Colorado Taxing Information
If the state of Colorado believes that you owe taxes and their initial efforts to assess and collect the tax have been unsuccessful, the delinquent account is turned over to the collection division.
Prior the taking aggressive collection actions, the state of Colorado will inform you in writing that collection actions may be taken. Collection actions may include, but are not limited to freezing bank accounts, garnishing wages, asset seizure, and account receivable levies for businesses.
The department will, at least 30 days prior to the initial filing of a lien, give the taxpayer preliminary notice of the lien.
Priority One: Stopping Aggressive Enforced Collections
If you think that the state of Colorado has made a mistake on an assessment of taxes owed or had filed a lien in error, the Protest Resolution section of the Department of Revenue will hear your case. They have the power to adjust or wave interest and penalties, as well as notify credit reporting agencies of liens filed in error.
Offer in Compromise of Tax Liability
The Department of Revenue may accept a taxpayer's offer to settle their tax liability for less than the full amount due, through the Offer in Compromise program. Colorado's Offer in Compromise program borrows heavily from the IRS's Offer in Compromise forms and requirements.
In order to be eligible to apply for an Offer in Compromise you must meet the following criteria:
- Your tax filings are up to date, and must be kept current going forward.
- The IRS has already accepted an Offer in Compromise covering the same years and liabilities.
- This is your first Offer in Compromise with Colorado, and you have not had taxes discharged in a bankruptcy.
- You will be able to meet the obligations of the offered amount as well as your ongoing tax obligations.
Payment Plans or Installment Agreements
If you are unable to make a lump sum payment for taxes due, it is possible to make payments to the state of Colorado. In general, the collection officer or collection agency attempt to collect the taxes as quickly as possible. It is important to know your rights and what you can afford, so that any installment agreements do not put undue burden upon your finances, or worse, cause you to fall behind in ongoing tax obligations. The state will require detailed financial statements in assessing repayment time line.
Similar to the IRS's rules, Colorado calculates penalties as cumulative accruals, and can combine different penalties where applicable.
Corporate Officers Penalty
All officers of a corporation and all members of a partnership or a limited liability company who are required to collect but do not collect, account for, and pay over Colorado state taxes are subject to a penalty equal to 150 percent of money assessed but uncollected. Essentially, if you have the "power of the pen" to write checks for taxes, you may be held liable for a company's tax liability.
- Filing of fraudulent, frivolous or willfully false return: 150% of tax owed or $150 or, whichever is greater.
- Evasion or fraudulent failure to pay: 150% of taxes owed.
- Fraudulent or willful failure to file: 100% tax owed or $75, whichever is greater.
- Failure to pay: "Notice or demand For payment": 15% of tax due.
- Failure to file penalty: 5% of tax owed or $5, whichever is greater, to a maximum of 12%.
- Deficiency due to negligence: 25% of the deficient taxes.
- Warrant Penalties: 15% to 30% of tax, penalty and interest due, depending upon circumstances.
- Delinquent payment penalty: 5% of tax owed or $5, whichever is greater, to a maximum of 12%.
- Sales/use deficiency due to negligence: 10% of taxes owed due.
- Sales tax nonfiler penalty: 10% of taxes owed or $15, whichever is greater, to a maximum of 18%.
- Sales tax (fraudulent evasion): 100% of taxes owed and 3% per month.
Power of Attorney
You may have a qualified professional represent you. 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 Colorado accepts the Power of Attorney for Department Administered Tax Matters form for this purpose.
Seizures may occur after other collection efforts have failed, or when the state believes that "their" assets are in jeopardy.
- Seizures are easier to avoid than to reverse.
- If you believe that you may be a target of seizure, get immediate professional advice.
Liens and Warrants
A tax lien, or tax warrant, is a legal document that gives the Colorado Department of Revenue the power to collect past due taxes, seize and sell sufficient property, or encumber the sale of assets. Once a lien or warrant is been filed against a business, it becomes a matter public record and is available to credit agencies. Liens and warrants are filed with county court houses and/or with the Secretary of State.
Wage Garnishments and Bank Levies
The state of Colorado may levy bank accounts and garnish wages in order to collect money due. Employers and banks are legally obligated to comply with garnishments issued by the state on wages and bank accounts for tax delinquencies. There is typically a grace period of ten days, during which the tax payer may dispute the levy or garnishment, or obtain professional help to extend or resolve the collection action.