Installment Agreement – Minnesota Department of Revenue

This is the sixth post in the Collection Options series. This series is dedicated to presenting individuals and businesses with options for dealing with outstanding tax obligations.

Installment Agreement – MDR

Guidelines. The Department of Revenue states that it does not have specific payment plan guidelines. It determines the appropriateness of an installment plan for each case based on the following factors:

Can the Taxpayer pay the obligation in full immediately? If the taxpayer can liquidate an asset to pay the obligation in full, without creating an undue hardship, the state will most likely not accept a payment plan.

Does the proposal include all obligations from both filed and unfiled returns? All returns should be filed and the taxpayer should be current with estimated tax payments.

How long does the taxpayer want to pay the tax? The less time the better. The Department will push for payment in less than 1 year. If that is not possible, it will consider longer periods as may be justified by the taxpayer’s financial information. For in business taxpayers with outstanding trust fun obligations like sales tax and withholding tax, it will generally not go beyond 5 years. The state would prefer to shut down the business.

How frequently will the taxpayer make payments, monthly, biweekly? This is not a common issue when negotiating, but anything that shows an effort to get the obligation paid as fast as possible will help get the proposal accepted.

How much is the taxpayer proposing to pay? Obviously, the larger the payment, the better. But the key is whether the amount proposed is equal to or more than the amount the state could collect through its own enforcement action. See the Department of Revenue Collection Manual for a listing of collection authority and sources. Go to select Collection Division and then Collection Manual.

What is the taxpayer’s maximum ability to pay? The state requires complete financial statements on its Forms C-58P (Personal) and C-58B (Business). The taxpayer’s ability to pay is calculated using their total household income, even from household members who do not owe the liability. The state includes all household income to determine how much the taxpayer is required to contribute to the pay the reasonable and necessary living expenses. If others contribute to household income, the state assumes they contribute to meeting the household expenses. The state uses the IRS guidelines for calculating reasonable and necessary living expenses.

Negotiating the payment amount. The state may decline the original proposal, but it is willing to listen to reasons why a proposed payment amount is appropriate. It will usually allow the taxpayer to submit additional information to support the amount. When talking with the state’s representative, listen carefully for the state’s concerns. Is the payment period too long? Are there assets that the state believes can be liquidated to pay the liability but you know they have no value? Whatever the issue may be, you have the opportunity to address it with the Revenue Collection Officer.

Reconsideration by the Taxpayer Rights Advocate. If the state denies the taxpayer’s installment proposal, the taxpayer can ask for a reconsideration by the Taxpayer Rights Advocate. While the Advocate’s authority is limited, they can sometimes convince the state to give the taxpayer the extra consideration that is needed to get the agreement approved.