How New York Collects Taxes & Options for Those Needing Tax Help
The New York Department of Taxation & Finance is in charge of administering the tax laws of the State and this includes collecting taxes from individuals and businesses. All residents must be made to pay their fair share to the State of New York. If your tax return is audited, you may find that you owe more than you paid, which means you’ll get a tax bill that may include interest and penalties. If you were instead expecting a refund, you may be out of luck in that regard.
The Department of Taxation & Finance will also contact you if you don’t pay the tax assessment or if your rights to appeal are outdated or used up. If you have a tax bill that remains unpaid you would be wise to send in the money as soon as you can so that you are not subject to enforced collection efforts and avoid accruing any more interest and penalty charges, as follows:
Interest & Penalties
The NY Department of Taxation & Finance sets the interest rate and the penalties for delinquent taxpayers on a quarterly basis. However, if it is determined that the taxpayer’s failure to pay or pay late is the result of a reasonable cause and not neglect, the interest and/or penalty may be less.
The penalty for paying your taxes late is around 5% per month of the unpaid amount until the debt is fully paid. The minimum late payment penalty is $15, with a maximum late payment penalty of approximately 60% of the unpaid balance.
When a tax lien is legally filed against you as the result of a tax warrant, it will be against any real estate you own as well as personal property of value. A tax lien is public information and as such anyone checking will find out that you owe New York State taxes, which can be collected through a levy and the seizure of income and property.
Tax liens are filed with the County Clerk and the Service Office of the State of New York. This will appear on your credit report, making it hard to gain approval for a loan or to buy, transfer or sell property. However, once you fully pay the taxes you owe, the Department of Taxation & Finance will remove the warrant and notify the County Clerk that the lien has been lifted.
A levy is a type of legal order requiring a third party (your bank) to take money out of your account(s) and send it to the Department of Taxation & Finance. Money that someone owes you can also be levied to pay off your tax debt. Certain types of funds cannot be levied to pay a tax bill. These funds include: public assistance or welfare checks, benefits such as disability, social security checks and other security income, unemployment checks, workers’ compensation, and income from a private or public pension.
If a married couple filed their taxes jointly they are both responsible for paying the tax bill. If they don’t pay what they owe, they both may be levied. If you are facing a tax levy you would be wise to hire an experienced tax professional or CPA who can provide you with the tax help you need to successfully resolve your tax situation. You can also call the Department of Taxation & Finance with any questions you have using the phone number on your notice.
Statute of Limitations on Collecting NY State Taxes
The NY Department of Taxation & Finance is allowed 20 years to collect unpaid taxes. The 20 years starts running from the date the Department is legally entitled to file a warrant. In contrast, The IRS only has 10 years to collect unpaid tax debts.
The date that a tax warrant can first be filed depends on the situation:
- If the taxpayer were not legally entitled to a hearing regarding the payment demand, the date would be one day after the due date for payment, according to the letter.
- If the taxpayer were entitled to a hearing, the date would be one day after the deadline for requesting the hearing.
- The State of New York and the taxpayer are allowed to agree on an extension of time for collecting on a tax warrant.
Tax Help & Tax Relief Options are Available for New Yorkers in Need
New York State Department of Taxation & Finance is known for offering tax help to individuals and businesses through a reliable range of options for those having difficulty paying their back taxes. Some of these programs allow taxpayers to pay their tax debt over time with installment payments.
For taxpayers who are suffering a severe financial hardship there are tax relief options allowing them to settle their entire tax debt for less than what they actually owe. If you are trying to figure out how you’re going to pay off your back taxes to the State of New York, the following overview should be of help. Remember that tax laws and programs are subject to change, so it would be wise to consult a reputable tax professional or CPA for the tax help and advice they can provide.
Power of Attorney
You are legally entitled get tax help from a professional by having him/her represent you in matters before the Department of Taxation & Finance, although most taxpayers are successful working with the Department themselves to resolve any tax matters. If you decide you want a representative you will have to fill out the New York State Power of Attorney form POA-1.
Options for Individual Taxpayers
It’s best if everyone could file and fully pay their taxes in time every year in order to avoid interest and penalties accruing, not to mention collection efforts. In the event you do not have the funds to pay your taxes in full, you can request an Installment Payment Plan. Whether or not your request is approved will depend on a thorough review of your finances, history of complying with all tax laws and your acceptance of the stipulations set forth by the Department of Taxation. In entering an Installment Payment Agreement you will be obligated to make monthly payments until your debt is paid off. During this time you will continue to accrue interest and penalties.
Payment Plan Options for Individuals
The State of New York offers individual taxpayers a 36-month payment plan that in most cases requires no financial disclosure. This payment plan is similar to the Streamlined Installment Agreement offered by the IRS. Under a 36-month payment plan the taxpayer must agree to pay off their balance within 36 months or within the number of months remaining on the statute of limitations. The law allows New York State 20 years from the date on the assessment to collect unpaid taxes.
36 to 72-Month Plan
When New York taxpayers need up to 72 months to pay off their taxes, the Department of Taxation & Finance can accommodate them after a review of their financial information. This will likely involve an evaluation of the taxpayer’s assets, income, living expenses and debts. Supporting documentation is not required in all cases, but you should be prepared with the proper paperwork just in case they want to verify the information.
There have been some cases in which the taxpayer needed longer than 72 months to fully pay what they owed in back taxes. In such cases the Department of Taxation & Finance is going to require specific documentation and forms to support the need for a payment plan lasting more than 6 years.
Before entering into a payment agreement you may want to consult with an experienced tax professional or CPA for their tax help and expertise.
To request an Installment Payment Agreement, do the following:
Go online to the Department of Taxation & Finance’s Online Services page and set up an account if you haven’t already done so. Login to your account and go to the left side of your screen and click on Payments, Bills & Notices. Once there, click on Request an Installment Payment Agreement.
If you do not want to do this over the Internet and have a copy of your billing notice on hand, call (518) 457-5434 to submit your request by phone. The prompts will ask you to enter your Taxpayer ID Number along with the 4-digit PIN on your billing notice. From there you should just keep following the prompts.
For additional questions or concerns, you can phone the Department of Taxation & Finance at: (518) 457-5434.
Currently Not Collectible Hardship Status
If you are not eligible for an Installment Payment Plan you may qualify for hardship status, which is generally good for 1 year. To be considered you will need to provide your financial information and complete the required forms annually. This status benefits taxpayers who are disabled and/or retired the most because their financial situation is unlikely to change much in the future. In requesting this you can expect a tax lien or warrant to be filed against you.
You could compare this to the Currently Not Collectible status that the IRS offers in similar situations. Unlike the IRS, the Department of Taxation & Finance does not make this information public and does not provide any formal procedures to obtain this status. However, taxpayers who are suffering in a difficult financial situation can receive some measure of tax relief this way. If you are unemployed, dealing with difficult family issues, are suffering with an illness, have had a huge decrease in income, or are dealing with a recent flood or fire you should ask to be considered for this status.
Hardship status does have some drawbacks because tax liens often follow, although sometimes they’ve already been filed. For most individual taxpayers who are able-bodied and not planning on retiring anytime soon this may not be your best option, especially if you are in a short-term unemployment situation.
Innocent Spouse Relief
This is an option for a spouse or ex-spouse who filed their taxes jointly when married. There are three types of Innocent Spouse Tax Relief available, as follows:
- Innocent Spouse Relief
- Equitable Relief
- Separation of Liability
In general, Innocent Spouse Relief would be best for spouses or ex-spouses who had no idea or no reason to suspect that the joint tax return he/she signed had any errors or omissions. Moreover, the spouse or ex-spouse believes that the Department of Taxation & Finance should not make them financially liable for any tax that was understated.
Offer in Compromise
Although New York’s Offer in Compromise program is similar to the one offered by the IRS, New York’s Department of Taxation & Finance is somewhat more selective in its eligibility requirements. This tax relief program is offered to individual and business taxpayers that have become insolvent or have gone through bankruptcy. Individual taxpayers who are solvent may also apply if paying their taxes would create undue financial hardship.
New York residents who qualify may seek an Offer in Compromise if there is no way they can possibly pay what they owe in taxes. If their offer to pay a reasonable amount were accepted they would be able to resolve their entire tax debt for less than what they owe.
Before approaching the Department of Taxation & Finance with an offer it would be smart to hire a reputable tax professional or CPA with a track record of navigating this process successfully for other clients. In applying for an Offer in Compromise with the State of New York, your offer would need to be for the equity amount of your assets and your likely future disposable income.
You may be considered for an Offer in Compromise if you meet at least one of the following criteria:
- An individual or company that is insolvent or bankrupt
- Individuals who are not in bankruptcy, but if they were required to pay in full they would face undue financial hardship
- You do not believe you owe the full amount of tax you’ve been assessed
To qualify for tax relief via an Offer in Compromise due to undue financial hardship, you must be a U.S. citizen. This includes businesses for which an individual is personally responsible. Every application is thoroughly evaluated so that every citizen applying receives the Department’s full consideration.
Applicants receiving hardship relief must meet the required qualifications. Applications that are not in the State’s best interest or in the best interests of all other citizens will be rejected. The “offer” would generally need to be equivalent to the value of any assets the taxpayer owns plus their disposable income, if they have any. Basically, the taxpayer would have to be insolvent with their liabilities exceeding the value of their assets in order for them to be considered for an Offer in Compromise.
The Department of Taxation & Finance is currently updating its forms. At the present time taxpayers applying for an Offer in Compromise would need to submit the following:
- Offer in Compromise for Liabilities Not Fixed and Final and Subject to Administrative Review Form DTF-4. Only use this form if your tax liability has not yet been finalized.
- Offer in Compromise for Fixed and Final Liability Form DTF-4.1.
Statement of Financial Condition and Other Information Form DTF-5. Do not forget to include the requested documents, which are listed on the last page of the form.
If you are asking for relief from financial hardship, you are required to provide a statement detailing the financial hardship that would result if you were forced to pay the full amount you owe in taxes. Included with this you must provide supporting documents.
You must submit 2 copies of each form, along with the required supporting documents to the Department of Taxation & Finance at the following address:
Offer in Compromise Program
P.O. Box 5100
Albany, NY 12205-0100
The Department does not provide a timeline for reaching a decision. If the Department accepts your offer, you may be required to sign an additional agreement to ensure your compliance so the State is confident about its ability to collect as much of your debt as possible.
Taxpayers may submit no more than one Offer in Compromise application in a given time period, whether or not that offer is accepted. If you have questions you may want to call the Offer in Compromise Program office at (518) 457-9086.
Offer In Compromise
As has already been discussed, a business that is literally insolvent or bankrupt is eligible to apply for tax relief through an Offer in Compromise. The State of New York will not accept an offer if it is for less than what the business owes in trust fund taxes. However, an offer for the principal amount owing without the accrued interest and penalties would be considered.
Generally, the best option for a still-active business would be to enter an Installment Payment Agreement that includes a down payment. However, if the Department of Taxation & Finance has assessed a “responsible person” and is holding them personally liable for the tax debts of the business, then that person may apply for an Offer in Compromise if he or she meets the qualifications.
Business & Trust Fund Taxes
New York’s Department of Taxation & Finance treats Business and Trust Fund taxes very seriously. These would be payroll withholding taxes, sales and use tax and other types of taxes that the business holds and is required to remit to the State, but for some reason has failed to do so. Each case is thoroughly looked into before the Department makes its determination.
These cases are generally resolved by having the business make a 20% down payment on the outstanding tax balance and monthly payments from that point on until every cent is paid in full plus interest and penalties.
Contact Information for the New York Department of Taxation & Finance
The State of New York has an effective framework for resolving tax matters involving individuals and businesses. The Department of Taxation & Finance has a very experienced staff who are available to help residents get their outstanding tax debt(s) paid in full so they can be back in compliance with the tax laws of the State.
For questions about requesting an Installment Payment Plan, please call (518) 457-5434 and have your tax bill handy as well as your Tax ID Number. If you are not eligible for an Installment Payment Plan you should review publication 125 for more information on the collection process.
If you no longer have your tax bill or have questions about warrants and liens for child support payments, please call (518) 457-5893.
Note: The Department of Taxation is not allowed to speak to your designated representative unless you have submitted a Power of Attorney form to them.Contact Us