Did you attend the Accounting & Finance Show earlier this month? Many of our friends and colleagues gave great presentations on a wide range of topics. Our attorneys were honored to present on IRS Appeals and Collections, New York State Tax Collections, and Residency Audits. If you couldn’t attend, here are a few topics we covered:
There has been guidance recently issued by the IRS regarding passport revocation. Specifically, it provides that some tax debt will not be included in determining if a taxpayer is seriously delinquent, such as debts meeting any of these criteria:
- Being paid timely with an IRS-approved installment agreement;
- Being paid timely with an offer in compromise accepted by the IRS, or a settlement agreement entered into with the Justice Department;
- For which a collection due process hearing is timely requested regarding a levy to collect the debt; and
- For which collection has been suspended because a request for innocent spouse relief under IRC § 6015 has been made.
Additionally, a passport won’t be at risk if the taxpayer fits into one of the following categories:
- In bankruptcy;
- Identified by the IRS as a victim of tax-related identify fraud;
- Account is currently in non-collectible status due to hardship;
- Located in a federally declared disaster area;
- Request pending with the IRS for an installment agreement;
- Pending offer in compromise with the IRS; and
- Has an IRS accepted adjustment that will satisfy the debt in full.
IRS Silent Lien vs. New York State Tax Warrant
A federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt. The IRS doesn’t need to actually file a lien. If a tax isn’t paid after a formal request, the Code grants the IRS an automatic lien against all of a taxpayer’s property and rights to property. This differentiates the IRS from other creditors who need to get a judgment in order to forcibly collect monies due. The IRS’s “silent lien” even attaches to property acquired after the assessment itself. However, the IRS files a Notice of Federal Tax Lien in order to establish collection priority.
A New York State tax warrant is a legal judgment and notice for priority. To take most tax collection actions, New York State must first file a tax warrant. It acts as a perfected lien upon the taxpayer’s real and personal property when filed and enables New York State to take certain collection action against his/her real and personal assets. A tax warrant serves as a perfected security interest and ensures that the State will get paid ahead of subsequent creditors.
The IRS’s silent lien can take priority over the New York State tax warrant even when no Federal Tax Lien has been filed. The IRS’s silent lien begins on the date of assessment while a New York State warrant is based on date docketed. Consequently, if the liabilities are for the same period, the IRS lien usually takes priority over New York State.
There are no collection appeal rights against a New York State tax warrant and the state does not give notice to the taxpayer until after the warrant is filed.
The IRS does give the taxpayer a notice of levy in advance and a notice of lien afterward. The IRS also gives Collection Due Process (CDP) rights to taxpayers to protest the filing after the fact. A Collection Appeals Proceeding can also be commenced before the Federal Tax Lien is filed.
New York Installment Payment Agreements
If the taxpayer is financially unable to pay the full amount of the liability all at once, the taxpayer might qualify for an Installment Payment Agreement (IPA). Under the IPA, the taxpayer is allowed to pay off the total tax liability in monthly installments over time. Interest and penalties will continue to accrue until the liability is paid in full.
Self-service options are available online or on the phone. To use these self-service options, the taxpayer must be current, have no prior IPA defaults, no open collections, bankruptcy, or protest cases. Taxpayers can add direct payment information. The balances must be less than $20,000 with a repayment term of 36 months or less and the taxpayer must have no prior defaults.
In fiscal year ending in 2017, over 105,000 IPAs were approved, bringing in revenues of $368 million to the state. New York is planning to enhance the online IPA application process.
Thanks to Terrapin for organizing a great conference.
See you at the next tax conference.
Filed Under: Installment Payment Agreements, IRS, Passport Revocation, Tax Lien Tagged With: IRS Passport Revocation, IRS Tax Lien, New York Installment Payment Agreement, NYS Tax Warrant