Tax issues surround our daily lives, whether it is tax on your income or sales taxes you owe for your business. However, there are times in your life, whether its a sickness, divorce, death in the family, business problems, or just being busy, that you overlook that there are income or sales taxes to pay. Therefore, it is always good to look back and try to determine if there are tax issues in your past that needs to be resolved now by creating a tax payment plan or filing an offer in compromise. Whatever the issue, a tax debt is never eliminated quickly. For instance, New York State typically has 20 years to collect on taxes that you owe to them. When a tax debt increases with time (due to penalties and interest for not paying on time), your financial well being only worsens and the tax problem only becomes more difficult to resolve. Its best to act quickly and to monitor your tax health. In general terns, the Internal Revenue Service has 10 years to collect the tax once they make an assessment, so this is both a Federal and State tax law issue.
The Issue of Unpaid Taxes and example of lack of contact
At my office about five times a year, I receive a call from a person who use to live in New York State, and then moved out of state many years ago. They call and tell me that there bank account was frozen by New York State, and the monies taken for unpaid taxes. Often, there taxes can relate to tax years ten to eighteen years ago, and involve a business tax debt (often sales taxes). The enforcement arm (i.e. collections department) of the New York State Tax Department does not spend time trying to contact the errant taxpayer, they just take the asset to satisfy the tax debt, so it comes as a surprise (emotional and financial) to the taxpayer that they have an issue. For these people, while they were troubled that their business failed, and leave the state, it only becomes worse to ignore the unpaid taxes since with penalty and interest I have seen tax debts of $20,000 grow to a few hundred thousand dollars. Therefore, it is important to stay in touch with the tax authorities, and provide them with current mailing addresses, so you are not blind sighted by a tax levy (where they take your assets). For the person who simply does not know if they have a tax issue lurking in there past, they can always call the state that they resided in, or the IRS, and ask if they owe any taxes, and also review there own credit report to see if that shows any tax debts.
Solutions for Tax Liabilities- Offer in Compromise and Payment Plans
The New York State Tax Department or Internal Revenue Service are not as heartless as they appear and have programs to deal with unpaid tax issues. However, it is best to act before they do. These programs generally allow that the back tax debts can be resolved without taking from you the money you need to have for basic living expenses (using IRS standards for food, clothing, housing, etc). However, to qualify for this relief, you either need to show a hardship, that your financially insolvent (that you liabilities exceed your assets), or are unable to pay the taxes. If you do not satisfy this criteria, you will typically be eligible for an affordable payment plan.