If you live in New York State and you owe taxes to the Department of Taxation and Finance, it can be confusing to know how to resolve the problem of tax debt. Which is why we at Solvable are here to help: we’re going to break down everything you need to know about tax debt in New York State. Conveniently for you, New York State’s taxation department is known as being one of the most efficient at finding resolutions in the whole of the U.S.
Often those in tax debt owe taxes at the state and federal levels. Every state taxation department is separate from the IRS, and each has their own rules governing how they collect taxes. The first thing you must do is work out where your debt lies.
Look carefully at any preexisting taxes you’ve already filed, and find out if your existing tax returns are at the state or federal level. Use a spreadsheet to place the two types of taxes in separate columns, and work out the total owed for each. When you have those figures, calculate an increase of 0.5% for each month your taxes went unpaid at the federal level, and 5% for every month your taxes for New York State were unpaid. Once you’ve done this, you should have the total amount you owe to the federal government and the taxation department of New York State.
If you’ve not paid your taxes in New York State, and have failed to negotiate a payment installment plan or the filing of your account as Uncollectible, the state will begin implementing methods to collect the taxes. Some of these are quite conventional; like the IRS, New York state implements tax levies on those who haven’t paid their back taxes. Others, like their Tax Delinquents List, are quite remarkable.
One way New York State deals with tax delinquents is quite unconventional; each month, they publish a list on their website of the 250 individuals with the highest tax debt. Individuals on the list are ranked by the amount of taxes owed. The only people included are those who have not settled a payment agreement with New York State, filed for bankruptcy or are in the process of protesting the tax bill. If you resolve your tax delinquency with New York State while you’re on the list, it won’t be taken down until the following month.
A tax warrant, also known as a tax lien, is the equivalent to a money judgment for New York State’s tax department. Once this is released, New York State will be able to pursue the money you owe them through various means, completely legally. The first effect of a Tax Warrant is to prohibit a debtor from liquidating their assets. In practice, this means that, while under a Tax Warrant, you will be unable to sell any property you own. Secondly, once a Tax Warrant is issued, New York State can begin the process of seizing assets through levies, deductions from wages, and seizing properties.
However, tax warrants are not issued if an individual sticks with their negotiated installment payment plan or their Offer in Compromise with New York State’s taxation department. The four main ways to avoid having a Tax Warrant issued in your name are:
After a Tax Warrant has been issued, New York State will proceed to issue levies. Tax levies allow the state to collect money, not from you, but from a third-party who administers you money. Third-parties the state may issues levies to could be the bank, or your tenants, if you’re a landlord. Even credit card processors are susceptible to levies.
However, there are many funds which are exempt from levies, and these include:
Income Execution is where New York State requires that a portion of your wage is deducted and paid to the state. Often, New York State allow you to do this yourself, and will not contact your employer. However, if you do not initially respond, they may do, so make sure to affirm that you will pay it yourself before the State take that action.
Seizure and sale is usually the final effort New York State take to claim your tax debt. Usually, this involves seizing and selling your property or properties to pay off your debt. However, if your debt is very high, they may also seize other high net-worth items, like jewelry, artworks and cars.
However, if you tackle your tax debt responsibly, it will never come to seizure and sale. CTA: At Solvable, we want you to connect with the right companies to relieve your tax debt. If your debt is handled in a timely manner, and you reach a resolution quickly with New York State, you will not no need to worry about any of their more punitive tax collection methods.