Some States Are Hard Levying Taxpayers – Be Careful If You Owe

Oct 26, 2022 Uncategorized

State governments are finding that they are crunched during this Economic Crisis. A study conducted by the Center for Budget and Policy Priorities (CBPP) shows that all states, on average, cut 12% from their budgets during fiscal 2010. And, it is expected they will cut another 13% this year, in 2011. Income shortfalls count for much of the deficit, from federal cuts to reductions in tax revenues. And it is the reduction in tax revenues that is at issue here.

A number of people have talked with me recently about state tax collection methods. In every case, they’ve either lost jobs or been cut way back on their work hours. Many families I’ve talked with have lost at least one of two jobs. They owe back taxes, and in some cases, two years. The economy slid downhill after the collapse of Bear Stearns and Lehman 2008. And, by 2009, most of us knew there were problems.

Since then, there have been business emergencies, bailouts, job losses, mortgage crisis, foreclosures, and government cuts, especially at the state level.

While the bailouts were available for a number of banks and insurance companies, and large auto companies, there were few areas of assistance for those on Main Street. And those few begun, like the “Home Affordable” program have been acknowledged to be failures.

As a consequence, people who have suffered job losses or cutbacks between 2008 and 2010 have had few, if any, remedies to help them fill the gap. “Home Affordable” became a national joke, and people trying for mortgage modifications often found that banks used the “3 month pilot period” to run up the clock on late payments, causing people to be desperately late if they did not complete the modification.

Good solid people, contributing citizens have not been helped by any of the federal programs, and have been caught in a financial morass often leading to bankruptcies and foreclosures. This is an increasingly serious situation, since it appears the economy will have an anemic recovery at best, and a stall or “W double dip” at worst.

People who have been hit and bruised by job cuts, foreclosures and bankruptcies still owe state and federal taxes. And, if there was a big drop, the current income is increasingly unable to meet basic obligations, much less taxes. For Federal Taxes, the payment plan is often the solution, and can provide time for people to increase earnings, and make small payments given a more limited income. States are a little more difficult to figure out. I’ve looked at statues and policies for a few states, and read some commentary. It appears that, in some states, if a person is unable to meet tax payments or payment plan, then the state will garnish or levy up to a certain amount. So, there are very limited funds left for mortgage/rent, food, car, insurance, etc.

However, it seems that some states are able to levy, period. Which means that the state could take everything, and they are probably not interested in having a long term taxpayer because they would strip someone of not only their funds but their means of earning anything more and contributing in the future.

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