Reconciling back taxes and debt in Arizona can be a complicated procedure. Taxpayers in 2024 have numerous stages and choices at their disposal. Here is an overview to help you navigate the reconciliation process.

Understand Your Tax Debt

• Review Your Tax Returns: Examine previous tax returns to find discrepancies or missed payments. Ensure that all income, deductions, and credits are reported correctly.
• Request a Transcript: Request a transcript of your tax account from the Arizona Department of Revenue (ADOR). It contains a full record of your tax returns, payments, and outstanding balances.

Contact the Arizona Department of Revenue (ADOR)

• Initiate Contact: Contact the ADOR to verify your status.
• Set Up a Payment Plan: Requesting an installment payment plan is possible as well. There are short-term and long-term installment plans available.

Payment Plans and Installment Agreements

• Short-Term Payment Plan: Pay off smaller debts within a few months.
• Long-Term Installment Agreement: Pay off larger debts over several years. This option has interests and penalties.
• Automatic Withdrawal: Set up recurring withdrawals from your bank account to avoid penalties.

Offer in Compromise (OIC)

• Eligibility: Paying your entire tax bill may result in financial hardship. Determine your eligibility for an Offer in Compromise (OIC). Tax due may be reduced.
• Application Process: Provide complete financial information to the ADOR. This includes income, expenses, assets, and liabilities. The ADOR will assess your ability to pay and decide whether to accept your offer.

Penalty Abatement

• Requesting Penalty Relief: Present valid cause for failing to pay your taxes on time. It could be the result of a serious illness or a natural calamity. You may be eligible for penalty abatement. It does not eliminate the tax debt. It lowers the amount owing by eliminating penalties.
• Interest: Interest on unpaid taxes is not waived.

Filing Amended Returns

• Correct Errors: File an amended return for corrections in your previous tax filings.
• Amended Returns Process: Use the correct Arizona tax forms to file an amended return. The ADOR will reassess your tax liability based on the corrections.

Tax Liens and Levies

• Tax Liens: The ADOR may file a tax lien against your property for failure to settle your tax debt. This guarantees the government’s interest in your property. Selling or refinancing your property becomes difficult.
• Levies: The ADOR may issue a levy. This allows them to confiscate your assets to pay off your tax debt. It includes your bank accounts or salaries.

Bankruptcy Considerations

• Dischargeable Tax Debt: Certain tax debts may be dischargeable in bankruptcy. This depends on the age of the debt and the timely filing. Consult with a bankruptcy attorney first.
• Chapter 13 Bankruptcy: Set up a payment plan to repay your tax debts. You can pay it off in three to five years.

Staying Compliant Moving Forward

• Timely Filing and Payment: File your taxes on time. Pay your tax debt by the deadline. These easy steps prevent penalties and interest.
• Estimated Tax Payments: Self-employed individuals should get help from a tax professional for accurate estimates. File your quarterly taxes to stay current with your tax obligations.

Resources

• Arizona Department of Revenue (ADOR): AZDOR.gov
• Internal Revenue Service (IRS): IRS.gov
• Low Income Taxpayer Clinic (LITC): Find local clinics that offer free or low-cost legal assistance.

Understand your options in reconciling back taxes and debt so you can take proactive steps. Also, settle your tax obligations to avoid penalties. Consult with a Certified Public Accountant (CPA), tax attorney, or enrolled agent for a well-informed tax plan.