What Restaurants and Auto-Body Shops Should Know About New York Tax Warrants

If you own a restaurant or auto-body shop or related business, beware the New York State Department of Taxation and Finance. That’s because businesses like yours are often audited, which in turn may lead to a tax warrant if you fail to respond. For example, every month, the State updates its list of the top 250 individual and business tax debtors with outstanding warrants. On the business side, certain industries tend to be over-represented on the list, especially the food and automotive industries. To protect your restaurant or auto-body shop, here are a few things you should know about New York tax warrants:

What Is a Tax Warrant in New York?

Before New York State can pursue most collection actions against a taxpayer who owes back taxes, it must first file a tax warrant. A tax warrant is the equivalent of a legal judgment against a taxpayer who owes taxes to the State. It is a public record, on file at the County Clerk’s Office and with the New York Secretary of State. Anyone can search for open tax warrants on New York’s tax department website.

Once filed, the warrant serves as a perfected lien on the taxpayer’s real and personal property and ensures that the State will get paid ahead of subsequent creditors. A tax warrant is valid until the underlying tax liability is completely satisfied, or the warrant expires so don’t ignore it and hope it goes away. Consult a tax lawyer for help in eliminating the warrant.

What Types of Businesses Are on New York’s Top 250 List of Delinquent Taxpayers?

New York’s most recent list has a mix of companies but certain industries appear more frequently on the list. Among them are businesses in the automotive and food and beverage industries. For example, of the top 10, 5 are automotive companies that mostly owe sales, use, and withholding taxes. Of the top 30, 7 are in the food and beverage industry. The construction industry is also well-represented.

Why Are Certain Industries Heavily Targeted for New York State Audits?

Several industries are frequent targets of state auditors because statistically, there tend to be more problems with tax returns of businesses in those industries. Often, these are ones that have a significant number of cash transactions that can be harder to track. However, New York relies on various data tools such as its Case Identification and Selection System (CISS) to review tax returns. CISS utilizes electronic data collected from third parties such as wholesalers and distributors to compare against retailers to detect businesses under-reporting their cash sales. It also takes averages of similar businesses and can determine sales based on inventory levels and other markers. Data collected from debit and credit card purchases are also used. Sales reported by credit card companies can be compared to those a retailer reports on state tax returns to help detect retailers who fail to remit sales tax. New York, other states and the IRS also share data to help identify taxpayers for audit. As a result, it is very risky for businesses to file inaccurate tax returns.

How Do You Avoid a New York Tax Warrant?

The key to avoiding a tax warrant is to make sure you keep meticulous financial records and file your tax return and pay your taxes accurately and on time. If you are having trouble paying your taxes on time or owe back taxes, get help as soon as possible. A tax attorney can assist you in resolving your tax problems before it damages your business.

Tenenbaum Law has extensive experience helping clients with tax warrants. If you owe back taxes, contact us for help with your matter.