How Minnesota Collects Back Taxes
How You Can Get Tax Relief in Minnesota
The Minnesota Department of Revenue is responsible for collecting taxes from individual residents, businesses, organizations and other entities in accordance with the Minnesota State tax laws. The funds collected from taxpayers pay for the public services provided by the state.
Residents of the State of Minnesota for the most part must pay their income taxes by April 15th. If you cannot meet that deadline for financial reasons, you should still make every effort to file your tax returns and send as much money as you can. The Minnesota Department of Revenue has a policy of taking progressively stronger measures to collect taxes from residents who do not voluntarily pay their taxes in full or on time.
Minnesota State tax code allows the Department of Revenue to take any or all of the following measures:
- Levy bank accounts
- Levy financial assets
- Levy and/or garnish wages
- File liens
- Seize real estate and/or other assets
- Referral to a private collection agency
Unpaid Business Taxes Can Impact Individual Taxpayers
Personal Liability for Business Taxes
If a business owes back taxes to the State of Minnesota, the Department has the right to hold one or more individuals personally liable for the debt. They will communicate this by sending an assessment letter, which is an Order Assessing Personal Liability, notifying specific individuals that they are being held personally responsible for the business’ tax debts. The assessment letter will also inform them of their right to appeal the decision. The individual(s) being assessed have 60 days from the assessment letter’s date to appeal.
The Department may assess the following individuals for the tax liability of a business:
- Board Chairs
- Executive Officers
- Financial Officers
- Financial Secretaries
- Other Employees
If you’re wondering which types of business taxes that individuals can be held responsible for, the Minnesota Department of Revenue has the right to assess personal liability for a business’ tax debts in the following categories:
- Withholding tax
- Sales and Use Tax
- Liquor Tax
- Tobacco and Cigarette tax
- Petroleum Tax
- Gambling Tax
- Non-Resident Withholding Tax from Shareholders
- MinnesotaCare Tax – 1996 and later
Revocation of Sales Tax Permits
An individual or business that owes back sales taxes risk the revocation of their sales tax permit if they fail to do everything required to file their sales tax returns and pay what’s owed. A fine of $100 per day may be imposed if the DOR discovers that the business is still selling goods retail after the revocation of its permit.
The Minnesota Department of Revenue makes public a list of all the businesses with revoked sales and use tax permits in which new names are added at the beginning of each month. The business’ name will come off the list within three business days once the matter has been resolved.
Liability of Business Successor
For those buying or otherwise acquiring a business and/or the assets, you have a responsibility to inquire of the Department whether there are any tax liens against the business for withholding or unpaid sales taxes. If tax liens have been filed, it is your obligation to submit Form C50 (Notice of Business Transfer) to the Department. Form C50 must be submitted at least 20 days before finalizing the purchase. This serves as formal notification of the upcoming transfer.
Information for Minnesota Residents in Need of State Tax Help
Due process for Minnesota taxpayers consists of the Department of Revenue giving them written notification prior to taking any action to enforce collection of the debt. The taxpayer is given 30 days in which to resolve matters before any action will be taken to collect the tax debt.
If a taxpayer fails to comply with the state’s tax requirements and penalties and interest are assessed, abatement may void the penalties. The taxpayer is given 60 days from the date of first being notified of the penalty assessment to request abatement. If a resident needs tax help and files a reasonable cause request, abatement of penalties might be approved. However, this is very rarely approved for the interest accrued.
Residents who need tax relief because they have no way of coming up with the money to pay their tax debt are allowed to ask for a Compromise Agreement. This is similar to what the IRS agrees to with an Offer in Compromise. The taxpayer, the Department of Revenue and the Attorney General’s Office enter into a Compromise Agreement, which settles the taxpayer’s unpaid tax debt for a lesser amount than what they legally owe.
If there were no way that you could pay your back state taxes in full, it would make sense to try and reach a compromise. The Commissioner of the Department of Revenue along with the Attorney General’s Office may decide that reaching a compromise is in everyone’s best interest. Under this compromise, you would make a one-time payment on your tax debt, which would be less than the full amount owed.
To be considered for tax relief in the form of a compromise, you would need to submit a Compromise Application by completing Form C58C. This is basically a financial statement that includes a questionnaire. Along with your submission a nonrefundable application fee of $250 is required, which will be applied to your back taxes whether the Department goes along with your compromise proposal or not.
In your proposal you must provide information as to when you would be able to make the one-time payment, the amount of the payment, where the money would be coming from for the payment and why the Department and the Attorney General’s Office should accept your proposed compromise.
In deciding whether or not to allow you this form of tax relief by accepting your proposal, they will take the following information into consideration:
- How long the debt has existed and been accruing penalties and interest
- How long the DOR can legally collect the debt
- Your financial assets
- Your age, earning potential and health
- The potential for collecting the full amount of the debt
- Whether anyone else could be held liable for the debt, like a spouse
- The breakdown for the amount owed in terms of taxes, penalties and interest
- Your collection history on any previous collection activity
- Amount of money already paid towards the debt
- Whether the debt can be discharged in bankruptcy, and any other bankruptcies
- Whether this is your first compromise offer or a request to reconsider a previous one
- Whether you are up-to-date on the filing of all your income tax returns
- Whether there is any doubt about whether you actually owe these back taxes
If you need some form of tax relief because you cannot pay your state tax obligations in one full payment, you can enter into a payment agreement with the Department.
You can do this tax help by reaching out to the Department of Revenue directly or by utilizing the Department’s e-Services system for arranging Payment Agreements. The agreement itself will be based on your particular situation and your ability to pay off your debt. The Department carefully reviews each case when they consider entering into a Payment Agreement. As of July 1, 2010, these agreements are subject to a $50 fee, which is nonrefundable.
Payment Agreements allow taxpayers to make installment payments with the stipulation that the payments are made through an electronic funds transfer (EFT). If the taxpayer does not have a bank account in their name and cannot get one, other arrangements may be made. In any case, a Payment Agreement with the Department of Revenue is not allowed to extend out further than five years.
If you need tax help and wish to submit an application for a payment agreement, the first step
would be to submit a Personal Financial Statement by completing Form C58P. This allows the Department to assess your finances and your ability to pay your back taxes.
Taxpayer Rights Advocate (TRA) for Tax Help
The Minnesota Department of Revenue keeps an office for its Taxpayer Rights Advocate (TRA), which the Commissioner of the Department of Revenue directly oversees. In situations in which the taxpayer has exhausted all appeals, they can request help from the Advocate to come to a resolution with the Department of Revenue.
The Advocate’s job is to intercede on the debtor’s behalf. This allows taxpayers to receive an independent evaluation of their tax situation, which ensures the Minnesota State tax code is being applied fairly and consistently. The TRA is also called upon to settle disagreements between former (and current) spouses via the Innocent Spouse Allocation and Joint Spouse Allocation programs.
Most tax issues can be directly worked out with the staff at the Department of Revenue. However, if you have tried everything possible to get tax help and to come to a resolution utilizing all administrative remedies without success, you can reach out to the Taxpayer Rights Advocate Office as follows:
By phone: (651) 556-3013 during the hours of 8:00 a.m. to 4:30 p.m., Mon. – Fri.
By email at: .
By mail: Taxpayer Rights Advocate Office, P.O. Box 7335, St. Paul, MN 55107-7335
When taxpayers do not voluntarily pay their back taxes, the Department has the right to enforce collection of the debt through a levy. This gives the Department the legal right to seize property belonging to the debtor.
The types of levies used in this effort include bank levies, which allow them to take the money from checking and/or savings accounts, the seizure of real estate and/or personal property owned by the debtor, investment levies to seize financial assets like stocks and/or bonds, wage levies that garnish a portion of the taxpayers’ wages, and/or third-party levies, which allow the Department to seize funds owed to the taxpayer from a third-party payment source.
The Department of Revenue has the legal right to file a lien against a business or individual taxpayer if they do not pay what they owe in taxes. A lien claims a legal right to something of value like real estate or personal property. This may be business equipment and inventory, land, vehicles, homes, wages, bonuses and/or commissions and more.
Once a lien is filed the statute of limitations for collecting the debt is extended for another 10 years from the filing date. Once the tax debt is paid in full with secured funds, the Department may release the lien by issuing a lien release form. If the tax debt is paid off with unsecured funds the Department will wait 30 days after receiving the payment before releasing the lien.
Power of Attorney (POA) with the State of Minnesota
Tax information is confidential and cannot be disclosed unless there is an authorized Power of Attorney that allows the Department of Revenue to reveal the debt information. The POA identifies the third party authorized to receive the confidential information as well as the document recording the authorization.
There are a variety of methods used in authorizing POA and each specifies which authorizations are permitted, such as which periods of time or tax years are covered, which debts the authorization covers and what the restrictions are on the Power of Attorney.
The Minnesota Department of Revenue won’t need a specific POA form to be filed, but a detailed letter from the debtor will be considered sufficient if it includes the following:
- The debtor’s full name and Social Security or Minnesota Tax Identification Number
- Signature of the debtor and date
- The full name of the individual assuming Power of Attorney
- Detailed explanation of the extent of the powers being given to the POA
- Type of debt as well as the time periods related to the debt
The Minnesota Department of Revenue will also accept the following forms to effectuate a Power of Attorney:
Minnesota Revenue Power of Attorney (Form REV184) – The debtor stipulates the types of information related to the debt that the POA is allowed to know about and discuss with the DOR. The debtor may or may not allow the POA to sign his/her tax returns. Unless there is a specific expiration date, the REV184 form authorizes the POA for an indefinite period of time.
Election for Power of Attorney (Form REV184a) – This form goes with form REV184 and must be attached to such. This form allows the debtor to grants permission to the Minnesota Department of Revenue to send to his/her POA all legal notices and refunds as well as any correspondence that relates to his/her tax situation. It also allows his/her non-tax debts to be referred to the DOR for collection. If a debtor elects to do this he/she will no longer get any refunds or correspondence from the DOR.
Minnesota Revenue Authorization to Release Tax Information (Form REV185) – This permits a one-time disclosure of specific information to the specified person. The individual being granted Power of Attorney is not allowed to act on the debtor’s behalf and only permitted to receive the information. Once the information has been disclosed the authorization immediately expires.
Power of Attorney & Declaration of Representative (IRS Form 2848) – This IRS form will be accepted, however it is required to specify the state, the tax years and categories of taxes in question. This can be done by either referring to the Minnesota DOR tax form number or by referring to the State of Minnesota (or MN) along with the exact tax years.
For Minnesota Residents in Search of Tax Help or Some Form of Tax Relief
You can contact the Minnesota Department of Revenue regarding questions on your Individual Income Tax Returns as follows:
By Phone: For General Questions (800) 652-9094 or (651) 296-3781
Property Tax Refund: 651-296-3781 or 1-800-651-9094
By Phone for Collections: (800) 657-3909 or (651) 556-3003
By Automated Phone: (800) 657-3676 or (651) 296-4444
Business Income Taxes: 651-556-3075
Sales and Use Tax: 651-296-6181 or 1-800-657-3777
By Fax: (651) 556-5116
TTY: Call 711 for Minnesota Relay
By Mail: Minnesota Department of Revenue
600 North Robert St
St Paul, MN 55146