We must begin by saying what you should not do – and that it is ignore your situation and hope it will go away. In other words, don’t be like the cartoon character Wile E. Coyote when he awoke to find that his house had been picked up by a tornado during the night and placed on a railroad track. After being awoken by the sound of a train whistle, he got out of bed and raised the shade on his bedroom window. Upon seeing a massive freight train locomotive bearing down on him at high speed, he tried to solve the problem by pulling the shade down again in the hope that what he couldn’t see couldn’t hurt him. His situation only got worse, and the same thing will likely happen to you if you don’t take action.
But the situation is not all doom and gloom, because the State of Mississippi’s Department of Revenue (DOR) provides a number of different methods for you to deal with your tax problems and get your debt resolved.
Appealing Against a DOR Decision
Even though you may have received a notice from the DOR to notify you of a tax debt, it is quite possible that the notice may be incorrect. For example, the notice may be based on a return that you filed without including details of a W-2 that you had forgotten about. After realizing your mistake, you corrected the error by filing an amended return which the DOR has not yet processed. If you disagree with the notice for this or any other reason, you can file an appeal within 60 days of the assessment or notice. You can use an appeal to dispute the assessment of taxes, a penalty, interest, and other MS DOR actions.
Penalty Abatement
After all parties have agreed on the details of the debt, you will probably find that the amount that you owe to the DOR includes a penalty in addition to the original amount of tax that was not paid. There may well also be a certain amount of interest included, depending on how many months have passed since the tax was due to be paid. Under certain circumstances, the DOR may agree to “abate” (in effect, remove) some or all of the penalties included in your debt. An example of this might be if you were able to make a single sum payment for most, but not all, of your debt. Each case is treated on its merits, but if you were able to show the DOR that you could immediately pay $3,000 towards your debt of $3,500, the DOR may abate some of the penalties included within the $3,500 and accept your $3,000 payment to settle the case.
Installment Agreement
If you are not able to pay the amount you owe in a single payment, the DOR may allow you to pay off your debt in a series of monthly payments over an agreed period of time. You would have to make a request to the DOR to participate in this program, and your approval would be subject to certain conditions. These include filing all tax returns that are due with the State, and you must have paid all taxes that were due in the past five years. Also, you are not eligible for an installment agreement if you have a bankruptcy case that is still pending. Assuming that you have met all of the conditions, and the DOR has approved your application, you would then start making monthly payments towards resolving your debt. However, please be aware that penalties and interest will continue to be added to the remaining balance of your debt throughout the duration of your installment agreement.
Offer in Compromise
In some cases, the amount that a taxpayer owes to the DOR can be so high in comparison to his ability to pay, that an installment agreement would not resolve the debt with a reasonable time period. In cases such as these, the DOR provides the option of an Offer in Compromise (OIC) which allows the taxpayer to negotiate an agreed amount that he can pay, and which the DOR will accept as full settlement of the taxpayer’s debt.
Although this may seem to be a quick and simple way of resolving your debt, the process for applying for an OIC with the State of Mississippi can be quite cumbersome and time-consuming. Similar to the Installment Agreement, there are a number of conditions that must be met – one of which is that the debt must be $3,000 or more and your liability must be at least 4 years old. This means that the DOR must have been unsuccessful over the past few years in using other methods to collect the debt. In effect, it seems that the OIC is a last resort option for the DOR to collect at least part of the outstanding debt that a taxpayer has shown that he is legitimately unable to pay in full.
But from the taxpayer’s point of view, reaching an agreement with the DOR on an OIC would at last allow him to put the matter of his outstanding debt behind him.
How to Get Help
As we have just seen, there are several options open for you to deal with your tax debt – but how do you know which one is right for you? You realize you definitely need to take action, but what action exactly? Fortunately, qualified help is just a phone call away and there is no cost or obligation involved on your part. If you contact
TaxAudit, you will be able to discuss your case with one of our experienced tax professionals who will help you understand the best way to proceed towards getting your tax debt resolved (and avoiding that speeding locomotive! 😄)
