North Carolina State Tax Payment Plan Overview
If a taxpayer owes back taxes to the State of North Carolina, they can set up its version of a tax payment plan. NC’s Department of Revenue (DOR) calls it an Installment Payment Agreement. An Installment Payment Agreement allows a taxpayer to pay off their taxes (including accrued penalties and interest) over a series of monthly payments. Moreover, the state will not let a taxpayer set up an Installment Payment Agreement until it sends the taxpayer an official notice. Consequently, once the taxpayer has received a tax notice, they can consider requesting an Installment Payment Agreement to avoid enforced collection action.
If you have received a notice from the state, you can request a payment agreement based on the following parameters:
North Carolina Tax Payment Plan Details
|Tax Type||Tax Owed||Months|
|Individual Income||Less Than $1,000||15|
|Individual Income||$1,000 to $6,999||30|
|Individual Income||$7,000 to $49,999||40|
|Individual Income||$50,000 or more||50|
Applying for an NC Payment Plan
A taxpayer can request an Installment Payment Agreement by filling out a form online. You can find the North Carolina Department of Revenue’s links to this Installment Payment Agreement form online now. In this case, there are no fees to apply for or to process your application for an installment payment plan.
Remember, taxpayers need to receive official notice from the N.C. Department of Revenue to request an Installment Payment Agreement. If they have not yet received one, they can make payments on the Department of Revenue’s website.
Individuals also have the option of calling 1-877-252-3252.
Other Documentation a Taxpayer May Need
If the taxpayer believes that they cannot make payments according to the parameters provided by the Department, the taxpayer may submit more information for review. In other words, the taxpayer needs to complete a form. Specifically, individuals should use the Collection Information Statement for Individuals (Form RO-1062), and Businesses should use Collection Information Statement for Business (Form RO-1063). Therefore, if you are submitting financial information to the NC Department of Revenue, you may want to receive help from a licensed tax professional.
Generally, when submitting these forms, a taxpayer must include three months of bank statements and supporting documentation for all income and expenses listed on the forms.
What Else Do I Need to Do to Apply for a Payment Plan?
To apply for an installment payment agreement, a taxpayer must:
- Continue to file and pay all tax returns in full during the entire term of the agreement
- Have a bank account
- Allow the Department to take automatic payments
- File and pay estimated income taxes
- Provide any additional information that the Department requests
Forms of Payment Accepted
An installment payment plan can only be paid by automatic electronic debit from a bank account. Consequently, you are required to have a Personal Checking, Personal Savings, Business Checking, or Business Savings account to set up a plan.
Reasons for Payment Plan Being Denied or Defaulted Automatically
Taxpayers can default on an installment payment agreement automatically or receive a denial if they:
- Fail to file and continue to pay all tax returns in full during the term of the agreement
- Do not have a bank account
- Fails to make a scheduled payment, or the payment is returned
- Do not pay current estimated income taxes
- Do not provide any requested information to the DOR
Potential Negative Consequences From Obtaining a Payment Plan
If you obtain an installment payment plan with the Department of Revenue and default on any of the terms, the Department must take legal action to force collection of the tax immediately.
Forced collection actions include:
- Garnishment and Attachment – An order that requires that money be withheld from a taxpayer’s bank accounts, wages, or other intangible property.
- Certificate of Tax Liability (CTL) – A CTL places a judgment on real or personal property that is held by a taxpayer. Moreover, a CTL is public information and must be resolved to obtain a clear title to a property.
- Jeopardy Assessment – The NC Department of Revenue may immediately assess and collect any tax the Department finds in jeopardy. Furthermore, when making a jeopardy collection, the Department may use any collection remedy in NC General Statutes § 105-242.
- Tax Warrant – A tax warrant is a request issued to a Sheriff to seize and sell any personal property owned by a taxpayer who has failed to pay taxes, penalties, interest, or fees that have been assessed by the NC Department of Revenue.
When in doubt, it is generally a good idea to work with a licensed tax professional that has resolved or has experience fixing tax problems with North Carolina's DOR, click the link or start your search below to see top-rated tax professionals. Sometimes other options, like an Offer in Compromise can be a better course of action if a taxpayer qualifies.
Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.