Arizona tax payment plan: the ADOR installment agreement
Arizona law allows the Department of Revenue to arrange installment payments for any tax owed to the state. If you meet the terms of an approved agreement, the late-payment penalty can be kept off your bill.
- Law that covers the plan
- Arizona Revised Statutes 42-2057
- Late-payment penalty
- 0.5% per month
- Highest penalty allowed
- 10%
- Interest rate
- Federal short rate, plus 3%
Arizona law lets the state waive the late-payment penalty on a plan
Inside the penalty statute is the Arizona law worth knowing most. Under A.R.S. 42-1125, a late payment normally carries 0.5% of the tax for every month, up to 10%. If a payment agreement fits and ADOR finds reasonable cause for the late payment, no penalty is imposed. The penalty stays off unless you break the agreement.
Show why you fell behind and ask early and you can shrink the bill rather than only spreading it out.
Which taxes in Arizona can you pay through an installment agreement?
All of them. A.R.S. 42-2057 lets the department accept installments for a tax liability. Individuals and businesses have income tax covered by Title 43, Taxation of Income. The transaction privilege tax is covered as well. Arizona’s tax works much like a sales tax and applies to the gross receipts a business earns.
The statute sets no dollar cap and no fixed number of months. A financial report may be required by the department. Your income, bills and assets are things you should expect to provide.
What can end an Arizona installment agreement?
Under the installment statute, you may petition the taxpayer assistance office if ADOR refuses a plan or changes its terms. That change may be paused and the office may modify or overturn it.
Some changes do carry a warning. Before ADOR alters or ends a plan because your finances have improved, you must get at least 30 days’ notice with the reasons. You and the department can sign a new or modified agreement at any time.
That same law sets out the reasons ADOR may end or change a plan, in each case without notice:
- You miss an installment when its due date passes.
- A new tax bill stays unpaid past its due date.
- You do not file a return or report by its due date
- For more than 30 days, you ignore a request for information
- Failing to let the department know within 30 days that your income rose well above the amount you reported.
- Information the agency receives from you is false or incomplete.
Interest growth during payment
Interest keeps building as long as a plan is in place. A.R.S. 42-1123 sets the rate at 3 percentage points above the federal short-term rate. On January 1 each year, unpaid interest becomes part of the tax and from then on it earns interest too
What if you do nothing?
A.R.S. 42-1151 explains that a lien, meaning a legal claim, reaches real and personal property when an Arizona tax goes unpaid and is assessed or when its return is filed. That lien covers everything you own.
ADOR may use a levy to take property or wages and satisfy the debt. A.R.S. 42-1201 allows ADOR to levy for up to 10 years, starting once the amount is final.
Signing an installment plan does not shut down every enforcement tool. Refunds can still be applied to the balance and lien filings can still happen. After you sign an installment agreement, the department may withdraw a recorded lien notice under A.R.S. 42-1153, unless the agreement says otherwise.
One plan with the IRS and one with Arizona
Separate agreements are kept by the IRS and by ADOR. You handle two plans. Each one has a monthly payment and rules of its own. Missing either payment can cause the plan to fall apart, so pick amounts for both that you can stick to.
States that sit close by
Do you owe money to both ADOR and the IRS?
Have you fallen behind on what you owe ADOR and the IRS? A free call lets a licensed tax pro help you ask Arizona for an installment agreement and penalty break, plus set up your federal plan.
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