Michigan State Enforcement: Understanding Bank
Levy and Collection Actions
Introduction
Michigan state enforcement occurs when the Department of Treasury takes formal collection actions against a taxpayer who owes unpaid taxes. This typically happens after initial payment notices have been issued and remain unpaid. A bank levy is one tool the state uses to enforce collection. It allows Michigan to freeze funds in a taxpayer’s bank account and direct those funds toward the unpaid tax debt. Understanding how state enforcement works matters because taking action early can sometimes limit or prevent additional collection steps. If enforcement notices are ignored, the state can continue escalating its collection efforts indefinitely through administrative means.
What This Issue Means
A bank levy is a legal collection tool that allows the Michigan Department of Treasury to freeze money in your bank account. When a levy is placed through a notice of levy, the bank is ordered to hold those funds and send them to the state to pay your unpaid tax debt. The levy is not a court judgment or a criminal action. It is an administrative debt-collection procedure the state uses to collect taxes owed. State enforcement in Michigan can take several forms, including bank account garnishment, wage garnishment, property liens, and, in some cases, seizure of personal property.
Why the State Issued This or Requires This
The Michigan Department of Treasury issues enforcement actions, including bank levies, when a taxpayer fails to respond to earlier collection notices or does not pay the full amount owed by the deadline specified in those notices. Typically, the state issues demand letters and payment notices before taking enforcement action, allowing time for voluntary payment. Common triggers for enforcement include unpaid income tax, unpaid business taxes, unpaid sales tax, or other outstanding state tax obligations. The state’s authority to levy is derived from Michigan tax law, which grants the Department of Treasury specific powers to enforce tax collection when voluntary payment has not been made.
What Happens If This Is Ignored
If a bank levy or other enforcement action is ignored, the state typically continues collection efforts. The Department of the Treasury may pursue additional enforcement methods, such as wage garnishment on employment income or filing a lien against real property. Michigan has no statute of limitations for administrative collection actions, meaning the Department can pursue
levies, liens, and offsets indefinitely. The debt continues to accumulate interest and may be subject to penalties. Michigan creditors holding judgments may also pursue their own collection actions.
What This Does NOT Mean
Receiving an enforcement notice or learning that a bank levy has been placed does not mean you are being criminally prosecuted. Bank levies are civil collection tools, not criminal actions. A levy also does not mean the state has obtained a court judgment against you. Michigan allows the Department of Treasury to issue levies through administrative authority without first going to court. A bank levy does not automatically result in wage garnishment or property seizure. These are separate enforcement tools that may be used in addition to or instead of a levy.
Protected Funds From Bank Account Garnishment
Certain types of income are exempt from garnishment of bank accounts under Michigan garnishment laws. Federal payments such as Social Security benefits and disability payments are generally protected from levy. Child support payments you have received, and support payments from certain programs, may also be exempt. Michigan Public Employee Retirement
Benefits receive protection under specific circumstances. If your account contains protected funds, you must notify the Department of the Treasury and provide documentation. Your bank may hold funds for up to 30 days before sending payment to the state, giving you time to file objections to garnishment.
Checklist: What to Do After Receiving an Enforcement
Notice or Bank Levy
Step 1: Locate All Related Notices and Documents
Gather every notice of levy or enforcement document you have received from the Michigan
Department of Treasury related to this tax debt. This includes demand letters, payment notices, and any correspondence about the specific tax years involved.
Step 2: Verify the Debt and Account Information
Review the enforcement notice carefully to confirm the tax type, the tax years involved, and the amount listed as owed. If you have a bank account with the financial institution named in the levy notice, contact that institution immediately.
Step 3: Contact the Michigan Department of Treasury
Call the Department of Treasury’s customer service line at 517-636-5265 or visit the official
Michigan Department of Treasury website. Provide the notice number, your tax identification or
Social Security number, and request a full accounting of what is owed.
Step 4: Request Information About Levy Release or Payment Options
Ask the Department of the Treasury representative whether the levy can be released or suspended, or whether installment payments or other arrangements are available. Explain your situation honestly to explore possible resolutions even after enforcement has begun.
Step 5: If You Dispute the Debt, Request Verification
If you believe the debt is incorrect or that you do not owe this amount, ask the Department of the Treasury for written verification of the debt—request documentation showing the original assessment, any prior notices, and how interest and penalties were calculated.
Step 6: Determine If You Have Protected Funds
Check whether your bank account contains exempt funds, such as disability, child support, or federal payments, that may be protected from garnishment. Gather documentation showing the source of these funds to support your claim for protection.
Step 7: Document Your Communications
Write down the date and time of each call or contact you make with the Department of the
Treasury. Record the name of the person you spoke with and a summary of what was discussed to maintain accurate records.
Step 8: Follow All Deadlines in the Enforcement Notice
The enforcement notice typically includes a deadline for responding or for the state to release the levy if conditions are met. Mark this deadline clearly and prepare to react before it passes to preserve your rights.
Step 9: Consider Payment Arrangement Options
If you cannot pay the full amount immediately, ask about installment payments rather than a lump-sum payment requirement. The Department of the Treasury may offer payment plans lasting 24 months or less, or longer arrangements for qualified taxpayers.
- Ignoring the enforcement notice: The notice will not go away if left unopened or
- Failing to contact the Department of the Treasury: Many enforcement situations can
- Missing the response deadline: Enforcement notices typically include a deadline for
- Not identifying protected funds in your account: Disability payments, child support
- Assuming the debt will disappear after a certain time: Michigan has no statute of
- Closing the bank account where the levy was placed without resolving the debt:
- Confusing Michigan income tax refund offsets with bank levies: The state may also
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 10: Maintain Records of All Payments
If you make payments toward the debt, keep receipts, bank statements, and confirmation numbers as proof. Document proof that payments were made and track how the payment was applied to the debt balance.
What Happens After This Is Completed
After you have completed these steps, the Department of the Treasury typically reviews your response and any information you have provided. If you have requested installment payments or other arrangements, the state will evaluate your request and notify you of approval or denial.
If the debt is verified and no dispute is resolved, the state will apply any funds that were levied toward the unpaid tax balance. The levy may be released once the debt is determined through a lump-sum payment or an approved payment plan. If you have entered into an installment agreement, you will receive confirmation of the terms and a payment schedule.
Common Mistakes to Avoid unanswered, and the state will continue collection efforts if no response is received. be resolved or modified through communication, and without reaching out, you lose the opportunity to explain your situation. response or for requesting a hearing or appeal, and missing this deadline limits your options. payments, and federal payments may be exempt from levy, but you must document and claim these protections. limitations for administrative tax collection, meaning the debt does not automatically cancel after a few years.
Closing an account does not release the levy, and the state may attempt to reach other accounts or use other enforcement methods. offset your Michigan income tax refund to pay the debt, which is a separate action from bank account garnishment.
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