05/26/2026
I am writing to explain a recent and frustrating development regarding your New York City taxes and the Form 1127 liability.
The city is currently disallowing the 1127 liability credit, which increases your overall liability to an amount greater than the income tax a standard NYC resident pays.
What NYC is Doing
• Retroactive changes: The city claims these deductions should not have been allowed since 2016, despite permitting them for years.
• Instruction contradictions: I downloaded the instructions from the city website today, and they still state you should take these deductions.
• Rule shifting: The city is attempting to change the rules after your tax returns have already been filed.
Why the City's Position is Flawed
• Not a tax: The 1127 liability is a condition of employment, not a tax, meaning standard tax credit rules should not apply here.
• Unfair burden: NYC residents still receive these credits. By disallowing your deduction, the city is forcing you to pay more than actual city residents.
• Preparer compliance: Your taxes were prepared strictly following the official instructions provided by the city, which they now suggest were wrong.
My Professional
I completely disagree with the city's findings. In my opinion, you are being ripped off, and you rightfully qualify for the deduction as originally filed. Because this is a condition of employment, there is nothing more I can do for you within the scope of tax preparation.
