How Colorado Collects Taxes & Programs Available Offering Tax Help
Like the Internal Revenue Service, the Department of Revenue is responsible for administering the tax laws for the State of Colorado, with the primary task of collecting taxes from residents and businesses. For those who are having difficulty paying their taxes, the Department is willing to work with them to find solutions. However, if delinquent taxpayers ignore repeated attempts by the Department to collect the outstanding tax debt then more aggressive collection tactics will be employed, as follows:
If you owe back taxes to the State of Colorado, and the Department of Revenue has had no luck collecting your tax debt, your outstanding account will be referred to the Collection Division. But,
before aggressive collection activities begin, you will be informed in writing that your account is now subject to collection efforts. These efforts may include the seizing of assets, freezing your bank account(s), wage garnishment, if you are a business owner levies may be placed on your account receivables and other collection tactics may be employed as well.
Similar to the rules put in place by the Internal Revenue Service, Colorado accrues tax penalties on a cumulative basis and where applicable can combine various penalties. The bottom line is that penalties can add up quickly.
Penalties are imposed for every type of infraction, as follows:
- Knowingly filing a false, frivolous or fraudulent tax return: Whichever is greater, either 150% of the tax due or $150.
- Tax evasion of fraudulently failing to pay: 150% of tax due.
- Willfully or fraudulently failing to file taxes: Whichever is greater, 100% of tax due or $75.
- Failing to pay after receiving Notice or Demand for Payment: 15% of tax owed.
- Failing to file: Whichever is greater, 5% of tax due or $5, but not to exceed 12%.
- Deficiency caused by negligence: 25% of whatever tax amount is deficient.
- Warrant: 15%-30% of tax, interest and penalties owed, depending on the situation.
- Delinquent payment: Whichever is greater, 5% of tax due or $5, but not to exceed 12%.
- Sales or Use tax deficiency caused by negligence: 10% of tax amount due.
- Failing to file Sales tax: Whichever is greater, 10% of tax due or $15, not to exceed 18%.
- Fraudulent evasion of Sales tax: 100% of tax due and 3% per month.
Penalties for Corporate Officers
All corporate officers and members of a limited liability company or partnership whose job it is to account for, collect and pay taxes to the State of Colorado and fail to do so are risking a penalty of 150% of the assessed but unpaid taxes. This means that if you have been given “the power of the pen” to issue checks to pay taxes, you could be held personally financially responsible for the company’s tax debt.
Liens & Warrants
The Collection Division does give taxpayers preliminary notice 30 days prior to filing a tax lien against them. If you receive such a notice, it would be wise to consult with an experienced tax professional to get all the tax help and advice you can to avoid the lien.
When a tax warrant or lien is issued the Department of Revenue has the legal right to collect your unpaid taxes. They can do this by seizing and selling your property or encumbering your assets so they cannot be sold. Once a warrant or lien is placed against a business, this is now a public record, which means that credit agencies may become aware of it. Warrants and liens get filed at local county courthouses and/or with the Colorado Secretary of State.
Bank Levies & Wage Garnishments
Colorado taxpayers who are delinquent in paying their State taxes may find that their bank account(s) have been levied and/or their wages garnished. Banks and employers are obligated by law to comply with orders issued by the State to collect unpaid taxes. The taxpayer is typically given 10 days to dispute the order or to find an experienced professional who can offer them much needed tax help as they seek an extension or try to resolve the entire matter.
When other collection activities have been unsuccessful in collecting the tax you owe, or when the Department of Revenue thinks “its” assets are at risk, the State may begin seizing your assets. Because it is a lot easier to avoid having your assets seized than reversing the process, it would be wise to hire a reputable professional who can give you sound advice and tax help if you believe you are at risk of having your assets seized.
Programs Available to Colorado Taxpayers for Tax Help & Tax Relief
For taxpayers who do not have the funds to fully pay their taxes, the Department of Revenue offers solutions. These may be in the form of an Agreement to Pay, which is essentially an installment payment plan giving the taxpayer additional time to pay. In addition, there are a number of other tax help and tax relief programs available to Colorado taxpayers as well.
Power of Attorney
You are within your rights to have someone qualified to represent you in tax matters before the Colorado Department of Revenue. You would need to complete, sign and submit a Power of Attorney for Department Administered Tax Matters Form before discussions can begin with the professional you’ve chosen to represent you.
If you believe that the Department of Revenue has made an assessment error on the amount of tax you owe or has filed a tax lien against you by mistake, you can request that the Protest Resolution Section hear your case. If warranted, they can waive or adjust penalties and interest and if asked to do so, they will let credit reporting agencies know if the lien filed against you was in error. Before trying to handle this on your own you should reach out to a qualified professional who can offer the type of tax help needed to succeed with your protest.
Extensions on Tax Filings
You do not have to request an extension if you want to file your Colorado State taxes late. You can file your tax return as late as October 15th, which is the extension filing date, but you still must pay your taxes by April 15th. If the Department of Revenue has not received at least 90% of what you owe in taxes by April 15th, you will be subject to interest and penalty charges.
Agreement to Pay (ATP)
If you cannot pay your taxes in full by April 15th, you may be able to work out an Agreement to Pay with the Department of Revenue’s collection officer. This is an installment payment plan so that the State can collect the taxes you owe as quickly as possible. This will avoid you suffering a 5% delinquent payment penalty (charged at 0.5% per month after the 1st month, not to exceed 12% of the total tax due). Before entering into such an agreement it might be wise to consult with a qualified professional for any tax help and information on your rights and how best to navigate this process.
It’s important that you do not promise more than you can afford in installment payments since you would run the risk of falling behind on your upcoming tax obligations. Before agreeing to anything the State will require you to provide detailed up-to-date financial statements so that they can accurately assess your payment timeline.
You can request an Agreement to Pay by doing any one of the following:
Use the Income Tax Account Information Service.
Phone collections (303) 205-8291 to speak to a representative.
Phone the Call Center at (303) 238-7378.
Go online to the Colorado Department of Revenue’s website and register with a Login ID and a password. Once your account is set up, request an Agreement to Pay through the website.
Once the Department of Revenue receives your request they will send you an ATP packet that contains coupons for your installment payments. While making your ATP payments, interest will continue to accrue, but you will no longer be subject to penalties. Colorado does not charge any fees for an Agreement to Pay. Please do not hesitate to phone the Department of Revenue at (303) 205-8411 with your questions or concerns.
Offer in Compromise (OIC)
Colorado Taxpayers who qualify may be accepted for an Offer in Compromise, which allows them to pay a less than what they owe to settle their entire tax debt. If you have fallen behind in your taxes and are seeking a resolution, now would be the time to hire a CPA or qualified tax professional who can provide sound advice and the type of tax help that will effectively get you out from under this stressful tax obligation.
In the following cases a taxpayer is allowed to pay less than what they owe to settle their tax debt with the Colorado Department of Revenue:
- When the taxpayer is at their maximum ability to pay
- When the taxpayer’s offer is considered in the best interests of Colorado
Before accepting an offer, the State will review the taxpayer’s complete financial situation in terms of total assets, income, debts, monthly expenses, and etc. Colorado’s OIC program borrows quite a bit from the Internal Revenue’s OIC requirements and forms. If you would like to be considered for tax relief through an Offer in Compromise you would need to have the following qualifications:
- You have already worked out an Offer in Compromise settlement with the IRS, which covers the same tax liabilities and years.
- You are completely up-to-date on filing your tax returns and will continue being up-to-date moving forward.
- You do not have the money to fully pay your overdue tax liabilities within the required time period to collect.
- You have never had a previous tax debt written off because the statute of limitations had already passed.
- You have had no prior Offer in Compromise concerning Colorado, and you have never had any taxes you’ve owed discharged in bankruptcy proceedings.
- You have no previous taxes that have been settled due to Innocent Spouse Relief.
- You can pay the amount you’re offering to settle your back taxes while continuing to pay your current tax obligations and those going forward.
In preparing your Offer in Compromise it would make sense to consult with an experienced tax professional that has navigated this process with other clients. You need to correctly fill out a lot of forms to apply for this tax relief program, so get the tax help you need to properly fill them out:
- Collection Information Statement for Wage Earners & Self-Employed Individuals, which is IRS Form 433
- Offer in Compromise Terms & Conditions fully completed, along with the necessary signatures.
- Statement of Income & Expenses, which is Form DR 6596.
- Proof of your accepted Offer in Compromise with the IRS, a copy of IRS Form 656 with the IRS Received Date stamped on it, along with any other documentation that you deem relevant regarding your IRS Offer in Compromise agreement.
- A “Record of Account” from the IRS and proof that you are living up to your Offer in Compromise agreement with them regarding payment.
- A written and signed disclosure regarding your filing status, marital status, and whether any real or personal property, such as money, vehicles, or title(s) to any property has been transferred.
- A written explanation detailing why the Department of Revenue should consider granting you an Offer in Compromise. Include the amount of your proposed offer.
The Department will send you a Notice letting you know whether your Offer in Compromise has been accepted. If your offer has been accepted, you must send in a lump-sum payment of the amount you offered within 15 days from the date on your Notice, unless the Department says otherwise. If you make your payment by check and the bank it’s written on refuses to honor it, your Offer in Compromise will be revoked. You will then be liable for the full amount of the tax you owe plus any interest and penalties.Contact Us