Virginia Tax Problem Guide: Resolve Back Tax Problems

The Virginia Department of Taxation is responsible for administering all Virginia tax laws. The Department of Taxation is in charge of accepting income tax returns, generating revenue for the Commonwealth of Virginia through the collection of tax liabilities, and providing various online services to benefit and facilitate the compliance of consumers and businesses with Virginia tax laws.

VA Payment Plans

If you cannot pay your state tax bill in full, you may be able to enter into a payment plan with the Department of Taxation that allows you to pay your bill in full, typically over a 12-month period, although some agreements may last for up to 24 months. To set up a payment plan, you will need to have received a bill. It is up to the Department whether you are eligible for an installment agreement, although you may not be entitled to this type of repayment agreement if you have a history of defaulting on payment agreements if you have the financial ability to pay the taxes owed in full. Penalties and interest will continue to accrue on the unpaid balance of your taxes owed while you are making payments pursuant to such an agreement.

You can enter into a payment plan over the phone by calling 804-367-8045, by calling their automated Teleplan system at 804-440-5101 or by using the Department’s automated online system.

VA Offer In Compromise (OIC)

If you or your business is unable to pay your state tax bill in full, the Department of Taxation permits you to make a proposal to settle your tax bill for less than the full amount. Through this offer in compromise process, you may be able to reduce or have waived any penalties that have been assessed for you as a result of your unpaid state taxes. In order to qualify for an offer in compromise, you must prove to the Tax Commissioner that you may not owe the full amount of the tax, or that the ability of the Department of Taxation to collect the full amount of the tax from you is doubtful.

VA will consider an OIC if:

• The taxpayer wants to abate over $2000 in penalties due to “extenuating circumstances” that prevented the taxpayer from filing or paying on time. If so, individuals need to fill out Form OIC I-2 and businesses need to fill out Form OIC B-2.
• The taxpayer is doubtful of the liability. If this is the case, the same forms above will need to be completed.
• The taxpayer is facing financial hardship. If the taxpayer is experiencing financial hardship, different forms than above will need to be completed. These include Form OIC I-3, Fin 1-1, and an OIC-Fee. If the taxpayer is a business, then Form OIC B-3, FINB-1, OIC Fee will need to be filled out.

Taxpayers may submit required forms and supporting documentation to:

Tax Commissioner
Virginia Department of Taxation
P.O. Box 2475
Richmond, VA 23218-2475

Your request for an offer in compromise must contain the following information:

• A description of the type of tax involved
• The taxable period in which the tax was due
• The date and the amount of the tax bill
• A detailed explanation as to why the tax, penalty, or interest should be reduced or waived by the Tax Commissioner
• A signed Financial Information Statement if your offer in compromise is based on your inability to pay

Taxpayer Rights Advocate

The Taxpayer Rights Advocate is a division of the Virginia Department of Taxation that helps taxpayers resolve problems and complaints that they have been unable to resolve through normal administrative processes. When you contact the Taxpayer Rights Advocate, you must provide a detailed description of your problem, as well as the steps that you have taken so far to resolve the problem, and a telephone number where you can be reached during normal business hours.

You can contact the Taxpayer Rights Advocate by mail at:
Taxpayer Rights Advocate
Virginia Department of Taxation
P.O. Box 546
Richmond, VA 23218-0546

You can contact the Taxpayer Rights Advocate by telephone at:
(804) 367-8031 (for individual taxpayers)
(804) 367-8037 (for businesses)

Our Simple Tax Relief Process