Individuals face state and local tax issues in a variety of contexts. Typically, individuals must address the increasing efforts by states to tax income from nonresidents. Individuals also must deal with increasing efforts by states to collect delinquent taxes.
Decades of experience and exclusively focused on state and local tax law. Read more.
Georgia Department of Revenue State Tax Executions
Like most state taxing agencies, the Georgia Department of Revenue is different from other creditors in that the Georgia Department of Revenue does not have to file a lawsuit to collect on a tax debt. If a taxpayer fails to respond to Georgia Department of Revenue notices, then the Georgia Department of Revenue can issue a State Tax Execution. The State Tax Execution Modernization Act (effective January 1, 2018), changed the manner by which the Georgia Department of Revenue prepares, files, records, and enforces state tax executions (commonly known as tax liens). Unlike the past rules, the Georgia Department of Revenue no longer has to physically send the state tax execution to the clerk of superior court of the taxpayer’s county of residence. The Georgia Department of Revenue (effective January 1, 2018) sends the state tax execution to the Georgia Superior Court Clerks’ Cooperative Authority (“GSCCCA”), and the GSCCCA forwards the state tax execution to the clerk of superior court for recording. But the state tax execution is deemed recorded and enforceable at the time that the GSCCCA receives the state execution from the Georgia Department of Revenue. Further, effective January 1, 2018, state tax executions have a ten-year life. Thus, the Georgia Department of Revenue now has 10 years to enforce a state tax execution. In the past, the Georgia Department of Revenue had the right to rerecord a state tax execution every seven years. Thus, taxpayers must recognize that the Georgia Department of Revenue will increase its collection efforts and not sit idly by waiting for the individual to sell his home or investment property.
Individuals should expect the Georgia Department of Revenue to use all tools available to enforce state taxes, including levying on bank accounts, wage garnishment, setoffs from refunds due from other government agencies. In issuing a state tax execution, the Georgia Department of Revenue must follow to specific procedures. If the Georgia Department of Revenue fails to adhere to the statutory guidelines for issuing and recording a state tax execution, then, although eventually recorded, the state tax execution may not be enforceable. Litwin Law draws from more than 30 years of experience in helping individuals resolve state tax executions issued by the Georgia Department of Revenue and/or other states. Depending on the circumstances, the result can vary from a withdrawal of the state tax execution by the Georgia Department of Revenue to a reduced payment through an Offer in Compromise or monthly installment payment agreement.
State Tax Residency
Georgia borders two states that have no state income tax (Tennessee and Florida). Longtime legal residents of Georgia purchase homes or condominiums in Florida or Tennessee with an eye toward changing their legal residence (domicile). A legal resident (domicile) of Georgia must understand the intricate rules that govern state income tax residency to avoid the various traps that one encounters in trying to abandon Georgia domicile. An individual may unwittingly fail to take the steps necessary to abandon his/her Georgia legal residence (domicile). The Georgia Department of Revenue uses sophisticated data mining software to find individuals who may not have abandoned their Georgia domicile, who still have ties to Georgia, and who are still considered legal residents (domiciles) of Georgia. Unfortunately, several years could pass before the Georgia Department of Revenue begins its investigation. Thus, where an individual fails to follow the proper steps in changing his/her legal residence to Florida or Tennessee, and also, has not filed Georgia returns, the Georgia Department of Revenue can assess the individual at any time. No statute of limitations applies to non-filed returns. For more than 30 years, Litwin Law has handled a variety of state income tax residency cases, including representing individuals before the Georgia Department of Revenue, at the administrative level, and in court. Attorney Richard Litwin has unique experience and specialization in state and local tax law matters. He advises high net-worth individuals, their CPAs and their legal counsel in structuring sales of businesses so as to minimize Georgia taxes. He has represented individuals before the Georgia Department of Revenue in audits and residency investigations initiated by the Georgia Department of Revenue. In addition, Richard Litwin has represented individuals who have not been contacted by the Georgia Department of Revenue and who want to come forward voluntarily anonymously (through counsel and under the protection of the attorney client privilege) to use the Georgia Department of Revenue’s voluntary disclosure program (1) to limit the look-back period (number of years for which back returns must be filed) and (2) to get a waiver of civil penalties. The firm also represents taxpayers in the Georgia Tax Tribunal in challenging an Official Assessment and Demand for Payment or challenging a state tax execution tied to residency issues.
Nonresident Income Taxes
States are very aggressive in seeking out and assessing nonresident individuals that earn money in the state but fail to pay income taxes on such earnings. Entertainers, athletes and celebrities, in particular, may make a one-day appearance at an event in a state and earn substantial monies from the time spent in the other state. Litwin Law helps individuals understand state and local tax laws, and arrange their affairs to comply with nonresident requirements imposed by other states. Litwin Law also helps individuals who have received assessment notices from states.
Personal Liability for Trust Fund Taxes
An individual who holds a position of responsibility at a business can be held personally liable for any trust fund taxes that the business fails to pay over to the government, including the Georgia Department of Revenue. A trust fund tax includes employer withholding taxes and payroll taxes (the portion withheld from employee wages). For state tax purposes, a trust fund tax also includes any amounts required to be collected from customers, including sales taxes. The individual officer or employee in the position of authority within the business can be held personally liable if the business collected or did not collect (and should have collected) sales taxes or withheld or should have withheld payroll taxes. Litwin Law helps individuals who have been targeted by state taxing agencies, including the Georgia Department of Revenue, as a liable responsible person.
As with other taxes, the state taxing agency can only collect from persons who are (1) responsible persons and (2) that acted willfully (which means paying other creditors over the taxing agency). Moreover, many state taxing agencies, including the Georgia Department of Revenue, are restricted or limited by a statute of limitations. Litwin Law advises individuals targeted by the Georgia Department of Revenue and other state taxing agencies for the unpaid trust fund taxes. Litwin Law also represents individuals in the Georgia Tax Tribunal and Superior Court in litigating responsible person trust fund liability assessments. Further, Litwin Law represents individuals who have not been contacted by the Georgia Department of Revenue but who want to come forward voluntarily (without having been contacted) under the Georgia Department of Revenue’s voluntary disclosure program, to limit look-back period and penalties. With more than 28 years of handling such matters, Litwin brings experience as both an Assistant Attorney General for the Georgia Department of Law (representing the Georgia Department of Revenue) and in private practice devoted exclusively to state and local tax.
Airplanes, Exotic Cars and other Large Asset Purchases
A purchaser of an airplane must pay Georgia sales and use taxes and county ad valorem taxes every year based on the county in which the airplane is principally hangared. Effective March 2013, a purchaser of a car does not have to pay sales and use tax. But, the purchaser must pay Georgia’s title ad valorem tax (TAVT). The tax rate for 2015, 2017 and 2018 is 7%. By law, the rate cannot exceed 9%, but the Georgia Department of Revenue can increase the 7% rate for purchases after December 31, 2018. The TAVT is imposed on the fair market value of the car. Some cars are not subject to the TAVT, and some transactions are taxed at a reduced rate, such as transfers of title between certain relatives or transfers of cars to a charitable non-profit organization. Further, in some situations, no tax is due. A purchaser who buys a car for immediate transport outside Georgia and with the intent to register the car in another state does not have to pay the TAVT. Litwin Law deals exclusively in state and local tax matters. Litwin Law represents clients in disputes with the Georgia Department of Revenue relating to the imposition of sales and use tax on airplane purchases. Litwin Law represents clients in disputes with county taxing agencies in ad valorem property tax matters tied to airplanes. Litwin Law also advises clients on title ad valorem tax matters, at both the state and county level.
Repaying Delinquent Taxes and Collections
The Georgia Department of Revenue offers several options for repaying delinquent taxes, interest, and penalties. If the Georgia Department of Revenue has not contacted the individual, the taxpayer can pursue the voluntary disclosure program. The voluntary disclosure agreement provides a limited lookback period (typically four years for individual income taxes), waiver of civil penalties, and waiver of criminal penalties. If the Georgia Department of Revenue has contacted the taxpayer, other options are available, including an offer in compromise and installment payment agreement. Drawing from more than 28 years of experience practicing exclusively in state and local tax, Litwin Law represents individuals in determining the best payment option and in negotiating the terms of the payment plan under voluntary disclosure agreements, installment payment agreements, and offers in compromise.
Georgia State Tax Litigation in the Georgia Tax Tribunal
Some state tax disputes with the Georgia Department of Revenue cannot be resolved at the administrative (Department of Revenue) level. Effective January 1, 2013, Georgia has a tax tribunal that is specifically charged with hearing tax disputes with the Georgia Department of Revenue. The judge is a tax attorney who has experience with tax issues. The rules and guidelines for litigating a case in the Georgia Tax Tribunal are unique and designed to streamline the process with an eye toward a speedy resolution. A taxpayer who has received an Official Assessment and Demand for Payment can file a petition with the Georgia Tax Tribunal. A taxpayer can also challenge a State Tax Execution in the Tax Tribunal. At Litwin Law, we represent individuals and businesses before the Georgia Tax Tribunal and have seasoned experience in litigating cases in the Tribunal. For more information about the Tribunal and its role in resolving state tax disputes, read more in my co-authored article “The Georgia Tax Tribunal of 2012”, State Bar of Georgia Journal (December 2012).
Voluntary Disclosures to Georgia Department of Revenue
Individual taxpayers who have not filed Georgia income tax returns or who have filed incorrect returns can approach the Georgia Department of Revenue, anonymously and through counsel, to file returns and pay back taxes and interest.
As consideration for coming forward voluntarily, without having first been contacted by the Georgia Department of Revenue, the Department agrees to the following:
- Lookback Period – Typically, the Department limits the period for which the taxpayer must file returns to the five most recent years, where the taxpayer has filed a federal but not state return. Where the taxpayer has not filed either federal or state returns, the lookback period is three years. Thus, if a taxpayer has not filed a Georgia income tax return for the past 10 years, then the look-back period minimizes the taxpayer’s filing obligations to three years, at best, and five years, at worst.
- Penalty Waiver – The Department also waives criminal and civil penalties. The typical civil penalty is 25% of the tax. Thus, if the taxpayer owes $100,000 in back taxes, the Department agrees to waive the $25,000 penalty.
To qualify for the voluntary disclosure program, the taxpayer must meet two conditions:
- No Prior Contact – Through counsel, the taxpayer confirms that the Georgia Department of Revenue has not contacted the taxpayer for the taxes disclosed. If the Georgia Department of Revenue has already contacted the taxpayer, then the taxpayer does not qualify for voluntary disclosure treatment. However, although contact has been made, other options may be available to the taxpayer to resolve the non-filed returns and unpaid taxes.
- Current – Through counsel, the taxpayer confirms that the taxpayer is current with other state tax obligations. If the taxpayer owes unpaid state trust fund taxes (e.g., sales taxes and/or employer withholding taxes), then such disqualifies the taxpayer from the program. But other options are available for resolving unpaid state trust fund taxes.
As noted above, the voluntary disclosure program is not limited to income taxes. The program encompasses other taxes that an individual may owe the Georgia Department of Revenue, including sales taxes and employer withholding taxes for which the individual is liable personally.
Other Issues
Do you have a state and local tax matter that we did not itemize? We have noted the most common state and local tax issues our clients face, but this list is not exhaustive. Contact us to discuss your specific situation and learn how we can help you effectively and efficiently resolve your state and local tax matter, whether in Georgia, another state, or across multiple states.