New York State Tax Help
Getting hit with an unpaid tax notice for New York state taxes can be stressful and frightening. What if you can’t pay? Will the state seize your assets? Close your business? Take away your driver’s license?
These are all valid concerns. The state of New York will act swiftly and aggressively to collect unpaid taxes. But it’s important to know the state will also work with you to help you resolve your tax debt.
If you’re struggling with unpaid taxes in the state of New York, you’re not alone. Attorney Sammy Kim is an experienced New York state tax attorney, and she is available to help you solve your New York tax problem now.
Know this: You can’t just ignore a tax problem. Open any letters you receive from the New York Department of Taxation and Finance (DTF). Pay attention to any information requested and any specific rules or deadlines for responding.
New York State Has Really High Tax Rates & Complicated Tax Laws
New York has the highest tax burden in the country. When you combine property tax, income tax, and sales tax, people who pay taxes in New York pay 12.47% of their income to state taxes — higher than any other state in the country.
New York is ranked worst in the nation for individual taxes, and 49th overall for business, property, and other taxes combined, according to the Tax Foundation.
In addition to New York’s high tax rate, the state’s tax laws are complex. New York has a number of different tax credits, deductions, and obligations that can be confusing for taxpayers. It’s no wonder people run into tax problems in the state!
What Happens If You Have Unpaid Taxes In New York
If you have unpaid taxes in New York, the DTF will send you a collection notice. If you disagree with the tax assessment, you have a certain amount of time to file an appeal.
If you don’t take action, New York will issue a tax warrant. That means the state is ready to start seizing your assets or taking other serious collection actions against you.
Penalties for unpaid taxes can include interest, fees, wage garnishment, suspension of your driver’s license, and more.
Interest on unpaid New York taxes is assessed at the federal underpayment rate established under Internal Revenue Code Section 6621, plus 2%. New York can impose a number of other penalties for late payment and unpaid taxes, making the penalties very high in some cases.
- Late payment penalty: 5% of the unpaid tax for each month it goes unpaid, up to 25%.
- Failure to file penalty: 5% of the unpaid tax for each month the return is late, up to 25%.
- Fraud penalty: 2x the difference between the correct tax and the tax shown on your return.
New York state taxing authorities have significant power to collect tax debts — more than any other type of creditor.
If you have unpaid taxes, you need to work with the state tax office to make arrangements before they pursue actions like these:
New York Tax Warrant
A New York tax warrant is a legal document that gives the state the authority to collect unpaid taxes. The DTF can file a tax warrant with the county clerk’s office in the county where you live or work and with the New York State Department of State.
Once a tax warrant is filed, it becomes a public record and creates a lien against your real and personal property.
A tax warrant can have serious consequences. The DTF can use the tax warrant to:
- Seize and sell your real and personal property
- Garnish your wages or other income
- Prevent you from buying or selling property
- Prevent you from obtaining credit
Once New York has issued a tax warrant, the state may serve a levy on any bank that holds your money. That includes joint accounts you might share with someone who is not liable for the taxes owed. A levy freezes your account, meaning you cannot access your funds until you reach an agreement with the state.
Businesses can also be subject to a bank levy for unpaid New York taxes. A business bank levy can have a devastating impact, preventing a business from paying its employees, vendors, and other expenses.
Driver’s License Suspension
New York can suspend your driver’s license if you owe $10,000 or more in back taxes, interest, and penalties. The New York State DTF will send you a notice before suspending your license, and you will have 60 days to pay your tax debt or enter into a payment plan.
You may be able to qualify for an exemption. The following circumstances exempt you from a driver’s license suspension for New York tax debt:
- You hold a commercial driver’s license (CDL).
- Your wages are being garnished to pay your tax debt.
- You’re paying child support or combined child/spousal support.
- You receive public assistance benefits or SSI.
Income Execution Order or Wage Garnishment
In New York, an income execution order, also known as wage garnishment, is a legal process that allows the government to take money directly from your paycheck to pay off a debt. The government can issue a wage levy for a variety of debts, including unpaid taxes.
It’s a dreaded, embarrassing situation when someone from your HR department or your boss calls you to tell you that the New York tax authorities are garnishing your wages.
Attorney Sammy Kim handles many wage garnishment cases for taxpayers and there is one important thing to know: Once a wage garnishment is in place in New York, they’re not going to lift it.
The state is legally allowed to take either 10% of your gross earnings or 25% of your disposable earnings, every time you’re paid. Disposable income is the amount of money left after taxes and other mandatory deductions have been taken out of your paycheck.
However, with the help of an experienced New York state tax attorney, you may be able to get the wage garnishment reduced.
The state of New York can put a Memorandum of Lien on your home, car, or other assets for unpaid taxes.
A lien is a legal claim against your property that gives the state the right to seize and sell the property to satisfy your tax debt. Liens make the assets difficult to sell, as lengthy lien discharge or release processes will turn potential buyers away.
New York will not release the lien on your property until you pay your tax debt in full. However, you may be able to negotiate a payment to pay your tax debt over time. If you enter into a payment plan, the state taxing authority may release the lien on your property, but they will likely require you to post a bond or other security to guarantee your payments.
Worse than a lien, of course, is an outright property seizure. New York State may be able to seize your vehicles, your business, or even the contents of your cash register in order to collect unpaid taxes and penalties.
What Can You Do to Resolve Back Taxes In New York
If you have unpaid taxes, you shouldn’t ignore it. The outcome is always better when you’re proactive and responsive to the New York tax authorities.
Once you know how much you owe, you’ll have a better idea of what resolution options are available. The process is typically easier — and more successful — when you work with an experienced New York State tax attorney, who can walk you through the possible scenarios.
Resolution: Installment Payment Plan
When paying your full New York tax liability all at once is unmanageable, a tax attorney can help you negotiate an installment payment plan, allowing you to spread your payments over time.
There are two types of installment payment plans available in New York:
- Full payment plans: These plans allow you to pay your tax debt in equal installments over a period of up to three years (36 months). For some taxpayers, a 36-month full payment plan means a high monthly amount, which can be difficult to manage.
- Partial payment plans: These plans allow you to pay a lower monthly amount, but you will owe a balloon payment (the remainder of what you owe) at the end of the plan. This can give you a longer time to pay, but many people still find those final balloon payments a challenge.
No matter which payment plan you use, penalties and interest continue to accrue on the unpaid balance. So, a payment plan doesn’t actually provide any tax relief. However, it will keep tax collectors from trying to garnish your wages or freeze your bank account.
Resolution: Offer in Compromise
An Offer in Compromise (OIC) is an agreement between a taxpayer and a tax authority to settle a tax liability for less than the full amount owed. The New York tax department may agree to an OIC when the taxpayer is unable to pay their tax debt in full or when it would cause undue economic hardship.
New York DTF may waive penalties or interest if you can show you had reasonable cause for the late payment or failure to file. In determining whether to assess penalties, the state may consider hardships and issues like these:
- Natural disasters
- Serious illness or injury
- Death of a close family member or the person responsible for tax preparation
- Military service
- Fire or theft
- Postal service errors
- Tax advisor mistakes or delays
- Unforeseen financial hardship, such as a business downturn or job loss
Each case is evaluated individually, and experiencing one of the above hardships is no guarantee that penalties and interest will be waived.
A state tax attorney can help you gather all documentation needed and make a strong argument for relief.
Be aware, the New York tax authorities do not adjust the principal balance of a tax debt very often. (The principal is the original tax you owed before interest and penalties.) However, they do make exceptions when you can show you’ve suffered a significant adversity.
An experienced state tax attorney will use all relevant facts to show that you experienced a tax problem due to issues out of your control and that paying the full tax liability would create undue economic problems for you and your family.
Resolution: Hardship Status
New York also offers temporary tax relief in the form of hardship status. In this case, the state still wants to collect on your tax bill, but they will make some sort of arrangement, such as temporarily suspending collection actions.
Hardship status is not typically a permanent solution. The tax authorities may periodically reevaluate your financial situation to ensure that you still qualify for relief. If your financial situation improves, they may adjust your payment plan accordingly.
Resolution: Innocent Spouse Relief
Innocent spouse relief is a tax law provision that allows a spouse to seek relief from joint tax liabilities when their partner improperly reported income, omitted information, engaged in fraudulent activity without their knowledge, or coerced them into noncompliance. If granted, the innocent spouse is relieved of the tax debt, penalties, and associated interest.
Special Alert for Business Owners: New York Sales Tax (Economic Nexus)
Since the U.S. Supreme Court ruling in the South Dakota v. Wayfair case, states are able to pursue sales tax from businesses with a significant presence or “nexus” in their state.
New York moved quickly and passed its economic nexus law on June 21, 2018, the same day the Supreme Court issued its decision.
If you meet the economic threshold for annual gross revenue ($500,000) or total annual transactions (100) in New York, you must register, collect, and remit sales taxes to the state.
If you run a business located outside the state of New York, and are facing a bill for unpaid New York sales taxes, a tax attorney can help.
Get New York Tax Relief With A Qualified Tax Attorney
Regardless of why you have unpaid taxes, Attorney Sammy Kim can help you negotiate your tax debt and settle tax obligations.
As a tax lawyer with experience handling state tax cases in New York, she helps clients with unfiled returns, back tax debt, errors, and more. Get help with your tax problems now.
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