New York Tax Relief: Consequences of Unpaid Taxes and Resolution Options

The Department of Taxation and Finance (DTF) is the primary revenue collection and tax enforcement agency for New York State. The DTF is one of the Empire State’s most important agencies. The DTF is responsible for collecting dozens of state and local taxes and fees, which add up to well over $100 billion in revenue each year.

The DTF claims that about 96% of the revenue they collect comes from voluntary compliance, with roughly 4% of revenue coming from enforcement activities, such as audits, collections, and criminal prosecution. Despite this small percentage, it still amounts to billions of dollars in taxes and fees. As much money as this is, it still doesn’t fully represent the true cost of these enforcement actions in terms of the stress, anxiety, and burden these activities place on New York taxpayers.

If you’re having trouble meeting your New York State tax obligations, it’s okay to ask for assistance. 20/20 Tax Resolution is more than happy to help you understand your state tax requirements and resolve any tax disputes or unpaid tax balances you might have with the DTF. The following is an overview of the kind of tax troubles you or your business could potentially face from the DTF.

Key Takeaways

• The Department of Taxation and Finance (DTF) is the primary tax collection and enforcement arm of New York State.
• The DTF collects various state and local taxes, including sales and use, corporate, property, and personal income.
• Failing to pay these or other taxes can result in enforcement actions by the DTF, including audits, tax warrants, income executions, levies, property seizures, driver’s license suspensions, and private debt collection actions.
• Taxpayers can resolve their unpaid tax issues if they pay off their entire balance, set up an installment payment agreement, request an OIC, or ask for spousal relief (if applicable).
• Taxpayers who disagree with the DTF can file a protest or request a review.
• While not required, NY taxpayers dealing with the DTF are usually best served by consulting with an experienced tax resolution professional.

Taxes Collected by the NYS Department of Taxation and Finance

The majority of taxes collected by the DTF fall under the following four categories:

• Personal income tax
• Property tax (in conjunction with local governments)
• Corporate taxes
• Sales and transaction taxes

The DTF spends much of its time collecting the following taxes:

• Income taxes
• Estate taxes
• Mortgage recording tax
• Real estate transfer tax
• Metropolitan commuter transportation mobility tax (MCTMT)
• Corporate tax
• Sales tax
• Withholding tax

What Happens When You Have Unpaid Taxes in New York

If you fail to pay taxes or report taxable income to the DTF, you could face one or more of the following:

• Audit: The DTF reviews your applicable tax returns and financial documents to confirm that you’ve paid your legally required taxes.
• Tax warrant: This is a type of state tax lien. It gives New York State a legal interest in your property. The DTF uses tax warrants to protect its legal interests in property owned by taxpayers who owe money to the state of New York. Tax warrants make it harder to buy or sell property, as well as obtain credit.
• Levy and property seizure: These are similar tax collection tools in that they both refer to the taking of taxpayer property. However, NY levies usually refer to levies that apply to financial institutions (such as banks), while seizures typically cover the sale of property where the proceeds are used to satisfy a tax debt. Before the DTF can levy or seize your property, they will first file a tax warrant.
• Income execution: This is more commonly known as wage garnishment, where up to 10% of your paycheck may be withheld by your employer and sent to the DTF. The DTF will often file a tax warrant before implementing an income execution.
• Driver’s license suspension: If you owe at least $10,000 to the state of New York, the DTF may suspend your New York driver’s license. Several exceptions apply, such as already being subject to an income execution, having a commercial driver’s license, or receiving public assistance benefits.
• Private debt collection: Taxpayers who don’t promptly settle their tax debts with the DTF may be contacted by a private debt collector who is working on behalf of the DTF. The DTF is currently utilizing the private debt collection agency of Harris and Harris based in Chicago, Illinois.
• Penalties: In addition to monetary penalties, you could also be subject to criminal fines and even jail time.

Tax Resolution Options for NY Taxpayers

As serious and unnerving as the above-referenced tax enforcement tools can be, the good news is that the DTF offers multiple ways to resolve unpaid taxes. Some of the more popular options include:

• Pay in full: This is the simplest and quickest solution, although not usually the easiest. You can pay off your tax balance directly from your bank account (for free), with a credit card (for a fee), by check, or with a money order.
• Installment payment agreement (IPA): This is a type of payment plan where you make monthly payments to the DTF to pay your tax debt over time. You can request an IPA through your online DTF account as long as the balance is $20,000 or less and you can pay off the entire balance within three years.
• Formally dispute the tax debt: If you disagree with a bill or notice from the DTF, you may file a formal appeal or protest. If your protest rights have expired or don’t exist, you can dispute the tax debt by requesting a review.
• Offer in compromise (OIC): An OIC allows you to settle a tax debt for less than the full amount. The DTF typically grants OICs if you or your business is insolvent or if full payment of the New York tax balance would create an undue economic hardship.
• Voluntary disclosure and compliance program: If you owe back taxes and haven’t filed necessary tax returns, you can reduce the chances of monetary penalties and criminal prosecution if you voluntarily come forward and tell the DTF that you owe taxes and agree to pay any current and future tax obligations.
• Spouse relief: The DTF may offer financial relief for taxes, penalties, and interest (all or some) that may be attributable to your spouse and not you. The three types of spousal relief include innocent spouse relief, separation of liability, and equitable relief.

Responding to the NYS Department of Taxation and Finance

If you have an issue with the DTF, you’ll most likely learn about it from a letter in the mail. Given the sheer number of taxes and fees the DTF collects, combined with the complexity of the New York tax code, there are many possible notices you might receive. Each letter or notice typically requires a different response, especially if you disagree with the DTF and want to file a protest.

Common Letters and Notices

• Form DTF-948 or DTF-959-O, Request for Information
• Form DTF-973.52 or DTF-973.73 (child or dependent)
• Form DTF-973.56-O or DTF-973.96-O (wages and withholding)
• Form DTF-973.52 (self-employment income)
• Form DTF-973.66 (business loss)
• Form DTF-973.65 (rental loss)
• Form DTF-973/55 (itemized deductions)
• Notice of Proposed Driver’s License Suspension

File a Protest

The protest process depends on the specific notice or letter. Also, not all tax issues can be disputed through the protest process. If you have protest rights, it will be explained in the letter or notice you want to dispute. Generally speaking, filing a protest gives you the right to request a conciliation conference or petition for a Tax Appeals hearing.

A conciliation conference is a less formal and quicker option as it consists of a conferee to hear the DTF’s position and your position. To request a conciliation conference, you’ll need to complete Form CMS-1-MN, Request for Conciliation Conference.

These conferences take place in person and usually last just a few hours. You’ll have the opportunity to ask questions, present arguments, and submit additional documentation. The conferee will attempt to mediate the dispute, but if no agreement can be reached, the conferee will issue a decision. If you disagree with this decision, you may file a petition for a hearing before the Division of Tax Appeals.

A Tax Appeals hearing is a far more formal and involved process where an administrative law judge presides over a hearing and each side has a chance to present evidence in support of their position. If you don’t agree with the administrative law judge’s decision, you may ask for additional review before the Tax Appeals Tribunal.

Request a Review

You won’t have protest rights if the time to file a protest has lapsed or your tax matter deals with either situation:

• A tax dispute that revolves around an unpaid balance due to a clerical or mathematical error on a tax return, the IRS making a change on your federal return, or you were late in paying a tax you determined you had to pay on your own tax return.
• The DTF sent you a Statement of Audit Changes/Adjustment.

Even if you have no protest rights, you might still have the right to request a review. There are three ways to request a review:

• Online
• By phone (using the number on the notice or letter you received)
• By mail

If requesting a review by mail, you’ll mail your explanation and supporting documentation to:

NYS ASSESSMENT RECEIVABLES

PO BOX 4127

BINGHAMTON NY 13902-4127

After the DTF reviews your submission, they’ll send you a letter explaining their decision. If this decision confirms you owe money to the DTF, you can pay the bill in full or request an IPA. If you don’t, you risk collection actions by the DTF or its designated third party. You may have other options available, but you’ll probably want to first consult with a qualified tax professional.

Get Help Dealing with the New York Department of Taxation and Finance

The DTF takes its tax collection and enforcement responsibilities seriously, and they won’t hesitate to file a tax warrant against your property, suspend your license, levy your bank account, or garnish your wages if you don’t pay your New York taxes. Businesses are at particular risk, given the added tax reporting and collecting burden due to payroll, corporate, sales, and use tax obligations.

If you’re worried about complying with your tax duties in New York or have just received a letter or notice in the mail, contact 20/20 Tax Resolution. We offer free consultations to help you better understand what you’re dealing with and how to achieve the best possible resolution to your tax problem.