Michigan Tax Installment Agreement

Michigan Tax Installment Agreements

How to Set Up Monthly Payments on State Back Taxes

If you owe back taxes to the State of Michigan and you can’t afford to pay in full, contact the Department of Taxation (DOT) to request an installment agreement. The MDOT offers monthly payment plans on a case-by-case basis. Keep reading for more info, or contact us at the W Tax Group for help today.

Key Takeaways

• If you owe back taxes to the state of Michigan, you can either pay the outstanding balance in full, appeal the tax assessment, or ask to pay your tax debt over time with an installment agreement.
• If you ignore your tax debt, the Michigan Department of Treasury (MDOT) will start collection actions against you, which can include bank and wage levies.
• To request an installment agreement, you must complete Form 990, which includes your proposed monthly or bi-weekly payment amounts and due dates.
• If you want an installment agreement that spans more than four years, you’ll also need to complete a Collection Information Statement.
• Even if the MDOT accepts your request, they may still file a lien against your property to protect their legal interests until your taxes are fully paid.

MDOT Notices About Back Taxes – How to Respond

If you receive a Letter of Inquiry, Notice of Intent to Assess, or a Bill for Taxes Due in Michigan, you have three options:

• Pay the amount due in full.
• Appeal the tax assessment.
• Enter into an installment agreement.

If you choose to do none of these things and ignore your unpaid tax problem with the MDOT, your tax case gets sent to the Collection Services Bureau (CSB). This is the division of MDOT responsible for collecting Michigan delinquent taxes. The CSB will then begin collection enforcement actions against you. These may include:

• Tax liens
• Tax levies (this can include wage garnishment, bank levies, or the seizure of assets)
• Tax balance offset using a tax refund or credit
• Referral to a third-party tax collection agency

To avoid the above, you can challenge the underlying tax balance itself (by filing an appeal). If that’s not an available option, you’ll need to set up an installment agreement.

What Are Michigan Installment Agreements?

A Michigan installment agreement allows you to pay off your tax debt over time using monthly or bi-weekly payments. You’re not typically eligible to apply for an installment agreement until you’ve either received: 

• Bill for Taxes Due (Form 168, Intent to Assess), or 
• Final Bill for Taxes Due (Form 169, Final Assessment). 

Assuming the MDOT sent you one of these documents, your installment agreement application process depends on how much time you’re asking to pay off your unpaid taxes.

Installment Agreement for 48 Months or Less

If you can pay off the balance within four years, you can apply by completing Form 990, Installment Agreement. Mail this form to:

Michigan Department of Treasury
Collection Services Bureau
P.O. Box 30199
Lansing, MI 48909

The MDOT will review your proposal, but until the MDOT makes a decision, you’ll need to make your proposed payments.

Installment Agreement that’s Longer than 48 Months

Asking for more than four years to pay off your Michigan tax debt has a more involved application process. In addition to completing Form 990, you’ll also need to complete a Collection Information Statement. 

This is a form that will provide financial information to the MDOT about your income, expenses, liabilities, and assets. The MDOT uses this information to complete a financial analysis and determine if you meet the strict requirements to be eligible for an installment agreement that lasts longer than four years. 

To obtain the Collection Information Statement form and the additional information needed to apply for an installment agreement that’s longer than 48 months, you must contact the CSB by calling 517-636-5265.

What to Expect After Submitting Form 990

If the MDOT approves your installment agreement request, they’ll send you a confirmation letter containing pre-identified payment coupons which you’ll send along with your payments to the CSB. This confirmation letter will also tell you what your payment amounts should be, as well as their due dates. You can also make payments online.

If the MDOT denies your installment agreement request, the CSB will send you instructions on your next steps.

Additional Requirements for Installation Agreements in Michigan

In addition to completing the application forms, you must meet the following requirements to qualify for a monthly payment plan on your Michigan state taxes:

• Filed all outstanding tax returns.
• Made all estimated tax payments due.

While you are on the payment plan, you must file all tax returns and make all tax payments when due. If you don’t, the state can rescind your payment plan and demand payment in full.

What to Expect While You’re on a Payment Plan

One thing to keep in mind is that even if the MDOT accepts your installment agreement request, the CSB will file a lien on your personal and real property to protect Michigan’s legal interests as a creditor. This lien may be in place until your tax debt is fully paid. Additionally, penalties and interest will continue to accrue until the liability is paid in full.

The MDOT will also seize all state tax refunds and apply them to your balance due. If you’re a state vendor, your vendor payments may also be directed toward your tax debt. You still need to make your monthly payments during the months when these other amounts are applied to your balance due.

Can Businesses Apply for Installment Agreements on Michigan Taxes?

Yes, both individuals and businesses can apply for installment agreements in Michigan. 

What If You Owe IRS Taxes?

If you owe both state and federal taxes, you will need to apply for two different payment plans. The IRS offers installment agreements to qualifying taxpayers – generally, you get up to six years to pay, but longer in select cases.

IRS Installment Agreements vs. Michigan Installment Agreements

Both Michigan and the IRS offer monthly payment plans to qualifying taxpayers. Here are some of the similarities between these programs:

• Must file all outstanding tax returns to qualify.
• Must stay current with tax obligations while on the payment plan.
• Must apply for payments.
• Must file a collection information statement if you owe over a certain amount or need a long time to pay.
• Tax refunds will be seized and applied to your tax debt while you’re making payments.
• A lien may be filed against your assets – but not always.
• Available for individual or business taxes.

These payment plans have the following differences:

• Michigan offers up to a four-year repayment term as the standard; the IRS offers up to a six-year repayment term as the standard.
• Michigan requires a collection information statement if you need more than four years to pay; the IRS requires a CIS if you owe more than $50,000, need more than six years to pay, or have recently defaulted on a payment plan.
• The IRS assesses interest based on the prime rate plus 3 points; Michigan assesses interest at the adjusted prime rate plus 1 point. As of Q2 2025, the IRS’s interest rate is 7%, while Michigan’s is 9.47%.

Need Help Applying for a Michigan Installment Agreement?

You’re not required to consult with a tax professional (such as a tax lawyer) when requesting an installment agreement, but it’s often a good idea to do so. Not only can they help you through the application process, but they can also examine your tax situation and see if another option is possible, like a Michigan offer in compromise or appealing the tax assessment. 

To learn more, contact the W Tax Group to schedule a free consultation. You can contact us online or by calling (877) 500-4930.

Lead Tax Attorney at The W Tax Group

Stephen A Weisberg