Call Us Now
Email Us Now
Why Would the State Revenue Department Send Me a Notice?
With millions of households and businesses filing for taxes every year, some questions or errors are bound to be made. If you have received a notice from your state’s revenue department, it could be for a myriad of things. This article will discuss some of the most common reasons and what to do if you receive a notice.
You Have a Balance Due
One of the most common reasons for the state to send you a notice is that you have a balance due on something you missed. This missed payment or balance due could be from past years of taxes, this year’s taxes that you may have miscalculated, and more.
One of the best steps to take is to pay the amount owed immediately if you do not dispute the amount and comfortably have the ability to pay it. Even if you would like more time to review it with your tax attorney or accountant, being late on a payment, whether realistic or not, can create more problems than most of us would like to deal with. In some cases, paying a tax even if you dispute the balance can resolve the issue with collections now and can allow you to dispute it later without the fear of continuing to accrue penalties and interest if your dispute fails. However, seeking professional advice is a must prior to paying a disputed tax owed to ensure a realistic, legal route for a refund exists.
If you cannot pay the entire amount, you should consult a tax professional right away. While you could call the number on the notice and ask to set up a payment plan to help you initiate the payment and avoid a late payment fee, we find many clients attempting to set up their own payment plan are not familiar with the types of payment plan structures and frequently get themselves into a payment plan they cannot afford, leading to a snowball of future problems. A tax professional can provide valuable strategy in vetting options and ensuring you have a payment plan or other resolution that will work in the present and the future. If a payment plan is successfully arranged, then it may also allow more time for you to review the amount owed and dispute it while making a payment in good faith to avoid further penalties or interest penalties.
Once this is in place, you can begin to untangle the reasons for the late payment, and if there was a mistake on their part, you can submit for a refund. Though this may seem counterintuitive, paying what is owed to avoid other unnecessary fees or fines is almost always the way to go while you figure out where the mistake occurred.
Routes apart from a payment plan to resolve back state taxes vary from state to state and situation to situation. Many states’ only realistic route to resolve back state taxes is a payment plan. Some states may advertise “settlement” or Offer in Compromise programs, but in reality, these can be extremely difficult to get with state departments of revenue. Bankruptcy is often not an option with many types of state tax debts. Therefore, if you are interested in a route other than or unable to qualify for any payment plan, consulting with a qualified tax attorney trained in advocacy and negotiation for back taxes is critical to obtaining a good outcome for your case.
Adjustment Notice
An adjustment notice is standard for some, as it means that the taxes sent to them weren’t calculated correctly, and they have since made an adjustment. In some cases, this means you get some back, but it can also mean you need to pay a balance.
Again, if you cannot pay the total amount immediately, seek the help of a qualified tax professional to help you review notices and vet potential options to resolve the outstanding liabilities prior to contacting the respective state department of revenue on your own.
In many cases, the wrong sales rate was used, or the totals were incorrectly calculated, causing a change to be made by the revenue department.
Non-Filer Notice
If you haven’t submitted your returns for the year or longer, you may receive this notice letting you know that the required sales or other tax paperwork hasn’t been received. It’s in your best interest to work with a qualified tax professional immediately to resolve this to avoid further penalties or fines, or worse. It is a crime in most if not all states to fail to file required tax returns, and while somewhat rare, prosecutions occur for willful failure to file such required returns.
If you haven’t filed and have ignored requests to complete your requirements of filing your taxes, liens or levies may be imposed against you. Once this process has been initiated, it can lead to lengthy financial issues; for example, the respective state department of revenue could issue a levy / garnishment or lien against you. Financial impacts to you could also result in having a lasting effect on your credit report and keep you from obtaining a loan, buying or selling a house, or leave you unable to pay for basic and reasonable living expenses.
See below for more information.
Notice of Intent to Levy/Lien
If you have refused to pay alleged taxes owed or ignored requests for more information or payment, the state may choose to initiate a levy and/or lien against you. They will typically send a letter notifying you of their intent to do so. There is technically a difference between a levy and a garnishment, but the words are often commonly interchanged in public.
If you receive any letter referring to either of these enforcement methods, you must act immediately to resolve the situation or risk facing a levy or lien.
If you can’t submit the required payment, you should review your options with a qualified tax attorney right away.
If you can’t find a resolution, your wages may be garnished, or state tax liens may be placed against you personally, encumbering your real estate or other property. It’s important to note that paying the amount owed to avoid this next step may be challenging if you have a lien or levy on your property or wages, but it can be incredibly difficult to recover from.
Do whatever you can to be proactive in this environment rather than reactive to avoid years of potential effects on your credit and more. Some state tax liens are particularly gruesome, because state tax debts may at some point expire, but the liens that secure the underlying tax debts may not expire in some states with the tax debts, resulting in a encumbrance that cannot be removed in many practical circumstances.
Payment Issues
Letters are sometimes sent regarding payment issues. Payment issues can be that you set up an auto withdrawal from an account that has since been changed, so they weren’t able to pull the funds. You may also have sent a payment to the wrong department or address, so it hasn’t been applied correctly yet.
In some cases, you may have sent an overpayment, meaning that you now have a credit on your account. In this case, you can typically ask that the amount be refunded or applied to a future amount owed.
Don’t Panic. You Have Options
In many cases, options may be available to you to address state tax debts, whether or not you are disputing the claims made within the letter and more.
An experienced tax attorney can be just the invaluable ally you need to help strategize and vet your options when you are faced with a state tax liability by untangling
the information in the letter, reviewing your situation with you, and assisting you in resolving it. If they can’t do so for you, they may be able to refer you to other professionals who can help you avoid further penalties or interest, or worse, liens or levies.
Contact our office today at (314) 260-6120 to learn more.
