Many times when taxpayers are behind on their federal taxes, they are also behind on their state taxes. When it comes to tax collections and notices, the Colorado Department of Revenue can be more aggressive than the IRS. What is the best action for a taxpayer to take when both the IRS and the Colorado Department of Revenue are owed large sums? You need to promptly address the issue
To start you will need to prepare the federal return first, because information from the federal return is use in calculating the Colorado tax return. Depending on your circumstances, you may file the Colorado return before filing the federal tax return. This determination is made on a case by case basis.
If you owe tax the Colorado Department of Revenue will assess penalties and interest on the tax. You can calculate the interest and penalties with the tax on the return and include with the payment. If you are unable to make the full payment, submit the tax return anyway. The Colorado Department of Revenue will process the return and send you balance due notice.
After the tax, interest, and penalties have been assessed you can make a payment by check, money order, or online. If you are unable to pay in full, you can setup a payment plan by following the Colorado Department of Revenue guidelines. In some cases setting up a state payment plan is to your advantage if you also owe federal income tax. This is why I mentioned earlier the possibility of filing the Colorado income tax return before filing the federal income tax return.
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