What is my recourse when the Dept. of Revenue makes a mistake?
June 23, 2017 8:50 AM   Subscribe

The Pennsylvania Department of Revenue recently put a tax lien on my credit report for unpaid state income taxes. The problem is, I didn't live in the State of PA during the year they're claiming I didn't pay income taxes. They're not being very helpful...what should I do?

In 2011, I lived in Philadelphia. In 2012, I lived in New Hampshire. In 2013, I lived in Philadelphia again. Because I filed my 2012 federal return from a Pennsylvania address and didn't file my state return (New Hampshire doesn't have a state income tax), the PA Department of Revenue erroneously decided that I owed them for 2012 state income taxes.

They apparently sent me letter after letter about this, but they sent it to an old PA address, so I never received notice. I moved back to New Hampshire for good in late 2013 and have had an address on file in New Hampshire since then. I'm in no way vagrant -- I'm a drivers license holder and a homeowner, and it would have been incredibly easy to find me. I only found out about this because I watch my credit report, which now has a tax lien on it. Ouch!

I provided proof to the Board of Appeals that I didn't live in PA in 2012, but they denied my appeal because it came too late.

There's obviously more nitty gritty (this is the government, after all), but that's the short story. My question is this:

Should I lawyer up? Is there any organization in Pennsylvania or elsewhere that could provide information about this?

I've called the Consumer Protection Bureau in PA, who couldn't really help and just suggested that I dispute the debt w/ the credit reporting agencies.

Any help or advice would be much appreciated!
posted by anonymous to Law & Government (7 answers total) 1 user marked this as a favorite
I work for a local taxing authority.

In our jurisdiction (not PA), if you have indisputable proof that you were not liable for the tax, it would be considered an illegal assessment. An illegal assessment is always an illegal assessment regardless of whether your paperwork was filed on time or not.

In most cases something like this would indeed be resolved at the Board and my first advice to you would be to file an appeal. But in this case you've already done that and have not gotten satisfaction.

I do believe that the next step would be to seek the help of a lawyer. You need to speak specifically with a lawyer who is a tax agent or who specializes in taxation issues in your jurisdiction. In my opinion it is worth the cost in order to keep your credit clear. As you know, taxes are not bankruptable and they never go away. Unless you get this cleared, one way or another the govt is going to collect those taxes, plus penalties and interest, and the lien will remain on your credit to boot.

There is one caveat here in that if you were using the PA address as your legal (filing) address, you may actually be liable for this state tax as well. That is a question for your lawyer to answer and it should be the first question you ask, in order to not waste time.
posted by vignettist at 9:10 AM on June 23, 2017 [8 favorites]

A person who is not resident in a state and doesn't earn income in the state generally isn't liable for taxes in the state, regardless of the return address on the form. But otherwise, yes--it's lawyerin' time. If you're living in PA now, they will intercept your state tax refunds, and will probably eventually graduate to garnishing your wages, which they can do even out of state.
posted by praemunire at 10:09 AM on June 23, 2017

Not a CPA, but I would think you would have to have lived out of state for the entire year, Jan to December. If you lived in PA even part of the year, you would owe PA income tax for those weeks and months. (It's not like voting. It's not based on where you live when you file, right? It's based on where you live when you earned the income. And, I could be wrong.)
posted by puddledork at 10:30 AM on June 23, 2017

Yes, puddledork is correct -- I have had to deal with this a lot recently because I've done a few inter-state moves over the past few years. You have to divide up your time as to where you were residing, down to the day, and pay part-year resident taxes for whichever days you were a resident of each state. This means filing multiple state returns, which is a pain. If you really moved on December 31/January 1 of each year and can prove that, you will probably be okay (although may still need to lawyer up), but if you moved any other day of the year you are likely going to owe some part-year resident taxes + interest and penalties.
posted by rainbowbrite at 11:16 AM on June 23, 2017


There are a few confounding issues here. If you lived or worked in Pennsylvania at any point in 2012, the state has the ability to estimate your taxes. If you miss your appeal window, the estimated amount will stand.

I get news alerts for state taxation as part of my job. And while there are probably tons of cases that regularly get dismissed by competent counsel, I regularly see cases where estimated taxes are upheld because the taxpayer should have reasonably anticipated the notices or was at fault for not leaving a forwarding address or some other ridiculous overreach.

The main problem is that everyone claims they didn't get notice. So there's the human risk of being believable.

It might feel Kafkaesque, but start overdocumenting now.
posted by politikitty at 12:35 PM on June 23, 2017 [1 favorite]

IANYL, and IANAL who knows anything about Pennsylvania law, and this is stuff that's super variable by state, so this is general, and it's not legal advice, just sort of navigating the system advice. But I AAL who used to represent the Tax Department in another state when they got sued by people who were, or who were claiming to be, in variants of your position.

(1) You've got paper communications with PA Tax now? Read all the fine print on them. If they have any instructions about next steps to take with the PA Tax Department, take those steps. Generally, you can't get any help from a court against a state agency until you have done everything possible to get the agency to change its mind, and they've told you that their decision is completely final. (The term of art is "exhausting your administrative remedies".) It sounds possible that you've done this already, but if you haven't, keep chugging through the process.

(2) In parallel with the above, are you talking to a human being at PA Tax? I don't know the culture at PA Tax. But in my state, and by reputation in other states, the Tax Department really doesn't want to screw you. If you really don't owe them money, and you can make the situation clear to a person, there is a good chance you can talk your way out of it.

(3) If 1 and 2 don't get you anywhere, your choices are pay, sue the agency to make them lift the lien, or just not pay it and take the hit to your credit rating and the risk that they will get around to collecting the money nonconsensually (that is, I don't know what PA can do, but in my state, Tax could under the right circumstances take the money out of your bank account). It is probably not worth the money in attorneys fees to sue (guessing on how much a state tax bill is likely to be, and also that from what you've said it could totally go either way). On the other hand... I really normally wouldn't suggest that anyone try representing themselves. But... if you're confident you've got a compelling story, and you can figure out how to bring the appropriate sort of lawsuit pro se? It is low odds, but you don't have anything to lose but your time. And when I was doing this? Most of my job was winning cases when the state got sued. But a fraction of it was looking at (often pro se) cases, figuring out that the agency had screwed up, and talking them through how they should stop doing bad things to the nice citizen who hadn't done anything wrong, and settling (the state doesn't actually want to be breaking the law, but everyone screws up sometimes. When they figure out they're wrong, they will often back down and make things right). You're probably not going to win a suit, but bringing one might get your story in front of someone else who might straighten things out for you. THIS IS A SUPER LONG SHOT -- don't do it unless the trouble involved is little enough that you're all right with wasting your time.
posted by LizardBreath at 3:46 PM on June 23, 2017

I think I may have underexplained the foundation of my point 3.

That is, ideally, you'd get a lawyer. But depending on the size of the unpaid tax bill, I think you're very unlikely to successfully get much legal help for less than the amount of the bill. At which point, win or lose, you've still lost money, and there's a real shot you pay the lawyer and have to pay the tax bill anyway. So if that's your situation, getting legal assistance is a sure money-loser.

You can make the problem go away guaranteed by just paying the bill. Maddening, but a definite solution, and you know exactly how much it'll cost you. Or you can tolerate the situation you're in with not paying it. Or you can do the long-shot suing without a lawyer (which is generally a very silly thing to do, and you should only do it if you can tolerate the immense amount of trouble it will be and you don't mind it getting you nowhere, but it does have a slightly more than zero chance of shaking something loose in the situation.)
posted by LizardBreath at 4:12 PM on June 23, 2017

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