Tax Problems in Virginia: What You Need to Know
If you received a letter of any kind from the Commonwealth of Virginia taxing authority, you might be nervous, upset or confused.
You might be worrying that the state will take your assets or garnish your wages to pay your past-due tax debt.
The first thing you need to know is: You are not alone.
Attorney Sammy Kim is an experienced Virginia tax attorney, and she is available to help you solve your Virginia tax problem now.
The next thing you need to know is that you should not ignore any letter you receive from the Virginia Department of Taxation.
Pay attention to any information requested and any specific rules or deadlines for responding and be sure to meet them.
Virginia Tax Problems & IRS Tax Problems All at Once
If you have a Virginia tax problem or a tax problem in any state, the chances are that you also have an IRS tax problem.
People often assume that they should focus on the IRS matter and leave the state taxing authority on the back burner.
But that isn’t the right way to handle a tax problem.
In fact, the Virginia Department of Taxation moves more quickly than the IRS and can be even tougher with its collection actions against taxpayers.
Plus, dealing with the state of Virginia on any collection action or negotiating a payment arrangement takes place on the phone and in writing. You only have limited actions available on the Virginia online accounts such as making payments, electronic filings and viewing the account history.
That’s why it’s important to get the right help.
A skilled Virginia tax attorney can help you handle all sorts of Virginia tax problems.
Here are some examples:
Wage Levy or Garnishment
When the Virginia taxing authority takes money out of your paycheck to pay for your tax debt, it’s called a wage levy or wage garnishment.
This type of collection action has been very common in Virginia in recent months.
It’s a dreaded, embarrassing situation when someone from your HR department or your boss calls you to tell you that the Virginia Department of Taxation is garnishing your wages.
Attorney Sammy Kim handles many wage garnishment cases for Virginia taxpayers and there is one important thing to know: Once a wage garnishment is in place in Virginia, they’re not going to lift it.
However, there is some good news.
With the help of an experienced Virginia tax attorney, you might be able have the wage garnishment modified.
The amount can be reduced down to 75%, 50% or, in some cases, as low as 25% of the original 100% wage garnishment on the paycheck.
Business Bank Levy
If you own a business, the Virginia Department of Taxation can issue a business bank levy. That means that the state takes action to get your tax debt paid using the money in your business bank account.
If a bank levy hits your account, that means you can’t make any payments to employees or vendors until you can find the cash to pay for it.
In Virginia, even if you call the state taxing authority right away, they will not immediately set up a payment plan because they first want to wait and see what money they can get from your bank by the due date on their notice.
If you engage a tax attorney, they can work with you to propose a payment plan instead of the bank levy and get your business running again. A bank levy should be handled differently from wage garnishment.
Memorandum of Lien
The Virginia Department of Taxation is often quick to file a Memorandum of Lien when their normal collection action using correspondence appears to be ignored by taxpayers.
Like the IRS, Virginia can place a lien on your home, car or other assets, making it difficult to sell. Lengthy lien discharge or release processes will turn potential buyers away.
In Virginia, a Memorandum of Lien can be a big tax problem.
That’s because Virginia will not release the lien on your property until the tax debt is paid in full.
A tax attorney can help you sort out dealing with both the Commonwealth of Virginia and the IRS in an attempt to make it possible for a sale of your property to go through.
Driver’s License Suspension
If your Virginia driver’s license was suspended due to failure to pay your tax debt, the state will request a lump sum payment in order to get your license back.
Full Payment Plan
When you can’t afford to pay the full amount of your Virginia taxes due at one time, a tax attorney can help you negotiate a payment plan so you can pay it over time.
In Virginia, a full payment plan can go as long as 24 months. For some taxpayers, a 24-month full payment plan means a high monthly amount which is very difficult to maintain.
Partial Pay Payment Plan
With a partial payment plan in Virginia, you pay a lower amount on a monthly basis.
However, at the end of the plan, you owe a balloon payment, which is the remainder of what you owe. You may be allowed to extend the payment plan based on the financial information you or your representative provides to the Commonwealth.
Under this type of plan, the amount you owe will be paid eventually, just over an extended period of time. Penalties and interest continue to accrue on the unpaid balance.
Offer in Compromise with Reduced Penalties and Interest
Unlike the IRS, it is much more difficult to arrange an Offer in Compromise with the Virginia Department of Taxation.
There is no deadline for them to respond, and sometimes you may not hear back from them even after two years have passed.
Also, Virginia is less likely to reduce the principal tax for your outstanding tax balance.
If they do accept an Offer in Compromise — which is hard to get — their basic policy is to generally abate penalties and interest. You may still be required to pay the principal tax amount.
Still, an abatement can be significant because Virginia interest is assessed at the federal underpayment rate established under Internal Revenue Code Section 6621, plus 2%. Virginia also imposes an additional post-amnesty penalty on top of all other penalties, making the penalties very high in some cases.
A state tax attorney can help you gather all documentation needed and make a strong argument for your interest and penalties to be removed or reduced.
Virginia Tax Audits
Attorney Sammy Kim has successfully represented many people in Virginia tax audits. It includes Sales & Use tax audit, Payroll withholding tax audit, converted assessment, and income tax audits. The process requires a professional who is familiar with the Virginia Tax Code and Virginia Tax Rulings of the Tax Commissioner, Tax Bulletins, Attorney General Opinions and Legislative Summaries for your advantage.
A skilled tax lawyer will make your case and help you pay less to the state.
Having a tax attorney is especially important if your case is complicated or involves actions that could be considered tax fraud.
Business Sales and Use Tax Return and Economic Nexus
The new law requires remote sellers and marketplace facilitators who sell or facilitate the sale of greater than $100,000 in annual gross revenue from retail sales into the Commonwealth or 200 annual transactions to Virginia customers to register for the collection of the tax beginning July 1, 2019 (See Va. Code 58.1-612 (C)).
For a business located anywhere that establishes an economic nexus with the Commonwealth, you are required to register for sales tax and complete the Business Registration Form.
It is important for a business to be aware of this threshold for economic nexus and which classifications of sellers they fit in among remote sellers, marketplace facilitators, marketplace sellers or any mix of the three classifications within the Commonwealth.
A tax attorney can help ensure compliance will all business tax rules.
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