When you find yourself behind on your taxes, you not only have to worry about collection attempts from the IRS, but also from your state’s taxation authorities. Having back taxes can create a variety of problems for you to deal with. If you live in a state where you have to file state income taxes, you risk the same things as if you failed to pay the IRS.
Possible consequences with having state back taxes, include tax liens, wage garnishments, bank levies and property seizures. Though jail time is unlikely, many state tax officials do have the right to arrest a taxpayer.
Like the IRS, states have their own standard collection procedures leaving most taxpayers with liens and levies when they fail to file and pay. With back taxes, you run the risk of having to pay additional interest, paying hefty fees and penalties. If you fail to file your state taxes, your state can file a substitute return for you. This return is based on the information they have on file and is generally just your W-2 from your employer and other forms sent to you to file your taxes. In addition to penalties for not filing, if the state files a substitute form, you run the risk of not having everything claimed, such as credits and deductions, which can cause you to owe more than if you would have filed it on time.
If you cannot file your state taxes on time it might be possible to request an extension. With an extension, you are given more time to file and pay, without having to pay penalties for failure to file. In order to avoid any additional penalties, you must file and pay for your state income tax bill by your new deadline. Failure to do so, may result in penalties and the state could start its collection process.
Sometimes falling behind on state taxes is caused by unforeseen events in your life. If you find you have back state taxes, for whatever reason, there is still hope to get them filed and paid. You could request an installment agreement which will divide up what you owe into monthly payments over a reasonable amount of time. An Offer in Compromise is available to qualified candidates, making it possible to pay off the tax liability in one lump sum, which is less than the original tax bill. Partial or part pay installment agreements are similar to a regular payment plan, but the monthly amount is smaller and only for those who have limited income qualify for this plan. You could also be labeled as Currently Not Collectible. This puts collection activities for your tax bill on hold until your financial situation improves and you are able to pay or may payments.
Each state is different when it comes to their income tax laws. When seeking help getting your state taxes filed and paid, seek the assistance of a local tax professional. One who is trained and experienced in tax laws and requirements for your state.
Be sure to review some of our tax problem services by calling us at 800-901-0885.