Speaking of tax problems, taxpayers who owe money to New York State may soon have another headache to deal with. A little-known provision of the 2013-2014 NYS budget bill, enacted in late March, 2013, allows a taxpayer’s driver’s license to be suspended if he or she owes more than $10,000 in overdue tax, interest and penalties. The provision is modeled after the State’s successful use of license suspensions to compel the payment of child support. The State is hoping to collect $25M through this program.
This may seem counterproductive: how will a taxpayer pay his liabilities to the State, if he or she cannot drive to work? Fortunately, there are ways that this harsh remedy can be mitigated. The suspension can be modified to allow the taxpayer to drive to his or her employment and other necessary trips. Also, if the taxpayer enters into an Installment Payment Agreement or similar arrangement with the State to pay the outstanding balance, the suspension will be lifted.
There are still questions as to how the law will be implemented, and whether it is overbroad. For example, a retired taxpayer may owe $500,000 in trust tax from a failed business some years earlier. Let’s assume he is not able to resolve his liabilities through an Installment Payment Agreement or other remedies, due to his limited income and assets. Taking away his driver’s license would not help the taxpayer or the State. For many taxpayers, however, the possibility of losing their driving license could force them to move overdue taxes closer to the top of their list of priorities.
It will be interesting to see the effect of this law on the NYS collection process. With a powerful new tool at its disposal, the State will have more leverage in negotiations for Installment Payment Agreements, and that may not be favorable for the taxpayer.
We will explore other recent changes in a future post. We hope you continue to check back here for further updates from our firm.
Submitted by Tenenbaum Law on