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How to Resolve Unpaid Tax Debt in New York

February 5, 2018

If you or any other New Yorker should find yourself in a situation in which you’re panicking about how to deal with back tax debt, the first piece of advice you need to absorb is this: don’t panic, because you have options. In the U.S., at both the state and federal level, the tax system is not intended to function as an overly oppressive, poverty-inducing machine. We are far removed from the days when taxation literally amounted to a tyrannical system designed mainly to enrich the lucky few who reigned at the top of the social hierarchy. Today, we are fortunate to have a system which is much more equitable and much more receptive to compromise.  This article will explain how New Yorkers can resolve unpaid tax debt.

For New Yorkers, there are two options to choose from to resolve unpaid tax debt, and the option you decide to pursue ultimately depends on the specific facts of your situation. You need to perform a careful analysis – with the help of a qualified professional, of course – of your individual case and then make a clear-headed conclusion as to which option will be the most desirable. 

Let’s discuss these two options in detail. 

Offer-in-Compromise to Resolve Unpaid Tax Debt

Residents of the State of New York can choose to make an offer-in-compromise (OIC) to resolve their debt. OICs with New York State follow somewhat different standards from those which underlay OICs made to resolve federal tax debt: the State will approve an OIC only if the taxpayer can demonstrate that he or she is already bankrupt or insolvent, or will suffer “undue economic hardship” by paying the full amount.  

Unfortunately, the State offers little in the way of guidance as to what constitutes undue economic hardship in practice. The statute says that the State will consider all of the unique facts of each case to make an independent determination. Relevant factors include your age, mental condition, employment status, employment history, and number of dependents, among others. The statute also says that such hardship is not the same as the inability to maintain a luxurious lifestyle. This makes intuitive sense, but sadly leaves quite a bit of uncertainty for you and other New York taxpayers. To increase your odds of success and resolve unpaid tax debt, be sure to provide all necessary documentation when submitting your OIC.  

Installment Payment Agreement 

Along with the OIC option, New York taxpayers can also elect to pay their back tax debt by setting up a payment plan. In New York, this is referred to as an “installment payment agreement” (IPA).  

The payment plan is the “fall back” option for individuals who are unable to develop a successful OIC. This option will allow New York State residents to pay off their debt gradually, over a fixed period of time. If you either must – or decide to – pursue this route, you will have to submit a tentative payment plan to the New York Department of Taxation and Finance, and whether your plan will be accepted often depends on the documentary support you can provide. The more time you require to settle your debt, the more information you will need to submit regarding your financial situation. The majority of plans run between 36-72 months, though more time can be granted in certain cases.  

Again, in order to get an accurate sense of which option is right for you, you must draw a level-headed conclusion based on a thorough analysis of your situation. In some cases, it may make sense to submit an OIC to resolve your debt for less than the face amount; in other cases it may be better to develop a long-term payment plan. Regardless of the particulars of your case,  an experienced New York tax attorney at Mackay, Caswell & Callahan can help you with the situation. 

Comments

A Guide to Filing NYC Tax Returns | New York Tax Attorney 5 years ago

[…] here to answer any inquiry related to outstanding New York City tax debt.  We can walk you through the steps on how to address outstanding New York tax debt.  If a New […]

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Comments

A Guide to Filing NYC Tax Returns | New York Tax Attorney 5 years ago

[…] here to answer any inquiry related to outstanding New York City tax debt.  We can walk you through the steps on how to address outstanding New York tax debt.  If a New […]

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