Tennessee State Tax Enforcement Decision Checklist

Tennessee State Tax Enforcement Decision Checklist

Introduction

State tax enforcement occurs when the Tennessee Department of Revenue takes action to collect unpaid taxes, address filing violations, or pursue compliance issues. This can include notices, liens, wage garnishment, or account levies.

Understanding what enforcement means and what typically happens next helps you respond appropriately and avoid escalation. Ignoring enforcement notices generally makes the situation worse, not better.

What This Issue Means

State enforcement is a formal action taken by Tennessee’s Department of Revenue when taxes are believed to be unpaid or when filing and compliance obligations have not been met.

Enforcement actions can include notices demanding payment, liens placed against property, wage garnishments, or bank account levies.

These actions represent a shift from routine collection efforts to formal legal or administrative enforcement mechanisms. The Tennessee Department of Revenue has statutory authority under the Tax Enforcement Procedures Act to pursue collection action without first obtaining a court order for state tax debts.

Why the State Issues Enforcement Actions

Tennessee initiates enforcement when a taxpayer has an unpaid tax liability and previous collection attempts have not resolved the debt. Enforcement may also occur when returns are not filed, payments are significantly overdue, or a taxpayer has not responded to earlier notices.

Franchise tax, excise tax, sales and use tax, business tax, and other specific state taxes fall under Tennessee's enforcement authority. Individual income tax does not apply in Tennessee, as the Hall Income Tax on dividends and interest was fully repealed effective January 1, 2021.

What Happens If This Is Ignored

Ignoring an enforcement notice typically results in escalation through a documented progression. Collection follows this pattern: Notice of Proposed Assessment, Final Demand

Letter, Collection Case assignment, Intent to Levy or Lien Letter, and ultimately, levy or lien action.

Tennessee adds penalties and interest to the existing debt, pursues additional enforcement tools, or proceeds with property seizure or wage garnishment. Each enforcement action generally increases the total amount owed and may lead to additional collection attempts.

What This Does NOT Mean

Receiving an enforcement notice does not mean criminal prosecution has been initiated, as enforcement is a collection tool rather than a criminal action. An enforcement notice also does not mean you have automatically lost the right to challenge the underlying tax assessment or to request payment arrangements.

Checklist: What to Do After Receiving an Enforcement

Notice

Step One: Locate and Review the Actual Notice

1. Find the official notice or document from the state revenue agency.

2. Read the entire document carefully, including the date it was issued.

3. Note the type of enforcement action stated in the notice.

4. Identify the tax year, tax type, and amount stated.

5. Write down the case number, notice number, or reference number shown on the document.

6. Check the response deadline if one is listed.

7. Keep the original document in a safe location.

Step Two: Gather and Organize All Related Tax Records

Collect copies of the tax returns in question for the year or years listed in the notice. Gather proof of any payments made toward this tax debt, including checks, receipts, and bank statements.

Step Three: Verify the Information in the Notice

Check whether the name and identifying information match your records, then confirm the tax year and tax type listed in the notice. Compare the amount stated in the notice to your own tax records and prior correspondence.

Step Four: Determine Whether You Have Questions About the Assessment

Review your filed tax return for that year, if you filed one, and compare what you reported to what the notice says you owe. Identify any specific items you believe are incorrect, such as income reported, deductions, credits, or payments.

Step Five: Contact the Department of Revenue if Clarification Is Needed

Locate the contact information on the enforcement notice and call during posted business hours with your notice number ready. Explain what information you believe is incorrect or what you need clarified, then write down the representative’s name, date, and time of the call.

Step Six: Consider Whether You Can Pay the Amount in Full

Determine the total amount due, including any penalties and interest accrued under published guidance, then review your current financial situation and available resources. Check whether you can pay the full amount immediately and confirm the accepted payment methods.

Step Seven: Research Payment Plan Options If Full Payment Is Not

Possible

Contact the revenue department to inquire about available payment arrangements, noting that only the TNTAP master account holder can request a payment plan. All tax returns must be filed before requesting a plan, and if any subsequent return becomes delinquent, the payment plan is automatically revoked.

Ask what information or documentation is required to request a payment plan and what interest and penalties continue to accrue during the arrangement. Find out what happens if you miss a payment on an approved plan and request written confirmation of any payment arrangement offered.

Step Eight: Review Your Right to Request a Hearing or Appeal

For a Notice of Proposed Assessment, you have thirty days from the date of the notice to request an informal conference in writing. This deadline is established by Tennessee Code

Annotated Section 67-1-1438.

Determine whether the state offers informal conferences before a formal hearing, and ask what issues can be addressed. Find out whether requesting a hearing pauses the enforcement action, and obtain the appropriate request form if you wish to proceed.

Step Nine: Prepare and Submit Any Response Required by the Deadline

Note the exact response deadline shown in the notice and determine the required format, such as a written letter, a specific form, or an online submission. Prepare your response with clear, factual information and include copies of supporting documentation, not originals.

Step Ten: Track All Communication and Documentation

Create a folder for all enforcement-related correspondence and record the date, time, person, and content of each phone call or contact. Save copies of all written correspondence you send and receive, then note any promises or commitments made by state representatives.

Common Mistakes to Avoid

Failing to respond to an enforcement notice does not make it go away, as the state typically escalates enforcement when notices are ignored. Enforcement notices and hearing requests have specific deadlines, and missing a deadline may result in loss of the opportunity to be heard.

If you submit a response or request, incomplete or disorganized information may delay resolution, and failing to document your communications makes it harder to resolve disputes later. Always request written confirmation of any agreement or decision made by phone or in person, as verbal assurances without written documentation may not be enforceable.

Frequently Asked Questions

Can the state garnish my wages without a court order?

Yes, but only for Tennessee state tax debts. Tennessee Code Annotated Section 67-1-1405 grants the Commissioner of Revenue the authority to levy wages and bank accounts without a court order after 10 days' notice and demand, specifically for the collection of unpaid state taxes.

What is the difference between a lien and a levy?

A lien is a claim placed against your property to secure payment of the tax debt, while a levy is the actual seizure or garnishment of property, wages, or bank accounts to satisfy the debt.

Does the statute of limitations apply to state tax enforcement?

Yes. For Tennessee state tax returns that require a return, the statute of limitations for assessment is three years from December 31 of the year in which the return is filed. However, when no return is filed, or a false or fraudulent return is filed, an assessment may be made at any time.

Closing

State tax enforcement is a serious administrative action, but it is not the end of your options.

Understanding what enforcement means, what the notice requires, and what steps you can take puts you in a position to respond effectively.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.