South Carolina Tax Problems and Solutions

If you have South Carolina tax problems, here are some solutions — and what could happen if you ignore them.

If you’re facing South Carolina tax problems, such as unpaid back taxes, you’re not alone. But the worst thing you can do is ignore your tax bill because it won’t go away. In fact, not addressing your taxes owed on time (or at all) could make matters worse and cost you more money in the long run, but the state offers options to eligible taxpayers who need a little help. 

Here’s what you should know about having unpaid taxes in South Carolina. To get help right away, contact us at The W Tax Group.

The South Carolina Department of Revenue

The South Carolina Department of Revenue manages and collects several types of state taxes, including (but not limited to) personal income tax, withholding tax, sales tax, partnership tax, corporate tax, and several other business taxes.

When a taxpayer fails to pay their tax bill, the South Carolina Department of Revenue initiates collection efforts (more on that below). But the department also offers assistance to eligible taxpayers to help make their state tax bills more manageable.

What if You Can’t Pay Your South Carolina Taxes?

Not everyone can pay their South Carolina tax bill in full. Thankfully, there are various payment and relief options available to taxpayers in the state (or those who do business in the state). However, not everyone will qualify for every relief option, so it’s essential to do your homework or hire a tax pro with experience in this state. 

Here’s an overview of the options if you can’t pay in full.

Set up a payment plan for SC taxes

Businesses and individuals can take advantage of payment plans if they meet the criteria. Setting up payments will stop the SCDOR from garnishing your wages or seizing your assets, but opting for a payment plan doesn’t pause your late penalties and interest charges. These will continue to accumulate as you make your monthly payments. 

Additionally, individuals are charged $45 just for setting up the payment plan. Still, installment agreements can be a good option for taxpayers who can’t pay in full and want to avoid additional consequences, such as tax liens or levies. 

If there is already an active lien or levy tied to the taxpayer’s account, they are ineligible for a payment plan with the South Carolina Department of Revenue. In other words, if you can’t pay in full, set up a payment plan ASAP or you may lose the chance.

Request an offer in compromise

Unlike a payment plan, an offer in compromise could prevent additional financial penalties. That’s because an offer in compromise is an offer to settle your state tax debt for less than you owe, but not everyone is eligible for this relief. 

The South Carolina Department of Revenue accepts offers under the following circumstances.

• Doubt as to collectability: The department has doubts you are able to pay the full amount you owe. 
• Economic hardship: You have the ability to pay but cannot due to extreme circumstances, such as a serious injury or long-term disability.

Unless your circumstance fits into one of the two above, an offer in compromise likely isn’t an option for you. That means if you have assets, a steady stream of income, etc., you may need to look into other tax debt relief options.

Ask for abatement on your SCDOR penalties

Like the IRS, the SCDOR will also remove penalties in some situations. You can contact the Department directly to ask for penalty abatement, or you can file Form 530 (Penalty Waiver Request). This can help reduce your balance, making it easier to set up payments. 

If applicable, apply for innocent spouse relief

Innocent spouse relief applies in situations where your tax liability is due solely to your spouse or ex-spouse. Typically, you can only qualify if you didn’t know about the tax bill and didn’t have a reason to know. To apply, file Form SC8857 (Request for Innocent Spouse Relief).

The IRS also has an innocent spouse relief program. The rules vary between the IRS, the SCDOR, and the other states. A tax professional can help you find the best approach in your situation. 

Appeal your South Carolina tax liability

You should not appeal your South Carolina tax bill based on an inability to pay. However, if you dispute the accuracy of your tax bill, you have the right to appeal it. To apply for an appeal, you’ll need to fill out South Carolina Form C-245. You must file your written protest within 90 days of receiving the notice you want to dispute. Here’s what happens after you submit your protest:

• You will receive an acknowledgment letter, which states you can request a meeting (optional but highly advised).
• The South Carolina Department of Revenue will review your protest.

If the department agrees with your protest, the matter will be resolved. If not, the appeal must go through these additional steps:

• A representative from the department’s litigation section will review your protest. (You will have a chance to argue your point.)
• The South Carolina Department of Revenue will issue a Department Determination, which highlights the important details of the dispute and any settlement or agreement resulting from the appeal.

The Department of Determination must be issued within one year of your initial protest. If you disagree with the determination, you will have 30 days to request a Contested Case Hearing with the South Carolina Administrative Law Court.

What Happens if You Don’t Pay Your South Carolina Tax?

If you fail to resolve your tax problems with one of the solutions above, you could face consequences. In less extreme cases, you’ll be subject to financial penalties, which can add up quickly. In more severe cases (for example, if you fail to pay your South Carolina tax debt for an extended period of time or if you owe a lot of money), the consequences become more extreme.

Tax liens in South Carolina

The South Carolina Department of Revenue can place a tax lien on your property if you don’t pay your taxes. Some people confuse tax liens with tax levies, but they are not the same thing. State tax liens are a legal claim to your assets, and they can prevent you from selling or refinancing your home (or other assets) until you’ve satisfied your tax debt (paid off the lien).

In contrast, a levy is when the state takes your assets for unpaid taxes. If your state taxes remain unpaid, and you fail to set up a payment plan, the SCDOR may levy intangibles, such as your bank account and certain investment accounts. This means that current and future payments in these accounts may be taken by the department and applied to your tax debt. 

SC wage garnishments

Wage garnishment is another type of tax levy. The SCDOR can place a levy of up to 25% of your gross wages for unpaid state tax debt. That means the department can take a fourth of your wages before taxes and benefits are subtracted. So, if your gross (pre-tax) weekly pay is $1,000, the SCDOR can levy up to $250 per week. 

Setting up a payment plan or paying your tax debt can help you avoid a South Carolina wage garnishment. Unfortunately, if there is already a levy against your wages, it will likely stay in place when you set up payments, but you may be eligible to have your levy percentage lowered from 25% to 15%. 

To make this request, you must have filed all past tax returns. If your returns are up-to-date, you can send an email to ComplyToday@dor.sc.gov with the following information:

• A letter of financial hardship (why you can’t afford to pay 25%).
• Copies of your last two paystubs and the bills you’ve received within the last 30 days.
• A breakdown of your monthly expenses.
• Your two most recent bank statements.
• The account number listed for the wage levy.
• Your payroll department’s email address.

Penalty for late tax payments

Late payment penalties may not be as severe as tax liens and levies, but these penalties can make a high tax bill even more difficult to pay off. The late payment penalty starts at 0.5% of your balance due per month, but this amount can increase an additional 0.5% each month the balance is unpaid. 

If your bill remains unsatisfied, the penalty can reach 25% of the South Carolina tax you owe. So, for example, if your SC tax debt is $1,500, you could pay an additional $375 in penalties, and that’s not including the interest you’ll have accrued.

Delinquent taxpayer list

Having your name appear on the delinquent taxpayer list might not cost you financially, but it can bring feelings of shame and professional embarrassment, especially since it’s publicly available for all to view. The South Carolina Department of Revenue publishes two Top Delinquent Taxpayer lists each quarter: one for individuals and one for businesses. 

If you are worried about appearing on one of these lists (or if you already have), you can contact the SCDOR to set up a payment agreement. Taxpayers who are actively enrolled in payment agreements are not included in the Top Delinquent Taxpayer lists. Those who have filed for bankruptcy are also excluded.

Get Help With South Carolina Tax Problems

It’s important to get help with your South Carolina tax problems as soon as possible. As a full-service tax resolution company, W Tax Group has the experience and expertise to help you with your tax problems, including unpaid back taxes, inaccurate tax assessments, and more. Contact us today for a free consultation.