10 New York State Tax Problem FAQs
If have a New York State tax problem or IRS problem, you may have questions about what the taxing authorities can do to collect back taxes that you may owe and what your options are to resolve your tax problems.
Experienced NY tax attorney Charles Rosselli answers the most commonly asked questions about your New York State tax problem.
What is a NYS tax warrant?
A tax warrant is lien against any real estate or any personal property that you own.
A tax warrant gives New York State the legal authority to pursue collection activity against you. It is typically the first step in the collection process.
Once a tax warrant has been issued, NY State has the legal authority to issue a bank levy; go after a percentage of your wages; or seize your property.
The tax warrant will be recorded at your local county's clerk's office as well as the New York Department of State.
Since a tax warrant is a matter of public record, it will be often picked up by credit reporting bureaus.
As such, a tax warrant can possibly have a negative impact on your credit as well as impede your ability to borrow or sell the property against which the tax warrant has been issued.
Typically, a tax warrant will stay in effect until such time that the state tax debt is satisfied or 20 years, whichever comes first.
Can NYS Take My Wages ?
If you owe back to NYS, your employer may receive an income execution.
Your employer will be required under the law to withhold and send 10% of your gross income or 25% of your disposable income to New York State until such that that the tax debt is paid.
In other words, an income execution is an ongoing levy.
A percentage of your wages will be automatically deducted and forwarded to the state based upon how frequently you are paid (weekly, biweekly, etc.).
Can New York State issue a bank levy?
Yes. Just like the IRS, New York State uses bank levies as a common enforcement tactic to collect back taxes.
There are certain exemptions that apply and you should consult a tax attorney about your legal rights.
Can NYS seize and sell my property?
Yes. Before your assets are seized, a tax warrant will be issued. The asset will be seized and you will be advised of the date of sale of your property.
If you reach an agreement with the state prior to the sale date, your property will be returned to you.
Otherwise, your property will be sold at public auction for fair market value.
If the value of your property exceed the amount of your tax debt, including penalties and interest, then you will receive the balance.
Why Did NYS Suspend My Driver’s License ?
NYS Back Tax Driver’s License Suspension Law is the one of the many aggressive tactics that the New York State Department of Taxation and Finance may employ to collect back taxes.
You may received a Notice of Driver’s License Suspension from the New York State Department of Taxation and Finance, which brings you to this article to learn what to do next.
Is the NYS Back Tax Driver’s Suspension Law legal?
The first question you may ask is: “ Is this legal?” The answer, unfortunately, is “yes.” Section 171-v of the New York State Tax Law allows NYS to suspend the driver’s licenses of individuals who owe $10,000 or more in back taxes.
This tax law was signed into place by Governor Cuomo. It is called the “Driver’s License Suspension Program.” The law has been highly successful in collecting hundred of millions of dollars in back taxes as of 2013.
The NYS Back Tax Driver’s License Suspension Law has been so successful that there are proposals to expand the law by lowering the dollar amount owed in back taxes to $5,000.
Also, there is a proposal in place where an applicant for a business license or professional license would be required to enter into a payment arrangement with NYS for back taxe prior to to the license being issued or renewed.
While neither of these two proposals have been made into law of yet, it would not be surprising for these two proposal to become part of the New York State Tax Law given the aggressive stance of the NYS Department of Taxation and Finance in collecting back taxe.
How a Driver’s License Is Selected for Suspension
You owed $10,000 or more of back taxes to NYS. This amount is cumulative of the assessed balance along with penalties and interest.
For example, you owe back taxes on your NYS income tax return in the amount of $6500. However, over the years, penalties and interest continue to accrue on the tax liability. If the balance is now over $10,000, your driver’s license may be suspended.
It must be less than 20 years from the notice and demand of assessment.
You are not in a formal payment arrangement with the New York State Department of Taxation and Finance.
What is a 60 Day Notice?
You will receive a letter in the mail from the New York State Department of Taxation and Finance informing you that your driver’s license will be suspended in 60 days unless you enter into an acceptable payment arrangement with NYS.
The notice will also advise you that you have 60 days from the date of the notice to either request a conciliation conference with the Bureau of Conciliation and Mediation Services or file a petition with the Division of Tax Appeals.
Six Ways to Challenge the Suspension
Under Section 171 of the New York Tax Law, there are only six ways to challenge the suspension of a driver’s license resulting from back taxes:
You are not the taxpayer in the notice ( example : Your father has the tax debt and has the same name as you.)
You paid the past due taxes.
Your wages are being garnished by the NYS Department of Taxation and Finance as a result of past due child support or spousal arrears.
Your wages are being garnished by income execution under Section 5241 of the CPLR ( Civil Practice Law and Rules ) as a result of past due child support or spousal arrears.
Your driver’s license is a commercial driver’s license.
The Department of Taxation and Finance made a mistake pertaining to the terms of a payment arrangement you made more than once in the last twelve months.
Can I Challenge the Suspension Because I Have No Money?
No. All challenges to the suspension of one’s driver’s license on the basis of “financial hardship” have been unsuccessful to date. All decisions on this issue, to date, have referenced that there are only six grounds to challenge an assessment.
Unfortunately , NYS does not care that you need to a car to get work, bring your kids to school, or go to the supermarket.
Can I Challenge the Suspension Because I’m Filing My Unfiled Tax Returns?
No. You are required under the tax law to file your income tax returns every year. Failure to comply with the tax law is not a ground for a challenge.
I Got a Visit From a NY Collection Officer
If a tax warrant, levy, or income execution didn't get your attention or you owe a large balance in back taxes, do not be surprised if you hear a knock on your door.
That knock will be from a NY collection officer that wants to “discuss” your New York State tax problem.
Certain collection officers can be intimidating, to say the least.
As such, it may be in your best interests to seek counsel from a New York tax attorney that handles back tax matters on a regular basis.
What if the Tax Debt is My Spouse's Fault?
When you file a tax return with your husband or wife, you are both responsible for the tax debt regardless of how it was incurred.
In legal terms, you are jointly and severally liability for the tax debt as well as the penalties and interest that accrue.
If the tax debt is a result of your spouse’s income, you may qualify under circumstances to be exonerated from the tax liability.
Can I settle my tax debt?
Here is some good news.
New York State, similar to the IRS, permits taxpayers that cannot afford to pay their entire tax debt the opportunity to reduce their overall tax liability to a "reasonable amount."
In order to qualify for an Offer in Compromise, you must be able to prove conclusively that your assets are exceeded by your liabilities and that NYS is unable to collect the unpaid tax debt from you through legal collection actions.
New York State uses similar standards as the IRS Financial Standard Guidelines to determine what constitutes your reasonable living expenses.
Some additional factors that the New York State Department of Taxation and Finances uses to determine your ability to pay your back taxes, may include:
- your age
- present employment status
- employment history
- illness or medical condition
- your financial obligation to dependents
- a natural disaster (ex. Hurricane Sandy)
- inability to borrow against certain assets, such as real estate
You may qualify for an offer in compromise if you have “undue economic hardship” as a result of your tax debt.
Undue economic hardship is based upon your inability to pay the basic living expenses to take care of yourself and your family.
However, New York State does not take into account such factors as credit card debt, private school tuition, or contributions to your retirement account.
However, many offers are rejected by the IRS and the State because the taxpayer does not apply the tax law correctly to the particulars of their situation.
Here are some common reasons why your offer in compromise may be rejected:
- You need not meet the requirements as set forth in the New York State Tax Law
- You submitted false information
- You did not disclose all your financial information
- You transferred property for less than it was worth
- You did not make a good faith effort to repay the back taxes
- Your tax debt is related to a crime that you have pleaded or been found guilty
I Do Not Qualify For a Tax Debt Settlement
If you do not qualify for a tax debt settlement, you may qualify for a payment arrangement that will allow you to pay your tax debt over a period of time.
You may also qualify for a reduction of the penalties that are owed, if you can show “reasonable cause.”
In other words, you need a very good reason, such as serious health issues, etc. for the tax years in questions. NYS uses similar criteria as the IRS as what constitutes reasonable cause.
How to Solve Your New York State Tax Problem
Dealing with a New York State tax problem is stressful, to say the least. You do have tax resolution options available to you if you cannot pay the tax debt in full.
However, you must understand that neither the New York State Department of Taxation and Finance nor the IRS represent your interests.
If you want someone to represent your interests and not the interests of the government, it would be wise to seek legal counsel from an experienced NY tax attorney that routinely handles tax problems like yours.