NC Department of Revenue Collections
NC Department of Revenue Garnishment
If you have a past due balance, the Department of Revenue may do any of the following:
- Attach and garnish (levy) your bank account to pay taxes due.
- Attach and garnish 100% of any payments received as a result of the contract as well as any commissions.
- Attach and garnish the wages owed to you by an employer. Wage attachments and garnishments are 10% of a taxpayer's gross income until the tax liability has been settled. Non-wage, contract and bank attachments and garnishments are issued at 100% of the liability due until the tax liability has been settled.
Priority One: Stopping a North Carolina Department of Revenue Garnishment
Attachment and garnishment payments withheld should be remitted to the Department of Revenue every 30-days until the liability shown due on the attachment and garnishment together with accrued interest is paid in full.
Certificate of Tax Liability in North Carolina
A Certificate of Tax Liability places a judgment on any real or personal property that is held by a taxpayer and it makes the liability public information. In order to get a clear title to the property, the CTL must be satisfied or resolved.
If the CTL has been satisfied and released in the Clerk of Court office, you will need to contact the various credit reporting agencies to have it removed from your credit report. This is not something that the NC Department of Revenue can have removed for you.
North Carolina Department of Revenue Notice of Collection
If you have received a Notice of Collection, then an assessment against you has become final and collectible. Your account has been assigned for collection. If the liability is not paid, the North Carolina Department of Revenue may pursue one or more of the following collection options:
- Attach and garnish your wages, salary or bank deposits.
- Issue a Tax Warrant directing the sheriff or a designated employee of the Department of Revenue to levy upon and sell your property.
- File a Certificate of Tax Liability (i.e., a lien on your property).
- Where criminal tax proceedings are initiated, request payment of taxes as a condition of any plea arrangement or as restitution upon any conviction.
If the NC Department of Revenue pursues the collection options set out above, the following options or remedies are available to you:
- You can end the attachment and garnishment of your wages, salary, and bank deposits and the seizure of your property by making full payment of the assessed liability.
- You can secure the release of a Certificate of Tax Liability (CTL) by making full payment of the assessed liability.
- You can seek the release of a Certificate of Tax Liability if one of the following conditions are met:
- The judgment was filed in error.
- The liability has become unenforceable due to the lapse of time.
- The CTL is creating an economic hardship for you.
- The fair market value of the property exceeds the tax liability and release of the CTL on part of the property would not hinder collection of the liability.
- Releasing the CTL would increase the State's chances for collecting the tax.
- You can seek to enter into an installment payment agreement.
- In the event criminal tax proceedings are initiated, you should contact your attorney and the prosecutor to determine your options.
Offer in Compromise
The NC Department of Revenue may settle a liability for a lesser amount than is due when in their opinion it is in the best interest of the state. You may be a candidate for offer in compromise if you meet 1 of the 4 conditions listed below:
- There is a reasonable doubt as to the amount of the liability of the taxpayer under the tax code and facts.
- You are insolvent and the Secretary probably could not otherwise collect an amount equal to or in excess of the amount offered in compromise.
- Collection of a greater amount than that offered in compromise is improbable and the funds or a substantial portion of the funds offered in the settlement come from sources from which the Secretary could not otherwise collect.
- A federal tax assessment arising out of the same facts has been compromised with the federal government on the same or a similar basis as that proposed to the State and the Secretary could probably not collect an amount equal to or in excess of that offered in compromise.
Upon acceptance of the offer, the Department requires payment of the settlement amount in full. The Department will not accept a "zero dollar" offer.
Offer in Compromise with the IRS
The North Carolina Department of Revenue will evaluate your offer separately from an IRS Offer in Compromise.
Penalties and Interest in North Carolina
On or before June 1 and December 1 of each year, the Secretary of Revenue establishes the interest rate to be in effect during the six-month period beginning on the next succeeding July 1 and January 1, respectively. The rate applies to refunds and assessments.
If you do not pay the total amount of taxes you owe, the North Carolina Revenue Department charges interest on any unpaid tax. Interest is computed at the applicable rate from the original due date to the date of payment.
- If you do not file by the original due date, a late filing penalty of 5% of the unpaid tax is added for each month your tax return is late. This penalty cannot exceed 25% of your unpaid tax.
- The penalty for the late payment is 10% of the tax shown due and not paid by the original due date. However, if you have an extension and pay at least 90% of your tax by the original due date, the late payment penalty will not apply if you pay the remaining balance due with the return by the extended due date.
- Interest on the underpayment of estimated income tax is computed on Form D-422. If your income tax liability after credits and North Carolina tax withheld was $1,000.00 or more, you are required to pay estimated tax.
- If the IRS changes your federal return, you must amend your State return within 6 months after the date the federal report is received. If you fail to report the federal change, you must pay a 5% penalty for each month the federal change is not reported to the Revenue Department. The penalty cannot exceed 25% of your additional tax.
- If you understate your income, overstate your deductions, or make erroneous adjustments to your federal taxable income you will be subject to a negligence penalty of 10% or 25%. If the IRS changes your federal income tax return and assesses the negligence or accuracy penalty, you will be subject to a negligence penalty for North Carolina tax purposes.
- If you fail to pay an overdue tax debt, the Revenue Department can assess a 20% Collection Assistance Fee on any tax, penalty and interest not paid within 90 days after the tax debt becomes collectible. The fee will not apply if you are making payments under an installment agreement that became effective within 90 days after the debt became collectible.
- If you write a bad check to the Revenue Department, you will be charged a bad check penalty of 10% of the check amount that was returned for insufficient funds. The bad check penalty cannot exceed $1,000.
- If it is discovered that there is fraud with intent to evade or defeat the tax, you will be assessed a fraud penalty of 50% of your unpaid tax.
Power of Attorney with the State of North Carolina
You may have a tax professional represent you before the state of North Carolina. This require form GEN-58, "Power of Attorney and Declaration of Representative", to be filed with the state.
Tax Warrants in North Carolina
A tax warrant is a request to levy on and sell any personal property owned by a taxpayer who has failed to pay tax, penalty, interest and fees that have been assessed by the NC Department of Revenue. The warrant is issued to the Sheriff of the county in which the taxpayer's property or business is located.