Having tax liability is always a burden, and this is not only because your penalties and interest on the amount that you owe grow extremely fast. Unresolved tax debt always leads to collection actions, and it is just a matter of time for your bank accounts to be levied or income garnished by taxing authorities. The terminology for these actions varies from state to state, but the procedure is very similar. All states operate very similar to the federal government when it comes to tax collection.
What is known to the federal taxpayers as Wage Garnishment or Levy on Wages, NY State Department of Taxation calls Income Execution. It is a situation when the state of NY takes a portion of your salary before you have a chance to see the money. This does not happen unexpectedly; the State of NY Department of Taxation is required by law to notify you in writing about your tax debt and potential collection actions by sending you a notice about the balance due. If you believe there is a mistake, and you either do not owe money to the State of NY, or your tax portion should be lower than is shown on the received document, you can file a protest and submit it to the NY Department of Taxation. Your case will be placed on hold for enforced collection actions while your protest is reviewed.
If you ignore the state notice about your tax liability, you will soon receive a copy of the Tax Warrant filed with the NY Department of State and your County Clerk's office. The NY State Warrant is very similar to the IRS lien. It is a legal claim against your property, which can badly affect your credit rating and any ability to get a loan. However, this is just the first step in the State of NY collection process. Bank levy, income execution and seizure of property are three possible subsequent steps.
There are two ways you can deal with the State of NY income execution. You can respond to the notice received within 20 days after it was issued and start sending money to the state every time you receive your salary. If you do not comply with this requirement, your employer will receive a similar notice and will have to withdraw money from your paycheck and send it to the state. However, by law these wage deductions in the state of NY cannot exceed 10% of your gross income.
If you cannot afford, or do not wish, to pay 10% of your income to the state for the back taxes, one of the ways to deal with the situation is to contact the State Department of Taxation and negotiate resolution for your debt. The State of NY accepts Installment Agreements and has an Offer In Compromise program. However, it is a good idea to review your financial situation before making a decision on how to proceed, because your Installment Agreement amount might be higher than 10% of your gross monthly income, which is what an income execution will take from you. Bankruptcy usually stops all NY State collection activities, including income execution.
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