State Tax Issues

As a state tax collections representative, my goal is to help residents resolve outstanding tax issues in a way that protects both public revenues and taxpayers’ financial stability. Every state that levies a personal income tax has its own mix of payment plans, settlement programs and relief options. Understanding these programs—and contacting your state tax agency promptly—can help you avoid escalated collection actions such as wage garnishments, liens or levies.

Common State Resolution Programs

Payment plans (installment agreements)

Most states offer payment plans that let you pay delinquent taxes over time. For example, the Georgia Department of Revenue describes payment plans as formal contracts in which you propose a monthly payment amount and number of payments; you can request a plan online or by mail and fees apply. In New York, an installment payment agreement (IPA) allows you to make monthly payments on balances up to $20,000 over 36 months, though penalties and interest continue to accrue. New Jersey’s Division of Taxation notes that payment plans may be approved for up to 60 months and require a minimum monthly payment of $25; unpaid balances continue to accrue interest and a recovery fee may be added. Terms vary by state—some may require a financial statement or restrict plans if you have unfiled returns or bankruptcy proceedings—so check your state’s guidelines.

Offer in Compromise (settlement) programs

Several states allow qualifying taxpayers to settle a liability for less than the amount owed. New York’s Offer in Compromise program is open to taxpayers who are insolvent or whose paying in full would create undue economic hardship; the state considers factors such as income, assets and expenses and only accepts offers that are in the best interest of the state. Louisiana’s Department of Revenue similarly allows settlement offers when the amount offered represents the most the state can expect to collect within a reasonable period; the agency reviews ability to pay, asset equity and future income and requires that all returns be filed before an offer is considered. States often require a down payment and non‑refundable application fee, and acceptance is not guaranteed.

Penalty abatement and hardship relief

Like the IRS, many states provide penalty relief for taxpayers who can show reasonable cause (e.g., serious illness, natural disasters or other events beyond your control). Some states, such as Georgia and New Jersey, may waive or reduce late‑payment penalties if you meet income thresholds or are on a payment plan. Several states also offer “currently not collectible” or hardship status, temporarily suspending collection when you can prove you cannot pay basic living expenses. Because eligibility rules vary widely, you should consult your state’s tax agency or a qualified tax professional.

Filing past‑due returns

Before you can qualify for any payment plan or settlement, most states require that all past‑due returns be filed. Submitting missing returns reduces penalties and interest and prevents the state from filing a substitute return that may overstate your liability. States can also intercept tax refunds, revoke licenses or pursue liens if returns remain unfiled.