Tax Dispute Legal Procedure New York

The initial step in a tax dispute is usually a formal objection, commonly filed within 90 days after the tax notice is received. This objection is submitted to the New York Department of Taxation and Finance and requests cancellation or correction of the notice based on legal or factual errors.

This stage is often referred to as a Conciliation Conference Request or Bureau of Conciliation and Mediation Services (BCMS) review.

• Deadline: 90 days from the notice date
• Filing method: Online or by mail using Form CMS-1
• Outcome: Informal resolution or escalation to appeal

If the objection is denied or no resolution is reached, the taxpayer may file a petition for appeal to the Division of Tax Appeals. This is an independent tribunal where Administrative Law Judges (ALJs) conduct hearings.

• Deadline: 90 days after receiving denial from BCMS
• Outcome: Binding decision unless appealed to judicial court
• Venue: Division of Tax Appeals (DTA)

This process is governed by New York Tax Law § 170–§ 179.

After exhausting administrative remedies, taxpayers may initiate judicial litigation in the form of an Article 78 Proceeding in the New York Supreme Court. This litigation is filed when:

• The taxpayer challenges the legality of the state’s final decision
• Procedural due process was allegedly violated
• The DTA or tax authorities acted beyond their powers

Taxpayers may file civil claims such as:

• Refund Litigation: Seeking repayment of overpaid taxes
• Injunction Action: Halting improper tax collection
• State Damages Claim: Under the Court of Claims Act

These actions are governed by New York Civil Practice Law & Rules (CPLR) and often require notice of claim filings.

In rare circumstances, a taxpayer may raise constitutional objections to a tax law as part of broader litigation.
These challenges are typically included in proceedings such as Article 78 petitions or federal court lawsuits, where the taxpayer argues that the tax law infringes upon constitutional rights.
New York State courts may evaluate such claims within the context of an existing dispute, but exclusive constitutional review—such as striking down a statute—is generally reserved for appellate or federal courts.

Some tax disputes may lead to criminal prosecution, particularly in cases involving:

• Intentional tax evasion
• Fraudulent returns or false documentation
• Unlawful deductions or shell companies

Criminal tax prosecutions are governed under New York Penal Law Article 190 (fraud) and Tax Law § 1801 et seq.

Taxpayers should prepare:

• Detailed accounting records
• Communications with the tax authority
• Expert reports if valuation is disputed
• Legal arguments referencing Tax Law and precedent

Proper preparation increases the likelihood of successful resolution either through settlement or court ruling.

The New York Department of Taxation and Finance may offer settlement agreements to resolve disputes prior to judgment. These include:

• Closing Agreements under §171-F
• Compromise of Penalties in hardship cases
• Installment Agreements for collections

Taxpayers should escalate to litigation when:

• Administrative appeals fail
• There is a clear legal error in agency decision
• There are constitutional concerns

The decision to escalate must be made within the statute of limitations, and ideally with legal counsel.