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new york state back taxes



New York State Back Taxes Options

new york state back taxes optionsNew York state has a tax resolution framework for taxpayers struggling with back taxes. Furthermore, the NY State Department of Taxation and Finance (DTF) has a reputation for being consistent and reliable. Some of the tax programs available help taxpayers pay off their balance over time. Other options are available to help financially strapped taxpayers settle for less than they owe. If you are struggling with New York State back taxes, the overview below will provide you some direction.  Keep in mind that programs and laws change, so it is always a good idea to contact a licensed tax professional.

NY State Individual Tax Options

NY Installment Payment Agreement (IPA)

DTF offers different types of payment agreements for those who cannot pay their taxes in full. They will look at a taxpayer’s compliance history, current financial state, and adherence to department requirements to determine whether to accept an IPA. Remember, that you will be paying your tax debt over a series of monthly payments. Interest and penalties still accrue.

Read more here about the different IPAs available and how to apply.

12-Month Currently Not Collectible Status (Hardship)

If you do not qualify for an IPA, you can look to apply for hardship status. Generally, a hardship status is good for one year.  You must complete a financial form and/or disclose financial information annually. The disabled or retired greatly benefit from this option because they don’t expect their financial situation to change in the future. However, a tax lien, or tax warrant, usually will be filed.

This is comparable to obtaining a CNC status from the IRS. Unlike the IRS, the DTF does not publicly discuss this option and there are no formal procedures. However, it is available for taxpayers facing difficult situations. For example, unemployment, illness, family issues, fire or floods, and severe decreases in income.

Offer In Compromise (OIC)

This is very similar to an IRS Offer in Compromise.  NYS is a little more selective when it comes to who qualifies. It is available to individuals and businesses that are insolvent or were discharged in a bankruptcy proceeding. It is also available to individuals (not businesses) who are solvent but payment would create “undue economic hardship.” With a NY OIC, taxpayers make an offer that represents the equity in their assets and future disposable income.

Read more here about the NYS offer in compromise program, who qualifies, and how to apply.

Innocent Spouse Relief (ISR)

NYS does offer Innocent Spouse Relief as an option for spouses or former spouses who filed a joint tax return. There are three types of innocent spouse relief options available:

  • Innocent Spouse Relief
  • Separation of Liability
  • Equitable Relief

Generally, ISR is best for spouses or former spouses who did not know and had no reason to know a joint tax return they signed had an omission or error. Furthermore, the spouse believes that DTF should not hold he or she responsible for the understatement of tax.

NY Business Tax Options

In NY state, withholding tax and sales taxes are “trust” fund taxes. Businesses collect the former taxes on behalf of consumers and/or employees and submit them to the state. Therefore, unpaid trust fund taxes are a serious matter to New York. Generally, these tax cases are handled by the state on a case by case basis. Here are some of the common paths frequented by businesses that owe taxes.

Installment Payment Agreement – IPA

In most cases, NY State requires a down payment of around 20% before they agree to an IPA. However, DTF may still grant an IPAs without a down payment.

Offer In Compromise

As discussed above, businesses that are insolvent or bankrupt may apply for the OIC program. NYS normally will not approve an offer for less than the amount of trust fund taxes owed. However, you can make an offer for the principal excluding penalties and interest. However, income taxes are different. Therefore, if a business is still active, an IPA with a down payment is usually the best option. However, if NYS assessed a “responsible person” personally for business tax debts, then that individual may apply for the OIC program if he or she qualifies.

NY State Statute of Collections

New York or the DTF has 20 years to collect tax liabilities. It is 20 years from the date a warrant could be filed by the DTF. While the IRS has 10 years to legally collect the tax debt, NY State has 20 years.

The first date a warrant can be filed is different depending on the situation:

  • If there is no right to a hearing with respect to a demand for payment, the day would be day after the demand for payment letter specifies
  • If there is a right to a hearing, it would be the first day after the deadline to request a hearing

Remember, NY State and the taxpayer can agree to extend the time to collect on a tax warrant.

If you are struggling with New York State back taxes, it is generally a good idea to connect with a licensed tax professional or a tax firm with experience resolving NY tax problems.  Use the form at the top of the page to request a free consultation and quote.