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Missouri Tax Collection updated 1/29/15

If you owe the IRS, you likely also owe the Missouri Department of Revenue ("DOR").

DOR does NOT have extensive procedures such as the IRS has, such as "reasonable living expense standards" to determine the appropriate monthly installment payment amount, and DOR generally does not recognize inability to make payments. DOR's "typical" installment payment arrangement is payment in full over at most 24 months, 12 months if you default in an installment payment and it is reinstated, with not 3rd installment agreement. While there is some possibility of a longer term payment plan, it is difficult to obtain the DOR agreement to an extended payout plan. If a garnishment is in place DOR wil not agree to an installment agreement until the garnishment return (due) date, typically 180 days.

The DOR does not have extensive staff to pursue collection of unpaid tax. The typical DOR process is to send out a number of notices, then if not resolved, refer collection to either private collection agencies (e.g., NCO Financial or GC Services) or the county prosecutor.

The private collection agencies act as they do when collecting for commercial creditors. The prosecutors seem to have other preferred priorities, but will pursue a tax collection matter. The prosecutors generally seem amenable to payment arrangements, and may be more flexible with the terms than the DOR. If you have some tax periods placed with the prosecutor and others periods still in the DOR inventory, you have to arrange two separate installment payment plans.

Missouri tax liens expire after 10 years, but may be renewed one time prior to expiring for an additional 10 years (20 years total).

Statute of limitations

Missouri does not have an explicit statute of limitations on tax collection, but two cases are cited as imposing a 5 year statute of limitations for collections. State v. Dalton, 182 S.W.2d 311 (Mo. 1944), and State ex rel. Lohman v. Black, 980 S.W.2d 41 (Mo.App. W.D., 1998), which says " '§ 143.861.3 recognizes that collection actions are to be prosecuted 'in the same manner as provided by law in civil actions.' This means that the general statute of limitations governing civil actions govern this tax collection lawsuit and that § 516.120(2) governing '[a]n action upon a liability created by a statute other than a penalty or a forfeiture' " places a deadline of 5 years on the state's filing its lawsuit., BUT, see below as these cases appear to be limited to civil actions and not other options afailaabe to the Department. new 1/10/12

The Department of Revenue has provided informal, non-binding advice as to its position: new 2/1/12

"Collection" is a two part process: the assessment of the tax delinquency and post assessment collections. Because no one statute of limitations applies to the entire collection process, it is best to explain the applicable statute of limitations by identifying what "collection" is actually being measured.

For assessment, in cases where a taxpayer has filed a tax return and has failed to pay or properly pay the tax, the Department shall mail the notice of deficiency/assessment within three years after the return was filed. Sections 143.711.1 (income and withholding taxes) and 144.220.3, RSMo (sales and use taxes). In cases of filing a fraudulent return or where no return is filed, there is no limitation on the period of time the Department has to assess. Sections 143.711.3 (income and withholding taxes) and 144.220,1 (sales and use taxes).

Post-assessment collection is measured from the date of finality of the assessment, which is sixty days after the notice of deficiency/assessment is mailed to the taxpayer if no protest to the Department of Revenue or appeal to the Administrative Hearing Commission has been filed. Sections 143.621 (income and withholding taxes) and 144.230 (sales and use taxes).

It was correctly stated in an earlier post that there are two primary appellate cases that discuss the statute of limitations in initiating civil suits for the collection of delinquent state taxes. However, in both cases, State v. Dalton, 182 S.W.2d 311 (Mo. 1944) and State ex rel. Lohman v. Black, 980 S.W.2d 41 (Mo. App. W.D. 1998), the issue was the statute of limitations applicable to file civil lawsuits in the collection of delinquent state income taxes. The courts correctly noted that Chapter 143 provides that, when the Department of Revenue elects to pursue collection of delinquent taxes through the filing of a civil lawsuit, such lawsuits are "prosecuted in the same manner as provided by law in civil actions." Section 143.861 (income and withholding taxes). The applicable statute of limitations for such collections to initiate a civil suit for the collection of delinquent taxes is five (5) years from the date of finality of the assessment. Section 516.120(2).

However, the opinions in State v. Dalton and State ex rel. Lohman v. Black are limited. First, there is no comparable version of Section 143.861.3 found in Chapter 144 dealing with sales and use taxes. Second, Section 143.861 and the opinions in the two appellate cases only apply when the Department elects to seek collection through the filing of a civil lawsuit. The Department is authorized to use several different methods for the recovery of delinquent sales tax, many of which do not involve the filing of a civil lawsuit. These include offsetting income tax refunds (Section 143.781, RSMo); offsetting state payments to vendors (Section 140.855); and reporting to professional licensing boards, including the Missouri Supreme Court (Sections 324.010 and 484.053); and the filing of certificates of tax lien with recorder of deeds (Sections 143.902 and 144.380). This is not an exhaustive list, and none of these recovery methods involves the filing of a civil lawsuit subject to Section 516.120(2).

The filing of certificates of tax lien are governed by Sections 143.902 (income and withholding taxes), 144.380 (sales tax) and 144.690 (use tax). When the Department files a certificate of tax lien with the recorder of deeds, such lien remains in effect for a period of ten (10) years after it is filed unless it is refiled once more, at which time the refiled certificate shall remain in effect for another ten (10) years after the date it is refiled. So a certificate of tax lien filed with the recorder deeds and later refiled could remain in effect for up to twenty (20) years.

From the time of filing the certificate of tax lien with the circuit clerk of the circuit court the "amount of the tax, interest, additions to tax and penalties specified therein shall have the full force and effect of a default judgment of the circuit court until satisfied" for income, withholding and sales tax delinquencies (Sections 143.902.1(2) and 144.380.1(2)) or for use tax the "amount of tax, interest and penalties shall have the force and effect of a judgment of the circuit court until satisfied by the director of revenue through his duly authorized agents" (Section 144.690). Because of the wording of the statute, certificates of tax lien filed with the circuit clerk under Chapters 143 and 144 are effective until satisfied and Section 516.350, RSMo regarding the presumption that judgments are paid at the expiration of ten (10) years unless revived is not applicable.

This should clarify the law on the statute of limitations applicable to the assessment and collection of delinquent state taxes. If anyone has general or case specific questions, they are encouraged to contact the Department of Revenue's legal counsel to discuss.

Offer in compromise

Missouri has statutory provision for offers in compromise ("OIC"), but there appear to be no standard process and DOR responds inconsistently to OICs currently.

A Department representative at Missouri Bar Tax Committee meeting indicated the Department was looking for offers of the tax amount or greater (compared to the IRS "reasonable collection potential") new 5/12/11

Missouri income tax returns by spouses are "combined" rather than "joint", so you are not liable for your spouses Missouri income taxes, so there is no need for Missouri innocent spouse relief.

Under Mo. Rev. Stat. § 32.378(6) the Director's decision to reject or accept an offer in compromise is not subject to review by the AHC or any court. Meshack, Yourshack, & Abedtogo/MYA, LLC v. Director of Revenue, Mo. Admin. Hearing Commission, No. 14-1091 RS, 08/05/2014. new 9*17/14