New York Income Execution

What Is an Income Execution?

In New York, an income execution happens when the state takes a portion of your wages, either from you directly or from your employer. The NY Department of Taxation and Finance (DTF) uses income executions to collect taxes when someone owes state taxes and has not taken sufficient steps to pay the balance or apply for a relief program. Aside from tax debt, situations like unpaid child support or student loan defaults could also lead to an income execution in New York. 

Note that the IRS and/or the New York State DTF will first issue tax notices and penalties when you haven’t paid your taxes on time. For this reason, you should never ignore notices from either the New York state government or the IRS.

How Much Can New York State Garnish from My Wages?

New York State law indicates that the state tax agency will request that you pay, voluntarily, up to 10% of your gross wages from each paycheck. If you don’t do this, the agency will require your employer to deduct up to 10% of your gross wages from your paycheck to send to the state tax agency. This process could continue until your full tax liability is paid.

Fortunately, the state cannot take all of your wages to pay for your tax debt in a given week, but they can take a substantial amount. It’s also important to remember that this is 10% of your gross wages, not your take-home pay.

How Does the Income Execution Process Work?

If you have unpaid tax debt in the state of New York, what will the process look like for collection? When does the state initiate an income execution? Here are the general steps to expect when you haven’t paid your taxes in NY:

Notification of Unpaid Debt

The New York tax agency will contact you through the mail if you fail to resolve your tax bill in a timely manner. This is your first indication that you owe taxes and they are past due. 

At this stage, if you pay your tax bill quickly or set up an Installment Payment Agreement, you have the best chance of avoiding building penalties and interest. If you don’t do anything, the tax collection process begins.

Filing a Tax Warrant

The state may then file a tax warrant against you, which helps them protect their interests in collecting the tax debt you owe. This is a public record and creates a lien against your property. 

This warrant is an indication that the agency may decide to seize your property or garnish your wages because of your debt. A lien also means that if you sell your assets, the DTF has a right to the proceeds up to the amount of the tax debt plus penalties and interest, and that impacts your ability to get credit since other creditors can see this public record.

Issuing an Income Execution

If you still haven’t resolved your tax debt, the state tax agency may then decide to issue an income execution against your wages. Note that while a tax warrant usually is the first collection action, it could come before or after the income execution.

One relatively unique factor about the NYS income execution process is that the state will first reach out to you and let you voluntarily garnish your own wages. That just means that you make a payment worth a certain percentage of your wages every time you get paid. Most states and the IRS do not offer taxpayers this option. Instead, they just reach out to the employer.

The agency will send this income execution to your mailing address. The notice outlines how to comply with the execution:

• You must make your first payment within 20 days of receiving the income execution billing notice
• Send 10% of your gross income, or 25% of disposable earnings, from each paycheck you receive

You’ll want to do everything you can to comply with the instructions to avoid further tax issues.

Required Employer Remittance

If you don’t comply with the income execution notice, the agency will send the document to your employer, requiring that they send in the required payments on your behalf. The employer will automatically withhold the required amounts from your paychecks to send to the NY state tax agency. Although you cannot get fired for wage garnishment in New York, it’s still professionally embarrassing and financially damaging.

Release of Income Execution

Eventually, the goal is that you will pay off your tax debts yourself after receiving an income execution, or the payments your employer withholds will pay off the debt on your behalf. When this happens, the state tax agency sends you or your employer a Release of Income Execution document, indicating that the bill is paid off, which includes penalties and interest charges.

Implications of New York Income Execution

Dealing with tax debt is never fun. If your unpaid taxes lead to an income execution in New York, there are some consequences you should be aware of:

• Ability to borrow: If the state tax agency files a tax warrant and pursues income execution, other creditors can see the public records, and they will also see that your disposable income is now lower. This means that you may have trouble getting credit approval while this is on your account.
• Financial implications: If you continue to fail to pay your tax balance, remember that you’ll accrue penalties and interest which will continue to increase the taxes you owe. In many cases, penalties and interest can nearly double your tax liability.
• Issues with your employer: If you don’t pay your taxes after receiving an income execution, your employer will have to do it for you. This doesn’t necessarily mean anything will happen with your job, but it doesn’t look the best when the state tax agency has to go this far to collect. 

Federal Implications of Unpaid Taxes

Don’t forget that state taxes are just one piece of your obligations. If you haven’t paid your state taxes, chances are you still owe the IRS for federal taxes, too. 

This means on top of dealing with New York income execution, you may also have to deal with IRS penalties, IRS liens, and IRS levies, further impacting your financial obligations and implications on your credit. The IRS may also decide to garnish your wages to cover your federal tax liability, or it could seize your property.

How to Stop Income Execution

There are steps you can take to either avoid income execution or stop it once it starts. Here’s what to do:

Pay and File Taxes on Time

The best thing you can do to avoid tax issues is to comply by filing your tax returns on time and paying your full tax bill on time – on both the state and federal levels. Pay attention to deadlines and save for taxes throughout the year to keep in good standing with tax agencies.

Respond to Notices Promptly

Another part of good tax compliance is responding to notices immediately. Whether you get something in the mail from the IRS or the NY state tax agency, follow the instructions carefully. Often, these notices will outline what you can do if you can’t pay your full balance right away. It’s also better to be in communication with the government about your tax issues rather than just ignoring notices.

Pay Off Your Unpaid Tax Balance

If you receive an income execution in the mail, you can stop further action from taking place and get rid of the execution by simply paying off the balance indicated on your notice. This is the fastest way to stop wage garnishment in NY. The state tax agency says you can pay through the online portal, send in a check or money order, or pay with a card for a fee.

Comply with the Income Execution

If you can’t pay your full balance after receiving an income execution, you can follow the instructions on the notice to comply. You must make your first payment — outlined on the notice — within 20 days, and then also make payments from each paycheck, which is 10% of your gross wages.

Challenge the Agency’s Decision

You also have the option to challenge an income execution or other action if you disagree with it. This is your right as a taxpayer. The document you receive in the mail will include specific instructions on how to file a dispute. But the important thing is to act as quickly as possible.

Talk to a tax attorney if you disagree with something the state tax agency sent you so you know you’re taking the right steps to get your matter resolved in your favor. 

Apply for Tax Relief

New York gives taxpayers a few options if you’re not able to pay your tax bill. One is an offer in compromise (OIC), which could allow you to settle your debt with the state for less than you owe. An OIC is considered if you are insolvent or discharged in bankruptcy or if payment in full would create undue economic hardship for you.

Another option from the NY tax agency is an installment payment agreement. You can request this plan online through your account if your balance is $20,000 or less. You’ll still accrue penalties and interest on your unpaid balance, but this plan helps you avoid further collection actions until your agreement period is over.

FAQs About New York Income Execution

What Is a New York Income Execution?

The state tax agency in New York may issue an income execution against you when you have unpaid taxes that go unresolved. The income execution is the same thing as wage garnishment, where the agency will require that you pay a percentage of your paycheck to pay off your debt.

Can New York Garnish All of My Wages?

The state can’t take all of your wages for income execution. The NY tax agency requests that you send 10% of your paycheck each time you receive one, on top of paying the initial outlined payment within 20 days of receiving your notice.

How Do I Stop an Income Execution in New York?

It’s possible to stop an income execution by paying off your balance in full. You can also comply with the requirements outlined for payment, and when the bill is paid off, the income execution is released.

Does My Employer Have to Comply with Income Execution?

Yes, employers are required to comply with state-issued income executions should you not comply on your own first. The employer will have to automatically withhold the 10% from each of your paychecks to remit to the government.

What If I Can’t Afford to Pay Taxes in New York?

If you can’t afford your full tax bill, you have options. Apply for a payment plan online to pay off the debt over time. Request an offer in compromise, which will allow you to settle your debt with the state for a lower amount. These tax relief options will help you avoid the state issuing an income execution. 

What’s the Difference Between Wage Garnishment and Income Execution?

These two terms essentially meant the same thing. New York State often refers to wage garnishment as income execution. The IRS typically refers to it as wage garnishment.

Find Professional Help with New York Income Execution

When you’re dealing with an income execution in New York, or you just have unpaid taxes, reach out to a tax professional for assistance. These matters can get complicated quickly, and you want to do everything you can to avoid building penalties and interest, having your property or assets seized, and other legal problems.

Work with the team at McLaud Law P.C. today. We help taxpayers in New York deal with a range of tax problems and headaches, including income execution, tax audits, appeals, tax relief options, and more. 

Contact our office to talk to a tax attorney.

This communication is Attorney Advertising. It is presented for informational purposes only and does not constitute legal advice. Every legal situation is different, and prior results do not guarantee a similar outcome. This communication does not create an attorney-client relationship between McLaud Law P.C. and the recipient.