Did Not Pay Your Taxes? You May Lose Drivers License

August 28, 2013 | By: TaxCure Staff

license suspended for unpaid taxesNew York is the latest of a handful of states to decide to suspend the driver’s licenses of those who don’t pay their taxes.

Because many people view the ability to drive a car a mark of independence, it is not surprising that a driver’s license suspension is painful. Think about how many times you use your car in a week. What if you could no longer drive because of a suspended license?

How States Decide to Suspend Your License for Back Taxes

New York brings the total of states that will suspend your license over unpaid taxes to four (the other states include Maryland, Louisiana, Massachusetts, and California). Each state has its own requirements. In New York, your license won’t be suspended unless you have $10,000 in unpaid state taxes and you are out of appeals. In Louisiana, though, all you need is a tax balance of $1,000 to see your driver’s license suspended.

The New York version of the law also recognizes that taxpayers still need to get to work, and you can receive a limited-use license. After all, how will you pay off your taxes if you can’t drive to work? In New York, you can also set up a payment plan that will allow you to retain at least some of your driving privileges.

Since this is a state issue, states can decide how they want to try to collect taxes. If you owe back taxes to the state and live in a state that will yank your driver’s license for your taxes, make sure you understand how your license will be pulled, as well as what you need to do in order to get it back.

Why Take Your Driver’s License?

States can garnish your wages or place a lien on your property. Why would they bother with taking your driver’s license? For some states, this is the easier route. It can take weeks of paperwork to get the wage garnishment right, and there are formulas that often have to be used when it comes to determining how much the state can take from your paycheck.

Plus, many people are more likely to fight garnishment or a lien because of all the technicalities and requirements involved. It’s often easier to just pull a driver’s license. Plus, rather than trying to hem and haw, many delinquent taxpayers will try to do what it takes to pay up as quickly as possible. A driver’s license suspension hits scofflaws right where they hurt — with something that directly affects them in their everyday lives. It’s much easier for many taxpayers to accept that they have a smaller paycheck than it is for them to deal with the inability to drive.

With many states seeing increasing deficits, it makes sense for them to look for sources of revenue. One of the best ways to drum up more revenue is to go after those who owe money but haven’t paid. Real consequences for unpaid taxes is one way to encourage more payment.