Michigan Tax Installment Agreement

Michigan Tax Installment Agreement Overview

When taxpayers owe taxes to the State of Michigan, they will receive a letter of inquiry, notice of intent to assess and or a bill for taxes due. When taxpayers are unable to pay these unpaid taxes and has received these letters it’s in their best interest to explore ways to resolve how best to satisfy their liability with the state.  Failure to resolve the matter can and often lead to liens, tax warrants, wage levies and financial institution levies among other punitive actions the Michigan Department of Treasury (MDOT) may undertake. 

Taxpayers need to be proactive so as not to subject themselves to collection action from the Collection Services Bureau (CSB) which is the division of MDOT responsible to collect Michigan delinquent taxes. One way for the taxpayer to resolve their delinquent taxes with MDOT is by entering into an Installment Agreement (IA).

MDOT offers a delinquent taxpayer two avenues to resolve their matter through the use of a Michigan Tax  Installment Agreement. Each has a different criterion for the taxpayer to qualify for the IA. One option is to request an IA for 48 months or less and the other is to request on IA that exceeds 48 months. Determining the length often depends on the financial condition of the taxpayer.

For IA’s of 48 months or less the taxpayer must complete the actual IA, propose an amount they’re able to pay and mail it to MDOT. The amount proposed by the taxpayer is reviewed by the appropriate parties and based on their review either approved or denied. For the IA less than 48 months the taxpayer will not have to provide any financial analysis and other related information which MDOT requires for IA’s in excess of 48 months. Think of it in this context, provided the delinquent taxpayer is offering to pay back the liability in its entirety, in most cases without the submission of additional information, their request for an IA will be approved.

For the Michigan taxpayer seeking a Michigan Tax Installment Agreement in excess of 48 months it’s a much more detailed process. It requires the taxpayer to qualify based on financial analysis by the State Revenue Authority. MDOT has strict financial standards that they apply in order for them to ascertain the taxpayer’s ability to pay the delinquent taxes in arrears. In essence a request for an installment agreement in excess of 48 months puts the onus on the taxpayer to prove that they are suffering from a financial hardship. 

The MDOT Collection Financial Standards for individuals are applied to the analysis of whether a taxpayer qualifies for an installment agreement in excess of 48 months.  These financial standards used by MDOT takes into account the taxpayers living expenses include only those expenses deemed absolutely necessary, those that they must pay to sustain themselves and their family to live. MDOT’s definition of necessary expenses also takes into account the number of exemptions claimed in one’s tax return.

To provide guidance, the IRS has developed financial standards for housing, utilities, transportation, medical costs, food and clothing and other relevant expenses which the taxpayer can reference to provide guidance in completing a financial statement. The taxpayers’ allowable expenses must be based on the identical number of exemptions claimed in their most recent years tax return unless extraordinary circumstances exist which would allow the taxpayer to use a different number of exemptions. Extraordinary circumstances regarding the number of exemptions very rarely occurs.

For the State of Michigan IA of 48 months or less or in excess of 48 months in both cases penalties and interest will continue to accrue until the liability is paid in full.  In addition, the CSB can still file a lien against one’s real and personal property to protect the states interest on the delinquent taxes owed until their back taxes are paid in full.

How Do I Apply for an Installment Agreement in Michigan?

For Installment Agreements lasting 48 months or less complete the Installment Agreement (Form 990) then sign and return it to the address indicated on the form.

For Installment Agreements exceeding 48 months complete the Installment Agreement (Form 990) and the collection information statement – Individual (Form 3189) providing the appropriate supporting information outlined in the form.

Need assistance with a State of Michigan tax problem?  Our qualified team of professionals including lawyers, accountants and EA’s will get you the answers you need. Call (877) 500-4930.