The taxpayer should make every effort to pay the full amount listed on the tax return or the Notice of Tax Due. However, there are times when the taxpayer is unable to pay the full amount of tax owed. In those circumstances, the taxpayer should first pay as much of the tax liability as possible. The more tax paid with the tax return or the Notice of Tax Due, the fewer penalties, interest, and cost of collection fees will accrue.
When unable to pay in full, the taxpayer should contact the Department of Revenue immediately to explain their circumstances. The Department of Revenue will work with the taxpayer to determine the most effective and expedient way to satisfy the tax liability.
In determining the most effective way for the taxpayers to satisfy their tax liability, the Department of Revenue may request that the taxpayer complete one or more of the following:
- Statement of Financial Condition for a Business (29K)
- Request that the taxpayer sell or mortgage certain assets to secure the necessary funds to pay the tax liability, if there is sufficient equity to do so.
- Request that the taxpayer secure a commercial or personal loan to pay the tax liability.
The Department of Revenue will review the Statement of Financial Condition (Business) or (Individual) and will compare the taxpayer's monthly income with expenses to determine the ability to pay.
In most cases the Department of Revenue will require the taxpayer to pay using electronic payments (E-check). Once placed on a payment agreement, the taxpayer must make each payment on time. It is the taxpayer's responsibility to contact the Department of Revenue immediately if unable to make the payment on time, the taxpayer has changed banks (for electronic payment), or anytime the taxpayer's financial condition changes. Payments may be adjusted to prevent undue hardship.
The taxpayer should be aware that the Department of Revenue might file a Notice of State Tax Lien as part of an approved payment agreement to secure the Department of Revenue's interest in assets. The Department of Revenue may also periodically request an updated Statement of Financial Condition (Business) or (Individual) to determine a change in the taxpayer's ability to pay.
A cost of collection fee may still be added to the account. Applicable penalties and interest will continue to accrue on the unpaid tax. If the taxpayer is entitled to receive a tax refund while there is an outstanding tax liability, the Department of Revenue will first apply the refund to the unpaid tax debt and refund any remaining balance. If the taxpayer is entitled to receive a payment from a business contract with a state Government agency and owes a delinquent tax liability, the Department of Revenue will apply the payment to any outstanding liability first before releasing the payment to the taxpayer.
Payment agreement negotiations are discontinued and approved payment agreements are cancelled if the taxpayer does not provide the requested financial information or if the terms of the agreement are no longer met. Examples include late payment, missing payments, closed bank accounts, non-filing and non-payment of future required tax returns. At any time the terms of the agreement are not met, the Department of Revenue may continue with enforced collection action.
If, after reviewing the Statement of Financial Condition (Business) or (Individual), the Department of Revenue determines that the taxpayer cannot pay any amount of the tax debt, collection may be delayed until the taxpayer's financial condition improves. If collection is delayed, penalties, interest, and cost of collection fees continue to accrue on the account. A Notice of State Tax Lien may also be filed to protect the Commonwealth's interest in any assets. The Department of Revenue will request updated financial information from time to time during this period to determine the taxpayer's ability to pay.
Inquire about a Payment Agreement