May 1, 2024
Texas Sos | Tax Texas | Taxes In Texas | State Tax For Texas | Sos Direct
Texas Sos | Tax Texas | Taxes In Texas | State Tax For Texas | Sos Direct
Tax Resolution Options and Outcomes of Back Taxes in Texas
In Texas, there is no state income tax, however, the Texas Comptroller's office collects 60 various taxes, fees as well as assessments along with local sales tax, franchise tax, mixed beverage tax, and state sales tax. In addition, the property owners of Texas have to make payment of property taxes to local authorities in their respective areas.
In this guide, you will know who you should expect when you owe back taxes in Texas and also about various options for tax resolutions for any unpaid taxes and unfiled tax returns.
Tax resolution options Texas back taxes
Texas provides several options for people having back taxes. When you cannot afford to pay back your tax bill in complete amount, you will qualify for any of these following programs:
Payment plans for Texas back taxes
Texas provides several payment plans for paying back taxes based on specific cases. Generally, the payment plans get approval when paying the tax in full amount causing undue suffering on the taxpayer. You can propose for payment plan by consulting a local comptroller field office.
Even after setting up a payment plan, the tax collection action will continue. Bill notices will be sent, lien will be filed and all state warrants will be on hold until payment of tax in full amount. This means the state will not approve any kind of payment for you.
Tax resolution options for negligent property taxes in the state of Texas
If you owe property taxes, you have the option to make a payment plan for making payments in installments. The local taxing authorities have the authority to approve payment plans according to their choice and will. They can give you this option on when your property is a residence estate.
Offer in a compromise payment plan
This is a payment plan where the state allows you to pay an amount that is less than what you owe. In Texas, taxpayers do not have this option but they can opt for a penalty abatement program. In the penalty abatement program, the penalty is removed which will lower the overall tax liabilities.
Innocent Spouse Relief
You can opt for Innocent spouse relief for Texas back taxes. But if you have federal income tax due because of your spouse, you will qualify for innocent spouse relief on the federal level.
Hardship status
Even though, in Texas, you will not get a formal hardship program for paying your back taxes you can avail of some tax relief programs occasionally. For instance, the comptroller provides payment plans for those businesses that cannot pay off their sales tax bills because of the COVID-19 pandemic.
If you are not able to pay your tax bill, you can reach out to the state. The comptroller's office might offer you relief in some situations.
Penalty Abatement or Penalty Waivers
You can request waiving penalties because of unpaid taxes. Use form 89-224 when your penalties are due because of a late report or payment and form 89-225 when you have penalties because of failing to file or make payment.
You can send these forms through mail to the Comptroller of Texas or you can also send them by email. Otherwise, you can also request a penalty waiver by writing to the state but in that case, also you have to make inclusions of all details that have been mentioned in the forms for penalty waiver.
Process of appeals
After auditing by the comptroller on your sales tax return, franchise tax return, and other kinds of tax report, if you do not agree with their decision, you can request for reconciliation conference with the audit supervisor. You can also make a request Tax Policy Division for guidance.
If in case, you and the audit supervisor cannot come to any conclusion at the time of reconciliation, you can request the Independent Audit Review Conference or IARC. It is like an informational meeting that occurs between you, the audit supervisor, and the Independent audit reviewer. You will obtain a Texas notification of audit outcomes when the IARC decides on your case.
If you still disagree with the decision, you can request a reconsideration hearing, but in that case, you can request on or before the final notice date. Usually, the final date is 60 days after the statement date on the notification, and in case of jeopardy consideration, the final date will be 20 days after the date of determination.
If you make a payment of the balance, penalties, and full interests, then you have six months from the final date to request the refund.
Amnesty program
As of 2021, Texas does not have an existing amnesty program for taxpayers. From May 1st, 2018 to June 29th, 2018, Texas had a tax amnesty period where taxpayers could make a payment of their due taxes without thinking of any criminal prosecution.
Forced actions on taxpayers for unpaid taxes in Texas
Normally, when you refuse to make payment of your state taxes, the state will need you to post a security bond. Post that, the state will file for a tax lien on your property, a seizure of your non-exemption assets, and suspend all your licenses or permissions. The state might also file criminal charges against you.
Here are the activities for the collection of back taxes from taxpayers in Texas
Tax liens
Texas state law needs the state to safeguard its interest in owed back taxes through tax liens. It is something where a state makes a legal claim against your property against your back taxes, interest, and penalties. A tax lien is automatically attached to your properties on the first of January each year based on your property taxes. If you do not make payment of your property taxes, then the respective authority keeps the right to exclude, seize, or auction your property for paying the tax bill.
Tax levy
The state of Texas can seize your assets in case you have any unpaid taxes. The comptroller's office can seize and sell your non-exempt assets to cover your tax bill.
Penalties and Interest on Wrong Tax in Texas
A penalty amount of $50 is applied for every late tax report in Texas. The penalty is applied from the day after the due date. You might also face a penalty of 5% when tax filing becomes 30 days late or 10% when it is more than 30 days.
An extra 10% penalty is applied when you make payment of tax after the date that is written on notice of tax/fee due. Thus late payment gives you a penalty of 20%.
Texas assesses interest starting from the 61st day past your due date. The rate of interest is the primary rate including 1% and it adjusts annually.
Instinctive termination of Entity
Texas Secretary of State can obligatory terminate your entity when you do not meet the needs of filing yearly reports, making payment of the Texas franchise fee, maintenance of the registered agent, or making payment of SOS filing fees. This implies that you might become liable for business debts and other lawsuits, will not be able to open business bank accounts, and cannot take out loans. In some cases, you can't carry out your business operations. You have to stay in compliance with the needs for reinstating Texas business.
Penalties for late payment of unemployment taxes
Most of the employers in Texas have to pay unemployment taxes to the Texas Workforce Commission each quarter. When you are late, you will have to pay penalties of up to 37.5% of the unpaid unemployment tax amount.
Penalties for past taxes owed to the International Fuels Tax Agreement
IFTA taxes have varied penalties than other Texas state taxes. The minimum penalty for IFTA tax is $50 or 10% of total liabilities, which is more. Interest starts accumulating on the first date after the due date.
Penalties and interest on wrong property taxes
In general, the bills of property taxes are mailed in October and they become due on January 31st. When you make payment on or after February 1st, your property tax bill will start incurring interest and penalties. Keep in mind that when your tax authority mails your tax bill later, it will be not counted as late until 21 days after the postmark date.
In Texas, the late property tax bills incur a 6% penalty on the IST of February and they incur an extra 1% penalty every month till July 1St. Then the penalty starts becoming 12% of the total balance. If in case, the taxing authority gets associated with a private attorney for the collection of tax, then they might charge an extra penalty of 20% of the total balance.
For instance, when your unpaid property tax is $2,000, then your penalty will be $240 on the 1st of July. When the taxing authority gets associated with an attorney for the collection of unpaid taxes, the penalty can go up to $400.
On top of all penalties, you will also face an interest of 1% of the total balance every month. There is no maximum limit on the interest.
Suspension of permission and license for unpaid taxes in Texas
When you do not report or file your tax, the comptroller's office conducts a hearing to decide whether to suspend any permission or licenses that have been issued by agencies. When you fail to appear in these hearings, the comptroller's office will go for suspension of permission and licenses.
You can only avoid the hearing if you file or pay back your taxes or post a security bond needed by the state.
Common notices
An estimated billing is sent by the comptroller's office when you fail to file the needed tax report. The billing notice gives a brief about penalties, collection actions, and interest and also explains what to do when you disagree.
When you do not file, make payment of taxes, or post of security bond, you might get a notice of hearing for canceling or suspending your permits or licenses. You will also get notices before the stake takes any kind of collection actions on your tax account.
In some rare cases, the comptroller's office might hand the account to any Attorney general. When you do not respond to the notice, you will face civil actions.
Statute of Limitations on Tax Collection in Texas
The comptroller's office in Texas has four years starting from the due date of paying tax for assessing tax liabilities. But this statute of limitations is not applicable in the below situations
- The taxpayer does not file a sales tax return
- The taxpayer makes filing of tax return with a gross error that underreports the tax due by a minimum of 25%
- The taxpayer makes a fake tax return with the intent to evade the taxes.
There is a chance of extending the Statute of Limitations by 24 months through an agreement between the Comptroller and the taxpayer. The limit is stopped when a bankruptcy case is pending, in between the filing of a lawsuit and the date of protest payment and also when a reconsideration is pending. Within three years from the date of deficiency determination, the comptroller's office can seize the assets.
Tax auditing in Texas
The Texas comptroller keeps the right to carry out audits on your Texas state tax returns. The comptroller can audit the tax returns that you submit but specifically, the state does audit of many restaurants. If you are facing difficulties because of sales tax or any mixed beverage tax audit in your restaurant, it's time to hire a tax pro who has the required experience with the same kind of tax issues.
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