Facing tax collection efforts from the IRS or the New York State Department of Taxation and Finance is a stressful experience. Many people who find themselves in this situation do not know how to resolve their tax collection issues quickly and completely. At Delia Law in New York, our team routinely assists clients with IRS collection and New York State tax collection problems, helping them avoid the potentially severe penalties that unpaid taxes entail.
If the IRS or the New York State Department of Taxation and Finance has sent you a Notice and Demand for Payment, it’s essential to act quickly to avoid the collection methods these agencies employ. Your tax attorney will be an essential ally as you navigate your resolution options. In some cases, it may be possible to reduce your tax liability and stretch your repayment over time.
How Does the IRS Collect Back Taxes?
When you owe the federal government taxes as an individual or a business owner, it’s vital to repay them as quickly as possible. Once the IRS has identified a tax liability, they will issue a Notice and Demand for Payment to the taxpayer. This Notice informs the taxpayer of the full amount due and the deadline for submission of their payment. If the taxpayer neglects to respond to this Notice or can’t pay the amount listed in the Notice, the IRS will start their collection efforts against the taxpayer.
The IRS has a ten-year statute of limitations for tax collection. After this time, they write up the unpaid tax as a loss and essentially wipe the slate clean for the taxpayer. While this sounds like a fresh start, ten years is a long time. It’s unlikely they will ignore your debt. In fact, during that time, the IRS will continue collection efforts to the best of their ability. Some of the ways the IRS may attempt to recover unpaid taxes include:
● Wage garnishment. The IRS can garnish your wages without a court’s approval, unlike most private creditors. Additionally, the IRS can take substantially more from each of your paychecks than a private creditor could. The IRS will contact the taxpayer’s employer and arrange for the employer to deduct the garnishment from the employee’s paychecks until their debt is paid.
● Lien. The IRS may also issue a lien against a taxpayer who has been unable to pay their tax debt listed in a Notice and Demand for Payment. A lien is a public notice to creditors that the IRS has a claim on the taxpayer’s assets and real property. A Notice of Federal Tax Lien attached to your property can make it difficult or impossible to complete major purchases or secure financing.
● Levy. In some cases, the IRS may have the right to seize your property and sell it to pay your tax debt. It’s also possible for the IRS to seize any future tax refunds to which you may have been entitled to pay off your tax debt.
These penalties can have extensive repercussions on a taxpayer’s life that persist for many years. While confronting the IRS can be incredibly intimidating without legal assistance, it is vital for New York taxpayers to remember that the New York State Department of Taxation and Finance has its own range of methods for unpaid state taxes, similar to those of the IRS but much more liberally implemented and pursued.
New York State-Level Tax Collection Methods
The New York State Department of Taxation and Finance uses many of the same methods as the IRS when it comes to collecting unpaid taxes. In addition to wage garnishment, levies, and liens, the Civil Enforcement Division of the New York State Department of Taxation and Finance may also issue a tax warrant for unpaid state taxes. This amounts to a civil liability claim against you, and it automatically generates a lien against your property.
In the event you owe more than $10,000 in unpaid taxes to the State of New York, the Department of Taxation and Finance may also pursue suspension of your New York State driver’s license. Some taxpayers may qualify for exemption from this form of collection, such as CDL drivers who must drive for work and those already subject to wage garnishment. A taxpayer subject to license suspension will receive a Notice of Proposed Driver’s License Suspension and will have 60 days to respond.
Why You Need a Tax Attorney
The penalties for unpaid taxes can be quite severe at both the state and federal levels. However, both the IRS and the New York State Department of Taxation and Finance offer taxpayers several methods for negotiating their unpaid tax debts and avoiding the harsh penalties their tax debts typically entail. However, navigating the options available to you can be extremely challenging unless you have an experienced tax attorney working on your case.
Your tax attorney can potentially help you resolve your tax debt much more easily than submitting a lump sum payment for your full tax liability. Some of the potential resolution methods your tax attorney can help you explore include:
- Offer in Compromise. Some taxpayers may be able to negotiate an Offer in Compromise, which essentially allows a taxpayer to satisfy their tax debt for less than they actually owe. This is a complex legal motion that requires a thorough review from a tax attorney.
- Installment Agreement. A taxpayer may be able to qualify for a repayment agreement that allows for installment payments instead of a lump-sum payment, making it much easier to manage tax debt repayment and avoid penalties like tax lien and wage garnishment.
- “Currently Not Collectible” status. A tax attorney can help a taxpayer complete the application process for “Currently Not Collectible” status, which halts tax collection efforts at the state and/or federal level until the taxpayer’s financial situation allows for reasonable repayment of their tax debt.
Every taxpayer’s situation is unique; that’s why hiring an experienced tax attorney is crucial. They can make an incredible difference in the outcome of an IRS tax collection and/or New York State tax collection matter. Attorney Dawn Delia and her team at Delia Law have solid experience handling complex tax collection cases involving both federal and New York State tax authorities. If you are ready to discuss your tax collection issues with an experienced attorney, contact Delia Law to schedule a consultation today.