Tax Help with Arizona State Taxes
A levy is the taking of money, real estate, or personal property belonging to you, to satisfy a tax liability. If the state levies your bank account(s), your bank is required to hold funds you have on deposit, up to the amount you owe for 21 days. This period of time allows you to resolve any errors about the levy, make arrangements to pay the amount due, and get necessary professional advice.
A levy may be initiated against you if you fail to make satisfactory payment arrangements with the department, fail to respond to a final demand notice, fail to keep your installment arrangement, or fail to provide financial information to the taxing department upon request.
Priority One: Stopping Aggressive Enforced Collections
Do you owe taxes due to the following?
- underpayment or non-payment
- missed tax return filings
- tax return errors
- dispute on taxes owed
If so, the IRS or state will send a billing notice to your last known address. This is also considered a demand for payment and is the beginning of the collection process.
The state of Arizona Collections Department will attempt to collect as much money as possible in the shortest amount of time. They may ask you to:
- Sell or mortgage any assets to pay the taxes.
- Secure a loan to pay your taxes
They may also take their own actions such as:
- Levy your bank account
- Garnish your wages
If you have an unpaid tax liability, eventually the state will file a tax lien against you with the Secretary of State and/or County Recorders Office. A tax lien attaches to all your real estate or personal property, and to all your rights to property. At this point, the lien is public record and may have an adverse effect on your ability to borrow money or buy or sell property until the lien has been paid in full.
Offer in Compromise
If your financial circumstances make it impossible for you to satisfy your tax obligation, you may wish to make an offer in compromise. This allows you to settle a tax debt for less than is owed. If your offer is accepted, payment in the amount of the offer in compromise will discharge your tax liability and any liens securing it. For your offer to be considered, it must be for an amount, which reflects your maximum ability to pay.
To submit an offer in compromise, all income tax returns for the last three years must be filed. If you are operating a business, all business tax filings and licenses must also be current.
Once the department accepts or rejects the offer in writing, you have no right to contest the amount of the tax liability.
The state will retain any refunds or overpayments made by the taxpayer, as well as any proceeds from a levy served prior to the receipt of the offer but not received at the time the offer is submitted.
Finally, you must comply with all the provisions of Arizona tax code relating to the filing of returns and payment of any tax due for a period of three years following acceptance of this offer in compromise. Non-compliance with any of the terms stated in this offer in compromise would be considered default.
In situations where paying the liability in full isn't an option for you, the state of Arizona will consider taking payments.
For individual income taxes, you may be asked to provide detailed financial information, including your income, name of employer, your spouse’s income and employer, number of dependents, monthly expenses, banking information, and other financial information to determine your ability to pay the liability. The state has allowable expenses for home and automobiles, but if you exceed their allowable expenses, they can force you to either pay more than you can afford, or to down-size your expenses so that you can pay the state a higher amount.
For business taxes, you may be asked for the above, as well as the names, addresses, and social security numbers of the owners of the business, and related tax account identification numbers. In addition, you may be asked to provide a complete written financial statement and profit and loss statement. Once a financial analysis has been made, a revenue officer from the state will work out a payment plan with you. The state often has an unrealistic idea of a business's ability to pay a tax liability while also staying current and having money for reinvestment and income. Know your budget before agreeing to anything.
The state may alter, modify, or terminate your installment payment agreement if any of the following occur:
- You fail to pay an installment payment or any other tax liability at the time it is due.
- You fail to file any tax report or return at the time the report or return is due.
- You fail to furnish any information requested by the department within thirty days after the request.
- You fail to notify the department of a material improvement in your financial condition.
Personal Assessment for Business Taxes
If you are a corporate officer, or deemed one, you may be held responsible and personally liable for unpaid taxes, interest, and penalties. Further, corporations that owe taxes may have their corporate charters denied for renewal.
You may have a qualified professional represent you before the state of Arizona. 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 Arizona Department of Revenue accepts the Arizona Form 285 for this purpose.
Sales Tax Permit
If your business collects sales tax and makes sales tax payments to the Arizona state government, you must have a valid sales tax permit. If you are delinquent in your tax obligations your sales permit may be suspended or revoked.
Wage Levy or Garnishments
When the state issues a wage levy to an employer, the employer is legally obligated to withhold a portion of your earned wages and send them to the state. A levy on wages is continuous and will remain in effect until the entire amount you owe (tax, penalty, and interest) is paid in full.
The state can also levy any tax refund, State or IRS. This action is called a refund offset.