Tax Law Insights

If a taxpayer owes South Carolina taxes, the South Carolina Department of Revenue (SCDOR) will require payment of these taxes, including any related penalties and interest. SCDOR will consider payment plans for outstanding state taxes, however.

SC Form FS-102, Installment Agreement Request, should be submitted for this purpose. A nonrefundable fee of $45 and a 10% down payment is required. All tax returns during the period of the payment plan must be filed. Collection information statements using IRS forms (e.g. 433-A, Collection Information Statement for Wage Earners and Self-Employment Individuals or 433-B, Collection Information Statement for Businesses) may be required by SCDOR.

SCDOR will often issue wage and other levies ('garnishments") against a taxpayer to collect unpaid state taxes. For wage levies, this levy is at 25% of the gross wages when paid to a taxpayer. If a taxpayer is not currently compliant with his or her tax return filing and payment obligations with the state, but becomes compliant, SCDOR may reduce the wage levy to 12.5%. If SCDOR has issued a wage levy, it will not generally release this levy in exchange for a payment plan.

The IRS has a well-recognized "Offer in Compromise" program, under which the IRS may legally be able to agree to accept less federal tax than what is owed. South Carolina has such a program only "in name only", and does not administratively accept offers in compromise.

If a taxpayer completely has no ability to pay the tax, or to enter into a payment plan, SCDOR has an informal policy to place a taxpayer's account into "currently not collectible status". As with payment plans, all tax returns during the period of the payment plan must be filed. Collection information statements using IRS forms (e.g. 433-A, Collection Information Statement for Wage Earners and Self-Employment Individuals or 433-B, Collection Information Statement for Businesses) may be required by SCDOR. During any period in which a taxpayer's account is placed into "currently not collectible status", penalties and interest continue to accrue, the taxpayer still owes the tax, and SCDOR may, and often will, come back periodically to ascertain the financial status of the taxpayer.

Thus, if a taxpayer owes tax to the state, the options are to pay the tax, enter into a payment plan, seek currently not collectible status, or risk a wage or other levy.