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PDtax
PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1745
Experience:  32 years tax experience, including four years at a Big 4 firm.
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WE just received a letter from our bank, Wachovia, that over

Customer Question

WE just received a letter from our bank, Wachovia, that over $17,000 has been taken out of our bank accounts due to 'individual income taxes' that the state of NC think we are indebted to them... it listes the period of 01/01/08-12/31/08 and tax= $7855.00, penalty/fee/interest=$7,682.66, interest=$1,758.10. We just checked our bank accounts 10 minutes after opening this letter--the money is gone. We have never received anything from North Carolina, IRS, NOTHING from anyone saying we owed anything, nothing saying we were in default, NOTHING saying this was coming....NOTHING! Opening the mail tonight was the first time we even knew anything about this----Here is the thing-We lived in NC until October 2007. My husband was laid off work in NC in June 2007. He started working in VA in September 2007. We officially moved to VA in October 2007. At that time we no longer owned any property, worked in NC, etc ever again. For 2007, we paif taxes in NC and VA. And since October 20, 2007 we have lived in the same residence in VA and worked at the same place. Again, we never received anything from NC that there was any kind of problem---plus we are confused because it lists the period as 01/01/2008 to 12/31/2008---how could we owe something to NC and now 6 years later how can over $17,000 be taken away from us with no notice-NOTHING. What can we do?
Submitted: 5 months ago.
Category: Tax
Expert:  PDtax replied 5 months ago.

PDtax :

Welcome to the site. I'm PDtax, and will be helping you today.

PDtax :

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Expert:  PDtax replied 5 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  PDtax replied 5 months ago.
State tax agencies have been getting very creative in pursuing former residents for back taxes. There are specific issues that would give NC taxing authority, most likely the type of income earned, that would create a taxing 'opening'. The concept is often called nexus.

States have long been preparing what the IRS calls 'substitute for returns' using income information to calculate an income tax and create an assessment. That assessment allows the state to collect on something (a tax debt has been created).

Often, the bank has to release funds to the tax agency within 21 days. If so, the funds have not been forwarded, just locked up by your bank. There will be time to pursue relief.

Because there was no tax return filed, many states do not start the statute of limitations on collection, so six years, sixteen years, they could pursue collection for years.

NC issues what they call a Certificate of Tax Liability, or CTL, which acts as a lien on your property. They have the unique creditor ability to create their own debts, issue a judgment, and collect it from people, all without ever going to court to pursue a judgment. I'll bet there is not a requirement that the CTL or follow up bank levy have to be sent to you (many states have this same weakness in their debtor-creditor law that allows this kind of collection).

There are steps you can take yourself to pursue relief. The traditional request for state review is done with NC-242, Objection and Request for Review, http://www.dornc.com/downloads/nc242.pdf. This will likely take weeks, and by then obtaining release of your funds will have to be done directly with the state, as your bank will send the $$ they hold to them.

Faster relief may be available. We now offer a new service called Additional Services, which you may wish to consider. I can provide specific advice, which I will offer in a separate message.

Thanks for asking at Just Answer. I'm PDtax.
Customer: replied 5 months ago.

This answer doesn't really address anything I asked. In the question, I said we did not live in NC--we moved out of NC in October 2007. The paperwork that I quoted in the question gave dates of 01/01/2008 to 12/31/2008---that is why the questions was posed. As I stated, we did not live in NC in 2008---also as stated, we did not own property, work, earn money, etc in NC in 2008. Thus, how can money be taken from us when nothing was owed----and we never received anything ever notifying us of an issue. I understand states can go after back taxes---my question was--how we could possibly owe back taxes when we don't live or work there, how can we get back money that has already been taken out of our account? There is nothing in this answer that makes it even seem like you read what I wrote in. Is that what you are referring to getting 'additional assistance' for?


Thanks.

Expert:  PDtax replied 5 months ago.
My answer gave background as to how they can do what they did, but not why.

Nonresident tax assessments are like low-lying fruit for state tax agencies. Often, the burden is on you to prove you severed your ties with the state, which most people don't completely do. This gives the state a link, or nexus, to try and tax you as a nonresident. I didn't say the taxes were actually owed. It sounds like you can get your money released. How is the key.

You moved out in 2007. But I bet you didn't change where you registered to vote, driver's licenses, and some of those links to the state. Based on your facts, I believe you should not owe a tax to NC. They see it differently.

The money has likely been frozen by the bank, held for a time (21 days is standard in the state I work most in, mentioned in my answer). During the pendancy of the holding period, you can negotiate with NC DOR for release, while the bank holds your money. After that time, the bank releases the funds, and NC DOR cuts your refund check after negotiation.

When I went over how an assessment was created, it was to explain one of your questions, how could this happen? The traditional way to respond is the form I provided, which you can fill out yourself and wait. There are several steps you can take that may resolve things within that 21 day period, faster than that, or fastest, depending on the urgency and how able you are to do this yourself.

I assure you I read your question. Your specifics will indicate how best to proceed, as well as an assessment of how able you are to represent yourself. A review of all your options is best, so you know how to respond.

If you just want a list of options, I can provide them.

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