Understanding what the Michigan corporate officer liability process is and how to respond to it.
The Michigan Department’s authority to assess officers, members, managers, and/or partners for the liabilities of a corporation, limited liability company, limited liability partnership, limited partnership or a partnership is derived from Michigan Compiled Laws, Section 205.27a, Subsection 5 hereafter referred to as MCL 205.27a(5)), which states in part:
“If a corporation, limited liability company, limited liability partnership, partnership or a limited partnership liable for taxes administered under this act fails for any reason to file the required returns or to pay the tax due, any of its officers, members, managers, or partners who the department determines, based on either an audit or an investigation, have control or supervision of, or responsibility for, making the returns or payments is personally liable for the failure.”
Throughout this article the term “officer or corporate officer” refers to: 1) an officer of a corporation 2) an officer, member or manager of a limited liability company 3) a partner, officer, member or manager of a partnership, limited partnership or a limited liability partnership.
The term “Corporation” refers to a Corporation, Limited Liability Company, Limited Liability Partnership, Limited Partnership or a Partnership.
How the Michigan Corporate Officer Liability Process Begins
The Michigan Corporate Officer Liability process begins when a corporation fails to file returns and/or pay taxes due to the State of Michigan. Department staff will perform an investigation in order to identify all individuals who may be held personally liable for the corporation’s failure to file returns and/or submit payment under MCL 205.27a Subsection (5).
Letter of Inquiry
Based on documents obtained during the investigation, the Michigan Department will issue a Letter of Inquiry to all individuals identified as being potentially liable for the corporate liability during the period in question. This letter is called a “Letter of Inquiry, Notice of Officer Liability” or a “Letter of Inquiry, Notice of Member/Manager/Partner Liability”.
At the time the Letter of Inquiry is issued, it is the understanding of the Department that you may be liable for the billing/assessment. At this time, personal liability has not been assessed against you.
If you receive a Letter of Inquiry, you have thirty days (30), from the date on the letter to submit documentation that proves you were not:
- Involved with the corporation.
- An officer of the corporation.
- Responsible for paying Michigan taxes or for filing returns on behalf of the corporation during the time period indicated on the Letter of Inquiry.
Further, any documentation, information or knowledge you may have indicating which officers of the corporation have control or supervision of, or responsibility for making returns or payments should be submitted.
All documentation may be submitted to Michigan Department of Treasury, Office of Collections, Corporate Officer Liability Unit, Post Office Box 30168, Lansing, Michigan 48909. Or you may contact us at (517) 636-5265.
Michigan Corporate Officer Appeals Process
Bill for Taxes Due (Intent to Assess)
The Michigan Department will issue a Bill for Taxes Due (Intent to Assess) if:
- No documentation has been submitted establishing that the individual is not a corporate officer within thirty days of the Letter of Inquiry, or
- The documentation submitted is insufficient to demonstrate that the individual was not a corporate officer.
The Bill for Taxes Due notifies the individual that the Department intends to hold him/her personally liable for the taxes in question.
If an individual chooses to dispute the fact that he/she is being held personally liable for the corporation’s taxes, a request for an informal conference must be received within sixty days (60) from the date on the Bill for Taxes Due. The request must be made in writing and submitted to the Michigan Department of Treasury, Hearings Division, Austin Building, Lansing MI 48922.
For more information on the informal conference process visit the Hearings Division web site or you may contact the Hearings Division at (517) 636-4117.
Final Bill for Michigan State Taxes Due (Final Assessment)
If a request for an informal conference is not received within sixty days of the date on the Bill for Taxes Due, a Final Bill for Taxes Due (Final Assessment) will be issued.
An individual may contest the Department’s decision and the Final Bill for Taxes Due by appealing the Final Bill for Taxes Due to the Michigan Tax Tribunal within thirty five days from the date on the Final Bill for Taxes Due. The individual may appeal all or part of the bill/assessment. Any portion of the bill/assessment that is uncontested must be paid prior to submission of the request for an appeal to the Michigan Tax Tribunal.
For more information, including contact information, for the Michigan Tax Tribunal visit their web site or, contact the Michigan Tax Tribunal at P.O. Box 30232, Lansing, MI 48909.
If the period for requesting an appeal with the Michigan Tax Tribunal has expired, the individual may file an appeal of the Final Bill for Taxes Due (Final Assessment) with the Court Of Claims, within ninety days from the date of issuance of the Final Bill for Taxes Due (Final Assessment).
An appeal of a Final Bill for Taxes Due (Final Assessment) to the Court of Claims requires the full payment of the disputed and undisputed taxes.
After the Appeals Process
The Department will proceed to collect taxes due within sixty days from the date of the Final Bill for Taxes Due (Final Assessment) unless:
- The Department has received payment in full.
- An installment agreement covering the Final Bill for Taxes Due (Final Assessment) has been agreed to and approved by the Department, or
- A notice of an appeal of the Final Bill for Taxes Due (Final Assessment) to the Michigan Tax Tribunal has been received.
The Department will proceed to collect the amount owed through the normal collection process which may include enforcement methods including, but not limited to:
- Levying of wages and bank accounts.
- Placing liens on real/or personal property.
- The interception of money owed to the individual by the state (such as income tax refunds.)
Further information about enforcement actions the Department may take may be found on the Office of Collections website.
For more information about the Corporate Officer Liability process, see our Corporate Officer Liability Frequently Asked Questions.
More information regarding your rights and responsibilities as a taxpayer may be found in the Taxpayer Rights Handbook.
If you need assistance with corporate back taxes due in the state of Michigan, The W Tax Group’s team of Attorney’s can help you. We are located in Southfield, Michigan and are experienced in Michigan tax administration and collections. We offer 100% free tax case consultations to assess the status of your case and set you up so that you can find peace of mind and resolve your tax issues.