New York Payment Plan Guide & Help
New York state has very high tax expectations. Recent statistics show that New York’s state and local governments have the highest overall tax collection rate of all the states, averaging about $135 per $1,000 of personal income.
With such high tax burdens across the board, it’s not all that uncommon for New York taxpayers to receive tax bills they can’t afford to pay off in full. If that happens to you, you’ll need to consider your options ASAP to avoid facing unwanted consequences. One of the most common solutions to tax delinquency in New York state is agreeing to a NY state tax payment plan.
In the following sections, we outline the basics of NY taxation and the consequences of not paying your taxes. Then, we’ll go over exactly what this payment plan is and how you can request one to get back in good standing with the New York State Department of Taxation and Finance.
New York State Taxes: The Basics
As of 2024, New York State has a graduated individual income tax rate that ranges from 4 to 10.9%. In addition, some jurisdictions collect local income taxes.
The corporate income tax rate is about 6.5 to 7.25%. The state sales tax rate is 4%, and local jurisdictions add up to 4.875%. On average, the state and local sales tax rate comes in at about 8.52%. Property taxes in New York are also very high, ranking 2nd highest in the nation.
Throughout 2021, New York and local governments in the state collectively received more tax revenue than any other state. Each resident paid an average of $10,331, which is about $4,000 more than the national average.
What is a New York State Tax Payment Plan?
One of the most common strategies for dealing with a tax debt is agreeing to a NYS Installment Payment Agreement (IPA). A New York State IPA allows you to pay off your tax debt over a period of time by making payments at regular, monthly intervals.
In exchange for you making these timely payments, the New York State Department of Taxation and Finance (DTF) will not initiate more collection efforts such as wage garnishments and asset levies so long as you’re staying on top of your obligations.
How to Set Up a Payment Plan
You can request an Installment Payment Agreement online through the Department of Taxation and Finance’s website if you owe $20,000 or less, and you can pay off the debt within 36 months. If you owe more or need longer to pay, you need to contact the DTF directly or work with a tax professional.
Conditions of NYS Payment Plans
When you set up a payment plan, you agree to the following conditions. If you don’t keep up with these obligations, the state can rescind your payment plan:
- File all future state returns on time.
- Pay all state taxes on time and in full.
- Pay your agreed monthly IPA payments on time every month.
- Give the DTF financial details if requested.
The DTF will seize all of your state and IRS tax refunds and apply them to your total tax bill, but these offsets will not apply to your IPA payment. If you break the terms of your agreement, the DTF will typically give you 30 days’ notice before canceling your payment plan.
How to Make the First Payment
If you set up direct debit payments, the NYS DTF will send you a notice before taking the first payment out of your account. Just make sure you have enough money in your account to cover the withdrawal on the scheduled day.
It often takes a few months for your direct debit to take effect. Until it does, you will receive a voucher and a reminder of your payment. You can make your payment online or through the mail. If using the mail, send your payment early so that it reaches the DTF by the due date. Make sure to write your name and installment agreement number on the check or money order so the payment gets credited correctly, and send it via certified mail with return receipt so you can prove it was sent and delivered on time.
What If You Default on a NYS Tax Payment Plan
If you default on your NYS Installment Payment Agreement, the state will add penalties and interest to your account. As of 2024, the interest rate on late income tax payments is 10.5% and it’s 14.5% on late sales tax payments. The state will also add penalties to your account, and the penalties will also incur interest. The DTF may also issue tax warrants, seize your assets, take action against your business, and revoke your driver license.
New York State Tax Warrant
Another consequence you could face is a NY state tax warrant. A tax warrant is a lien against your assets, which gives the state tax agency a legal claim against your property. If you attempt to sell your asset while a tax warrant is active, the state has a right to the proceeds of the sale.
A tax warrant can also give the state a legal right to your income, too. Wage garnishment (which NYS calls an Income Execution) is an official seizure of a portion of your paycheck. You will be given an opportunity to comply with the Income Execution voluntarily at first. If you refuse, or do not report your full income and remit the correct percentage, the order will be given to your employer, and your employer will deduct the amount from your pay.
State tax warrants can be issued for unpaid state income tax, business taxes, sales taxes, and withholding tax.
Consequences of Defaulting on Business Payment Plans
Businesses are expected to stay on top of all their tax obligations, including withholding and remitting sales tax. Falling behind could be a threat to your business, and defaulting on a payment plan generally leads to the same consequences as not paying your bill in the first place.
Ignoring a tax debt can result in the revocation of your business’s certificate of authority to collect sales tax. This means you won’t be able to legally sell anything that could be subject to sales tax.
The state can ultimately shut down your entire business when you don’t pay your sales tax obligations. You don’t want to risk your entire business, so make sure to address any tax delinquencies as they come up. Because of the high interest and penalty rate for sales tax liabilities, if you are dealing with any unresolved sales tax issues, it’s best to consult with a tax lawyer or tax professional like those at McLaud Law P.C.
Alternatives to a New York Tax Payment Plan
One of the most obvious alternatives to submitting to a New York tax payment plan is making a lump sum payment that takes care of your entire tax debt burden. This strategy is your best way to reduce interest and penalties, but it’s most people who have tax liabilities lack the funds to fully pay immediately.
You also have a few other options, like seeking penalty abatement. If you cannot afford to make monthly payments, you may be able to get a NYS offer in compromise, where you settle your debt for less than the full amount, however not every person or business qualifies for this relief. NYS also has an innocent spouse program to help people who incur tax debt due to actions their spouses took without their knowledge. All of these resolutions require a financial analysis to determine if you qualify.
One option that will almost never work is to ignore your NYS tax problem. NYS has 20 years to collect a tax debt (twice as long as the IRS) and are capable of ruining your business and personal finances with collection action until they have been paid or until you establish a resolution with the DTF.
FAQs: NY State Payment Plans
Do you have more questions about your New York State tax payment plan, tax debt bill, or alternatives? In general, your best option is to speak with a tax resolution lawyer or tax professional like those at McLaud Law P.C. about the specific facts and circumstances surrounding your situation. Below, we’ll provide some general answers to some of the most frequently asked questions about New York state payment plans.
How do I arrange a New York payment plan?
The easiest way to request a New York payment plan is to use their online portal. Visit this website and create an account. From there, you’ll be able to request an Installment Payment Agreement, submit the proper documents, and get information regarding your tax situation directly online.
What happens if I miss a payment on my NYS income tax payment plan?
If you miss a payment on your NYS Installment Payment Agreement, then your entire payment plan is at risk. One of the terms and conditions of your agreement is to maintain your payment obligations. Missing even just one payment could cause your entire plan to lapse, exposing you to collection action like levy, lien, and garnishment.
That said, you need to get in touch with the New York State Department of Taxation and Finance immediately as soon as you realize you won’t be able to make a payment on time. Waiting too long may not leave you with any options for fixing the situation. Once the state cancels your payment plan, they can issue tax liens, move forward with asset seizures, garnish your wages, and even take away your driving license.
What if my bank doesn’t accept the automatic payment?
If the direct debit for your installment agreement payment gets rejected by your bank, the DTF will attempt to do the withdrawal again in two business days. If the payment still doesn’t go through, the state can charge you a $50 fee. If the payment continues to fail, your Installment Payment Agreement will default.
How do I make changes to my NY tax payment plan?
You can request changes to your payment plan through the DTF’s website. You can change your bank account info or your monthly payment date. You can also cancel your monthly payment if needed.
Can I add a future tax debt to my existing NYS tax installment plan?
No. When you submit a payment plan with the New York State Department of Taxation and Finance, you agree to certain terms and conditions. One of those terms is that you’ll stay on top of your future tax debt obligations. You won’t be able to add future debt onto your existing plan, and a failure to make your future payments on time could ruin your current plan.
However, if you incur new state tax debt, you can pay off your existing payment plan and request a new payment plan on the new tax debt. Alternatively, you may be able to negotiate a new payment plan that includes the existing tax debt and the new tax debt. But if that happens, the DTF will issue a tax warrant, and your monthly payment will be higher.
Is there a statute of limitations on New York state tax debt?
Yes. The statute of limitations on New York state tax debt is 20 years. After 20 years, the tax liability will expire, and the tax agency will not have a legal claim to continue collection efforts. That said, you could accidentally extend the statute of limitations by taking certain actions. To protect yourself, you should talk with a tax pro for help.
How can I prepare for my future tax situations?
The best way to prepare for your future tax situations is to get fully informed regarding the tax laws and regulations in New York that will impact you and your business in the future. You can also consider getting expert help with tax return preparations and tax planning.
Do You Want Help Setting Up a Payment Plan in New York?
Have you fallen behind on your New York state tax obligations? Are you considering requesting a NYS Installment Payment Agreement and weighing your other options? Here at McLaud Law P.C., our team of qualified tax resolution professionals can help you tackle a wide variety of tax problems. From unfiled tax returns to unpaid tax debts, audits, liens, levies, and possible legal consequences, our team can help you navigate your situation and find a workable solution for your tax issues.
We are a law firm that works with individuals and businesses, and we can help you. Are you ready to get started? You can contact us online to discuss your specific tax matters in more detail or give us a call at 585-397-7785. Don’t stress yourself out trying to handle your tax problem on your own. Contact McLaud Law P.C. today and make your tax problem our tax problem!
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