Tax Resolution Services for New York Taxpayers
Help Negotiating with the IRS and NY Dept. of Taxation and Finance
If you live or operate a business in New York, you must pay and file both federal and state tax returns. The Internal Revenue Service (IRS) and the NY Department of Taxation and Finance (NYS) both require individual income tax returns and a variety of business returns. Failure to stay compliant can lead to a myriad of federal and state tax problems, but there are specialists who can help.
To protect your personal and business finances, you need to work with a tax attorney who specializes in tax resolution work. Attorney Stephen B. Kass has extensive experience resolving complex tax issues for his clients, and he can help you negotiate with both the IRS and the NYS as well as other state revenue agencies.
The Law Offices of Stephen B. Kass, PC are located at 7 Penn Plaza, Suite 830, New York, NY 10001. To talk with a tax attorney now, contact us at (212) 843-0050. In the meantime, here is an overview of the tax problems and solutions we regularly address.
Common Tax Problems Faced by New Yorkers
Back Taxes
Unpaid back taxes can quickly snowball into an untenable position. Whether you miss a payment to the New York DTF or the IRS, you will incur penalties and interest. Both agencies can also initiate involuntary collection actions such as seizing your wages or property or even taking away your international travel or local driving privileges.
IRS and NY Tax Audits
The IRS and the NY DTF routinely audit personal and business tax returns. You may be selected for an audit due to discrepancies between the information on your return(s) and returns submitted by other entities, but both agencies also randomly select some returns for audit.
During an audit, you must be able to substantiate all of the claims on your return, and if the auditor disagrees, you will incur a tax liability as well as interest and penalties.
Current and former New York taxpayers must also be aware of the risks of residency audits. NYS has stepped up its scrutiny of taxpayers who move out of the state or who claim residency for only part of the year. If you’re selected for a residency audit, you will be required to prove that you don’t live in New York, and the process can be exhausting.
An audit attorney can represent you in front of the auditor and help you get the best results possible.
Penalties and Interest
The late filing penalty on both the state and federal levels is 5% of the tax due per month, up to 25%. If you file but don’t pay, the penalty is 0.5%. If you understate your income due to gross negligence, New York assesses a penalty of 5% of the tax and 50% of the interest, while the IRS’s penalty is 20% for the same offense. Fraud penalties are 75% on the federal level and 2x the underreported tax on the state level.
Both federal and state income tax accrues interest at a variable rate which compounds daily. In many situations, taxpayers can qualify for penalty abatement, especially if they have reasonable cause or have incurred a late filing/payment penalty for the first time. However, interest is generally only abated in the case of an agency error.
Tax Liens and Levies
The IRS can issue a federal tax lien if you don’t pay your taxes. The lien attaches to everything you own for 10 years. NYS may issue a tax warrant which works similarly to a tax lien, but under New York State law, the warrant stays in place for 20 years. Tax liens are public records, and although they don’t appear on your credit report, they can prevent you from getting loans or selling your property easily.
A levy is when the state or IRS seizes your assets. The most common levies attach to bank or investment accounts, but the IRS and NYS may also seize real or personal property. If you’re behind on your business taxes, NYS may change the locks on your business and deny entry while they seize your assets for auction. In extreme cases, both of these agencies may even seize and auction off your primary residence.
Wage Garnishments (Income Executions)
If you do not pay your taxes, the IRS can contact your employer to garnish your wages. The agency has more power than most creditors, and rather than taking a certain percentage of your paycheck, the IRS leaves you a small amount to live on and takes the rest.
In New York State, the DTF uses income executions. The agency starts by sending you a letter to voluntarily handle your own garnishment by remitting a portion of your paycheck every pay period. If you don’t comply, the DTF contacts your employer to handle the wage execution.
Driver’s License Suspension
You cannot lose your driver’s license for not paying IRS taxes, but if you owe more than $10,000 to the DTF, the State of New York can take away your driver’s license. There are a few exceptions. For example, if you have a commercial driver’s license or are on certain types of public assistance, the state cannot take your license. You can also apply for an exemption based on financial hardship.
Loss of Passport
The DTF cannot take your passport for unpaid state taxes, but if you owe a seriously delinquent level of tax debt, the IRS can tell the State Department to revoke or refuse to renew/issue your passport. As of 2024, you may lose your passport if you owe over $62,000 and don’t make arrangements to pay or get your account marked as uncollectible.
Federal and State Tax Resolution Options
IRS and New York State Installment Agreements
If you owe back taxes, you may qualify to make monthly payments through an installment agreement. You can set up a payment plan online with minimal financial details if you have a history of compliance and meet the following criteria:
- NYS: Owe $20,000 or less and can pay off within 36 months.
- IRS: Owe $50,000 or less and can pay off within 72 months.
Taxpayers who owe over those thresholds or need longer to pay may still be able to get an installment agreement, but they must contact the agency directly and provide financial details.
Offer in Compromise
NYS and the IRS settle tax debts for less than owed through offers in compromise (OIC). Both agencies have a unique application process where you must share very detailed information about your personal and business income, assets, debts, and expenses. Generally, to qualify for a settlement, you must prove that your offer represents the most you can afford to pay, but both the state and the IRS offer settlements based on equitable tax administration as well.
Currently Not Collectible/Hardship Status
If you cannot afford to pay anything, you may want to ask the IRS to label your account as currently not collectible (CNC). CNC status stops all collection actions on your account until your financial situation improves or the tax debt expires. The NY DTF does not offer CNC status, but the state has hardship exemptions for a number of situations.
Penalty Abatement
The penalties for not paying or filing state and federal taxes can significantly increase your tax liability, but if you have a history of compliance, you will generally qualify for first-time abatement from the IRS. Both the DTF and the IRS offer abatement for penalties incurred due to reasonable cause such as a death or illness that prevented you from filing or paying on time.
Innocent Spouse Relief
If you incurred a tax liability due to actions your spouse took without your knowledge that increased the tax due on a jointly filed tax return, you should look into IRS or DTF Innocent Spouse Relief. For example, say your spouse did not report income that you did not know about and the unreported income was discovered in an audit. Or imagine your spouse claimed deductions or credits fraudulently without your knowledge or coerced you into signing a false return.
Voluntary Disclosure Programs
The DTF offers a Voluntary Disclosure Program for all taxes administered by the state. You must reach out to the DTF before they contact you, and if you qualify, you will be able to file and pay your delinquent returns without penalties or criminal consequences if applicable.
The IRS’s Voluntary Disclosure Program is for taxpayers who willfully failed to report income or foreign assets. This program does not guarantee criminal immunity, and you should always consult with an experienced attorney before making a voluntary disclosure to the IRS. In some cases, you may be able to rectify the unfiled returns or unreported income in other ways such as filing past due returns or amending old returns.
How Stephen Kass Helps Resolve IRS and NYS Tax Issues
The Law Offices of Stephen B. Kass, PC can help you resolve your state and federal tax issues. We have dedicated experience helping individual and business taxpayers navigate back taxes, audits, collection actions, and other tax problems. When you contact us, we’ll start with an assessment of your situation, and then, we will work with you to customize a solution that works with your budget and is in line with your preferences.
Dealing with the tax agencies can be very stressful, and unfortunately, when taxpayers navigate these issues on their own, they often end up with an unsustainable solution or other unwanted tax problems. Don’t let the IRS or the DTF assess excessive penalties or pursue involuntary collections against you. Instead, contact us and let us negotiate on your behalf.
At our NYC-based law firm, we have a strong track record of reducing penalties, resolving audits, setting up favorable payment plans, and helping our clients get the best solutions possible. To learn more, contact us today. We can also help you deal with other state revenue agencies in addition to the DTF.
