Minnesota Taxing Information
In the State of Minnesota income taxes are due for most individuals by April 15th. In the event that you cannot pay the full amount due you should still file tax returns and pay as much as possible. The Minnesota Dept. of Revenue takes progressively stricter measures against those who demonstrate that they will not voluntarily meet their tax debt obligations. DOR may by tax code impose any of the following:
- Levy upon bank accounts or financial assets
- Levy or garnish wages
- Penalties and interest
- File liens
- Seize property
- Referral to collection agencies
Abatement may cancel the valid penalties, along with interest on the penalties that have been assessed for failing to comply with Minnesota State tax requirements. The taxpayer has 60 days from the first written notification of penalty assessment for abatement to be requested. While abatement of penalties may be granted when a reasonable cause exists, abatements of interest are rarely given.
Business Successor Liability
If you are acquiring or buying a business or its assets, it is your responsibility to check with the Department of Revenue for sales or withholding tax liens. If you do not check for liens, you may be held liable for any delinquent taxes, penalties and interest. If there are liens filed, you should notify the Department of Revenue of the upcoming ownership transfer by submitting form C50, Notice of Business Transfer at least 20 days prior to the closing or purchase. Include in this form the business' tax identification number and the terms of the transfer.
Taxpayers who are unable to pay their debt may request a Compromise Agreement, similar to the IRS Offer in Compromise. A compromise is a written agreement between the taxpayer, the Minnesota Dept of Revenue and the Attorney General's Office to settle the unpaid tax liability for less than the full legal amount owed. The taxpayer will be required to submit a detailed proposal and if accepted by the department will usually need to make one payment for the agreed upon amount.
Due process is written notification given to the debtor that is required before any enforced collection action may take place. The taxpayer has 30 days to resolve the debt before any enforced collection action is taken.
If a taxpayer fails to voluntarily pay the tax liability, the Minnesota Department of Revenue may take enforced action in the form of a levy. A levy allows the collector to take property and the rights to obtain property from the debtor. Types of levies may include bank levies that takes assets such as funds in a checking account, a wage levy that takes a portion of the debtors wages, an investment levy which takes assets such as stocks, a third-party levy taking funds owed to a debtor from a one-time payment source or seizures that take real or personal property from the debtors possession.
The Minnesota Department of Revenue has the authority to file a lien against an individual or business for failure to pay tax debts. A lien is a claim on real or personal property, which may include land, dwellings, business inventory and equipment, cars, recreational vehicles, wages or commissions and more. When a lien is filed it extends the statue of limitations on the collection for an additional 10 years from the date of filing. When the debt is paid off with secured funds, the department may immediately issue a lien release document. If paid with unsecured funds the lien will typically be released 30 days after the payment is received.
A payment agreement is when the taxpayer is unable to pay the tax liability in one full payment and the Department of Revenue agrees to installment payments. DOR requires a full financial statement and reviews each case individually when considering a payment plan. Effective July 1, 2010, all payment agreements are subject to a nonrefundable $50 fee. If the department agrees to establish a payment plan, you will be required to make your payments electronically. Interest will continue to accrue on the unpaid tax and penalties until the balance is paid in full.
If a business owes debts to the Minnesota Department of Revenue, an individual may be held personally liable. An Order Assessing Personal Liability letter will be sent by the Minnesota Department of Revenue to notify individuals of their personal responsibility for payment of the tax debts and their appeal rights. The assessed party has 60 days from the date of the assessment letter to appeal. The Minnesota Department of Revenue may assess liability against:
- Financial officers
- Executive officers
- Board Chairs
- Treasurers and financial secretaries
- Accountants and bookkeepers
- upervisors and other employees
The Minnesota Department of Revenue may assess personal liability for the following debt types:
- Cigarette and Tobacco tax
- Gambling tax
- Liquor tax
- MinnesotaCare tax from 1996 and later
- Non-Resident withholding tax against shareholders
- Petroleum tax
- Sales and use tax
- Withholding tax
Power of Attorney with Minnesota
Power of Attorney (POA) refers to both the third party that is authorized to receive confidential debt information from the Minnesota Department of Revenue and the actual document that records the authorization. Confidential tax information may not be disclosed without a POA. There are many ways to authorize POA and each must be checked for different authorizations such as which debts are covered, which tax years or periods are covered and what restrictions have been placed on the POA.
The Minnesota State Department of Revenue does not require a specific form and will find correspondence from the debtor sufficient if it has the following:
- The debtor's signature and date
- The debtor's name and Minnesota Tax Identification Number or Social Security Number
- The name of the designated Power of Attorney
- The type of debt and the time periods of the debt
- An explanation of the powers granted to the POA
The following preprinted forms are also accepted:
- Minnesota Revenue Power of Attorney (REV184) – The debtor specifies what types of debt information can be discussed with the POA. The debtor can also grant the POA power to sign tax returns. Unless a specific date of expiration is given this form authorizes an indefinite amount of time for the POA.
- Election for Power of Attorney (REV184a) - If submitting this form it must be attached to form REV184. With this form the debtor elects to have the Minnesota Department of Revenue send to your POA any and all refunds, legal notices, and correspondence relating to your tax matters and to your non-tax debts referred to the department for collection. If you make this election you will no longer receive any correspondence from the department including refunds.
- a href="forms/MNrev185.pdf" target="_blank">Minnesota Revenue Authorization to Release Tax Information (Rev185) ¬- This form allows a one-time disclosure of information to the specified party. The POA has no powers to act for the debtor and is only allowed to receive information. The authorization expires immediately after the disclosure is made. The debtor must specify which tax types and years are covered by the authorization.
- Power of Attorney and Declaration of Representative (IRS Form 2848) – this federal form is accepted but must specifically state the tax types in question- either by stating the Minnesota Department of Revenue tax form number or Minnesota (MN acceptable) and the specific tax years.
Taxpayer Rights Advocate
The Minnesota State Department of Revenue has a Taxpayer Rights Advocate (TRA) office, which reports directly to the Commissioner of Revenue. If you have exhausted all other administrative appeals, you may request the Advocate's help to resolve tax issues with the Department.
The TRA will intervene on behalf of the debtor to give taxpayers an independent review of their tax situation while ensuring fair and consistent application of Minnesota state tax code. TRA will also help settle disputes between spouses and former spouses through the Joint Spouse Allocation program and Innocent Spouse Allocation program. Click on the following link for the Taxpayer Rights Advocate office.
Revoked Sales Tax Permits
A business or individual who is liable for delinquent sales taxes may have their sales tax permit revoked for failing to comply with the requirements for filing and paying sales tax returns. A $100 per day fine may be imposed if the business is found to be making any retail sales once the permit has been revoked. The Minnesota Department of Revenue publishes a list of businesses that have had their sales and use tax permits revoked and adds new names during the first week of each month. Once the debt is resolved the business name will be removed from the list within 3 business days of the resolution. The following is a link the list of Revoked Sales Tax Permits.