How Alabama Collects Back Taxes & The Tax Help Available to Taxpayers
If you are in trouble with the State of Alabama for unpaid back taxes, you will need to resolve your problems with Alabama’s Department of Revenue Services. If you are in trouble with the IRS as well, those issues will have to be resolved separately with them.
To start getting your state tax problems resolved, you will need to phone the Department of Revenue for all the necessary forms to deal with your back taxes. If you fail to contact them you will ultimately be subject to a very aggressive collection process as follows:
If you file your taxes, whether personal or business, and you do not send the payment or the full amount you owe, a tax assessment will be made. A Notice of Preliminary Assessment will arrive in the mail. If you disagree with the tax assessment, you can write the Department within thirty days requesting a review. You may want to consult with a professional for expert tax help at this point in time.
If the Department does not get your letter within thirty days of the date on the Preliminary Assessment, or if they decide to uphold the assessment, they will enter a final tax assessment. You can appeal this final assessment within thirty days by contacting the circuit court or the Department of Revenue’s Administrative Law Division. If the final assessment is unchallenged and rendered, it is tantamount to a legal judgment.
Personal Liability for Business Taxes
If you own a business or are an officer of a corporation, you could be held personally financially responsible for paying specific business taxes called “trust fund taxes,” which include local and state sales taxes, motor fuel and gasoline taxes, income withholding tax, use tax, and gross receipts utility taxes.
If you are a partner in a partnership or are a sole proprietor in a business, you may ultimately be subject to having your personal assets seized if you do not pay the trust fund taxes of your business. Furthermore, the Alabama legislature in 1984 passed a law that allows the State to go after the individuals that work for a corporation whose job it is to collect, withhold, and pay the State the trust fund taxes that are owed by the business.
Every business needs a professional who provides tax help and advice on a regular basis so that the business can avoid getting into this type of situation.
100% Penalty Assessment
There is a 100% Penalty Assessment that may be transferred to the person or persons working for a corporation who were responsible for accounting for, collecting and paying the taxes owed by the corporation to the State.
The Department of Revenue uses its Collection Services Division to aggressively collect unpaid back taxes. If your case is referred to the Collection Services Division this means that you’ve had a final assessment rendered and the time has run out on the appeals period. At this point the full force of the law backs up your tax liability, as if it were a court judgment. At this point it would be advisable to consult with a reputable professional on what type of tax help would be available to you. The Department has a right to go after the money in a number of ways:
Final Notice Before Seizure
Once the Collection Services Division receives your case they will send you a letter called the Final Notice Before Seizure. You will have 10 days to take care of your unpaid taxes before they will proceed with further action to collect the debt. This is the only notice you will receive before they proceed with further action.
Garnishment of Wages
If you end up ignoring the Final Notice Before Seizure, the next step would be the issuance of a Writ of Garnishment to your local sheriff’s department. This Writ allows money to be taken out of your bank accounts(s) or credit union account(s) to pay your back taxes. It may also make a demand that your employer withhold 25% of your wages to the State until your unpaid taxes are fully paid up. No one wants the embarrassment of this situation. If this is what you are facing, contact a reputable professional for the tax help you need.
The Department has the right to place a tax lien on all property or rights to property, whether an individual taxpayer, partnership, corporation or some other entity that is behind in paying taxes owed to the State of Alabama. Thirty days after a final tax assessment has been rendered, the Department will file a Notice of Tax Lien.
This will secure the tax payment and may adversely affect the taxpayer’s credit score. If will also affect the transfer or sale of the property because potential buyers will be notified of the lien and that the property may be seized to pay the taxes. A tax lien is typically valid for 10 years, which is how long the statute of limitations lasts on collecting a final tax assessment.
The State also has the right to place a levy of a delinquent taxpayer’s property. This orders the shriff or some other law enforcement official to seize the property, sell it at auction and send the money to the Department of Revenue. The tax levy is as a result of the final assessment, nothing to do with the lien.
Alabama Offers Taxpayers Some Measure of Tax Relief When Needed
The Alabama Department of Revenue does understand that taxpayers often have financial issues that keep them from paying their taxes on time and/or the full amount they owe. They offer a variety of programs for taxpayers to get the tax help they need to resolve their problems once and for all. The resolution methods most commonly used by taxpayers are explained in detail below:
Installment Payment Agreement
If you cannot pay all your taxes at once you can agree to an installment payment plan, which will allow you to pay what you owe in increments. Alabama is not as easy for taxpayers to work with as the IRS when it comes to approving Installment Payment Agreements, so you may have some difficulty getting this approved. This type of tax relief is intended to help the taxpayer avoid the financial burden of having to pay their entire tax debt all at once.
For the Commissioner of the Department of Revenue to consider you for an installment payment plan, you must meet the following conditions:
- You must have already received a final assessment on your tax bill and are not appealing.
- The Commissioner must be convinced that this installment plan will help to collect your entire tax liability.
- The Commissioner has the authority to agree with the taxpayer on an installment payment plan if their tax liability has a final assessment with no appeal. If you are in this situation it may make sense to consult with a reputable professional regarding a payment agreement and whether another type of tax help would possibly be available to you.
- The Commissioner in this case must believe that the payment plan will help in collecting the tax debt. The agreement must stipulate that the payments will not last any longer than a year. The payment agreement may be ended at any time under any of the below circumstances:
- The taxpayer does not make his/her installment payments when due.
- The taxpayer does not pay any other taxes owed to the Department in a timely manner.
- The taxpayer provides incomplete or inaccurate information to the Commissioner or the Department.
- The taxpayer does not provide an update on his/her finances when requested.
- The taxpayer’s financial situation has dramatically changed.
- The Commissioner thinks that collecting these taxes under this agreement is somehow in peril.
To get the ball rolling on an Installment Agreement, you should call the Department of Revenue at (334) 242-1220 to have them send you all the appropriate forms for requesting an Installment Agreement. The application process will require that you do the following:
- Complete the Collection Information Statement and the Affidavit attached to it and submit it to the Department of Revenue.
- Submit the required documentation, which are spelled out at the bottom of page 5 of the Collection Information Statement.
- Submit your initial payment, either with a check or money order. It should be made out to the Alabama Department of Revenue. If you don’t send the payment, the Department can start the collection process.
Your completed forms, documentation and payment must be sent to the address at the bottom of the attached Affidavit. The Department of Revenue will send you a written response letting you know whether they approved the payment plan you proposed, denied it, or made changes to it. Do not expect to find out how long it will take the Department of Revenue to make their decision. You are welcome to call the Department of Revenue at (334) 242-1220 with your questions.
Office of Taxpayer Advocacy
Alabama’s Department of Revenue formed a Taxpayer Advocacy department to give residents the tax help and/or tax relief they need to resolve their unpaid back taxes. They can turn to the Taxpayer Advocacy Department when they’ve had no luck resolving their tax issues through normal channels. To qualify for help from the Taxpayer Advocacy, you must meet one of these requirements:
The Department of Revenue did not respond to the taxpayer within 30 days of initially being contacted, by the promised date or within the required statutory time limit.
- Must have tried at least 3 times to get your problems resolved using normal channels
- Made notes of the existence of a perpetual and/or ongoing issue with a specific procedure
- The Department of Revenue provided inadequate or erroneous information that resulted in confusion or undue hardship for the taxpayer
For tax help and/or tax relief contact the Office of Taxpayer Advocacy at the Department of Revenue is as follows:
Alabama Department of Revenue
Office of Taxpayer Advocacy
P.O. Box 327005
Montgomery, AL 36132-7005
Phone: (334) 242-1055
Fax: (334) 242-0814