Tax Law Insights

If an individual or business owes South Carolina taxes, and does not have the present ability to pay off this state tax debt, the South Carolina Department of Revenue is authorized to enter into payment plans with taxpayers to pay these back taxes. Even with a payment plan, DOR may still file tax liens protectively against a taxpayer and his property, and which will remain recorded during the time the payment plan is in effect and until all back taxes are paid. SCDOR also has the power to seize assets of a taxpayer who has not paid state taxes, including bank accounts, and to levy (garnish) a taxpayer's wages and other sources of income. If SCDOR has already levied a taxpayer's wages, the policy for SCDOR is to not release the levy until all taxes are paid, and SCDOR will generally not enter into a payment plan with a taxpayer where SCDOR has already levied a taxpayer's wages for payment.

To apply for a payment plan with DOR to pay back taxes, a taxpayer must complete and submit a SCDOR Form FS-102, Payment Plan Request. The form previously required a taxpayer to first make a ten (10) percent down payment of all taxes due, and to also pay a $45 filing fee, as conditions for a payment plan, but DOR then had discretion and latitude concerning the amount of the monthly payment and the term of the payment plan. DOR also often requested financial information from a taxpayer in order to evaluate the taxpayer's financial ability to make payments under a plan.

Effective January 24, 2017, DOR has revised its tax payment plan policies, including the applicable Form FS-102. Under the new DOR payment plan policies, a 10% down payment is no longer required (but a $45 filing fee is still due), and monthly payments and the applicable payment plan term is fixed under a schedule now added to the Form FS-102 (e.g. if an individual owes state taxes of $9,999, the payment plan term can be up to 36 months). The FS-102 payment plan request form can be mailed or electronically filed with SCDOR, and all payments under a payment plan with SCDOR must now be made through electronic bank debit/draft. The new payment plan form does notify taxpayers that DOR may file tax liens against a taxpayer, as before, and with the costs of the tax lien filing being added to the taxpayer's account for payment, and the new payment plan form also alerts taxpayers that the filing of a tax lien "may negatively affect my tax rating or the tax rating of my company." This new form, with instructions, may be obtained from the SCDOR website.

The new SCDOR payment plan policies and payment plan request form represent a trade-off: taxpayers no longer must make a 10% upfront payment to get into a plan, but payment plan terms are fixed and DOR now has less discretion to set the amount and term of the payments. Payments under a payment plan must also now be made electronically through a taxpayer's bank account.