If you missed the April 18th deadline for filing your New York State tax return, you could face serious penalties. Even if your case is not as egregious as the latest politician to be arrested for tax evasion, nonfilers are subject to monetary penalties and possible criminal charges. However, New York offers a way to become compliant by applying to the NYS Department of Taxation and Finance’s Voluntary Disclosure and Compliance Program. [Read more…]
Recently, the NYS Department of Taxation and Finance introduced a new Commissioner, Jerry Boone. As the leadership changes, the time could be right for a fresh look at Department policies or procedures.
One welcome development would be a modification of the driver’s license suspension program.
In 2013, the legislature gave the Department the ability to authorize the suspension of a taxpayer’s driver’s license for the nonpayment of taxes. With the enactment of Section 171-v of the Tax Law, a taxpayer who owes $10,000 or more is at risk of having his license suspended. If he can work out a collection resolution with the Department, however, his license won’t be affected. The taxpayer generally has sixty days from the date of the proposed suspension letter before being referred to the Department of Motor Vehicles for action.
The taxpayer has a few options during that sixty-day period. Prompt payment in full is often the best way forward for those who can manage it. Taxpayers can pay online or mail in payment. It may be helpful to call the State to let them know that payment is coming soon; the State might hold off on levying a bank account or filing a warrant if they are aware that payment will be made in a few days or so.
Taxpayers who need more time to pay may be able to enter into an Installment Payment Agreement, making monthly payments until the liabilities are paid in full. Interest and penalties will continue to accrue. Alternatively, a taxpayer who is working and earning income may qualify for an income execution, where the State will take ten percent of the taxpayer’s paycheck. Another option is to enter into a settlement through the Offer in Compromise program.
Unfortunately, not everyone with a tax liability can work out a resolution. According to the Department, these taxpayers can apply for a restricted driver’s license. But the law applicable to restricted licenses, part of the Vehicle and Traffic Law, limits drivers who should not be on the road to journeys necessary for work, medical reasons, or school. Taxpayers who are retired or unemployed, for example, do not appear to be eligible for a restricted license. And there are no exceptions or special considerations for these individuals in Section 171-v of the Tax Law either.
There should be a policy or procedure available to assist financially distressed taxpayers who aren’t able to resolve their tax problems in the usual ways, especially if they also are not eligible for a restricted license. These taxpayers may be punished by losing their driving privileges, and the law provides no avenue for relief.
Submitted by Tenenbaum Law on Wed, 07/22/2015 – 20:10
With April 15th just around the corner, New York State published a press release on March 31, 2015 providing tips from the Acting New York State Tax Commissioner, Nonie Manion, for hiring an ethical and qualified tax preparer. Commissioner Manion recommends asking a potential preparer these four questions:
- Are you registered with the IRS and New York State? Most tax preparers are required to be registered with both the IRS and NYS.
- What will be the fee for preparing the return? The fee should be directly related to the services provided and should not include a charge to e-file in New York State.
- How will I receive my refund? The refund should be directly deposited in your bank account, not into a preparer’s bank account. If you don’t have a bank account, consider getting your refund on a debit card.
- Will you sign the return? A completed tax return must be signed by both the taxpayer and the preparer.
Even if you hire the appropriate tax preparer, there are still many reasons you can fall behind on filing your tax returns. New York State offers a program to help you easily get up-to-date with your taxes, possibly even without penalty. Under New York State’s Voluntary Disclosure and Compliance Program, the State won’t impose penalties and won’t bring criminal charges against eligible taxpayers who “fess up” and pay. If you meet the eligibility requirements, to participate, you need only inform the State about taxes owed, enter an agreement to pay what is owed and continue to pay taxes in the future.
Additionally, if you owe back taxes, don’t let another year go by accruing more interest and penalties. You may be eligible to set up an Installment Payment Agreement to pay your bill over time or to submit an Offer in Compromise whereby the State will consider reducing your bill to something more affordable.
Submitted by Jaime Linder on Fri, 04/03/2015 – 14:29
AGAIN, someone was arrested for not paying New York State sales tax. The New York State Department of Taxation and Finance announced that the owner of two furniture stores in Rochester, NY was arrested for sales tax evasion on Thursday, February 19, 2015. If convicted for the top charge of Grand Larceny, the maximum sentence could carry up to 15 years in jail.
Just a few weeks earlier on January 23, 2015, the New York State Department of Taxation and Finance announced that co-owners of three restaurants in the Bronx were also arrested for sales tax evasion and face up to 7 years in jail.
Sales tax evasion is a hot trend in white collar crime in New York State. Business owners believe that if they conduct their business dealings in cash or under report their sales, their transactions will fly under the State radar. High rates of sales tax in New York, 7% to 9% depending on the county, create temptation for businesses especially retailers that routinely engage in cash transactions to skimp on reporting their sales.
Aside from the potential for criminal liability, up to 14.5% interest is incurred for late payment of sales and use tax. Some businesses are simply not prepared to pay the back taxes combined with exorbitant interest and penalties and therefore have no choice but to shut their doors.
According to the New York State Department of Taxation and Finance, New York State collects more than $25 billion in sales tax from their customers each year. For FY 2014, sales tax comprised 21% of total revenue received for New York State. However, the State still loses billions in uncollected tax revenue each year.
Governor Cuomo announced on Thursday, February 19, 2015 that $14.7 million in grants will be issued to 28 district attorneys’ offices throughout the State to enhance their investigation of State tax evasion and fraud cases. Kenneth Adams, the incoming Commissioner of Taxation and Finance, fully supports the initiative and plans to work with the district attorneys to aid in prosecuting these tax crimes.
Thanks to advances in technology, the days of hiding your cash in the mattress may be coming to an end. The State has new tools in its arsenal to detect unreported sales. Utilizing electronic data collected from third parties such as wholesalers and distributors to compare against retailers helps the State to detect businesses under reporting on their cash sales. The State takes averages of similar businesses and can determine sales based on inventory levels and other markers.
Mining the electronic data collected from debit and credit card purchases further aids the State in detecting retailers who fail to remit sales tax. In New York State, every tax return filed is reviewed by its Case Identification and Selection System (CISS). By comparing the sales reported by credit card companies with those a retailer reports on State tax returns, CISS intends to create industry models to enhance fraud detection.
Rest assured, if you haven’t filed or paid your taxes, you still have a few options at your disposal.
Under New York State’s Voluntary Disclosure and Compliance Program, the State won’t impose penalties and won’t bring criminal charges against eligible taxpayers who “fess up” and pay. If you meet the eligibility requirements, to participate, you need only inform the State about taxes owed, enter an agreement to pay what is owed and continue to pay taxes in the future.
If you filed a return, but didn’t pay in full, you may be eligible to set up an Installment Payment Agreement to pay your bill over time or to submit an Offer in Compromise whereby the State will consider reducing your bill to something more affordable.
Unfortunately, overdue sales taxes are not dischargeable even in bankruptcy. The best bet is to stay compliant and pay your taxes!
Submitted by Jaime Linder on Wed, 03/04/2015
New York State continues to suspend driver’s licenses of taxpayers who owe more than $10,000 in back taxes and do not have a resolution in place. Some taxpayers who reach out to our office wonder whether a legal action challenging the State’s authority to impose the suspension could be successful.
One taxpayer recently went to court to find out. Andrew Lappner received a Notice of Proposed Driver License Suspension Referral. Included with the notice was a statement reflecting his outstanding liabilities in excess of $70,000. Mr. Lappner filed a petition to the New York State Division of Tax Appeals to protest the suspension, arguing that “medical bills and limited current income provide the basis to request a waiver of the suspension referral.”
Sounds like a potentially reasonable reason to prevent suspension, right? Let’s look at what the law says.
New York Tax Law section 171-v(5) specifies a taxpayer who receives the notice may only challenge such suspension or referral on the grounds that
i. The individual to whom the notice was provided is not the taxpayer at issue;
ii. The past-due tax liabilities were satisfied;
iii. The taxpayer’s wages are being garnished by the department for the payment of the past-due tax liabilities at issue or for past-due child support or combined child and spousal support arrears;
iv. The taxpayer’s wages are being garnished for the payment of past-due child support or combined child and spousal support arrears pursuant to an income execution issued . . . ;
v. The taxpayer’s driver’s license is a commercial license . . . ; or
vi. The department incorrectly found that the taxpayer has failed to comply with the terms of a payment arrangement made with the commissioner more than once within a twelve month period . . . .
The State says that “the past-due tax liabilities were satisfied” under (ii) if the taxpayer enters into an Installment Payment Agreement or an Offer in Compromise; an income execution is another possibility available under (iii). Unfortunately, for some taxpayers, perhaps like Mr. Lappner, none of these options may be feasible.
An Installment Payment Agreement requires payment in full over the length of the agreement. We see many taxpayers whose monthly income, less reasonable living expenses, is insufficient to afford the monthly payment amounts required to pay the State in full.
An Offer in Compromise may not be an option either, particularly when sales tax or withholding tax liabilities of a business flow through to the individual. For these responsible person assessments, the State is seeking payment of at least the tax amount owed (excluding penalties and interest) in an Offer in Compromise. Taxpayers with minimal equity in assets often cannot put together the funds to pay this amount.
Finally, if a taxpayer is not earning wages, then an income execution may not be possible. In this case, Mr. Lappner asked for a nine month extension to avoid suspension in order to find employment and make payment arrangements with the State. Apparently he didn’t have sufficient income to set up an income execution.
Ultimately, the court held that Mr. Lappner failed to demonstrate the requisite grounds to avoid suspension. The court stated that the specific grounds to challenge the suspension “do not include an extension of time, medical or financial hardship, or limited current income.”
Mr. Lappner’s situation is one that many taxpayers who are in financial distress face: None of the grounds to avoid suspension are feasible. Yet some of these taxpayers need to drive to find and maintain employment, buy groceries, etc. Sounds like an unfair paradox.
What has been the State’s response to this type of situation? Get a restricted license.
Submitted by Brad Polizzano on Thu, 01/29/2015 – 08:13