What Assets Can New York State Legally Seize for Back Taxes?

If you owe taxes to the New York Department of Taxation and Finance, they may seize your assets. The DTF’s asset seizure process is slightly different from the IRS’s, but in both cases, they can take a significant portion of your assets. To protect your assets, you need to know what the DTF can legally seize and how to respond when you receive a levy (seizure) notice.

Key takeaways:

• New York State can seize your assets if you owe state tax debt and do not make payment arrangements.
• The DTF targets wages and bank accounts first, but can seize other assets.
• To protect yourself, work with an experienced NY-based tax attorney.

If you are an individual or a small business owner facing unpaid state or federal taxes and enforcement of them, set up a consultation to speak with a tax attorney at Timothy S. Hart Law Group, P.C. We’ll leverage our experience with the NYDTF to help you get out of tax debt and protect your assets.

New York State’s Asset Seizure Authority

New York State has the authority to seize assets in specific legal situations. To be clear, the NYS DTF will not simply seize your bank account or other assets if you owe taxes. However, if you ignore collection notices and don’t try to make payment arrangements, the state may take your assets.

The legal right falls under Tax Law § 1092 and the New York Civil Practice Laws and Rules (CPLR), Article 52. The seizure may include:

• Real estate, including second or investment homes
• Bank accounts of all forms
• Investment accounts
• Wages through wage garnishment actions
• Vehicles
• Business assets

What Triggers Asset Seizure?

Various situations can lead to New York tax asset seizure, including:

• The issuance of a tax warrant due to unpaid tax debt from income, sales, or other state taxes
• Default on existing payment plans to catch up on that tax debt
• Failure to respond to notices and communications sent about the state tax debt you owe

In most situations, the NY SDTF will notify you of the tax debt owed, providing a timeline for payment as well as steps to appeal or clarify what you owe. If you don’t respond, you will likely receive additional notices, as well as the addition of interest and fines for nonpayment.

If you continue to ignore notices, the NYS DTF will then take further efforts, including filing a tax warrant through the county clerk. This warrant is a civil judgment against you, establishing the state’s right to legally claim your property. The warrant places a lien on your personal and real property, and also gives the DTF the right to move forward with asset seizures.

What Are Bank Account Levies?

A bank account levy is when the DTF seizes what’s in your bank account to pay back your tax debt.

The DTF’s process differs from what a traditional creditor, like your car lender or credit card company, can do. In those situations, the lender must take legal steps involving a lawsuit and court judgment before they can simply demand what’s in your bank account. The NYS DTF does not have to go through that process. It has the legal power to levy on your account without requesting any action from the court.

NY State can take this action with most bank accounts, including both personal and business bank accounts. However, the NYS bank levy and wage garnishment process is very clear and must be followed carefully to provide the state with this right. Typically, this process involves.

• A tax warrant is issued, giving the state a legal claim to your assets.
• A Final Notice of Intent to Levy is sent to you to inform you of the tax debt owed and overdue, and the action the state plans to take.
• The state then serves the levy on the bank. This happens if you don’t respond by the deadline on the levy notice. The DTF notifies the bank directly, requiring the bank to take immediate action.
• A 20-day freeze occurs on your account. The state can freeze up to the amount of tax debt you have, along with interest and penalties. You cannot use those funds. The bank will decline transactions against those funds. For example, if you have an outstanding check or an automatic payment, the bank will return it.
• The bank sends the funds to the DTF. The 20-day freeze gives you the chance to prove that the levy was issued in error. Otherwise, the bank will send the funds to the state.

Then, the NY DTF will apply the funds to your tax debt. If they cover the full liability, you no longer owe anything. If not, the DTF will look for other assets to take.

What Taxpayers Can Do

If you receive notice of pending action, you can contact the department directly to discuss available payment options. In some situations, you can file for an exemption or challenge the accuracy of the debt. Avoid waiting. By not communicating with the NYS DTF or taking any action, you may limit the opportunities to rectify the situation.

With the guidance of a New York tax attorney, you can pursue legal strategies that may help you avoid a NYS bank levy and wage garnishment.

Is a NYS Bank Levy the Same as an IRS Bank Levy?

A NYS bank levy and an IRS bank levy are the same in terms of what they do – seize assets to pay unpaid taxes. However, they have different collection processes. The IRS does not have the same requirements for notices as the state does – the IRS still must notify you in advance, but the exact rules vary. Another difference is that the state of New York can pursue collection of tax debt for two decades, but the IRS can only collect most taxes for 10 years.

In both situations, you can take legal action to rectify the situation before it reaches seizure of assets.

Wage Garnishments for NYS Tax Debt

Wage garnishments, called Income Executions in New York, are when the state requires your employer to withhold a certain amount of money from your paycheck to pay towards your outstanding tax liability. This is one of the most popular asset seizure methods used by the state – simply because it’s much easier than seizing physical assets.

If the IRS garnishes your wages, they send you a final levy notice and then send a garnishment notice to your employer. The DTF takes a slightly different approach – first, they ask you to voluntarily garnish your own wages (which simply means that they tell you to send in a certain percentage of your wages). Then, if you don’t comply with that, they reach out to your employer.

How Much Can NYS DTF Take in Wage Garnishments?

To comply with the income execution, you must voluntarily remit 10% of your gross income or 25% of your disposable earnings. You have 20 days from the date of being served the notice of execution.

If you don’t do so, then the agency will send the income execution directly to your employer. Your employer is required under law to remit 10% of your wages to the agency.

Seizure of Physical Property

For those who have significant physical assets but not enough in a bank account to cover their tax debt, the NYS DTF will take action to seize the actual property. Seizure of vehicles, equipment, or business assets allows the agency to then sell those items at auction, to recoup some of the value to pay towards your tax debt.

It is possible for the state to seek seizure of real estate, such as investment properties or second homes, but the DTF can also take your home or your business property.

Seizure of physical property is a last resort in most cases because it uses added labor and can be financially limiting for the state if the property is not worth enough to cover the debt. The seizure of physical assets is certainly more challenging (for both you and the state), but if you have unpaid taxes, you need to be aware of the risks.

Will the Sheriff or Marshall Seize My Assets?

In situations where the state must seize actual property, the state can use the city marshal or county sheriff to support them in the effort. For example, if your business is delinquent in paying taxes, the state can turn to the city marshal to help enforce the seizure of your cash register or other business assets.

License Suspensions and the NYS DTF ^[a]

NYS DTF can suspend your driver’s license if your tax debt is over $10,000. Professional and business licenses issued by the state may also face seizure or suspension.

The process is much like any other tax seizure in that a notice must be sent to you. The NYS DTF first issues a Notice of Proposed Driver’s License Suspension to you. This gives you 60 days to resolve the debt. Then, the NYS DTF contacts the Department of Motor Vehicles (DMV) to recommend suspension.

DMV issues an Order of Suspension or Revocation.” This gives you another 15 days to take action to pay the debt before the license suspension or revocation occurs.

To protect your license, enter into a payment plan agreement, pay the debt in full, or seek an exemption if you qualify. If you cannot take these actions and your license is suspended, the NYS DTF will not reinstate it until a payment solution is in place. You may be able to petition for a restrictive use license.

Once you resolve the debt, you can then take steps to reinstate your license. This means obtaining documented clearance from NYS DTF, visiting the DMV to present the documentation, and paying a reapplication fee of $100.

Can the IRS Suspend My License?

The IRS does not suspend licenses. However, they can take other steps to require payment of federal debt, including requesting the State Department to suspend your passport ^[b].

Other Enforcement Tools

There are numerous other ways the NYS DTF can take action against you if you fail to pay your tax debt. Depending on what’s most effective in your case, the NYS DTF’s actions could include:

• Seizing tax refunds or lottery winnings before you receive them
• Applying levies on payments others are making to you, such as tenants paying rent
• Work with other agencies to find assets as applicable

Hiding assets is not effective, and in most situations, it is easier to deal with the tax debts early on than to navigate each of the actions the NYS DTF can and will take.

How to Protect Your Assets from NYS DTF Seizure

What you do now can play a role in whether you lose your assets. Your most important first step is to hire a tax attorney. As soon as your lawyer can provide guidance to you, the more opportunities you may have to navigate the specifics of your situation.

Keep these tips in mind:

• Always open and respond to all collection letters and communication from the NYS DTF (and the IRS). Not responding does not delay the process.
• Consider all resolution options, including installment agreements and hardship claims.
• Discuss possible seizure exemptions you may qualify for with your attorney. The NYSDFT cannot seize Social Security and Supplemental Security Income (SSI), child support, alimony, public assistance awards, public or private pensions, unemployment, or disability compensation.

Act quickly. The sooner you take action, the easier it is to navigate your legal options. Waiting until after a NYS bank levy or wage garnishment is not helpful to you and could limit your options.

How a New York Tax Attorney Can Help You

By working with a New York tax attorney, you gain insight, support, and clarity on your legal rights. Your attorney will help you navigate IRS and NYS DTF tax obligations and create a plan to pay them off, settle, or explore other resolution options. Your lawyer will negotiate on your behalf, potentially reducing what you owe in fees or requesting a levy release if the state has levied exempt assets.

If your assets haven’t been levied yet, a tax attorney can help you avoid that and protect your assets. If your assets are already being levied, your attorney can help you understand your rights, protect exempt assets, and figure out the best steps forward.

Seek a Free Consultation with a New York Tax Lawyer Now

New York tax asset seizure is a scary possibility, but the right attorney can help you find the best possible route through your situation. Act as soon as possible to prevent asset loss and, most importantly, to gain peace of mind.

Set up a free consultation with Timothy S. Hart Law Group, P.C. now for real answers and authentic tax solutions.

FAQs

Can New York seize my home for back taxes?

Though real estate seizures are rare, it is possible that the state can seize your home if you owe state taxes and have not set up a payment plan or sought another solution to settle the debt.

How long does a bank levy last in NY?

A bank levy is referred to as a one-time levy. That means the DTF seizes the funds in your account on the day of the levy, up to the amount of your tax debt and penalties. To seize more funds, the state must initiate another bank levy.

Can both the IRS and NY State garnish my wages at the same time?

As financially challenging as this can be, yes, the IRS and NY State can garnish your wages at the same time. However, they must leave you some money to live on – a certain portion of your income is exempt from garnishment. If you’re experiencing financial hardship due to wage garnishment, contact a tax attorney immediately.

What is a tax warrant in New York?

The DTF issues a tax warrant, the equivalent of a civil judgment, to collect unpaid state taxes. It provides the agency with a legal stake in your assets and gives them the authority to seize assets up to the amount owed.

How do I stop NY from suspending my driver’s license over taxes?

If you cannot pay the tax debt, contact the state directly to request relief, ask for a restricted license, or set up a payment plan. Ultimately, it is best to seek the guidance of an attorney to navigate these situations.