Many Alabama residents and business owners find it challenging to pay off their taxes in full. To help, the Alabama Department of Revenue (ALDOR) offers structured payment plans that allow taxpayers to resolve their tax liability through manageable monthly payments rather than a single lump sum. These plans provide a path to compliance and help prevent serious enforcement actions like bank levies or wage garnishments.
Unlike the IRS, which provides standardized installment options, Alabama’s process is more discretionary and handled case-by-case. Each application is individually reviewed, and approval depends on factors such as payment history, debt size, and compliance with state filing requirements. That’s why understanding eligibility, required documentation, and timelines is critical for those hoping to qualify for relief.
Whether you’re facing back taxes from a prior tax year, have received a final notice, or are seeking to protect your business or student’s account, this guide will walk you through your payment options, explain the differences between state and federal plans, and help you avoid unnecessary penalties or collections.
Overview of the Alabama Department of Revenue (ALDOR)
The Alabama Department of Revenue (ALDOR) is the central authority responsible for administering and enforcing state tax laws. Established officially in 1939, ALDOR oversees nearly all taxes collected in the state and provides critical services to individuals, businesses, and educational institutions. Understanding how ALDOR is structured and what functions it performs is essential when applying for a payment plan, responding to notices, or trying to resolve outstanding tax liability issues.
Below is an overview of the agency’s roles, responsibilities, and key contact points:
What ALDOR Does
- Administers state tax laws and ensures proper assessment and collection of taxes.
- Processes filings and payments related to personal, corporate, and business taxes.
- Issues assessments when underpayments are detected or returns are not filed.
- Manages collections and enforcement through its dedicated Collection Services Division.
- Offers relief options, including payment options and compromise agreements for eligible taxpayers.
Taxes Administered by ALDOR
- Individual and corporate income tax
- Motor fuel and excise taxes
- Tobacco and alcohol taxes
- Utility and severance taxes
Each tax type may be assessed separately, and failure to pay on time can result in notices, liens, and enforced collections.
Key Division: Collection Services
The Collection Services Division is ALDOR’s internal unit that handles delinquent accounts and enforcement once an account reaches final assessment status. This division is responsible for:
- Sending out the final notice before enforcement
- Setting up arrangements for payment plans
- Executing garnishments, bank levies, and liens if taxpayers do not respond
Once your tax case is transferred to this division, you must act quickly to obtain a plan or risk immediate enforcement.
Important Contact Information
Alabama Department of Revenue,
375 South Ripley Street,
Montgomery, AL 36104
- Collection Services Phone Number:
334-242-1220
This portal allows you to file your Alabama tax return, make payments, view notices, and request a payment plan directly from your account.
Understanding how ALDOR operates will help you better navigate your interactions with the department. Knowing which office to contact and how the system is structured gives you a head start in resolving any state tax issue, whether checking your student’s account, managing a business, or acting through an attorney.
Individual Taxpayer Payment Plans
Alabama offers installment agreements to help individuals who cannot pay their full tax liability at once. These structured arrangements are issued at the discretion of the Alabama Department of Revenue (ALDOR) through its Collection Services Division. Applying for a payment plan can help taxpayers avoid wage garnishments, liens, and property seizures, but approval is not guaranteed. To improve your chances, it’s essential to understand the eligibility rules, repayment terms, application process, and documentation requirements.
Eligibility Requirements
To qualify for an individual payment plan in Alabama, you must meet specific conditions outlined by ALDOR:
- You must have received a formal tax notice from ALDOR, such as a Final Assessment, a Notice of Intent to Offset a Federal Refund, a Final Notice Before Seizure, or a Certificate of Lien for Taxes.
- Your tax debt must have reached the final assessment stage, meaning you no longer have the right to appeal.
- You must agree to make monthly payments via debit from a valid bank account—this is the only method ALDOR accepts for individual plans.
- You must propose a monthly payment of at least $25, the minimum allowed under state guidelines.
- You must demonstrate the ability to pay off the balance within 24 months, as ALDOR does not offer extended terms for individuals beyond two years.
Applying does not guarantee approval. ALDOR evaluates each request individually and may decline plans based on prior compliance history or the size of the balance owed.
Payment Terms and Conditions
When you enter into a payment plan with ALDOR, these are the standard terms you can expect:
- Your minimum monthly payment must be at least $25, although higher payments are encouraged to resolve the debt faster.
- The maximum term for individual agreements is 24 months (2 years); Alabama does not offer long-term payment options like the IRS.
- Payments must be made via automated debit from your bank account—other forms of payment, such as checks or credit cards, are not accepted for installment plans.
- Interest accrues on any unpaid balance throughout the life of the payment plan, and the rate is based on the federal underpayment rate.
- Penalties are not removed once a tax has reached final status, although in rare cases, ALDOR may consider waivers for penalties assessed before the finalization of the tax debt.
How to Apply
ALDOR provides three primary methods for individuals to apply for a tax payment plan. Each method requires specific information and supporting details.
1. Online via My Alabama Taxes (Preferred Method)
- Provide your Social Security number and the letter ID printed on your ALDOR notice.
- Select the appropriate payment plan type under the “Quick Links” section of the dashboard.
- Enter your bank account information to authorize monthly ACH withdrawals and propose payment terms.
- Submit your request and await ALDOR’s response through your portal notifications or mail.
2. By Phone
- Call ALDOR’s Collection Services Division at 334-242-1220 to begin the application over the phone.
- Provide your identifying details and reference the ALDOR letter you received regarding your unpaid taxes.
- Discuss your proposed payment amount and supply your bank account details for automated withdrawal.
3. In Person
- Visit your region's ALDOR office (Taxpayer Service Center) to apply face-to-face.
- Bring your ALDOR notice, photo ID, and banking details so a representative can assist you in completing the application.
Documentation Required
In most standard cases, applying for a payment plan requires only basic identifying and financial information. However, in more complex cases—especially where higher balances are involved—ALDOR may ask for detailed financial disclosures.
- You will need to provide your full name, Social Security number, and any letter ID associated with your tax assessment.
- ALDOR requires accurate bank account and routing numbers to authorize ACH withdrawals for your monthly payments.
- If ALDOR requests a more in-depth financial review, you may be asked to complete a Collection Information Statement outlining your assets, income, expenses, and liabilities.
Interest and Penalty Rules
Understanding how interest and penalties work is essential for long-term planning.
- Interest continues to accrue daily on any unpaid amount and is based on rates set under federal law.
- Once a tax reaches final assessment, penalties are generally locked in place and cannot be waived—making early action essential if you're hoping to reduce additional costs.
- Taxpayers may still be able to negotiate penalty relief if they act before the expiration date on their initial notice, but this option disappears once the case is referred to collections.
If you’ve received an adjustment to your Alabama tax return or a notice of delinquency, applying for a payment plan could be the difference between manageable monthly payments and aggressive enforcement actions. Responding to a final notice quickly and correctly can protect assets like your paycheck, vehicle, or even your student’s account if you're a parent or a college student. Acting early gives you more control, more payment options, and fewer long-term consequences.
Business Taxpayer Payment Plans
Businesses in Alabama that fall behind on their taxes may be eligible for a structured installment agreement through the Alabama Department of Revenue’s (ALDOR) Collection Services Division. While the state does offer payment relief to businesses, these arrangements are more stringent than individual plans. ALDOR evaluates each business case independently, and approval depends heavily on current compliance, financial capacity, and the timeliness of the request.
Businesses must act quickly once their tax liability reaches the collections stage. Delays can lead to garnishments, liens, or forced asset sales—all of which can severely impact operations or even lead to closure.
Eligibility Requirements for Businesses
To qualify for a tax payment plan for businesses, you must meet all of the following criteria:
- The business must have a delinquent tax liability that has already moved into the Collection Services Division.
- The business must be current on all prior tax filings and payments for the current tax year.
- At the time of application, the business must not have any garnishments in place.
- The business must demonstrate that it can stay current on new tax obligations while paying down old debts.
Failure to remain compliant with current taxes during the term of the payment plan will result in immediate cancellation of the agreement.
Types of Business Taxes Covered
ALDOR accepts payment plans for various business tax categories, including the following:
- Sales and use tax
- Withholding tax
- Business privilege tax
- Corporate income tax
- Lodgings and rental tax
- Motor fuel and tobacco taxes
- Severance taxes
- Other specialized industry-specific taxes
Businesses most commonly enter payment plans for back taxes owed on sales and withholding, as these are considered trust fund taxes collected from customers or employees.
Unique Requirements and Limitations
Business payment plans come with more rigorous expectations than individual plans. Here are the key differences:
- Down Payment Requirement: Businesses are expected to make an upfront payment along with the application. The amount is determined during plan negotiation.
- Documentation Burden: ALDOR requires businesses to submit extensive financial records to review the viability of the plan.
- Balloon Payment Clause: Some business plans include a lump-sum payoff requirement at the end of the term if the proposed monthly amount does not fully cover the total debt.
- Ongoing Compliance Mandate: The business must continue filing all new returns on time and pay any newly assessed taxes during the life of the agreement.
Documentation Required
Businesses must submit a complete application package, which includes the following:
- A completed Collection Information Statement for businesses
- A recent profit and loss statement (current year-to-date)
- Three months of business bank account statements
- Outstanding accounts receivable listings
- Statements from credit card processors and loan servicers
- Depreciation schedules from your accountant or CPA
- Enrollment records if you're a trade school or university-affiliated business
- Ownership, officer, or partner information
- Details of any open bankruptcy or legal matters
Missing or incomplete documents will delay or void your application. Always double-check your submission before sending it by mail or electronic upload.
How to Apply
To apply for a business payment plan, follow these steps carefully:
- Download and Complete the Business Collection Information Statement
- Gather All Required Documentation
- Refer to the checklist above and confirm everything is included.
- Include a Proposed Down Payment
- This must be submitted at the same time as the application.
- Submit Your Application Package
- Mail the full package to:
Alabama Department of Revenue
Collection Services Division
P.O. Box 327790
Montgomery, AL 36132-7790
- Follow Up by Phone (Optional but Recommended)
- Call 334-242-1220 to review your file or clarify issues with a representative.
- Authorize a Representative, If Needed
- If you're working with an attorney or accountant, attach Form 2848A (Power of Attorney) with your submission.
Compliance Expectations During the Plan
Once approved, the business must strictly follow these terms to avoid default:
- Make all monthly payments on time through an approved bank account.
- File all new returns for the current and future tax years on or before the due date.
- Avoid incurring any new delinquent balances.
- Keep all contact information up to date with ALDOR.
- Respond to any additional letter or request from ALDOR promptly.
- Avoid transferring or concealing assets during the repayment term, as this may trigger an immediate enforcement proceeding.
Business owners navigating a tax crisis should not delay action. ALDOR moves quickly to collect from businesses, particularly when it involves trust fund taxes. Setting up a formal payment plan protects your operations and allows time to stabilize your finances while staying in good standing with the state.
Consequences of Default
Once you’ve entered into a tax payment agreement with the Alabama Department of Revenue (ALDOR), it is critical to maintain strict compliance. Missing a monthly payment, failing to file a new return, or ignoring follow-up communications can result in the agreement being canceled. When that happens, ALDOR will proceed with enforced collection actions—many of which can happen without further warning.
Defaulting on a payment plan may lead to financial hardship, damage your credit, or even affect your ability to run a business, enroll in college, or access your student’s account if tax liens are filed.
Late or Missed Payments
If you fail to make your scheduled monthly payment, the following consequences can occur:
- The entire balance of the debt becomes immediately due and payable in full.
- ALDOR may cancel the arrangement without additional notice.
- The agency will treat your case as if no agreement ever existed, triggering full enforcement procedures.
- Additional interest and penalties will continue to accrue on the unpaid tax liability.
- You may lose the ability to renegotiate or propose new payment options under favorable terms.
Reinstatement Options (Limited)
Alabama offers limited flexibility for reinstating canceled payment plans. Reinstatement is not guaranteed and is considered on a case-by-case basis.
- If you miss a payment, contact ALDOR before the next due date to explain the reason for default.
- You may be allowed to make up the missed payment along with the next scheduled one.
- A formal written request for reinstatement may be submitted by mail or phone, explaining the cause of hardship.
- Reinstatement approval depends on your prior payment history, balance amount, and whether any enforcement actions have already begun.
Collection Actions That May Follow a Default
If you do not resolve your balance or fail to obtain a new agreement, ALDOR may take any of the following enforcement steps—often without further notice:
Enforcement Actions and Their Consequences
1. Tax Lien
- What It Is:
A lien is filed in the probate court of your county. - Impact:
- Damages your credit score
- May block real estate transactions
- Can interfere with loan approvals
2. Wage Garnishment
- What It Is:
A writ of garnishment is issued to your employer. - Impact:
- Up to 25% of your gross wages may be withheld from each paycheck
- Continues until the debt is fully paid
3. Bank Levy
- What It Is:
ALDOR seizes funds directly from your bank account. - Impact:
- Your checking or savings account may be drained
- Occurs without prior notice
4. Property Seizure
- What It Is:
A writ of execution is issued to the county sheriff. - Impact:
- ALDOR may seize and sell your vehicles, equipment, or real estate
- Proceeds are used to recover the debt
Once a final notice has been issued and ignored, these actions can begin in as little as 45–60 days after the final assessment. There is no grace period once the case has been assigned to the Collection Services Division.
Long-Term Impact of Enforcement
The effects of ALDOR’s enforcement actions may go beyond simply recovering unpaid taxes:
- A recorded lien may appear on your credit report and remain there for years, affecting job prospects and rental applications.
- Garnishments can disrupt your household budget and delay tuition or other important payments.
- Business owners may lose access to merchant accounts or see their university contracts suspended due to non-compliance.
- Financial aid may be delayed if the state attempts to intercept your student’s account refunds or offsets.
How to Minimize Risk
To avoid defaulting on your Alabama tax plan:
- Set reminders well in advance of each payment due date.
- Ensure your bank account has sufficient funds before your scheduled withdrawal.
- Notify ALDOR immediately if your contact details change, especially your mailing address.
- Monitor your My Alabama Taxes account regularly for updates, letters, or balance changes.
Defaulting on your plan is not just a financial risk—it’s a legal one. Staying compliant protects your credit, income, and ability to continue operating your business or supporting your family. If you're struggling to keep up, act immediately. You may be eligible for a compromise, renegotiation, or other relief before enforcement actions are taken.
IRS vs. Alabama Tax Payment Plans
If you’re dealing with both federal and state tax debt, you may find yourself juggling separate payment plans with the IRS and the Alabama Department of Revenue (ALDOR). While both agencies offer relief through installment arrangements, the terms, eligibility rules, and enforcement practices differ significantly. Understanding these differences is critical for managing your obligations effectively and avoiding default on either side.
Term Lengths
- The IRS offers more flexible and extended repayment terms. Individuals can repay over 72 months (6 years), and in some hardship cases, up to 120 months.
- Alabama, by contrast, limits individual plans to 24 months and often restricts business plans to 12 months or less.
Eligibility Thresholds
- The IRS allows taxpayers to automatically qualify for streamlined plans if they owe less than $50,000 for individuals or $25,000 for businesses.
- Alabama does not publish official thresholds. Each case is individually reviewed and approved at ALDOR’s discretion.
Application Process
- The IRS provides a standardized and largely automated process online, requiring minimal documentation for smaller balances.
- Alabama’s application process is more involved, requiring more frequent communication with the office and sometimes submission of a Collection Information Statement even for individual taxpayers.
Setup Fees and Charges
- The IRS charges setup fees for installment agreements, typically ranging from $31 to $130, depending on how you apply and how payments are made.
- Alabama does not charge explicit fees but often requires a down payment (especially for businesses) and expects ACH debit withdrawals through a verified bank account.
-
Collection Practices
- The IRS generally suspends active collection actions once a valid plan is in place and current.
- Alabama, however, may still file tax liens even after a plan is approved, particularly for cases that have moved into the Collection Services Division following a final assessment.
Side-by-Side Comparison
Comparison: IRS vs. Alabama Payment Plans
Maximum Term Length
- IRS Payment Plan: 72 to 120 months
- Alabama Payment Plan: 12 to 24 months
Eligibility Threshold
- IRS Payment Plan: Individuals with balances ≤ $50,000 are eligible
- Alabama Payment Plan: No publicly stated threshold
Setup/Application Fees
- IRS Payment Plan: Fees range from $31 to $130
- Alabama Payment Plan: No fee, but a down payment is often required
Application Complexity
- IRS Payment Plan: Process is streamlined and automated for many applicants
- Alabama Payment Plan: Handled on a case-by-case basis; more documentation is typically required
Collection Suspension
- IRS Payment Plan: Collections are suspended during compliance
- Alabama Payment Plan: Partial liens may still be filed even during the plan
Documentation for Low Balances
- IRS Payment Plan: Minimal documentation is needed
- Alabama Payment Plan: May require a collection information statement
Managing Both IRS and ALDOR Plans Simultaneously
It’s common for taxpayers to owe both state and federal back taxes. If this applies to you, you’ll need to manage each plan independently. Documentation shared with one agency won’t transfer to the other, and each agency enforces its own rules.
- Your federal and state accounts are not linked—make sure to monitor both portals and correspondence.
- Filing your Alabama tax return does not satisfy IRS obligations, and vice versa.
- Defaulting on one plan doesn’t automatically impact the other, but it may signal broader financial distress that could eventually affect both.
Prioritization When Funds Are Limited
When money is tight, you may wonder which plan to prioritize. Consider the following:
- Alabama tends to act faster with enforcement tools like wage garnishment and bank levies. State enforcement can start just weeks after a final notice.
- IRS collections usually take longer to initiate, giving slightly more breathing room.
- Compare interest rates and penalties to see which balance costs you more over time.
- If ALDOR has already filed a lien, resolving the state debt may help clear your credit faster.
- Be strategic: maintain minimum payments on both plans if possible, and apply any extra funds to the one with the highest urgency or interest rate.
Frequently Asked Questions
Can I renegotiate my Alabama tax payment plan if my financial situation changes?
Renegotiation is possible, but it's not a guaranteed outcome. If your financial situation significantly changes—such as a job loss, reduced income, or unexpected hardship—you may request a modification from the Alabama Department of Revenue. ALDOR will typically require updated financial information and, in some cases, a new collection information statement. The agency will review your ability to pay and determine whether revised terms are appropriate based on your current circumstances.
Will a tax payment plan stop all collection actions?
No, not all collection actions stop automatically. While an approved and active payment plan usually pauses garnishments, levies, and other direct enforcement measures, ALDOR may still file a tax lien to secure the state’s interest in your property. Additionally, any collection actions taken before setting up the plan—such as an existing lien—will remain in effect until the full balance is paid. Staying current on payments and future filings is essential to avoid further enforcement.
What happens after I finish paying off the plan?
Completing your Alabama tax payment plan is a significant milestone, but your responsibilities don’t end with the final payment. To fully close out your case and protect your financial standing, you must take additional steps to ensure your records are precise and updated.
After you’ve made your last payment:
- Request official confirmation from the Alabama Department of Revenue that your balance has been paid in full. This can serve as proof in case of future disputes or clerical errors.
- Obtain a lien release if a tax lien was filed during repayment. ALDOR does not automatically remove liens, so you must request a release document to clear your property and credit profile.
- Check your credit report approximately 60–90 days after your final payment. If a lien had been reported, make sure it now appears as “released” or “satisfied.”
- Maintain records of your payment history, letters from ALDOR, and lien releases for at least seven years. This documentation may be vital if you apply for credit, loans, or professional licenses.
Taking these follow-up steps ensures that your tax resolution is complete in ALDOR’s system and your financial and legal records. It’s the best way to protect your credit, restore full control over your assets, and confidently move forward.
