Alabama Taxing Information
If you file a tax return, personal or business related, and payment or full payment is not included, an assessment is made. You will receive a Notice of Preliminary Assessment. If you do not agree with the assessment you may file a written request for review with the Department within 30 days of the preliminary assessment date. If a written request for review is not received within the 30 day time period, or if upon review, the assessment is upheld, the Department will enter a final assessment. Final assessments may be appealed, within a 30-day period, to the Department's Administrative Law Division or circuit court. Once final assessment has been rendered, if unchallenged, it is equal to a court judgment.
The Collection Services Division acts as an in-house collection agency for the state of Alabama Department of Revenue. If your file reaches the Collection Services Division it means that you have had a final assessment and the appeals period has expired. Once reaching this Division, the tax liability has the full force and effect of a court judgment and may be collected by several enforced collection methods.
Final Notice Before Seizure
Once your tax liability has reached the Collection Services Division you will receive a letter titled Final Notice Before Seizure. The notice gives you 10 days to resolve your tax liability before further collection action is necessary. You will only receive the one notice before the Department takes further action.
If the taxpayer makes no response to the Final Notice Before Seizure, the Department will most commonly issue a Writ of Garnishment to the local sheriff. A garnishment allows funds to be taken from the taxpayer's credit union or bank account. A garnishment may also require an employer to withhold 25% of the taxpayer’s wages until the liability is paid in full.
The Department of Revenue may issue a tax lien against all property or rights to property of an individual, corporation, partnership or other entity that does not pay the taxes required by the state of Alabama. In general, a Notice of Tax Lien will be filed 30 days after final assessment. A tax lien is a security for payment of the liability and may negatively affect the delinquent taxpayer’s credit as well as inform any potential buyers that the property may be subject to seizure. A lien is usually valid for 10 years, the statue of limitations for collecting final assessment.
The state may also levy on the tax debtor's property, resulting in an order for the sheriff or other official to seize the property, hold a public sale, and give the sale proceeds to the department. The levy is based on the final assessment and not the tax lien.
Personal Liability and 100% Penalty Assessment
As a business owner or corporate officer, you may be held personally liable for the timely payment of certain business taxes referred to as trust fund taxes. Trust fund taxes include income withholding, state and local sales taxes, lodgings tax, motor fuels tax, gasoline tax, utility gross receipts tax, and use tax. As a sole proprietor or partner in a partnership, you may eventually be subject to seizure of your personal assets for failure to pay business-related trust fund taxes. Additionally, in 1984, legislature passed making it possible for the State of Alabama to go directly after individuals in a corporation who are responsible for the collection, holding and payment of trust fund taxes to the state. The 100% Penalty Assessment transfers what the corporation owes to the person or persons who had the responsibility of collecting, accounting for, and paying taxes to the state on behalf of the corporation.
The Commissioner of the Department of Revenue is authorized to enter into a payment agreement with the taxpayer if the tax bill has been finally assessed without appeal and the commissioner determines that an installment plan will help facilitate the collection of the tax debt. Payment agreements may not extend beyond a 12-month period. The agreement may be terminated at any time if any of the following circumstances occur:
- Information provided by the taxpayer to the commissioner or department is determined to have been inaccurate or incomplete.
- The taxpayer fails to pay any installment at the time that it is due.
- The taxpayer fails to timely pay any other tax liability that is due to the department.
- The financial situation of the taxpayer has changed significantly.
- The taxpayer fails to provide a financial update when requested.
- The commissioner believes the collection of any tax under the agreement is in jeopardy.
Power of Attorney
You may have a qualified professional represent you before the state of Alabama. This requires that you have a Power of Attorney form completed and signed before any tax matter can be discussed with your representative. The state of Alabama accepts Alabama Form 2848A for this purpose.