Can New York State Taxes Garnish Disability?

If you owe property or state taxes, New York -- like other states -- has a legal right to garnish your wages or place a lien on your property or bank account to collect the debt. While some states do not exempt certain types of income from state levies, New York has provisions that protect disability payments from back-tax collection.

Tax Warrant

The New York Department of Taxation and Finance must file a tax warrant before garnishing wages. It allows the state to take additional steps to collect the back taxes you owe. It creates a lien against you and your assets. It is a public record that remains on your credit report until you pay off the past-due balance. It may have a negative effect on your credit score and prevent you from getting a job, obtaining new credit or renting an apartment.

Tax Levy

The government may use a bank account garnishment, also called a tax levy, to collect the past-due debt. A levy is an order to a third party -- a bank -- to turn over the funds you have in your bank account to the state to pay the balance you owe. When your bank receives the order, it freezes the funds in your account for compliance procedures and ownership verification. The bank must send you a levy notice by mail by the following business day.

Exempt Funds

The State of New York protects certain types of income from back-tax collection. Social Security income, disability, public assistance, child support, unemployment, workers' compensation, and public and private pensions are exempt from the tax levy. If you receive disability income, and the state places a levy on your bank account, you should contact the New York Department of Taxation and Finance and notify them of exempt income in your account. You may also need to file an exemption form provided by the bank along with the levy notice.

Negotiating a Settlement

While the state cannot take an exempt income to pay your tax bill, you may use your disability income to pay it. It is in your best interest to repay what you owe, because the tax lien remains on your credit record for seven years even after it's been paid. If you cannot pay because you are in a financial hardship, New York allows you to negotiate a settlement for less than the amount you owe. You should submit an offer in compromise with a proposed settlement amount and include copies of any documents as proof of your financial difficulties.