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Everyone Doesn't "Heart" New York

New York State collects taxes from out of state residents on the sale of real estate.  The tax isn’t due by April 15th of the following year, as many taxes are. This tax must be paid at the closing table, and it can run into thousands and thousands of dollars.

As usual, I sent the form to a client living in the Midwest who was selling a house on Long Island. A few days later, she returned it to me with a slash mark through it and a bright pink stick-on with a note for me: I WON’T PAY EXTRA TAXES!

I gave her a call, explaining that the tax issue was out of my control.  She wondered, “How would anyone know unless you tell them?” Since she had to produce a driver’s license as ID, I advised, it would clearly show her “foreign” status.

Then she grumbled something about fighting the man or taking a stand--I’m not sure which, followed by, “Then just fill out the form for me and put zero in the space for taxes owed.”

I declined the assignment.  She could fill out and sign the form on her own, or in conjunction with her accountant, but I could offer no assistance. 

“So if I understand you, you say you need the form, but you can’t do anything about the timing, and won’t help me fill it out?” she inquired. “Yes,” I replied.

She sounded exasperated as she declared, “This is just another reason to hate New York.”


( 4 comments — Leave a comment )
Aug. 16th, 2011 12:54 pm (UTC)
Alabama has instituted this practice of making the closing attorney their tax collector as well. However, they manage to take it one step further into absurdity. The buyer is legally responsible for collecting and remitting the taxes owed by the seller at closing. So who gets stuck with this additional unpaid task? The closing attorney.
Aug. 16th, 2011 02:08 pm (UTC)
That truly is absurd. In my area of NY, the Title Closer takes the check and I never have to think about it again. If you're representing the buyer, your responsibility to ensure a clear transfer continues on until the check is received, I'm guessing?

That goes beyond revenue enhancement. That's burden-shifting.
Aug. 18th, 2011 12:45 pm (UTC)
In this market, typically there is only one attorney involved and they represent the lender. The title insurance companies are okay with the tax issue since there is no provision in the statute creating a lien of any sort.

The "burden-shifting" is no big surprise. Filed any 1099's lately? With no (until very recently) title companies in the market, everything falls on the closing attorney.
Aug. 18th, 2011 05:22 pm (UTC)
Of course you're right about the 1099s, and that liability is quite the burden.

On Long Island, we typically have three attorneys plus a title closer. I never considered it a luxury until now.
( 4 comments — Leave a comment )



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