If you have outstanding income tax liabilities with the Colorado Department of Revenue (the “Department”) and cannot pay them in full, the payment options are limited. They also vary from those accepted by the Internal Revenue Service for payment of the same or most other types of taxes.
The Department does not have any type of temporary hardship status when a taxpayer is not showing the ability to make pay its outstanding income tax liabilities, even when that person is unable to pay his or her necessary monthly living expenses. The options for repayment are generally: (1) pay the entire balance due (including penalties and interest) within 36-months, or (2) provide financial information to enter a longer-term agreement, not to exceed 99-months. See the Department’s Form 6596, Statement of Income and Expenses.
If a taxpayer shows a total inability to pay, based on financial information, the Department will still require a 99-month Installment Agreement. Of course, this is very difficult for some taxpayers, especially if they are not earning income as a result of the pandemic. Despite a taxpayer’s inability to pay, the Department requires an Installment Agreement. Otherwise, it will issue wage and bank garnishments, and turn a taxpayer’s account over to a third-party collection agency, resulting only in more fees.
While the Department will consider an Offer in Compromise, whereby it may be willing to accept less than the full amount the taxpayer owes, it will only do so if a taxpayer has an accepted and fully-paid Offer from the Internal Revenue Service. Other eligibility determinations are made by the Department, but the requirement of an IRS-accepted Offer often precludes taxpayers from qualifying.
If you have questions, contact Anderson & Jahde for competent, professional tax help.