How Arkansas Collects Taxes & The State Programs Offering Tax Relief
All Arkansas residents and non-residents who make an income from employment, a business, real estate located in Arkansas, or through trusts must pay income tax to the State of Arkansas on their income.
Those who have a taxable income that does not exceed $3,700 pay the lowest rate of 1%. Those who make $11,100 to $18,600 pay 4.5%, and those making $18,600 to $31,000 pay 6%.
Rather than having tax returns categorized as “single,” “head of household” or “filing jointly,” Arkansas provides tax credits for these categories.
Corporate Income Tax
All businesses, partnerships and corporations that do business in Arkansas or reside in the State must pay income tax to the state. This can seem a little complicated, but it becomes clear once it’s been explained. All businesses should have a professional that provides tax help.
The first $3,000 of a corporation’s income is taxed at 1%. To clarify, if a business in Arkansas earned an income of $6,000 in a year, the first $3,000 would be taxed at 1% and the second $3,000 would be taxed at 2%.
The next $5,000 in income would be taxed at 3%, with the next $14,000 being taxed at %5, with the next $75,000 being taxed at 6%. All earnings over $100,000 are taxed at a rate of 6.5%. This means that all income $100,000 and under is prorated and taxed at the lower rate. (When you add up all the previous brackets you get $100,000.)
Corporations that end up having a sustainable net operating loss are allowed to carry the loss forward as a deduction for up to five years. Check with your CPA for tax help on these matters.
Sales tax is 6% across the State of Arkansas on most items being sold. However, many municipalities charge consumers an additional sales tax on top of the 6%. For example, Little Rock adds 0.5% for a total sales tax of 6.5%.
Because Arkansas is historically a “dry state,” which means in many counties there are limits on the sale of alcoholic beverages. This still exists today in a lot of counties. Therefore, the State has set various tax rates on the purchase of alcoholic beverages, with beer being taxed at a rate of 1%. The sales tax on mixed drinks is much higher at 10%.
The State of Arkansas is not in charge of setting or collecting property taxes; it’s generally done ounty-by-county based on which county the resident lives in. There are 75 different counties in the State and most property is taxed no matter how it is being used. Vehicles are considered personal property and as such are taxed based on their assessed value. This is usually 20% of the vehicle’s market value multiplied by whatever the mileage rate is in that particular county.
Protesting Tax Assessments
If you want to protest a tax assessment you have to do this in writing or ask for a hearing within 60 days of the date you got your tax assessment notice.
If you want to contact the Office of Hearings & Appeals for tax help, please phone them during business hours Monday – Friday 8:00 a.m. to 4:30 p.m. at (501) 682-7003.
Other contact information:
Arkansas Department of Finance & Administration
Tax Problem Resolution Office
P.O. Box 1271
Little Rock, AR 72203
Phone: (501) 682-7751
Fax: (501) 683-0066
Office of Hearings & Appeals
P.O. Box 1272
Little Rock, AR 71103
Phone: (501) 682-7003
Fax: (501) 683-2098
There Are Programs Set Up for Arkansas Taxpayers Who Need Tax Help
The Arkansas Department of Finance & Administration (DFA) is in charge of tax collections for the State of Arkansas. Similar to the Internal Revenue Service, the Department is willing to help taxpayers with problems paying the full amount they owe in taxes.
The Department has a number of commonly used tax relief programs available to help taxpayers resolve their state tax issues once and for all.
Taxpayers who do not have the money to fully pay their state taxes can be considered for an installment payment plan. Requests are decided case-by-case after being carefully reviewed. Those accepted for this program pay their back taxes, penalties and interest in installments over time, with the interest continuing to accrue until the debt is paid in full. There are cases in which the Department of Finance & Administration may feel the need to place a lien that will last until the tax debt is fully paid to ensure that the debt can be collected.
If you want to submit an application for a payment plan agreement you should initiate the process by calling (800) 292-9829 or (501) 682- 5000 for a chance to speak with someone about your situation. They will help you determine whether or not you might qualify for this program.
Offers in Compromise
Arkansas has an Offer in Compromise (OIC) program that taxpayers who are in severe financial distress to the point of insolvency can take advantage of. Taxpayers who are approved for this program have a chance to take care of their delinquent taxes for an amount less than they owe.
The qualifications are as follows:
The taxpayer has financial liabilities in excess of their assets and/or his/her living expenses are more than he/she makes in income, which means he/she is insolvent.
The amount of money owed in taxes is in dispute.
If it sounds like you qualify for an Offer in Compromise then you should submit a completed application without any missing information, otherwise your application will be returned as “unacceptable.” To proceed you need to completely fill out and submit Form 2000-4 Offers in Compromise (OIC) Applications and Checklists. You also have to provide all the documents detailed on page 6 of the OIC form. Sign and date the form and send by mail to the address provided on the form. Do not email or fax the form. This program offers significant tax relief.
Before submitting your application for an OIC make sure that all your tax returns have been filed. If you would like the State of Arkansas help you get through the OIC process you can reach out to the Problem Resolution & Tax Information Office at (501) 682-7751.
All approval decisions are made case-by-case. The Department of Finance & Administration will send you their decision in writing. You have no right to an administrative or judicial review of their decision. It might make sense to consult with a professional on such a vital matter so that you improve your chances of getting the tax relief you need.
Arkansas has an office dedicated to providing taxpayers with a convenient and fair way to resolve disputes having to do with Arkansas tax laws. The Office of Hearings & Appeals is in charge of helping taxpayers resolve their disputes regarding the following state tax laws:
- Beer and Liquor Excise Tax
- Corporate Income Tax
- Estate Tax
- Income Tax Withholding
- Individual Income Tax
- Motor Fuel Tax
- Real Property Transfer Tax
- Refund Denials
- Sales Tax
- Severance Tax
- Soft Drink Tax
- Use Tax
- Waste Tire Fees
- Wine Tax
- Power of Attorney
If you have a CPA, financial advisor, tax professional that you trust whom you want to represent you before the Department of Finance & Administration regarding your taxes, you can assign them your Power of Attorney in these matters. If you think this professional would represent you will and get you the tax help or tax relief you need, complete the form for Power of Attorney, sign it and submit it to the Department.Contact Us