Guide to Resolving Arizona Back Tax Problems

Arizona tax collections are controlled by the State of Arizona Department of Revenue. The Arizona Department of Revenue operates in a very similar manner to the IRS when it comes to tax problems. The solutions that they offer are almost identical to IRS solutions, so if you have a problem with both the IRS and the state of Arizona, this can make it easy to fill out the paperwork together since most of the information they ask for is the same.

Below are the main solutions that are offered by the Arizona Department of Revenue. These solutions help taxpayers in Arizona who cannot pay taxes in full.

Arizona Installment Agreement

An installment agreement is the most common method used to pay back taxes when they can’t be paid in full. Once you qualify for an installment agreement you will generally have up to 24 months to pay back the taxes owed. Below are the basic requirements to qualify:

• You can’t incur any new liabilities on top of what you currently owe
• Your payments must be made on time
• Must be willing to provide updated financial statements at any time during the term of the payment plan for review by the Arizona Department of Revenue
• Must not have more than two installment agreements that you have defaulted on in the past

To file for an installment agreement for individuals it is required that you fill out 1040IA tax form. It is also possible that Arizona will ask for a collection information statement which you will be required to provide detailed financial information (businesses must fill out this financial statement). If you have any questions on these forms, you can contact the Office of Collections at (602) 542-5551 for Phoenix office or (502) 628-6442 for the Tucson office.

Arizona Temporary Hardship Consideration

The Arizona Department of Revenue has the ability to place you on temporary hardship. While you are under this status they will not take collection actions against you, but interest will still accrue on the tax amount owed. Some reasons they may grant temporary hardship are the following:

• Natural Disaster
• Currently unemployed and it would cause financial hardship to pay taxes owed
• You received a significant decrease in pay and paying the taxes owed would cause financial hardship
• Large medical expenses incurred or currently ill
• Unexpected home or auto repairs that caused financial hardship
• Death in the Family
• Large moving expenses
• Separation or Divorce
• Child Support

Arizona Offer in Compromise

With an offer in compromise, the taxpayer may settle their taxes owed for less than the total amount. In order to qualify, the tax amount owed must be determined to be uncollectible or the cost of collecting the tax would exceed the amount of the actual tax liability. The state of Arizona has detailed requirements for submitting the offer which can be found Arizona Offer In Compromise booklet. There is a lot of paperwork that goes along with submitting an offer and it is highly advised that you use a qualified tax professional to assist with this filing.

Penalty Abatement

With penalty abatement, penalties may be removed where this is reasonable cause. Below are some common reasons the Arizona Department of Revenue would allow penalties to be abated:

• Mathematical error on a tax return that was filed on time
• Unexpected sickness that caused a delay in filing a tax return. This can also be due to the illness of an immediate family member
• Some sort of unavoidable absence of a taxpayer, such as in prison, taken as a prisoner, got shipwrecked etc.
• Death of a taxpayer or family member
• Lost or destroyed tax records
• Many other reasons could also be accepted

One way to request penalty abatement for Arizona taxes is to use the form the state provides. This request is similar to abating IRS penalties. or read more on the Arizona Department of Revenue site on what exactly is required. Once your written request for abatement is complete, send it to the following address:

Arizona Department of Revenue
Penalty Review Unit
1600 W Monroe
Phoenix AZ 85007

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