New York Tax Levies

debtA levy is an order issued by the court to a bank or other third party to turn over funds or assets belonging to you to New York State to pay a tax obligation. Before a tax levy can be issued, a tax warrant must be filed.

What is a Tax Warrant?

A tax warrant is simply a legal action that creates a lien against personal or real property. Warrants are filed by the taxing authority with the local clerk’s office and the New York State Department of State. It also becomes a public record and likely will appear on your credit report. The warrant gives the tax department the right to collect the debt by a levy, income garnishment and by seizing and selling your property.

If a warrant is filed, it will make create obstacles if you want to sell your property or try to obtain a loan.

Exemption Funds

Not all of your funds are subject to seizure. The following may not be the subject of a tax levy:

  • Child support
  • Spousal maintenance
  • Public assistance
  • Benefits from workers’ compensation or disability
  • Unemployment compensation
  • Social Security and supplemental security income

If you filed jointly and your spouse is responsible for the tax debt, however, your spouse can also be ordered to pay with a levy from nonexempt funds.

What an Attorney Can Do

If you are notified that a tax levy has been issued against you, promptly contact a tax attorney to discuss your rights and your legal options. A tax attorney can advise you on several options:

Innocent Spouse Relief

If your spouse is solely responsible for the tax obligation, your attorney can help you file a Request for Innocent Spouse Relief, Equitable Relief and Separation of Liability if the debt was incurred after January 1, 1999. Partial relief is also possible. This situation generally arises where you are divorced or separated.  You do have to show that you were unaware of the under-reported income or error in the joint return when filed.

  • Separation of Liability Relief

In this type of relief, the tax liability is divided between you and your spouse based on your respective responsibility. You must have filed a joint return and been separated or divorced 12 months or more before filing for relief, were widowed or not a member of the same household for the same 12-month period.

Equitable Relief

If the first two avenues of relief are denied, you can still get equitable relief if you can present special circumstances indicating why you should not be held responsible for your spouse’s or ex-spouse’s tax debt.

Other Relief

You can also request either an installment payment agreement or an offer in compromise for financially strapped debtors. An offer in compromise permits you to settle your tax debt for less than what you owe. You will need to submit an initial payment of 20% of the offer amount when you apply. If accepted, you will have to pay the balance in no more than 5 payments; otherwise you should continue to make a payment until you hear back. Have your attorney discuss with you if this is a viable option and if so, to negotiate it for you.

Otherwise, your attorney can discuss the possibility of filing a Chapter 13 bankruptcy, which is a reorganization of your debts and stops any collection activity.