Connecticut Taxing Information
A bank levy may be issued as a one-time garnishment that is executed on the day the bank receives the warrant. All available funds will be taken up to the amount of the warrant, including any fees that are due and will be held by the bank for 15-21 days before being sent to DRS.
The Collection and Enforcement Division is responsible for ensuring that tax returns and payments are filed and paid on time. In general, you will receive at least 30 days notice from DRS that there is intent to take civil enforcement action. If you pay your tax liability within the 30 days of the notice, there will be no enforced action. Enforced actions may include liens, bank levy, wage garnishment, offset, referral to collection agencies and more.
If you willingly fail to file a tax return, there are criminal sanctions.
Priority One: Stopping Aggressive Enforced Collections
Offers in Compromise
If there is a doubt as to your liability for a tax assessment or serious doubt as to the collectability of the tax, you may be able to qualify for an Offer in Compromise.
You must make an offer in compromise that is based on doubt to liability to the Appellate Division and it must be made before the assessment becomes final. Doubt to liability only applies to assessments that are made by an audit assessment, and not on a self-assessed tax.
An offer in compromise that is based on doubt as to collectability must be made to the Collections and Enforcement Division. A doubt to collectability may exist when the full correct amount of the tax debt exceeds the taxpayer's assets and income.
An offset is when a refund that is due to you is seized and applied to your delinquent tax bill. If you have a past due Connecticut tax liability, you will receive a certified Note of Intent to Offset. To avoid the offset you must take action within 60 days of the notice by either making the full payment or requesting a review. A review may be requested if you believe that all or part of the liability is not past due or not legally enforceable or you believe that your debt has already been paid in full.
Even if you have a payment plan, DRS will offset your federal and state tax returns.
You may qualify for a short-term payment plan if you are not able to pay all of your taxes when they are due. The following requirements must be met to request a payment plan:
- You may not currently be in collection status with DRS or have your account in collections with an outside agency;
- You must owe less than $3,000;
- You must be able to pay off the liability within 1 year of the plan request; and
- You must have filed all returns.
Requests are reviews on an individual basis. If you do not meet the requirements for a payment plan, there may be other options available through the Collections and Enforcement Division.
Once you have been approved for a payment plan, you must make all payments on time, remain compliant on all future tax obligations, and provide any further financial information when it is requested. Your payment terms may change if there has been a significant change to your financial situation. You will receive 30 days notice before any changes occur.
A tax lien may be placed on your property to secure the interest of the state, even when you have an approved payment plan. Interest will also continue to accrue on the unpaid portion of your tax bill at a rate of 1% per month or fraction of a month.
Penalties & Interest
Penalties and interest will be assessed if you fail to file your tax returns on time or if you fail to pay the full amount of your tax bill. The following are penalties and interest rates that may apply:
- Late income tax payments - penalty of 10% of the balance and interest of 1% per month until the debt is completely paid off.
- Late sales tax payments - penalty of 15% of the tax due or $50 whichever is greater. Interest of 1% per month is also charged.
- Late use tax payments - penalty of 10% of the balance and interest of 1% per month until the debt is completely paid off.
- Late Business Entity Tax - $50 late payment penalty; if you use the electronic system, the penalty is $25.
Can a penalty be waived?
A penalty waiver may be requested if you failed to pay the tax on time due to reasonable cause rather than simply due to neglect. To request a penalty waiver you must first pay all tax and interest that is due. Penalty waivers are reviewed on a case-by-case basis and you may be asked to provide documentation and facts that support why you did not pay on time, what attempts you made to comply, if those attempts were made in a reasonable time and how you handled other financial obligations during the time you were noncompliant.
Can interest be waved?
You may represent yourself or choose to be represented by or advised by counsel or another qualified representative in administrative interactions with DRS. To authorize representation, you will need to complete and file Form LGL-001, Power of Attorney.
If you fail to pay your taxes, a lien may be recorded against your real and personal property to secure the interest of the state. A lien may also be placed on your property when you set up a payment plan with DRS, as added security.
A lien may affect your ability to purchase or sell real estate and may also negatively affect your credit rating. Once your tax liabilities have been paid in full a Certificate of Release will be issued.
DRS normally sends a 30-day notification if your wages are going to be attached to a warrant once it is issued. If you do not pay your liability or otherwise make arrangements for payment, your employer will deduct 25% of your disposable income from your wages or the difference between the disposable income and 40 times the minimum wage; whichever amount is lower. Disposable income is your gross income minus taxes, normal retirement, and health insurance & union dues.