The Oklahoma Tax Commission (“OTC”) imposes tax penalties and interest on delinquent taxes. Interest accrues at 1.25% per month from the date of tax delinquency until paid in full. In addition, a tax penalty of at least 10% shall be added. If the OTC determines negligence caused the tax delinquency, they may assess greater tax penalties up to 25%. If fraud and intent to evade causes the tax deficiency, the OTC may impose up to a 50% tax penalty in addition to the delinquent tax owed and monthly interest.
In certain situations the OTC enters into agreements to compromise tax penalties and interest. When the OTC considers a waiver request, it looks at several factors: whether the interest and tax penalties will result in bankruptcy, whether the interest and tax penalties are uncollectible due to insolvency, whether the tax liability was caused by others and it would be inequitable to hold the taxpayer liable, and whether the taxpayer failed to collect from its customers trust fund taxes (such as sales tax) and the taxpayer had a good faith belief that collection was not required. The OTC will also consider whether the taxpayer benefited from the nonpayment of taxes, whether the taxpayer received an economic benefit from the failure to timely pay, and if the taxpayer made good faith efforts to comply with tax laws.
If the Oklahoma Tax Commission levies interest and tax penalties on delinquent taxes, a taxpayer may timely protest the amount. In response to a protest, an abatement of tax liability can occur by unanimous vote of the members of the OTC pursuant to 68 O.S. Section 219.1. The OTC’s protest decision shall be discretionary and final.
If the OTC grants an abatement of tax penalties and interest, and the amount is in excess of $25,000, the agreement is not effective until it has been approved by an Oklahoma county district judge after a hearing. The district court judge is assigned to the matter by the chief judge on a rotating basis.
If you obtain a waiver order from the OTC in excess of $25,000 waving interest and tax penalties pursuant to 68 O.S. § 220, contact our firm to obtain court approval of the tax abatement. Our lawyers can file the necessary petition, have the matter set for hearing, and attend the hearing to obtain proper judicial consent for the waiver of tax penalties and interest.
By Jeremy Ward