Ask Me Help Desk - Back Taxes: Out of State Employment.. .

Hi,

I have a question regarding back taxes.. .

In 2004-05, I participated in a paying fellowship outside of my state (AL) of residency. The job was only for a year. I never filed taxes in state.. . primarily because I have not been back and do not plan to return. I received a letter today from the state saying that I have to pay in 2 days or they will be taking action. Unfortunately, I do not have employment or any real/personal property but I do have a checking account that I use to receive funds (approx $600.00/month) from family to help with bills (ex. Medical and living expenses). I do not pay rent and most of my living support has come from my partner.

Over the past 3 years, many things have occurred--most outside of my control (i.e. illness, etc). I have just gotten to a point where I am able to get back on my feet. But unfortunately I will not be able to attempt to pay these taxes until the spring--which will be no earlier than 4 months from now. And even then, I will not be able to pay the amount in full--which is a little less than $500.00

Is there anything that I can do to postpone these actions?

On a side-note: I have always been good about paying ALL of my bills. My credit was great and I did not have any delinquencies. This is where I would like to get back to.. . but if my bank account is levied, my financial problems will only be exacerbated. So, if someone could be of assistance, I would truly appreciate it.

Thanks so much,

Quote:

Originally Posted by GeorgiaInplant

Hi,

I have a question regarding back taxes. . .

In 2004-05, I participated in a paying fellowship outside of my state (AL) of residency. The job was only for a year. I never filed taxes in state. . .primarily because I have not been back and do not plan to return. I received a letter today from the state saying that I have to pay in 2 days or they will be taking action. Unfortunately, I do not have employment or any real/personal property but I do have a checking account that I use to receive funds (approx $600.00/month) from family to help with bills (ex. medical and living expenses). I do not pay rent and most of my living support has come from my partner.

Over the past 3 years, many things have occurred--most outside of my control (i.e., illness, etc). I have just gotten to a point where I am able to get back on my feet. But unfortunately I will not be able to attempt to pay these taxes until the spring--which will be no earlier than 4 months from now. And even then, I will not be able to pay the amount in full--which is a little less than $500.00

Is there anything that I can do to postpone these actions?

On a side-note: I have always been good about paying ALL of my bills. My credit was great and I did not have any delinquencies. This is where I would like to get back to. . .but if my bank account is levied, my financial problems will only be exacerbated. So, if someone could be of assistance, I would truly appreciate it.

Thanks so much,

The States don't fool around when it comes to unpaid and/or unfiled taxes. They will take any means necessary to collect, including a levy against your bank account.

Didn't they send you other notices, advising you of the money due and advising you about interest and penalties? Usually you get a notice and are asked to call them to make arrangements long before it reaches this stage.

Unless you can call them and make some sort of arrangement, they will move against any assets you now have or will have. Plus steep penalties and interest.

And it will go - if it hasn't already - on your credit report.

I'm a little confused if it was income earned in that State why you didn't think you had to file a tax return. Where did you file that year?

The first thing you need to do is make it clear about in WHICH state did you work. Your title indicates you now live in Georgia, and you said your residence was in Alabama, but it is NOT clear where you did the work.

The nest thing to do is dig up the pay documents for the years in question (2004 and 2005). I assume that, because it is a fellowship in which you got paid, that you have W-2s from that institution that offered the fellowship.

Next, check to see for which states income taxes were withheld. If money was withheld for the state in which the work was done, you can file the return late and possibly get this problem resolved.

If money was withheld for the forking state, there is also the credit given by Alabama for those withheld taxes.

Suggest you contact a local tax professional to see if filing returns for 2004 and 2005 could resolve this matter.

Thanks so much for the information.

The state that I worked in was GA. The organization that sponsored the fellowship was in DC. And the fellows worked all around the US and the world. Because of this, we had to withhold our own taxes.. . unfortunately for me, I did not pay AL.

At the time, I was 24 and understood very little about this type of taxation. In all honesty, I was warned that AL (and GA) could ask to be paid and I assumed that when they did I would pay them. In the end I did not factor in the unpredictability of life. When I received the bill from AL in 2006, I was out of a job, loaded with medical bills and huge debt. So, $400.00 in taxes was the least of my problems.

I want to pay them, but I am not financially able. I know that I will be able to make some type of payment in the next couple of months (at least 50%). I am going to call them on Wednesday and see what my options are.

Thanks again.

Give Alabama a call to tell them that you will want to file the return late and to please give yo time to contact a competent tax professional.

Then, contact the tax pro THIS WEEK! This is relatively easy return to prepare for a tax professional, and it will give you an accurate figure on which to base your payments. Do NOT use the state-generated amount, because they will NOT give you any breaks/credits to which you are entitled.

When the return gets filed, ask them to waive the late filing/late payment penalties (all they can do is say NO) and request a payment plan. Assuming this is the only time you have had problems with Alabama, it should not be a problem.

However, you need to realize this fact: you probably owe Georgia the income tax, not Alabama, because Georgia taxes all income earned within its state borders. Alabama taxes the income as well due to your Albama state residencv, but to avoid doble taxation, Alabama gives you a credit for the Georgia taxes paid.

If you show this fact on your return, you can probably get the Alabama tax amount due reduced to either a minimal amount, or maybe even ZERO, and then file the Georgia return late, requesting the same waiver of late filing/late payment penalties noted above for the Alabama return. Since you are NOT currently on Georgia's radar, they are more likely to grant the waiver.