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 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 [email protected] 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:
- Violated constitutional or statutory provisions
- Exceeded the agency’s statutory authority
- Was unlawful
- Was affected by other errors
- Was clearly erroneous
- 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.
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.