What is a Michigan State Tax Lien?

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What is a Michigan State Tax Lien?

Michigan State Tax Lien

What is a Michigan State Tax Lien?

A lien is put in place to protect interest in specific property that is taken as security for a debt. A lien may be voluntarily created by agreement of the parties, or it may arise by operation of statute. An example of a voluntary lien is the interest that a mortgage creates upon a homeowner’s house in favor of the mortgage lender. Tax liens, on the other hand, generally arise by operation of law, and that is the case with state tax liens in Michigan.

Notices of state tax liens are filed for public recording by the Michigan Department of Treasury. Michigan law provides for the creation of a lien when a taxpayer owes back taxes to the Michigan Department of Treasury to protect the State’s interest in the property because of back taxes – in other words, to ensure that profit from a sale of property is paid to the Michigan Department of Treasury.

If you owe back taxes to the state of Michigan a tax lien may be one way they will try and collect from you for the tax amount due.

More research: Everything you need to know about an IRS Tax Lien

When Would I Expect To Get a Michigan State Tax Lien?

The Treasury will not file a Notice of a Michigan State Tax Lien against a taxpayer’s property, thereby making the lien a public record, unless three things take place first:

  1. The taxpayer has been assessed a tax liability;
  2. The Michigan Department of Treasury has sent the taxpayer a Bill for Taxes Due (Intent to Assess) and/or a Final Bill for Taxes Due (Final Assessment), stating the amount of tax owed by the taxpayer; and
  3. The taxpayer has failed to pay the stated tax debt in full within 35 days (90 days if the taxpayer is an individual) from the date shown on the Final Assessment.

If you have started receiving letters regarding a tax lien it is important you take action immediately. You have options to solve this tax lien before it turns into a tax levy where your property and assets could  be seized and or your bank account levied.

When the Michigan Department of Treasury Files a Michigan State Tax Lien, does that Mean They Are Going to Take My Home?

The filing of a Michigan state tax lien does not mean that the Michigan Department of Treasury will immediately take your home. Instead, a Michigan state tax lien gives the Michigan Department of Treasury an interest in a debtor’s property, typically lasting until the underlying tax debt is fully paid. So the short answer is no, probably not. There are times when high debts are owed that the State of Michigan COULD start proceeding to try and forcibly sell your house but it is unusual. However, if the liened property is sold before the tax debt has been paid, the profit from the sale will first pay off the tax debt. Tax liens may be filed against property that is owned by either individual or business taxpayers.

What’s The Difference Between a Michigan State Tax Lien and a Michigan State Tax Levy?

A lien is different from a levy or a warrant. As we discussed, a lien is a legal claim against the property of an individual or a business to ensure profits from a sale are used to pay the Michigan state tax debt first. Levies and warrants are generally used later in the collection process for Michigan state tax debts, when a taxpayer has failed to resolve it voluntarily.

However,  a Michigan state tax lien, once filed, becomes a public record. Lenders and news agencies may legally obtain, publish, and report Michigan state tax lien information. 

A levy is a way of taking the taxpayer’s property to be used to pay the tax debt owed.  A warrant may be used to close a taxpayer’s business and to seize the taxpayer’s real or personal property. A levy is used to withdraw funds from a taxpayer’s bank account or to take wages from the taxpayer’s paycheck. 

How Much Time Do I Have If I Receive a Michigan State Tax Lien Notice?

Generally, a tax debt must be paid in full in order to avoid the filing of a Notice of Michigan State Tax Lien. However, a resolution can be negotiated with the Michigan Department of Treasury before a Michigan state tax lien is filed. If the taxpayer enters into an installment agreement before 90 days from the date shown on the Final Assessment, Michigan Department of Treasury will not file a lien notice as long as the taxpayer continues to make payments on their Installment Agreement payments and remains in compliance with all Michigan tax debts in the future. Lien notices will likely be filed against business taxpayers even if an installment agreement is in place.

How Can I Get My Michigan State Tax Lien Released?

Once a Michigan state tax lien has been filed it will typically only be released when the underlying tax debt has been paid in full. The release of a Michigan state tax lien means that the pertinent county records will be updated to reflect the fact that the previously recorded lien has been released, and that the Michigan Department of Treasury no longer has a legal claim against the tax debtor’s property. 

When the determination is made that a tax debt on which a lien has been filed has been satisfied in full, Section 29a(1) of the Revenue Act specifies that Michigan Department of Treasury has 20 business days to file for a release of the Michigan state tax lien from the taxpayer’s property. That subsection states a Michigan state tax lien will be released if the Michigan state tax debt has been satisfied or the Michigan state lien was filed improperly.

The W Tax Group are licensed tax attorneys and experienced tax professionals who are able to effectively deal with Michigan Tax Liens. We are based in Michigan and have local offices in Southfield, MI. Our team offers 100% free tax case reviews and consultations so you can quickly understand your tax situation and what options you have at no cost or obligation. 

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