IRS & NYS Tax Collections: Differences & What to Expect

IRS vs New York Tax Collections: What’s Different and Why It Matters

If you owe taxes to both the IRS and New York State, you need to make payment arrangements separately with these agencies. You also need to be aware of their unique collection processes, so that you know what to expect and how to resolve your tax debt strategically.

At the Timothy S. Hart Law Group, P.C., we help individuals, families, businesses, trusts, estates, and other taxpayers resolve problems with both state and federal taxes. To get help, contact our New York tax attorney today.

Key takeaways

• Many taxpayers owe both NYS and the IRS.
• Both the NYS and the IRS can file tax liens, garnish wages, and seize assets.
• The DTF has 20 years to collect taxes, while the IRS has 10 years.
• You must make arrangements separately with each agency.
• Find a tax attorney who has experience with both state and federal taxes to guide you.

Why Taxpayers Often End Up Owing Both the IRS and NYS

Taxpayers typically end up owing both state and federal taxes for many reasons, including:

• Not having enough tax withheld from their paychecks at the state and federal levels.
• Failing to pay estimated quarterly taxes to both the IRS and the NY DTF.
• Falling behind on payroll deposits for both NY and IRS taxes.
• Incurring an expected tax liability that increases both federal and state income tax.

In some cases, taxpayers may only owe one entity – for example, a business owner may get behind on NY sales tax but be up to date with federal income tax and payroll taxes. It’s often easier to deal with tax debt if you’re only behind with one agency, but the process can get overwhelming when you’re dealing with both state and federal collections.

IRS Vs. NYS Tax Collections

The IRS and the NY DTF use similar processes to collect taxes – they assess penalties, send notices, file tax liens, garnish wages, and seize assets. But the details, terminology, and timelines differ.

Here’s a visual breakdown of the differences in the collection processes, followed by more details.

IRS Vs. NY DTF Collection Processes	IRS	New York State
Collection Time Limit	10 years from assessment	20 years after a tax warrant could be filed
Penalties	Apply for late filing, late payment, negligence, and fraud	Apply for late filing, late payment, negligence, and fraud
Tax Liens	Notice of federal tax lien – usually only filed if you owe over $10,000	Tax warrant – may be filed on any level of tax debt
Wage Garnishment	Right to garnish everything over an exempt amount	Right to garnish up to 10% of gross income
Levies	Most commonly target bank accounts, but may seize and auction off assets	Most commonly target bank accounts and funds due from third parties. May also seize and auction off assets
Other Collection Powers	May revoke passport by certifying tax debt to the State Department	Can take away driver’s license or business licenses
Collection Pauses & Extensions	Appeals and certain filings may pause action and extend the collection deadline	Fewer automatic pauses once enforcement starts
How to Stop Collections	Set up payments or another relief option	Set up payments or another relief option

When collections start

Both the DTF and the IRS can start collections at any point after you have incurred a tax liability, as long as they send the legally required notices. However, in practice, the DTF often starts involuntary collections within 90 days, while the IRS tends to take a few months or even a year or more to start involuntary collections, in some cases.

Collection expiration dates

NY state law and the Internal Revenue Code (IRC) both limit how long these agencies have to collect delinquent taxes. The last day collections are allowed is called the collection statute expiration date (CSED).

• DTF – 20 years
• IRS – 10 years

After this time frame, the taxes effectively expire, as the agencies are banned from collecting them. With both agencies, certain actions, such as applying for an offer in compromise or filing bankruptcy, may pause and extend the time clock. But the exact actions that affect the timeline vary between the agencies.

Penalties

The IRS and the NY DTF may assess the following penalties if you don’t file or pay:

• Failure to file: 5% per month, up to 25%, same for both agencies.
• Failure to pay: 0.5% per month, up to 25%, same for both, but the IRS often increases this penalty to 1% or drops it to 0.25% if you’re on a payment plan.
• Incorrect calculation of tax: DTF penalty of 10% of the underreported tax, if you underreport by more than the greater of 10% or $2000.
• Accuracy-related penalty for income understatement: IRS penalty of 20% of the underreported tax, if you underreported by the greater of $5000 or 10% (5% if you claim the QBI deduction), may increase to 40% in some cases.
• Negligence: DTF penalty is 5% of the underreported tax and 50% of the interest due to the underpayment; IRS penalty is 20% of the underreported tax or 40% in some cases.
• Fraud: DTF penalty 2X (200%) of the unreported tax; IRS penalty 75% of the unreported tax.
• Frivolous return penalty: $5000 for both IRS and DTF.

Tax liens and warrants

Tax liens attach to all of your assets until the lien is resolved or expires, and they’re referred to as tax warrants in New York. Both the DTF and the IRS will send you notices about the tax debts and resolution options before filing a tax lien or warrant. Once filed, the tax lien makes it extremely difficult to sell or transfer assets.

You may be able to avoid a tax lien by setting up an installment agreement, but even if you set up payments, you may face a lien in the following cases:

• IRS installment agreement – if you owe more than $50,000.
• DTF payment plan – if you owe more than $20,000 or need more than 3 years to pay.

With both agencies, you must set up the payment plan proactively to avoid a lien or warrant. Once one is filed, you can’t necessarily get it removed from the public record just by setting up payments.

Wage garnishments and income executions

If you don’t pay your taxes, the DTF and the IRS can garnish your wages, but they take different amounts:

• DTF income execution – 10% of your gross wages.
• IRS wage garnishment – all of your wages over an exempt amount based on your filing status and number of dependents. For example, as of 2026, a single person with a dependent has a weekly exemption of 566.34, meaning the IRS can take everything over that amount.

If NY decides to garnish your wages, they’ll give you a chance to resolve it voluntarily before alerting your employer. The DTF sends a wage execution notice to taxpayers, telling them to voluntarily send in 10% of their gross wages. If they don’t comply, the DTF sends a notice to their employer.

The IRS, in contrast, simply contacts the employer – but only if the taxpayer fails to respond to the Final Notice of Intent to Levy, which gives them 30 days to appeal or set up payment arrangements.

IRS and NYS levies

Both the state and the federal government can seize or levy your assets for unpaid taxes. They may target:

• Bank accounts
• Funds owed to you by third parties, such as clients, renters, payment processing services, etc.
• Personal property
• Real property
• Business property

Both the IRS and the DTF must go through a very specific process of notifying the taxpayer about the potential seizure, the minimum auction bid, and how the funds from the auctioned off assets are applied to their tax debts and collection costs.

Assets exempt from collections

Certain assets are exempt from seizure, and the list is about the same for both IRS and DTF tax debts. These agencies cannot seize public assistance payments, unemployment, disability, or workers’ compensation, or Supplemental Security Income.

However, the IRS can seize Social Security payments (with the notable exception of children’s survivors’ benefits) and certain pension payments, while the DTF usually exempts these payments from seizure.

Additional collection powers

Finally, the IRS and the DTF have additional powers that are completely unique from each other:

• DTF – May rescind driver’s licenses, revoke sales tax certificates, or take away business licenses. Also, publicly posts lists of the most delinquent taxpayers in the state.
• IRS – May certify seriously delinquent tax debt to the State Department, leading to the loss of your passport.

Understanding all of the nuances and differences in these agencies’ powers is critical if you owe a significant tax debt. Whenever possible, find a tax attorney with dedicated state-level tax experience.

NYS and IRS Resolution Options

You can stop collections by setting up a payment plan or securing another arrangement with the DTF or IRS. Here is a breakdown of each agency’s resolution options:

Option	IRS	NY DTF
Monthly payments	Up to 10 years to pay up to $50,000. Approval may be available on higher levels of tax debt on a case-by-case basis.	Up to three years to pay up to $20,000. Must provide financial details if you owe more or need more time to pay.
Offer in Compromise	Available to individuals and some businesses based on: doubt as to collectibility, doubt as to liability, effective tax administration	Available to insolvent or bankrupt businesses and individuals, and individuals experiencing economic hardship
Innocent spouse relief	Available based on innocent spouse relief, separation of liability, equitable relief	Available based on innocent spouse relief, separation of liability, equitable relief
Currently not collectible status	Pauses collection actions for taxpayers experiencing financial hardship	Not available. Taxpayers may need to apply for an offer in compromise instead.

Again, remember that each agency handles its own tax debts. If you set up a resolution with one agency, the other one can still come after you. That’s why you need a strategy that resolves both tax debts.

Strategic Considerations When You Owe State and Federal Taxes

Here are some strategic considerations, but keep in mind that you should work with an experienced tax professional. There’s no one-size-fits-all advice, and these ideas may not apply to your unique situation:

• Debt limits on installment agreements – The IRS has a higher threshold on payment plans than the DTF. If making a lump sum payment, you may want to pay down the state taxes first.
• Special rules for trust fund taxes – Both the IRS and the DTF can assess personal liability for trust fund taxes (for example, sales tax, excise taxes, and tax withheld from employee paychecks), so you may need to address these taxes first, whether they’re on the state or federal level.
• Offer in compromise variances – The DTF may be more likely to consider payments you’re making to the IRS when reviewing your application for a NY offer in compromise. In contrast, the IRS may not be as willing to take payments for delinquent state tax debt into account. So, it may be better to apply for the IRS offer first and ensure your DTF offer reflects the IRS payments.

The most important strategy? Working with a tax attorney and CPA who’s experienced with both types of tax debt. To get help now, contact us at the Timothy S. Hart Law Group. We will help you customize a sustainable solution to all of your tax debt.

FAQ: IRS and New York State Tax Debt Collections

What’s the difference between IRS and New York tax collections?

The IRS pursues federal tax debt, while the New York DTF collects state tax debt. Both agencies use tax liens, wage garnishments, and asset seizures to collect unpaid taxes. NY can also rescind professional licenses and business licenses.

How long can New York State collect back taxes?

The NY DTF has 20 years to collect back taxes. Typically, the timeline starts when the taxes are assessed or when appeal options expire on tax deficiencies.

Is New York more aggressive than the IRS?

In many cases, New York is more aggressive than the IRS – for instance, the state often uses levies or wage executions at lower levels of tax debt than the IRS. However, in other cases, the state is more lenient – in particular, the DTF garnishes wages at a much lower rate than the IRS does.

If I’m on an IRS payment plan, can New York still garnish my wages?

Yes, the NY DTF can garnish your wages, even if you’re making payments on your IRS tax debt. To stop state collection actions, you must make arrangements with the DTF on your state tax debt. The reverse is also true – setting up payments on your NY tax debt will not stop the IRS from garnishing wages or pursuing other collection activity.

Which tax debt should I deal with first: IRS or New York State?

Ideally, you should deal with both as soon as possible. However, in certain cases, it may be better to focus on setting up payments or other resolution options on the state or federal level first. Talk with a tax attorney for guidance.

Can IRS and New York tax debts be resolved at the same time?

Yes, you can make payment arrangements or apply for relief on both NY and IRS tax debt at the same time. However, you’ll have to make arrangements with each entity separately – there’s not a universal application or a way to combine both debts into a single payment plan. However, if you hire a tax attorney, they can deal with both of these debts for you, so you don’t have to worry about navigating the complexities of two government agencies.