Past due state of New York (NY) taxes is a problem that is difficult to ignore. Although it is usually possible to resolve this issue and set up an agreement with the NY State Department of Taxation and Finance, in many cases people just choose to wait and see what happens.
This is not a good practice, because any unpaid tax balance continuously increases due to the enormous amount of penalties and interest that accumulate on top of the tax due portion. In addition, any unpaid tax case eventually gets assigned to the Tax Compliance Division, which is actually a collection entity within the NY State Department of Taxation.
The Tax Compliance Division has a number of methods to ensure taxpayer’s compliance with its filing and payment requirements. Its arsenal includes tax warrants, levies and seizures of property, income executions, offsets of any refunds due to the delinquent taxpayer, and revocation of a Certificate of Authority. Each one of these methods, when applied, can create a substantial economic hardship for a taxpayer.
Taking into consideration all possible outcomes of having unresolved tax debt with the state of NY, it is a good idea to take care of any tax debt as soon as possible. There are a few options to achieve this. First of all, if you believe that you have been assessed with the tax balance by mistake, or if the amount you really owe to the state of NY is not the amount you were notified about, you can file a protest and take the case to the Division of Tax Appeals, which is another branch of the NY State Department of Taxation. Tax Court is the next place to go, if you cannot reach an agreement with the Division of Tax Appeals.
An Installment Agreement is one of the most common ways to repay outstanding tax. However, you should be aware that your Installment Agreement proposal will not be considered until all of your missing returns are filed and entered into the state computer system. It is important to have all returns filed and all tax balances assessed before entering into an Installment Agreement, because any new liability accrued after this agreement is accepted automatically defaults it.
In addition, failure to make an installment payment on time also defaults the Agreement. This is the reason why it is imperative to carry out a detailed analysis of your financial situation when preparing an Installment Agreement proposal to the state of NY. Tax Resolution companies that specialize in resolving state tax liabilities can be very helpful in these instances, helping you to negotiate a monthly payment amount that you can afford.
The NY State Department of Taxation also has an Offer in Compromise program for those taxpayers whose collection potential is limited. The idea behind the Offer is to settle your tax debt with the State of NY for less money than you owe. The amount of the Offer does not depend on what you owe; it depends solely on your equity in assets and disposable income amount. However, few submitted offers are accepted. It is very difficult to prove to the NY State Department of Taxation that your collection potential will not increase with time, and that it is in the best interest of the Department to accept what you can offer and close the case.