Skip to comments.New York floods mailboxes with 700,000 vintage tax-delinquency letters: You may be a debtor!
Posted on 03/14/2010 10:06:20 AM PDT by Altura Ct.
New York floods mailboxes with 700,000 vintage tax-delinquency letters: You may be a debtor!
New York state has unearthed billions of dollars in unpaid taxes as old as the 1950s in an attempt to shake money from the pockets of some taxpayers.
In January, the state dug into its archives and mailed a list of outstanding bills to 700,000 people everyone who has a debt older than three years on the states books.
Maybe they hoped we forgot about it, Acting Tax Commissioner Jamie Woodward said.
Gov. David Paterson and state legislators are offering a kind of half-off sale on the old debts. If taxpayers pay in full by Monday, they can have a discount.
The effort has sent accountants and retirees into their own archives to find records from businesses they closed decades ago. The notices surprised many people who said they had not been billed previously. Some say the state is mistaken.
The state told Michael Rothman, 59, of Manlius, that he owed $3,491 with penalties and interest on unpaid taxes from 1988.
It was news to him. He sold his car repair business 17 years ago and said he did not hear about an outstanding tax bill until January.
The notices tell taxpayers the tax year, an amount due and amount of the discount. But the letters do not say what kind of tax the state thinks the person owes or how much of it is penalties and interest. The letters offer options to pay by phone, Internet or mail.
They do not offer an avenue for appeal, even though the burden is on the taxpayer to prove the state wrong.
Rothman said he called two phone numbers at the tax department and got no more information.
He said he does not intend to pay.
Ben Berry, 69, of Jamesville, was also surprised to get a notice for a 1998 tax bill he said he does not owe. He operated a coin laundry business and then two TCBY franchises, but closed his last business in 1997.
If he paid by March 15, the letter said, the state would reduce his bill from $20,571 to just $9,724.
Its just fishing, I think, Berry said.
An opportunity to pay
To help raise quick money for the cash-strapped state, Paterson and legislators ordered the tax department to run a two-month tax amnesty program.
Eligible taxpayers who had unpaid bills more than three years old could get a discount if they paid by Monday. The Penalty and Interest Discount Program, also called PAID, works like this: Liabilities between 3 and 6 years old could be eligible for 50 percent off of penalties and interest; bills older than 6 years could qualify for 80 percent off.
The tax department tried to pitch the amnesty program as a win-win for the state and taxpayers. They didnt want to leave anyone out of an opportunity, so they woke up even their oldest records of debt, Woodward said.
Everybodys looking for that money and we thought this was a good opportunity for folks, Woodward said.
They tried to remove the names of people who had died or had incorrect addresses. Then, they mailed 700,000 notices. Thats one letter for every 25 people in the state.
Woodward said she saw the letters as an invitation to participate in the amnesty program. She knew they would be stirring up issues some people had not thought about in a long time.
The highest possible income from this effort, if all 700,000 debts were paid, is about $13 billion, she said.
The state knows, however, that is an imaginary number.
Patersons office came up with a more realistic estimate $250 million.
So far, the tax department has collected $24 million.
We really did try to present it as an opportunity, not as a mandate or a requirement or a bill, Woodward said.
One taxpayer who owed more than $1 million paid $400,000 at once, the tax department said.
Not everyone saw it as a bargain.
What were seeing is more of a nuisance than anything else, said Tom Riley, a tax partner at ParenteBeard, of Syracuse. He said about 80 percent of his clients bills are incorrect.
He wonders how many people are choosing to pay small amounts they dont owe because it is easier than fighting it.
Try and argue about something from 1990, he said.
Chris Anderson, an accountant with Testone Marshall Discenza in Syracuse, said about 12 of his clients received letters. In most cases, he sends a copy of the companys final tax return to prove he properly closed out the business with no taxes due.
This is information, he said, the state should have in its own files.
A hard look for revenue
Rothman said the experience reminds him of another agencys try to bill business owners for workers compensation insurance. A Post-Standard story last summer said the Workers Compensation Board was seeking judgments against people who had not had employees for many years.
Woodward said she does not know of any coordinated statewide effort to dig up old debts.
I think the fiscal situation has made everyone go back to look very hard at where there could be some money that would not include raising taxes or cutting programs, she said. Were working very hard to do our very best at making sure that the money that is due the state is paid and here. The Legislature added the incentive piece.
Woodward said the department has heard from a small number of people who said they did not owe the money, and they are working to sort out those accounts.She said she wishes she could rewrite some of the things people have said about the tax department.
A lot of it is folks didnt give us the right information to begin with, she said, adding that people may need to learn how to properly close a business.
She also knows a lot of people simply dont have the money.
Its like Macys has a sale, even if the dresses are 90-percent off, if you dont have the money to buy it, you cant participate, she said. A lot of people are in financial trouble and maybe cannot even borrow from friends and relatives to take advantage of the deal.
To Berry, the idea of surprising small business owners in difficult financial times is an extra insult. He does not have a problem with the state pursuing bad debts, but said it should be diligently researched and clearly explained. He never had a problem with the tax department in the 40 years he ran his businesses.
I really think it was a ripoff for people to have this thing come out of the blue in this economy, he said.
There is no statute of limitations on these debts. But the tax department does not plan to do anything out of the ordinary to prosecute the people who ignore their invitation to participate in the amnesty program, Woodward said.
The old accounts will go back to sleep until the state finds some other reason to wake them up.
“Tax money, tax money, where for art thou, tax money?”
What would stop a state from simply making up “debt” that is owed and then trying to collect it?
The people ought to pay their tax bill with their credit card.
And then default on their credit card.
Because they already paid the credit-card bill with the financial bailouts.
That the government paid with taxpayer money, against the will of the taxpayer.
Let the snake eat its own gangrened body.
What happened to statute of limitations, due diligence lien processes and credit reporting by state at time of assignment of debt?
Sounds like ex post facto and abandonment of property by the state.
I think that is exactly what is happening. I would love to see each and every one of the 700,000 letters be followed by process that takes them to NY state tax court. That would be one way to grind this lunacy to a halt.
Wake up Dagwood ... The revenuers are here!
You know there WILL be a salt shaker fine.
People who have gotten these notices should storm the courtrooms demanding documentary proof that the tax was,in fact,owed and that it was not,in fact,paid.Otherwise...."case dismissed"!
“What would stop a state from simply making up debt that is owed and then trying to collect it?”
Only their deep and abiding sense of honor and fairness, or maybe Leprechauns or Pixies.
I would not be surprised to see more backlash against the IRS in NY.
Why pay an "opportunity"? How much will this cost to hire employees to deal with this and how much will it cost to track down delinquent taxpayers?
A tax debt from the 1950's?
Got that right here, brother. It's black and white. Here's what you owe, and here's the deadline. Pay up, or we'll take everything you have. Don't argue with the government -- we've got the goods on you.
I had to read to the end of the article to find this out. I cannot believe that NY has no SOL on taxes. That is just outrageous. The only other law that I know of that has no SOL is murder. The feds have a 3 year SOL on tax liability, 6 for fraud.
There ought to be a due process claim that can be brought as a class action and prevent the state from enforcing tax debts longer than the federal SOL.
Aren’t they doing that now?
That is a proper ruling. It would also be proper to force the government to prove the underlying tax debt, not just show a piece of paper with a number on it. Since they probably can't do it on any of these, they will go away.
They are going after those who are willing to pay the nuisance value on these cases.
This isn't the IRS, it's the state of NY. Although the IRS deserves a backlash, too, but for other reasons.
I’m willing to bet that the vast majority of those delinquent taxes for all of those years are owed by DEMOCRATS! They are the group who usually feel that taxes are for others to pay.
NY State was always after him for an "Unincorporated Business Tax" they said he owed for the days before in incorporated. My father was an outside salesman who usually represented several women's clothing firms. In the NYS law defining an unincorporated business it says (or said at the time) something like , "No person shall be deemed to be an unincorporated solely because he is an outside sales man representing more than one firm."
A rapacious government is such a nice thing.