When the IRS Garnishes Wages and How to Prevent Wage Garnishment

For many people facing tax issues, wage garnishment is the worst possible outcome. A significant portion of the United States lives paycheck to paycheck, and losing a chunk of your paycheck to the IRS can be devastating. If you are facing tax issues, it is important to understand all the potential outcomes of your current situation and take control of it. 

Wage garnishment is often the tax agency’s solution for taxpayers who have unpaid tax debts or who have been non-compliant with previous IRS payment agreements. Keep reading to learn more about the basics of wage garnishment, when it’s used, how much the IRS can take, and how you can protect yourself from wage garnishment. Panicking over your tax situation and unsure how to proceed? Use TaxCure to find a tax professional who can help you—TaxCure is a curated directory of tax professionals from around the country who focus on tax problems. When you search for a tax pro with TaxCure, you can check out reviews and profiles for many different pros, and you can also narrow down your search based on experience (even wage garnishment) and location.

Why Does the IRS Garnish Wages?

The IRS rarely jumps to wage garnishment as its first solution for unpaid taxes. Generally, it only turns to this option when payment demands have been ignored, tax returns have not been filed, and other attempts to recover payments have been unsuccessful. When the IRS cannot reach any other type of agreement with a taxpayer, they may move to a tax levy. 

A tax levy gives the IRS the authority to garnish wages, seize money held in bank accounts, or seize and sell assets. The IRS's goal is to get what they are owed, and they turn to wage garnishment if they feel it is their best option.

What the Law Says About Wage Garnishment

Under federal law, the IRS is allowed to garnish wages. Per Internal Revenue Code (IRC) Section 6331, the IRS may impose a levy on all non-exempt property or rights to non-exempt property in order to cover the amount owed. A very small amount of wages are considered to be exempt, but the rest are non-exempt property, meaning the IRS can take them.

The law also requires employers to comply with tax wage levies against their employees. When the IRS sends the proper notices and paperwork to an employer, the employer must turn over the amount the IRS is allowed to garnish until the levy is released. They can face legal issues and steep financial penalties if they do not comply.

The IRS Doesn’t Always Garnish Wages—When Do They Pursue This Option?

In general, the IRS files a tax lien before moving to a tax levy. Levies are expensive and time-consuming for the IRS, and they would much rather collect the amount they are owed via other means. But if you ignore tax bills, levy warnings, and other communication from the IRS, they are likely to move forward with a levy. 

Due to the work and money involved in wage levies, the IRS is more likely to go this route for taxpayers who have sizable tax bills. Generally, that means the IRS won't garnish your wages unless you owe at least $10,000, but the IRS can garnish wages for lower amounts of debt. They are just less likely to garnish wages if you owe a negligible amount. Still, that does not mean you should rest easy if you don’t have sizable back taxes. You should still take a proactive approach to settling your tax problems.

That said, the IRS will generally resort to wage garnishment before exploring a property levy. Seizing your physical property and auctioning it off is a lot more time and labor-intensive than sending a notice to your employer and garnishing your wages. 

Notices You Receive When the IRS Garnishes Your Wages

The IRS must go through specific steps to garnish your wages. First, they must assess your taxes and send you a Notice and Demand for Payment. This is your tax bill. Paying this upon receipt is the easiest way to avoid wage garnishment. The standard process they generally follow is sending a CP14 Notice, then a CP501, then a CP503, and then a CP504 notice. After this it is likely they will move to some sort of levy after no response to those notices. 

If you ignore the tax bill and do not either pay in full or make other payment arrangements, the IRS may move forward by sending you a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This notice must be sent at least 30 days before the levy takes effect. You’ll receive the notice by registered mail or at your place of employment. This is one reason it’s so important to keep your address updated with the IRS and other financial agencies; those who move frequently or forget to update their address may not realize they are in trouble with the IRS until their employer contacts them.

In addition to sending notices to you directly, the IRS will also send Form 668-W to your employer if they are moving forward with wage garnishment. Your employer will then give you paperwork to fill out to determine how much the IRS can garnish. What they garnish depends on how many dependents you have and your tax filing status. The chart on Publication 1494 is helpful for calculating this.

A Revenue Officer is Involved—What Does That Mean?

IRS revenue officers are agency employees who attempt to collect delinquent taxes and get taxpayers to submit overdue tax returns. In general, they prefer to help taxpayers come to a payment agreement with the IRS, rather than impose a levy. However, if it is impossible to come to an agreement, they will move forward with other enforcement actions. 

This is one reason we encourage you to be proactive when it comes to delinquent taxes; inaction can be perceived as a refusal to pay, which may lead to more aggressive collection tactics.

In general, when a revenue officer is involved in your tax problems, you should expect the process to move fairly quickly. They are committed to collecting what you owe—collecting your tax debt is on their to-do list when they come to work every day. While they would prefer to come to an agreement with you regarding a payment plan, they will not hesitate to levy your income if necessary.

However, having your wages garnished doesn't require a revenue officer. Accounts that have not been assigned a revenue officer are in the IRS's automated collection system (ACS). The automated system can initiate the wage garnishment process. 

Exceptions to the 30-Day Rule: Wage Garnishments Without Notice

In the majority of cases, the IRS cannot garnish wages any earlier than 30 days after sending you a notice informing you of their intent to levy. However, there are situations in which the 30-day notice period is not applicable. They include:

• When the IRS feels that the collection of the delinquent taxes is in jeopardy. This includes if the taxpayer is likely to flee the country, put their property out of reach of the government, or otherwise dispose of their assets
• When you have requested a CDP hearing for payroll or employment taxes in the previous two years
• When the delinquent taxpayer is a federal contractor.

How Much the IRS Can Take and What You Can Expect

When other types of debt lead to wage garnishment, the amount seized is usually just a percentage of the individual’s income. Tax debts are handled differently—but how much of your paycheck can the IRS garnish? The IRS decides how much an individual needs to survive based on their family size and filing status. The amount they calculate is how much you can exempt from your wage garnishment, and then, the agency can take everything over that amount.

For example, Publication 1494 indicates that someone filing Head of Household with two dependents could exempt $613.45 on a weekly basis. The IRS could technically seize anything above that amount (once income and FICA taxes have been deducted). If you go through the figures listed on Publication 1494, you’ll notice that the amount of money the IRS lets you keep is quite low. It may not even be enough to cover your basic expenses. 

That’s one reason you must address tax issues as promptly as possible. The earlier you begin working with a tax professional to settle your tax debt or come up with a payment plan, the less likely it is you will end up having your wages garnished.

If the IRS takes so much that you are struggling to get by, they do allow you to contact them to discuss your financial situation. Should they determine that the levy is causing an immediate economic hardship, they may opt to release the levy. This does not erase your tax debt; you are still obligated to pay it, but the IRS will then pursue other options, such as a payment plan.

Types of Payments the IRS Can Garnish

The IRS can garnish hourly wages, salary, bonuses, fees, commissions, and other types of compensation you receive from your employer. This can be particularly painful if you receive a holiday bonus or any other type of windfall. Assuming that your exempt amount was paid to you during the pay cycle in which your bonus was paid out, the IRS can seize the entire bonus.

There are some limits to what the IRS can take. For example, if there is a child support order in place before the levy is initiated, the amount you pay can be released from the levy. Note, though, that you can either have the child support amount released or claim the child as a dependent for purposes of calculating your exempt income. You cannot do both.

How to Prevent Wage Garnishment

The easiest way to avoid wage garnishment is to file your tax returns on time every year and always pay your taxes in full. Should you fall behind on taxes, paying the full amount due as quickly as possible is your next best option. However, people rarely end up in this situation because they have enough money to pay in full—that’s why it’s important to take swift action at the first sign of tax trouble. 

The IRS is generally more than willing to work with taxpayers who have hit hard times or are struggling to keep up with their taxes. You may be able to set up a short-term or long-term installment plan that allows you to spread your payments over time, an option that can also save you money in penalties that accrue the longer you wait to pay.

Other options are available for those who want to decrease the amount of tax debt they owe. Possible options include innocent spouse relief, offer in compromise, currently not collectible status, and penalty abatement.

How to Stop a Wage Garnishment

There are several ways to stop a wage garnishment. If you're still within the 30-day warning period, you can appeal. If you're past that point, you may still be able to request an equivalent hearing. Once the garnishment is in place, you may be able to stop it by proving economic hardship, applying for an offer in compromise, or potentially setting up a payment plan. 

Before you consider any DIY solutions to your garnished wages, please talk to a tax professional. There is a lot of bad advice out there, and following it can make your problem worse. For example, it’s common for people to job-hop in order to avoid wage garnishment. This is an oft-passed-around piece of advice that really doesn’t help you. 

The IRS is persistent when it comes to collecting debt, and they will simply follow you to each new job you get and garnish you there. Either way, your wages will be garnished until the entire amount (including penalties and interest) is paid, so it doesn’t make sense to delay the inevitable this way.

FAQs About When the IRS Garnishes Wages

Here are answers to some additional questions you might have about the timing and processes for wage garnishments. If you have additional questions, reach out to a tax professional for help.

When will the IRS garnish wages?

The IRS will garnish your wages if you have unpaid taxes and you don't respond to IRS notices. Before garnishing your wages, the agency will send you a notice that gives you 30 days to request a hearing or suggest another payment arrangement.

Can the IRS garnish wages without warning?

Generally, no. The law requires the IRS to give taxpayers ample warning before garnishing their wages. The IRS must give taxpayers 30 days to dispute the garnishment. However, in rare cases such as a jeopardy levy (ie, where the IRS believes that it will not be able to collect the money without acting instantly), the IRS doesn't have to give you a 30-day warning.

How do I know if the IRS garnishes my wages?

The IRS will send you several notices. Then, your employer will advise you about the garnishment when they receive letters from the IRS. Finally, you will see a smaller paycheck, and you will see IRS wage garnishment listed in the deductions section of your pay stub.

How long does it take for the IRS to garnish wages?

The IRS waits varying amounts of time before resorting to wage garnishment or asset levy. Typically, these actions don't happen until your tax debt has been unpaid for a significant amount of time. The process can take years from the filing date in some cases, but if a revenue officer gets assigned to your case, the process tends to go a lot faster. Once you get the final notice of intent to levy, the garnishment is just 30 days away.

Get Help With IRS Wage Garnishment

It’s important to note that everyone’s tax situation is unique, and the options available to another delinquent taxpayer may not be a good fit for you. That’s why we recommend connecting with a CPA, tax attorney, or EA who can look at the details of your situation and help you find a path forward. 

Taking the initiative and deciding to address this problem head-on may help you avoid wage garnishment and other negative outcomes. Use our directory of local tax professionals to find tax experts in your area who can guide you to the best solution for your needs. TaxCure is designed to help you find local tax professionals so that you can avoid the big, rip-off tax resolution firms and get the personalized, high-quality, local tax help you really need.

Former IRS Agents and Revenue Officers for Tax Relief

Former IRS Agents/Officers Have the Knowledge and Experience to Solve Your Tax Problems

You have a tax problem and you need help. Who should you call? Well, if you listen to the major review sites, they'll tell you to contact one of the nationwide firms. Unfortunately, however, these bad tax companies are hardly ever the best option. Instead, you should call a local tax professional.

There are many tax pros who focus on tax problem resolution, and to help you narrow down your search, this post takes a look at a special subset of tax problem solvers: former IRS employees. First, take a look at the profiles of former IRS agents and revenue offers who work on the other side of the table now – some of them have even become USTCPs which are the only non-attorneys allowed to represent taxpayers in front of the US Tax Court. Then, continue reading about how they can help.

Former IRS Agents/Officers Who Provide Tax Relief Services

Why You Should Avoid the Big Tax Relief Firms

If you're looking for tax relief, you need to be aware of the risks. The big tax resolution companies are part of a relatively new industry, started by unscrupulous tax pros in the late 80s. These companies invested millions of dollars into advertising but they failed to focus on services.

Often, they kept the money and didn't solve the problem at all, leading to criminal charges and corporate shutdowns. In other cases, they provided taxpayers with overpriced solutions to their problems. After the first generation of tax resolution firms were shut down, their employees went to new firms and kept the scam going. 

Do not call these companies for help. Instead, you should reach out to a local professional. Enrolled Agents, tax attorneys, and CPAs can all represent you in front of the IRS, and professionally, they must follow the guidelines of Circular 230, a Treasury publication that outlines ethical rules for tax representation pros. In contrast, the big tax relief companies often put you in the hands of an unlicensed salesperson who is not bound by these considerations and who is generally not even aware of them.

Note, however, that not all tax pros are the same. Tax problems are a unique part of the accounting industry, and to get the best solution to your concern, you need a pro who's experienced with tax debt resolution. As explained below, that's often a former IRS employee.

Why Hire a Former IRS Agent/Officer?

Tax pros who have worked for the IRS have an in-depth understanding of the IRS's policies and procedures. They haven't just studied the rules. They have lived with the rules day in and out. They know how the IRS operates in both theory and reality.

Former IRS officers/agents understand what IRS employees want to see when dealing with taxpayers. They have handled tax disputes and arguments from the inside, and they can often predict the IRS's questions and concerns. These pros know the best way to stop collection actions, and they use their experience to find creative solutions for their clients. 

Beyond that, former IRS employees often have an established rapport with current IRS employees. They may also know shortcuts or have direct channels into the IRS. 

IRS Experience and Enrolled Agents

An Enrolled Agent is a tax pro who can represent taxpayers in front of the IRS. If you work for the IRS for five years in a role where you have to interpret tax regulations, you earn the EA credential. Alternatively, you can become an EA by passing a three-part test on the tax code. The three parts are focused on 1) individuals, 2) businesses, and 3) representation, practice, and procedures. 

IRS Agents Vs. Officers

If you decide to hire a former IRS employee to help with your tax problems, you'll notice two main categories: agents and officers. Although people often mistake these two words, they are different. 

An IRS officer deals with collections. They personally handle delinquent accounts. They can initiate collection actions (tax liens, wage garnishments, asset seizures, etc), but they can also help taxpayers set up payment plans or other arrangements. 

IRS agents, in contrast, focus on audits. They review tax returns from individuals and businesses for accuracy. They request records to verify information presented on a return, and they may also question a taxpayer's interpretation of the tax code. IRS Special Agents also play a similar role but focus on criminal tax issues.

Types of Problems Former IRS Employees Can Help With

Former IRS agents/officers work with individual and corporate income tax, estate tax, excise tax, and payroll tax. They help individuals, partnerships, S-corps, C-corporations, trusts, estates, and non-profits. They can help with many different tax problems including the following:

• Unpaid taxes
• Unfiled tax returns
• Unreported income
• Tax penalties
• IRS audits
• Collection actions such as tax liens and levies
• Loss of passport due to seriously delinquent tax debt
• Cryptocurrency issues
• Tax problems caused by your spouse or former spouse
• IRS notices
• Collection appeals
• Audit reconsideration/appeals
• Taxpayer disputes

A former IRS employee can help you pursue many solutions, including payment plans, offers in compromise, innocent spouse relief, and penalty abatement. They can also help you appeal IRS collection actions and assessments. 

For best results, look at the tax pros experience area — for example, some pros work more with individuals than businesses, while others are more experienced with trusts or estates. Also, consider what they did while working for the IRS, and when possible, find someone who has experience with your specific issue. 

How to Find a Former IRS Employee

Finding a former IRS employee can be difficult. Most internet searches are not going to yield the results you want. You can look through websites of local tax pros to find someone with this professional experience, but that is likely to be overwhelming and time-consuming. The best option is to use Taxcure to find tax pros who are former IRS agents. 

TaxCure is a directory of local tax attorneys, CPAs, and enrolled agents. When you search for a pro on TaxCure, you can filter the results based on experience with certain problems and solutions. You can also narrow down the list based on your state and preferred language spoken. 

To help you get started, here is a list of former IRS employees who now represent clients. If you are a former IRS agent who wants to be listed here, please contact us. We would love to talk with you about featuring you on this page or the other benefits you get with a TaxCure profile. 

Find a Former IRS Agent for Tax Services Now

To get help from a former IRS agent, contact one of the pros above. Or search through the TaxCure directory to find other tax pros based in your area. If you're a pro who would like to be featured on this page, contact us directly. 

Tax Attorney Free Consultations: What to Expect, Questions to Ask, Red Flags, and More

If you've been looking for a tax attorney for a while, you may have noticed that many of them offer free consultations. Their blogs often end with "contact us now for a free consultation, and we'll help you solve your tax problem," and they usually have spots on their websites where you can request a free consultation. 

What does this mean? Why are attorneys giving away consultations for free? Should you schedule a free consultation with a tax attorney? Well, you should strongly consider it, as a free consultation can be a very useful tool when you're trying to hire a tax attorney. Here's what you need to know.

What Is a Tax Attorney Free Consultation?

A free consultation is a short meeting, usually on the phone, with a representative from the tax attorney's office. You give them a synopsis of your tax problem, and they tell you how they can help. 

This meeting gives you a chance to decide if the tax pro has the experience you need and feels like a good fit for you personally. The consultation also gives the tax pro a chance to make sure that they can handle your problem.

How to Prepare for a Free Consultation

You generally don't need detailed documents for a free consult, but to make the most of this time, you should have the following essentials:

• Type of tax related to the problem (personal income tax, corporate income tax, payroll tax, sales tax, state withholding tax, etc.)
• A brief description of the problem (for example, unpaid taxes, unfiled returns, audit, etc.)
• Tax agency you owe (state or IRS)
• The amount of tax debt you owe
• List of tax periods for which you have unfiled returns
• How much you can afford to pay every month
• A general overview of your assets

Once you provide a few basic details, the firm can give you an idea of how they can help. Be very suspicious of tax relief firms that offer big promises without knowing about your situation. For instance, if the rep promises that they can get you a settlement but they didn't ask about your income or assets, that's a big red flag that they may not be offering legitimate tax relief services. 

What to Expect During a Free Consultation With a Tax Attorney

When you call the tax attorney for the first time, be prepared for the consultation. It will often take place during that initial phone call. If you want some time to prepare, find a tax attorney near you and schedule a free consultation in the near future. 

With a very small firm, you may talk directly to the attorney handling your case, but in most cases, the free consultation will be with a sales rep or a supporting team member at the firm. 

During the consultation, you will explain your tax problem. For instance, you may say that you haven't filed tax returns in the last 10 years, you owe $100,000 in tax debt, or you've been assessed a penalty for not paying payroll taxes. Then, the rep will tell you if they can help, and they'll give you an outline of what to expect in terms of cost and resolution options. 

In some cases, a tax attorney may tell you that they cannot help. For instance, say that you have a problem related to not disclosing foreign assets on your tax return, but the attorney focuses on business tax issues. They may refer you to another tax attorney. Or if your problem is too small to justify the tax attorney's fees, they may advise that you handle the problem on your own or talk with your usual tax preparer.

Questions to Ask During an IRS Lawyer Free Consultation

Free consultations are pretty short, so you should be armed with the right questions. Here's what you should ask in your search to find a great tax lawyer:

1. Who will be working on my case? Only enrolled agents, CPAs, and tax attorneys can represent you in front of the IRS. Make sure that you know who's working your case. You want an experienced in-house pro, and you definitely want to avoid companies who are selling your case to another law firm. 
2. Who will be my point of contact? Ideally, you want the tax pro handling your case to be your primary contact, and in situations where that's not possible, you want a dedicated contact so that you can reach the company easily when you have concerns or questions.
3. Does your firm have experience with this type of tax problem? There are many different tax problems, and you need to ensure that the tax attorney you hire has experience with that specific type of problem. This includes experience with the type of tax, the return you filed, the penalties involved, the tax agency (IRS or state agency), etc.
4. Can you share any success stories? The rep should be able to point you to case studies or consumer reviews on their website or other sites, or they should be able to provide you with references.
5. How do your fees work? The tax attorney may not be able to provide an exact estimate, but they should have a clear answer about how their fees work so that you know what to expect.

Learning About Costs During a Free Consultation

During the free consultation, you should ask how much the services cost. But don't necessarily expect to get an exact price. Tax pros cannot always predict exact costs because there are so many different elements that can affect how a case plays out. However, they should be able to clearly explain their pricing structure and payment processes. 

For example, some attorneys may charge an upfront fee to look at your case, and then, they may charge hourly. Others may charge based on the forms that they file. There are a lot of different pricing structures that are all completely valid and ethical. The important thing is that the pricing is transparent and you understand what you are paying for. 

Red Flags You're Talking to the Wrong Tax Attorney

Now, you know what to expect during your free consultation, but how can you tell if it's a good fit? How do you tell if you're talking to a legitimate tax pro who can really help you or a greedy company that just wants your money? Keep an eye out for these red flags:

• Aggressive sales tactics — Quality tax attorneys don't need to use aggressive sales tactics because they provide useful services that people want. Unscrupulous tax relief firms, in contrast, often use aggressive tactics to lock in customers. This may include overpromising about the services they provide, using scare tactics (the IRS is going to take your assets if you don't take action today), or strong-arming people into making large upfront payments they don't understand.
• Lack of experience — You need someone who's experienced with your specific tax problem. The experience becomes especially important when you're dealing with complex cases such as business tax audits, penalties related to not disclosing foreign assets, trust fund recovery penalties, state tax problems, or other unique situations. 
• Vague answers — Even when you're dealing with a complex issue, the tax attorney should be able to outline what they're going to do to help you. If their answers or vague or you don't understand what's going on, that's often a red flag. 

Free Vs. Paid Consultations

In general, a free consultation covers an overview of your tax problem, while a paid consultation takes an in-depth look at the issue. During the free consultation, the tax pro will ask how much you owe and get a general overview of your finances. During a paid consult, they will look at tax forms you've filed and collect detailed information about your finances. 

A free consultation gives you a feel for the tax firm. It helps you decide if you want to hire them. If you have a simple problem, the lawyer will often be able to tell you which services you need during the call. 

But with complex cases, the attorney can often only give you a brief overview of what to expect during a free consult. Then, they'll schedule a paid consultation where they'll dig into the details and figure out a path forward. You will pay for this meeting, but you won't be obligated to pay for the rest of the services unless you decide to move forward after the consultation. 

Keep in mind that free consults aren't always with the tax attorney. Often, they are with an administrative employee, a sales rep, a paralegal, or another pro at the firm. Paid consults should always be with an attorney.

Some attorneys don't offer free consultations. Instead, they start with a paid consultation. In either case, just make sure you understand their process.

FAQs About Free Consultations

We've rounded up some FAQs about free consultations with tax attorneys. 

Why do tax attorneys offer free consultations?

Free consultations lower the barriers for people to contact attorneys. If someone has to pay to talk with a firm, they are a lot less likely to call. This strategy helps law firms bring in more clients. 

Additionally, the free consultation is also helpful for the attorney. It gives them a chance to ensure that they are a good fit for the client's needs. For instance, if a tax attorney doesn't have expertise with a certain tax problem, they can refer the client to a different attorney.

Can an attorney fix my tax problem during the free consultation?

A free consultation doesn't mean that you can call an attorney, tell them about your problem, and get free advice on how to fix it. Instead, the consultation provides you with an overview of the process. During the meeting, the rep may tell you about some of the options to fix your tax problem or outline how their services work. They aren't going to give you a blueprint that you can take home and use to fix your own tax problem. 

Why don't all tax attorneys offer free consultations?

Free consultations take time and resources. That costs money for attorneys. Some tax attorneys have very successful practices, and they don't need to use free consultations to draw in clients. Instead, they rely on their reputation and experience. So many times, if you are referred to a specific attorney and they mainly obtain their clients through word of mouth, they likely offer paid consultations. If they rely heavily on paid advertising, they likely will offer some sort of free consultation to help lower the barrier to contacting them to see if you are a good fit for their services. 

Should you start with a free or paid consult?

If you are still trying to decide if a firm is right for you, start with a free consultation. If you've already picked a firm and feel confident about their offerings, you can dive into a paid consult. If you are not sure if you really need an attorney, then take advantage of a free consultation to ensure you actually would benefit from the services.

Is not offering a free consultation a red flag of a bad attorney?

Not all tax attorneys offer free consultations, and it's not a red flag. It just means that's how they've structured their pricing. If you're uncomfortable with that, just look for an attorney near you who offers a free consultation. 

Ultimately, a free consultation with a tax attorney is a tool that gives you a chance to see if you are a good fit. And because the meeting is free, you can schedule meetings with multiple pros until you find the right one. 

How to Find a Tax Attorney near Me for a Free Consultation

Want help finding the right tax attorney? Then, use TaxCure to search for tax pros who have experience with your tax problem. Once you've found a list of options, look at their credentials, read their reviews, and see who offers a free consultation. Then, give them a shout and see if they feel like the right fit for you. For a list of tax attorneys near you that offer a free consultation, you can navigate to this search result for free tax attorney consultations.

You can also search for CPAs and enrolled agents on TaxCure. Many of these tax professionals also offer free consultations. You can also search for pros that have industry-level certifications focused on tax resolution, such as Certified Tax Representation Consultants and Certified Tax Resolution specialists.

TaxCure Pro Membership Benefits

At Taxcure, our vision goes beyond simply offering a platform; we are genuinely dedicated to the success of our TaxCure Pro members. When you decide to take that step and upgrade to TaxCure Pro, you’re not just purchasing a premium membership but becoming part of our exclusive community, where our team is fully committed to your success.

High-Level Overview of TaxCure Pro & Our Dedication to You:

• Personalized Optimization: Our team will provide hands-on assistance to ensure your profile is primed for maximum visibility and success, leveraging the additional tools available with the upgrade to TaxCure Pro.
• Extended Reach with Advanced Marketing: As a TaxCure Pro member, we will leverage additional marketing strategies to highlight the specific problems, solutions, and agencies you’re skilled in navigating for clients. This translates into more visibility and highly targeted prospects for you.
• Ongoing Investment: Your commitment as a Taxcure Pro member allows us to enhance our platform continually. We are constantly innovating and refining to bring in high-quality prospects that match well with your expertise. 
• A Mutual Journey: Each professional has their unique skills. We analyze each pro member’s problems, solutions, and agencies they focus on. We work consistently behind the scenes to optimize the site to drive clients who value your unique skills. 

By upgrading to Pro status, not only do you directly benefit, but you also play an important role in ensuring that taxpayers get the best help they desperately need. Our goal is to become the go-to place for Taxpayers seeking help with tax problems. With each new Pro membership, we get one step closer with our constant investment into TaxCure to help tax pros and taxpayers to make the industry a better place. 

Additional Benefits of TaxCure Pro Membership

• Increased Visibility on TaxCure: TaxCure Pro membership promotes your profile to those taxpayers most likely to hire you. TaxCure Pro members receive an average of 1045% more inquiries compared to free members. 
• Top Placement in Search Results: Your profile appears at the top of the search results when a taxpayer searches. 80% of taxpayers contact professionals listed at the top of search results. As a Pro Member, you get a double listing in search, one says ad, and the other is the organic listing. Here is a sample search for a taxpayer looking for help with an IRS garnishment, unpaid taxes, & tax penalties. Notice the top two professionals that are displayed. That is where you would be when upgraded to the pro membership when a taxpayer does a search that matches your selections & location. 
• Exclusive Visibility on Content Pages: Gain additional exposure with exclusive visibility on content pages related to various tax problems and solutions. These content pages are generally the entry pages for taxpayers and only display Pro members.
• Click-to-Call Button for Easy Contact: Taxpayers generally prefer to call than complete an online lead form. When upgraded, your profile will gain a click-to-call button where taxpayers can easily call you. These types of leads make up over 50% of all inquiries on TaxCure.
• Instant Notifications for Prospects Information: You will no longer need to log in to the TaxCure platform to access lead information. Once upgraded, new prospects will be sent to you directly via email and text message. Being able to respond quickly increases close rates significantly. 
• Access to Webinars and Premium Content: expand your knowledge and stay up to date about industry trends with exclusive access to webinars and premium content. Enhance your practice and gain a competitive edge with valuable insights and best practices designed to help tax pros grow their businesses.
• Profile Analytics: Track your success with profile analytics, which provides data on views, messages, website clicks, social media clicks, and click-to-calls.
• Website & Social Media Links: Have your website link visible to the public on your profile, and also have the ability to show links to your various social media platforms. 
• Removal of Similar Profiles from Your Profile Page: Ensure that prospects focus on your unique offering. Similar profiles will no longer be shown on your profile.
• Custom Byline for Enhanced Branding: Stand out from the competition with a custom byline that you can edit and use as an ad for yourself in the search results. This personalized touch can make your profile even more appealing to potential clients. 

Remember, we’re not just another platform; we’re a dedicated team working in the tax resolution industry since 2007, working towards a shared vision. Make the leap, and let’s achieve success together. Upgrade to TaxCure Pro.

Business Owner's Guide to the Texas Workforce Commission and Unemployment Taxes 

The Texas Workforce Commission (TWC) might not be a well-known organization in the Lone Star State, but it has a wide range of responsibilities. If it’s employment-related, there’s a good chance the TWC is involved in some way. One of its biggest tasks is handling Texas’ unemployment program, which includes collecting unemployment taxes from employers.

This guide takes a broad look at the TWC, including what it does and how it can address various problems that many Texas businesses face. There will also be a special focus on answering unemployment tax questions employers commonly have. Having problems with the TWC and want help now? Then, use TaxCure to search for a Texas-based tax pro who has experience with this agency.

What Does the Texas Workforce Commission Do?

The TWC’s role in Texas employment can be categorized into three main areas: workforce development, legal compliance, and running the state’s unemployment benefits system.

Workforce Development 

With respect to workforce development, there are a plethora of programs and services handled by the TWC. Some of the more notable ones include: 

• Veteran’s Services
• Skills Development
• WorkInTexas.com
• Senior Community Service Employment program
• Child Care Services program
• Apprenticeship program

Legal Compliance

One of the TWC’s biggest jobs is administering and enforcing several Texas laws, including: 

• Texas Unemployment Compensation Act (deals with unemployment benefits)
• Texas Payday Law (deals with unpaid wages and how workers get paid)
• Chapter 21 of the Texas Labor Code (deals with employment discrimination)
• Chapter 51 of the Texas Labor Code (deals with child labor)
• Chapter 62 of the Texas Labor Code (deals with minimum wage)

How the TWC Deals With Common Employment Issues

The vast majority of employers in Texas try to obey the law. If not because it’s the right thing to do, at the very least, it’s because following the law avoids unexpected costs and headaches that can make any manager or owner lose sleep at night. However, several issues commonly get brought to the TWC’s attention, whether by a whistleblower, employee, or confused business owner. 

Here are some of the most common employment issues and tips to help employers avoid or resolve these issues:

Worker Misclassification

Most workers can be classified as employees or independent contractors, and employers need to make sure that they classify their workers correctly. This distinction matters because it can affect the legal exposure and finances of an employer. For example, as a general rule, employers are liable if their employees commit a tort during the course of their job duties. But if independent contractors commit a tort, then employers usually aren’t liable.

Financially, it’s usually cheaper for an employer to hire a worker as an independent contractor instead of an employee. This is because an independent contractor typically doesn’t have the right to minimum wage or overtime pay. Additionally, employers don’t have to pay payroll taxes (including unemployment taxes) for independent contractors.

How to Avoid Worker Misclassification in Texas 

The best way to avoid worker misclassification issues is to properly classify workers from the start. The TWC uses a Comparative Approach test for determining if a worker has been properly classified and employers can apply that test relatively easily in most cases.

When it comes to worker classification, a rule of thumb is that the more control an employer has over the worker (such as how work is done, how much training the employer provides, and if the employer provides the tools and equipment to the worker), then the more likely the worker is an employee and not an independent contractor.

If an employer has questions when trying to classify a worker, they can contact their nearest TWC unemployment tax office for assistance. Additionally, talking to an employment law attorney may be necessary for more complicated questions. 

Wage and Hour Violations

Probably the most prevalent wage and hour violation employers have to deal with is a claim for unpaid wages. If an employee believes they haven't been paid properly, they can submit an unpaid wage claim to the TWC online or by mail or fax:

Texas Workforce Commission
Wage and Hour Department
101 E 15th St, Rm 514
Austin, TX 78778-0001
Fax: 512-475-3025

After the claim gets filed with the TWC, the TWC mails a copy of the claim and an Employer Response to Wage Claim form to the employer. An employer then has 14 days to respond to the claim by mail, email, or fax using the contact information listed on the Employer Response to Wage Claim form.

When the TWC receives the employer’s response to the unpaid wage allegations, they will investigate the claim. Sometimes the TWC will reach out to the employee or employer for more information. The TWC makes a decision in the form of a Preliminary Wage Determination Order, which can be appealed by the employee or employer. This appeal must come within 21 days of the Preliminary Wage Determination Order decision notice.

Assuming no party files an appeal and the original decision was in the employee’s favor, then the decision becomes final and the TWC Wage and Hour Collections Unit steps in to enforce the order.

How to Prevent a Wage and Hour Claim With the TWC

As with many other problems in life and the law, preventing a wage and hour claim is almost always a lot easier and cheaper than handling one after an employee has filed a claim with the TWC. Some unpaid wage claims can’t be prevented, such as those coming from disgruntled employees. But many others can. Here are some steps employers can take to avoid preventable unpaid wage claims:

• Make sure paychecks are sent on time; use a payroll service if necessary.
• Be careful when assigning tasks to volunteers and interns.
• Keep careful records of documents used to calculate employee compensation, such as timesheets and invoices.
• Ensure management has the proper training and up-to-date information about federal, state, and local pay laws.

If there’s a question about paying an employee and no one at work seems to know the answer to that question, consider talking to an attorney. A simple telephone call and a few hundred dollars may be a very small price to avoid expensive problems in the future. 

You should also reach out to a tax attorney who has experience with the TWC if you want to appeal a decision or dispute an employee's claim.

Unemployment Claims

One of the TWC’s biggest areas of responsibility is handling the unemployment benefits system in Texas. In an effort to make it as fair as possible, while also avoiding fraud and abuses, the unemployment benefits application process is far from simple. So it’s understandable when there’s confusion or other problems, like the wrongful denial of unemployment benefits.

Another common area of confusion, at least for many employers, is how to handle their unemployment tax obligations. Much of the money used to pay out unemployment benefits comes from taxes that employers pay into the Unemployment Compensation Trust Fund.

Even though employers might already know all of this, they might not fully understand how to meet their unemployment tax payment obligations. The following section attempts to answer some of the most commonly asked questions employers have about unemployment taxes. 

FAQs: Unemployment Insurance Taxes and the TWC

Do All Employers Have to Pay Unemployment Taxes in Texas?

No, but most do. For purposes of the Texas Unemployment Compensation Act, three main types of employers have to pay unemployment taxes:

• Domestic employers who hire workers who typically work in or around the home, like gardeners, nannies, and housekeepers.
• Agricultural employers who have workers who usually work on a farm or ranch. These workers are involved in the maintenance, operation, or management of the production of livestock and/or crops.
• Regular employers who hire workers who don’t qualify as agricultural or domestic employees.

Do Domestic Employers Need to Pay Unemployment Taxes?

A domestic employer must pay unemployment taxes if they do one of the following:

• Pay $1,000 or more in total wages over a three-month period; or
• Take over a household with domestic employees and that household is required to pay unemployment taxes.

Do Agricultural Employers Need to Pay Unemployment Tax?

An agricultural employer must pay unemployment taxes if they do any of the following: 

• Hire three or more employees for a minimum of one hour a day for 20 weeks in a year;
• Pay $6,250 or more in total wages over a three-month period;
• Hire seasonal workers for an orchard, truck farm, or vineyard;
• Hire seasonal or migrant workers who work for a labor agent, ranch operator, or farmer; or
• Take over an organization, workforce, trade, or business that is required to pay unemployment taxes.

Do Regular Employers Need to Pay Unemployment Taxes?

A regular employer must pay unemployment taxes if they do any of the following: 

• Pay $1,500 or more in total wages over a three-month period;
• Hire one or more employees for a minimum of one hour a day for 20 different weeks in a year;
• Have employees that are subject to the Federal Unemployment Tax Act;
• Are an IRS-designated 501(c)(3) organization and have four or more employees for 20 different weeks in a year; or
• Take over or acquire an organization, workforce, trade, or business that is required to pay unemployment taxes.

Employers do not have to pay unemployment insurance taxes for:

• Independent contractors
• Employees paid through a professional employer organization 

How Do Eligible Employers Pay Unemployment Taxes?

Within 10 days of becoming required to pay unemployment taxes, an employer should register an unemployment tax account with the TWC. This registration process is free and requires an employer to provide information about who owns the organization and its operating locations. At the end of the registration process, the employer will receive a TWC Tax Account Number.

An employer can then use the unemployment tax account to pay the unemployment taxes online by using ACH debit or credit card. Unemployment taxes can also be paid by mailing a check to the TWC, but only if the employer has an approved hardship waiver. There’s also the TEXNET electronic funds transfer system, which is optional for most employers, but required for employers who pay more than $250,000 in taxes for a fiscal year. 

When Do Employers Pay Unemployment Taxes?

Most employers submit wage reports and make tax payments quarterly. These reports and payments are made in the month following the calendar quarter. For instance, for first-quarter unemployment taxes, an employer will submit its quarterly report and tax payment by April 30.

Domestic employers can sometimes choose to report and pay their unemployment taxes annually. These reports and payments are due January 31. 

Which Wages Must Employers Report to the TWC?

In most situations, all wages should be reported. However, wages don’t need to be reported if they are paid to a sole proprietor or partner.

How Much Does an Employer Have to Pay in Unemployment Taxes?

Only the first $9,000 paid to an employee for a calendar year is subject to unemployment taxes. In situations where an employee has made more than $9,000 in the first quarter, the employer may still need to file reports for the second, third, and fourth quarters.

As for the unemployment insurance effective tax rate, it can range from 0.23% to 6.23% for 2023. The reason for this wide range is because the effective tax rate consists of five components:

• General tax rate: this is based on the amount of unemployment benefits the TWC has paid to a particular employer’s former employees.
• Replenishment tax rate: this is a flat rate paid by all eligible employers. In 2023, this was 0.13%.
• Unemployment obligation assessment rate: this portion of the overall unemployment tax rate exists to pay for the bond obligations and interest payments on loans used to help fund the unemployment benefit system.
• Deficit tax rate: this tax percentage gets added for years when the Unemployment Compensation Trust Fund falls below a minimum level.
• Employment and training investment tax assessment: this is 0.10% of wages paid by an employer and the money goes to an employment and training investment holding fund.

What Is a Reimbursing Employer?

A reimbursing employer refers to a government or non-profit employer that doesn’t pay any unemployment taxes annually or quarterly. But they do have to reimburse the TWC for unemployment benefits paid out to the reimbursing employer’s former employees who receive unemployment payments.

What Happens if an Employer Is Late With Paying Unemployment Taxes or Reporting Wages?

An employer could have to pay a late report penalty and/or interest for a late payment. The late payment interest rate is 1.5% for each month the payment is late, with a maximum interest rate of 37.5%

The late report penalty is $15.00 if the report is filed within 15 days of the due date. For longer delays, a special formula applies. To provide a rough idea of how much this penalty could be, employers who file reports during or after the third month in which the report was due (this represents the maximum penalty formula) are subject to the following penalty formula

Penalty = taxable wages x 0.35% + $90.00

Do Employers Have Other Obligations Concerning Unemployment Taxes?

Yes. Some of the more important obligations include informing the TWC of a change in business status, displaying necessary workplace posters, and reporting new hires (within 20 days of the hire date) to the Employer New Hire Reporting Operations Center, which is part of the Texas Office of the Attorney General.

Find Assistance with Texas Unemployment Tax Issues

If you aren’t sure about your unemployment tax obligations, it might be a good idea to get professional tax help. Whether you’re trying to prevent problems or are already facing interest and penalty payments, there’s a Texas tax pro that can help.

Marketing Methods to Consistently Acquire New Tax Resolution Clients

Acquiring new tax resolution clients is unlike traditional tax practices of getting new tax preparation clients. With the sporadic nature of clients' tax problems, nobody really has a go-to person for resolving tax problems. It requires different strategies to bring in new clients consistently.

This guide will review some of the top strategies to attract new tax resolution clients consistently. We’ll explore various marketing methods, community engagement, and more to help you grow and succeed in the tax resolution industry.

This guide is written in collaboration with the owners of TaxCure, who combined have more than 30 years of experience in the tax resolution industry, with a primary focus on marketing. We have spent millions on marketing, tested many marketing methods, and worked with the largest companies in the industry. This guide will cover some of the main techniques to consistently bring in tax resolution revenue for your practice. If you want further customized assistance, please contact us. We have various plans tailored to different size practices. Our goal at TaxCure is to create transparency in this marketplace dominated by scam review sites when we know taxpayers want someone local if given the opportunity. 

 

Website Optimization for Tax Resolution

Your website is a powerful marketing platform that you have complete control over. A powerful website allows you to control what potential clients see when researching or hearing about your services. Your website is your digital storefront that can make or break the deal for a client. Your website can become your most powerful asset to drive new clients, and wise investing in it is essential. Below are some subcategories on how to invest in your website to drive more tax resolution clients.

Search Engine Optimization Specific to Taxpayers that Need Help

Obtaining rankings for terms that taxpayers search into search engines when they have a tax problem or are looking for help can significantly boost traffic and qualified leads for your business. It is essential to understand your potential clients and understanding common search queries to focus on what will drive the best return on investment for your business. (For example, if you arrived at this page through a search engine, you got to this page because TaxCure researched the queries that tax professionals use when searching for ways to obtain new tax resolution clients. We made this article specific to your needs, and we aim to provide valuable content for you to grow your business.) With this article, we hope you sign up as a free profile to be listed on TaxCure to grow your business. 

One way TaxCure grows business for Tax Pros is by consistently publishing content about various problems and services our members help with. There is a science to this, and it is one piece of the puzzle to drive more prospects your way. If you are looking for help with this aspect of your business, you can always contact us to see if we are a good fit for your SEO services.

About Us & Bios for Website

Often this is overlooked. The value of providing valuable insight about yourself and your business helps form a connection with the taxpayer that has arrived at your website. Obtaining new tax resolution clients is a balance between marketing, sales, and quality services. Sales is a major aspect that many companies struggle with. Having a good about page to help people connect with you or your business can help close the deal before they even contact you.

Client Testimonials of Prior Tax Resolution Clients

A page dedicated to testimonials of prior tax resolution clients can be very powerful in closing the deal. It is crucial to showcase real testimonials. Consider using video testimonials as consumers trust them to see real people talking about their experience. 

Professional Badges and Certifications

Use your website to showcase professional certifications and badges. Professional certifications show prospective clients that you have gone above and beyond to take care of their tax problems, and this helps to build trust in your services. Additionally, while you train to become a Certified Tax Representation Consultant or a Certified Tax Resolution Specialist, you learn valuable skills that allow you to provide top-notch services to your family. There are many different training programs for tax pros.

Pay-Per-Click (PPC) Advertising for Struggling Taxpayers

Your website is the first thing people see when you do pay-per-click advertising. This is a game of constant optimizations and a clear call to action. Having a professional site to give the taxpayer confidence to reach out to you and specifically giving them confidence you can assist with the service or problem they searched for is imperative. 

Doing PPC isn’t something you can do overnight and get it running successfully. The PPC market is extremely competitive, with some of the highest costs of keywords to bid on. For example, if you wanted to advertise on the term “Tax Relief Attorney,” you would likely spend $25+ per click. It is important to know what you are doing here before jumping in and knowing which keywords will likely generate the clients you want. You also need to ensure your website is optimized for conversions and has the appropriate KPIs to limit wasted spending.

When optimized, this method can be one of the fastest and most reliable ways to bring in business consistently, but it will cost you a lot of money. You can read more here on what you should pay to bring in a new tax resolution client to put some things into perspective.

Places for Tax Resolution PPC Advertising

• Google Ads: The largest PPC network with the highest potential, the most competitive, and some of the highest prices for keyword bidding. If you don’t have experience with this, it is suggested to hire an expert to assist, especially in the field of tax resolution. Even companies specializing in all-tax marketing tend to fall short when it comes to marketing tax resolution services, and it is a very niche industry. Working with a company with experience is essential to lower your wasted spend. 
• Microsoft Advertising: Very similar to Google Ads, but with a far lower reach and also a bit looser on being able to target specific keywords. This can be effective and should be considered, especially with their potential to increase market share, as they have the first-mover advantage of using AI in their search platform. 
• Facebook Advertising: Different from your typical keyword bidding platform, you can target audiences. It can be difficult to target taxpayers that have issues with FaceBook, but there are clever ways to do it.

Email Marketing

While there can be many aspects of email marketing, we will cover some of the top ways you can use email marketing to increase your tax resolution clients.

Email Marketing to Your Client Database

If you have an existing practice doing tax prep or other tax services, you should have a list of your current clients and their emails. This is a great way to let your services be known to existing clients. Maybe they don’t know that you offer these services and may come into a tax problem. Emailing your current clients that already trust you is a great source of securing existing clients for more services. Even if you only do tax resolution, following up on an annual basis can help ensure you stay in their mind if they come across another tax issue. Many tax resolution clients tend to come into future tax issues as well.

Email Opt-ins on Your Website

Leverage your website to have potential clients sign up for a newsletter or other email communications. You can offer incentives like a free e-book on resolving tax problems, tax savings tips, etc, to motivate them to share their email address with you. You can then email them in the future to stay in their mind about your services. Many taxpayers are struggling financially, like to try things themselves sometimes, and aren’t ready to move forward with services. If you give them an offer that doesn’t require them to spend money and you can help them in some way without much effort, you can have their contact information for a future time when they may want to reach out to you.

Getting email opt-ins requires traffic first, so don’t build out this campaign before you have found an effective way to drive some traffic to your brand first. 

Drip Campaigns

These email campaigns help nurture a potential prospect who may have contacted you on your website or inquired about your services but have yet to become a client. An effective email campaign that will consistently send them emails about your services and highlight your company can greatly assist them in making the final decision to move forward with your services.

Networking Event Emails

Networking events can be a powerful way to drive client referrals. If you have a non-competitive business but you share a target audience. Staying in front of these people is essential to drive potential referrals to your business. Have a newsletter that provides value to these clients and keeps them aware of your services, and you are open to referrals. Be sure to collect business cards at networking events, save their emails to your marketing platform, and create a specific campaign targeted just to them.

Claim Relevant Online Listings – Review Sites

People often overlook the value of many online listing services. Business listings are very important for brand reinforcement. Finding ones that reinforce your brand and promote your services are the best, but most are just mainly suitable for brand reinforcement. 

Why is Brand Reinforcement Important?

Various studies have been done on how many touch points it takes before a customer makes a hiring decision. You can have the most optimized website, but people know that you control this information and can say whatever you want. Therefore, many people seek external references before making a hiring decision. They then do a brand search on your company name or a search on your name, and it is vital to have solid listings that support the work you do outside of your website to increase your close rate significantly.

I’m going to list a few below that can be suitable for tax professionals that offer tax resolution services. You must be active on them and only claim the ones that will rank for your brand and aren’t loosely regulated to prevent fraudulent reviews you can’t do anything about. 

TaxCure

We have crafted our system to showcase your expertise and give positive feedback to anyone looking for information about you or your company. We have professional profiles as well as company profiles. Not only do we reinforce your brand, but we also promote your brand through our search and various other aspects of our site features.TaxCure is open to enrolled agents, CPAs, and attorneys to claim their profiles. We allow client reviews that are highly vetted to ensure the professional was explicitly hired for tax resolution services for the review to be published. Our unique system allows you to only show to taxpayers that match your unique skill set to ensure taxpayers can obtain the best quality services and the tax pros can obtain new business from clients that meet their skills. 

You can obtain further reach in acquiring new leads by upgrading to our TaxCure Pro membership. This membership is an easy win to obtain new clients at an excellent return on spend.

Google Business Profile

This profile is one of the most critical profiles you can claim and optimize. Google Business Profile helps with brand reinforcement when someone types in your company name, showing in the results a lot of information about your services. This listing also is essential for catching those local searches where searchers have the intent to make a hiring decision. This is a separate listing from your website and can drive a good amount of traffic to your brand if optimized correctly. In order to for this method to be effective at reaching clients in need of tax relief services it is essential to consistently obtain reviews from current and prior clients to this platform. These reviews don't need to be only about tax relief services, they can be for tax preparation or any other tax-related service. Be sure to be active on here at least once a month, it helps signal to Google you are an active business and can impact your rankings. You can easily post quick updates or add some new product pages related to services you offer.

National Association of Enrolled Agents (NAEA)

The NAEA has professional profiles for enrolled agents that will help you claim a place in the top 10 listings for you as a professional. They also offer other services as well. They do have an annual fee for their membership, but the standard profile is a great promotion to show great credentials at the top of the search results.

AVVO

For attorneys, this is a powerful directory that can provide clients as well as a high-ranking profile for your name and brand. They don’t drive a significant amount of traffic for tax-related topics to drive client referrals, but the listing helps strengthen your brand.

LinkedIn

Having a presence on LinkedIn through a personal profile and creating a company page can help boost your brand visibility. Generally, these profiles rank in the top 10 search results and are essential for brand reinforcement. 

Yelp

Yelp is one of those sites that aren’t great for generating tax resolution clients. It can be suitable for brand reinforcement. If you have a profile already, make sure you maintain it and get some good reviews because it generally is favored high in the results for your brand. This is a go-to place for people to post negative reviews, and it is tough to combat them. This is not a high suggestion of ours, but an easy place to grab a place in the top 10 results for your brand. This can be valuable to those professionals that offer other tax services, like tax preparation, to generate some referrals. 

Super Lawyers

Super Lawyers is a site for lawyers with a profile page that can rank decent for their brand. They have a free listing option, and not all lawyers can get listed. It can be a good place to reinforce your brand and claim a listing if you are an attorney.

Justia

Justia is for attorneys general, blanketing many aspects of the law. For tax resolution, they can showcase your experience. They don’t receive significant traffic from people with tax issues. However, their platform allows your profile to rank high in search for your brand. 

FindLaw

FindLaw is another directory just for attorneys. They cover various aspects of law and allow you to create a profile for yourself and your company. This can be great for brand reinforcement as long as you put some effort into it. They don’t receive much traffic related directly to tax, so don’t expect direct referrals from here. If you have a solid profile it should rank top 10 in the search results for your brand.

Better Business Bureau (BBB)

This long-standing brand is well-recognized and a trusty entity. Having a listing here and in good standing will help reinforce your credibility. A BBB profile for your business generally ranks highly in the search results, and if you maintain it well, it is a good profile. The BBB has built somewhat of a strong reputation to give extra trust to clients knowing they have an intermediary to get involved if there are any issues. The BBB does assist in helping resolve client complaints, but the main benefit of their service that is not stated is you get a nice listing that ranks high in the search results for your brand and lets customers know they have some BBB “protection.” This does have an annual or monthly fee to be a part of, but generally, if this listing can sway one person a year to use your services, it will l likely be worth the cost.

Facebook Business Page

Facebook can play a crucial part in enhancing brand reinforcement. With a Facebook business page, your brand is more visibility to your audience. It shows great in search for your brand in search engines and helps foster trust and engagement. Having a Facebook business profile can help to show you are actively engaged with your clients, but it can also hurt you if you don’t show frequent updates and give the impression you aren’t that involved. Generally, this profile ranks high in the results for your brand and is an important marketing angle to maintain. 

TaxBuzz Profile

If you like it or not, you probably already have a profile here if you are a tax professional since they use web scraping technology. They rank well for brands, and that is what they have built their business on. They drive much of their traffic from people searching for certain tax professionals and possibly doing a bait-and-switch tactic, especially if you haven’t claimed your profile. If you haven’t claimed your profile, we suggest you claim it and update you with relevant information. Especially if this profile already ranks for your brand in the top 10 results for your brand name.

Buying Tax Resolution Leads/Tax Relief Leads

Sounds easy, right? Just pay to receive prospects with tax issues and seeking help. Well, it isn’t quite as it seems, and this can be an expensive way to acquire new clients, but many businesses base their whole business solely on this type of marketing. We have a very detailed article on how buying leads works & how to avoid getting ripped off. 

Tax Lien Mailers

This approach involves acquiring lists of individuals who recently had tax liens filed against them and sending them an informative and professionally designed mailer. There are some companies out there that offer this service from obtaining the lien lists to sending the notice. There are many businesses who have relied solely on this practice to build their business. While it can be an effective strategy, there can be times where it isn't effective when the IRS isn't being aggressive and implementing new tax liens. This can also be an expensive form of marketing with the cost of acquiring the lists (there are free ways to do this), printing copy, coming up with the creative for the letter, and setting up effective split testing to see which gets the best response and then the cost of mailing the letters.

Companies that have this dialed in can have an effective and repeatable model of generating new clients. Many people jump in and think they will achieve great results right away, but generally fall short of the return needed to continue. With consistency and testing while having the appropriate KPIs in place, this can become an effective method.

With the mailers, be sure not to come off like you are a tax agency. This was an old-school method used by many marketing companies and shady tax resolution companies back in the day. While this did probably produce good results for them, in this day an age with technology, this will only make a bad name for you and your company, which will hurt your long-term success. Be sure to explain how your services can assist in resolving their tax debt and the benefits they can receive by taking timely action. Be sure to promote trust and include client testimonials and information about your firm to establish credibility. Be sure to have a clear call to action, maybe a phone number that you specifically track so you can attribute that call to the mailer, or a website that you can track that it came from the mailer (maybe acquire a similar domain to yours or a very short name domain that redirects to your site that passes a UTM parameter that you can effectively track traffic from that source).

Social Media Presence

Why Is Presence on Social Media Important?

With over half of the world on social media. This is a tool that no business can ignore. We’ve already mentioned the importance of this in various aspects of marketing above. Here are some tips on leveraging it to help grow your tax resolution services. 

1. Establish Presence and an Indexable Profile: These profiles show high for your brand in search. These profiles should be complete, up-to-date, and reflect your brand’s messaging. 
2. Share valuable content: Share things that meet your target audience. Even if they don’t find you directly through social media, this is your platform to showcase things when someone searches for your brand. Things like tax law updates, tax tips, client testimonials, and more. Just think, if someone was to hire my business or are an existing client, what type of information would they like to see to solidify their commitment to my business?
3. Engage: Be sure to be responsive. Being responsive will lead to new clients and will also show you are a business that cares and will respond to your client's needs.

Social Media Platforms to Consider

• LinkedIn: This is a good platform that showcases your expertise. This is great for creating a company profile and a professional profile. This ranks well in search engines and reinforces your brand to potential prospects. This isn’t that powerful in terms of generating new prospects, but it is an important profile to have. This can be important for professional networking and having a place to connect with other professionals that you may receive referrals from. 
• Facebook: This has a broad user base. Many taxpayers will look up companies' information here, and it has become an essential platform for all businesses to get on.
• Twitter: A good platform for sharing updates, engaging in discussions, and connecting with customers or similar businesses with similar target audiences. Generally, this profile ranks high in search for your brand and can be valuable for brand reinforcement.
• Instagram: While this may not seem like an intuitive choice for tax resolution, Instagram can be effective for sharing visual content, such as infographics that simplify complex tat issues and images about your company to help build more trust. 
• Youtube: Creating video content allows you to show in the second largest search engine in the world. This is also a powerful profile where potential prospects can see you and make a connection with you, which can significantly increase the close rate when they reach out to you. YouTube can be an effective way to generate valuable content that can directly drive prospects and grow your business. This is a good place to showcase your skills and answer common questions from tax problems that you frequently help resolve, and this can help generate potential prospects that meet the types of skills that you have. 

Partnerships and Referrals

• Professional Networking: Collaborating with complementary service providers such as financial planners, real estate agents, attorneys, accountants, etc. These professional connections can lead to referrals for the services you offer. Networking events, industry conferences, and online forums can be a really great way to build some of these connections. 
• Client Referrals: Happy clients often recommend services to friends. Tax resolution is a touchy subject, and staying in touch with prior clients is important to stay in their minds for possible future services or to remind them of the services you helped them with so that maybe they will refer others to you.

Final Words on Acquiring New Tax Resolution Clients

Attracting new clients requires strategic planning, a good understanding of your target market, and a commitment to providing top-notch services. There are a variety of strategies, and it is best to use multiple techniques to diversify your mix in the ways you receive new clients.

There is also software that can help you track leads, onboard new clients, and follow up. In all cases, it is important to find strategies that work for you that can be consistent and repeatable. The more consistent you can become with implementing various acquisition strategies and consistently putting effort in, your client base will consistently grow over time. 

In the challenging landscape of tax resolution, having a company like TaxCure on your site can make a big difference. We cater to firms of all sizes, providing services that help reinforce your brand, generate new leads, optimize your website, pay-per-click services, and more. You can reach out to us to learn more about the services we offer. Let’s make success a reality together!

State Sales Tax Guide Michigan

Any individual, business, or entity selling goods and services in Michigan must collect sales taxes from their customers and pay them to the state government. Understanding how sales tax in Michigan works is crucial to ensure you pay the correct amount on time.

Failing to pay sales taxes correctly in the state of Michigan can result in fines and criminal charges. Our comprehensive guide can help you understand Michigan’s sales tax rates, schedules, and penalties, how to file and pay sales taxes to the state government, and what to expect in a sales tax audit.

What Are Michigan’s Sales Tax Rates?

The Michigan Department of Treasury and the General Sales Tax Act of 1933, Michigan require the collection of two taxes: the sales tax and the use tax. 

Per Section 205.52 of the General Sales Tax Act, all persons engaged in a retail business or selling tangible personal property must pay the Michigan sales tax. For most taxpayers, the Michigan sales tax rate is 6%.

An exception applies to specific categories of taxpayers providing electricity, natural gas, and home heating fuels, such as state-regulated gas providers. The tax rate for these products is 4%, corresponding to the state’s sales tax rate before April 1994.

In addition to the standard Michigan sales tax, the state government levies the use tax, described by the Michigan Department of Treasury as a companion to the sales tax. The use tax applies where the sales tax cannot apply to businesses providing specific categories of tangible personal property, rentals, leases, telecommunications services, lodging, and out-of-state companies. The use tax rate is 6%, equal to the state’s sales tax rate.

Internet purchases are a typical transaction where the Michigan use tax applies. 

For example, when an out-of-state retailer ships clothing to a Michigan resident, the clothing items count as tangible personal property. The retailer will owe the use tax to the Michigan state government, calculated from the transaction’s total price, including shipping and handling charges.

Only the state government levies the Michigan sales and use tax. There are no city or local sales taxes in Michigan.

Who Needs to Collect Sales Tax?

Generally, any business or organization that meets the legal definition of engaging in retail sales must collect the Michigan sales tax from their customers and pay it to the state government.

The law (MCL 205.52) specifies the sales tax applies to individuals in any of the following cases:

• Transfers of tangible personal property for consideration, such as from a retailer to a customer. Businesses providing repairs, improvements, alterations, or other services to tangible personal property must also pay the sales tax.
• Sales of electricity, when transmitted or distributed to the customer for consumption, either through the seller’s own utilities or another provider’s.
• Sales of prepaid telephone cards, including authorization numbers and reauthorizations of existing telephone cards and numbers.
• Conditional sales, installment lease sales, and any other property transfers if the title is temporarily retained for security with the intent to transfer it later.

Per MCL 205.53(4), any individual who owes the use tax but is not otherwise required to obtain a sales tax license does not have to apply for a sales tax license as long as they are registered under the state’s streamlined sales and use tax agreement.

Individuals and organizations engaged in multiple businesses must keep separate books if at least one business is subject to the sales tax and at least one other isn’t. If you fail to keep the books for each business separate, the Michigan sales tax applies to the gross proceeds of each of your businesses.

For instance, if you manage three businesses and fail to maintain separate books for each one, you will pay sales taxes on the gross proceeds generated by all three, even if only one is subject to the sales tax.

All individuals and businesses required to collect and pay the Michigan sales tax from their customers must be licensed by applying for a Michigan Sales Tax License. Individuals may register for a Sales Tax License through the Michigan Department of Treasury’s online portal.

What Are the Due Dates for the Michigan Sales Tax?

The Michigan Department of Treasury (MTO) states that taxpayers who owe the Michigan sales and use taxes must file and pay them to the state government according to their assigned filing frequency. Each business is allocated a filing frequency ranging from monthly, quarterly, or annual, calculated based on their estimated activity levels. 

Businesses assigned a monthly or quarterly filing frequency must still complete an annual Michigan sales tax return. The Michigan sales tax due dates for each filing frequency are as follows:

• Monthly filing: On or before the 20th of the next month

• Quarterly filing: On or before the 20th of the month following the quarter. For example, when filing for the first quarter of the year (January 1 to March 31), your deadline is April 20.

• Annual filing: February 28

If the due dates fall on a weekend or holiday, Michigan law considers the due date the next business day. If you pay through Electronic Funds Transfer (EFT), the state government recommends paying one business day before the due date or one day before the weekend or holiday if the due date falls into either.

Michigan recognizes 12 holidays, the dates of which may affect your sales tax due dates: New Year’s Day, Martin Luther King Jr. Day, President’s Day, Memorial Day, Juneteenth, Independence Day, Labor Day, General Election Day, Veterans Day, Thanksgiving Day, Christmas Eve and Christmas Day, and New Year’s Eve.

What Are the Penalties for Failing to Collect or Pay Michigan Sales Taxes?

Michigan law (MCL 205.23) outlines the penalties for failing to collect and pay your sales taxes on time. The statute provides three levels of severity for which penalties may be applied:

• First degree: If the state government determines you have failed to collect or pay the Michigan sales tax with the intention of committing tax fraud, you are liable for the first and highest degree of penalties. If it applies to you, you will owe the state government 100% of the taxes you failed to pay, plus interest.

• Second degree: If Michigan determines you failed to collect or pay the sales tax due to an intentional disregard of the law but not with the intent to commit tax fraud, you must pay 25% of the total amount you failed to pay or $25, whichever is higher, plus interest.

• Third degree: If you failed to collect or pay the sales tax due to simple negligence but not intentional disregard, you must pay 10% of the total amount you failed to pay or $10, whichever is higher, plus interest.

The interest owed on a failure to pay sales taxes is calculated based on an annual rate and a daily rate. The Michigan state government revises the interest rates every six months on January 1 and July 1 of each year. You can find the current interest rates in the latest edition of the Michigan Revenue Administrative Bulletin.

• Between January 1, 2023, and June 30, 2023, the annual interest rate is 5.65%, and the daily rate is 0.0001548%.
• Between July 1, 2023, and December 31, 2023, the annual interest rate is 8.25%, and the daily rate is 0.0002260%.

Criminal penalties may apply if the state finds a taxpayer has intentionally failed to collect or pay the sales tax, filed false documents or tax returns, or helped another person avoid paying the sales tax. 

Per MCL 205.27, a criminal failure to pay the Michigan sales tax with intent to commit fraud is a felony punishable by up to $5,000 in fines and up to five years in prison. 

You may be charged with a misdemeanor if you failed to pay but did not intend to commit fraud, such as intentional disregard. This is punishable by up to $1,000 and up to one year of imprisonment.

What Are the Penalties for Late Sales Tax Returns in Michigan?

Michigan taxpayers filing their sales tax returns past the specified deadline are subject to penalties for late returns. The Michigan Department of Treasury outlines all penalties for late payments. 

Failing to file a tax return within the allotted time for the Michigan sales tax exposes you to a penalty equal to 5% of the tax due for the first two months plus 5% for every additional month over the first two, up to a maximum of 25%.

If you filed a sales tax return but failed to pay the tax due on time, the same penalties apply; 5% for the first two months plus 5% for every additional month afterward, up to a maximum of 25%.

How to Avoid Michigan Sales Tax Penalties

To avoid Michigan sales tax penalties, you must pay all applicable taxes and file a sales tax return on time. However, the state government allows you to request a penalty waiver for a failure to pay on time if you can provide sufficient evidence explaining why you were reasonably unable to do so.

Examples of situations where you may need a penalty waiver include:

• Serious illness or death
• Fires and natural disasters
• Criminal acts committed against them
• In specific states of emergency

Whether you need to file a sales tax return on time or require assistance requesting a penalty waiver from the state government, contact an experienced tax professional with TaxCure. 

What to Expect in a Michigan Sales Tax Audit

The Michigan sales tax audit process ensures compliance with the state’s sales tax regulations. The state uses computer-generated risk assessments to select businesses for audits. If your business undergoes a sales tax audit, you can expect the following procedures: 

• Notification: The Michigan Department of Treasury will notify you in writing about the upcoming audit. The notice will include details such as the audit period, the documents they will review, and any specific instructions.

• Documentation review: During the audit, the state auditors will examine your sales records, purchase invoices, exemption certificates, and other relevant documents. They will verify if your sales tax returns accurately reflect your business activities. Generally, an audit can only go back four years; however, if you did not file, the audit can review documents from any period. 

• Interview: The auditors may interview key personnel in your organization to gather additional information and clarify any discrepancies. During this process, you have the right to request that the audit happens at a convenient location and reasonable time, have a tax professional accompany you or represent you during the audit, receive copies of the audit schedule, and meet with the auditor to discuss the findings. 

• Sampling: In some cases, the auditors may use a sampling method to review a representative portion of your sales and purchase transactions. This helps them assess the accuracy of your overall sales tax reporting. 

• Findings and adjustments: The state auditors will provide you with their findings after completing the audit. If discrepancies or errors are identified, they may propose adjustments to your sales tax liability, which could result in additional taxes, penalties, and interest. 

You will receive a Determined Audit Adjustments (DAA) letter with the treasury’s Preliminary Audit Determination (PAD) and a Final Audit Notification (FAN) stating your amount due. Unless you pay the bill or request an appeal, you will receive a Final Bill for Taxes Due – Final Assessment (Form 169) 60 days after the first DAA notice. The MTO provides a guide to SUW audit payments you can reference for paying any assessed liability resulting from your audit. 

• Appeal process: You can appeal if you disagree with the audit findings. You can provide supporting documentation and explanations to contest the proposed adjustments. You can request an Informal Conference in writing within 60 days of the DAA notice, where an impartial referee will hear your appeal and report to the Treasury Executive, who will make a final decision. 

If you wish to appeal the Informal Conference decision, you can appeal to the Michigan Tax Tribunal within 60 days or the Michigan Court of Claims within 90 days. These can be appealed to the Michigan Supreme Court as a last recourse. 

To prepare for a sales tax audit, maintain accurate and organized records, have proper documentation for exempt sales, and review your sales tax compliance to identify and address potential issues. A professional tax advisor from TaxCure can help your safeguard against or prepare for an upcoming audit to ensure you comply with state regulations.

How to File and Pay Michigan Sales Tax

Filing and making your on-time Michigan sales tax payment is a crucial responsibility for businesses operating within the state. If you are wondering how do you file sales tax in Michigan, you can take the following steps to ensure you pay and file on time and with the proper forms:

• Registration: Before filing and paying sales tax, you must register for a Michigan sales tax license. You can register for a sales tax permit with the Michigan Department of Treasury through the eRegistration process or by filling out Form 518, allowing 5 to 6 weeks for processing. 

• Filing frequency: Once registered, the Michigan Department of Treasury will assign a frequency and deadline for you to file and pay Michigan sales tax based on your assigned filing frequency, either monthly, quarterly, or annual. You must still file yearly sales tax returns if assigned a monthly or quarterly frequency.

• Electronic filing: Michigan offers convenient electronic filing options. You can file your sales tax returns electronically through the MTO portal following the Michigan Sales, Use, and Withholding Taxes E-File Tax Preparer Handbook guidelines or use approved tax software vendors to submit an electronic return. 

The state requires employers with over 250 employees to complete Michigan sales tax filing online using Form 5082 if submitting an amended return. 

• Paper filing: If you prefer, you can file paper returns by downloading sales and use tax forms and mailing them to the designated address. Forms may include:

• Form 5080 – Monthly/Quarterly Sales, Use, and Withholding Taxes Return
• Form 5081 – Annual Sales, Use, and Withholding Taxes Return
• Form 5092 – Monthly/Quarterly Sales, Use, and Withholding Taxes Amended Return
• Form 5082 – Annual Sales, Use, and Withholding Taxes Amended Return
• Form 5088 – Seller’s Use Tax Return
• Form 3372 – Michigan Sales and Use Tax Certificate of Exemption

• Payment options: You have several options for making sales tax payments in Michigan. If filing electronically, you can make payments through the MTO portal using your checking account and routing number or a credit or debit card. You can also pay by electronic funds transfer (EFT), following instructions provided by the MTO or EFT debit. You can include a check or money order along with your filed return when paper filing. 

• Reconciliation return: An annual reconciliation return may be required if you are registered directly with Michigan. This return reconciles any differences between estimated payments and the actual tax liability. Typically, this is only required if you file and pay sales tax monthly or quarterly. For a 2022 reconciliation, businesses use Form 5081. 

• Voluntary disclosure: If you are an out-of-state seller who has not previously paid Michigan sales tax but now realizes the obligation, you may consider the Voluntary Disclosure program. This program allows you to report unpaid taxes and comply with reduced penalties and limited lookback periods. To do so, you will use Form 4133. 

What Are the Tax Rules Regarding Online Sales in Michigan?

Generally, Michigan follows the same guidelines for online sales as in-person sales. If you sell goods or services to customers within the state, you must collect and remit the 6% sales tax.

If you have an online store and sell products to customers in Michigan, you need to determine whether the items you sell are taxable or exempt. Most tangible goods are subject to Michigan online sales tax, while certain items like grocery food items, prescription drugs, and medical devices are typically exempt.

For example, if you run an online clothing store and sell a shirt to a customer in Michigan, you need to collect sales tax on that transaction. However, if you sell prescription medication to a customer in Michigan through your online pharmacy, that sale would be exempt from sales tax. 

To stay compliant, you must register for your sales tax permit, collect sales tax from customers, keep detailed records of your sales, and file regular sales tax returns. 

If you are an out-of-state seller conducting business without a physical presence in Michigan, you are considered a remote seller. Michigan’s online sales tax rules for remote sellers are outlined in Revenue Administrative Bulletin (RAB) 2021-21, which provides guidance on sales and use tax nexus standards. 

Remote sellers who meet the economic nexus in Michigan must register with the state and report and pay sales tax nexus. If you earn over $100,000 in gross sales or conduct 200 separate transactions selling to Michigan customers in the previous calendar year, you meet the remote seller threshold. This means you must follow the sales tax guidelines for all businesses in Michigan even though you operate out-of-state.

Sales of tangible personal property, such as clothing, furniture, books, and prewritten computer software, are subject to sales or use tax. If you meet the nexus threshold, you need to register for a Michigan state sales tax license. 

If you’re uncertain about your sales tax obligations or need compliance assistance, consult a professional from TaxCure for guidance tailored to your situation.

Get Help With Michigan Sales Tax

As a business operating in Michigan, it is vital to understand the intricacies of sales tax and manage it effectively. For example, you must pay the current 6% tax rate, know the exemptions available for certain goods and services, and comply with reporting and filing requirements. 

Properly managed sales tax ensures you follow legal requirements for Michigan businesses and helps you avoid penalties while optimizing your operations. But problems are common — if you're facing an audit, a penalty, unfiled returns, or any other sales tax problems, turn to one of Michigan's best tax relief firms. Or use TaxCure to search for tax pros — on TaxCure, you can find local professionals who specalize in Michigan sales taxes. You can start a search today using the search feature on the site, or you can view the Michigan sales tax professionals here.

Washington Sales Tax Guide

Washington sales tax rules are complex. Here’s what you should know about them and when to seek help from a professional.

It is important to know whether you need to collect Washington sales tax, and if you do, how — and when — to file your taxes and make payments. You may need to collect Washington sales tax even if you have never stepped foot in the state. Additionally, Washington tax law requires you to take specific steps before you can even begin collecting sales tax. 

Understanding state laws can help you better run a successful business. But failing to follow Washington’s tax regulations can lead to costly penalties or even forced business closure. Here’s everything you need to know about staying compliant with sales tax regulations in Washington.

Washington Sales and Use Tax

Sales tax is applied to all retail sales of tangible goods in Washington State, with very limited exceptions. For instance, postage stamps and most groceries aren't subject to sales tax. Retailers collect the tax from buyers, then file sales tax returns and send the funds to the state. 

When the full Washington sales tax rate has not been paid on a taxable good or service, the buyer may need to pay a Washington use tax. You may encounter Washington use tax if purchases are made in another state with no sales tax or a lower sales tax rate than Washington’s. 

For example, if you make a purchase in Oregon (where there is no sales tax), but you store or use the goods in Washington, you would need to pay a use tax equal to the Washington sales tax rate. 

Washington Sales Tax Rate

The Washington state sales tax rate is 6.5%, but that doesn’t mean retailers only collect a 6.5% tax on their sales. Local sales tax rates may also apply. 

In fact, some areas charge as much as 10.6% when taking into account state and local sales taxes. To sell taxable goods or services in Washington, you need to know the local sales tax rate in every tax jurisdiction you do business in.

How to find local Washington Sales Tax Rates

Since you might do business in several Washington tax jurisdictions, having an easy way to find local Washington sales tax rates is essential. Thankfully, the Washington Department of Revenue (DOR) has a handy local sales tax rate lookup tool that will compute the sales tax you need to collect. You can even check the sales tax rate for a specific address, which is handy if you sell goods or services online.

Register to Collect Sales Tax in Washington

You will need to apply for a Washington business license (Form 700 028) if you need to collect sales tax in Washington. You can find a business license application on the Washington DOR website.

• Washington typically processes online applications within ten business days.
• Paper applications may take up to three weeks to process.
• There is a $50 fee to apply for a business license in the state of Washington.

You cannot collect any sales tax until you receive your Washington business license. Washington will provide you with a Unified Business Identifier (UBI) number, which you will use for tax purposes (such as filing your sales and use tax returns). 

There may be additional steps you need to take after your business license has been processed. Requirements vary depending on the type of business you conduct. Cities and counties in Washington may have separate licensing requirements.

 

What Triggers Nexus in Washington?

You do not necessarily need to have a physical business or live in Washington to trigger a sales tax nexus. The word nexus means "connection" and if you only have to collect sales tax in a state if you have nexus with that state. 

Of course, if you do have a physical presence in Washington, a nexus is automatically triggered. If any of the below apply, you also have nexus in Washington State.

• You have more than $100,000 in combined gross receipts sourced or attributed to Washington State. 
• You are organized or commercially domiciled in Washington.

This means that if you are a remote seller that meets any of the above criteria, you need to register to collect Washington sales tax. Tax-exempt goods and services must be included when determining your gross receipts.

To give you an example, imagine that you have an online store selling gifts, and people living in Washington State buy $50,000 worth of products from you. In this case, you don't have nexus, and you don't have to collect or pay Washington sales tax. Now, imagine that the next year, you sell $101,000 in taxable goods to Washington residents. Now, you are over the threshold and must collect, file, and remit sales tax. 

Who is Required to Collect Sales Taxes?

Any individual who triggers a sales tax nexus in Washington needs to collect sales tax on taxable goods. You can't collect sales tax until you receive your business license from the state. The sales tax you collect must be paid to the state of Washington, so it’s wise to keep sales taxes separate from other business revenue.

How to Report Sales Tax in Washington State

You will report your retail sales on your Washington State excise tax return. This return is for business income as well as sales and use tax. 

Sales tax returns can be tricky, so you may find it beneficial to consult with a tax professional that has experience working with Washington State excise tax returns. Failing to report your sales tax properly can result in expensive penalties. If the penalties go unpaid, you may even lose your Washington business license.

On the other hand, mistakes can also cause you to overpay. A tax pro can help you ensure that you're tracking your sales tax and filing the forms correctly. 

How to Pay Sales Tax in WA

Most businesses in Washington need to file and pay taxes online. However, some can get an exemption and file through the mail. The Washington DOR accepts the following payment methods.

• EFT Debit: The Washington DOR withdraws specific funds from your bank account (no fee)
• EFT Credit: Your bank or financial institution sends specific funds to the Washington DOR (fees may apply)
• E-Check: Similar to EFT debit but requires taxpayers to enter financial information for every transaction
• Credit Card: The Washington DOR accepts American Express, Discover, Master Card, and Visa (convenience fee applies)

There are certain circumstances where you may pay your Washington sales tax in other ways. It is possible to pay your sales taxes via a paper check or cash, but you must request an e-file/e-pay requirement waiver to make a payment this way. 

Payments may be made over the phone only if you receive a bill from the Washington DOR for an outstanding excise tax debt. The department has special requirements for cash payments that exceed $20,000.

Can You Pay Sales Tax With a Payment Plan?

If you have trouble paying your Washington State sales tax bill, you may qualify for a self-service payment plan. If you qualify for a payment plan, you will have between three and nine months to pay your tax bill in full, but interest will continue accumulating, so it is not the best choice for everyone. 

The rules for payment plans in Washington State can be complicated, and the DOR has specific criteria that must be met to enroll in a self-service payment plan. Qualifying criteria includes the following.

• Must have received a Notice of Balance Due.
• Including penalties and interest, your total tax due must be more than $100 but less than $100,000.
• Must have the ability to schedule ACH debit payments.
• Must not have had an active payment plan within the last 12 months.
• Must not have penalties related to tax evasion or avoidance.
• Must not have any active DOR tax warrants or liens.

The above is not an exhaustive list. You may need to meet other criteria to qualify for a Washington State payment plan. Additionally, you must follow payment plan guidelines or risk defaulting on your payment plan. Failure to follow the below guidelines could cause Washington DOR collection efforts to resume.

• Make a payment within 30 days of setting up your payment plan.
• File future returns by their regular due dates.
• Make all future tax payments within five days. 

Can You Settle Sales Tax in Washington?

You may be able to settle certain sales tax liabilities or penalties through a Rule 100 settlement in Washington. However, that option is only available in cases of dispute. You cannot directly apply for a settlement. Instead, you need to request a formal or informal review of the tax issue. Then, at any point during the review process, you may request a settlement. The state only settles sales tax in cases of dispute, when it is a non-recurring issue, forcing you to pay the tax would have harsh consequences, or you received incorrect written advice from the Department. 

Sales Tax Deadline in Washington 

Washington sales tax filing frequency requirements vary. When you receive your Washington business license, you will also receive a packet that details your specific filing frequency requirement. How often you need to file depends on your estimated Washington State annual revenue.

• If you are a monthly filer, your tax return is due by the 25th of every month.
• If you are a quarterly filer, you must file by the last day of the month following the end of the quarter.
• Annual filers must file taxes by April 15 for the prior year’s tax return.

If your regular filing due date falls on a weekend or federal holiday, you have until the next business day to submit your tax return. All people conducting business in Washington who collect retail sales tax must file sales tax returns.

Washington State Tax Extension

If you cannot file your Washington tax return by the due date, you may be granted a tax extension. Tax extensions will not be approved if requested after your filing due date.

Most tax extensions are for 30 days or less, and Washington will only grant them in certain situations. You may get approved for an extension if any of the following scenarios apply.

• A natural disaster impacted your ability to file.
• You had a medical emergency.
• You experienced technical difficulties that prevented timely tax filing.
• Your business records were lost or stolen.

Penalties for Filing or Paying Late

Filing your sales tax return late comes with hefty penalties. Taxpayers will face a 9% penalty ($5 minimum) for late payments, but larger penalties may apply, including the following.

• 19% penalty after the last day of the month a return was due.
• 29% penalty after the last day of the second month that a return was due.

Some taxpayers may have late tax filing penalties waived. If you fail to file your Washington tax return due to reasons beyond your control, Washington may waive late penalties. Simply not having the money or not knowing when your tax return is due are not valid reasons for a penalty waiver, according to the department’s website. 

You might also avoid a late filing penalty if you filed all Washington state tax returns and made all tax payments for 24 consecutive months prior to your latest tax return due date, regardless of your filing frequency requirement. 

Interest Rate for Late Payments in WA

If you fail to pay your full tax balance, you could face late payment penalties. These are in addition to Washington's late filing penalties. The interest rates for late tax payments in Washington vary each year. For 2023, the late payment interest penalty is 3%.

Are Discounts Taxable in Washington State?

Offering discounts is a good way to attract more customers or clients, but offering discounts can make filing your Washington excise tax return a little more complicated. For true discounts (discounts offered by you and not the manufacturer), you won’t need to collect sales taxes on the discounted amounts. You will only charge and collect Washington sales tax on the amount your customer actually pays. 

However, you must include the full price (price before the discount) in the gross amount column of your excise tax return. You will also need to report the discounted amount, but this amount goes in the deductions column of your tax return. 

Individual reporting and collection requirements may vary depending on the type of discount you give. Consulting with a local CPA or tax attorney can ensure you don’t make mistakes that could cost you later.

Does Washington Audit Sales Taxes?

Washington State audits sales tax returns. In fact, the Washington DOR’s website states that it does so “routinely.” So, you’ll want to make sure you are prepared for an audit in case one happens to you. Retail sales tax reporting is one of the major categories the department looks at during an audit. 

If your Washington States sales tax return is pulled for an audit, you will need to show documented proof of sales and use taxes, both paid and collected. The auditor may look at your returns for the four prior years in addition to your most current tax return. Having a Washington tax attorney represent you during a tax audit can save you a lot of stress — and possibly a lot of money, too.

What Happens if You Don’t Collect Sales Tax in WA

Not collecting and paying Washington sales when required can result in a tax evasion — or even tax fraud — conviction. These are serious offenses that may come with financial and/or criminal penalties. 

Information from various lawyers’ websites in Washington state that you may face a misdemeanor or felony charge if you fail to accurately report Washington sales taxes. You may also have your Washington business license revoked if you don’t collect the required sales taxes. If your business license is revoked, you will no longer have the ability to conduct business in the state. So, if you have determined you have sales tax nexus in Washington, you should follow the state’s tax guidelines very carefully.

Voluntary Disclosure Agreement

You may have already started doing business in Washington State without knowing all the tax laws. In that case, you don’t need to panic. Washington offers voluntary disclosure agreements. These agreements can help unregistered businesses comply with Washington tax laws going forward, even when the business hasn’t filed excise tax returns for the past four years. If you are approved for a voluntary disclosure agreement, you can even have penalties waived. 

Taking advantage of Washington’s voluntary disclosure agreement can save you a lot of money. That’s because you won’t be able to apply for the program if your non-compliant business activities are discovered by the state first. Here’s what could happen if Washington State discovers your failure to comply.

• You could face a 5% penalty for underpaid tax.
• You could face a 5% penalty for not having a Washington business license.
• You could face a 29% late payment of a return penalty.
• Washington could assess tax non-compliance penalties for the past seven years (compared to four years with a voluntary disclosure agreement).

Not every business is eligible for a VDA in Washington. Businesses already registered in Washington State are not eligible. If your business was registered in Washington at any time, you would not qualify. If Washington State has ever contacted you regarding tax compliance (i.e., the state already discovered your tax non-compliance), your application will not be approved.

You can apply for a Washington voluntary disclosure agreement online. If the department approves your application, it will send you a formal agreement that must be signed and returned within 30 days. The 30-day window starts on the date you filed your application, not the date you were approved. Failure to sign and return the document in this timeframe will result in a denial of your application.

Get Help with Washington Sales Tax

Whether you need to determine if you have nexus in Washington State, need help filing your Washington State tax return, or are facing a sales tax audit in Washington, working with a tax professional can make the process much easier. Due to the consequences of failing to comply with Washington sales tax laws, hiring a professional can be much less expensive than going it alone. 

It’s easy to find qualified Washington State tax professionals on TaxCure. You can filter by state agency, type of tax problem, and your zip code to find profiles for Washington tax attorneys, certified public accountants (CPAs), and enrolled agents (EAs).

Nevada: Relief Options and Consequences of Tax Problems

While Nevada doesn’t have a state income tax, the Nevada Department of Taxation (NVTaxDept) does collect other state taxes, including local sales tax, state sales tax, and gross receipts commerce tax. Understanding and budgeting for your business tax responsibilities is key to running your business well, and if you fall behind or underestimate your tax responsibilities, you could find yourself financially unable to pay. 

If you don't pay your taxes, you can face a range of very serious consequences ranging from tax liens to asset seizures. However, to help you out, the NVTaxDept offers a range of payment and relief options. This guide looks at resolution options for NV back taxes. It also discussed tax audits and how to amend your return. Then, it outlines what happens if you don't pay. 

Resolution Options for Nevada Back Taxes

Nevada offers several resolution options for businesses with unpaid taxes and unfiled returns. Here is an overview of the options you may want to explore.

Payment Plans for Nevada Back Taxes

The Nevada Department of Taxation approves tax payment plans on a case-by-case basis. If you cannot pay your back taxes because of financial hardship, you can apply for a monthly installment plan. The size of your payments and the duration of the repayment plan will depend on your financial condition. 

To apply for a plan, you will need to file all of your tax returns and complete the Payment Installment Plan Request Form. If you owe more than $50,000 in tax or are applying for a plan that will last more than 36 months, you will also need to complete a Financial and Other Information Statement for Businesses, plus the Financial Statement for Individuals forms. 

You should file your payment installation plan request with the Nevada Department of Taxation as soon as you realize that you cannot pay your tax liability. Once your payment plan is approved and finalized, you will need to file and pay all of your future returns by their due dates. If you don’t make those payments on time, you will default on your payment plan, and the collections process will resume. 

Offer in Compromise for Nevada Back Taxes

You may be able to request a compromise with the Nevada Tax Commission (NTC). The NTC may consider compromises for taxes, contributions, premiums, fees, interest, and penalties. If your compromise is approved, the NTC may settle your debt for less than the full amount that you owe. 

The NTC allows you to apply for a compromise for three reasons. 

• You feel that you are unable to pay the full tax amount. If so, you will need to complete a personal financial statement and a financial information statement for businesses with your request. 
• You don’t believe that you owe the total tax amount that the NTC has calculated. You will need to describe why you feel you don’t owe the tax liability and must identify the correct amount of tax, the penalty, and the interest that you believe you actually owe. 
• You have a hardship situation, such as exceptional circumstances that caused you to pay the incorrect amount or to not be able to pay the full amount of tax. Depending on your circumstances, you may need to complete the personal financial statement and financial information statement for businesses. 

You must apply for a compromise in writing using the department's OIC form and include a detailed explanation of why you are requesting the compromise. Once you apply, collections activity on your debt will stop until the NTC has accepted or rejected your offer. 

Generally, the Department requires you to pay offers in five months or less — if you take this option, you can make up to five monthly payments. However, you can apply to pay the offer over a longer period of time. 

Nevada Tax Penalty Waivers

The Nevada Department of Taxation may be willing to remove tax penalty, interest, or both if you can prove that your failure to file a return or make a payment on time was from circumstances beyond your control. To apply for a tax penalty waiver, you will need to show that your failure to file or pay occurred without your intent. 

For example, circumstances like natural disasters, fire, death, or serious illness of the taxpayer, or system issues that delayed electronic filing or payment may be considered valid reasons for failing to file or pay. If you believe that your circumstances qualify for a tax penalty waiver, you will need to complete the Request for Waiver of Penalty and/or Interest Form, briefly describing the reasons why you feel the penalty should be waived. 

Help With Unfiled Tax Returns in Nevada

If you have unfiled returns, you may want to look for an amnesty or voluntary disclosure program. At the time of writing, there isn't an active amnesty program, but there is a voluntary disclosure option. Here's an overview. 

Nevada Tax Amnesty Program

The last time Nevada had a tax amnesty program was in 2020. Nevada’s 2020 tax amnesty program was a one-time program for businesses or individuals doing business in Nevada with existing tax liabilities. 

Under the program, the department waives penalties and interest as long as the taxpayer's debt meets the program’s criteria as follows: 

• Tax was due and payable on or before 6/30/2020.
• Delinquent tax was paid in full for the period.
• Delinquent tax is paid during the upcoming amnesty period.

This program included many types of tax, like sales and use tax, liquor tax, cigarette tax, modified business tax, live entertainment tax, wholesale marijuana excise tax, and retail marijuana excise tax. It does not include lodging tax, real property transfer tax, and locally assessed tax. 

Voluntary Disclosure 

Voluntary disclosure is a program that allows people with unfiled tax returns to get into good standing with a minimum of penalties. Generally, you can only qualify if you haven't been contacted by the department about the tax. To apply, file an Application for Voluntary Disclosure of Failure to File Return.

For example, people often use the voluntary disclosure program for sales tax. Say that you're an online seller and you didn't realize that you were supposed to be collecting sales tax from your customers in Nevada. To catch up on your filing requirements, you may want to look into this program. 

Amending Your Nevada Tax Return

If you have discovered incorrect information on your original tax return, you can submit an amended tax return to correct that information. For example, if you realize that you forgot to claim all of your business deductions, amending your tax return to reflect those deductions could reduce your tax liability. 

The state of Nevada requires you to include an original copy of your return and write “AMENDED” on it in black ink in the upper right-hand corner. You can put a straight line through the original incorrect figures, then enter the correct figures next to or above the lined-through figures. You will also need to include a written explanation and any documents, like exemption certificates or adjustments, to identify why you are making those changes. 

Once you have completed the amended return, you can email it to nevadaolt@tax.state.nv.us or mail a hard copy to the Department of Taxation. 

If your amended return increases your tax liability, you will need to submit the payment and any penalty and interest. If you can't afford to pay in full, you will need to request a payment plan or other relief option. If you qualify for a refund or credit because the amendment reduces your liability, you will receive written notice when that credit is available. 

Nevada Tax Audits

During an audit, the NV Department of Taxation asks you to support the information on your tax return. Then, the auditor makes a determination of whether you owe back taxes by reviewing the facts of your return and any information that they may have received about your business operations. 

Upon failing an audit, you may be subject to pay penalties and interest in addition to the full amount of taxes due. However, you can appeal if you disagree with the taxes assessed during an audit.

Appealing a Nevada Tax Assessment

If you have a disagreement with the Nevada Tax Commission, you can request a hearing. The hearing is similar to a court of law, but it's a bit less formal. Generally, it happens around a conference table, and an Administrative Law Judge (ALJ) will issue a decision. 

You have the right to appeal the ALJ’s decision to the Commission. You must file your appeal within 30 days of the ALJ’s decision and must show that the decision: 

1. Violated constitutional or statutory provisions
2. Exceeded the agency’s statutory authority
3. Was unlawful
4. Was affected by other errors
5. Was clearly erroneous
6. Was arbitrary or lacked discretion

When you file your appeal, you will receive a letter from the Department acknowledging your appeal. The letter will request specific information and a list of documents that you need to submit to the Commission to consider. You will also receive a letter identifying the date, time, and place for your hearing before the Commission. 

During the hearing, you will have the chance to present your case to the Commission and explain why you feel the ALJ’s decision is incorrect. The Department will also have a chance to explain why they agree or disagree with the ALJ’s decision, and after hearing both sides, the Commission will decide to accept, reject, or modify the ALJ’s decision. 

Bankruptcy to Resolve Business Tax Debts?

Depending on your business’s financial situation and the amount of taxes that you owe, you may want to consider filing for commercial bankruptcy. When you file for commercial bankruptcy in Nevada, you may be able to minimize your business debt obligation, but you won't necessarily be able to eliminate all of your tax debt. To be on the safe side, you should always consult with a bankruptcy attorney before taking this path.

Chapter 11 bankruptcy lets you continue to operate your business while you create a reorganization plan and restructure your debt. Once you file for Chapter 11 bankruptcy, your creditors will be placed under an automatic stay, meaning they can’t seek foreclosure or repayment from your business. Your business will file a reorganization plan with the bankruptcy court, and once that plan is approved, you will be responsible for filing monthly operating reports, paying quarterly fees, and making all payments required by the reorganization plan. 

If you’re operating your business as a sole proprietor, you may be eligible to file for Chapter 13 bankruptcy, instead. To qualify for Chapter 13, you must have no more than $1,395,875 in secured debts, and no more than $465,275 in unsecured debts. 

Just like Chapter 11 bankruptcy, chapter 13 bankruptcy will require you to create and follow a repayment plan. Chapter 13 bankruptcy allows you to keep your property while typically giving you between three to five years to repay your debts. 

For businesses that are no longer viable, Chapter 7 bankruptcy may be an option. With a Chapter 7 bankruptcy, your business must stop operating, and its property and assets will be liquidated to pay off debts. 

How to Pay Nevada Taxes Owed

You can pay your taxes online through the Nevada Tax Center website. Once you register to use the website, you can make all of your payments online via Electronic Funds Transfer (EFT). You can also use the site to file your tax return and view financial statements. 

You can also print a paper return using the Nevada Tax Center. You can print those forms and mail them with your check or money order. If you don't have a printer, most libraries let you print tax forms for free. 

If you wish to make a payment with cash, you will need to visit your district tax office. District offices can also accept check or money order payments. If your payment is for $10,000 or more, The Department of Taxation requires that you make the payment electronically. 

During busy tax times, including April, July, October, and after January, it can take up to 15 days for your check to clear your account. 

Statute of Limitations on Tax Liabilities in Nevada

After you have filed a tax return in Nevada, the Nevada Department of Taxation has up to three years to audit your tax return. If you did not file a return, the statute of limitations is extended up to eight years. If you are found guilty of fraud or intentional evasion of sales tax, there is no statute of limitations. 

The Consequences of Owing Back Taxes in Nevada

Owing back taxes in Nevada can unleash a series of consequences that can affect your financial stability and personal peace of mind. From penalties to asset seizures, the scope of consequences reaches far. That’s why it’s so critical to know what you’re going up against if your business taxes slip. 

Whether you’ve fallen behind due to negligence, evasion, or just because you've been busy, there are a lot of penalties and consequences to unpack. Here's an overview of what can happen if you don't pay or file taxes in the Silver State. 

Nevada Department of Taxation Contact Information:

• Business Tax Assistance: (866) 962-3707
• General Tax Information: (866) 962-3707
• Collections: (866) 962-3707
• Website: Nevada Department of Taxation

Taxpayer Penalties in Nevada

If you don’t pay your Nevada business taxes in a timely manner, you’ll face a series of late penalties until you pay your account in full. The exact penalties depend on the tax delinquency in question – for instance, whether the offense is a late return, a returned check, a failed audit, a case of negligence, or outright fraud. 

Penalties for Returned Payments

If you pay your taxes using a check that your bank doesn’t honor, you’ll be charged a fee. You may be required to pay the NVTaxDept using other methods of payment in the future such as cashier’s checks, money orders, traveler’s checks, or cash. 

Penalties for Filing Late

If you don't file your tax return on time, the penalty can be up to 10% of the total amount you owe, including both taxes and fees. Until you pay your tax obligation, interest also accrues at a rate of 0.75% per month. 

Nevada sales and use tax returns are due by the last day of the month following each reporting period. Commerce tax returns are normally due August 14 or the following business day — the fiscal year for business returns in Nevada runs from July 1 to June 30. 

If your return isn’t submitted and postmarked on or before the due date, the penalty scales based on how many days late the payment is, and it can get up to 10%. For example, if you're less than 10 days late, the penalty is just 2%. It reaches 10% once you're a month late.

Penalties for Fraud or Evasion

The penalty for committing tax fraud or evasion in Nevada is 25% of the amount you’re determined to owe. You can be convicted of fraud or evasion if the Department determines that you intended to avoid paying taxes. 

Tax Liens in Nevada

If you don’t pay your business taxes in Nevada, you can be subject to a lien. A lien is a claim on your property representing the debt that you owe. For instance, the NVTaxDept can guarantee your tax obligation by placing a claim on your home or car until your tax debt is paid. After your account goes unpaid, the NRS has three years to bring a lien against you. 

Tax Levies in Nevada

If you fail to fulfill your tax obligations, the Department can issue a levy against any property you own that has value. A levy is a legal seizure of property that fulfills a tax obligation. If you own a business, a home, or a car, it can be taken to satisfy a tax debt in Nevada. The Department of Taxation can also seize most sources of income and the funds in your bank or retirement accounts. 

Revoked Business Licenses in Nevada

The Department of Taxation can also order a sheriff to lock and seal your business doors if it’s determined that you’ve sold taxable fuel without remitting taxes. The Department must provide notice by mail before carrying out the order. 

Tax Penalty and Collection Notices in Nevada 

A tax penalty or collection notice from the Department of Taxation might come by mail or email, or it might be served in person. A mailed notice will always come to your home or business address, not a PO box. You’ll only receive an email if you’ve agreed to receive notices in that manner. You may be served if you have a history of being unresponsive to notices. 

Some of the common collection notices in Nevada include: 

• Notice and Demand for Payment: This tax bill arrives after the Department makes a determination on your tax obligation. To avoid collection actions, you should respond – even if you can’t pay in full, you can arrange a payment plan. 
• Final Notice of Intent to Levy: The levy notice appears in your mailbox when you’ve neglected to answer a tax bill or arrange a payment plan. It gives 30 days advance notice before the levy can be carried out and your property gets seized. 
• Notice of Levy on Your State Tax Refund: This document usually makes its appearance around tax time, and indicates that the Department is seizing your tax refund to satisfy the debt. 
• Notice of Your Right to a Hearing: Most letters come with a copy of this notice, which informs you of the process to dispute a tax determination. 

• Advance Notification of Third-Party Contact: If you receive a third-party contact letter, it means the Department can contact other people and organizations while inquiring about your ability to pay the tax debt. 

Get Help With Nevada Back Taxes 

Even if you've ignored multiple notices or missed filing several returns, it’s not too late to get back into good standing with the Nevada Department of Taxation. Don’t risk losing your assets or having to lock and seal your business doors for good – talk to a professional who can help you. 

At TaxCure, we have a comprehensive directory of tax professionals who know from experience how to deal with the NVTaxDept, and they’ll work with you to find a solution with a peaceful outcome. Use our site to search for a Nevada tax professional today and narrow down your search results to find someone who has experience with your specific concern.

State Sales Tax Guide – Colorado

If you’re selling goods in Colorado, there’s a good chance you’ll need to collect a sales tax and send that money to the Colorado Department of Revenue. If you don’t, you could face monetary penalties, interest, and/or be subject to a tax lien. Paying the necessary Colorado sales taxes seems like a simple thing to do, but it can often be a complicated process. 

This guide is designed to shed some light on that process.

What Is the Colorado Sales Tax Rate?

The Colorado state sales tax rate is 2.90%. However, the effective sales tax rate is higher in most areas as county and municipal sales tax get added to this amount. 

For instance in Aspen, there’s the Aspen sales tax of 2.40%, the Pitkin County sales tax of 3.10%, the Roaring Fork RTA Snowmass and Aspen sales tax of 0.40% and the Pitkin County MTSD sales tax of 0.50%. This adds up to a total sales tax in Aspen of 9.30%.

If you’re curious about the total sales tax for a particular location in Colorado, the Colorado Department of Revenue has a handy Colorado Sales Tax Lookup tool.

Sales Tax Exemptions

Note that sales tax doesn’t apply to all products or services sold in the state. For example, there are various exemptions where there’s no state sales tax. Some of these include:

• Food sold from a vending machine.
• Medical and farm equipment.
• Residential energy usage.
• Components used to generate electricity from a renewable energy source.
• Wholesale sales.
• Most services.

Sales Tax Vendor Fees

A Colorado retailer may keep for itself a certain amount of the collected sales tax to help it cover the costs of collecting and paying the Colorado state sales tax. Not all businesses are eligible for this service fee (or vendor fee), but if you qualify, your sales tax due is reduced by the amount of the fee. You must file and pay on time to keep the fee. 

If a business is entitled to a service fee that exceeds $1,000 for the applicable filing period, then a special form (State Service Fee Worksheet) may be required.

Who Needs to Collect Colorado Sales Tax?

As a rule of thumb, only the sale of tangible goods results in a state sales tax. Three notable exceptions are commercial gas and electricity utilities for commercial use, hotel rooms, and intrastate telephone services. Also, some Colorado home-rule cities that administer their own sales tax have the option of imposing a sales tax on certain services.

This means most retailers located in Colorado or who sell to customers located in Colorado, must collect a sales tax. If a business is obligated to collect a Colorado sales tax, it will need to first obtain a Colorado sales tax license.

How to Pay and File a Sales Tax Return in Colorado 

Filing and paying the Colorado sales tax can be done with either a paper return or by with e-filing. If e-filing, there are several methods available, including:

• The Colorado DOR online portal.
• Using a sales tax software vendor that’s been approved by the Colorado DOR.
• Using an approved Microsoft Excel spreadsheet.
• XML (Extensible Markup Language).

Regardless of how you file your sales tax return in Colorado, there are two things to be aware of. First, if you have a Colorado sales tax license, you will need to file a sales tax return every applicable filing period, even if you have zero sales during that time (and therefore, collected no sales tax). If you don’t file this zero sales tax return, the Colorado Department of Revenue will file a return for you and estimate the amount of sales tax they think you generated.

Second, if your business pays more than $75,000 per year in Colorado sales tax, you must pay the necessary sales tax with an Electronic Funds Transfer, or EFT. If you’re not required to pay with an EFT, you have the option of using a check or money order, as well as a credit or debit card.

What’s the Due Date for Colorado Sales Tax? 

When and how often you must file a Colorado sales tax return depends on the amount of sales tax collected each month. If the collected sales tax is $300.00 or more each month, then a monthly sale tax return is needed. These are due on the 20th of the month following the reporting period. So if your business collected $325.78 in Colorado sales tax for July, then the sales tax return is due by August 20th.

If the collected sales tax is less than $300.00 per month, then sales tax returns must be filed quarterly, with the following deadlines:

• April 20 for the first quarter (for sales made from January to March).
• July 20 for the second quarter (for sales made from April to June).
• October 20 for the third quarter (for sales made from July to September).
• January 20 for the fourth quarter (for sales made from October to December).

If you collect an average of $15.00 or less each month, then you file a return once a year. These annual sales tax returns are due January 20 following the year of sales. 

For a seasonal business, which may only generate sales in Colorado for a few months of the year, it may request permission from the Colorado Department of Revenue to only send sales tax for the months that the business is in operation.

You’ll notice that the sales tax filing deadline is always on the 20th of a particular month, but this assumes this is a regular business day. If the 20th falls on a weekend or holiday, then the deadline moves to the next business day.

Are There Penalties for Filing a Late Sales Tax Return in Colorado? 

You could have to pay penalties and interest, in addition to any unpaid sales taxes if you fail to:

• File a sales tax return by the due date;
• Pay sales tax by the due date; or
• Properly account for all state and local sales taxes that are due.

Penalties and/or interest may apply even if you fail to do any of the above on accident, although they will be more severe if the sale tax infraction was deliberate or committed fraudulently.

If you get behind on sales tax payments, you may be able to set up a payment plan. The DOR reviews payments plan requests for sales tax delinquencies on a case-by-case basis. 

Colorado Penalties for Sales Tax Noncompliance

If you “neglect” or “refuse” to file a sales tax return or pay any sales taxes due, you could face a penalty which is the greater of $15.00 or 10% of any unpaid sales taxes, plus 0.5% for each month the tax goes unpaid. However, this penalty rate shall not exceed 18%.

Interest begins to accrue on any unpaid taxes starting from the original due date of the tax. The interest rate depends on the calendar year in which the interest accrues. For example, in 2022, the interest rate was 6%.

This interest rate may be reduced if you pay your past-due sales taxes quickly. Generally speaking, you will receive about a 3% reduction of the interest rate if you:

• Pay the tax bill in full before the Colorado DOR issues a notice of deficiency;
• Pay the tax bill in full within 30 days of the issuance of a notice of deficiency; or
• Enter into a monthly payment plan agreement within 30 days of the issuance of the notice of deficiency.

If you fail to pay taxes due to negligence or an intentional disregard for the tax laws and rules (but there’s no intent to defraud), then there’s an additional penalty of 10% of the total tax deficiency amount, plus interest.

If you try to commit fraud to avoid paying the sales tax, then the penalty is 100% of the tax deficiency amount. For example, if you owe $10,000 in sales tax, the fraud penalty would be $10,000. The penalty doubles your bill, and then, interest makes it even higher. 

Any unpaid taxes, penalties, and interest not promptly paid when due could also result in a tax lien being placed on your personal and real property. A tax levy on your property is also possible.

A tax lien is a legal claim in property to secure the government’s ability to collect a tax debt. In contrast, a tax levy is the actual taking or selling of property to pay off a tax debt.

Voluntary Disclosure for Unfiled Sales Tax Returns

If you have not filed your sales tax returns or registered your company, you may qualify for Colorado's voluntary disclosure program. Typically, you must contact the state before they contact you if you want to qualify. When you apply, the state generally limits the lookback period to four years, and you get waived or reduced penalties. This program allows you to catch up without worrying too much about excessive penalties or other consequences. Consider this program if you were supposed to collect sales tax but didn't, or if you have unfiled sales tax returns.

Amending a Colorado Sales Tax Return (Form DR 0100)

You can amend Colorado sales tax returns online. After signing in to your online DOR account, you’ll go to your home page and find your sales tax account. Then click on the “File/Amend and View Returns/Payments” link to access prior filings. 

On the right side, there should be a link that allows you to “View or Amend Return.” You will now be on the Sales Tax Return screen where you’ll see an “Amend” link toward the top of the screen. Follow the instructions and fill in the updated information, then click “OK.”

You may also need to make changes to all applicable retail locations or amend additional tax forms like the DR 0200 (Colrado Special District Sales Tax Return Supplement). Toward the end of the tax amendment process, you’ll end up at the ACH Debit payment screen. If you don’t owe additional taxes or wish to pay with a different payment method, click “No” at the “Would you like to make a payment?” prompt on the ACH payment screen. Then click “Next” to get to the Confirm and Submit screen, where you can officially submit your amended return. 

Finally, you’ll see a Confirmation screen, which allows you to pay the sales tax using a method other than ACH Debit. For example, you can follow the instructions to mail in a check. 

How to Claim a Refund After Amending

If you are due a refund after amending your sales tax return, you need to file Form DR 017 (Sellers/Retailers Claim for Refunds). You can file on paper or online. At the time of writing, the DOR is taking over a year to review refund requests, and generally, revenue officers request more information. To improve your chances of successfully requesting sales tax refunds, you may want to work with a tax professional. 

In the past, the CO DOR allowed you to roll overpayments from amended returns onto the next filing period. However, the agency changed this rule during the COVID pandemic. Now, you must request a refund if amending your return leads to an overpayment. However, you can use the overpayment line if you simply send in extra money with your tax return. This change has created excessive delays for many Colorado business owners who've requested refunds due to filing errors or other issues with their originally filed sales tax returns. 

It's also important to note that if you request a refund, your online sales tax account will show the requested refund as a credit. This can be very confusing. Even if a credit shows up on the home page of your account, you must still pay the amount due for the current filing period. 

For instance, say that you have requested $10,000 in refunds from tax year 2022, and you have a sales tax return for $1,000 due on April 20, 2023. You must pay the $1,000 bill. Although the credit appears on your online account, it is still pending. 

That said, if you see a credit for the tax return due on April 20, 2023. Then, you can apply that credit to your bill for that period, as long as the credit applies to the location for which you are filing. 

How to Avoid Sales Tax Penalties

The best way to avoid penalties is to file a sales tax return by the deadline and pay the full amount of sales tax due. But this can be a lot easier said than done, especially given the complex rules and requirements concerning not just a state sales tax, but local sales taxes, too. 

This is why it’s important to consult with a Colorado tax professional if you have any questions or need guidance on fulfilling your sales tax obligations. If you’re not ready to talk to a Colorado tax professional, there are online resources that may answer any questions you have concerning sales tax collection in Colorado.

One such resource is the Colorado Sales Tax Guide, which has detailed information about how sales taxes work in the state. Even if this guide can’t answer your questions, it can offer solid background information that can help you ask more pointed questions when you do speak with a tax professional or someone from the Colorado Department of Revenue.

Colorado Sales Tax Audit

As you might imagine, the Colorado Department of Revenue may audit your business or organization to ensure that you’re paying the proper amount of state sales taxes. Because of this, Colorado law requires retailers and other sales tax collecting organizations to keep at least three years’ worth of records and accounts relating to sales tax transactions.

The exact records required will vary based on the business, but there needs to be enough information to confirm the correct state sales tax amounts. Retailers located outside the state are also subject to sales tax audits by the Colorado Department of Revenue. Colorado retailers may also be subject to sales tax audits from localities, such as home-rule cities.

Special Rules for Online Sales Tax

A retailer not located in Colorado may still need to collect and pay Colorado sales taxes if they are deemed to be “doing business” in the state. A retailer is doing business in Colorado if it solicits business or receives orders from residents of Colorado. This sales tax requirement is subject to at least two exceptions.

1. The small retailer exception. A retailer that doesn’t have a physical location in the state is exempted from sales tax collecting requirements if their sales tax-eligible transactions for the current and prior year amount to less than $100,000.
2. If the online seller uses a marketplace facilitator. Then, it’s the marketplace facilitator that’s required to collect and pay the Colorado sales tax. A marketplace facilitator can include an Internet website or other electronic forum such as Etsy that enters into a contract with the seller to carry out a transaction in return for a fee or collects payments from the buyer and sends it to the seller. 

Special Sales Tax Disclosures to the Consumer

A Colorado retailer that collects a Colorado sales tax may not tell the consumer that the sales tax will be:

• Assumed by the retailer;
• Not added to the final selling price of the product sold; or
• Refunded to the consumer.

The retailer is also obligated to communicate the sales tax dollar amount to the consumer as a separate line item. In other words, the retailer may not simply tell the consumer what the sales tax rate is or include a single total amount on the transaction receipt or invoice. 

Do You Need Help With a Colorado Sale Tax Issue?

Dealing with Colorado sales taxes can be complicated. With so many exceptions, filing periods, and sales tax rates to keep track of, complying with Colorado state (and local) sales tax laws can seem overwhelming. Whether you’re facing an audit, trying to figure out how much sales tax to collect, or have missing sales tax returns, find a tax professional with experience resolving Colorado sales tax problems. 

Use TaxCure to search for a pro with Colorado-specific experience. Most of these professionals offer free consultations to help you decide what your next steps should be.