If you owe taxes to the state of New York and ignore repeated attempts to collect this past-due back taxes, a lien may be placed on your property. This means the state can seize your assets and funds to pay your taxes. Because a lien is a public record, it also negatively affects your credit score.
Here’s what you need to know about getting a New York state tax lien removed from your credit report.
After you file your tax return, you will receive a Notice of Deficiency from the state if your wage withholdings did not cover your total state tax liability. This notice will be sent to the address on file with the state. If you do not receive a Notice of Deficiency because it was sent to the wrong address, you are still subject to collections actions. Make sure the state tax agency has your correct address.
Image via Flickr by tinto
When you receive the Notice of Deficiency, you have 90 days to pay your past-due tax balance. If you do not take action within 90 days, you will receive a final Notice of Deficiency.
If you do not respond to the final notice within 21 days, a tax warrant will be issued. This public record is the precursor to a lien. It will be filed with the clerk in the county where you live or do business and will also be sent to your mailing address on file.
Unlike an arrest warrant, which allows the state to keep you detained, a tax warrant allows the state to seize your property. This includes real estate, vehicles, inventory, and equipment as well as bank accounts and wages. You can even be subject to driver’s license suspension.
Because lenders will see the lien when they check your credit score, it will be difficult for you to get approved for a loan or mortgage. These serious consequences make it worthwhile to resolve your New York back taxes as quickly as possible.
Even if you can’t afford to pay your state taxes, taking action when you receive the initial Notice of Deficiency can prevent you from receiving a tax lien. New York allows you to pay your taxes over time in monthly installments. As long as you adhere to the terms of your installment agreement, a lien will not be placed on your property.
Taxpayers who cannot afford to make even small monthly payments can ask for an offer in compromise. With this program, you negotiate with the state to settle your back taxes for less than you owe. While the state is considering your offer, other collections activities will be placed on hold.
You can have your New York tax lien removed if you make arrangements to pay the back taxes or if you challenge the validity of the warrant and win the case. This can occur if your back taxes were assessed incorrectly or if an error was made in the collections procedure.
If you file for bankruptcy, you may be able to discharge some or all of your state back taxes. This can result in removal of your lien.
Back taxes has a 20-year statute of limitations in New York. This means the back tax amount can no longer be collected 20 years after the assessment date. The lien will be removed at this time.
Once your lien has been released, you must still take steps to have it removed from your credit report. Although the state may report the released lien on your behalf, you should obtain a certified copy of the release and send it to each of the three credit bureaus.
Keep in mind that even when a lien has been released, it will remain on your credit report for seven years. This is one of the most detrimental items that can appear on your credit report. It will continue to lower your credit score even after the back taxes have been repaid.
You can ask New York to withdraw the tax lien once payment arrangements have been made. Withdrawn liens will be removed from your credit report and from the public record. However, the state is under no obligation to withdraw tax liens.
You can protect your credit by preventing a lien in the first place. Take action to make payment arrangements as soon as you get a tax notice from the state.
If you aren’t sure whether a tax lien has been added to the public record, check your credit report regularly. Unpaid tax liens will remain on your credit report as long as they remain unsettled. This is true even after the statute of limitations on the back tax expires. Dispute any items that are incorrect.
If you do have a tax lien, contact the state tax agency to make arrangements to pay the back taxes. If you believe that the assessed amount is incorrect, you have the right to an appeal.
If you need help with your state back taxes, you can contact the Office of the New York State Taxpayer Rights Advocate. This office has been established to assist taxpayers who are unable to resolve their state back taxes through other means. You can also receive free help if your back taxes is causing serious financial issues.
Contact the Office of the Taxpayer Rights Advocate online or call 518-530-HELP (4357).
Contact Solvable if you want help with your back taxes from experienced, well-reviewed companies who work on cases like yours. Our back tax assistance services can help you get on the road to a better financial future.