State Tax Relief & Back Taxes Consequences

According to the Washington Department of Revenue (DOR), taxes are the most important source of funding for the state, making up almost half (38%) of the entire state’s revenue.

Considering that fact, it makes sense why the state aggressively pursues businesses that aren’t paying their taxes.

If you’ve fallen into a bad way and found yourself on Washington’s DOR’s bad side, then it’s paramount that you learn more about your rights and legal options in a timely manner. Otherwise, you could find yourself subject to various tax fees, penalties, and other consequences.

Find out more about the collection efforts available to Washington State’s Department of Revenue and learn how you can mitigate the consequences against you if you owe the DOR below. To get help now, contact us at Seattle Legal Services, PLLC. Based in Washington, we have extensive experience helping people deal with state and federal tax issues.

Do You Owe Money to the Washington DOR?

There are a few situations where you may owe money to the DOR:

• You filed a return with a balance due and didn’t pay.
• You were supposed to file a return and didn’t.
• The DOR assessed a tax against you related to an unfiled return or an underreported tax and sent you a bill.

If you live in Washington State, you don’t need to file an individual tax return because the state doesn’t collect individual income tax. However, as of 2022, the state has a capital gains tax for individuals with long-term gains over $262,000 as of 2024. But if you own a business, you generally have multiple tax payments and filing obligations including business & occupation (B&O) tax and sales tax.

In some cases, even if your business isn’t located in Washington, you may have to file returns based on having customers in the state. Keeping track of the rules can be confusing — especially if you do business in multiple states. Wondering if you need to file business tax returns in WA? Then, check out the state’s nexus rules or contact a WA tax pro.

Unfortunately, owing Washington’s Department of Revenue (DOR) is equally as daunting as owing the IRS. If you’ve found yourself owing the tax agency money, then you’ll want to get back in good standing with them ASAP. Otherwise, you could face significant penalties and consequences including loss of business licenses and closure of your business.

The good news is that no tax problem is too big to solve. Even if your tax situation isn’t ideal, there is likely a workable plan that you can leverage to improve your situation. Keep reading to learn more about the consequences Washington’s DOR can use against you if you owe taxes and the tax solutions that you can leverage to solve your tax issues.

Consequences of Owing the Washington DOR

Washington State’s Department of Revenue derives authority directly from Washington Administrative Code regulations. Per WAC 458-20-228, a taxpayer’s failure to pay their taxes in a timely manner could result in a few different types of penalties.

The DOR has the authority to utilize the following types of consequences against a taxpayer who is falling behind on their tax obligations:

• Adding interest to their tax bill.
• Charging additional penalties and fines.
• Issuing a tax warrant.
• Utilizing a tax lien.
• Revoking professional licenses.

The following sections outline more details about each of these consequences.

Financial Penalties

Your tax account will be considered delinquent when the due date for the taxes comes and goes without you paying the full amount of the bill to the DOR. Once your account becomes delinquent, you will be charged specific financial penalties. These penalties are steep and amount to:

• 9% when paid after the due date
• 19% when paid after the last day of the month following the due date
• 29% when paid after the last day of the second month following the due date

On top of these consequences, the interest you owe on your tax bill will continue to accrue until your balance is completely paid off. The bigger your tax liability, the larger your interest payments will be.

If you file or pay late, the state will notify you. If you do not get in touch with the DOR about your situation, then the agency will assign a Revenue Agent to your case.

Tax Warrants

Once a Revenue Agent is assigned to your case, their main goal is to get in touch with you and make you aware of your obligations. They will attempt to contact you via snail mail or telephone. If they cannot get in touch with you, then they may have to move on to the next step – issuing a warrant.

This is not a warrant for your arrest. A tax warrant is similar to a tax lien. It attaches to your assets, and it secures the state’s right to the value of your assets up to the amount of your tax debt plus collection costs.

A tax warrant outlines exactly how much you owe in unpaid taxes, penalties, and accrued interest. Once issued, the warrant gives you 10 days to either pay the full amount owed or get in touch with the DOR. If you don’t, then the warrant will be filed with the clerk of a Superior Court. When that happens, your property could be put at risk. Unfortunately, at this point, you will need to go through the courts and the DOR to resolve your tax problems.

Tax Liens

You will be informed regarding the tax warrant against you, and you’ll be expected to pay off the full liability upon learning about the warrant. Unfortunately, if you can’t pay the tax debt within 10 days, then a tax lien will be established against any property that’s attached to your name.

The DOR and Superior Court have the authority to place liens against your home, car, bank account, and wages.

This newfound tax lien will become public information, and it could potentially be listed in some local newspapers, business journals, and the internet. Unfortunately, it will also show up on your credit report. Even after you pay the debt off, it will remain on your credit history for up to ten years!

Once this lien is in place, it gives Washington’s DOR the authority to enforce other debt collection efforts that could leave your property and wages at risk for seizure. Brace for the potential of your bank accounts getting levied, your wages being garnished, and your property potentially being seized by the government. To prevent these enforcement actions, you’ll need to get in touch with the DOR and make arrangements to pay.

Revocation of Business Licenses

If your tax debt still isn’t paid off after 30 days of issuing the tax warrant, then the DOR may revoke your business license certificate of tax registration. If this very important certificate is revoked by the state, then your business won’t have the authority to continue operating and making sales in the state.

What’s more, once your license is revoked, you won’t be able to obtain a new certificate of registration or have your old one reinstated until you pay off your tax obligations.

The Statute of Limitations for WA State Taxes

Most debts have an expiration date, but you may be surprised to learn how the DOR handles tax debt. In general, the agency has four years after the end of the calendar year in which the tax was incurred to assess the tax burden. There is no time limit, however, on assessing a tax burden if a taxpayer fails to register to pay, intentionally commits fraud, or collects sales tax but never remits it to the DOR.

No Tax Problem is Too Big: Tax Resolution Options

Unfortunately, the longer you ignore a tax debt, the bigger the problem will get, and the more your debt will grow. Penalties, interest, and various fees will continue to accumulate. Don’t get discouraged, though, because no tax problem is too big to resolve.

The best way to settle your situation is to pay off your tax bill in full to the DOR. This isn’t always an option, though. Luckily, the DOR is willing to work with taxpayers so there are many alternatives if you can’t afford to pay in full.

In general, the Washington DOR agents aren’t interested in penalizing you for not being able to pay off your tax debt. They will only take severe collection actions if you are willfully ignoring your tax obligations. If you prove to the agency that you’re going through financial stress, then they’re more likely to work with you to resolve your issues. Here are the main resolution options in Washington.

Payment Plans

The number one way of settling a tax debt you have with Washington’s DOR is to agree to a payment plan. The Department of Revenue confirms that this option is usually the best way to regain control over a difficult situation. It will help provide you with peace of mind as well as give you specific terms and guidance on how to pay off your debt.

In general, your payment will be automatically withdrawn from your account each month. This payment will go towards paying down your tax burden. Typically, these plans can last anywhere from three to 12 months. If something happens where you can’t meet your payments, you need to get in touch with the DOR ASAP. When your payment plan is created, your financial situation will be taken into consideration.

Offer in Compromise: Rule 100 Settlements

An offer in compromise settlement is another type of tax solution. Similar to the offer in compromise offered by the IRS, this type of agreement is reached when the DOR offers to accept less than your overall total tax burden in exchange for a lump sum payment. The DOR also agrees to eliminate the remaining amount.

In Washington, these agreements are made possible by Rule 100(7). Rule 100 settlements are very beneficial for both taxpayers and the DOR.

Penalty Waivers

When you miss your payment date, you’ll automatically get charged a penalty. If you continue to ignore your tax debt, then those penalties and fees can really add up fast. Under the law, being just one day behind will lead to a 9% penalty. After the last day of the second month of the due date, that will rise to a 29% penalty.

The good news is that these penalties can be waived when:

• This is the first time you’ve had a tax problem
• You’ve paid and filed on time for the previous 24 months and your tax issue was a result of a circumstance that was beyond your control

You can request a penalty waiver by contacting the Department of Revenue directly.

Interest Waivers

Similarly, interest payments will continue to accrue for debts that you haven’t paid off. While rare, the Department of Revenue does have the authority to waive interest payments under limited circumstances. Reach out to the Department to see if you qualify.

Hardship Programs

If you have fallen into financially stressful times, then the DOR will work with you. Consider inquiring about hardship programs that can help you reduce or eliminate your tax burden altogether based on your specific financial situation.

Taxpayer Advocate Service

According to the IRS, the Taxpayer Advocate Service is an independent organization that operates within the IRS but serves the taxpayer. This agency is entrusted with the task of ensuring that every taxpayer gets treated fairly. In Washington, there is also a Taxpayer Advocate Service that operates on the state level.

If you have questions about your rights and responsibilities as a taxpaying citizen of Washington, then contacting a Taxpayer Advocate Service representative can help you answer any questions you have. The agency offers free assistance and can help you find innovative solutions when you’re facing financial hardship, pressure from the DOR, or even collection efforts. Washington’s Taxpayer Advocate Service can be reached at 206-946-3707.

DOR Business Tax Audits

The DOR may audit your business’s state tax returns to ensure that you are compliant with your state tax obligations. Washington state tax audits generally cover the last four calendar years and the current year up to the end of the last quarter, and they cover sales tax, business and occupation tax, and public utility tax.

Voluntary Disclosure Program

Small business owners have a lot to handle on a daily basis, and unfortunately, navigating complicated tax codes is one of them. If you are unsure if your business is properly registered or paying the appropriate tax levels, then you can submit to the DOR’s voluntary disclosure program.

This program can help you look back on the previous four years of business, get straight with the DOR, and avoid certain penalties and interest you might acquire if you don’t utilize this program.

How to Get Help with Washington Tax Problems

The IRS and the Washington Department of Revenue have free resources that can help you resolve your tax issues, but it will still take you a lot of time, effort, and consistency to reach your tax goals. In most cases, you will need to spend time collecting all the proper documentation, proving your financial status, negotiating with tax agents, and more.

Often, one of the best ways to stay on top of everything is to hire a tax expert to help. Here’s our step-by-step guide on how to get help with your Washington tax problems:

Step One: Understand Your Financial Situation

First, you need to know more about your financial situation. Make sure you understand exactly why you owe the DOR and whether you’re facing collection efforts. These facts could make a difference in the type of tax professional you need to hire.

Step Two: Determine What Type of Tax Help You Need

Once you know more about the problem you face, you can determine what type of tax professional can help you resolve it. Look for a CPA if you need help crunching numbers and with accounting for your transactions. Consider looking for a legal tax expert if you’re facing legal repercussions such as liens or levies as a result of your tax decisions.

Step Three: Find the Right Tax Professional to Help

Next, locate a local tax professional or firm that has the right experience, positive past reviews, and good case results. Ideally, you want a pro with experience in Washington State. You also want to ensure the pro has experience with your specific concern. For example, if you’re dealing with state sales tax problems such as determining nexus or dealing with a sales tax audit, you need an attorney experienced with WA sales tax.  Once you’ve found the right tax professional, they’ll be able to fully inform you regarding your rights, obligations, and options moving forward.

Are You Looking for a Tax Resolution Law Firm?

Have you found yourself on the wrong side of Washington’s DOR due to not filing your taxes, failing to pay off your tax debt, or for other reasons? If so, then your next steps are very important. You’ll want to get a good understanding of your obligations as a Washington state taxpayer, your rights, and your legal options moving forward.

In most cases, you can get back in good standing with the DOR by communicating appropriately, providing financial documentation that backs up your claims, and working out an agreement. If you don’t communicate, though, the DOR might opt to start leveraging collection efforts against you. This could not only cause your tax bill to get higher due to fees and penalties, but it could also potentially impact your career or property.

When you are potentially facing legal repercussions, or you need to know more about your legal options, it may be best to consult with a tax resolution law firm. Here at Seattle Legal Services PLLC, we’re prepared to help you determine your best course of action to help resolve your tax issues. Schedule a consultation with our team now to discuss your situation in more detail with our experts.