How Rhode Island Collects State Taxes & Available Tax Relief Programs
The State of Rhode Island Division of Taxation is responsible for making sure all residents and non-residents of the state pay their taxes as required by state law. Most residents take their responsibilities seriously and consistently file their faxes and pay the full amount owed on time each year.
However, people sometimes neglect to file or pay their taxes on time, whether for financial reasons or some other reason. When this happens the State is obligated to go after these taxpayers to collect the money they owe. The collection methods that the Division of Taxation employs against delinquent taxpayers are as follows:
Taxpayers who don’t file and pay their taxes when they’re due risk having penalties added to their tax debt, unless they can present a reasonable reason why they failed to file or pay their taxes on time. Before you run the risk of accruing penalties in your unpaid taxes, it would be wise to hire a professional who can provide tax help in the form of expert advice. The following is a list of the infractions that could result in penalties being added to your tax bill:
Fraud: if any portion of your tax deficiency were caused by fraud, an amount equal to 50% of your deficiency would be your penalty and added to your tax liability.
Negligence: if any portion of your tax debt were caused by your purposeful disregard for tax laws or negligence, a 5% penalty of that portion of your debt would be your penalty and added to your tax bill.
Failing to File Tax Return: if you do not file your state tax return or if you are an employer and do not file your withholding returns when they are due, your penalty will be 5% of the amount due in taxes and this amount will be added to your tax bill for every month that your taxes remain unpaid, but only up to 25%.
Failing to Pay the Full Amount Owed: if you do not pay the full amount of money you owe in taxes when they are due, your penalty will be 0.5%, which will be added to your tax bill for every month or part of a month that your taxes remain unpaid, but only up to 25%.
Penalty Abatement: if you can prove that you were not negligent and you did not intentionally ignore the tax code, you are entitled to ask for an abatement of your penalties if you feel you are entitled to this tax relief.
If you’ve received a demand notice for payment and have ignored it or declined to pay the tax owed within 10 days of the date on the notice, the administrator may start enforced collection actions by placing a levy on your property and any rights you have to property. Prior to risking a levy it would be wise to consult with a reputable tax professional so that you can determine what tax help options might be available to you in this situation.
A levy comes with the power of seizure and distraint, which allows the tax administrator to seize your property, whether it is real estate or other tangible or intangible personal property. You will be notified 30 days prior to your assets being frozen or your property being seized. Your salary or wages may also be levied and this would stay in effect for 6 months or until your delinquent taxes are paid in full or the debt becomes uncollectable due to the lapse of time.
Any amount of tax imposed on you, including interest and penalty charges shall be deemed a lien upon any real estate you own until you’ve paid your taxes. A tax lien can adversely affect your credit report and keep you from buying or selling property. The Division of Taxation has a list posted naming all delinquent taxpayers with a tax lien recorded against them. The list is updated every 30 days.
Personal Liability for Business Taxes
Any individual whose job it is to account for, collect and pay taxes to the State may legally be held personally responsible if he/she does not submit tax returns and payments to the State as required by law. Every business owner or operator should have an experienced accountant or tax professional that they can turn to for tax help in order to avoid getting into situations like this.
Programs Available to Rhode Island Residents in Need of Tax Help
Residents of Rhode Island have a number of programs available to them that offer tax help and/or tax relief regarding their unpaid back taxes. Everyone’s financial situation is different so depending on what yours is; you may be eligible for an installment payment plan. You can also ask that any penalties you’ve been assessed be waived or you may qualify to enter negotiations to settle your tax debt once and for all.
Installment Payment Agreements
If you are not in a position to pay your taxes in full, the Rhode Island Division of Taxation can provide tax relief with an installment payment agreement. This would allow you to pay your tax bill over time. You can propose this through the Compliance and Collection department and after reviewing your proposal they will let you know whether it has been approved or denied. If you get approved, you would have to make monthly installment payments as per the agreement and file your future tax returns on time with payment in full.
The Division does not specify what the requirements are for qualifying to be considered for an installment payment agreement.
If you want to be considered for an installment payment agreement, submit the following to the Compliance and Collections Section of the Rhode Island Division of Taxation:
- Installment Agreement Request Form RI-9464. The submission address is below.
- Include a check for a down payment of half the amount you own in taxes.
Submit to the Division of Taxation at the following address:
Rhode Island Division of Taxation
One Capitol Hill, Suite 10
Providence, RI 02908-5812
Your application will be evaluated by the Compliance and Collections Section and you will be notified in writing within 30 days as to their decision. Until you have paid your balance in full you will continue to accrue interest and penalties. If you want tax help or to discuss your situation and ask questions, please phone collections at (410) 574-8941.
If your proposed installment payment agreement gets denied, or you fail to abide by any existing agreement, steps to collect your overdue taxes may begin. These could include having a levy placed on your wages or assets, tax liens filed, any licenses you have being revoked, or more. Even if you are approved for an installment payment agreement, a lien may be required as security in the interest of the state. However, this lien will not show up on the Division’s website on the published list of liens.
If you are dealing with the Division of Taxation on your own and not getting the results you’d hoped, it may be time to consult with an experienced tax professional that can advise you on the types of tax help and/or tax relief you may be eligible for in your situation.
Offer in Compromise
If you are undergoing a case of extreme financial hardship the Division has the option of offering you an Offer in Compromise (OIC). This tax relief program would enable you to settle your taxes for less than what you really owe. In order to start the process you would have to provide them with very detailed information on your finances, listing all your assets and liabilities.
If your case were accepted for an OIC you would be required to comply with all Rhode Island tax codes and file your returns and pay on time. This would be for a period of 5 years from when you accepted the OIC; otherwise you would be in default of the offer. If you default on the offer, the Division of Taxation is entitled to file a lawsuit against you or place a levy on your assets to collect the money you owe the State.
To request an Offer in Compromise for any taxes, interest, penalties, fees or other charges considered illegal, excessive or uncollectable by the Director of Administration and Tax Administrator.
If you would like to be considered for an OIC, you will need to submit a proposal by completing and submitting the following:
Offer in Compromise Form RI-656
Collection Information Statement Form RI-433A for the self-employed and individual wage earners
A detailed request in writing that discusses:
- Which type of tax this involves
- Amount of abatement or tax relief you are requesting
- All your reasons for requesting an Offer in Compromise
- Any information you have given the IRS regarding an Offer in Compromise request
Everything must be signed and sent to the following address:
Rhode Island Division of Revenue
Division of Taxation
One Capitol Hill
Providence, RI 02908-5812
You will receive written notification when they have come to a decision. If your offer is accepted, the full amount must be paid within 30 days from the date on the written acceptance. If you are denied, the payment you sent with your offer will be returned in full without interest.
When asking for a settlement of your delinquent taxes, you are entitled to request an abatement of the penalties you’ve been slapped with. To qualify for this form of tax relief, you must prove the assessment of these penalties was an error or that you didn’t deliberately intend to not pay your taxes. If you want to ask for a penalty abatement or waiver, you should write a letter with all the details and include any substantiating documentation. Send your request to the above address.
Power of Attorney
You are entitled to have a tax professional, enrolled agent, CPA, or any other qualified person represent you during your administrative contacts with the Division of Taxation. To facilitate this you would need to file Form RI-2848, which is Rhode Island’s Power of Attorney form. Dealing with the Department of Taxation can be very stressful and you have every right to have a Power of Attorney, someone you trust who will work on your behalf to give you the tax help you need.Contact Us