What is a Michigan Tax Levy?

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What is a Michigan Tax Levy?

What To Do If Michigan Levies Your Money for Back Taxes

What is a Michigan Tax Levy?

The State of Michigan Department of Treasury is responsible for Michigan’s income tax, business tax, sales and use tax, and more. Within the Department of Treasury (DOT), a Michigan division called the Collection Services Bureau (CSB), has the responsibility to collect Michigan’s delinquent taxes. The DOT also uses MACRS or the Michigan Accounts Receivable Collection System. MACRS is a private collection agency responsible for helping collect delinquent tax, penalties, and interest from taxpayers.

In short, when an Michigan state income tax liability becomes due as a result of you either filing a tax return without payment or a DOT audit leads to a tax assessment, you will receive a final notice to pay the tax liability. If you then fail to make a tax payment within the time listed on your final notice, DOT will forward the account to CSB for enforced collection (a collections agency).

More reading: Everything you should know about an IRS Tax Levy

Will I get a Michigan Tax Levy Notice or Letter?

Usually, before sending a taxpayer’s account to CSB, you will receive a “Letter of Inquiry, Notice of Intent to Assess,” and/or a “Bill For Taxes Due (Final Assessment).”

Letters and Notices from the State of Michigan should always come to you by U.S Mail and never via email or social media. Always be highly suspicious of tax notifications that come from the Internet in any way. Although the State of Michigan does use a collection agency, who may call you directly regarding this delinquent tax due, you should never provide sensitive information to anyone who has CALLED YOU. Instead, look at your tax notification letter and call the number directly yourself.

You should already have this letter or notice from the State of Michigan Department of Treasury

Statute of Limitations for a Michigan Tax Levy

Michigan’s Collection Services Bureau technically has six years to collect a taxpayer’s tax liability. A court-judgment, along with other options, can extend your six years or statute of limitations on tax collection. The state of Michigan has four years to assess a penalty, interest, or tax deficiency from the date set for filing the required tax return or the actual date the return was filed, whichever comes later. You should note, there are many exceptions to this general rule which may impact WHEN the 6 year limitation actually starts and whether the 6 year limitation is extended. See below:

The statute of limitations on collection may be extended by reaffirmation of the tax liability. What does “reaffirmation” mean?

Reaffirmation is the process wherein you agree to remain responsible for a liability so that you can keep the property securing the liability (collateral). Reaffirmation of tax amount occurs if the taxpayer:

  • Makes voluntary payments (including by way of an Installment Agreement)
  • Signifies to the liability on a letter of acknowledgment (including signing off on a resolution including Installment Agreements)
  • Mutually agrees to extend by signing an agreement with the Commissioner of Revenue.
  • The statute may also be tolled if the Department is unable to locate the taxpayer.

So for practical purposes, the 6 year statute of limitations can be WAY longer than 6 years. Do not rely on the 6 years statute to get out of paying the liability. It is extended many different ways and very easily.

Michigan Enforced Collections

The Michigan Collection Services Bureau (CSB) has a number of enforced collection actions that they are authorized by Michigan law to utilize to collect delinquent taxes from you. The CSB can use any of the following enforced collection actions against delinquent taxpayers during the six years.

  • Michigan Tax Liens – Filing a tax lien on real or personal property will establish a record of the State of Michigan’s interest in the taxpayer’s assets. A tax lien can negatively affect the taxpayer’s ability to obtain credit or sell or buy assets.
  • Michigan Tax Warrants (Seizure of Property) – Tax warrants allow the DOT to seize a taxpayer’s business or personal property. Furthermore, the DOT can then sell the property to pay off or reduce the taxes owed.
  • Michigan Wage Levies – A wage levy requires the taxpayer’s employer to withhold a percentage of the taxpayer’s wages. The employer needs to remit this withholding to the DOT who will apply it against the delinquent tax liability.
  • Michigan Financial Institution Levies (Bank Levies) – Financial Institution Levies attach to a taxpayer’s bank account(s). They require the financial institution to remit all funds in the bank or financial account, up to the delinquent balance due and apply it against the delinquent tax liability.
  • Other Levies – The CSB may use other levies, which act in the same manner as financial institution levies, but against other sources of income or funds that are due to be paid to the taxpayer and that are currently held by third parties who are not the taxpayer’s employer or financial institution.
  • Offset Refunds – A Refund Offset allows the State of Michigan to seize federal or other state tax refunds. Any refunds taken by the state gets applied against the delinquent tax liability
  • Refer the Account to a Collection Agency – The DOR and CSB reserve the right to forward the account to the Michigan Account Receivable Collection System (MARCS). Specifically, MARCS is a Michigan Department of Treasury program operated by a privately owned collection agency.
  • Refer Account to Michigan Department of Attorney General (MDAG) – The state can refer your account to the MDAG for additional legal actions.

When Will A Michigan Tax Levy Be Released?

Once you have paid all taxes owed including interest and penalties, the DOT will release the associated tax liens. DOT will also release tax liens if the tax amount owed becomes satisfied through an Offer-in-Compromise Agreement. Upon satisfaction of your obligations, the tax lien will be released, and the Register of Deeds will be notified.

Getting Help With a Michigan Tax Levy

The W Tax Group is a full-service, attorney based, tax resolution firm specializing in resolving Michigan tax levies or liens. Our attorneys and other tax professionals resolve a wide range of tax issues including wage garnishments, back taxes, unfiled taxes, tax audits, levies, liens, and penalties. We offer a 100% free tax case consultation to give you a clear understanding of what you’re up against.

As discussed above, Michigan’s Collection Services Bureau has six years to collect a taxpayer’s tax liability. A court-judgment, among other actions, can extend the six years or statute of limitations on collection. Moreover, the state has four years to assess a penalty, interest, or tax deficiency from the date set for filing the required tax return or the actual date the return was filed, whichever comes later.

The statute of limitations on collection may also be extended by reaffirmation of the tax liability. Reaffirmation of tax amount will occur if the taxpayer:

  • Makes voluntary payments
  • Signifies to the liability on a letter of acknowledgment
  • Mutually agrees to extend by signing an agreement with the Commissioner of Revenue.
  • The statute may also be tolled if the Department is unable to locate the taxpayer.
  • In Michigan, the state generally has 6 years to collect a tax liability. However, unlike the IRS, the statute of limitations for the state is renewed every time the taxpayer reaffirms their liability—either by signing an acknowledgement (required to set up a payment plan or to get non- collectible status,) or by making a voluntary payment.
  • If you set up an installment agreement with the state and make payments toward that agreement, the tax SOL will never run. This is because it starts over every month when you send in a check—a huge difference between the state and IRS.

In short, the Department of Treasury does not have ANY statute of limitations with regards to collecting a tax liability if it uses any means other than civil litigation. Michigan is free to intercept funds, conduct administrative setoffs, issue levies, and record liens against any real and personal property.

If the Department of Treasury does file suit and is successful in obtaining a judgment, then they can have up to 10 years to collect on the balance of the judgment. They may be eligible to renew the judgment for another 10-year period if done before the first period expires.

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