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We collected sales tax but didn't report until 2-3 years later. We were hit with penalties. Is there a statue of limitations? Can we negotiate?

Full Question: We collected sales tax starting in 2005. It didn't get reported until 2007-2008 and we were hit with huge penalties that are more than the actual tax and we can't pay it. Is there a statue of limitations? In addition, is there any way to negotiate just paying the collected tax without the penalties? Should mention we are in chapter 13 because of this but may have to convert to 7 because we can't pay the taxes/penalties in the 5 years.

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Answer:

Diane Yetter photoWhen you collect sales tax and fail to remit it, this is considered fraud and subject to substantial penalties as you have discovered. Unfortunately any statute of limitations would not apply in this case since you have been assessed the penalties and it is likely in your situation that no statute of limitations would apply. There may be an opportunity to discuss you situation with the state to attempt negotiations. Taxes that you collect such as sales tax are often not extinguished in bankruptcy and could attach to the individuals who either owned the company or had responsibility for the filing and payment of the taxes. Working with a tax consultant or attorney who has relationships with the Department of Revenue is advisable. If this is something you would like to discuss, we have provided services like this to other individuals.

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