If you owe a state money from unpaid taxes, the debt continues to accumulate interest and late fees until it is paid. it is always best to pay in full immediately. Unfortunately, sometimes that is easier said than done. If you cannot afford to pay off your debt in a lump sum, you can contact your state's department of revenue or taxation to apply for an installment payment agreement. Specific guidelines and terms of the agreements vary among states.
Qualifying for an Installment Agreement
In most cases, you can apply for an installment repayment agreement if you owe less than $25,000. The state revenue department will thoroughly review your finances to determine your ability to pay. You may need to submit detailed financial information, such as proof of income, name of employer, spouse's income and employer, number of dependents and monthly expenses. All required state tax returns must be filed and current with the state's department of taxation.
Length of the Agreement
When you enter an installment agreement, payments are typically required every month. States will only approve an application for an installment plan if the debt can be paid off within a reasonable amount of time. The length of an installment plan varies greatly, but generally range from a minimum of 3 months to a maximum of 60 months in certain states. For example, in California, installment plan agreements can last up to 60 months. In Georgia, installment plans are limited to 36 months. Arizona generally offers 24-month installment agreements, but will allow longer under certain circumstances.
Paying As Agreed
If you are approved for an installment agreement, it is important to make sure you pay on time every month. A missed payment can void the agreement. If you are unable to make a payment as agreed, contact the taxation department to request an extension. When you enter an installment repayment agreements, states will usually require you agree to not incur additional liabilities.
Liens and Off-Sets
Depending on the amount of your debt and the length of time it will take to pay off, the state may file a tax lien on your property. Once the debt is paid, the lien is released. Even while you have an installment agreement, the state can keep your future state tax refund and apply it towards your debt. Your state may also participate in the Federal Offset Program, which allows the Internal Revenue Service to seize your federal return and forward the funds to the state.
- The New York State Department of Taxation and Finance: Request an Installment Payment Agreement
- State of California Franchise Tax Board: Installment Agreement - Individuals
- Georgia Department of Revenue: Installment Agreement Request
- State of Arizona Department of Revenue: Payment Arrangement Information - Personal and Business
- State of New Jersey Department of Treasury: Set-Off/Offset Programs
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.