closed so there was no banking access.
I decided to call back the NYS Dept. of Finance investigator anyway to send him what I had found. He had me fax him the bill and check I had and he called me back later that day to inform me that what I had sent would be all that he needed to “resolve” the case.
I believe that this was not normal procedure and that the calls from my legislative representatives had assisted in making my case a bit easier to resolve. While I had never contacted any of my representatives before this incident, I would not hesitate to do it again. We always think our politicians don’t really have much to do with the ordinary citizen but I’m proof that this is not the case. This is part of what they do when they go back to their districts. They are there for us. Use them.
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