On Sept. 5, 2025, Moe, a Connecticut resident who requested anonymity for this story, received a Failure to File Notice from Connecticut’s Department of Revenue Services (DRS), addressed to his eldest daughter.
“Our records show that you did not file a Connecticut Income Tax Return for tax year 2021,” the letter read. “As a result, we have calculated a proposed amount due based on information this Department received from the Internal Revenue Service (IRS), under §6103(d) of the Internal Revenue Code.”
In the notice, DRS officials estimated she earned $68,265 in 2021 and owed $3,365 in state income tax, plus a penalty of $336.50.
Moe’s daughter, who wished to remain anonymous and will be referred to as Caroline, hadn’t lived in Connecticut since 2020, when she moved to Boston.
“I hadn’t lived in the state in four or five years, so at first it was kind of like, is this spam?” Caroline recalled thinking. “Is this real? What’s going on?”
Unfortunately for Caroline, the notice was very real. The letter directed her to file a tax return or complete and return a form included on the notice’s second page, explaining why she wasn’t required to file a return. Moe, an attorney, filed the form on her behalf, attaching a copy of her 2021 Massachusetts tax return as proof that she didn’t have any taxable income that year. He sent it back on Sept. 15, 2025. They received another, identical notice on Nov. 4, 2025.
“I responded to each one,” said Moe. “I pointed out that I was counsel, and I received zero from the state of Connecticut. No response, no acknowledgement, nothing.”
DRS tax collectors improperly seized more than $5,000 from Caroline via bank levy, prompting her to fight with state officials and her bank before she could recover the money. Moe said she had to “go to somebody else” to cover her rent for that month because of it.
Robert Lyon, partner at O’Connor & Lyon, a Durham-based law firm that specializes in tax law, said Caroline getting her money back after it was levied is an incredibly rare win.
“I’ll be honest with you, it’s very difficult to get them to do that,” said Lyon. “Once they have the money in hand, it’s very difficult to convince them to give it back.”
Inside Investigator requested comment from Tiffany Thiele, DRS’s Director of Communications, but did not receive a response.
Caroline’s Story
After graduating college, Caroline moved to Boston in 2020, where she has since lived and worked as a trade development director at a liquor distributor. Her father notified Caroline of the DRS’s first notice in September 2025, and Caroline recalled them both being confused. When her father responded to both the September and November notices, with her Massachusetts tax return attached to each, they received no reply.
“We kind of just wrote it off as, like, it must be an error in the system,” said Caroline, “and then when he wasn’t getting responses to what he was saying to them, we were like, ‘Oh, maybe it’s a fluke.’”
On April 30, 2026, however, the DRS sent a 30-day collection notice.
“You did not respond to our repeated notices and requests to resolve your overdue tax obligation,” reads the notice. “The unpaid bills are listed on the back of this notice. Any more delays resolving this obligation will not be accepted.”
In the notice’s summary of unpaid bills, the DRS determined that Caroline now owed $5,350.50, including $1,648.85 in interest.
On June 2, Moe sent a letter back, demanding DRS rescind its “illegal or improper collection and enforcement threat to her,” or set up a “hearing on this matter before a neutral operator” should they refuse to.
“Your allegations are a desperate lie, and you have zero proof of your allegations and assessment as this NEVER HAPPENED,” wrote Moe. “You have been offered a signed authorization from the state where Caroline lived, worked and paid taxes in 2021 but you have done nothing to secure same.”
On June 22, Caroline noticed that DRS officials had seized $5,350.50 from her bank account.
“I got the money taken out of my account, and there was a number to call,” said Caroline. “So, we ended up calling, and my dad tried to talk to them, but because he wasn’t appointed as my attorney, they weren’t able to speak to him about my information.”
The same day, her father faxed DRS an LGL-001 to give him power of attorney over Caroline’s tax matters. By that point, however, it was too late. Over the next week, Caroline had to man the phones. She first spoke with a DRS representative, who Caroline called “very helpful.” The representative let Caroline know what information was required.
“My dad faxed over all my tax returns and everything that I had paid in Massachusetts, as well as my employee status in Massachusetts and my lease,” said Caroline. “So, we had to send all that over.”
After that, Caroline said she called “this guy every day, and he ended up pushing it through in like a day and a half for me, just because I probably was calling a lot and I had all my information.” At that time, the representative told Caroline he sent all the information to the DRS’s Collections and Enforcement Division. On June 23, Caroline called the Collections Division.
“Their job basically is to receive the information that was sent to them, approve or decline it, go back,” said Caroline. “They obviously approved it because there was no case with it because I didn’t live in the state. So, then their job is, what they do, is once they approve it on the collections, they send it to my bank, and then my bank has to release it. That’s kind of where the big holdup happened.”
On June 24, Caroline spent all day on the phone, calling Santander, her bank in Massachusetts, and DRS back and forth until the freeze was ultimately lifted. Caroline said Santander kept redirecting her to various representatives, and DRS representatives told her several times that they had faxed and emailed the release authorization to the bank, but that she still could not access her funds.
“The branch wasn’t receiving it,” said Caroline. “The collections agency ended up sending me the release form. So, I went into my bank, and I was like, ‘I have this release form, I don’t know why you guys don’t have it,’ and then, finally, they released it.”
Around 5 p.m. on June 25, after “a lot of calls,” Caroline received her money back. She described the ordeal as a “very crazy, eye-opening experience.”
“It was, at the end of the day, just extremely frustrating,” said Caroline. “It was very shocking to me that another state could come into my bank account and just withdraw funds without any documentation to me directly.”
How It Can Be Avoided
The mechanism through which Caroline’s funds were seized is called a bank levy, one of many tools in the tool belt of state and federal tax collectors. When DRS officials determine, rightly or wrongly, that a person has an unpaid tax debt, officials must first provide the person with a formal tax bill and notices of intent to collect. If the person does not pay within the 30 days provided upon receipt of their final notice of intent, then DRS officials can begin enforcement.
A bank levy is the most direct way DRS can enforce an unpaid debt. When DRS decides to levy, they notify both the affected taxpayer and their bank. Banks provided with such a notice must freeze the funds. At this point, taxpayers have 15 days to appeal the levy before it’s transferred to the state.
While Attorney Moe repeatedly said that DRS’s seizure of funds was “unconstitutional,” courts have routinely disagreed. Phillips v. Commissioner of Internal Revenue, a 1931 Supreme Court case, set the precedent that the IRS officials’ collection of “internal revenue by summary administrative proceedings” does not represent an unjust taking or violation of due process, so long as “adequate opportunity is afforded for a later judicial determination of the legal rights.”
Lyon said the issue was likely caused by a failure to file a part-time tax return, which indicates to DRS auditors that a resident has moved to another state. He said Connecticut is “very keen” on tracking people’s address changes because many of the state’s residents are transient.
“One thing to keep in mind about Connecticut is we are notorious for having people that live, work, raise their families in Connecticut, and then retire and move down to Florida,” said Lyon. “If you don’t tick all the boxes, it can crop up as an issue.”
Caroline said that because she hadn’t worked in Connecticut since before 2019, she believed she didn’t need to file a tax return. According to DRS’s “Helpful Information Page,” under “Common Filing Errors to Avoid,” this appears to be a common misconception.
“Not filing a return,” the site reads. “Do not skip filing a return because you have no withholding to report. You MUST file a ZERO return.”
Caroline’s conversations with DRS officials reinforced this notion.
“I asked them in passing, ‘Does this happen often?’” recalled Caroline. “And someone, I think at the Collections Agency [Division] was like, ‘Once or twice a week, I run into this.’”
Regardless of whether you have taxable income, a part-year return serves to “put on notice” that a resident has left the state, said Lyon. He also noted that state residents can file a change of address form, CT-8822, to notify DRS of a change in residence. Caroline did not get a Massachusetts license until 2021 or 2022 and said that DRS officials noted that this could cause confusion.
“They said that when you have a license and aren’t paying taxes in the state, you’re automatically flagged,” said Caroline. “So, they check your taxes and if you haven’t paid taxes.”
Lyon said that state departments of revenue use “two different concepts” to determine residency: your physical presence in the state and your domicile.
“Domicile is the place that you consider to be your permanent home, the place that you return to when you’re away,” said Lyon. “That concept gives Connecticut the ability to assert its taxing authority over your worldwide income, even if you’re not physically present in the state.”
Lyon explained that several factors, including a driver’s license, are considered to determine domicile, such as voter registration and the location of your health service providers.
“The less of those boxes that you tick, the easier it is for Connecticut to come back and say, ‘This looks to us like it was a temporary move,’” said Lyon.
On Caroline’s failure to file notice, DRS requested copies of any of the following documents to prove non-residency: Caroline’s resident state income tax, her out-of-state driver’s license, her voter registration card, a certificate of domicile, or a receipt from her moving company. According to another DRS website, people who receive failure to file notices despite not having any Connecticut income in the year must “submit copies of at least three” such documents to prove non-residency. The documents provided to Inside Investigator show Moe only responded to DRS with a copy of Caroline’s Massachusetts tax return.
When Caroline asked how DRS estimated her income and determined her taxes owed, an official reportedly told her that they had “no idea.” In situations like these, Lyon said the DRS creates “an assessment in the absence of return.”
“Through the sophisticated use of technology and data mining along with information provided by the Internal Revenue Service, the Department is able to identify nonfilers and reasonably estimate their income tax liability to Connecticut,” reads another DRS website. “If you received a Failure to File Notice and you disagree with our findings, simply check off the appropriate box on the back of the notice and enclose the required documentation.”
How Connecticut Differs from Other States
Lyon said that, in many ways, Connecticut’s DRS officials are more empowered than federal tax collectors.
“The DRS is, in general — the rules, everything in terms of what they’ll offer for people [such as] time to pay taxes off — it’s all ways less favorable than the IRS,” said Lyon.
Lyon compared the two entities, explaining that the IRS’s enforcement notice gives “due process rights before the IRS can take collection action,” while Connecticut’s does not.
“If you receive that notice and you file an appeal within 30 days, a collection hold will stay in place until you have a hearing with someone in IRS appeals that you can use to resolve whatever the issue is, or work out a payment plan or something,” said Lyon. “It’s a pre-levy due process right — In other words, you’re afforded the opportunity to basically present your case to the IRS before they just hit your bank account. The DRS doesn’t have any of that.”
While acknowledging that every state has different rules or tools surrounding collection, Lyon said Connecticut is “more zealous than most of the states that I work with.”
“I would say worse than New York and Massachusetts; those are the two main ones,” said Lyon. “Worse than Minnesota, I’ve dealt with them a lot, [and] probably worse than California.”
Lyon’s critique was Connecticut’s relative intransigence when working with debtors compared to other states.
“Most of the states, in my opinion, are willing to work with taxpayers to repay their taxes, based on their ability to pay, more so than the state of Connecticut,” said Lyon. “There’s almost no consideration given to a person’s actual financial standing.”
In his experience, Lyon said Connecticut DRS officials will give debtors a maximum of four years to pay off tax debts, and “the best they’re willing to do” to settle an unpaid tax debt is “the original tax balance due, plus one half of the interest.” This unwillingness is because, unlike the IRS, which waives its ability to collect unpaid debts after 10 years, Connecticut’s DRS effectively has the right to collect an unpaid debt forever, said Lyon.
“The DRS can really sit around forever to collect from you, and then if you die, they’ll collect from your estate,” said Lyon. “Whereas the IRS only has 10 years, so there’s more of an incentive for them to get what they can when they can and get it off the books.”
In 2022, Connecticut’s General Assembly passed House Bill 5473, which established a 10-year statute of limitations on DRS’s back-tax collection, but it left a carveout that Lyon argues made the law inconsequential; the debt is not wiped if DRS files a tax lien within those 10 years.
“I’ve only seen one instance, basically, where the DRS failed to file a lien within that 10-year window, and the tax was written off,” said Lyon. “In most instances, they’re gonna file a lien, basically to extend their time period to collect.”
The reason for DRS’s veracity when compared to the federal government’s, in Lyon’s view, is simple.
“The federal government essentially can just — if they don’t collect enough in tax revenue, they just borrow and print more money to pay their bills,” said Lyon. “The state of Connecticut doesn’t have the ability to do that.”
While Connecticut’s income tax rate is middle of the pack compared to other states, its overall tax burden routinely ranks among the highest in the country. Last year, DRS released its first report on the state’s “tax gap,” the difference between the amount of taxes owed to the state and the amount it actually collects. According to the Hartford Business Journal, they created a recovery unit following this report to “quickly identify non-filers, increase audit rates and improve outreach to delinquent taxpayers.”
Regarding her own experience, Caroline said that while turnaround time for DRS officials and her bank to return her money was “fine,” she wished the process was simpler and easier to navigate, and that she wishes the money was not improperly taken in the first place.
“It took me like a full day to figure out who I should be calling and directed to,” said Caroline. “I mean, I had the time to continue calling; I can’t imagine this happening to people that don’t have the time in the day to do all that, and then just get money taken from them.”
Ultimately, Lyon said that the most important thing Connecticut taxpayers can do is to make sure to let the state know when they move, and to respond quickly if DRS makes an erroneous judgment.
“Before you leave the state, update your address with the DRS because the most important thing is to get the notices and be able to head it off before it becomes a bigger issue,” said Lyon. “The further it gets in the process, the harder it is.”
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