Installment Payment Agreements
Payment in full is expected at the time a North Carolina State tax return is filed or a liability is discovered by the Department and assessed. Occasionally, taxpayers do not have the ability to immediately pay the tax in full. In limited circumstances, the Department will negotiate installment payment agreements based on financial need that allow taxpayers to repay tax debt over a period of time. NC Gen. Stat. §105-237(b) provides that the Secretary may enter into an installment agreement if it will facilitate collection of the tax.
In some situations, the Department establishes payment plans without any review of financial condition for short-term agreements involving small amounts of debt. For longer-term agreements, agreements involving large amounts of liability, or when a taxpayer with a history of non-compliance is the subject of the agreement, the Department requires financial statements and supporting documentation. A review of the taxpayer’s financial condition is performed to validate financial need for the payment plan.
The primary goal of any collection action, including an installment payment agreement, is to bring the taxpayer into compliance. Occasionally, a taxpayer will establish a payment agreement for one filing period, fail to pay the tax due for an additional period and then request that the Department build the additional periods into the payment agreement. This type of behavior does not promote compliance, is not fair to the vast majority of North Carolina taxpayers that pay their taxes in full and on time and cannot be permitted by the Department.
Standard Conditions For Installment Payment Agreements
- Must be in compliance with filing all returns due at the time of requesting the agreement.
- Must remain in compliance, filing and paying in full all returns that come due during the term of the agreement.
- Must allow NCDOR to draft payments from their checking or savings account if they have an account. Must remain current in paying estimated income taxes and must ensure NC-4s reflect the correct filing status and number of allowable exemptions.
- Must provide any additional information to NCDOR on an as requested basis. (Examples: Employer copies of NC-4s, pay stubs, lists of receivables owed to businesses and any other information requested.) The Department may perform periodic reviews of financial condition during the term of the agreement to assess continued need for the payment level as well as possible jeopardy of collection.
- Should assume that during the term of the agreement any state or federal tax refunds and NC Education Lottery winnings will be offset and applied to the debt. Offsets do not count as a payment under the terms of the agreement.
- Should assume that a North Carolina State Certificate of Tax Liability (CTL) will be docketed to protect the States interest. This is a public record and may be reflected on your credit report. Taxpayers with concerns about the CTL must express those concerns with the agent handling the case prior to establishing an agreement.
- Should understand that failure to abide by the above requirements, make any required payments, or meet any additional requirements established at the time of the agreement constitutes default.
- Should realize that any payments returned by your bank or financial institution to the Department constitutes default.
- Should be aware that legal action to force collection of the tax will commence immediately and without notice should the taxpayer default on any of the terms of the agreement. (As noted above, a CTL may be docketed and refunds and lottery winnings may be offset even where an agreement is not in default.)
In exchange for entering into an installment agreement, the State will:
- Not seize or levy any property during the term of the agreement unless it goes into default or the Department determines collection of the tax is in jeopardy. (As noted above, a CTL may be docketed and refunds and lottery winnings may be offset even where an agreement is not in default or collection of the tax is not in jeopardy.)
- Provide 30-days written notification prior to changing the terms of the agreement based on improved financial condition of the taxpayer.
- Not assess the 20% Collection Assistance fee as provided by NC Gen. Stat. §105-243.1(d) during the term of the agreement if it has not been assessed. (If previously assessed at the time of the agreement, payment of the fee will be built into the payment agreement.)
To request an installment payment agreement, complete an Installment Agreement Request form. Taxpayers or practitioners that would like to discuss payment agreements or other payment options may contact the Department at 1-877-252-3252 or their local Collection Division Office.