Kentucky Taxing Information
The DOR Division of Collections may use any of the following enforced collections actions: liens, levies, seizures, refund offset, license or permit revocation, injunction action, corporate officer or LLC manager assessment and state claims.
A levy is a legal enforcement action in which property or assets are seized to satisfy a tax liability that has not been paid voluntarily. A levy may be placed on property, wages, bank accounts or even third parties. If a financial institution receives a levy they must immediately withhold and remit funds to the Department of Revenue. A third party levy may include but is not limited to: cash value of life insurance, licenses and franchises, securities, contracts, accounts receivable, rents and more. Four legal requirements must be met in order to issue a levy:
- A Notice of Tax Due must have been sent to the taxpayer.
- The 45-day period to protest the Notice of Tax Due or assessment must have expired.
- The taxpayer must refuse or neglect to pay the tax liability.
- A Final Notice before Seizure must be served at least 30 days prior to the levy and may be served in person or sent via certified mail to the last known address of the taxpayer.
License or Permit Revocation
The Department of Revenue has the authority to revoke or deny renewal of certain permits or licenses until outstanding tax liabilities have been resolved.
If you have received a Notice of Tax Due, demanding payment, but have refused or failed to pay the tax a Notice of State Tax Lien may be filed by the department. A lien is a public claim against a taxpayer's property or rights to property and may be harmful to credit. This may include things such as a home or other real estate, boat, car or accounts receivable. A lien may also be filed if you default on a payment agreement.
Notice of Tax Due
A Notice of Tax Due begins the collection process if you have not paid all of your taxes. If you receive a Notice of Tax Due you should pay immediately to avoid accrual of penalties and interest. If you cannot pay the tax liability in full, you need to contact the Department of Revenue within 45 days of the notice date to examine your financial situation and determine the best way to satisfy your tax liability. Penalties, interest and cost of collection fees will accrue on any unpaid tax debt.
Offer in Settlement
An Offer in Settlement is when the Department of Revenue may, under certain circumstances, compromise with you, and allow you to settle your tax liability for less than the amount owed. Offers are considered on an individual basis, taking into consideration such things as inability to pay the debt in full, legitimate doubt that the liability is actually owed or extreme financial hardship. Submitting an offer does not suspend collection activity and you may not submit an offer to delay collections.
An Offer may be submitted for one or both of the following reasons:
- Doubt as to collectability: you agree to the liability, and have sufficient evidence to show that DOR will not be able to collect the full liability through other means.
- Doubt as to liability: you have sufficient documentation, and detailed evidence, to support your doubt that you owe the tax liability.
Requirements for submitting an Offer:
- You must be compliant with all other income tax returns that you are required to file.
- You may not have a currently open bankruptcy proceeding, nor plan to file one in the near future while your offer is under consideration.
- If required to make estimated tax payments, you must be current on all estimated payments.
- You must submit all required information listed in the Offer in Settlement Application or it will be returned to you.
About the offer process:
- The offer will be returned if all requested documents are not included or all prerequisites have not been met.
- You will be notified in writing when a decision has been made.
- If accepted, you must remain current on all tax filings and payments for a period of 5 years from the date the offer is accepted.
- f you fail to comply with the terms of the offer, it will be considered to be in default and the liabilities may be reinstated and considered final and due. Enforced collection actions may proceed.
- If the offer is rejected you must make payment arrangements or DOR will pursue enforced collections to satisfy the debt.
If you have a tax liability, the Department of Revenue may apply various types of refunds due to you to the outstanding debt until it is satisfied in full. Common offsets include vendor offset, lottery offset, and state or federal income tax refunds.
You should make every effort to pay as much of your tax bill as possible. If you are unable to pay the full amount DOR may be able to work with you to establish a payment agreement. Penalties and interest will continue to accrue on the outstanding liability and a cost of collection fee may be added to your account. Any tax refunds that you may be eligible for will be applied to the tax debt before releasing any remaining refund to you.
Most installment agreements will require payment in the form of an electronic payment (E-check). You must continue to meet all the terms of the agreement including making all payments on time, filing and paying all future required tax returns and supplying any additional financial information requested by the Department of Revenue. Failure to meet these terms could result in cancellation of the agreement and the pursuit of further enforced collection actions.
As a part of the approved agreement DOR may also file a Notice of State Tax Lien to secure the State's interest in assets.
Any or all officers of a corporation, or managers of LLCs, may be personally assessed in situations where the corporation or LLC owes certain types of tax liabilities to the State of Kentucky. The assessment, or Notice of Tax Due, is treated like and afforded the same protest and appeal rights as any other Notice of Tax Due. The following are the types of taxes that you may be personally and individually assessed for:
- Individual Income Withholding Tax
- Sales and Use Tax
- Coal Severance Tax
- Marijuana & Controlled Substance Tax
- Bank Franchise Tax
- Health Care Provider Tax
- Gasoline and Special Fuels Taxes
- Transient Room Tax
The assessment is due and payable 45 days after assessment unless a protest has been made or a protest is resolved. DOR may pursue enforced collection actions once the assessment has become final.
Protest and Appeals
If you do not agree with a Notice of Tax Due, you may submit a written protest within 45 from the notice date, and may request a conference. After reviewing the protest the department will issue a final ruling. You may file a written appeal with the Kentucky Board of Tax Appeals if you do not agree with the final ruling of DOR.
Representation & Power of Attorney
In any hearing or conference with the Department of Revenue, you have the right to be represented by your authorized agent (attorney, accountant or other person). Before DOR can discuss tax matters with your authorized agent, you may be required to submit a Power of Attorney Form (POA). You may use IRS Form 2848 as your power of attorney in Kentucky..
Seizures and Sale of Property
If you do not pay your taxes or do not make a suitable arrangement for the liability, the Department of Revenue may seize and sell your real or personal property. After property has been seized, a public notice of pending sale is given in at least three public places within the county where the property is located. Perishable property may be sold immediately upon seizure, while other property may be sold after 30 days notice has been given. Any proceeds of the sale will first be applied to costs of seizure and sale, and any remaining amount is applied to the tax liability including penalties, interest and any associated collection fees. If amount of sale does not cover the entire amount of the liability you are still responsible for paying the remaining debt. If there is any surplus from the sale proceeds, you may request a refund for the amount remaining.