Income Executions: What to Expect If You Don't Pay NY Taxes

In New York State, you can face severe consequences if you don't pay your personal income tax or business taxes, such as NY sales tax. The New York Department of Tax and Finance (NY DTF) may issue tax warrants, seize your assets, or even take away your driving license, but one of the first steps that the state usually takes is an income execution. 

Often called a wage garnishment, an income execution requires you to submit a certain portion of your wages to the state to cover your tax debt. If you don't comply voluntarily, the DTF will send an execution order to your employer so they can withhold the money from your wages and send it to the state. To get help now, use TaxCure to search for a NY-based tax professional. 

What Is an Income Execution in New York?

An income execution is when the state requires you to remit a certain portion of your wages to pay a state tax debt, unpaid child support, or delinquent student loans. Private creditors in New York can also bring income executions against debtors but only after obtaining a court order. 

The state will notify you if they issue an income execution against you. At that point, you can voluntarily comply by sending in a payment every time you get paid, and your employer won't be involved. If you don't comply, the state will send the order to your employer. Then, your employer will be obligated to calculate the garnishment and send the funds to the DTF. 

Statute section 5231 of New York State's Civil Practice Law & Rules (CVP), Chapter 8, Article 52 covers income execution rules. These statutes explain the process of serving an execution order and how to calculate the payments. Section 174C explains that the DTF doesn't need to obtain a court judgment to issue a wage execution. Section 5231 talks about sheriffs carrying out income executions, but section 174C says that the tax commission can take this role when it comes to state tax debts. 

What to Expect With NYS Income Executions

Generally, people face tax debt when they file a return and don't pay or they incur a tax liability through a tax audit or residency audit. The DTF will send you several notices about the tax debt and give you the chance to apply for a payment plan. If you don't respond, the state may issue a tax warrant and decide to move forward with the income execution. 

At that point, the DTF will send info about the income execution to your last address on file. Once you receive the letter, you should calculate your payment (more on that below) and submit your first payment within 20 days of receiving the notice (10 days if you owe $100,000 or more). If you don't respond or pay in full by the deadline, the DTF will send income execution orders to your employer. 

Your employer must comply with the orders. They will calculate the payments, withhold the funds from your paycheck, and send the money to the state. This garnishment will continue until the tax debt is paid in full or you contact the DTF to stop the execution. 

The DTF publishes a list of all people who have active or canceled income executions. The list is publicly available on the DTF website, and anyone can download the pdf to look for your name. New York State's income execution list for 2022 was 142 pages long.

How to Calculate Your Income Execution

To help you calculate your payments, the DTF website has a calculator that takes the following into account: paycheck frequency, gross income, court-ordered child and spousal support payments, Social Security and Medicare payments, federal and state income taxes, unemployment insurance, and NY disability insurance. Typically, the state takes 10% of your gross wages or up to 25% of your disposable wages, which are your wages after the payments noted here.

The DTF cannot garnish any of your wages if your weekly earnings are less than 30 times the state minimum wage. Once you earn above that threshold, the state can take the lesser of 10% of gross wages or 25% of disposable wages, but the state cannot take more than the amount by which your disposable earnings exceed 30 times the minimum wage. 

The minimum wage in New York State in 2024 is $16 per hour. That means if you earn $480 or less per week in disposable income, the DTF cannot require you to pay any of your wages in an income execution. 

Now, let's say that you earn $1,000 per week, and after taxes for a single person, your take-home pay is $793.31. In this case, the state can take up to 25% of your disposable wages: $793.31*.25 equals $198.32. 

However, the state cannot take 25% of your disposable wages if that causes your after-tax pay to dip below 30 times the state minimum wage. To give you another example, say that your weekly pay is $750 and after taxes, your disposable income is $607.11. Now, 25% of your disposable income is $151.78 ($607.11*.25). However, if your employer withheld $151.78, your take-home pay would drop to $455.33. 

Thus, in this case, your employer can only take the amount that your disposable income exceeds 30 times the minimum wage. To calculate that, they should subtract $480 from your disposable income of $607.11, bringing the amount garnished down to $127.11. 

Note that these calculations don't take into account retirement contributions or health insurance premiums, and that's how it works in reality as well. However, if you're being garnished for child or spousal support, your employer will take those amounts into account before calculating your state tax wage execution. 

Timelines for Income Executions

The DTF doesn't publish details about how long it takes to issue an income execution if you have unpaid taxes. However, the law requires the DTF to take action within a set amount of time. 

If no warrant has been issued, the state must issue the income execution within six years of the date on which a warrant could have been issued. Once a warrant has been issued, the state has 20 years to act on it. The state can also keep an income execution in place for up to 20 years or until the tax debt is paid in full. 

Wage Garnishments for Unpaid Taxes Vs. Other Debts

The laws regulating wage garnishments in New York vary for taxes and other types of debts. If you owe money to a private creditor such as a credit card company or a mortgage lender, they must go to court and get a judgment against you. Then, they can garnish up to 10% of your gross wages or 25% of your disposal income.

In contrast, if you owe taxes to the DTF, they do not have to take you to court to garnish your wages. Similarly, creditors also don't need to go to court to issue income executions if you have delinquent student loans or unpaid child support. These creditors can also seize a higher portion of your income. 

How to Avoid an Income Execution

Whenever possible, you should try to avoid an income execution. It's easier to prevent an execution from happening than it is to stop one once the wheels are in motion. To avoid an income execution or other collection actions, explore one of these options as soon as you know that you owe delinquent state taxes:

• Installment agreement - Make monthly payments on your state tax liability for three to six years and potentially even longer in select situations.
• Offer in compromise - The NY DTF may let you settle for less than you owe if you prove that you cannot pay in full or make monthly payments. To qualify, you need to share a lot of financial details and make a lump sum payment. 
• Financial hardship - The DTF will stop collection actions against you if you prove that you cannot pay due to financial hardship. This is no formal application process, and the DTF handles requests on a case-by-case basis.

If you're not sure of what to do, contact a tax pro for help. They can talk with you about the best option for your situation, and then, they can help you file the correct paperwork with the DTF. Tax pros can also help you if you have unpaid IRS taxes. 

How to Stop a Wage Execution

If the DTF has already initiated a wage execution, contact them directly or hire a tax professional as soon as possible. The most effective way to get an income execution removed is to pay in full. Then, contact the state and ask for the execution to be removed. To ensure this happens as quickly as possible, mail your payment to the following address and note your income execution ID number with your payment: 

NYS ASSESSMENT RECEIVABLES
PO BOX 4128
BINGHAMTON NY 13902-4128

Can't pay in full? Then, you may be able to get the execution stopped if you prove that it's creating financial hardship. However, as long as the execution leaves you at least 30 times the state minimum wage per week, you may not be able to prove hardship unless you're dealing with extenuating circumstances such as an illness. 

FAQs About NYS Income Executions

Here are some of the most common questions asked about NYS income executions. If you have a concern that's not listed, contact a tax professional directly. 

What triggers an income execution in New York State?

Income tax executions are triggered by unpaid state taxes. The state may issue a warrant before an income execution, but it doesn't have to take this step. 

How does an income execution differ from a wage garnishment?

Both income executions and wage garnishments take money from your wages to cover unpaid debts. The main difference between a wage garnishment and an income execution is that the state gives you a chance to pay your income execution voluntarily out of your wages. If you don't pay voluntarily, the state contacts your employer to take the payments from your wages. With a wage garnishment, the garnishment order goes directly to your employer. You don't get a chance to take care of it on your end first.

What are my rights if I receive an income tax execution notice in New York?

According to the NY DTF Taxpayer Bill of Rights, you have the right to request a review if you receive a notice about an income execution. You also have the right to protest, but you must do so in a timely fashion. You have the right to bring representation when you contact the state. You also have the right to request help from the Taxpayer Advocate Service if the DTF is not respecting your rights or responding to you in the usual timeframe. 

Can an income execution affect my credit score in New York?

Generally, income executions from the DTF will not appear on your credit report. However, if you have an income execution from a private creditor, the judgment will appear on your credit report. Income executions can also indirectly affect your credit report because it may become hard to stay on top of your car loans, credit card payments, and other liabilities if your wages are being garnished. 

Are there any exemptions or protections against income tax execution in New York?

The DTF cannot seize all of your wages. The state must leave you at least 30 times the minimum wage after accounting for state and federal taxes. If you do not have a job or are suffering financial hardship, contact the DTF at 518-457-5893 or reach out to a tax professional for help. 

Can I get fired for an income execution?

In New York, you cannot get fired for an income execution. Additionally, employers cannot deny promotions or take other negative actions for wage garnishments. However, the laws vary from state to state. Federal law prohibits employers from firing you over a single wage garnishment, but the law doesn't prohibit you from getting fired over multiple garnishments. If you live in another state and the DTF garnishes your wages, check the laws in that state to learn more about your rights. 

Get Help Today

To get the best help for your tax problems, don't reach out to one of the big nationwide firms. Unfortunately for consumers, the top-rated nationwide tax relief firms often provide the worst service, but they have the biggest advertising budgets so they dominate the national review sites. These companies are particularly subpar when it comes to state tax issues. 

Instead, put yourself in the hands of a local professional who can provide you with knowledgeable, personalized service. To find high-quality help, start your search on TaxCure where you can narrow down the options based on the experience you need and take your time reviewing multiple local pros.