South Carolina: Tax Resolution Options and Consequences of Back Taxes

The South Carolina Department of Revenue (SCDOR) collects individual income tax, estate tax, and other personal and business taxes. If you have unpaid taxes, the SCDOR can place liens on your property, garnish your wages, revoke business licenses, or take other collection actions. However, the department is also willing to make arrangements with taxpayers who have unpaid state tax liabilities.

This guide looks at the tax resolution options in South Carolina, and then it explains what the SCDOR can do if you don't pay your tax bill.

Table of Contents

• Tax Resolution Options for SC Back Taxes
  • Payment plans
  • Offer in Compromise
  • Innocent Spouse Tax Relief 
  • Hardship Status 
  • Penalty Abatement
  • Tax Appeals 
  • Voluntary Disclosure Program
• Back Tax Enforcement Actions
  • Tax Liens
  • Tax Levy
  • Tax Penalties
  • Public Notice of Tax Debt
  • Loss of Business Licenses
  • Common DOR Notices
• Statute of Limitations on Tax Debt
• SC DOR Contact Details and How to Make Payments
• Get Help With SC Back Taxes

Tax Resolution Options for South Carolina Back Taxes

If you have back taxes in South Carolina, you may be able to make various arrangements. The SCDOR offers payment plans, offers in compromise, and other tax relief programs to delinquent taxpayers. Here are the main options for people who owe back taxes in South Carolina. 

Payment Plans for South Carolina Taxes

The SCDOR allows both individuals and businesses to make payments on their tax liabilities. To qualify, you must have received a notice to request a Payment Plan Agreement, and you cannot have an active garnishment or levy from the SCDOR.

Payment plan terms vary based on how much you owe. Individuals can get up to 48 months to pay off their tax bills, but businesses need to contact the SCDOR directly. You can request a payment plan online or by emailing Brian at Brian.Smith@dor.sc.gov.

South Carolina Offer in Compromise

An offer in compromise lets you pay off your tax bill for less than you owe, and the SCDOR accepts offers in compromise due to doubt as to collectibility and economic hardship.

Doubt as to collectibility refers to situations where the department doubts it will ever be able to collect the tax liability. Economic hardship applies in situations where the taxpayer can't pay due to exceptional circumstances. It also applies if paying the bill would place undue hardship on the taxpayer.

You can apply for an offer in compromise using Form SC656 (Application for Offer in Compromise). This PDF contains the instructions, application, and a list of supporting documents. It also includes Form SC433A (Collection Information Statement for Individuals) and Form SC433B (Collection Information Statement for Businesses).

Innocent Spouse Relief

The SCDOR offers innocent spouse relief to taxpayers who need relief from tax liabilities due exclusively to their spouse or former spouse. You can apply for innocent spouse relief if you have received a proposed assessment or had a tax refund applied to a tax liability for which your spouse was liable. To apply, use Form SC8857 (Request for Innocent Spouse Relief).

Hardship Status

The Internal Revenue Service (IRS) will stop collection activity on your account if you qualify for hardship or currently not collectible (CNC) status. Unfortunately, the SCDOR does not advertise a similar program, but the state may be willing to accept offers in compromise from taxpayers experiencing economic hardship.

Economic hardship is for people who cannot pay their tax liabilities due to exceptional circumstances. You may also qualify if paying the tax liability in full would place unfair economic pressure on you.

Penalty Abatement on South Carolina Taxes

In South Carolina, you can apply for penalty abatement using Form C530. This concise form requires basic contact information and details about the tax you owe. Then, it prompts you to explain why the SCDOR should waive your penalties.

The application requests you to back up your request with relevant parts of the tax code. You may want to work with a tax professional to improve your chances of success.

South Carolina Tax Appeals Process

If you disagree with a tax assessment, you can file a protest with the SCDOR. The SCDOR Appeals Section and the SCDOR Litigation Section will review your protest. The Litigation Section will issue a Department Determination, and if you still disagree, you can request a contested case hearing.

Voluntary Disclosure Program

the NC DOR offers a voluntary disclosure program. If you haven't been filing and paying South Carolina taxes, you can come forward using this program, but you only qualify if you initiate contact. Once the SCDOR contacts you about the tax, you no longer qualify for voluntary disclosure. This program is not for people who have unpaid taxes related to previously filed returns.

The SCDOR still applies interest to your balance when you use this program, but the department waives all penalties. Additionally, in most cases, the SCDOR will only look back for three years or less. In other words, if you come forward voluntarily, you typically shouldn't have to worry about any taxes that are more than three years old.

At the time of writing, South Carolina does not have an active tax amnesty program. The SCDOR offered amnesty in 2015.

Back Tax Enforcement Actions

In South Carolina, the SCDOR has the right to take a range of collection actions against taxpayers who have not filed returns or paid their tax bills. The SCDOR also collects unpaid bills for state agencies, institutions of higher learning, housing authorities, political subdivisions, and other governmental entities of U.S. states through its Governmental Enterprise Accounts Receivable (GEAR) program.

Whether you owe state taxes or liabilities through GEAR, the SCDOR may use the following collection actions against you.

Tax Liens

The SCDOR may place a tax lien on your real or personal property if you have unpaid taxes. A tax lien refers to the state's legal right to your assets, and once in place, it is active for 10 years. During this time, you cannot sell your property or receive a clear title.

To remove a South Carolina tax lien, you must pay your tax bill in full. The state also publishes a directory of all state tax liens on the SCDOR's website. Typically, the SCDOR only files liens once the opportunity for appealing the tax bill has passed, but if you believe the SCDOR filed a lien in error, you should email the SCDOR at ComplyToday@dor.sc.gov.

Tax Levy

A tax levy is when the state seizes your assets to satisfy an outstanding tax liability. In South Carolina, the state may levy your wages, bank accounts, investment accounts, and contract payments.

For example, if you are an independent contractor and a client owes you money, the SCDOR may contact your client and have them send your payment directly to the department. Similarly, if you are a vendor and a business owes you money for products or services, the SCDOR may contact that business and request your payment.

The SCDOR can garnish 25% of your gross wages. The 25% refers to wages before taxes, health insurance premiums, retirement contributions, or other deductions.

In addition to placing levies for state taxes, the SCDOR may also be able to garnish your assets for bills from other entities such as state agencies, public and private institutions of higher learning, and housing authorities.

Tax Penalties

The SCDOR assesses a range of different penalties on taxpayers who fail to file returns or pay their tax liabilities. If you file late, you face a failure-to-file penalty of 5% of the balance each month, up to 25%. The failure-to-pay penalty is 0.5% of the balance due, and the SCDOR assesses this monthly until you pay your balance or the penalty reaches 25% of the balance.

In South Carolina, total penalties on your account can reach up to 50% of your balance. The SCDOR has an online calculator that will show your penalties based on your filing due date and when you plan to pay and file. The easiest way to get this information is by creating an account on MyDORWAY.

The SCDOR also assesses interest on outstanding tax liabilities. The department uses the IRS's interest rate. The IRS changes its interest rate quarterly, and it uses the federal short-term rate plus 3%.

Public Notice of Tax Debt

The SCDOR publishes a list of the top 250 delinquent individuals and the top 250 delinquent businesses every quarter. It does not include taxpayers who have filed for bankruptcy or set up payment plans.

Loss of Business License

The department also revokes business licenses from businesses that do not pay their tax bills or make arrangements on their outstanding tax liabilities. Businesses that continue operating after a license revocation may face a penalty of $500 per day.

Common Notices Sent by the SCDOR

The SCDOR sends a variety of notices to taxpayers with outstanding tax liabilities. The state uses notices to alert taxpayers about the following issues:

• Tax balance due.
• Increase or decrease to the taxpayer's refund.
• Request for additional information related to a tax return.
• Changes made to the taxpayer's return.
• Identity verification.

All of the SCDOR's notices should explain how much you owe, your resolution options and the state's plans to take additional collection actions. Notices also contain information on how to contact the SCDOR.

Statute of Limitations on SC Tax Collection

The SCDOR has three years from the date the return was due or filed to assess taxes, and the clock starts running on the latter of these dates. If the tax was underreported by 20% or more, the SCDOR has up to 72 months (six years) to assess the tax. This statute of limitations does not apply if there was fraudulent intent or a return wasn't filed. In those cases, the Department can assess the tax at any time.

Once the tax has been assessed, the SCDOR typically has 10 years to place a lien on a taxpayer's assets, and the lien can stay in place for 10 years. For example, if someone files but doesn't pay a tax return in 2020, the SCDOR has until 2030 to place a lien. If the SCDOR places the lien in 2030, the lien can remain in place until 2040.

How long can South Carolina collect back taxes?

SC Statute states that the state cannot collect taxes by levy, warrant, or court actions unless those actions have been started within 10 years of the date of assessment. If the state has not started collection actions by the 10 year period, they will not be able to collect the debt.

South Carolina Department of Revenue Contact Information and How to Pay

To find out how much you owe or to talk directly with the SC DOR about payment options or other arrangements, you can use the following contact details.

• Individual Tax Inquiries: 1-844-898-8542
• Business Tax Inquiries: 1-844-898-8542
• General Inquiries: 1-844-898-8542
• Income Tax Levy Questions: 803-898-5611
• GEAR Levy Questions: 803-898-5403
• Website: SCDOR Official Website

How do I find out how much tax I owe in South Carolina?

If you're unsure about how much you owe to the SC DOR, contact the Department using the numbers above, or consider setting up an online account for yourself or your business using DORWAY, the Department's online portal.

How do you pay taxes in South Carolina?

You can pay taxes online through DORWAY. You can also pay through the mail or in person. To get more details as well as instructions and mailing addresses, check out this guide on how to pay South Carolina taxes.

Get Help With South Carolina Back Taxes

If you owe back taxes in South Carolina, the SCDOR can use a lot of different tactics to collect your bill. To avoid wage garnishment, property levies, or other enforcement actions, you should reach out to the SCDOR and make arrangements on your account as soon as possible.

Unfortunately, dealing with the SCDOR on your own can be confusing and frustrating. For best results, you may want to work with a tax professional. To learn more about the best options for your situation, contact a tax professional experienced with the SCDOR today. Also, you can see the top-rated professionals that help with South Carolina DOR tax problems below as well as top-rated tax pros by designation type located in South Carolina.

• Top Pros That Help With South Carolina DOR Problems
• Top Tax Problem Pros Located in South Carolina
• Top Enrolled Agents in South Carolina

CT State DRS 2021 Tax Amnesty Program Overview

Note that as of 2024, this program is no longer active. This is historical data. Explore our site for more ideas on how to pay CT taxes and what to expect if you can't afford to pay in full.

The Connecticut Department of Revenue Services (DRS) is offering tax amnesty from November 1, 2021, to January 31, 2022. Taxpayers can report and pay CT back taxes without penalties. You can use this program to report and pay almost every tax administered by the DRS, and it can significantly reduce your tax bill. Here is what you need to know.

2024 IRS Tax Relief for Certain CT Individuals and Businesses

However, in 2024, the IRS offered tax relief to individuals and businesses affected by flooding in parts of Connecticut. If you live or have a business in New London County or the Tribal Nations of Mohegan and Mashantucket Pequot, you may qualify for 2024 IRS tax relief. 
 
All deadlines after Jan 10, 2024, and before June 17, 2024, have been extended to June 17, 2024. This includes personal income tax returns, quarterly estimated tax payments, quarterly payroll and excise tax returns, partnership and S-corp returns, and corporate returns. Payroll deposits and excise tax deposits due between Jan 10, 2024, and Jan 25, 2024, will not incur penalties if the deposits were made by January 25th.

What CT Taxes Are Available for Amnesty?

All taxes administered by the CT DRS are available for amnesty, except for Motor Carrier Road Tax also called International Fuel Tax Agreement (IFTA) tax. You can claim amnesty for the following Connecticut taxes: 

• Business use tax
• Cigarette tax
• Corporate business tax
• Gift tax
• Individual income tax
• Estate income tax
• Trust income tax
• Individual use tax
• Motor fuel tax
• Sales and use tax
• Withholding tax
• Pass-through entity tax 

You cannot use the CT Tax Amnesty program to get relief on taxes not administered by the CT DRS. This includes taxes such as CT property taxes, federal taxes, payroll taxes owed to the Department of Labor, and annual fees imposed by the Secretary of State. 

The program applies to all tax periods ending on or before December 31, 2020. You can apply for tax amnesty for any period up to that date, but you cannot apply for amnesty for taxes from 2021. 

Who Can Apply for Tax Amnesty in CT?

Both individuals and businesses can apply for tax amnesty in Connecticut if any of the following situations apply:

• You have unfiled returns.
• You have unreported tax liabilities. 
• You have delinquent tax balances.
• You are under an audit with the DRS. 
• You have an ongoing protest in front of the DRS's Appellate Division. 
• You are pursuing civil litigation with the DRS. 

You cannot apply for amnesty if you are currently under criminal investigation by the DRS or are party to criminal litigation pending as of November 1, 2021. You are also ineligible for amnesty if you are a party to a closing agreement with the DRS, you're party to a managed audit agreement, or the DRS has accepted an offer in compromise (OIC) agreement from you. 

Benefits of the CT Tax Amnesty Program

If you qualify for the tax amnesty program, the CT DRS will waive all the penalties associated with the tax and reduce your interest by 75%. For example, if you have penalties of $1000 and interest of $1000 on your account, your total penalties and interest will drop to just $250.

This program also allows you to avoid criminal persecution. CT tax amnesty applications are confidential, and the DRS does not use them as evidence in criminal investigations unless you knowingly file an application with false information. 

When you apply for amnesty, you agree to waive all rights of appeal related to the tax liability. 

How to Apply for Tax Amnesty in Connecticut

Again, you can apply for tax amnesty anytime between November 1, 2021, and January 31, 2022. You can apply online at GetRightCT.com — just click "apply now" to get started. Or you can apply through the DRS's online payment portal at myconneCT. 

To apply online, you need the following information:

• List of tax types and tax periods for which you want amnesty.
• Amount of tax due each period.
• Record of estimated tax payments made.

If you cannot apply online, you can call the DRS Amnesty Help Line at 1-866-658-1528. 

Amnesty Application Instructions Based on Your Situation

The CT DRS has specific instructions on how to apply for tax amnesty depending on your situation. You can learn more about what to do by contacting a tax professional.

Taxpayers with unfiled returns

If you are applying for amnesty for unfiled returns, you should complete the returns to determine how much you owe. Don't file the returns or send them to the CT DRS. Simply note the amount due on your amnesty application, and then, keep the returns for your records in case you are audited or the DRS wants more information. 

Taxpayers with underreported liabilities on filed returns

You should fill out an amended return if you are seeking amnesty on underreported taxes. Do not send the amended return to the DRS. Note the additional tax due on your amnesty application, and keep the amended return for your records in case of an audit or a request for additional information. 

Taxpayers with delinquent tax liabilities 

If you have an existing delinquent tax liability, the CT DRS should send you an Offer of Amnesty. When you apply, you need to enter the Amnesty ID printed on your notice. 

The CT DRS says that taxpayers with outstanding liabilities who have not received an Offer of Amnesty should contact the Amnesty Help Line at 1-866-658-1528.

Taxpayers with back taxes and underreported tax liabilities from the same tax period.

In this case, you need to complete two different amnesty applications. Follow the prompts to apply using the Amnesty ID on your Amnesty Offer Letter. Then, fill out an amended tax return and complete a second amnesty application following the above instructions for taxpayers with underreported tax liabilities on already filed returns.

Taxpayers with pending appeals or protests

This applies to taxpayers with pending appeals before the DRS Appellate Division and to taxpayers with protests pending before the Tax Session of the Connecticut Superior Court. 

If you have a pending case with the DRS Appellate Division, you should withdraw your protest by sending a fax to (860) 297-4780. If you appealed to the CT Superior Court, you must file a written Withdrawal of Action using the court's required forms. 

Once your protest or appeal has been withdrawn, you can apply for amnesty. If your withdrawal is not processed before you apply, any payment you make will be applied to your outstanding liability. 

Taxpayers under audit by the DRS

To get amnesty, talk to your revenue examiner about closing the audit under amnesty guidelines. Then, apply as usual based on your situation.

Paying Tax Liabilities Through the CT Tax Amnesty Program 

In exchange for tax amnesty, the CT DRS expects you to pay your bill in full. To qualify for this program, you need to pay the entire liability at the time of application. You can pay with direct debit, ACH credit, or credit card. 

There are no payment plans or extensions available with the tax amnesty program. If you can't afford to pay in full right away, the DRS will deny your application, and you will owe the taxes plus penalties and interest. 

Calculating the Amount Due When You Apply for Amnesty

If you have a delinquent balance, the amount owed will show in your Offer of Amnesty letter. If you have unfiled returns or underreported liabilities, you will figure out how much tax you owe when you fill out a return or amended return. 

When you use the amnesty program, you don't have to pay any penalties, and again, your interest will be reduced by 75%. Don't try to calculate the interest on your own. When you fill out the amnesty application, it will calculate the interest for you so that you know exactly how much to pay. 

Rejected CT Tax Amnesty Applications

The CT DRS will send you a letter if your amnesty application has been denied, and the DRS will apply any payments you have made to your tax balance. If your application is accepted, the DRS will not notify you. 

The CT DRS's Amnesty Offer Letter

The CT DRS plans to send Amnesty Offer Letters to people with outstanding liabilities who qualify for amnesty. This letter contains an ID you should use when applying for amnesty. 

If you have recently made a payment on your account, the offer letter may show an Eligible Balance that is higher than your actual balance. Do not simply subtract your payment when applying for amnesty. Instead, contact the Amnesty Help Line to ensure your application is processed correctly. 

The offer letters don't pause the collection process. As a result, you may get both an offer letter and a bill. Even if you get a bill, you are still eligible for amnesty.

Audit After Amnesty

The CT DRS has the right to audit you for the periods related to your amnesty application. If you are audited, your amnesty will not be revoked. However, if the audit reveals additional taxes due, you will be subject to interest and penalties. 

If the department finds out that you have falsified your amnesty application, you can be fined up to $5000, imprisoned for up to five years, or both. 

Get Help Applying for CT Tax Amnesty

The CT DRS's Tax Amnesty Program offers an invaluable opportunity for individuals and businesses. The last time the state offered amnesty was in 2017 and before that in 2013. If you do not take advantage of the amnesty program, you will owe outstanding taxes plus penalties and interest. 

To get help applying for tax amnesty in Connecticut, contact a CT tax professional that specifically helps with tax amnesty today. These tax professionals are experienced in dealing with the CT DRS, and they can help you make the most of this opportunity.

 

 

Guide & Help with Missouri Department of Revenue Offer in Compromise

If you have unpaid taxes in Missouri, you may be able to reduce your tax bill through an offer in compromise. An offer in compromise is when the state agrees to settle your tax bill for less than you owe. Essentially, you make an offer, and the state decides if it wants to compromise.

Missouri has strict qualification criteria for offers in compromise, and you may want to work with a tax professional when applying. So that you know what to expect, here is an overview of the process.

Key takeaways

• The Missouri DOR Offer in Compromise lets you settle state taxes for less than owed.
• To qualify, you must submit financial information showing your reasonable collection potential (RCP).
• There is a shorter application for applicants under 125% of the poverty, or under 200% of the poverty line and on social benefits.

 

Reasons for Offer in Compromise

The MO DOR may be willing to accept offers in compromise for the following reasons:

• Doubt as to collectability — There is doubt that you will be able to pay the full tax due.
• Severe economic hardship — Paying the total tax due would cause you extreme financial hardship.
• Doubt as to liability — There is a significant doubt that you owe the tax.
• Exceptional circumstances — Exceptional circumstances, such as a natural disaster or a severe illness, prevent you from paying the tax in full.
• Low income — You cannot afford the tax in full due to having a low income.

The application process varies slightly depending on your situation.

How to Apply for an Offer in Compromise in Missouri

You can use these forms to apply for an offer in compromise in Missouri:

• Form MO-656 (Missouri Individual Income Tax Offer in Compromise)
• Form MO-656B (Missouri Business Tax Offer in Compromise)
• Form MO-656A (Exceptional Circumstances or Low-Income Offer in Compromise)

If you're applying based on doubt as to collectability or severe economic hardship, you should complete all of Form MO-656 or MO-656B. You only need to complete sections one and two if you're applying based on doubt as to liability or exceptional circumstances. Low-income applicants should complete Form MO-656A.

Requirements for an Offer in Compromise

You can apply for an offer in compromise on MO individual income tax and MO business tax — but not for unpaid MO sales tax. The state will only consider your request if you meet the following criteria:

• You have filed all required tax returns.
• You do not have an open bankruptcy proceeding.
• You are current on all estimated tax payments.
• You have included all the documents listed in the application checklist.

You do not need to meet these requirements if you're applying based on doubt as to liability. In that situation, you need to prove to the state that you don't owe the tax, but you can still qualify if you have unfiled returns or are in the midst of bankruptcy.

Filling Out the Missouri Offer-in-Compromise Application

The application for an offer in compromise in Missouri requests basic information about you or your business in section one. Then, in section two, you explain why you need an offer in compromise, and you make your offer. The remaining sections require you to provide in-depth details about your personal and/or business finances. You must list all of your assets, liabilities, income, and expenses. You also need to include proof of income, bank statements, and credit card statements from the last three months. The state may request additional documents if needed.

Making an Offer on Missouri Back Taxes

You can offer to make a one-time payment within 30 days. Or you can offer to do a short-term deferred payment plan of x amount per month over x number of months. If you send a down payment with your offer, the MO DOR will keep the payment. If the offer is accepted, the payment goes toward your offer. However, acceptance of the payment does not require the state to accept your offer. If your offer is not accepted, the payment reduces your balance.

Reasonable Collection Potential

Typically, the state will only accept an offer in compromise if it represents the account's reasonable collection potential (RCP). The RCP is the most amount of money the state is likely to collect on the account. The DOR looks at your assets, current income, and future income to determine your RCP and then subtracts basic living expenses.

For example, if you have non-exempt assets worth $20,000 and you only owe $5,000, the state is unlikely to give you an offer in compromise. However, if you can show that your assets and income are not enough to cover your full tax liability, the MO DOR may be willing to settle your tax liability.

Common Reasons for Rejections

The MO DOR will reject offers in compromise if any of the following situations apply:

• The offer is not fair or reasonable.
• The application is incomplete.
• You have not attached the required documents.
• You have not filed all required tax returns.
• You have a history of non-compliance.
• The tax is related to a crime to which you pleaded guilty.

The state automatically rejects any offers of $0. Again, if you are applying for an offer in compromise, you should try to offer an amount equal to the account's RCP.

Appealing a Rejected Offer in Compromise

If the MO DOR rejects your offer in compromise, the decision is final. You do not have the right to appeal a rejection.

Collection Actions After an Offer is Accepted

Once you pay an accepted offer in compromise, the state will release any tax liens or levies issued against you. However, the state has the right to take any state or federal tax refunds for tax periods through the tax year that the offer is accepted.

Here's an example. Say that you owe $10,000, and in 2021, the MO DOR agrees to accept $5,000. When you file your 2021 tax return, you receive a federal refund of $1,000 and a state refund of $300. The MO DOR will take both of those refunds. Note that the state will not take any amounts that exceed the amount settled.

Default After Acceptance

If the offer is accepted, you must remain compliant with state tax filing and payment requirements for the next three years. If you miss a filing or payment obligation, the Missouri DOR will retract the offer, and you will owe the original balance plus interest and minus any payments you made.

Alternatives to Offer in Compromise

If you cannot qualify for an offer in compromise, you may want to request a payment plan or look into other resolution options. A tax professional can help you negotiate an arrangement with the MO DOR.

Get Help With Missouri Back Taxes

Dealing with back taxes can be scary and frustrating. If you don't make arrangements on your tax bill, the MO DOR may seize your assets, garnish your wages, or take other collection actions.

Protect yourself, your finances, and your business by reaching out to a tax professional. At TaxCure, we have a directory of tax professionals from around the country — contact a Missouri tax pro for help today that has experience with Missouri DOR offer in compromise filings.

• Top Pros that help with Missouri DOR
• Top Pros that help with Missouri DOES
• Missouri Tax Relief Professionals
  • Missouri Enrolled Agents
    • Kansas City, Missouri Enrolled Agents
    • Salem, Missouri Enrolled Agents
    • Saint Louis, Missouri Enrolled Agents
  • Missouri CPAs

FAQs About Missouri Offer in Compromise

Can I get an offer in compromise on multiple Missouri taxes?

Yes, you can apply for an offer on multiple types of tax. You must list all of the taxes when you file your application. If you qualify, you'll be able to settle all of the taxes with a lump sum payment. Talk with a tax professional if you want help navigating your tax debt.

Should I send a down payment with my offer in compromise application?

The MO DOR does not require a down payment with your offer-in-compromise application. If you send a down payment, it will be applied to your offer, and if the DOR doesn't accept your offer, they'll still apply the payment to your tax debt. Acceptance of the payment does not mean that the DOR has accepted your offer, and you cannot get the down payment back once it's sent.

What is a short-term deferred payment plan?

This is when you make monthly payments on a MO offer in compromise. You must note the amount of the monthly payment, the number of months you want to make payments, and the date of your payments. The DOR reviews these requests on a case-by-case basis.

Can I apply for an offer in compromise if I owe taxes due to an audit?

Yes, if you incur a tax liability due to a Missouri tax audit, you can apply for an offer in compromise. However, you still need to meet the required financial criteria. If you disagree with the tax liability and have no more appeal options, a tax professional may be able to help you apply based on doubt as to liability, but that depends on the situation.

Guide to Setting up Missouri Tax Payment Plan

The Missouri Department of Revenue (DOR) offers payment plans to qualifying taxpayers who cannot afford to pay their personal or business tax bills in full. Taxpayers get behind for all kinds of reasons, including filing and not paying, having the DOR adjust their return due to a math error or for another reason, or because they incurred a tax liability during a personal or business tax audit. If you owe back taxes to the DOR, here is what you need to know about installment plans.

Key takeaways

• The MO DOR lets qualifying taxpayers set up payments on back taxes for up to 24 months.
• You may qualify for longer payment plans if you provide the DOR with financial details.
• Payment plans may apply to individual income or business taxes.
• Setting up payments stops the DOR from pursuing unwanted collection actions, but interest will continue to accrue, and the DOR will take tax refunds.
• Work with a Missouri tax pro to set up payments or pursue other options.

Benefits of a Tax Payment Plan

A tax payment plan lets you pay off your Missouri tax liability in installments. For most taxpayers, this is the easiest resolution option, but if you don't qualify, there are other options available. Benefits include:

• Easy online application — if you can pay off the taxes in 24 months, you can set up payments online.
• Stop collection actions — the DOR will not levy bank accounts or garnish wages while you're making payments.
• Spreading out payments over time — you don't have to pay in a lump sum; instead, you can defer payments.

 

Payment Plans on Missouri Back Taxes

The MO DOR offers payment plans for individual income tax, delinquent sales tax, Missouri business tax, and other taxes administered by the Department. Plans have a 24-month term, and you may be required to make a down payment. For example, if you owe $2,800, the state may be willing to accept a $400 down payment followed by 24 monthly payments of $200. Note these are just sample numbers.

You may be able to negotiate a longer payment plan in some situations, but the MO DOR does not advertise longer terms on its website. You will need to contact the DOR directly if you need more than 24 months. To get more time, you usually need to submit extensive financial information.

How to Apply for a Tax Payment Plan in Missouri

You can apply for a payment plan by calling the MO DOR at (573) 751-7200. Or, you can request an Internet Installment Agreement online. Ensure you have your Social Security Number and the PIN from your last notice if you want to complete the online application.

Alternatively, you can apply using Form 4338 (Individual Income Tax Payment Installment Request). Form 4338 is a concise one-page form. It requires your name, Social Security Number, and contact information. Then, you note the tax due, your downpayment, and the amount you want to pay every month.

Making Payments on Missouri Back Taxes

The state generally requires you to make payments with a direct debit from your bank account. If you submit the paper application, you must include your checking account details so the payment plan can begin immediately if accepted.

You can also make payments with a debit or credit card online. The MO DOR charges a convenience fee between $1.25 and $2.15 for payments under $100. If your payment is $100 or more, the processing fee is 2.15%.

Interest and Penalties on Payment Plans

Once you set up a payment plan, the state will not assess additional penalties on your account. Typically, the state's penalties are 5% of the balance for unfiled returns, up to 25% of the balance. The state also assesses a one-time 5% penalty for paying taxes late. Interest will continue to accrue on your account while you make payments. The MO DOR adjusts its interest rate annually, and as of 2026, the interest rate is 7%.

Additional Documentation Required for a Payment Plan

Generally, the state does not require any additional documentation if you apply for a payment plan. Again, however, if you need more than 24 months to pay off your balance, you may be required to make full financial disclosure. In this case, you should be prepared to provide proof of income and bank statements for the last three months and any other information requested by the MO DOR.

Conditions for a Missouri Payment Plan

You can only receive a payment plan if you are current on all filing obligations. If you have unfiled returns, you can file them online. Or, you can submit your unfiled returns with Form 4338. If the state has already filed a tax lien against you, the lien will generally stay in place until you have completed the payment plan and paid the tax liability in full. However, if you set up a payment plan with direct debit before the state issues a tax lien, you may be able to avoid it.

In most cases, the state will not accept your payment plan if you have a history of defaulting on payment plans. Typically, you will not get a payment plan if you have defaulted on more than one agreement in the past.

Defaulting on Your Payment Plan

If you miss a payment, your Missouri tax payment plan may go into default. You will also go into default if you fail to file or pay a current tax liability. If your payment plan goes into default, the MO DOR can start collection actions against you.

Get Help With Missouri Back Taxes

If you owe back taxes in Missouri, you may want to reach out to a tax professional. They can help you identify the best resolution method for your situation, and they can negotiate with the MO DOR on your behalf. To learn more, contact a Missouri tax pro today.

• Top Pros that help with Missouri DOR
• Top Pros that help with Missouri DOES
• Missouri Tax Relief Professionals
  • Missouri Enrolled Agents
    • Kansas City, Missouri Enrolled Agents
    • Salem, Missouri Enrolled Agents
    • Saint Louis, Missouri Enrolled Agents
  • Missouri CPAs

FAQs about Missouri Tax Payment Plans

What if I can't afford a payment plan on my Missouri back taxes?

Consider looking into an offer in compromise. That is when the DOR agrees to settle your tax liability for less than owed. The application process is very involved, and you must prove that your offer is the most you can afford to pay. There's a shorter application for taxpayers under a certain income threshold.

What is a stipulated payment plan in Missouri?

A stipulated payment plan is when the DOR reviews your plan closely to make sure it meets the Department's requirements. Typically, if the DOR has already filed a tax lien or revoked your sales tax license, you can only qualify for a stipulated payment plan. That requires a 25% down payment and only allows payments for up to 12 months.

Will the Missouri DOR file a tax lien if I set up a payment plan?

If you set up payments before the DOR files a tax lien, they may not file one against you. After a tax lien is filed, you'll have to pay off the balance in full to get the tax lien released and withdrawn from the public record.

Missouri Tax Resolution Options & Consequences of Owing Taxes

The Missouri Department of Revenue (DOR) collects state income tax, corporate and franchise tax, sales and use tax, and other personal and business taxes. If you don't pay your state taxes, the DOR can issue liens, seize assets, garnish wages or bank accounts, or take other collection actions. The state may also send your account to a collection agency or a prosecuting attorney.

 This guide outlines the state's tax resolution options and then looks at what can happen if you don't pay your taxes in Missouri.

Key takeaways

• The Missouri DOR collects individual income tax, corporate income tax, withholding tax, sales and use tax, and special industry taxes.
• Unfiled returns lead to penalties and state tax assessments.
• Unpaid taxes lead to penalties, tax liens, and bank or wage garnishments.
• The DOR may audit any returns filed with the agency.
• To find help with Missouri tax problems, use TaxCure to find a professional with the right experience. 

Tax Resolution Options in Missouri

If you have unpaid taxes in Missouri, you should try to make arrangements before the state starts collection actions on your account. The state offers several options for taxpayers with outstanding liabilities.

Payment Plans on Missouri Tax Liabilities

The Missouri DOR offers payment plans to individuals and businesses that cannot pay their taxes in full. Missouri DOR calls their payment plans Internet Installment Agreements. Missouri's tax payment plans allow you to pay off your tax bill in monthly installments over 24 months. You can sign up online or by calling the MO DOR at (573) 751-7200. Make sure you have your Social Security Number and the PIN from your notice.

Missouri Offer in Compromise 

An offer in compromise lets you settle your tax bill for less than you owe. Missouri will accept offers in compromise on some tax liabilities but only if the amount offered reflects the account's reasonable collection potential (RCP).

RCP refers to the most money the state is likely to be able to collect. The state looks at all your assets, income, and future income, and then it makes a small number of allowances for living expenses. Obtaining an offer in compromise is a long and detailed process, and you may want to work with a tax professional. The state also offers a short offer-in-compromise application if your income is 125% of the federal poverty level. You may also use the short form if your income is 200% of the federal poverty level and you're on a fixed income, receive public assistance, or have significant medical issues.

Innocent Spouse Relief

The MO DOR does offer some relief for people who filed returns jointly, but it does not refer to the program as innocent spouse relief. If you want to split the unpaid tax liability on a jointly filed state tax return, you need to contact the DOR directly.

Hardship Status

If the MO DOR garnishes your wages or your bank account, you may apply for hardship status to get the garnishment stopped or reduced. To apply, you need to complete Internal Revenue Service Form 433-A for individuals or Form 433-B for businesses and include three months' worth of financial documents.

Penalty Abatement

Tax penalties in Missouri can be significant. State law allows the DOR to add a 100% penalty for employers who willfully attempt to evade income tax or sales or use tax. Late filing penalties are 5% per month, up to 25% and late payment penalties are 5% — together, these penalties can get up to 30% of the tax liability. Unfortunately, the state does not advertise any penalty abatement programs, but you can request penalty relief if you have reasonable cause.

You may be able to have penalties abated through the offer-in-compromise program, or a tax professional may be able to help you get penalties removed from your account.

Appeals Process for Missouri State Taxes

If the state adjusts your tax bill, you will receive an Assessment of Unpaid Tax. You can dispute the amount due by filing an official protest within 60 days. You have 150 days if you are outside of the United States. The state will review your account and issue a Final Determination. At that point, you have 30 days to file an appeal with the Administrative Hearing Commission (AHC). If you disagree with the AHC's determination, you have another 30 days to appeal your case through the state court system.

Missouri Tax Amnesty Program

At the time of writing, Missouri does not have an active state tax amnesty program. The state last offered tax amnesty in Fall 2015. Amnesty programs allow taxpayers to come forward and pay unpaid taxes without facing penalties or prosecution.

Missouri DOR Voluntary Disclosure Program

The MO DOR offers a voluntary disclosure program. If the MO DOR has not contacted you about your unfiled taxes, you may be able to use this program to file and pay. You can apply using Form 5310 (Application for Voluntary Disclosure Agreement).

If you make a voluntary disclosure, the state will not assess penalties on your account, and the MO DOR will only consider the last four years. However, if you have collected taxes from customers (sales tax) or employees' paychecks (withholding tax) and not remitted them, the state will look back further than four years. Additionally, you cannot use this program if you have filed a return but underreported taxes.

Consequences of Back Taxes in Missouri

The MO DOR uses a range of collection actions to deal with unpaid taxes, and the state will continue to pursue the tax liability until it is paid in full. Even if you anticipate a tax refund that could cover your outstanding tax liability, the state will still not pause collection actions.

Here are some of the measures Missouri uses to collect unpaid tax bills.

Missouri Department of Revenue Contact Information

• General Inquiries (Individuals and Businesses): 573-751-3505
• Business Taxes: 573-751-5860
• Collections: 573-751-3505
• Website: Missouri Department of Revenue

Missouri Tax Liens

A tax lien is a legal claim to your property. The MO DOR can attach liens to your real or personal property if you have unpaid state taxes. A lien can stop you from selling or transferring property until you have resolved the liability. If you sell property with a lien attached, the proceeds go to the lienholder.

To get the lien removed immediately, you can pay the tax in full with a cashier's check, money order, guaranteed bank check, or an escrow check. If you pay by any other method, the state will take six to eight weeks to remove the lien.

Garnishment for Tax Liabilities in Missouri

In Missouri, the state can garnish your wages or bank accounts for unpaid taxes. If the courts order a garnishment, your financial institution or employer will have to send your money to the DOR.

The MO DOR is legally allowed to garnish up to 100% of the funds in your bank account and your wages. However, in most cases, the state only garnishes 25% of your net pay, which is your pay after deductions such as taxes, healthcare premiums, and retirement contributions.

Tax Penalties

The MO DOR assesses a 5% penalty per month up to 25% of the unpaid balance if you don't file your tax return on time. The state also charges a one-time 5% penalty if you pay your taxes late. MO DOR assesses both penalties the first day you are late.

For example, if you file your return and pay your tax a day late, you will face both a 5% failure-to-file penalty and a 5% failure-to-pay penalty. On a $10,000 tax bill, these penalties are $1000. In contrast, if you pay and file your return six months late, you face the maximum failure-to-file penalty of 25% plus a 5% failure-to-pay penalty. This brings your penalty to $3000 on a $10,000 tax bill.

The MO DOR also assesses simple interest on your account. As of 2026, the interest rate is 7%. You can use the state's calculator to determine the interest and penalties on your outstanding balance.

Other Tax Collection Enforcement Actions

If you have unpaid taxes in Missouri, the state can claim your state and federal tax refunds. If your business owes sales tax, use tax, corporate income tax, or withholding tax, the state may take your personal income tax refund to cover these liabilities.

Notices for Unpaid Taxes in Missouri

If you have unpaid taxes in Missouri, the state will send the following notices:

• Balance Due, Adjustment, or Non-Filer Notice — You will receive one of these three notices depending on if you owe a balance, had your return adjusted, or failed to file. 
• Assessment of Unpaid Tax —The state will send this assessment if you don't respond to the first notice. You have 60 days to appeal before your tax determination becomes final. 
• 10-Day Demand Notice — You have 10 days to respond before the state revokes your sales tax permit for non-payment. 
• Notice of Intent to Offset — This notice says that the state has taken your state refund to offset liabilities from other state or federal agencies.
• Administrative Judgment or Lien — The MO DOR is issuing a lien against your assets. 
• Garnishment — The state plans to garnish the funds in your bank account or from your wages.
• Referral to Prosecuting Attorney or Collection Agency — The state is referring your account to a prosecuting attorney or a collection agency. 

If you owe business taxes in Missouri, you will also receive a Revocation of Sales Tax License Notice and a Bond Forfeited Notice. These will come after the garnishment and before the referral to the collection agency. The MO DOR can also revoke your sales tax permit for 

Statute of Limitations on Missouri Tax Liabilities

The state has three years to assess additional tax. The clock starts on the later of the date you filed the return or its due date. However, if the IRS adjusts your federal return, you are supposed to adjust your state return within 90 days. If you don't, the state can make an assessment after the three-year time limit. Additionally, if you fail to report more than 25% of your income, the MO DOR has up to six years to bill you.

If you don't file or file a fraudulent return, there is no statute of limitations. The MO DOR can bill you for the tax, interest, and penalties at any time. They may also pursue criminal charges against you.

Missouri Tax Audits

The Missouri Department of Revenue can audit any tax return filed with the agency. If the DOR selects your business tax returns for audit, they will likely come to your business, but some audits are conducted electronically or at the auditor's office. If you incur a tax liability after an audit, you'll generally also face interest and penalties, but you do have appeal rights. Audits can be stressful, which is why the right help is critical. 

Get Help With Unpaid Taxes in Missouri

Dealing with unpaid taxes in Missouri can be time-consuming, complicated, and frustrating. To get the best results possible in your situation, you should reach out to a tax professional with experience with the MO DOR.

At TaxCure, we have a directory of quality tax professionals from around the country — contact a Missouri tax pro to get help today. Our unique search and filters will help ensure you find the best professional to help with your unique tax problem. Also, see our list below of top-rated tax professionals in Missouri & by designation type.

• Top Pros that help with Missouri DOR
• Top Pros that help with Missouri DOES
• Missouri Tax Relief Professionals
  • Missouri Enrolled Agents
    • Kansas City, Missouri Enrolled Agents
    • Salem, Missouri Enrolled Agents
    • Saint Louis, Missouri Enrolled Agents
  • Missouri CPAs

Missouri Tax Brackets, Deductions, Deadlines and Resources

Before we get into the details of late taxes, let’s take a moment to discuss the tax brackets, deductions, deadlines and additional resources to help you better understand the overall landscape of Missouri taxes.

Missouri Tax Brackets

Missouri uses a progressive tax system for individual income taxes, meaning your tax rate increases as income rises. As of tax year 2026, Missouri's tax brackets are structured as follows:

• $0 to $1313: $0 tax
• Over $1313 to $2626: 2.00% of the amount over $1313
• Over $2626 to $3939: $26 plus 2.50% of the amount over $2626
• Over $3939 to $5252: $59 plus 3.00% of the amount over $3939
• Over $5252 to $6565: $98 plus 3.50% of the amount over $5252
• Over $6565 to $7878: $144 plus 4.00% of the amount over $6565
• Over $7878 to $9191: $197 plus 4.50% of the amount over $7878
• Over $9191: $256 plus 4.95% of the amount over $9191

These brackets apply to both single and married filers, although the income thresholds may be updated annually for inflation.

Deductions and Credits

Missouri offers several deductions and credits to reduce your taxable income or tax liability:

• Standard Deduction: Similar to the federal standard deduction, Missouri allows a deduction based on your filing status, helping to lower your taxable income.
• Personal Exemption: Taxpayers can claim a personal exemption for themselves and dependents, further reducing taxable income.
• Property Tax Credit: Also known as the "Circuit Breaker" credit, this is available to certain seniors and disabled individuals based on property taxes or rent paid.
• Missouri College Savings Plan (MOST) Deduction: Contributions to a MOST 529 plan are deductible up to certain limits, encouraging education savings.

There are also a handful of new tax deductions for 2024, including:

• Business Income Tax Deduction (Section 143.022): Enhancement of the deduction has been increased to 20% for the 2023 tax year. Eligibility Expansion now includes income reported by farmers on the IRS Schedule F and Form 4835, in addition to the existing eligibility for income reported on IRS Schedule C and Part II of Schedule E for partnerships and S corporations.
• Employee Stock Ownership Income Tax Deduction Extension (Section 143.114): Program Restart of the Employee Stock-Ownership Program (ESOP) deduction has been reinstated for all tax years starting January 1, 2023, encouraging employee ownership through stock options.
• Federal Broadband Grants’ Income Tax Deduction (Section 143.121) has a new deduction that Offers a 100% subtraction from federal adjusted gross income for federal grant money received for broadband internet expansion in underserved areas, applicable to grants received on or after August 28, 2023.
• Missouri Farmland Sold to a Beginning Farmer (Section 143.121) has a capital gains deduction for Farmers selling farmland or receiving income from rent, lease, or crop sharing agreements with beginning farmers can deduct a percentage of their capital gains or up to $25,000, for transactions occurring on or after August 28, 2023.
• Certification Requirement: A certification from the Missouri Department of Agriculture is required to qualify.

Tax Credits

You may also be qualified for a number of tax credits, with some of those including:

• Show MO Act Tax Credit Program (FPC) (Section 135.750) has a program revival and modification tax credit. This tax credit, aimed at motion media and series production projects, has been restarted and renamed the Show MO Act, with eligibility starting from January 1, 2023.
• Credit Details: Qualifying taxpayers can receive credits based on actual production expenses, with an annual cap of $16 million divided equally between motion media and series production projects.
• Intern & Apprentice Recruitment Tax Credit (Section 135.457) has a new program. Starting January 1, 2024, this program offers a $1,500 tax credit per intern or apprentice, subject to qualifications and an annual cap of $1 million.
• Ethanol Retailer and Distributor Tax Credit Program (Section 135.772) has a credit for ethanol sales. Retailers or distributors selling qualified ethanol blend fuels can receive a $0.05 per gallon credit, starting January 1, 2023, with a program cap of $5 million.
• Biodiesel Retailer’s Tax Credit Changes (Section 135.775) has enhanced credits. Retail dealers and distributors selling biodiesel blends can claim credits of $0.02 per gallon for blends of 5-10% and $0.05 per gallon for blends of 10-20%, starting January 1, 2023, with a cap of $16 million.
• Biodiesel Producer’s Tax Credit Program (Section 135.778) has support for producers. Biodiesel producers in Missouri can claim a $0.02 per gallon credit for fuel produced, applicable from January 1, 2023, with a first-come, first-serve cap of $5.5 million.

You may be eligible for any number of these tax credits, but to be sure, speaking to a tax professional is the best way to determine which tax credits you qualify for.

Filing Deadlines

The deadline for filing Missouri state income tax returns is typically April 15th, coinciding with the federal tax deadline. If April 15th falls on a weekend or holiday, the deadline is extended to the next business day. Taxpayers who request a federal extension automatically receive a Missouri extension, extending the filing deadline to October 15th.

Relevant Resources

Aside from consulting with Missouri tax professionals for help with back taxes, taxpayers have access to a few additional resources for assistance:

• Missouri Department of Revenue (DOR) Website: The official DOR website provides tax forms, instructions, and updates on tax laws and policies.
• Online Tax Services: The DOR website allows taxpayers to file returns and make payments online.
• Missouri Legal Aid: For those who qualify, Missouri Legal Services is a collection of free legal advice services on tax matters, including disputes with the DOR.

Missouri Filing Statuses and Income Level Rules

Missouri's tax system is built around different filing statuses, each with its own set of rules and thresholds. Understanding these statuses can help you accurately determine your tax liabilities and take advantage of any available deductions or credits. Here's a breakdown of the rules for different filing statuses and income levels in Missouri.

Single Filers

• Taxable Income: Single filers are subject to Missouri's progressive tax rates, starting from 0% up to the maximum rate based on their taxable income.
• Deductions and Credits: Eligible for standard deduction, personal exemptions, and may qualify for other state-specific deductions and credits based on income and personal circumstances.

Married Filing Jointly

• Combined Income: Couples who choose to file jointly will have their incomes combined for tax purposes, which could potentially place them in a higher tax bracket but also allows for a higher standard deduction.
• Deductions and Credits: Qualify for a doubled standard deduction compared to single filers, along with double personal exemptions. Other deductions and credits may be more beneficial when filing jointly, depending on the couple's combined income and expenses.

Married Filing Separately

• Separate Taxable Incomes: Each spouse reports their own income, deductions, and credits separately. This status may benefit couples who wish to keep their finances separate or when one spouse has significant medical expenses or miscellaneous deductions.
• Deductions and Credits: Each spouse may claim a standard deduction and personal exemptions for themselves. However, certain credits and deductions may be limited or unavailable compared to filing jointly.

Head of Household

• Qualifying Individuals: To file as head of household, you must be unmarried or considered unmarried on the last day of the tax year, have paid more than half the cost of keeping up a home for the year, and have a qualifying person living with you for more than half the year.
• Tax Benefits: Offers a higher standard deduction and lower tax rates compared to single filers. This status is beneficial for single parents or individuals supporting other dependents.

Qualifying Widow(er) with Dependent Child

• Income and Tax Rates: For two years following the year of their spouse's death, qualifying widow(er)s can file as married filing jointly, allowing them to benefit from the same tax rates and deductions as couples filing jointly.
• Eligibility: Must have a dependent child and not remarry within the tax year to qualify for this status.

While most taxpayers, if applicable, will see lower taxes when filing jointly, it’s best to speak to a tax professional to best determine your optimal method of resolving back taxes.

FAQs on Missouri Taxes

How do you pay Missouri taxes?

You can pay individual taxes online on the DOR's website with a check or credit/debit card for a fee, or you can mail in a check or money order. You can also pay business taxes online, whether or not you have an online business account. You can also mail in most business taxes, unless you're a high-volume payer with an online payment obligation.

What if you have unfiled Missouri tax returns?

Find a licensed tax pro to help you file the unfiled returns. You will be subject to interest and penalties based on the liability owed and backdated to the original due date. However, if you address the situation before the DOR contacts you, you may be able to use the Voluntary Disclosure Program, which lets you catch up while minimizing penalties and reducing your lookback period.

Does Missouri have a sales tax holiday?

Yes, every year from the first Friday of August to the following Sunday, the state offers a sales tax holiday on clothing, computers, school supplies, and certain other items. If you're a retailer, you should not collect sales tax on these items, and when you file your sales tax return, you should report the sales as exempt and not remit sales tax to the state.

Texas Tax Resolution Options and Consequences of Back Taxes

Texas doesn't have a state income tax, but the Texas Comptroller's office collects 60 different taxes, fees, and assessments, including local sales tax, state sales tax, franchise tax, and a mixed beverage tax gross receipts tax. Additionally, property owners in Texas must pay property taxes to the local taxing authorities in their areas.

This guide explains what to expect if you have back taxes in Texas, and it outlines your resolution options for unpaid taxes or unfiled returns.

Contact the Texas Comptroller's Office:

• Individual Taxes: 888-334-4112
• Business Taxes: 888-334-4112
• General Inquiries: 888-334-4112
• Collection's Number: 800-252-8880
• Website: https://comptroller.texas.gov/

Resolution Options for People Who Owe Texas Back Taxes

The state offers a few different options for people who have unpaid taxes in Texas. If you can't afford to pay your tax bill in full, you may qualify for one of these programs.

Payment Plans for Texas Back Taxes

Texas offers payment plans on back taxes on a case-by-case basis. Typically, the state only approves payment plans if paying the tax in full would place an undue hardship on the taxpayer. You can request a payment plan by contacting your local Comptroller's field office.

Collection actions will continue on your account even if you set up a payment plan. The state will continue to send billing notices, a lien can still be filed, and state warrants will be placed on hold until you pay your tax bill in full, which means that you cannot receive any payments from the state.

Payment Plans for Delinquent Property Tax in Texas

If you have unpaid property taxes, you may qualify to set up a payment plan to make installment payments over 36 months. Local taxing authorities grant payment plans at their discretion. They are only required to give you this option if your property is a residence homestead.

Offer in Compromise on Texas Back Taxes

An offer in compromise is when the state agrees to let you pay off your tax bill for less than you owe, and Texas does not have this option available for taxpayers. However, the state does have a penalty abatement program.

Removing penalties from your account can help lower your total tax liability.

Innocent Spouse Relief

You cannot apply for innocent spouse relief on Texas back taxes. However, if you owe federal income taxes exclusively due to your spouse, you may qualify for innocent spouse relief on the federal level.

Hardship Status

Texas does not offer a formal hardship program for people who cannot afford their state back taxes. However, the state occasionally offers relief programs. For example, the Comptroller offered payment plans to businesses that could not pay their sales tax bills due to the Covid-19 pandemic.

If you cannot afford to pay your tax bill, you should reach out to the state. The Comptroller's office may be able to provide you with relief in extreme situations.

Voluntary Disclosure Agreements in Texas

The voluntary Disclosure Program allows businesses and individuals with unfiled Texas returns to avoid penalties in exchange for coming forward voluntarily. To qualify, you must not be under audit, and you must come forward before the state contacts you. You may need to meet other eligibility criteria, but a tax pro can help you figure out the details. 

Penalty Abatement/Penalty Waivers

You can request a waiver of penalties due to unpaid or unfiled Texas taxes. Use Form 89-224 if your penalties are due to a late report and/or payment, and use Form 89-225 if your penalties are due to failure to file and/or to pay electronically.

You can mail these forms to the Texas Comptroller, or you can send them to the state over email. Alternatively, you can request a penalty waiver by writing to the state, but you need to include all the details requested on the state's official penalty waiver request forms.

Appeals Process

If the Comptroller audits your sales tax return, franchise tax return, or any other type of tax report, and you disagree with their position, you have the right to request a reconciliation conference with the audit supervisor. You can also request guidance from the Tax Policy Division.

If you and the auditor cannot come to an agreement during reconciliation, you may request an Independent Audit Review Conference (IARC). An IARC is an informational meeting between you, the auditor, and an Independent Audit Reviewer. You will receive a Texas Notification of Audit Results when the IARC decides on your case.

You can request a redetermination hearing if you disagree with the decision, but you must make your request on or before the final date on your notice. The final date is usually 60-days after the statement date on the notification, but if the state makes a jeopardy determination, the final date is 20 days after the determination date.

If you pay your balance plus penalties and interest in full, you have six months from the final date to request a refund. 

Amnesty Program

As of 2021, Texas does not have a current amnesty program for unpaid taxes. The state had a tax amnesty period from May 1st, 2018, to June 29th, 2018. During this period, eligible taxpayers could pay their back taxes without worrying about criminal persecution. 

Enforcement Actions for Unpaid Texas Taxes

Typically, if you refuse to pay your state taxes, the state will require you to post a security bond. Then, the state will file a tax lien on your property, freeze or seize your non-exempt assets, and suspend your permits or licenses. The state may also file criminal charges against you.

Here is a breakdown of the back tax collection activities used in Texas. 

Tax Liens

Texas state law requires the state to secure its interest in back taxes through a lien. A tax lien is when the state makes a legal claim against your property for back taxes, penalties, and interest.

A tax lien automatically attaches to your property on January 1st every year in relation to property taxes. If you don't pay your property taxes, the taxing authority has the right to foreclose, seize the property, and auction it off to pay the tax bill.

Tax Levy

The State of Texas may seize your assets if you have unpaid taxes. The Comptroller's office has the right to seize and sell any of your non-exempt assets to cover your tax bill. Exempt assets include your homestead, some personal belongings, and a vehicle of a reasonable value.

Penalties and Interest on Delinquent Tax in Texas

Texas applies a $50 penalty for every tax report that is filed late. The penalty applies the day after the due date. You also face a 5% penalty if the tax is up to 30 days late or a 10% penalty if the payment is more than 30 days late.

An additional 10% penalty applies if you pay the tax after the date noted on the Notice of Tax/Fee Due. Paying late brings your total penalty to 20%.

For example, if you file your sales tax report on time, but you don't pay until two weeks later, your penalty will be $100 on a $2,000 tax bill. If you don't pay for over a month, your penalty will be $200. If you pay after the Notice of Tax Due date, your penalty will be $400.

Texas assesses interest starting on the 61st day after your due date. The interest rate is the prime rate plus 1%, and it adjusts annually.

Involuntary Termination of Entity (LLC, LP, Corporation, Nonprofit)

Texas Secretary of State can involuntarily terminate your entity if you fail to meet the requirements of filing annual reports, paying the Texas franchise fee, maintaining a registered agent, or paying SOS filing fees. This means that you may become liable for business debts and lawsuits, won't be able to open business bank accounts, and will not be able to take out loans. Sometimes you will not be able to operate your business. You will need to comply with the requirements in order to reinstate your Texas business.

Penalties for Late Unemployment Taxes

Most employers in Texas must pay unemployment taxes to the Texas Workforce Commission every calendar quarter. If you're late, you may face a penalty of up to 37.5% of the unpaid unemployment tax amount. 

Penalties for Past Due International Fuels Tax Agreement (IFTA) Taxes

IFTA taxes have different penalties than other Texas state taxes. For IFTA tax, the minimum penalty is $50 or 10% of your total tax liability, whichever is greater. Interest begins to accrue the first day your bill is late, and it accrues monthly. As of 2021, the annual interest rate on IFTA is 5%.

Penalties and Interest on Delinquent Property Taxes

Typically, property tax bills are mailed in October, and they are due January 31st. If you pay on or after February 1st, your property tax bill will incur penalties and interest. Note that if your tax authority mails your bill later, it is not late until 21 days after the postmark date.

Late property tax bills in Texas incur a 6% penalty on February 1st, and they incur an additional 1% penalty each month until July 1st. Then, the penalty becomes 12% of the balance. If the taxing authority hires a private attorney to collect the tax, they can charge an additional penalty of up to 20% of the balance.

For example, if your unpaid property tax is $2,000, your penalty will be $240 on July 1st. If the taxing authority hires an attorney to collect your unpaid taxes, they may add a penalty of up to $400. 

On top of penalties, you also face interest of 1% of the balance per month. There is no maximum amount on the interest. To continue with the above example, by July 1st, your account balance would have incurred interest of 6% or $120 on top of the penalties. 

Permit and License Suspensions for Unpaid Taxes in Texas

If you don't report or file taxes, the Comptroller's office will conduct a hearing to decide whether or not to suspend any permits or licenses issued by the agency. If you don't appear at the hearing, the Comptroller's office will suspend your licenses and permits.

You can avoid the hearing by filing and paying your back taxes or posting a security bond required by the state.

Common Notices

The Comptroller's office will send you an estimated billing if you don't file a required tax report. The billing notice outlines penalties, interest, and collection actions, and it explains what to do if you disagree.

If you don't file, pay tax, or post a security bond, you may receive a notice of hearing to cancel or suspend your licenses or permits. You should also receive notices before the state takes any collection actions on your account.

In some cases, the Comptroller's office may hand the account to the Attorney General. If you don't respond to notices from the Texa Attorney General's Office, you can face civil actions.

Statute of Limitations on Tax Collection in Texas

In Texas, the Comptroller has four years from the date the tax is due to assess a tax liability. However, this statute of limitations does not apply in the following situations:

• When the taxpayer fails to file a sales tax return.
• The taxpayer files a sales tax return with a gross error that underreports the tax due by at least 25%.
• When the taxpayer files a fake return with the intent to evade taxes.

The taxpayer and the Comptroller may agree in writing to extend the statute of limitations for up to 24 months. The limit is paused if a bankruptcy case is pending, between the date of a protest payment and the filing of a lawsuit, and while a redetermination or refund hearing is pending. The Comptroller's office only has three years from the date of a deficiency determination to seize assets.

Tax Audit in Texas

The Texas Comptroller has the right to audit your Texas state tax returns. The Comptroller may audit any return that you submit to the state, but in particular, the state tends to audit a lot of restaurants. Depending on the situation and your history of compliance, you may qualify to request a managed audit which is where your tax pro audits the records under the supervision of a state auditor. If you're dealing with a sales tax or mixed-beverage tax audit on your restaurant, you should look for a tax pro who has dedicated experience with that type of tax problem. 

Get Help With Unpaid Taxes in Texas

If you have unpaid taxes in Texas, a tax professional can help. They can look over your records and help you identify the best resolution option for your situation. Then, they can help you negotiate an arrangement with the state. To learn more, contact a Texas tax pro today. To browse top Texas professionals by license type, please navigate using the links below. Attorneys, enrolled agents, and CPAs can help resolve problems with the Texas Comptroller and IRS issues.

• Texas Tax Relief Professionals
  • Texas Tax Attorneys
    • Dallas, Texas Tax Attorneys
    • Houston, Texas Tax Attorneys
    • San Antonio, Texas Tax Attorneys
  • Texas CPAs
    • Houston, Texas CPAs
  • Texas Enrolled Agents
    • Austin, Texas Enrolled Agents
    • Dallas, Texas Enrolled Agents
    • El Paso, Texas Enrolled Agents
    • Fort Worth, Texas Enrolled Agents
    • Houston, Texas Enrolled Agents
    • San Antonio, Texas Enrolled Agents
  • Corpus Christi, Texas Tax Professionals
  • Dallas, Texas Tax Professionals
  • Houston, Texas Tax Professionals
  • Texas COPA Tax Professionals
  • Texas Work Force Commission Tax Professionals

Disclaimer:  The content on this website is for educational purposes only. It does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Guide to Texas Penalty Waiver (Abatement) & Form 89-224, 89-225

The Texas Comptroller allows taxpayers the right to remove or reduce penalties and interest through a penalty waiver. Penalties and/or interest may be abated if you have a valid reason for filing or paying your tax report late.

How to Qualify for a Penalty Waiver in Texas

To qualify for a penalty waiver in Texas, you or your business must meet the following criteria:

• You are current with all state tax filing and payment obligations.
• You haven't received a waiver in the last two years — exceptions may be granted if you have extenuating circumstances.
• You are within the four-year statute of limitations from the date that the tax became due.
• The Comptroller's office has not frozen your bank account or seized your assets. 
• Your tax bill has not been outsourced to a third-party collector
• Your business doesn't have an inactive registration with the Texas Secretary of State. 

You must pay the underlying tax to request a penalty waiver. If you also paid the penalties, you will get a refund if your waiver is accepted.

How to Apply for a Penalty Waiver in Texas

You can apply for a penalty waiver using Form 89-224 (Request for Waiver of Penalty for Late Report and/or Payment) or Form 89-225 (Request for Waiver of Penalty for Failure to File and/or Pay Electronically). These forms are available on the Texas Comptroller's website. 

Both forms require contact details for you or your business. You also must list the tax type, filing type (yearly, quarterly, or monthly), the last month of the reporting period, the year the report was due, and the amount of the penalty you want to be waived. Then, you need to explain why your payment or report was late and what you have done to correct the issue.

Once you have completed the forms, you can mail or email them to the Comptroller of Public Accounts. Alternatively, you can write a letter, but you need to include all the details noted on the above forms.

Reporting Periods Eligible for Penalty Waivers

The Texas Comptroller's office limits the number of reporting periods for which you can claim a penalty waiver. Here are the maximum number of eligible periods based on how often you are required to report:

• One annual
• Two quarterly
• Six monthly

If you have penalties for more periods, a Voluntary Disclosure Agreement may help you. Voluntary disclosure is when you freely come forward about back taxes you owe, and in return, the state agrees to only look back four years and to remove penalties when you pay the tax in full. You can only qualify for a voluntary disclosure if the state has not previously contacted you about the tax.

Penalty Waivers on Audits

If the state does an audit, it treats your account as if you have requested a penalty waiver. If you are subject to an audit, you do not need to request a penalty waiver. When you receive your determination, you will also find out if your penalties have been waived.

If you don't agree with the determination, you can request a redetermination hearing and go through the appeals process.

Waivers on Interest

In most cases, Texas will only waive penalties, but you can request an interest waiver as well. The state will generally only waive interest if any of the following apply:

• An undue delay caused by comptroller personnel
• Poor advice provided by the comptroller
• A natural disaster

These rules apply if you apply for a penalty waiver on your own or if the state considers providing you with a waiver during an audit.

Appealing a Penalty Waiver Request

If your penalty waiver request is denied, you have 10 days to request an administrative appeal. You must appeal in writing — simply explain why you disagree and include any documents to support your case.

If the administrative appeal is denied, you can take additional steps. The state spells out your options in its denial letter.

Penalty Waivers for Property Taxes

You can request a waiver up to the 81st day after the delinquency date if you incur penalties due to a late property tax payment. Typically, the taxing authority has the discretion to accept or deny your request at its discretion, but it must waive penalties if one of the following situations apply:

• The taxing authority caused the delinquency.
• A qualifying religious organization acquired the property in the last year.
• You tried to mail your payment on time, but the address changed since the last time you paid property taxes. 
• Your mortgage copy doesn't keep your property tax payments in an escrow account, and they failed to send a copy of the property tax bill to you. 
• You provided the taxing authority with your new address before September 1, but the agency sent the bill to the wrong address. 
• Your electronic fund's transfer failed. 
• The property was previously omitted from the appraisal roll. 
• The carrier put the wrong postmark on your envelope, making your payment appear late. 

Get Help With Penalty Waivers in Texas

If you're struggling with unpaid taxes in Texas, you should reach out to a tax professional. They have experience dealing with the Texas Comptroller of Public Accounts, the Texas Department of Labor, and the Texas Workforce Commission, and they can help you negotiate with these agencies. To get help, contact a tax professional with experience in Texas penalty waivers today.

Disclaimer:  The content on this website is for educational purposes only. It does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Payment Plans on Texas Back Taxes

If you owe back taxes in Texas, you may be able to qualify for a payment plan to pay off your tax bill in installments over time. Unfortunately, the Comptroller's office doesn't publish clear guidelines on the payment plans it offers. Instead, it considers payment plans on a case-by-case basis. Here's what you need to know.

How to Apply for a Tax Payment Plan in Texas

To apply for a tax payment plan, you must contact the local Comptroller's field office in your area. There is no standard application, and the field office may ask for a variety of information.

Typically, you have to prove that paying the tax in full would be an undue hardship on you. You may also need to demonstrate a commitment to avoid getting behind on your taxes in the future. 

Penalties and Interest on Payment Plans

In Texas, interest begins accruing on taxes the 61st day after they are due. Interest will continue to accrue on your account if you set up a payment plan. The Comptroller's office adjusts the rate annually, and it is the prime rate plus one percent.

You may also face penalties. Penalties can be up to 20% of your tax bill. A 10% penalty applies when your taxes are over 30 days late, and an additional 10% penalty applies after the date noted on the Notice of Tax/FEE Due letter. However, you may request a penalty waiver to get the penalties removed from your account.

Collection Activity When You Have a Payment Plan

Even if you set up a payment plan, the Comptroller's office may continue collection actions on your account. You will continue to receive notices about your delinquent taxes, and the state may also place a lien on your assets until you have paid the tax, interest, and penalties in full.

Additionally, state warrants will be placed on hold, meaning that you cannot receive any payments from the state until you have paid off your state taxes in full.

Payment Plans for Delinquent Property Tax in Texas

You may be able to make payments on delinquent property taxes bills over 36 months, but the decision is up to your local taxing authority. They are only required to provide this option on residence homesteads.

Alternatively, the following people are allowed to pay their property tax bills in four installments:

• Disabled individuals
• People age 65 and older
• Disabled veterans or their unmarried surviving spouses
• Partially disabled veterans with homes donated by charitable organizations and their unmarried surviving spouses
• Individuals or business owners of properties in disaster areas that the disaster has damaged.

You must make your first installment payment before the delinquency date, and if your delinquency date is February 1, you should make your remaining payments by April 1, June 1, and August 1. If you have a different delinquency date, your payments are due two, four, and six months after that date.

Before signing an installment agreement, be aware that your signature means that you agree with the taxes. If you want to protest your property taxes, you should not sign this agreement.

Get Help Setting Up a Tax Payment Plan in Texas

Texas has relatively vague procedures about applying for and setting up payment plans on back taxes. For best results, you should work with a professional who has experience in Texas. To get help, reach out to a Texas tax pro today.

• Texas Tax Relief Professionals
  • Texas Tax Attorneys
    • Dallas, Texas Tax Attorneys
    • Houston, Texas Tax Attorneys
    • San Antonio, Texas Tax Attorneys
  • Texas CPAs
    • Houston, Texas CPAs
  • Texas Enrolled Agents
    • Austin, Texas Enrolled Agents
    • Dallas, Texas Enrolled Agents
    • El Paso, Texas Enrolled Agents
    • Fort Worth, Texas Enrolled Agents
    • Houston, Texas Enrolled Agents
    • San Antonio, Texas Enrolled Agents
  • Corpus Christi, Texas Tax Professionals
  • Dallas, Texas Tax Professionals
  • Houston, Texas Tax Professionals
  • Texas COPA Tax Professionals
  • Texas Work Force Commission Tax Professionals

Disclaimer:  The content on this website is for educational purposes only. It does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Review of the Arkansas State Tax Payment Plan

The Arkansas Department of Finance and Administration (DFA) may be willing to let you pay off your back taxes in monthly payments. To qualify, you typically need to show the DFA that you cannot pay your tax liability in full but you can afford to make monthly payments. Here is an overview of the process.

How to Apply for a Tax Payment Plan in Arkansas

In Arkansas, there is no set process to apply for a payment plan on back taxes, and the state publishes very limited information about how to qualify. To learn more about payment plans, taxpayers can call the state directly at 501-682-5000 or 1-800-292-9829.

Because there is such limited guidance on how to work through this process, you may want to work with a tax professional.

What to Expect When You Apply for a Payment Plan

The Arkansas DFA judges each payment plan request on a case-by-case basis. Essentially, the agency wants proof that you cannot afford to pay the tax bill in full and that you are making the highest monthly payment you can afford to make. If you call and request a payment plan, the state may request a variety of documents to assess your ability to make payments.

How Arkansas Assesses Your Financial Situation

To determine whether or not to offer you a payment plan, the state will want to know about your assets, debts, income, and expenses. Depending on how much you owe and your unique financial situation, the state may request copies of old tax returns, proof of income, a list of your assets, or other documents.

In some cases, the state may use the following forms from the Internal Revenue Service (IRS) to collect this information:

• Form 433A (Collection Information Statement for Wage-Earners and Self-Employed Individuals)
• Form 433F (Collection Information Statement)
• Form 433B (Collection Information Statement for Businesses)

Individual taxpayers should prepare to submit Form 433A or 433F, while businesses should be willing to file Form 433B. The Arkansas DFA may require both of these forms if you own a sole proprietorship, a partnership, or a closely held corporation.

Setting Up Automatic Payments for Arkansas Back Taxes

If you get approved for a payment plan, a representative from the Arkansas DFA will walk you through the process of how to set up payments. Generally, the state prefers that you set up automatic payments, and in some cases, you may be required to set up electronic payments if you want to avoid having a lien issued on your account.

You can set up automatic payments for your tax liability through the Arkansas Taxpayer Access Point (ATAP). This web-based service is available for most taxes administered by the Revenue Division, and in addition to allowing you to make payments, it also allows you to file and amend certain returns, view account balances, and look at recent activity.

Note that although you can make payments on individual income tax bills, you cannot use the ATAP to file individual income tax returns.

Alternatively, you can make ACH credit payments on your back taxes. You must contact your bank to set up these payments, and if they are formatted incorrectly, the payments will be returned and your account may be subject to a failure-to-ETF penalty.

Certificates of Indebtedness and Payment Plans

In Arkansas, the DFA may issue a certificate of indebtedness or a lien when you owe back taxes. A lien is a legal claim to your property, and if you sell property that has a lien, you are legally required to give all or some of the proceeds to the lienholder.

Even if you set up a payment plan, the state can still issue a lien on your real or personal property, and in most cases, the lien will remain in place until you pay your state tax liability in full. However, the state generally won't issue a lien if you set up automatic payments to pay off your tax bill in 12 months or less.

Interest on Payment Plans

Arkansas charges 10% annual interest on back taxes, and the interest will continue to accrue on your account if you set up a payment plan. For example, if you owe $2,000 in back taxes, your annual interest will be $200.

Because the interest rate is so high, you may want to take out a bank loan to pay off your Arkansas back taxes. Any loan with an interest rate lower than 10% will save you money in the long run.

Penalties and Payment Plans

Setting up a payment plan stops penalties from accruing on your account. Monthly failure-to-pay penalties are 1% of the account's balance up to 35%, while monthly failure-to-file penalties are 5% of the account's balance up to 35%. Note that the total combined penalties cannot exceed 35% of the account's balance.

Penalties can be very expensive. For instance, if you owe $10,000, your total penalties can get up to $3,500. The sooner you set up a payment plan, the fewer penalties you will pay.

Payment Plans After an Offer-in-Compromise Rejection

The state of Arkansas has an offer in compromise program that allows insolvent taxpayers to pay off their tax bills for less than they owe. To apply for this program, you must fill out a lengthy application, provide extensive supporting documentation, and submit the federal 433 forms listed above.

Arkansas will not accept your offer in compromise application if the state believes you can pay more than you are offering, but if the state rejects your offer in compromise, it will usually offer you a payment plan.

You have the option to accept the plan and start making payments or to request a different arrangement. At this point, the state has a very detailed overview of your financial situation, and it may be relatively rigid about the monthly payment amount it is willing to accept.

Defaulting on a Payment Plan

Arkansas is very serious about its payment plans. If you miss a payment or default on any other terms, the state will declare your payment plan in default, and it will pursue other collection activities, including wage garnishment or even business closure if you're dealing with unpaid business taxes. For instance, most payment plans require you to stay current on filing requirements so if you forget to submit a state return, you may lose your payment plan.

Can You Set Up Payment Plans on Sales Tax?

The DFA allows qualifying businesses to set up installment agreements on sales tax. You must be up-to-date on filing all returns to qualify. If the state has threatened to shut your business down for lack of payment, you may be able to avoid forced closure by setting up an installment agreement. 

Get Help Setting Up a Payment Plan on Arkansas Back Taxes

Dealing with the Arkansas DFA can be complicated, especially if you're juggling multiple state taxes or federal tax liabilities as well. To get help applying for a payment plan, contact a tax pro who is experienced with the Arkansas DFA. They can help you set up a payment plan or identify the best tax resolution option for your situation. For example, those that cannot afford a payment agreement may want to consider an Offer in Compromise.

A Review of the Arkansas Offer in Compromise for Taxes

The Arkansas Department of Finance and Administration (DFA) may be willing to settle back taxes for less than you owe if you are financially distressed and meet strict application criteria.

To apply for a reduction in your tax bill, you need to complete Form 2000-4 (Arkansas Department of Finance and Administration Settlement or Compromise of Tax Liability) and submit the requested supporting documents. Here is an overview of the process.

Qualifications for an Offer in Compromise

To qualify for an offer in compromise in Arkansas, you must have an established tax liability with no further administrative or judicial review available, and you must prove that you are financially insolvent. The DFA defines insolvency as when an individual's or business's expenses exceed their income and/or their liabilities exceed their assets.

You also must be current on all tax filing requirements. If you aren't required to file a tax return, you can note that on your offer-in-compromise application.

Can you qualify for an offer in compromise if your business is still operating?

In some cases, you may be able to get an offer in compromise even if your business is still operating. However, in most cases, you must prove that the business is insolvent. Also, keep in mind that the DFA can force you to close your business if you fall behind on your state tax obligations. 

How to Apply for an Offer in Compromise

To apply for an offer in compromise, you need to fill out Form 2000-4, provide the requested supporting documents, and make an offer to the DFA. You can send a payment with your application, but if the state doesn't approve your offer, the DFA will still cash the check.

Alternatively, you can make an offer without sending a payment, and if the state accepts the offer, you must pay it in full within 30 days.

Information Required on the Application

You need to include the following details when you apply for an offer-in-compromise:

• Individual name and contact details or business name and contact details.
• Social Security Number of the individual taxpayer or business owners.
• Sales tax permit number if applicable.
• Federal Employer Identification Number (EIN) or other permit numbers, if applicable.
• Type of tax – for example, sales tax or corporate income tax.
• Tax period.
• List of all prior bankruptcies including date filed, docket number, and date of discharge or dismissal.
• Written explanation of why you need a settlement and can't make monthly payments.
• The amount of your offer.
• The source of the offered funds — for example, if you cashed out a retirement account, received a bonus at work, or borrowed money from a family member.
• Written explanation of why the tax wasn't paid on time and why you need a settlement.

To ensure you make a compelling case for your situation, you may want to work with a tax professional who has experience dealing with offers in compromise in Arkansas. You must include a signed POA form if you have an attorney, accountant, or other tax professional complete your application.

Supporting Documents

When you apply for an offer in compromise in Arkansas, individuals and sole proprietors need to include IRS Form 433A (Collection Information Statement for Wage-Earners and Self-Employed Individuals) or 433F (Collection Information Statement). Businesses should include Form 433B (Collection Information Statement for Businesses). Partnerships, single-member LLCs, and closely held corporations should include the forms for both individuals and businesses.

You also must include the following supporting documents:

• Last two years federal and state income tax returns.
• Income and financial statements from the last two years if you are not required to file a tax return.
• Copy of last three paychecks stubs.
• Proof of other income such as pensions, Social Security, alimony, or rental income.
• Copy of bank statements for the last six months if the tax due is $25,000 or under.
• Copy of bank statements for the last 12 months if the tax due is over $25,000.
• Recent credit report.
• Affidavit of property transfers made in the last two years.
• Copy of most recent real and personal property tax assessments.
• Order of discharge from bankruptcy.
• Power of attorney if applicable.

If you have applied for an offer in compromise with the IRS, you must also include a copy of your application or the acceptance letter from the IRS.

Required Financial Information

The Arkansas DFA requires very detailed financial information from people who apply for an offer in compromise because the state wants to ensure that the offer reflects the most money it would likely be able to collect from the taxpayer.

As noted above, you can use the IRS's Collection Information Statement to provide full financial disclosure to the Arkansas DFA, and this form requires the following details:

• Bank accounts
• Investments
• Virtual currency
• Real estate
• Other assets
• Credit cards
• Accounts receivable (for businesses)
• Employment information
• Non-wage household income
• Monthly living expenses

The state will assess your offer based on the information you provide on this form as well as the other details noted on your application. However, it's important to keep in mind that both the IRS and the Arkansas DFA have very strict guidelines on the type of expenses they allow.

For instance, if you claim that you cannot pay your tax bill because you are insolvent but the IRS or the DFA thinks your monthly expenses are too extravagant, your request may be denied. This can happen even if your monthly expenses exceed your income.

Offer Due to Controversy Over Amount Owed

In addition to applying for an offer in compromise due to insolvency, you can also apply for an offer in compromise due to a controversy over the amount of tax due.

If you're applying based on a tax controversy, you must complete form 2000-4 and provide a written explanation of why you believe that you do not owe the tax, but you don't need to include any of the supporting documents except the Power of Attorney form if applicable.

Requests for Penalty Waivers

In Arkansas, you can use the offer-in-compromise application to request a waiver of penalties and interest, and in this situation, you only need to fill out the application. You don't need to provide the supporting documents.

Note that Arkansas recently released a form that is specifically designed to request penalty waivers, and if desired, you can use that application instead.

Rejected Offer in Compromise

The Director of the DFA has sole discretion over whether to accept or deny an offer in compromise, and if they reject your offer, you cannot request an administrative or judicial review of their decision. If your offer is rejected, you can apply for a payment plan, but you must do so promptly, and acceptance is not guaranteed. Keep in mind that once your offer in compromise application gets rejected, your balance is due in full. If you don't pay or make arrangements, the DFA can go after your assets, including pursuing wage garnishment. 

Accepted Offer in Compromise

Once an offer in compromise has been accepted and the closing documents have been signed, the state cannot make any additional assessments, and the taxpayer cannot attempt to recover any of the tax liabilities that they have paid.

The agreement cannot be changed by the taxpayer or the Arkansas DFA unless one of the following two conditions applies:

• The taxpayer falsified or concealed facts.
• The DFA and the taxpayer made a mutual mistake concerning a material fact forming the basis for the offer in compromise.

Get Help Applying for an Offer in Compromise in Arkansas

Obtaining an offer in compromise can be very tricky, and to improve your chances of success, you should contact a tax professional who has experience dealing with the Arkansas DFA. They can also help you determine if another tax resolution option is better for your situation.