- Plain Talk about Your Tax Liability
- Plain Talk II Collection of Your Tax Liability
- Power of Attorney and Declaration of Representative Form
- Collection Information Statement – Form C:41E(6/06)
The Collection Process for Final Assessments
The Alabama Department of Revenue enters an assessment when a taxpayer files a tax return without payment, or an audit resulting in a tax liability is not paid. After the assessment becomes final and the appeal period has expired, the assessment is transferred to the Department’s Collection Services Division. This division acts as an in-house collection agency for the Alabama Department of Revenue. When the taxpayer’s assessment reaches the Collection Services Division, the tax liability already has the full force and effect of a court judgment. This means that the Department may proceed to collect the tax liability in an involuntary manner using several different methods. Taxpayers are urged to pay a tax liability in full upon receipt of the first letter sent by the Collection Services Division. This letter, called a “Final Notice Before Seizure”, warns that further collection action will be necessary if full payment is not remitted within ten days. Personal checks, as well as money orders, Visa, MasterCard, Discover, and American Express debit or credit cards are accepted.
If a final assessment is not paid in full or appealed following entry of the Final Assessment, a lien will be recorded to protect the State’s interest, even if the taxpayer has made payment arrangements. The lien encumbers property and places competing creditors on notice that the state claims an interest in the property. The lien is usually recorded in the Office of the Judge of Probate of the county where the taxpayer resides or owns property. The taxpayer will be unable to sell or transfer his property until the tax lien has been paid. Although the Department of Revenue does not give notice of a lien to credit reporting agencies, the lien is a public record. Consequently, credit reporting agencies may obtain the information from the county courthouse and notate the taxpayer’s credit report accordingly. Once this occurs, the taxpayer’s ability to obtain credit may be affected for the next seven to ten years.
The Department may garnish a taxpayer’s wages, salaries, bonuses, commissions, and any other type of compensation from an employer. The employer is required to withhold 25% of the taxpayer’s gross wages. The wage garnishment remains in effect for subsequent pay periods until the total amount of the garnishment has been withheld and remitted by the employer.
Financial Institution Garnishments
A garnishment may be issued to a bank, credit union, brokerage firm, etc. The Department is entitled to receive the full amount of money in an account at the time the garnishment is served, not to exceed the amount of the tax liability.
Other Types of Garnishments
Garnishments may be issued to any third party holding property owned by the taxpayer. Examples might include insurance proceeds or rental income.
Writs of Execution
Writs of execution may be issued to the sheriff where the taxpayer has real or personal property. In the case of real property, the Department will ask the sheriff to offer the taxpayer’s right, title, and interest in and to the property to the highest bidder. The property is sold on the courthouse steps subject to any prior encumbrances. The taxpayer will have one year to redeem the property from the Department or the highest bidder by paying the costs of the sale, the total tax liability, and the accrued interest. Whenever personal property is sold, there is no redemption period.
100% Penalty Assessment
Sections 40-29-72 and 40-29-73, Code of Alabama 1975, provide that responsible persons who collect or withhold trust fund taxes may be personally assessed with the business tax liability if they willfully fail to remit fiduciary taxes to the Department.
Liquor License Revocation
The Department may petition the ABC Board to revoke a liquor license if the business is seriously delinquent in filing or paying business taxes. Businesses, such as restaurants, lounges, and package stores will be unable to sell alcohol products until the liquor license is restored.
Frequently Asked Questions
How do I make a payment?
Follow the instructions at the bottom of the most recent billing letter you receive from the Collection Services Division. If you have any questions, contact a Revenue Compliance Officer by calling (334) 353-8096. Checks or money orders should be made payable to the Alabama Department of Revenue. Always write your assessment number and account number on the check. When using a social security number, mask the number using the following format: XXX-XX-1234.
Mail your payment to the following address:
Alabama Department of Revenue
Collection Services Division
P. O. Box 327820
Montgomery, AL 36132-7820
To make payments and view your account online, visit My Alabama Taxes.
How do I submit garnishment answers and remit garnishment funds to the Alabama Department of Revenue?
Any company signed up to use My Alabama Taxes with a Master Web Login should submit garnishment answers and/or payment online directly through the website.
Where’s my refund?
The Department may seize a state tax refund to reduce a tax liability. The Department may use any other collection method allowed by law as needed to collect the tax liability.
What happens if I file bankruptcy?
The United States Bankruptcy Code prohibits creditors from taking actions to collect certain debts while a bankruptcy case is pending and the automatic stay is in effect. If you are currently in a bankruptcy case, contact the Collection Services Division at (334) 353-8096 immediately upon receiving a “Final Notice Before Seizure” and provide information about the bankruptcy case, including the bankruptcy case number. If you have questions about your tax liability in relation to a pending or prior bankruptcy case, please seek legal counsel from your bankruptcy attorney.
Can I make installment payments?
40-2A-4(b), Code of Alabama 1975 authorizes the Department of Revenue to enter into a written payment agreement when it will facilitate collection of the tax liability. The agreement is limited to a time frame not to exceed twelve months. Basically, this means the Department may offer an installment payment plan to you if it is in the best interest of the Department. Completion of the Collection Information Statement and enclosing a payment does not automatically guarantee an installment payment agreement will be granted. Please note that installment payment forms can only be submitted if you currently have a final assessment in the Collection Services Division.
What happens if I am no longer married to the person with whom I filed an Individual Income Tax return?
Ex-spouses remain individually liable on a final assessment entered on a joint tax return, even if the parties have mutually agreed that only one of the parties will be responsible for payment. Such decisions are not binding on the Alabama Department of Revenue.