Arkansas Tax Relief: OIC, Payment Plans, Liens & Levies

Arkansas Tax Relief Overview

Owing Arkansas state taxes is different from owing the IRS. The Arkansas Department of Finance and Administration (DFA) has its own rules, deadlines, and collection tools. Federal tax relief options do not automatically apply to Arkansas state tax debt.

Important: Arkansas does have an Offer in Compromise (OIC) program under A.C.A. § 26-18-705. Unlike some states, Arkansas allows taxpayers to settle tax liabilities for less than the full amount if they meet insolvency or controversy criteria. However, the director's decision on an OIC is final and not subject to review.

Arkansas payment plans are narrow and subject to statutory balance and term limits. They are available only for balances under $1,000 (general) or $2,000 (individual income tax), with a maximum term of 12 months. If your balance exceeds these limits, other options, such as an OIC or full payment, may be needed.

Depending on your situation, you may need one or more of the following:

• An Offer in Compromise to settle for less than the full amount
• A payment plan (only if the balance is under $1,000–$2,000)
• An appeal if you received a Notice of Proposed Assessment you disagree with
• Penalty relief if penalties make the balance impossible to pay
• Lien release or levy resolution if collection action has started
• Filing help if you have unfiled Arkansas tax returns

If you run a business in Arkansas and owe sales tax (gross receipts tax) or withholding tax, the stakes are higher. Trust fund taxes are treated more seriously by the DFA and can create personal liability under A.C.A. § 26-18-501.

Arkansas Tax Relief Options at a Glance

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What Arkansas Tax Notice Did You Receive?

Select your notice type for a quick explanation of what it means and your options.

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What the Arkansas Department of Finance and Administration Can Do to Collect

If you owe Arkansas state taxes and do not address the balance, the DFA has a range of collection tools. Not every case reaches the most serious actions, but the longer a balance goes unpaid, the more options the state may use.

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Arkansas Offer in Compromise (OIC)

Arkansas has an offer-in-compromise program. Under A.C.A. § 26-18-705 and DFA Rule 2000-4, the Arkansas Department of Finance and Administration allows financially distressed taxpayers to resolve overwhelming tax liabilities by paying a reasonable amount in compromise.

Key Point: The Director's Decision Is Final. Acceptance or rejection of an Arkansas OIC is within the sole discretion of the director. The final decision on an OIC is not subject to administrative or judicial review. This makes the application quality critical — there is no appeal if denied.

Eligibility for an Arkansas OIC

To qualify for an Arkansas Offer in Compromise, you must meet one of the following criteria:

• Insolvency: You are unable to pay the established liability because (1) your expenses exceed your income, OR (2) your liabilities exceed your assets
• Controversy: There is a genuine dispute over the amount of tax due
• Established liability: Tax liabilities for which further administrative or judicial review is not available

Requirements to Apply

• All required tax returns or reports must be filed
• Complete application with required documentation
• If also requesting a federal OIC, provide the IRS Collection Information Statement
• Submit to the DFA's Offer in Compromise program

Where to Submit an Arkansas OIC

Always confirm the current mailing address on the official Form 2000-4 before submitting, since addresses can change.

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What the Director Can Do

Under A.C.A. § 26-18-705, the director has broad authority:

• Compromise or settle controversies over the amount of tax due or insolvency
• Waive or remit interest or penalty if: failure is satisfactorily explained; results from a mistake by the taxpayer of law or facts; or inability results from insolvency or bankruptcy
• Enter into a written closing agreement — when signed, it is final and conclusive except upon showing of fraud or misrepresentation

Important OIC Limitations

• Filing an OIC does not stay the period of limitation for administrative or judicial relief
• The Director's decision is final — there is no appeal
• Approval is not guaranteed — each application is reviewed individually
• You must be current on all filing requirements

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Arkansas Tax Payment Plans

If you cannot pay your Arkansas state tax balance in full, a payment plan (installment agreement) may be an option. However, Arkansas payment plans are narrow and subject to statutory balance and term limits.

Strict Arkansas Payment Plan Limits

• General tax liabilities: Only available for balances of less than $1,000
• Individual income tax: Only available for balances of less than $2,000, if the installment agreement is for 12 months or less, and installments are paid electronically
• Maximum term: 12 months
• Approval is NOT automatic — each request is reviewed on a case-by-case basis

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Key Conditions for Arkansas Payment Plans

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What If My Balance Exceeds the Payment Plan Limits?

If your Arkansas tax debt is $1,000 or more (general) or $2,000 or more (individual income tax), a standard payment plan is not available. Your alternatives include:

• Offer in Compromise — If you qualify under insolvency or controversy criteria
• Pay in full — If you have the funds available
• Penalty relief — To reduce the total balance if you have reasonable cause
• Appeal — If you dispute the assessment

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Which Arkansas Tax Relief Option Fits Your Situation?

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Arkansas Tax Assessment and Appeals

A Notice of Proposed Assessment from the Arkansas Department of Finance and Administration is a serious step. It is not the same as a final assessment in some states — you have the right to challenge it before it becomes final. But the deadline is strict.

Since January 1, 2023, most Arkansas tax assessment and refund-denial disputes have been handled by the Arkansas Tax Appeals Commission, an independent body created to hear these cases outside the DFA.

Generally, for proposed assessments issued on or after January 1, 2023, taxpayers have 90 days from the date of the DFA notice to file a petition with the Arkansas Tax Appeals Commission. According to the commission's own guidance, it cannot extend this filing deadline, so the date on the notice matters — do not count on getting more time.

The Arkansas Appeals Process

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About the Administrative Process

The Arkansas Tax Appeals Commission operates independently of the DFA and hears petitions on proposed assessments and refund denials. You have the right to representation by an authorized agent or attorney at any time.

Venue for Circuit Court Appeals

You may file suit in:

• Pulaski County Circuit Court
• The circuit court of the county where you have your principal place of business

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Jeopardy Assessments: Only 5 Days to Respond

5-Day Deadline for Jeopardy Assessments

If the DFA issues a jeopardy assessment (an immediate assessment when collection is in jeopardy), you must file a petition with the Arkansas Tax Appeals Commission within 5 days of receipt. This is a much shorter deadline than the standard petition period. Jeopardy assessments apply when:

• The tax liability exceeds the bond on file
• You intend to leave the state, remove property, or conceal yourself or property
• You intend to discontinue business without adequate provision for tax payment
• Other acts are prejudicing the state's ability to compute, assess, or collect tax

Taxpayer Rights During the Appeals Process

• Right to representation by an authorized agent or attorney at any time
• Right to record interviews at your own expense
• Confidentiality of all tax information, subject to exceptions in A.C.A. § 26-18-303
• Right to bypass administrative review and proceed directly to circuit court (though this requires paying the tax first for a refund suit)

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Arkansas Penalty Relief

Penalty relief differs from a payment plan or an OIC. A payment plan lets you pay over time. An OIC lets you settle for less. Penalty relief asks Arkansas to reduce or remove penalties when allowed under state rules.

Under A.C.A. § 26-18-705(b) and DFA Rule 2000-4, the director may waive or remit interest or penalty under specific circumstances.

Arkansas Penalty Rates

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Grounds for Penalty Waiver or Remission

The director may waive or remit interest or penalty if:

• The taxpayer's failure is satisfactorily explained to the secretary.
• The failure results from a taxpayer's mistake of law or fact, subjecting them to tax
• The inability to pay results from insolvency or bankruptcy

Penalty Waiver Request Forms

Arkansas provides specific forms for penalty waiver requests:

• Individual: Individual Income Tax Penalty and Interest Waiver Request
• Corporate: Corporation/Pass-Through Entity Penalty and Interest Waiver Request
• Available reasons include: Illness, Natural Disaster, Insolvent/Bankrupt, Intent to Dissolve, Reasonable Cause, Other

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Closing Agreements

The Secretary may enter into a written closing agreement with any taxpayer. When signed, the closing agreement is final and conclusive except upon a showing of fraud or misrepresentation.

Penalty Relief vs. Payment Plan vs. OIC

These are separate processes. A payment plan does not automatically remove penalties. An OIC may include penalty reduction as part of the settlement, but that is at the director's discretion. Penalty relief must be requested separately and approved based on reasonable cause, mistake, or insolvency. Even if penalties are waived, the underlying tax and interest must still be paid unless they are waived as well.

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Arkansas Tax Liens (Certificate of Indebtedness)

In Arkansas, a tax lien is called a "Certificate of Indebtedness." It is filed with the circuit clerk of any county and has the same force and effect as a circuit court judgment. It can affect the title, your ability to sell or refinance property, and your business operations.

How Arkansas Tax Liens Work

• Filing: The secretary files a Certificate of Indebtedness with the circuit clerk of any county in Arkansas. The certificate certifies that you are indebted to the state for the tax amount.
• Force and effect: Has the same force and effect as an entry of judgment rendered by the circuit court.
• Property covered: Constitutes a lien on all real and personal property of the taxpayer in the county where recorded.
• Docketing: The circuit clerk enters the taxpayer's name, amount due, name of tax, and date of entry on the circuit court judgment docket.
• Duration: 10 years from the date of recording. The lien automatically expires after 10 years.
• Bankruptcy tolling: A bankruptcy filing tolls the 10-year period until 180 days after termination of the bankruptcy case.

Lien Priority

Generally, the Certificate of Indebtedness is superior to all other liens attaching after the date of entry on the judgment docket and all claims of unsecured creditors.

Purchase Money Mortgage Exception (Effective February 11, 2025). Under Act 29 of 2025 (HB 1273), effective February 11, 2025, a Certificate of Indebtedness is NOT in a superior lien position to a purchase money mortgage. This is a significant change that benefits homebuyers and lenders in Arkansas. A purchase money mortgage now takes priority over a state tax lien.

Electronic Publication

The Secretary may publish an electronic copy of the Certificate of Indebtedness on the official DFA website. The electronic copy is removed upon satisfaction of the debt and issuance of a release on the circuit clerk's records.

Lien Release

Under A.C.A. § 26-18-706, the secretary must release the lien when:

• Full payment of the adequate consideration, including costs, is made
• An adequate security deposit is made to secure payment
• The lien is clouding the title due to an error in the property description or similarity in names (release without payment)

The secretary's release is given under seal and filed with the circuit clerk. If the filing was erroneous, the secretary must issue a certificate of release within 14 days of determination.

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Arkansas Bank Levy / Writ of Execution

A bank levy allows Arkansas to freeze and take funds from your bank account to satisfy a tax debt. In Arkansas, this is done through a writ of execution issued by the circuit clerk to the secretary. The secretary acts in place of the county sheriffs for executing collection.

Key Facts About Arkansas Levies

• Authority: After filing a Certificate of Indebtedness, the Secretary may take all steps authorized by law for collection
• Writ of execution: Issued by the circuit clerk to the Secretary, authorizing levy on all real and personal property
• Full remedies: The Secretary has all remedies and may take all proceedings for collection that may be taken for recovery of a judgment at law
• Garnishment: Both wage garnishment and bank account levy are available under the writ of execution
• Business accounts: Business bank accounts are not exempt from levy or garnishment
• Costs: Any court costs or sheriff's fees from collection attempts, are collected from the taxpayer in addition to tax, interest, and penalties

If your account has been levied, you need to act quickly. A levy may be lifted or modified in certain situations, but the timeline is tight. No guarantee of release.

Permit Cancellation

The DFA may also cancel state tax permits or registrations as a collection tool, effectively shutting down business operations until the tax debt is resolved.

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Arkansas Wage Garnishment for Tax Debt

Wage garnishment means Arkansas can take money directly from your paycheck to pay your state tax debt. Under a writ of execution, the secretary may garnish wages, salaries, commissions, and other compensation.

How the Arkansas Writ of Execution Works for Wages

Unlike some states that specify a fixed percentage, Arkansas operates through the writ of execution system. The circuit clerk issues the writ to the secretary, who then acts to collect the judgment amount. The employer is required by law to comply with the garnishment order.

The wage garnishment remains in effect until the total tax liability has been withheld and remitted.

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Wage Garnishment vs. Bank Account Levy

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If you have received a notice about garnishment or an intent to garnish, do not ignore it. Once garnishment starts, the money is taken before you receive your paycheck.

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Arkansas Unfiled Tax Returns

If you have not filed Arkansas tax returns for one or more years, that can block most resolution options. The DFA may estimate your tax and issue assessments based on those estimates — sometimes higher than what you actually owe.

Filing accurate returns can sometimes reduce an incorrect balance. But do not rush or file bad returns. It's better to get the returns prepared correctly with the right income, deductions, and Arkansas credits.

Why Filing Matters

• Unfiled returns block payment plan eligibility
• The DFA may issue substitute returns with a higher tax than you actually owe
• Penalty relief generally requires all returns to be filed
• An OIC requires all required returns to be filed before applying
• The statute of limitations on assessments may not start until a return is filed

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Arkansas Business, Sales Tax (Gross Receipts), and Payroll Tax Debt

Business tax debt is a higher risk than individual income tax debt. Sales tax (gross receipts tax), income withholding tax, and other business taxes are trust fund taxes — money you collected or withheld that belongs to the state. The DFA takes these very seriously.

Responsible Person Warning: Personal Liability

Under A.C.A. § 26-18-501, any person who is under a duty to perform the act in respect to which the violation occurs may be held personally liable. This includes:

Who can be held liable?

• An officer, director, or employee of a corporation
• A partner or employee of a partnership
• A member, manager, or employee of a limited liability company

Trigger: Willful failure to (1) collect tax, (2) truthfully account and pay over tax, or (3) attempt to evade or defeat tax.

Penalty: Liable to a penalty equal to the total amount of tax evaded, not collected, or not accounted for and paid over.

Key points:

• Applies to persons required to collect, truthfully account for, and pay over any state tax
• Taxes collected are held in trust for the state
• Willful failure to remit creates personal liability
• Does NOT apply to corporate income taxes

Arkansas Gross Receipts Tax (Sales Tax)

Arkansas imposes a gross receipts tax under A.C.A. § 26-52-101 et seq. (the Arkansas Gross Receipts Tax Act of 1941). This is the state's primary sales tax. Unpaid gross receipts tax triggers the same responsible person liability as other trust fund taxes.

Withholding Tax Requirements

Withholding tax is administered under the Arkansas Income Tax Withholding Act of 1965 (A.C.A. § 26-51-901 et seq.). The current Arkansas withholding rate is 3.9%. Interest on unpaid withholding tax accrues at 10% per annum from the due date. Employers who average $20,000+ in monthly withholding tax must file electronically.

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Arkansas Statute of Limitations for Tax Debt

Understanding the time limits for assessment, collection, and refunds is important for managing Arkansas tax debt.

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Arkansas Tax Relief Tools & Calculators

Use our Arkansas calculators to estimate penalties, interest, or garnishment risk. Then request a review if the numbers show the balance is growing or collection is already active.

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Arkansas Government Resources

These are the official Arkansas sources for tax information, payment plans, appeals, and rules. Always check the official source for the most current information.

• Arkansas Department of Finance and Administration — Official Portal
• Arkansas Department of Finance and Administration — Offers in Compromise
• Arkansas Department of Finance and Administration — Taxpayer Bill of Rights
• DFA Rule 2000-4 — Offer in Compromise Regulation
• Form 2000-4 — OIC Application/Checklist (current mailing address)
• Arkansas Independent Tax Appeals Commission Act (A.C.A. §§ 26-18-1101–26-18-1120)
• Arkansas Tax Appeals Commission — FAQ
• Arkansas Tax Appeals Commission — Filing a Petition
• Act 29 of 2025 (HB1273) — Lien Priority / Purchase Money Mortgage Exception
• A.C.A. § 26-18-501 — Responsible Person Liability
• A.C.A. § 26-18-701 — Certificate of Indebtedness / Liens / Payment Plans
• A.C.A. § 26-18-705 — Settlement, Compromise, Penalty Waiver
• A.C.A. § 26-18-706 — Release of Property from Lien
• Arkansas Taxpayer Access Point (ATAP) — Online Portal
• DFA Withholding Instructions for Employers (current 3.9% rate)
• Individual Income Tax Penalty and Interest Waiver Request
• Corporation/Pass-Through Entity Penalty and Interest Waiver Request

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Not Sure What to Do With Your Arkansas Tax Situation?

Select the card that matches your situation to jump to the relevant section.

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Frequently Asked Questions

Does Arkansas have an offer-in-compromise program?

Yes. Arkansas offers an Offer in Compromise (OIC) program under A.C.A. § 26-18-705. The program allows financially distressed taxpayers to settle tax liabilities by paying a reasonable amount in compromise. Eligibility requires either insolvency (expenses exceed income or liabilities exceed assets) or a controversy over the amount of tax due. All required tax returns must be filed before applying. Applications are submitted to the DFA's Offer in Compromise program in Little Rock. The Director's decision on an OIC is final and not subject to administrative or judicial review. There is no application fee.

Does Arkansas have payment plans?

Yes, but Arkansas payment plans are narrow. DFA installment agreements are available only for delinquent tax liabilities of less than $1,000 (general) or less than $2,000 for individual income tax, provided the plan is for 12 months or less, and installments are paid electronically. Approval is not automatic, and each request is reviewed on a case-by-case basis. Interest continues to accrue during the installment period. If you default, the plan will be declared in default, and other collection measures will be pursued. If your balance exceeds these limits, an offer in compromise may be a better option.

How do I appeal an Arkansas tax assessment?

For proposed assessments issued on or after January 1, 2023, you generally have 90 days from the date of the DFA notice to file a petition with the Arkansas Tax Appeals Commission, stating your grounds for opposing the assessment. According to the Commission's guidance, this deadline generally cannot be extended, so act promptly once you receive the notice. The commission reviews the petition and holds a hearing. After the commission issues its decision, you may file suit in circuit court within 180 days (if no payment is made) or within 1 year of paying the tax. You may also bypass administrative review and proceed directly to circuit court, though a refund suit requires paying the tax first.

What is an Arkansas jeopardy assessment?

A jeopardy assessment is an immediate assessment by the Arkansas Department of Finance and Administration when the collection of taxes is in jeopardy. This applies when the tax liability exceeds the bond on file, the taxpayer intends to leave the state or conceal property, intends to discontinue business without adequate provision for tax payment, or takes other acts prejudicing the state's ability to collect tax. Unlike the standard petition period, you must file a petition with the Arkansas Tax Appeals Commission within 5 days of receipt. This is a much shorter deadline and requires immediate action.

Can Arkansas file a tax lien?

Yes. Arkansas files a Certificate of Indebtedness (State Tax Lien) with the circuit clerk of any county. The lien has the same force and effect as a circuit court judgment and attaches to all real and personal property of the taxpayer in the county. The lien lasts for 10 years from the date of recording and automatically expires thereafter. Effective February 11, 2025 (Act 29 of 2025 / HB 1273), a purchase money mortgage now takes priority over a state tax lien. The lien may be released upon full payment, adequate security deposit, or if the filing was erroneous.

Can Arkansas levy a bank account?

Yes. After filing a Certificate of Indebtedness, the Arkansas secretary may take all steps authorized by law for collection, including writs of execution and garnishment. The circuit clerk issues the writ to the secretary, who acts in place of the county sheriffs. The secretary is entitled to receive the full amount of money in an account at the time garnishment is served, not to exceed the tax liability. This can create immediate cash-flow problems. Acting quickly may help in certain cases.

Can Arkansas garnish wages for state taxes?

Yes. After filing a certificate of indebtedness, the Arkansas secretary may issue execution warrants that include wage garnishment. The employer is required by law to comply. The wage garnishment remains in effect for subsequent pay periods until the total amount has been withheld and remitted. The Secretary has all remedies available for recovery of a judgment at law and may also levy bank accounts, seize other property, and cancel state tax permits or registrations.

What if I have unfiled Arkansas tax returns?

Unfiled returns can block most resolution options. The DFA may estimate your tax and issue assessments that are higher than what you actually owe. Filing accurate returns can sometimes reduce an incorrect balance. Do not rush or file bad returns — get them prepared correctly with the right income, deductions, and credits. All required returns must be filed before applying for an offer in compromise or payment plan.

Can Arkansas waive penalties?

Yes. Under A.C.A. § 26-18-705(b), the director may waive or remit interest or penalty if: (1) the failure is satisfactorily explained, (2) the failure results from a mistake by the taxpayer of law or facts, or (3) the inability to pay results from insolvency or bankruptcy. Penalty waiver forms are available for both individual and corporate taxpayers. Penalty relief can be particularly valuable given that the failure-to-file penalty can reach 35% of the balance.

What if my Arkansas tax debt is from gross receipts tax or payroll withholding?

Gross receipts tax and payroll withholding debt are taken very seriously in Arkansas because they are trust fund taxes — money collected or withheld that belongs to the state. Under A.C.A. § 26-18-501, responsible persons (officers, directors, employees, partners, members, or managers) who willfully fail to collect, account for, or pay over trust fund taxes may be personally liable for a penalty equal to the total amount of tax evaded, not collected, or not paid over. This does not apply to corporate income taxes. Taxes collected are held in trust for the state.

What are the Arkansas penalty rates?

Arkansas imposes a 5% per month penalty for failure to file, with a maximum of 35%. The failure-to-pay penalty is 1% per month for income tax or 5% per month for withholding tax, also capped at 35%. Interest accrues at 10% per annum on unpaid tax from the due date. There is also a $500 penalty for frivolous returns and a 5% penalty for failure to pay by electronic funds transfer (when required). Addressing tax debt promptly can help limit the amount of penalties added to your balance.

How long does an Arkansas tax lien last?

An Arkansas tax lien (Certificate of Indebtedness) lasts for 10 years from the date of recording with the circuit clerk. The lien automatically expires after 10 years. A bankruptcy filing tolls the 10-year period until 180 days after termination of the bankruptcy case. The Secretary may file another lien if required to release a lien due to a bankruptcy stay and no subsequent discharge occurs. The lien is superior to other liens attaching after the date of entry, except that, effective February 11, 2025, a purchase money mortgage takes priority.

Sources Used

These are the official government sources used for this page. Always check the current official source for the most up-to-date information.

• Arkansas Department of Finance and Administration — Official Portal: www.dfa.arkansas.gov ↗
• Arkansas Department of Finance and Administration — Offers in Compromise: dfa.arkansas.gov/income-tax/offers-in-compromise ↗
• Arkansas Department of Finance and Administration — Taxpayer Bill of Rights: dfa.arkansas.gov/office/revenue/taxpayer-bill-of-rights ↗
• DFA Rule 2000-4 — Offer in Compromise Regulation: dfa.arkansas.gov/wp-content/uploads/rule2000_4.pdf ↗
• Form 2000-4 — OIC Application/Checklist: dfa.arkansas.gov/wp-content/uploads/2000_4_Form_2.pdf ↗
• Arkansas Independent Tax Appeals Commission Act — A.C.A. §§ 26-18-1101–26-18-1120: ig.arkansas.gov/tax-appeals-commission/arkansas-independent-tax-appeals-commission-act ↗
• Arkansas Tax Appeals Commission — FAQ: ig.arkansas.gov/tax-appeals-commission/frequently-asked-questions-general ↗
• Arkansas Tax Appeals Commission — Filing a Petition: ig.arkansas.gov/tax-appeals-commission/petition-2 ↗
• Act 29 of 2025 (HB1273) — Lien Priority / Purchase Money Mortgage Exception: arkleg.state.ar.us/Bills/Detail%20(HB1273) ↗
• A.C.A. § 26-18-501 — Responsible Person Liability: codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-501 ↗
• A.C.A. § 26-18-701 — Certificate of Indebtedness / Liens / Payment Plans: codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-701 ↗
• A.C.A. § 26-18-705 — Settlement, Compromise, Penalty Waiver: codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-705 ↗
• A.C.A. § 26-18-706 — Release of Property from Lien: codes.findlaw.com/ar/title-26-taxation/ar-code-sect-26-18-706 ↗
• Arkansas Taxpayer Access Point (ATAP) — Online Portal: atap.arkansas.gov/_ ↗
• DFA Withholding Instructions for Employers — Current 3.9% rate: dfa.arkansas.gov/wp-content/uploads/withholdInstructions.pdf ↗

Disclaimer: This page provides general information about Arkansas state tax collection procedures and is not legal advice. Tax laws and agency procedures change. Always consult the official Arkansas Department of Finance and Administration website or a qualified tax professional for advice specific to your situation. No guarantee of any particular outcome is expressed or implied. Approval for offers in compromise, payment plans, and other resolutions is discretionary, and the director's decision on an OIC is final and not subject to review.