Michigan Tax Relief: Payment Plans, OIC, Liens & Levies

Michigan Tax Relief Overview

Owing Michigan state taxes is different from owing the IRS. The Michigan Department of Treasury has its own rules, deadlines, and collection tools. Federal tax relief strategies do not automatically apply to Michigan state tax debt.

Three Critical Michigan Rules Everyone Should Know

1. Michigan taxes retail sales under its General Sales Tax Act, plus a companion use tax — this is not just "a use tax." Michigan imposes a 6% sales tax on retail sales of tangible personal property under the General Sales Tax Act (1933 PA 167, MCL 205.51–205.78). Michigan also has a separate 6% use tax (1937 PA 94, MCL 205.91–205.111), a companion tax that applies mainly to items brought into Michigan from out of state, online or mail-order purchases where sales tax wasn't collected, and certain leases and taxable services. In practice, retailers collect one or the other at the point of sale, so it looks the same to a shopper — but they are two distinct statutes, and both matter for business tax debt.

2. Michigan has NO administrative statute of limitations. Unlike the IRS and most other states, Michigan's position (per Nagle v Dep't of Treasury, 2017) is that there is no statute of limitations that extinguishes tax debt. Administrative collection actions (liens, levies, offsets) can continue indefinitely. The 6-year limit only applies to court actions.

3. Michigan has an Offer in Compromise program. Unlike some states, Michigan does offer OIC with three grounds: Doubt as to Collectability, Doubt as to Liability, and Federal Acceptance (MCL 205.23a, PA 240 of 2014).

Depending on your situation, you may need one or more of the following:

• A payment plan (installment agreement) to pay over time
• An Offer in Compromise to settle for less than you owe
• An appeal if you received an assessment you disagree with
• Penalty relief if penalties make the balance impossible to pay
• Lien release or levy resolution if collection action has started
• Filing help if you have unfiled Michigan tax returns

If you run a business in Michigan and owe sales tax, use tax, or withholding tax, the stakes are higher. These are trust fund taxes, and responsible persons (officers, LLC managers) can be held personally liable under MCL 205.27a(5) for willful failure to pay.

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Michigan Tax Relief Options at a Glance

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What Michigan Tax Notice Did You Receive?

Select your notice type for a quick explanation of what it means and your options.

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‍What the Michigan Department of Treasury Can Do to Collect

If you owe Michigan state taxes and do not address the balance, the Michigan Department of Treasury has a range of collection tools. Not every case reaches the most serious actions, but the longer a balance goes unpaid, the more options the state may use.

Warning: No Administrative Statute of Limitations

Unlike the IRS and most other states, Michigan does NOT have a statute of limitations that extinguishes tax debt or limits administrative collection actions (per Nagle v Dep't of Treasury, Court of Appeals Docket No. 333850, 2017). The Department may use liens, levies, and offsets indefinitely.

There is a 6-year limit for court actions under MCL 600.5813, but this does not stop administrative collection. Every voluntary payment made on an installment agreement extends the 6-year period for 6 more years from the date of payment (MCL 600.5865).

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Michigan Tax Payment Plans (Installment Agreement)

If you cannot pay your Michigan state tax balance in full, a payment plan (installment agreement) may be an option. Michigan offers installment agreements via Form 990 for up to 48 months.

Important: Penalties, Interest, and Liens Continue During Payment Plans. Even while your Michigan payment plan is active:

• Penalties and interest continue to accrue until the balance is paid in full
• A tax lien may be filed to protect the state's interest even when you are current on payments
• Michigan tax refunds are redirected to your collections account and applied to the end of the plan
• New debts or missed payments may cancel the plan and collection actions may resume

Key Conditions for Michigan Payment Plans

While on a payment plan, it is critical to stay current with all future tax filings and payments. Defaulting on a plan can reinstate full collection activity.

Source: Michigan Department of Treasury - Installment Agreement. Approval is not automatic. No guarantee of approval.

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Which Michigan Tax Relief Option Fits Your Situation?

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Michigan Offer in Compromise (OIC)

Yes, Michigan has an Offer in Compromise program. Unlike some states, Michigan does allow taxpayers to settle tax debt for less than the full amount under certain circumstances. The program began January 1, 2015, under MCL 205.23a (PA 240 of 2014).

Three Grounds for Michigan OIC

1. Doubt as to Collectability — You show that the amount offered is the most that can be collected from your present assets and income, and you do not have reasonable prospects for acquiring increased income or assets.

2. Doubt as to Liability — You provide evidence showing you would have prevailed in a contested case if you had appealed the assessment.

3. Federal Offer Acceptance — You have received an accepted OIC from the IRS for the same tax periods and tax types. This ground applies to taxes under the Income Tax Act of 1967 (MCL 206.1–206.699), which covers individual and corporate income tax; treasury guidance on how withholding fits under this specific ground has not been independently confirmed for this rewrite, so we describe it here only as individual and corporate income tax.

Important OIC Conditions

• Required payment: $100 or 20% of the offer amount, whichever is greater, must accompany the application
• Collection hold: The Department must suspend levy activities related to matters in a pending OIC submission (MCL 205.23a(7))
• Conditions of acceptance: Timely payments under any payment plan and timely filing of future tax returns
• Revocation: The OIC may be revoked if you fail to comply with conditions; the entire tax debt may be reinstated
• Limited reach: An accepted OIC does not extinguish the liability of anyone not named in the offer — for example, a joint-filing spouse who wasn't part of the offer, or a business's responsible officer, can still be pursued separately for their own share of the debt.
• Public record: Each accepted OIC is placed on file and included in a report published on the Treasury's website

Source: Michigan Department of Treasury - Offer in Compromise. Approval is discretionary. No guarantee of acceptance.

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Michigan Penalty Relief

Penalty relief is different from a payment plan. A payment plan lets you pay over time. Penalty relief asks Michigan to reduce or remove penalties when allowed under state rules.

Michigan civil penalties may be waived upon a determination of "reasonable cause and not willful neglect" under MCL 205.24(4) and Revenue Administrative Bulletin 2005-3. Qualifying reasonable cause circumstances include:

• Death or serious illness of the taxpayer responsible for filing
• Destruction by fire or other casualty of the taxpayer's records or business
• Prolonged unavoidable absence that precluded making alternate arrangements
• Timely mailed returns (US postmark on or before due date)
• Erroneous written information prepared contemporaneously and given to the taxpayer by a Treasury employee
• Serious illness, death, fire, natural disaster, or criminal acts against the taxpayer

Additional Factors Considered

• Compliance history of the taxpayer
• Nature of the tax
• Taxpayer's financial circumstances
• Reliance on a competent tax advisor after furnishing all necessary information
• Accounting/financial system breakdown due to unavoidable circumstances with prompt compliance upon discovery
• Lack of funds to make timely payment
• Reliance on an employee or agent to file the return or make payment

Willful Neglect Definition

"Willful neglect" means something more than mere negligence, but less than fraud. It does not require evidence of an intentional, conscious decision not to file while cognizant of the legal duty. The burden of proving reasonable cause is on the taxpayer.

Penalty Rate

Michigan penalties are assessed at 5% for the first 2 months, plus an additional 5% per month thereafter, with a maximum of 25% (for assessments after February 28, 2003).

How to Request Penalty Relief

Submit a written request to the Commissioner of Revenue / Collection Services Bureau at: Michigan Department of Treasury, Collection Services Bureau, P.O. Box 30199, Lansing, MI 48909

Source: Revenue Administrative Bulletin 2005-3. Approval is discretionary. No guarantee of penalty waiver.

Penalty Relief vs. Payment Plan

A penalty waiver and a payment plan are separate processes. A payment plan does not automatically remove penalties. Penalty relief must be requested separately and approved based on reasonable cause. Even if penalties are waived, the underlying tax and interest must still be paid.

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Michigan Tax Appeals

A Bill for Taxes Due (Intent to Assess) or Final Assessment from the Michigan Department of Treasury is a serious step. Once issued, it becomes the official amount Michigan says you owe. If you ignore it, your options to challenge the balance may be limited.

60-Day and 90-Day Deadlines

You generally have 60 days from an assessment, decision, or order to appeal to the Michigan Tax Tribunal, and 90 days to appeal to the Court of Claims (MCL 205.22). Missing these deadlines can severely limit your ability to challenge the assessment. Do not wait.

Appeal Process Options

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About the Michigan Tax Tribunal

The Michigan Tax Tribunal is an independent body separate from the Michigan Department of Treasury that hears tax appeals. Filing an appeal with the Tribunal can stop further collection action until a decision is rendered, provided you follow the procedural requirements.

An assessment becomes final after 90 days if not appealed (MCL 205.22(5)). If you received an assessment from Michigan, do not let the deadline pass.

Source: Michigan Tax Tribunal | MCL 205.22

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Michigan Tax Liens

A tax lien is a public claim filed by the state against your property. In Michigan, tax liens are filed with the county Register of Deeds (or Ingham County for out-of-state taxpayers). They can affect your credit, your ability to sell or refinance property, and your business operations.

How Michigan Tax Liens Work

• Filing: Tax liens are recorded with the county Register of Deeds in any county where the taxpayer resides or owns property. Also filed with the Secretary of State for personal property.
• Statutory basis: MCL 205.29 and MCL 205.29a
• Duration: 7 years from the date of attachment (not filing). May be extended for an additional 7 years by refiling within 6 months prior to expiration.
• Priority: Takes precedence over all other liens except bona fide liens recorded before the tax lien is recorded. The lien attaches from the date the return is required to be filed.
• Credit Impact: Remains part of the credit history for 7 to 10 years.
• Release timing: The Department must release the lien within 20 business days after funds to satisfy the tax liability have been applied to the taxpayer's account (MCL 205.29a(1)).
• Erroneous lien withdrawal: If a lien was filed in error, the Department must withdraw it within 5 business days after determination (MCL 205.29a(6)).
• During payment plan: Liens may be filed even when a taxpayer has made payment arrangements and is current with all payments, to protect the state's interest.

Source: Michigan Department of Treasury - Collections Actions

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Michigan Bank Levy and Wage Levy

A levy allows Michigan to seize funds or assets to satisfy a tax debt. The Michigan Department of Treasury may issue wage levies, financial institution (bank) levies, and levies against other third-party assets. At least 10 days notice is required before a levy is served (MCL 205.25). A $55 warrant cost applies per levy served.

Wage Levy (Wage Garnishment)

The employer must deduct a specified amount from wages until the levy amount is paid. A worksheet is provided to calculate the exempt amount. $55 warrant cost per levy served.

Financial Institution Levy (Bank Levy)

• The financial institution must send funds up to the total past due amount
• The institution may hold funds for up to 30 days before mailing payment
• The institution may charge a processing fee — $55 warrant cost per levy served
• Financial institutions may take 1-3 business days to process the levy release

Other Levies

The Department may levy against assets held by third parties, such as licenses in escrow, rental income, or insurance proceeds. A $55 warrant cost applies per levy.

Tax Warrant / Property Seizure

The Department may seize and sell personal property, including business vehicles, assets, equipment, and inventory. At least 10 days' notice is required before seizure. Most seized property cannot be sold for at least 10 days (perishable items may be sold within 24 hours). Seizure expenses (personnel, locksmith, towing, storage, advertising, mailing) are charged to the taxpayer.

Levy Release Timing

• Standard release: Not more than 10 business days after funds to satisfy the tax liability have been applied (MCL 205.29a(3))
• Erroneous levy release: Not more than 5 business days after the determination that the property was improperly levied (MCL 205.29a(4))
• Exemptions: Property described in IRC section 6334 (necessities such as clothes, tools of trade, child support payments) may be exempt

Source: Michigan Department of Treasury - Collections Actions

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Michigan Wage Garnishment for Tax Debt

Wage garnishment means Michigan can take money directly from your paycheck to pay your state tax debt. The Michigan Department of Treasury may issue a wage levy requiring your employer to withhold a specified amount from each paycheck until the tax debt is satisfied.

How Michigan Wage Garnishment Works

• Notice: At least 10 days notice is required before the levy is served
• Amount: The employer must deduct the specified levy amount; a worksheet is provided to calculate exempt wages
• Duration: Continues for subsequent pay periods until the levy amount is paid
• Warrant cost: $55 per levy served
• Employer obligation: Employers must comply by law

Wage Levy vs. Financial Institution Levy

If you have received a notice about garnishment or an intent to garnish, do not ignore it. Once garnishment starts, the money is taken before you receive your paycheck.

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Michigan Unfiled Tax Returns

If you have not filed Michigan tax returns for one or more years, that can block most resolution options. The Michigan Department of Treasury may estimate your tax and issue assessments based on those estimates — sometimes higher than what you actually owe.

Filing accurate returns can sometimes reduce an incorrect balance. But do not rush or file bad returns. It's better to get the returns prepared correctly with the right income, deductions, and Michigan credits.

Why Filing Matters

• Unfiled returns block payment plan eligibility
• Treasury may issue substitute returns with higher tax than you actually owe
• Penalty relief generally requires all returns to be filed
• Without a filed return, the statute of limitations on collections may not start (and remember: Michigan has no administrative SOL that extinguishes debt)

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Michigan Business, Sales, Use, and Payroll Tax Debt

Business tax debt is higher risk than individual income tax debt. Sales tax and use tax collected from customers, income withholding tax, and other trust fund taxes are treated very seriously by the Michigan Department of Treasury. Responsible persons can face personal liability.

Responsible Person Warning: Personal Liability

Under MCL 205.27a(5), officers, members, managers of manager-managed LLCs, or partners who are "responsible persons" may be held personally liable for taxes the business was required to collect from or on behalf of a third party and remit to the state, if they willfully failed to file a return or pay the tax due. This covers:

• Sales tax (General Sales Tax Act, MCL 205.51–205.78)
• Use tax collected from a third party (Use Tax Act, MCL 205.91–205.111)
• Income tax withholding (Income Tax Act of 1967, MCL 206.1–206.713)
• Tobacco products tax
• Motor fuel tax and motor carrier fuel tax
• Any other tax a business is required to collect from or on behalf of a third person

Four Elements Must Be Proven

• The person was an officer of the business
• The person controlled, supervised, or was responsible for filing returns or payment of taxes
• The person was an officer during the "time period of default"
• The person "willfully" failed to file a return or pay the tax due

Willful definition: The officer knew or had reason to know of the obligation to file/pay, but intentionally or recklessly failed to file/pay. Payment of other debts when the tax liability was known constitutes willfulness. Does not require bad purpose or criminal intent.

Assessment deadline: Within 4 years of the assessment issued to the business. Dissolution of the business does not discharge the responsible person's liability for withholding tax.

Prima facie evidence: Signature on a return or payment instrument before/during the time period of default establishes a prima facie case.

Corporate Officer Liability Scope

Corporate officer liability applies to:

• Sales tax
• Use tax (when collected from a third party)
• Income tax withholding
• Tobacco products tax
• Motor fuel tax and motor carrier fuel tax
• Any other tax a business is required to collect from or on behalf of a third person

Corporate officer liability does NOT apply to: Single Business Tax, Michigan Business Tax, or Corporate Income Tax.

Michigan Sales Tax and Use Tax, Explained

Michigan imposes a 6% sales tax on retail sales of tangible personal property (General Sales Tax Act, MCL 205.51–205.78), collected by the retailer at the point of sale. Michigan also has a separate 6% use tax (Use Tax Act, MCL 205.91–205.111) that mainly applies to taxable items brought into Michigan, purchased by mail or online from out-of-state retailers that didn't collect Michigan tax, and to certain leases and services. If your business collected sales or use tax from customers but did not remit it to the state, responsible persons may face personal liability under MCL 205.27a(5).

Source: Revenue Administrative Bulletin 2015-23

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Michigan Tax Debt Statute of Limitations

This is one of the most important differences between Michigan and other states (and the IRS).

Michigan Has No Administrative Statute of Limitations

Unlike the IRS and most other states, Michigan does NOT have a statute of limitations that extinguishes tax debt or limits administrative collection actions (per Nagle v Dep't of Treasury, Court of Appeals Docket No. 333850, 2017).

The Department of the Treasury may continue to use administrative collection actions — including tax liens, levies, wage garnishment, and refund offsets — indefinitely. The debt remains collectible for as long as the Department chooses to pursue it.

The 6-Year Limit Applies Only to Court Actions

Under MCL 600.5813, there is a 6-year limit for court actions to collect tax debt. However, this limitation does not restrict the Department's administrative collection powers.

What Extends the 6-Year Period

• Partial payment restarts the 6-year period from the date of payment (MCL 600.5865)
• Written acknowledgment of debt restarts the statute (MCL 600.5866)
• The court judgment gives 10 years to collect, renewable for another 10 years

Every Payment Extends the Clock

Every voluntary payment made on an installment agreement extends the 6-year court action period for 6 more years from the date of payment. This means that staying on a payment plan indefinitely extends the Department's ability to sue to collect the debt.

Source: Revenue Administrative Bulletin 2019-21

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Michigan Tax Relief Tools & Resources

Use these official Michigan resources to view your account, make payments, apply for relief, and access forms. Then request a review if the numbers show the balance is growing or collection is already active.

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Michigan Government Resources

These are the official Michigan sources for tax information, payment plans, appeals, and rules. Always check the official source for the most current information.

• Michigan Department of Treasury — Official tax agency portal
• Michigan Treasury - Collections — Collections bureau portal
• Michigan Treasury - Installment Agreement — Official payment plan guidance
• Michigan Treasury - Offer in Compromise — OIC program details
• Michigan Treasury - Collections Actions — Lien and levy rules
• Michigan Tax Tribunal — Independent tax appeals body
• Michigan Court of Claims — Judicial appeals venue
• Revenue Administrative Bulletin 2005-3 — Penalty relief rules
• Revenue Administrative Bulletin 2015-23 — Responsible person liability
• Revenue Administrative Bulletin 2019-21 — Collection provisions overview
• MCL 205.22 — Appeal procedure
• MCL 205.27a — Responsible person liability
• MCL 205.29 — Tax liens
• MCL 205.29a — Lien release and levy release

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Not Sure What to Do With Your Michigan Tax Situation?

Select the card that matches your situation to jump to the relevant section.

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Frequently Asked Questions About Michigan Tax Relief

Can Michigan garnish wages for state taxes?

Yes. The Michigan Department of Treasury may garnish wages for state tax debt. A wage levy requires at least 10 days' notice before it is served. The employer must deduct a specified amount from wages until the levy amount is paid. A worksheet is provided to calculate exempt wages. There is a $55 warrant cost per levy served. The levy remains in effect for subsequent pay periods until the total amount has been withheld and remitted.

Can Michigan levy my bank account?

Yes. The Michigan Department of Treasury can levy your bank account through a financial institution levy. Michigan must provide at least 10 days' notice before the levy is served. The financial institution must send funds up to the total past due amount. A $55 warrant cost applies per levy. The financial institution may hold funds for up to 30 days before mailing payment and may charge a processing fee. The levy must be released within 10 business days after funds to satisfy the liability have been applied.

Does Michigan have an offer-in-compromise program?

Yes. Michigan has an Offer in Compromise program that began January 1, 2015, under MCL 205.23a (PA 240 of 2014). There are three grounds: (1) Doubt as to Collectability — you show the amount offered is the most that can be collected from your present assets and income; (2) Doubt as to Liability — you provide evidence showing you would have prevailed in a contested case if you had appealed; and (3) Federal Offer Acceptance — you have received an accepted OIC from the IRS for the same tax periods and tax types under the Income Tax Act of 1967. A required payment of $100 or 20% of the offer (whichever is greater) must accompany the application. The Department must suspend levy activities during a pending OIC review.

Does Michigan have a statute of limitations on tax debt?

No administrative statute of limitations. Unlike the IRS and most other states, Michigan does NOT have a statute of limitations that extinguishes tax debt or limits administrative collection actions. The Department may use administrative collection actions (liens, levies, offsets) indefinitely. There is a 6-year limit for court actions under MCL 600.5813, but this does not stop administrative collection. Every voluntary payment made on an installment agreement extends the 6-year period for 6 more years from the date of payment (MCL 600.5865). A court judgment gives 10 years to collect, renewable for another 10 years.

Does Michigan have a sales tax?

Yes. Michigan imposes a 6% sales tax on retail sales of tangible personal property under the General Sales Tax Act (1933 PA 167, MCL 205.51–205.78). Michigan also has a separate, companion use tax of 6% (Use Tax Act, MCL 205.91–205.111), which mainly applies to taxable purchases where sales tax wasn't collected — for example, items bought from out-of-state or online retailers, or brought into Michigan for use. In practice, a shopper usually sees only one line-item tax at checkout, but the two are governed by different statutes. When a business collects sales or use tax from customers but fails to remit it, responsible persons may face personal liability under MCL 205.27a(5).

Can I get a payment plan for Michigan state taxes?

Yes, Michigan offers installment agreements via Form 990. Payment plans can extend up to 48 months. ACH payments are available at no charge through Collections e-Service. You can apply using Collections eService (requires information from a Treasury collections letter), by downloading and mailing Form 990, or by calling the Collection Services Bureau at 517-636-5265 (individuals) or 517-827-3227 (businesses). Penalties and interest continue to accrue until the balance is paid in full, and a tax lien may be filed even while you are current on payments. Michigan tax refunds will be redirected to your collections account during the plan.

Does a Michigan payment plan stop penalties and interest?

No. A payment plan lets you pay over time, but penalties and interest continue to accrue on the unpaid balance until it is paid in full. Penalties already assessed remain unless separately waived through Michigan's reasonable cause process. The plan does not erase the underlying tax debt. If you default, collection action may resume immediately.

Can Michigan take my state tax refund while I am on a payment plan?

Yes. The Michigan Department of Treasury offsets tax refunds and other monies owed by the state against tax debts. This includes income tax refunds (including spouse's refunds), Michigan lottery winnings, payments to vendors for services performed, and other money received from the State of Michigan. Refund offsets continue even when a taxpayer is on an approved payment plan. The non-obligated spouse on a joint return may claim a portion of the refund via Form 743 within 30 days.

What is a Michigan Bill for Taxes Due (Intent to Assess)?

A Bill for Taxes Due, also called an Intent to Assess, is a formal notice from the Michigan Department of Treasury that you owe a specific amount of tax, penalties, and interest. It is issued when returns were not filed or taxes remain unpaid. Once issued, it triggers appeal deadlines and collection action. You generally have 60 days to appeal to the Michigan Tax Tribunal or 90 days to appeal to the Court of Claims. An assessment becomes final after 90 days if not appealed (MCL 205.22(5)).

Can I appeal a Michigan tax assessment?

Yes. Michigan taxpayers may appeal to the Michigan Tax Tribunal within 60 days from an assessment, decision, or order (MCL 205.22). You may also appeal to the Court of Claims within 90 days. Before a formal appeal, you can request an informal conference using Treasury Form 5713 within 60 days from the Bill for Taxes Due (Intent to Assess) or a refund denial. The informal conference is filed with the Michigan Department of Treasury Hearings Division at P.O. Box 30038, Lansing, MI 48909 (Fax: 517-636-4115, Email: Treas-Hearings@michigan.gov). Missing the appeal deadline can make it much harder to fight the balance.

Can Michigan file a tax lien?

Yes. The Michigan Department of Treasury files tax liens with the county Register of Deeds (or Ingham County for out-of-state taxpayers). Tax liens last 7 years from the date of attachment and may be renewed for an additional 7 years by refiling within 6 months prior to expiration. The lien takes precedence over all other liens except bona fide liens recorded before the tax lien. The lien must be released within 20 business days after funds to satisfy the tax liability have been applied. If filed in error, the lien must be withdrawn within 5 business days. Liens may be filed even when a taxpayer is current on payment plan installments.

What if I have unfiled Michigan tax returns?

Unfiled returns can block most resolution options. The Michigan Department of Treasury may estimate your tax and issue assessments that are higher than what you actually owe. Filing accurate returns can sometimes reduce an incorrect balance. Do not rush or file bad returns — get them prepared correctly with the right income, deductions, and Michigan credits. Remember: Michigan has no administrative statute of limitations, so the debt does not expire just because returns are unfiled.

Can Michigan waive penalties?

Yes, Michigan civil penalties may be waived upon a determination of reasonable cause and not willful neglect under MCL 205.24(4) and Revenue Administrative Bulletin 2005-3. Qualifying reasons include death or serious illness of the taxpayer responsible for filing; destruction by fire or other casualty of records or business; prolonged unavoidable absence; timely mailed returns; erroneous written information from a Treasury employee; and serious illness, death, fire, natural disaster, or criminal acts against the taxpayer. The burden of proving reasonable cause is on the taxpayer. Submit a written request to the Collection Services Bureau at P.O. Box 30199, Lansing, MI 48909.

What if my Michigan tax debt is from sales tax, use tax, or payroll withholding?

Sales tax and use tax collected from customers, and payroll withholding tax, are treated very seriously by Michigan because these are trust fund taxes — money collected or withheld that belongs to the state. Under MCL 205.27a(5), officers, members, managers of manager-managed LLCs, or partners who willfully fail to file a return or pay the tax due may be held personally liable. Willful means the officer knew or had reason to know of the obligation but intentionally or recklessly failed to comply. Payment of other debts when the tax liability was known constitutes willfulness. Dissolution of the business does not discharge the responsible person's liability for withholding tax.

Does a Michigan payment plan stop collection?

No. A Michigan payment plan does not prevent the Department from filing tax liens, and state tax refunds may still be offset and applied to your balance. A tax lien may be filed even when you are current on payments to protect the state's interest. Penalties and interest continue to accrue on the unpaid balance. If you default on the plan, collection action may resume immediately.

How long does Michigan have to release a levy?

Under MCL 205.29a(3), the Michigan Department of Treasury must release a levy within 10 business days after funds to satisfy the tax liability have been applied. If the levy was erroneous, it must be released within 5 business days after the determination that property was improperly levied (MCL 205.29a(4)). Financial institutions may take 1-3 business days to process the levy release after receiving notice from the Department.

How long does Michigan have to release a tax lien?

Under MCL 205.29a(1), the Michigan Department of Treasury must release a tax lien within 20 business days after funds to satisfy the tax liability have been applied to the taxpayer's account. If a lien was filed in error, the Department must withdraw it within 5 business days after determining the lien was erroneous (MCL 205.29a(6)).

Should I apply for a payment plan or an Offer in Compromise?

It depends on your situation. A payment plan is for taxpayers who can afford to pay the full balance over time (up to 48 months). An Offer in Compromise is for taxpayers who genuinely cannot pay the full balance, dispute the liability, or have an accepted federal OIC for the same periods. An OIC requires a $100 or 20% payment upfront and has stricter qualification requirements. If you can afford monthly payments and want a simpler process, a payment plan may be the better option. If you cannot pay the full balance even over time, an OIC may be worth exploring. We can review your situation and explain which option, if any, fits your case.

Sources Used

These are the official government sources used for this page. Always check the current official source for the most up-to-date information.

• Michigan Department of Treasury — Official Portal: www.michigan.gov/treasury ↗
• Michigan Department of Treasury — Collections Actions: www.michigan.gov/taxes/collections/collections-actions ↗
• Michigan Department of Treasury — Installment Agreement: www.michigan.gov/taxes/collections/what-if-i-cant-pay-in-full/installment ↗
• Michigan Department of Treasury — Offer in Compromise: www.michigan.gov/taxes/collections/oic ↗
• Michigan Tax Tribunal: www.michigan.gov/taxtrib ↗
• Michigan Court of Claims: www.courts.michigan.gov/courts/court-of-claims ↗
• Revenue Administrative Bulletin 2005-3 — Penalty Provisions: www.michigan.gov/taxes/rep-legal/rab/2005-3 ↗
• Revenue Administrative Bulletin 2015-23 — Officer Liability: www.michigan.gov/taxes/rep-legal/rab/2015-23 ↗
• Revenue Administrative Bulletin 2019-21 — Collection Provisions Overview: www.michigan.gov/taxes/rep-legal/rab/2019-21 ↗
• MCL 205.22 — Appeal Procedure: legislature.mi.gov ↗
• MCL 205.23a — Offer in Compromise: legislature.michigan.gov ↗
• MCL 205.24(4) — Penalty Waiver: legislature.michigan.gov ↗
• MCL 205.25 — Levy Authority: legislature.michigan.gov ↗
• MCL 205.27a — Responsible Person Liability: legislature.michigan.gov ↗
• MCL 205.29 — Tax Liens: legislature.michigan.gov ↗
• MCL 205.29a — Lien Release and Levy Release: legislature.michigan.gov ↗
• MCL 600.5813 — Limitations on Court Actions: legislature.mi.gov ↗
• Nagle v Dep’t of Treasury, Court of Appeals Docket No. 333850 (2017)

Disclaimer: This page provides general information about Michigan state tax collection procedures and is not legal advice. Tax laws and agency procedures change. Always consult the official Michigan Department of Treasury website or a qualified tax professional for advice specific to your situation. No guarantee of any particular outcome is expressed or implied. Approval for payment plans, Offers in Compromise, penalty relief, and other resolutions is discretionary.