Tennessee Department of Revenue Payment Plans
If you have unpaid taxes in Tennessee, you may be able to qualify for a payment plan. The state offers payment plans for individual income tax, corporate income tax, sales tax, and other taxes. The exact rules may vary depending on the tax you want to make payments on. An Installment Payment Agreement (IPA) allows you to pay off your tax liability in equal monthly payments over a set period of time. Still, you must meet certain criteria to qualify. Take a look at how tax payment plans work in Tennessee.
How to Qualify for a Tax Payment Plan in Tennessee
To qualify for an installment plan, you must meet the following criteria:
- Owe at least $300
- Agree to make monthly payments of at least $50
- Set up direct debit for the payments
- Be able to pay off the tax liability in two to 60 months
You also must submit an application that includes a detailed analysis of your financial situation. If you have a business, you must keep your daily records current and submit all tax returns and reports as required to the TDR. If you cannot afford the monthly required payments then it may be possible that you could qualify for an offer in compromise with the Tennessee DOR.
What to Expect With a Tax Payment Plan in Tennessee
If you have a payment plan, your tax liability will continue to accrue interest, but it will not incur any more penalties. As of October 2021, the state charges 9.25% interest on payment plans accounts. Note that because the interest rate is so high, you may want to consider obtaining a bank loan to pay off your tax bill instead of requesting a payment plan through the state.
If you have a payment plan, the state will not impose any tax levies such as wage garnishments or asset seizures, but the TDR may still file a lien against your assets. Late payments violate the terms of your IPA, and the TDR has the right to demand full payment plus interest and penalties if you don't make your payments on time.
If you pay off your tax liability, make sure to cancel your automatic payment at least five days before it is scheduled and contact the IPA Unit directly to cancel future withdrawals.
How to Apply for a Tax Payment Plan in Tennessee
If you have had two or more payment plans in the last two years, you must submit a 25% downpayment with your application, or the TDR will not consider your request. For instance, if you request a payment plan on a $10,000 tax bill and you've already had two payment plans in the last two years, you need to include a downpayment of at least $2500.
How to Fill Out the Request for a Payment Plan
The installment plan request requires your name, address, Social Security Number or Employer Identification Number, the legal structure of your business, the type of tax, and the tax period. You also must include a written explanation of why you need an installment agreement.
Individuals and self-employed applicants must also include Form IPA-IND (Financial Condition Statement for Individuals). Similarly, corporations and partnerships must submit Form IPA-BUS (Financial Condition Statement for Business), and corporate officers and partners may also need to provide Form IPA-IND.
Financial Statement for Tennesse Tax Payment Plans
Whether you're a business or an individual, the financial condition statement gives the TDR an overview of your financial situation so the agency can decide whether or not to approve a payment plan. The IPA-IND requires individuals to provide the following details:
- Name and contact information
- Marital status
- Year of last filed federal return
- Adjusted gross income from your last federal return
- Employment info
- Dependent's info, including their monthly income
- All assets, including bank accounts, stocks, retirement accounts, life insurance, antiques, and collectibles
- All liabilities, including credit cards, past-due taxes, vehicle leases, etc.
- List of income and expenses
You also must disclose if you have disposed of any assets in the last 18 months, if you have a foreclosure against any real estate, if anyone is holding assets for you, and if you or your business is a party to a lawsuit or currently under bankruptcy.
Businesses must include the same details on their IPA-BUS. They must also disclose info about machinery and equipment, merchandise and inventory, accounts receivables, and loans to owners or partners.
Supporting Documents to Include With Payment Plan Application
If you're submitting a payment plan request with the state, you also need to include the following supporting documents:
- Copy of most current personal and business federal income tax returns.
- Bank statements for the last two months.
- Statements from lenders.
- List of business equipment plus fair market value.
- Accounts receivables records showing payor, the amount due, age of the account, and status.
- Proof of employment for you and your spouse.
If your spouse is not liable for the tax liability, their income will not be considered when determining the amount of your monthly payments. Still, their income can affect the distribution of your living expenses. In other words, you won't get credit for paying all your living expenses if your spouse's income indicates that they can cover some of your shared living expenses.
Get Help Setting Up a Payment Plan
At TaxCure, we have curated a database of tax professionals from around the country who are ready to help with your tax issues. If you owe back taxes in Tennessee, you need help from a tax professional who understands the laws in this state and how to negotiate with the TDR. To get help, contact a tax pro today.