Idaho Taxes Owed: Resolution Options and Consequences of Back Taxes
The Idaho State Tax Commission administers and collects personal and business taxes including individual income tax, sales and use tax, withholding tax, cigarette tax, and more. If you don't pay your state tax, the Commission can take a range of collection actions against you including tax liens, wage garnishments, and asset seizures.
To avoid collection actions, you should make arrangements to take care of your tax debt as soon as possible. To help you out, this guide looks at tax debt relief options in Idaho and explains what happens if you don't pay your Idaho state taxes. Then, it shows you how to find a local Idaho tax pro to help you.
Options for Resolving Idaho Tax Debt
If you owe Idaho tax debt, you may be able to set up a payment plan, but the state may require you to sell assets or take out a loan to resolve your back taxes. Here is an overview of the options for taxpayers with Idaho back taxes.
Payment Plan on Idaho Back Taxes
If you can't afford to pay your taxes, you may be able to set up a six, 12, or 18-month payment plan. The Idaho Tax Commission has strict eligibility criteria, and not everyone can qualify for a payment plan.
You can apply online by logging into your Taxpayer Access Point (TAP) account and choosing Request a Payment Plan. If you can pay off your tax debt within 12 months, the state won't file a tax lien against you. If you need 18 months to pay, the state may file a lien, but it won't move forward with any levies as long as you stick to your payment agreement.
Interest and penalties will continue to accrue on your account while you make payments. You must stay current on filing and paying state taxes, or the Commission can cancel your payment plan. Additionally, you also must provide financial information as requested to keep your plan active. For example, the state may ask you to file Form CFS (Comprehensive Financial Statement).
Offer in Compromise: Settlements on Idaho Back Taxes
The Idaho Tax Commission may be willing to settle your taxes for less than you owe in the following situations:
- Doubt as to liability — This is when there is a credible doubt that you really owe the tax bill.
- Doubt as to collectability — This is when you cannot afford to pay the tax bill. Usually, the Commission will only accept a settlement if it is the most you can afford to pay.
- Economic Hardship — This applies when you can afford to pay a larger settlement but forcing you to do so would create economic hardship. For instance, the Idaho Tax Commission may agree to a lower settlement if the only way you could pay would be to sell your home.
- Effective Tax Administration — This comes into play when the Commission gives you a tax settlement because it would be unfair to require you to pay more.
You can apply for a settlement by writing a written protest in response to a Notice of Deficiency Demand and going to an informal hearing. Alternatively, contact a tax professional to learn more about how to apply for an offer in compromise in Idaho. In most cases, you will need to complete a financial disclosure, and you may need to meet other requirements as well. Note that the Tax Commission applies special scrutiny to cases where it settles more than $50,000 in state taxes.
Innocent Spouse Relief in Idaho
Idaho does not offer innocent spouse relief. However, if you filed a joint return with your spouse and you believe that you should not be responsible for the tax liability, you can apply for innocent spouse relief on your federal taxes from the IRS.
Then, you can consult with a tax pro to figure out what to do about your Idaho tax liability. Depending on your situation, your tax pro may advise requesting a settlement based on effective tax administration, or they may be able to help you explore other options.
The Idaho Tax Commission does not advertise a hardship program on its website. However, the state can settle tax liabilities in cases where taxpayers cannot afford to pay. Contact a local tax professional to learn more about what to do if you can't pay taxes in Idaho.
The state will assess penalties against you if you pay or file late. The Commission doesn't mention penalty abatement on its website aside from the Voluntary Disclosure Program, which only applies to businesses not based in Idaho. However, it can't hurt to ask for penalty abatement.
Generally, most states and the IRS are willing to remove penalties if you can prove that you had reasonable cause to file late. Reasonable cause needs to be something along the lines of a death or a natural disaster that prevented you from paying or filing on time. If this is a first-time offense, you can also ask for first-time penalty relief. When you contact a local Idaho tax professional, they'll be able to talk with you about the best way to approach penalty relief.
Appeals Process for Idaho Tax Disputes
If you disagree with the information on a Notice of Deficiency Determination, you have the right to protest. You must protest in writing within 63 days of the date the notice was mailed. Include your name, contact details, and the tax period on the protest. Also, explain what you disagree with and provide the legal/factual explanation for your claims.
The Tax Commission will notify you if you need to provide more information about your protest. You must respond to the request within 28 days. Otherwise, your tax liability becomes final on the 29th day, and you lose your right to appeal.
Once you submit a complete protest, the Tax Commission's Appeals Unit will review your protest and send you a letter outlining the appeals process. At this point, you can request an informal hearing if you want to present more information. At the hearing, you get to explain why the Notice of Deficiency Determination is incorrect. You can present any extra information you have at the hearing, and you also have the right to bring representation such as a tax attorney, a CPA, or an enrolled agent.
You won't get a decision at the hearing, but you will get a decision within 180 days. The Tax Commission can decide to uphold the notice of deficiency, adjust it, or cancel it. The Commission can also approve a tax settlement during the hearing. If you don't agree with the final decision regarding an individual income tax protest or a business protest for sales, use, or corporate income tax for $25,000 or less, you have the right to appeal to the Board of Tax Appeals or a district court. If you disagree with a final decision about sales, use, or corporate income tax that is over $25,000, you can file a petition to the district court. You only have 91 days from the decision to appeal.
Idaho Voluntary Disclosure Program
Idaho has a voluntary disclosure agreement for businesses based out of state that owe Idaho state taxes. To qualify, you must owe more than $500, and your business can't have a location in Idaho during the tax period in question.
If you qualify, the state will waive some of the penalties, and it will only look back at three years. In contrast, if you don't use the Voluntary Disclosure Program, the state can look back an unlimited amount of time if it realizes that you haven't been filing or paying taxes.
If you file for bankruptcy, you may be able to get some of your state tax debts discharged, but there are strict rules. Don't assume that bankruptcy will erase your tax debts — talk with your bankruptcy attorney to learn more.
However, when you file, the courts will issue a temporary stay that prevents the state from pursuing collection actions for tax debts from periods prior to the filing date. However, the state can try to collect any tax debts from periods after the filing date.
What Happens If You Don't Pay Taxes in Idaho?
The Idaho State Tax Commission can take a range of actions against you if you owe back taxes. Ideally, you should try to resolve your state tax debt before the Commission starts enforcing collection actions. Here's what the state can do if you don't pay your taxes.
Idaho Tax Liens
If you don't pay, appeal, or make arrangements on your tax debt, the Tax Commission can file a tax lien against you with the Idaho Secretary of State. The tax lien attaches to everything you own, including your real estate and personal property. It also paves the way for the state to issue a warrant to seize your wages and other assets.
Idaho tax liens last for five years, and the state can refile continuations repeatedly until you pay the tax in full. State tax liens are public records, and they can make it impossible to take out loans or sell property. To get them removed, you must pay the tax debt in full.
The Idaho Tax Commission can levy (seize) your real and personal property. It can also seize property that is held by other people such as your bank accounts, wages, commissions, franchises, securities, contracts, accounts receivables, rental income, and dividends. The state doesn't need a court judgment to levy your assets. It simply needs to assess the tax and send you a notice.
If you don't pay your tax debt, the Commission can seize your property and auction it off. The state will send you a notice of the sale and will also post a public notice of pending sale in the county where the auction takes place. After giving notice, the state must wait at least ten days before holding the auction. If you pay the tax debt in that time frame, you can get your property back.
Tax Penalties in Idaho
The Idaho State Tax Commission assesses the following penalties for individual income taxes:
- Late filing penalty — 5% of the tax due per month, up to 25%.
- Late payment penalty — 0.5% of the tax due per month, up to 25%.
- Intent to defraud — 5% of the tax due.
- Substantial understatement of tax due — 10% of the understated tax
- False or fraudulent tax return — 50% of the underreported tax
As you can see, the penalty for not filing is ten times higher than the penalty for paying late. That means you should still file your return even if you can't afford to pay. That helps to keep the penalties as low as possible. There are different penalties for business tax returns. If you're getting ready to file a delinquent tax return, you can use the penalty and interest calculator to help you figure out how much the penalties and interest will be.
Notices From the Idaho State Tax Commission
The Idaho Tax Commission sends the following notices to people who owe a tax debt to the state:
- Statement of Account — Typically, the first notice you receive, this statement shows your tax due plus interest and penalties. It also explains what to do if you disagree with your tax bill.
- Notice of Deficiency Determination — You will receive this notice if you don't pay your tax debt by the date on the first notice.
- Notice and Demand — This demand for payment usually outlines the collection actions the state may take if you don't pay.
- Notice of Lien — The Tax Commission will send this notice if it plans to issue a tax lien against you.
- Notice of Levy — Generally, this notice comes before the state levies your wages, bank accounts, or other assets.
All of these notices can be scary and confusing. If you get a notice and you're not sure what to do, call the number on the notice to speak with someone from the Tax Commission, or reach out to a tax professional for help.
Note that the Commission sends notices to your last known address. If you have tax debt and have recently moved, you may be missing notices.
Statute of Collections on Idaho Tax Debt
Generally, the state can go back three years to assess a tax. The timeline starts when you file the return or on the return due date — the later date applies. However, the state can go back further if tax fraud is involved or if you haven't filed a return.
Typically, the state must collect tax debts within 12 years of the assessment. However, because the state has the right to refile tax liens, you should consult with a tax professional to learn about how that affects the timeline.
Get Help With Idaho Back Taxes
To get help with Idaho back taxes, use TaxCure to search for a local tax professional. A local professional has experience with the Idaho State Tax Commission. They understand how to deal with this agency, and they can also help you deal with the IRS.
An Idaho tax pro can give you the individualized attention that you need to resolve your tax debt. In contrast, the big tax relief forms may lack state-specific experience, and they often just assign your account to a salesperson who doesn't really understand the best relief options.