There are two things certain in life: death and taxes. And with taxes, we can sometimes get in over our heads. If your tax return has led to you owing the State of Colorado more money than you can afford to pay at one time, here are the options you face.
What Happens When Your Taxes Go to Collections?
Suppose you simply don’t pay your taxes. What happens then? Like any debt that goes unpaid, your owed taxes will be turned over to the collection division. You will first be informed of the turnover. While this is an option, it’s not ideal as it can affect your credit.
If you disagree with the amount of taxes you owe or you have Colorado tax questions, you can dispute your taxes owed or a deficiency. The case will be heard by the Department of Revenue and the result of the case may vary.
On one hand, interest or penalties on the amount you owe may be waived. If errors are found, the Department of Revenue will let all applicable credit agencies know of the State plans’ actions.
Are Payment Plans Available For Taxes?
Yes and this is by far one of the best options you have for State tax relief. Similar to any debt you owe, your taxes owed could be broken down into a payment plan. Because the State and creditors want your payment in full as soon as you can pay it, knowing your options and your rights is important.
Setting Up A Payment Plan
To start, you must request a payment plan from the State. Then, a Collections Representative will speak with you about the options for a monthly payment plan, determined by the amount you owe and your current financial standing.
After the monthly payment plan amount is agreed upon, you will receive the agreement paperwork. It’s crucial that you follow all the terms and conditions of your payment plan agreement.
If the payment plan terms create a burden on your finances, you can also request an extension on the terms. To do this, you simply complete and mail in your Statement of Income and Expenses. In the meantime, while the State is deciding whether to grant the extension or not, you should continue to pay your payment plan following the previously decided terms.
What Is a Tax Warrant Lien?
Another result of not paying your taxes owed is a lien or warrant. After your account becomes delinquent, the Department of Revenue will issue the lien or warrant. These are legal documents that allow the state to collect the amount owed in a variety of ways, including taking your property.
These are matters of public record and will be made available to credit agencies. As such, it’s important to pay your taxes before receiving the final notice from IRS.
An alternative to a lien or warrant is wage garnishment. This is a state tax levy on the bank account of the person who owes the taxes. Both your employer and your bank are required to abide by the terms of the order, even if it’s an order to withhold personal income tax.
If the State has no other option to get a payment on your owed taxes, they have the option to seize and sell your real or personal property. In terms of business tax relief, this could be detrimental and you could lose your business. If you believe that you’ve become the target of a seizure, take your Colorado tax questions to a professional.
Interest & Penalties
Should you not be able to pay your taxes in full or at all, you could be facing interest and penalties that will be added to the amount you owe. The amount of the interest and penalties will depend on the circumstances and the type of tax you owe. Remember, these can grow over time.
Who Qualifies For Offer In Compromise?
A great option for many individuals and businesses is an Offer in Compromise. In some cases, the Department of Revenue may accept a settlement of the taxes owed in a smaller amount than the original total owed. To apply for this, you submit an Offer in Compromise.
To be eligible for an Offer in Compromise, you have to first be willing and able to follow all the terms and conditions associated with it. You should also meet the following criteria:
- All your required tax returns must currently be filed.
- The IRS must have already accepted the corresponding compromise.
- You haven’t had an Order in Compromise accepted by the State before.
- You haven’t received forms of tax relief before.
- You can’t reasonably be expected to pay the delinquent amount within the collection period.