Guide to Tax Issues and Resolution Options for Georgia Taxpayers
If you’re behind on your state taxes with the Georgia Department of Revenue (GA DOR), failing to resolve can lead to levies, wage garnishment, penalties and interest, and state tax liens with a 20% collection fee.
You may even temporarily lose your professional license, which could significantly disrupt your business operations. The state can also take away sales tax licenses or business permits if you don’t pay business taxes.
The GA DOR collects personal and business taxes in the Peach State, including sales tax, withholding tax, corporate tax, and income tax. Not paying any of these taxes can put you at significant risk. To protect yourself, contact us for tax representation services.
In this guide, we shall cover all GA DOR tax problems and how to resolve them to prevent collection actions. If you’re already facing collection actions, keep reading. We have something for you, too.
Key Takeaways
- Georgia DOR imposes a 5% failure-to-file penalty and a 0.5% failure-to-pay penalty on the tax debt each month (both penalties can increase up to 25%).
- The Georgia DOR offers tax relief programs, including OIC and installment agreements.
- You can lose business licenses, such as a liquor license, due to unpaid taxes.
- The DOR sends you several notices before initiating aggressive collections, such as wage garnishment or a bank levy.
Georgia Tax Problems
The biggest tax problems in Georgia tend to be unfiled tax returns, penalties, collection actions, and tax audits. If you are dealing with any of these issues, you are not alone, and there is hope. The following sections provide an overview of each of these problems.
Penalties and Interest
The GA DOR will assess penalties if you miss the deadline or file late. However, the penalty for late filing is 10 times higher than the penalty for late payment. In almost every situation, even if you can’t afford to pay, you should still file.
The late filing penalty is 5% of the tax owed for the part of the month or every month you’re late. If you owe $20,000, that’s $1000. The late payment penalty, however, is just 0.5%. That’s only $100 on a $20,000 tax bill. Both of these penalties accrue monthly and can max out at up to 25% of your bill.
The GA DOR has several policies similar to those of the IRS, including the interest rate on back taxes. The GA DOR and the IRS both apply the federal funds rate plus 3%.
Official Assessment and Demand for Payment (Letter)
If you’ve received a Georgia Demand for Payment notice, it means the DOR believes you owe taxes. Before the demand letter, you’ll usually receive a proposed assessment stating you owe additional taxes, which gives you 45 days to protest or pay the tax bill.
If you ignore the notice, not only do penalties and interest keep accruing, but the DOR escalates collection actions.
State Tax Lien, Plus a 20% Collection Fee
A tax lien is a legal claim to your assets. That means if you try to sell an asset, the lienholder has the right to the money, not you. The GA DOR has the right to issue tax liens (also called state tax executions) 30 days after issuing the “Official Assessment and Demand For Payment.”
A state tax lien remains attached to assets even after a transfer of ownership. For example, if you inherit a property with a tax lien from a deceased taxpayer, the lien remains until it’s resolved. Should you decide to sell a property with a state lien, part or all of the proceeds, depending on what you owe, will go towards clearing the debt.
Additionally, the GA DOR adds a 20% collection fee when it issues a tax lien. To avoid this fee, you need to appeal the tax assessment or make payment arrangements before the GA DOR issues a lien.
Wage Garnishment / Bank Levy
The Georgia DOR can also instruct your employer to withhold a portion of your paycheck and send it directly to the DOR to cover your tax debt. This garnishment continues until the debt is fully paid or you enter into a payment arrangement.
The DOR can also resort to bank levies to pay your tax debt by freezing funds in your bank account up to the amount you owe.
License Revocation
If you fail to pay your taxes, you can lose your business licenses. This includes both standard business licenses, sales tax certificates, and liquor licenses. To protect yourself, you should contact the DOR to pay your taxes as soon as possible or reach out to a tax attorney to discuss your options.
Individual Income Tax Audit
Generally, an individual income tax audit is not an analysis of your tax return by the GA DOR. Instead, the GA DOR adjusts your return internally based on information from other parties. Then, it sends you a notice about the changes.
For example, say that the IRS audits your return, and that increases your income. Then, your taxable state income will also increase, and the GA DOR will send you a bill. Or, say that you report different information on your Georgia state tax return than on your IRS return. The computers will catch that and send you a bill.
However, just because this isn’t the traditional process doesn’t mean you can’t appeal. Once you receive the notice of the proposed assessment from the GA DOR, you have 30 days to appeal.
Business Tax Audits
If the GA DOR notices that your business deductions vary too much from those of other similar businesses in the area or you’re running a cash-intensive operation, it might decide to audit your business. There are many other reasons why the state can decide to audit your business. That said, not all audits lead to more tax liabilities, so no need to panic (just yet). At this point, you just need to meet the deadlines and submit the necessary documents.
Tax Solutions in Georgia
Whether you’re dealing with personal or business taxes, the GA DOR has numerous options to help you. So let’s discuss what you should really do to resolve tax issues in Georgia.
What Should You Do If You Owe Georgia Back Taxes?
- File returns: Without a filed return, the state has an unlimited statute of limitations to collect, not to mention the accruing failure-to-file penalty. Always file even when you can’t afford to pay. Consider pursuing the state’s Voluntary Disclosure Agreement if there are multiple years of unfiled returns.
- Apply for a GA Offer in Compromise: This allows you to settle your tax liability for less than you owe with the Georgia DOR.
- Set up a GA installment agreement: This arrangement allows you to pay your tax debt in monthly payments.
- Don’t ignore the DOR notices: Being non-responsive escalates collections and can result in levies, liens, and garnishments. You could also lose the right to appeal.
- Appeal: If you believe the DOR has made a mistake in calculating your tax liability. You can appeal for a discharge or adjustment.
- Hire a tax professional: If you’re feeling overwhelmed handling or understanding a tax debt, a tax professional can guide you on the best practices or even take over communications and negotiations with the DOR.
All these methods are discussed below in more detail:
Penalty Abatement
The GA DOR always assesses penalties for late tax payments. So, in addition to making payment arrangements on your debt, you should also request penalty abatement. The GA DOR will often remove penalties if you have “reasonable cause,” which means that a serious event (death, illness, etc) prevented you from paying on time. But the agency will also remove penalties for other reasons on a case-by-case basis.
Installment Agreements
The GA DOR may let you make monthly payments on your tax debt. Here are the requirements:
- Pay at least $25 per month.
- Pay off the balance within five years.
- Be current with the last five years of filing requirements.
- Not be in bankruptcy.
- Not have an Offer in Compromise pending with the state.
While you’re making payments, the GA DOR will keep your tax refunds and apply them to your bill until your account is paid in full. Interest and penalties will continue to accrue on your account, but the GA DOR won’t pursue wage garnishment, asset seizure, or other collection actions.
Offer in Compromise
If you can’t afford to pay your tax bill, you may be able to arrange a settlement with the state. This is called an Offer in Compromise, and you must provide the GA DOR with very detailed financial information when you apply. This type of settlement is based on doubt as to collectability.
The GA DOR also offers tax settlements based on doubt as to liability. This applies in cases where there is a credible doubt that you owe the tax, but for some reason, you’re unable to appeal. To apply for this program, you need a strong knowledge of the tax code and a compelling reason why the tax debt isn’t really your responsibility.
An Offer in Compromise with the Georgia DOR functions similarly to an OIC with the IRS. To find out more about how OICs work and whether you may be eligible, download our free whitepaper, “Demystifying the Offer in Compromise: Understanding the Frequently Misunderstood Tax Liability Solution.”
Download Our Free OIC Whitepaper
Innocent Spouse Relief
The Georgia DOR allows relief from tax liability if you can prove that, even though you were filing jointly with your partner, you had nothing to do with the tax debt. For example, proof that they omitted income. However, the Georgia law doesn’t offer injured spouse relief.
Appealing a Tax Assessment in Georgia
If you receive a tax assessment, you have 30 days to appeal. Typically, this happens if the DOR audits or adjusts your return and you disagree with the changes. It can also occur if the DOR assesses a tax against you related to an unfiled return.
After an audit or adjustment, you will receive a proposed assessment. You can send a response to the GA DOR if you disagree, but you can’t yet start a formal appeal. You need to wait until you get the final assessment.
Voluntary Disclosure
The Georgia Voluntary Disclosure program helps people who have unfiled taxes. To qualify, the GA DOR must not have contacted you first. Then, in exchange for your coming forward voluntarily, the GA DOR limits the look-back period of tax returns that have to be filed and waives penalties.
Bankruptcy
While some bankruptcy types, like Chapter 7, can eliminate credit cards entirely, and some income taxes. It’s not always the answer if your main concern is tax debt. Even with income tax, the tax debt must meet the 3-2-240 rule to be discharged. Not to mention that in Georgia, if you had a tax lien attached to your property before filing for bankruptcy, it still applies.
Before you file for bankruptcy, consult a tax attorney to get the amount of tax debt that will be discharged.
How Long Can Georgia Collect Back Taxes?
Like the IRS, Georgia’s statute of limitations is 10 years. This means from the day of your tax assessment, the state has 10 years to collect the tax liability. After 10 years, the state is legally required to discharge the tax bill. However, there are some factors that can stall the state of limitations, leading to an extension, including, but not limited to, filing for bankruptcy or applying for an installment agreement with the department.
Georgia has other state limitations that limit how it may collect back taxes. For example, state liens must be recorded within 5 years of the assessment date for assessments made after January 1, 2018. If this time elapses, the state can’t place a lien on your property for that specific debt.
FAQs About Georgia State Taxes
What happens if you don’t file state taxes in Georgia?
If you don’t file taxes, you’ll face a late filing penalty of 5% (up to 25% of the tax debt) and 0.5% failure to pay penalty (up to 25%). If you don’t take action, the state can access your estimated taxes and start collections, which include wage garnishment, bank levies, liens, and asset seizure.
What if I didn’t file sales tax returns in Georgia?
You’re required to file a sales tax return and remit sales taxes to the state if you sell certain products and services. If you didn’t file a sales tax return, you may face interest and penalties. The GA DOR may rescind your sales tax license for not filing. If you haven’t registered for a sales tax license, and you should have, the state can also assess penalties against you.
What happens if you don’t pay taxes in Georgia?
You get a 0.5% failure penalty that increases up to 25%. If you still don’t make payment arrangements, you will receive a series of notices. If you ignore the letters, the state can escalate its collection actions. This means wage garnishment, tax liens, bank levy, revoking liquor license, and any other actions to get you to either clear the tax debt or make payment arrangements.
What to do if you owe back state taxes?
Start by filing all your unfiled back taxes (a professional can ensure you don’t file unnecessary years and trigger unnecessary tax debt). After filing taxes, if you can’t afford to pay the full amount, explore Georgia DOR tax relief programs, such as an OIC or an installment agreement, to help manage the debt. This will prevent aggressive collection actions like wage garnishment, loss of business licenses, and bank levies.
What if you commit tax fraud in Georgia?
In Georgia, if you underreport tax due to fraud, the state assesses a penalty of 50% of the underreported tax. To explain, say an auditor discovers fraud on your tax return, and you underpaid by $20,000. The fraud penalty will be half of this amount, so $10,000.
How do you pay Georgia state taxes?
You can pay Georgia individual income taxes online. The GA DOR website has links to online payment options for state tax liens, estimated taxes, and assessments. Alternatively, you can pay through the mail. Send a check or money order along with Form 525-TV when you file your return. Use Form IT-560 to pay taxes related to an extension and Form 500-ES for estimated quarterly taxes.
When you file online, you can pay business taxes with a direct debit from your bank account. If you file through the mail, you can send a payment with your return. Or you can make a quick payment online through the Georgia Tax Center.
Get Help With Georgia Tax Problems
When dealing with state tax problems, you should avoid reaching out to the big nationwide firms – they’re focused on sales volume, not customized services with real, sustainable resolutions. Instead, you should get help from a local tax attorney who has experience with the Department of Revenue in your state.
Our firm, Wiggam Law, is based in Atlanta, GA, and our experienced tax attorneys have helped clients resolve issues with the GA DOR and the IRS for years. Whether you’re dealing with unfiled returns, tax audits, state tax debt, or any other tax issue, contact us today to see how we can help you. Call us at (404)609-1300 or fill out our online contact form to schedule a consultation.
