Discovering a New York tax lien on your property is an unsettling problem that often arrives at the most inopportune moments for your business. You may be attempting to sell the company, move valuable equipment and inventory, or obtain financing essential for future operations. A tax lien can delay or jeopardize these key transactions by creating a roadblock on your ability to hold a clear title. In this article, we explain how New York tax liens work and discuss potential strategies for resolving them. You can contact our team of sales professionals for assistance in removing a tax lien from your business or property. We use our years of experience and knowledge in sales and use tax to help businesses efficiently manage their liabilities with a keen sense for their business goals.
What Is a New York Tax Lien?
Also called a New York tax warrant, a tax lien is how the New York Department of Taxation and Finance records its interest in your property because of a past-due tax debt. The lien operates as a collection mechanism for The Department and makes it difficult for the indebted taxpayer to freely transfer or sell their real and personal property. For example, a tax lien could attach to the following types of property:
- LLCs, corporations, and other business entities
- Real estate
- Vehicles
- Equipment
- Inventory
- Bank accounts
The filing of a tax lien on your property usually happens after a sales and use tax debt has become fixed through the timely notice of an assessment and the exhaustion of appeal options. The Department may have sent additional notices of the debt and provided an opportunity for repayment prior to filing the tax warrant. This is the first step in The Department’s collection process, which could involve the Civil Enforcement Division seizing property and garnishing income or wages. To see if a tax lien exists on your property, use The Department’s search tool for reviewing current warrants.
Steps to Resolve a New York Tax Lien
The process to resolve a New York tax lien can be complex and depend on key factors such as bankruptcy filings, additional creditors, and ongoing business operations. You will likely need to consider the following options for addressing the tax debt in a manner that is consistent with your business and personal goals.
Establish an Installment Payment Agreement and Offer in Compromise with The Department
Unless you have the ability or desire to immediately pay off the sales and use tax debt, entering into an installment payment agreement with The Department may be necessary. This agreement sets up a monthly repayment of the tax debt that generally pauses further collection proceedings against the taxpayer. During repayment under an installment plan, additional penalties and interest may continue to accrue and is an important factor to consider when deciding on the best repayment approach.
The Department has the discretion to allow a taxpayer to use an installment payment agreement and may limit its use to cases where the taxpayer is unable to fully repay the tax debt at once. You may need to submit a Statement of Financial Condition using Form DTF-5 that confirms your inability to repay the tax debt at present. Once accepted, taxpayers must also meet the following compliance obligations to avoid a default under the installment payment agreement:
- Timely file future sales and use tax returns
- Timely pay future sales and use tax owed
- Update The Department with any significant changes to your financial status
Along with the installment agreement, you may also be able to propose an Offer in Compromise. This is a type of settlement where The Department allows the taxpayer to pay a reduced amount to resolve the tax debt when there is uncertainty around the ability to collect on the debt. A taxpayer must generally demonstrate they are severely financially distressed to qualify for an Offer in Compromise. Examples of financial distress that could be sufficient for an installment agreement could include a recent discharge from bankruptcy, general insolvency, or evidence that collection in full would jeopardize a taxpayer’s ability to pay their reasonable living expenses.
Request a Release or Subordination of the New York Tax Lien If Necessary
Another important tool for managing New York sales and use tax debt is obtaining a release or subordination of a tax lien when appropriate. A release of lien on your property generally improves your ability to sell it. The Department may agree to a release when it is in its best interest because the proceeds from the sale will go toward the tax debt or otherwise facilitate your ability to repay the debt later on. However, a release of lien on property is usually only available in situations where the proceeds from the sale will not be enough to fully repay the tax debt.
In comparison, a subordination of lien is when The Department agrees to lower the priority on its interest in your property to a lender when obtaining financing from them. The Department may agree to a subordination when the financing is necessary to improve a business’s financial position in a way that will assist with future repayment of the tax debt. The process for obtaining a release or subordination of debt is not easy and requires building a convincing argument that the request will benefit The Department in its collection efforts. Taxpayers or their representative will need to submit required documentation for the transaction along with a letter explaining the reasoning behind the request.
Obtain a Satisfaction of Judgement for Your Records
After settling the sales and use tax debt, the final step is to obtain a Satisfaction of Judgement from The Department. This record confirms full repayment of the debt and removal of the tax warrant. Having a copy of this record can be useful in the event of future dispute or error with the Department and as evidence of debt resolution for different business partnerships or transactions.
Address Your New York Sales Tax Debt Today with Sales Tax Helper
Resolving your sales and use tax debt through proper management of a New York tax lien or warrant can benefit your business’s future operations and mitigate the risks of additional collection efforts. Working with our trusted sales tax professionals can be beneficial at every stage of the process from negotiating a repayment agreement, requesting a release or subordination of lien, and other interactions with New York’s Department of Taxation and Finance. If you recently became aware of a tax warrant on your property, contact us for a consultation to discuss your situation and how our professional can develop a strategy that works for your business.