Michigan Taxing Information
You may appeal a Final Determination, a Notice of Intent to Assess, or a Bill for Taxes Due, also known as a Final Assessment.
The appeal is made by requesting an informal conference, and the request must be made in writing within 60 days of receiving the above notices. The request for informal hearing should include what you believe is owed or now owed, as the case may be, and why. Any taxes that are owed must be paid. If your appeal on a Notice of Intent to Assess is determined to be a delaying tactic or is frivolous, you may be subject to an additional 25 percent penalty.
The state of Michigan can take money out of your bank account, up to the total of the amount due.
Accounts Receivable Levies
Businesses that owe taxes may have levies sent to their receivables. When an account receivable gets a levy notice, they are then legally obligated to pay the state rather than the business to whom they owe the money. This can have devastating effects on cash flow, business relationships, and reputation. If the state has requested a list of accounts receivable, who you do business with, or has your bank records, you should seek get professional advice. It is easier to avoid than reverse a receivables levies, though they can be reversed.
Should you be unable to full pay your tax liability, the state will eventually mail you a Notice of Intent to Assess for the amount owed. You may pay the taxes or dispute the assessment. You have 60 days to dispute or appeal the assessment, in writing.
Letter of Inquiry
If the Michigan Department of Treasury believes that a taxpayer has underpaid taxes, a Letter of Inquiry will be sent out. You have 30 days from the time the Letter of Inquiry is sent to respond or pay, or a Notice of Intent to Assess will be issued.
Liens and Warrants
If 35 days pass and the bill has gone unanswered or unpaid, the Collection Division may place liens or warrants on personal property. A tax lien or tax warrant is a public record and can compromise your credit score, as well as limit your ability to sell or transfer property.
Offer in Compromise
The state of Michigan will not consider an Offer in Compromise or a reduced settlement on taxes due.
If the bill is not appealed and the assessment goes unpaid, you will receive a Bill for Taxes Due.
In situations where the taxpayer is unable to pay in full their tax bill or borrow money in order to pay their balance due, payments can be made to the state. This is called an installment agreement. Detailed and complete financial statements will be required by the state of Michigan from the taxpayer in order to obtain an installment agreement. The state of Michigan typically demands a 12-month payment schedule, regardless of what is owed. There are, however, strategies to get longer terms on installment agreements.
Penalties and Interest
Interest charges are calculated from the date a tax return or payment is due. The interest rate for taxes due and unpaid is 1% above the adjusted prime rate.
Reason for bill penalty charges. Some of the more common penalty charges are:
- Negligence: 10% of tax
- Intentional disregard: 25% of tax
- Fraudulent evasion: 100% of tax
- Frivolous protest: 25% of tax
- Failure to file a return or report: $10 / day, capped at $400 for each return
- Multiple penalties may apply
Penalties can be waived if certain criteria are met and the tax payer submits a request in writing. The request must explain the reason you incurred the penalty, but that reason must fall into one or more of the following categories:
- Death or serious illness of the taxpayer responsible for filing.
- Destruction of the taxpayer's records or the taxpayer's business by natural disaster, flood, or fire.
- Prolonged unavoidable absence of the taxpayer responsible for filing and the taxpayer is precluded, due to circumstances beyond the taxpayer's control.
- Proof that the return or payment was mailed to the state, but not delivered.
- The penalty was incurred by following erroneous (written) guidance from the state or IRS.
Personal Assessment on Business Taxes
The corporate veil can be pierced when businesses fail to meet their taxes obligations. If you are a corporate officer, or had the power of the pen at the time the liability was incurred, you may be held responsible and personally liable for the unpaid taxes, interest, and penalties.
Power of Attorney with Michigan
You may have a qualified professional represent you. This requires that you have a Power of Attorney form completed and signed before any tax matter can be discussed with your representative. The state of Michigan accepts the Power of Attorney form for this purpose.
The state may garnish wages or benefits checks. If you have received notice of an intent to garnish or levy, or are being garnished, get professional help. It is easier to avoid than reverse a bank levy, though garnishments can be reversed.