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Taxpayers are required to meet certain obligations under Michigan law. You are responsible for filing your tax returns on time with correct payments and ensuring that your returns are correct no matter who prepares them. Remember, you are responsible for the information in your return.
The following information will provide an overview of the Collection Process for Delinquent Taxes.
How To Resolve Tax Debts Prior To Collection
It is important to resolve any outstanding tax you owe as soon as possible. Penalty and interest will be added to your debt and will continue to grow until the amount is paid in full. Penalty charges can range from 25% to 500% of the tax due, depending on the type of the tax!
If you do not pay your taxes, you may receive a LETTER OF INQUIRY, NOTICE OF INTENT TO ASSESS, and/or a BILL FOR TAXES DUE (Final Assessment). This is your opportunity to resolve the debt prior to having the debt referred to collections, by either paying the amount due, appealing the assessment, or entering into an Installment Agreement. Do not wait for the Collection Services Bureau to contact you! You must immediately take action to resolve your debt to avoid collection enforcement action.
Actions We May Take
Under the authority of Public Act 122 of 1941 , as amended, the Collection Services Bureau is responsible for the collection of all delinquent state tax accounts for the State of Michigan. The Department may proceed to collect your delinquent tax debt by using several different enforcement methods. The Collection Services Bureau can use an enforcement action for a minimum of 6 years to collect the debt. The 6 year period, known as the statute of limitations, may be extended by certain actions such as a court judgment.
By law, the Department may use a variety of actions to collect your past-due tax, penalty and interest and may take these actions at any time during the course of collection.
Click on the categories below for more information regarding possible actions:
Collections - LiensThe Collection Services Bureau will file liens on Real and Personal property to protect the State's interest as a creditor. Liens will be filed even when a taxpayer has made payment arrangements and is current with all payments (Some Individual Income Tax debts on a payment arrangement may not be subject to liens).
Caution! Once a lien is filed, the taxpayer's credit rating could be harmed and, in most cases, property cannot be sold or transferred until the past-due tax is paid. A lien filed at a county Register of Deeds becomes a public record. Credit reporting agencies may obtain and publish the lien information. A lien filed against an individual or business that is picked up by a credit reporting agency will remain part of that credit history for the next seven to ten years.
Tax Warrants (Seizure of Business and Personal Property)
The Department has the authority to issue a Tax Warrant to close your business and/or to seize and sell your personal property (such as business vehicles, business assets, equipment and inventory). The money from the sale of the business assets will be applied to your tax debt. Notification is provided to you of the amount owed at least 10 days before the property is seized. Most seized property cannot be sold by the Department for at least 10 days (perishable items may be sold within 24 hours). Seizure related expenses (such as state personnel costs, locksmith service, towing company assistance, storage facility, advertising and mailing costs) will be charged to you.
The Department may levy against your wages, salaries, bonuses, commissions, and other compensation from your employer. A wage levy requires your employer to deduct a specified amount from your wages to pay the past-due debt. Notification is provided to you of the amount owed at least 10 days before a wage levy is sent to your employer. A worksheet is provided to the employer to determine the amount to be withheld. The employer must continue to deduct the specified amount from your net wages until the amount of the levy is paid. An additional fee (warrant costs) in the amount of $55 is added to the delinquent amount due for each levy served.
Financial Institution Levies
The Department may serve a levy against your financial institution (banks, credit unions, brokerage firms, etc.) which requires your financial institution to send any funds being held to the Department up to the total past due tax, penalty and interest amount. You will be notified of the amount you owe at least 10 days before a levy is sent to your financial institution. The financial institution may charge a processing fee and can hold funds for up to 30 days before mailing the payment to the State of Michigan. The State will add an additional fee (warrant costs) in the amount of $55 for each levy served. Financial institutions may take 1-3 business days to process a levy release.
Other Types of Levies
The Department may levy against assets held by a third party. Examples of this type of levy would be a license held in escrow, rental income or insurance proceeds. You will be notified of the amount you owe at least 10 days before a levy is sent. An additional fee (warrant costs) in the amount of $55 is added to the delinquent amount due for each levy served.
Offset Refunds or Other Monies Owed to You
Your (or your spouse's) income tax refund or credits may be offset and applied to your tax debt. In addition, we may offset any other money that you receive from the State of Michigan (such as lottery winnings and payments to vendors for services performed) and apply the amount to your tax debt.
Hold you Personally Responsible for Business Taxes
The Revenue Act provides the Department with the authority to hold officers, members, managers, and/or partners of a corporation, limited liability company, limited liability partnership, limited partnership, or a partnership personally liable for the unpaid taxes and any related penalties and interest. This process is referred to as Corporate Officer Liability.
Liquor License Revocation or Renewal
If the business holds a liquor license and is past due in filing or paying business taxes, the Department of Treasury can request that the Michigan Liquor Control Commission revoke or not renew your liquor license. Taxpayers are prohibited by law from selling any products containing alcohol without a valid liquor license. Wholesalers, manufacturers, or brewers cannot legally sell or deliver products to liquor retailers who do not have a valid liquor license.
Refer your Account to a Collection Agency
The Michigan Department of Treasury contracts with a private collection agency, GC Services LP, to help us collect the delinquent tax, penalty and interest owed to the State of Michigan.
Other Collection Methods (As Necessary)
Your account may be referred to the Michigan Department of Attorney General for additional legal actions.