If a taxpayer fails to pay their sales or income tax bill and no longer has the right to appeal the assessment, the New York State Department of Taxation and Finance’s Collections and Civil Enforcement Division will assess the tax they say you owe and file a New York State Tax Warrant (tax lien). Tax warrants are similar to a Federal Tax Lien. They have some similarity to civil judgments and its the way the state will protect its interest in the tax debt that you owe. The warrant is filed at the respective county clerks office in the county you reside. For out of state taxpayers, it gets filed with the Albany County Clerks office and state department of state.
If you have an unpaid tax bill that is correct, your best option is to pay the tax debt owed in full as soon as possible. As a taxpayer takes time to pay the balanced owed, the balance continues to accrue penalties and interest. The penalties and interest really add up since the interest rate is between 7.5% and 14%, and the penalties are up to 1/2 of the amount owed. If a taxpayer continues to delay paying the tax liability owed to New York State, civil enforcement actions may start and they may levy your account after they file a New York State Tax Warrant.
Civil “enforcement actions” are the Department of Taxation and Finance’s way of collecting unpaid tax bills. If a taxpayer continues to not pay the tax debt owed, the tax department has the power to: 1) Issue Tax Warrants (basically filing a tax lien), 2) Levy income and accounts (bank, broker accounts, etc.), 3) Seize property (such as real estate). This will hamper your ability to buy assets due to impact on credit score which affects your credit.
You can search for NYS tax warrants here: Division of Corporations, State Records and Uniform Commercial Code, NYS Dept. of State
A Tax Warrant NY is a harsh legal action against the taxpayer. They are not only a public record filed with the New York Department of the State of the tax liability owed to the state, but also:
For taxpayers facing both a Tax Warrant and bankruptcy, the tax department stops collection on individuals who file for bankruptcy. Though the tax department stops collection, the taxpayer may continue to receive documents about the tax debt owed. If the warrant is not resolved through the bankruptcy, it remain and have to be dealt with after the bankruptcy proceeding concludes.
Once the tax debt owed is paid in full, the tax department will notify the New York Department of the State and County Clerks office who keeps track of the Tax Warrant. This is the action needed to prove that the tax warrant has been satisfied, and the tax warrant lien will be removed against your property. This filing is known as a Satisfaction of Judgment, and you get a copy of the notice once its filed. If you are in the process of resolving the warrant issue, and paid the debt, but the state has not yet filed the papers with the county clerks office, the state will provide a Notice of Pending Warrant Satisfaction if 1) they tax debt is paid with certified funds, 2) the payment has posted to the state tax roll assessment database (meaning the check cleared your bank).
In some cases, it is not possible to pay off the tax debt and have the warrant satisfied but it is still affecting your ability to buy property. In these cases, it may be possible to have the warrant either subordinated or released. A warrant subordination is where the warrant is lowered in its pecking order as a lien against your property, and therefore, the new lien, such as a mortgage against real property can have higher priority and the bank is willing to lend money with this higher priority. A warrant release is where the tax debt remains, but the tax warrant is removed from the county clerk records.
In some cases, the tax warrant was filed in error. As an example of this, a taxpayer can file a return (or not filed a return) and the state incorrectly thinks a tax is owed. Often, when this happens the taxpayer no longer resides within the state and does not get the tax bill notice that was mailed to their last known address. If they still lived at the address, it would be a simple matter to clean up. When they do not get notice is when trouble really starts. Therefore, when the tax bill is not responded to, the state files a tax warrant. At that point, the taxpayer may become aware of it on their credit report, and then contact the state. Once the warrant is cleared up, the state will issue a warrant vacate which legally offsets the tax lien like it never existed to begin with.
Our New York tax law firm offices are located in New York State but we are able to help you in any state across the country. We can work with you no matter where you live. Mr. Hart is licensed to deal with the IRS in every state in the entire country.