Missouri Tax Resolution Options & Consequences of Owing Taxes
The Missouri Department of Revenue (DOR) collects state income tax, corporate and franchise tax, sales and use tax, and other personal and business taxes. If you don't pay your state taxes, the DOR can issue liens, seize assets, garnish wages or bank accounts, or take other collection actions. The state may also send your account to a collection agency or a prosecuting attorney.
Here's what to expect if you have unpaid taxes in Missouri. This guide outlines the state's tax resolution options and then looks at what can happen if you don't pay your taxes.
Tax Resolution Options in Missouri
If you have unpaid taxes in Missouri, you should try to make arrangements before the state starts collection actions on your account. The state offers several options for taxpayers with outstanding liabilities.
The Missouri DOR offers payment plans to individuals and businesses that cannot pay their taxes in full. Missouri DOR calls their payment plans Internet Installment Agreements. Missouri's tax payment plans allow you to pay off your tax bill in monthly installments over 24 months.
You can sign up online or by calling the MO DOR at (573) 751-7200. Make sure you have your Social Security Number and the PIN from your notice.
An offer in compromise lets you settle your tax bill for less than you owe. Missouri will accept offers in compromise on some tax liabilities but only if the amount offered reflects the account's reasonable collection potential (RCP).
RCP refers to the most money the state is likely to be able to collect. The state looks at all your assets, income, and future income, and then it makes a small number of allowances for living expenses. Obtaining an offer in compromise is a long and detailed process, and you may want to work with a tax professional.
Innocent Spouse Relief
The MO DOR does offer some relief for people who filed returns jointly, but it does not refer to the program as innocent spouse relief. If you want to split the unpaid tax liability on a jointly filed state tax return, you need to contact the DOR directly.
If the MO DOR garnishes your wages or your bank account, you may apply for hardship status to get the garnishment stopped or reduced. To apply, you need to complete Internal Revenue Service Form 433-A for individuals or Form 433-B for businesses and include three months' worth of financial documents.
The state also offers a short offer-in-compromise application if your income is 125% of the federal poverty level. You may also use the short form if your income is 200% of the federal poverty level and you're on a fixed income, receive public assistance, or have significant medical issues.
Tax penalties in Missouri can be significant. State law allows the DOR to add a 100% penalty for employers who willfully attempt to evade income tax or sales or use tax. Individuals can face penalties of up to 30% of their tax liability. Unfortunately, however, the state does not advertise any penalty abatement programs.
You may be able to have penalties abated through the offer-in-compromise program, or a tax professional may be able to help you get penalties removed from your account.
Appeals Process for Missouri State Taxes
If the state adjusts your tax bill, you will receive an Assessment of Unpaid Tax. You can dispute the amount due by filing an official protest within 60 days. You have 150 days if you are outside of the United States. The state will review your account and issue a Final Determination.
At that point, you have 30 days to file an appeal with the Administrative Hearing Commission (AHC). If you disagree with the AHC's determination, you have another 30 days to appeal your case through the state court system.
Missouri Tax Amnesty Program
At the time of writing, Missouri does not have an active state tax amnesty program. The state last offered tax amnesty in fall 2015. Amnesty programs allow taxpayers to come forward and pay unpaid taxes without facing penalties or prosecution.
Missouri DOR Voluntary Disclosure Program
The MO DOR offers a voluntary disclosure program. If the MO DOR has not contacted you about the back taxes you owe, you may be able to use this program to file and pay. You can apply using Form 5310 (Application for Voluntary Disclosure Agreement).
If you make a voluntary disclosure, the state will not assess penalties on your account, and the MO DOR will only consider the last four years. However, if you have collected taxes from customers and not remitted them, the state will look back further than four years. Additionally, you cannot use this program if you have filed a return but underreported taxes.
Consequences of Back Taxes in Missouri
The MO DOR uses a range of collection actions to deal with unpaid taxes, and the state will continue to pursue the tax liability until it is paid in full. Even if you anticipate a tax refund that could cover your outstanding tax liability, the state will still not pause collection actions.
Here are some of the measures Missouri uses to collect unpaid tax bills.
Missouri Tax Liens
A tax lien is a legal claim to your property. The MO DOR can attach liens to your real or personal property if you have unpaid state taxes. A lien can stop you from selling or transferring property until you have resolved the liability. If you sell property with a lien attached, the proceeds go to the lienholder.
To get the lien removed immediately, you can pay the tax in full with a cashier's check, money order, guaranteed bank check, or an escrow check. If you pay by any other method, the state will take six to eight weeks to remove the lien.
Garnishment for Tax Liabilities in Missouri
In Missouri, the state can garnish your wages or bank accounts for unpaid taxes. If the courts order a garnishment, your financial institution or employer will have to send your money to the DOR.
The MO DOR is legally allowed to garnish up to 100% of the funds in your bank account and your wages. However, in most cases, the state only garnishes 25% of your net pay, which is your pay after deductions such as taxes, healthcare premiums, and retirement contributions.
The MO DOR assesses a 5% penalty per month up to 25% of the unpaid balance if you don't file your tax return on time. The state also charges a one-time 5% penalty if you pay your taxes late. MO DOR assesses both penalties the first day you are late.
For example, if you file your return and pay your tax a day late, you will face both a 5% failure-to-file penalty and a 5% failure-to-pay penalty. On a $1000 tax bill, these penalties are $100.
In contrast, if you pay and file your return six months late, you face the maximum failure-to-file penalty of 25% plus a 5% failure-to-pay penalty. This brings your penalty to $300 on a $1,000 tax bill.
The MO DOR also assesses simple interest on your account. As of 2021, the interest rate is 3%. You can use the state's calculator to determine the interest and penalties on your outstanding balance.
Other Tax Collection Enforcement Actions
If you have unpaid taxes in Missouri, the state can claim your federal and state tax refunds. If your business owes sales tax, use tax, corporate income tax, or withholding tax, the state may take your personal income tax refund to cover these liabilities.
Notices for Unpaid Taxes in Missouri
If you have unpaid taxes in Missouri, the state will send the following notices:
- Balance Due, Adjustment, or Non-Filer Notice — You will receive one of these three notices depending on if you owe a balance, had your return adjusted, or failed to file.
- Assessment of Unpaid Tax —The state will send this assessment if you don't respond to the first notice. You have 60 days to appeal before your tax determination becomes final.
- 10-Day Demand Notice — You have 10 days to respond before the state takes collection actions on your account.
- Notice of Intent to Offset — This notice says that the state has taken your state refund to offset liabilities from other state or federal agencies.
- Administrative Judgment or Lien — The MO DOR is issuing a lien against your assets.
- Garnishment — The state plans to garnish the funds in your bank account or from your wages.
- Referral to Prosecuting Attorney or Collection Agency — The state is referring your account to a prosecuting attorney or a collection agency.
If you owe business taxes in Missouri, you will also receive a Revocation of Sales Tax License Notice and a Bond Forfeited Notice. These will come after the garnishment and before the referral to the collection agency.
Statute of Limitations on Missouri Tax Liabilities
The state has three years to assess additional tax. The clock starts on the later of the date you filed the return or its due date. However, if the IRS adjusts your federal return, you are supposed to adjust your state return within 90 days. If you don't, the state can make an assessment after the three-year time limit. Additionally, if you fail to report more than 25% of your income, the MO DOR has up to six years to bill you.
If you don't file or file a fraudulent return, there is no statute of limitations. The MO DOR can bill you for the tax, interest, and penalties at any time.
Get Help With Unpaid Taxes in Missouri
Dealing with unpaid taxes in Missouri can be time-consuming, complicated, and frustrating. To get the best results possible in your situation, you should reach out to a tax professional with experience with the MO DOR.
At TaxCure, we have a directory of quality tax professionals from around the country — contact a Missouri tax pro to get help today. Our unique search and filters will help ensure you find the best professional to help with your unique tax problem. Also, see our list below of top-rated tax professionals in Missouri & by designation type.