Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.
Welcome to the world of the budget crunch. Due to its financial difficulties NY is pursuing collection activities where they never did before. The problem here is, as you found out from hard experience, that NY does not recognize a statute of limitations on collecting an obligation once a billing has been generated. Sadly, as you have also found out, you generated this billing for them by filing the return.
There is a remedy available to you:
You can make a payment arrangement. NY will not be easy to work with since they have already needed to levy your bank account.
You can prepare and submit an Offer In Compromise (OIC). An OIC will let you settle this debt for something less than full value. The forms are available at the NYS Department of Taxation & Finance web site www.nystax.gov
Feel free to ask if you require assistance with this.
The ten year statute is a Federal collections effort only. It means that the IRS will not actively pursue collections efforts after 10 years. They do, however, reserve the right to seize refunds if they catch them. Many states have adopted similar approaches but are now reversing their choices due to financial difficulties. NY never joined in this and, accordingly, never needed to reverse its position. This is not and has never been a statute. It is a policy at IRS and is not a legally binding item. A statute would be binding. It is a common misconception.
As to an OIC in NY, the forms are available at the state web site www.nystax.gov The state takes the approach that they will accept an OIC if there is no likelihood of ever collecting in full by any other means than by accepting an OIC. They are not overly merciful and expect you to alter your lifestyle to just about welfare status to pay them. It is not a simple process and you should become familiar with the forms and the necessary disclosures before proceeding. Then seek professional representation in the matter.