One of the most common questions that hear is “why do I owe NYS tax?”
You made a mistake
One of the most common reasons that we see involves mistakes tax filers make when they prepare their own income tax returns.
Often, tax filers using a computer program to help prepare their taxes may take the wrong deductions and it is disallowed or made a mistake by omitting income.
Either way, you underpaid the tax and you’ll receive a notice from the New York State Department of Taxation and Finance letting you know how much you owe NYS.
You didn’t file your NYS tax returns
When you don’t file your NYS income tax returns, the New York Department of Taxation and Finance may still assess you for the taxes owed, plus penalties and interest.
The NYS Tax Department will create that assessment based upon W2s, 1099s, as well as other wage and income information.
Needless to say, the tax liability does not include any credits, exemptions, or deductions. As such, the amount that is owed may be an inflated figure.
You filed your NYS tax returns late
If you filed your NYS tax return late, you will be charged 5% of the tax due for each month (or part of a month) the return is late, up to a maximum of 25 percent.
In addition to the late filing penalty, you will also be charged interest that is compounded daily.
You failed to make NY estimated tax payments
If you are self employed and not making quarterly estimated tax payments, this can be the root cause of the tax problem.
Often, I know there is a problem when I ask someone if they have been paying their federal and NYS estimated taxes and I get a puzzled look.
If you are self employed, 1099, or work on commission, you often don’t get income taxes taken out of your income as you are paid during the course of the year.
As such, you are required under the tax laws to remit and pay your estimated income taxes to the IRS and New York State every quarter.
If you have not been paying your estimated taxes during the year, it is difficult for many taxpayers to come up with the often large tax balances due when it comes to tax time.
To prevent a high tax bill in future, you will need to carefully manage your income tax withholdings and estimated tax payments.
You took an early withdrawal from a retirement account
Did you make an early withdrawal from a retirement account, such as a 401(k), and didn’t take into account the tax liability?
Often, a taxpayer will first receive a Notice of Deficiency from the Internal Revenue Service.
Once the NYS Department of Taxation and Finance picks up the early withdrawal, you can expect a tax notice regarding the increase in taxes due to New York State.
You were personally assessed sales or withholding tax
Many New York business owners mistakenly believe that forming a corporation protects them from a personal tax liability. Wrong.
If you own or owned a business that was required to charge NYS sales tax, you are responsible for collecting sales tax and remitting the sales tax to New York State.
If you don't remit the sales tax to New York State, you will be assessed for the sales tax that the business was required to collect.
If you also have employees, you must withhold income tax from their earnings and pay employment tax ( Medicare and Social Security), and other taxes.
Similarly, if you were required to collect and remit withholding tax on behalf of a business, the New York State Department of Taxation and Finance can also hold your personally responsible in certain circumstances.
If the notices for payment go ignored, the New York State Tax Department will issue a tax warrant and begin aggressive enforcement action including but not limited to wage garnishments, bank levies, and asset seizures.
If you are in a situation where you owe NYS sales tax, you have criminal as well as back tax issues that you need to be aware of. We can help.
A Few Other Reasons You Owe NYS tax
Like it or not, tax laws change.
You may have lost a property tax deduction or perhaps there is a change in your filing status.
If you had good fortune on your side, perhaps you had lottery or gambling winnings.
Often, those sources of income are not taxed.
Lastly, you may not have had enough withholdings or deductions.
This leaves more income to be taxed resulting in either a lower refund or the need to pay additional taxes.
Help if You Owe NYS tax [the first step]
You received that dreaded notice in the mail from the New York State Department of Taxation and Finance.
What do you do now?
If you ignore the problem, it will only get more expensive over time.
The NYS Tax Department is highly aggressive.
The NYS Tax Department processes NYS tax returns and through it’s collection divisions and their agents will collect on any owed NYS taxes.
The NYS Tax Department will issue a tax warrant against you.
If you need your bank account or income to pay your living expenses, the NYS Tax Department will continue to levy or garnish you until every dollar is collected, including penalties and interest [ compounded daily ].
If you owe over $10,000, your NYS Driver's license will be suspended.
Owe at least $20,000, the first step is to contact our office to see if we can be of help. If we can assist you, we will start the process of stop enforcement action against you and solving your tax problems.