Louisiana: Consequences and Resolution Options for Back Taxes
The Louisiana Department of Revenue (LDR) collects income tax, sales tax, and other personal and business taxes in this state. If you owe back taxes, the LDR has the right to forcibly collect the amount due using wage garnishments, bank account levies, and assets seizures.
But this doesn't mean you need to be scared about your Louisiana tax bill — the agency is willing to work with taxpayers and offers a number of resolution options. Here's what you need to know if you owe delinquent taxes in Louisiana.
Resolution Options for Louisiana Back Taxes
If you owe back taxes in Louisiana, you may be able to set up one of the following arrangements with the state. The right option depends on your tax bill and your financial situation. A Louisiana tax pro can help you decide what to do.
The Louisiana Department of Revenue offers payment plans to qualifying taxpayers. Payment plans let you pay your tax bill in monthly installments, and the LDR allows you to take up to 36 months to pay off your bill. Businesses may be able to take longer.
To apply, individuals should use Form R-19026 (Installment Request for Individual Income Tax) and businesses should be Form R-19027 Installment Request for Business Tax). If you have a LaTAP online account, you can request a payment plan online. You can request more about Louisiana's state tax payment plan option here.
Offer in Compromise
If you are unable to pay your tax bill in full, the state may be willing to settle for less than you owe. Typically, this option is only available if the state believes that your offer represents the most amount of money it is likely to be able to collect on your tax bill. You can read more details about Louisiana's State Offer in Compromise option here.
To apply for an offer in compromise, individuals should use Form R-202121 (Offer in Compromise Application) and businesses should submit Form R-20212B (Statement of Financial Condition for Businesses).
Innocent Spouse Relief
You may qualify for innocent spouse relief under Louisiana Revised Statute 47.1584 if your spouse or ex-spouse was exclusively responsible for the tax liability. To get innocent spouse relief on Louisiana taxes, you must not have known and had no reason to know that your spouse failed to file a return or failed to pay tax. Or, you must have been physically or mentally coerced into silence.
Typically, you have to apply for innocent spouse relief within two years of the start of the collection actions. But if you apply after that window, you may still be able to get innocent spouse relief if the state feels that it would be unfair to hold you responsible.
If you're experiencing financial hardship due to your Louisiana tax bill, the state encourages you to apply for an offer in compromise. The IRS has a hardship program (also called currently not collectible) where the agency will pause collection actions if you prove that you cannot afford to pay. Louisiana does not advertise a similar program.
If the LDR has added penalties to your account, you can apply for a penalty waiver online using Form R-20128 Electronic Submission. Before applying, you must file all delinquent returns and pay all your state back taxes, interest, and penalties not included in the waiver request. The state will not waive penalties if you are behind on filing or payment obligations.
In very rare situations such as when the state caused an error or delay, the LA DOR may be willing to waive interest. You can request the state to waive the interest on your account using Form R-20130 (Request for Compromise of Interest).
You have the right to appeal if you disagree with a Louisiana tax assessment. To apply, you should write out a petition explaining why you disagree with the assessment and outlining what kind of relief you want. Then, you should send it to the Louisiana Board of Tax Appeals (LaBTA).
Most appeals can be resolved without a hearing, but in some cases, you may have to attend a hearing with the LaBTA in person or over the phone. You have the right to represent yourself, but due to the complex nature of Louisiana tax laws, you may want to work with a tax attorney. Note that you must appeal by the date on your notice or you may lose your chance to appeal.
Consequences of Unpaid Louisiana Taxes
The LA DOR can use numerous tactics to collect unpaid taxes. If you want to avoid collection actions, you need to be proactive about negotiating an arrangement for your unpaid taxes. The sooner you contact the state, the better. Here's what can happen if you have delinquent taxes in Louisiana.
State Tax Liens
If you have unpaid LA taxes, the state can issue tax liens in any parish where you own real or personal property. A lien means that the lienholder has a right to the proceeds if you sell the asset. Liens can make it hard to sell or transfer assets, and they can also impair your ability to get a loan.
The state will only release the lien if you pay the tax in full, and the state will add the cost of recording the lien to your tax bill. To get a pay-off amount and request a lien release, file Form R-19023 (Request for Louisiana Tax Assessment & Lien Payoff). Generally, the state takes four to five business days to respond to the request for a payoff amount. If you need information faster, you can fax your request to the Special Collection Unit at (225) 219-2256.
In some cases, the LDR may place liens on multiple properties. If some of these properties cover the full amount of your tax liability, you can request a partial lien release to have the state remove excess liens from your other properties. The LaBTA must approve these requests.
The LDR has the right to seize stocks, securities, bank accounts, wages, real estate, and all other types of property if you have unpaid tax liabilities, penalties, or interest. Generally, the state only takes wages and bank accounts, but it has the right to take nearly all of your personal or real property.
If the state garnishes your wages, it can take up to 25% of your pay. Typically bank account seizures are for the full amount in your account, up to the amount owed.
Tax Penalties Charged
The LDR assesses penalties and interest if you file or pay your taxes late. If you file your return late, Louisiana assesses a failure-to-file penalty of 5% of the balance due. This penalty applies immediately, and another 5% penalty applies every additional month, up to a maximum penalty of 25%.
The state also assesses a failure-to-pay penalty. For individual income tax, the penalty is 0.5% of the tax due every month, up to 25%. For all other taxes, the late-payment penalty is 5% of the amount due every month, up to 25%.
As you can see, the failure-to-file penalty is much higher than the failure-to-pay penalty on individual taxes. To minimize your penalties as much as possible, you should always file your return on time or as close to on time as possible, even if you cannot afford to pay the tax due.
Note that requesting an extension only extends the amount of time you have to file. It does not extend the due date for your tax return.
Interest on Louisiana Back Taxes
As of 2022, the interest rate on unpaid Louisiana state taxes is 0.5417% per month or 6.5% per year. The rate adjusts annually.
Seizing State and Federal Tax Refunds
When you owe back taxes to Louisiana, the state can take your IRS tax refunds through the federal offset program. Similarly, if you owe federal back taxes, the Louisiana Department of Revenue will send your state refund to the IRS.
Refusing to Let You Have a Driver's License
The State of Louisiana may revoke, refuse to issue, or deny the renewal of your driver's license if you owe more than $1,000 in state taxes. To get your driver's license back, you must pay the tax due or set up a payment plan. If you have not filed the return related to the tax due, you also must file the return.
Once you meet the requirements, the state will send you a clearance letter. To get your license back, take the letter and a $60 reinstatement fee to the Department of Public Safety.
Taking Your Hunting License
If you owe more than $500 in Louisiana taxes, penalties, and interest, the state also has the right to take your hunting licenses. When you go to apply for a hunting license, the state will reject your application if you have a final determination for more than $500 in unpaid state taxes.
Get Help With Unpaid Taxes in Louisiana
The state of Louisiana has a lot of power to collect unpaid taxes, and even if you only owe $1,000, you risk losing your driver's license and facing other serious collection actions.
To protect your assets, you should work with a tax professional who is experienced in dealing with the LDR. They can look at your situation, help you identify the best resolution option, and negotiate with the LDR on your behalf. To get help, search for a LA state tax pro using TaxCure today.