The Five Big Major Options If You Have Minnesota Tax Debts
If you owe a tax debt to the Minnesota revenue, it is highly recommended that give your tax issue immediate attention. If you don’t address your tax issue after 60 days from your first tax notice, you could face bank levies or wage garnishments.
If you have a tax debt with Minnesota Revenue, they will mail you a tax bill for the amount due. If you don’t follow up in thirty days, you will receive a more serious letter from Minnesota Revenue, which is a demand for payment letter. Pay attention to the date of the demand for payment letter because thirty from that date Minnesota Revenue can start aggressive collections.
It is important to know the five big options you have with your Minnesota tax debt. The five big options include: filing your back Minnesota tax returns, Minnesota Tax Settlement (Offer in Compromise), remove Minnesota Tax Penalties, Minnesota Hardship (suspension of tax collection) and Minnesota payment plans.
File Back Minnesota Tax Returns
Filing your Minnesota tax returns is the first major option in dealing with your tax debt. This is the first step because filling your tax returns are important to be in compliant with Minnesota Revenue so you can get full consideration for all of your possible Minnesota tax resolution options. If all your Minnesota tax returns are not filed there is no path to a long-term tax resolution for your Minnesota tax problems.
Second, filing tax returns can lower your tax debt by including your pertinent tax deductions and tax credits. Filing your Minnesota back Tax Returns can considerably lower your tax liability, especially if Minnesota Revenue filed your return for you. When Minnesota Revenue files your Minnesota back tax returns, it is called a Commissioner Filed Returns (CFR). Minnesota Revenue will file a tax return based off the limited information they have.
Keep in mind when Minnesota Revenue files a Commissioner Filed Return, they are more worried about your income and most likely don’t have much information about your tax deductions and credits that you would’ve taken if you filed your Minnesota tax return on your own.
Third, if you file a return, and you have a refund you will have only 3 ½ years from the due date of the tax return to collect your money. These refunds could offset some of your current tax debts you owe Minnesota.
It is highly recommended you work with a company like MWB Tax Solutions to complete your Minnesota back tax returns. We will work with you to file your Minnesota back tax returns until completion. The process of completing your Minnesota tax returns will include:
Gather all documents and tax information – there is information we will be able to order on your behalf and there is information we will work with you to order from past employers and financial institutions. In some cases, it may make sense to order your W-2 information from the Social Security Administration.
Fill out a tax organizer – A tax organizer is needed to so the tax preparer is aware of all pertain tax deductions, tax credits and issues in regards to your Minnesota tax return.
Complete your tax return – Most likely a federal tax return will need to be completed first. The Minnesota tax return will be completed next using the information that was just completed on your federal tax returns.
E-file or mail out your tax returns – we will electronically file your tax returns when possible and mail the older tax returns that are not eligible for e-filing. It is in your best interest to electronically file your Minnesota tax return (e-file) since you will get instant feedback that your tax returns were accepted by Minnesota Revenue, which in turn speeds up the process time of your tax return.
Speed is good when you are facing a Minnesota tax debt. Some older returns will not be eligible for electronically filing and therefore, will have to be mailed out to Minnesota Revenue.
I can’t stress it enough how important it is in filing your back tax returns and getting yourself in compliance with Minnesota Revenue. Filing your back tax returns is one of the most crucial steps in getting a tax resolution with your Minnesota tax debt.
Minnesota Tax Settlement
Minnesota Department of revenue offers a tax settlement program which is called Minnesota Offer In compromise. Minnesota Offer in Compromise is a written agreement between Minnesota Revenue and yourself where they agree with you for a one-time payment for settlement all your Minnesota back taxes. The ideal candidate for Minnesota Tax Settlement must show financial hardship with minimum assets and income.
There are some similar aspects to the IRS offer in compromise but in general Minnesota revenue has whole different criteria in analyzing your potential tax settlement offer.
Some of the criteria Minnesota Revenue looks at include the following:
Assets/ earnings of the potential applicant – let’s be blunt if you owe $50,000 to Minnesota revenue, and you have $50,000 in your bank account, there is a very good chance your tax settlement offer will be accepted.
The type of tax – An applicant with a business tax debt such as sales tax will have a harder time getting a tax settlement vs an applicant with an individual income tax debt.
Applicant’s collection history with Minnesota Revenue – An applicant who has a compliant history will be given more consideration vs an applicant who has history of noncompliance with Minnesota Revenue. Minnesota Revenue, will also look at if you have a past or current bankruptcy.
Collection Potential of the Applicant – If Minnesota Revenue reviews your application and it if they come to the conclusion that they can collect more tax dollars not accepting your offer, there is a good chance, they will not accept your tax settlement.
Requirements To Apply For Minnesota Offer In Compromise
Each Minnesota Offer In Compromise must be submitted with a $250 non-refundable payment to apply for a Minnesota tax settlement. This fee can be waived if you can prove economic hardship applying for the tax settlement and must write an additional letter explaining the reason for your waiver. In addition, you must show proof of two loan and credit denials from two financial institutions.
Full financial disclosure:
- Completed Financial Statement
- Verification of Income (two most current pay stubs)
- Three-month Bank Statements
- All Lease Agreements
- Medical Documentation
- Homeowners – property tax statements and homeowner’s insurance policy
Even though Minnesota Revenue states it can take 90 days to get a decision the time before you get a decision some offers took up to six months before they received a decision.
If you tax settlement is accepted you agree to the following terms and conditions:
- You will file all tax returns for the next five years before or on the due date.
- You will not incur additional tax debts.
- All tax refunds for the next five years will go toward your tax debt.
If you don’t follow all terms and conditions, your tax debt could go back to the original amount with accrual of additional fees, interest and penalties.
It is highly recommended that you use a tax professional to put your best case forward in order to get to tax settlement accepted.
Remove Minnesota Penalties
Minnesota allows reduction or removal of penalties for probable cause. You will have to write a letter explaining your hardship and why Minnesota Revenue should remove your penalties for probable cause. Examples of probable cause:
- Prolonged unemployment
- Business failure
- Death or major Illness
- Bad advice or information from Minnesota Revenue
- Bad Accountant or Financial advisor consultation
- Natural disaster
- Loss of records
When you write your Minnesota penalty abatement request, you will need to provide the following: Your contact information, Minnesota Tax ID number, periods your request is covering, tax type (income tax, Sales tax, etc.) and any information that will proof your case. A representative can even strengthen your request by writing a letter on your behalf.
However, all cases or unique so the success of your penalty abatement will be based on the facts and circumstances of your case. Even if Minnesota Revenue rejects your request for removal of penalties, if you have a timely request, you can appeal against that decision.
Minnesota Tax Hardship – One Year To Two-Year Suspension
If you have a financial hardship and cannot afford to make any payments to Minnesota revenue suspension of tax collection for one to two year could be an option. You still owe the tax, but it will shield you from aggressive collection activity such as wage garnishment or bank levies for the one to two year period.
In order to apply for One – Two-year suspension you will need to fill out Minnesota Revenue form CP personal financial statement fully. You must show proof if income such as your last four pay stubs or bank statements if you are self-employed. The agent could ask for additional information in the process of evaluating your suspension request.
If you accepted to one-year suspension, please document the date of acceptance because exactly in a year’s time Minnesota Revenue will mail you a demand for payment letter. You must disclose and update your financials again to get reconsideration for another one or two-year suspension
It is highly recommended that you acquire a good tax representative in order to increase your chances of your suspension to be accepted.
Minnesota Tax Payment Options
If you owe a tax debt to Minnesota Revenue, a tax payment plan could be an option while dealing with your tax debt. In general, Minnesota Revenue will like to be paid off within a 12 to the 24-month period. If you cannot afford to pay off your tax debt within 24 months, you must fill out CP 58 personal financial statement.
In the CP personal statement you need to disclose detail information about your finances, request a payment plan amount and provide your bank name, account number and routing number for direct withdrawal. ( Minnesota payment plans must be electronically withdrawn out of a bank account). You could also be asked to provide additional proof of income and expenses with documents such as bank statements, pay stubs, medical records, etc.
Once you forward your payment request to Minnesota Revenue an agent will contact your representative and ask could ask additional questions, request supplemental documents or accept, reject or counter offer your payment plan request.
If your Minnesota payment plan is accepted you will receive a confirmation letter in the mail. You must sign the letter and return to Minnesota Revenue.
So these are your five big options while dealing with Minnesota Revenue, It’s very important that you have proper representation in order to make sure you are first, have the lowest payment allowed by law. Second, while dealing with Minnesota Revenue it is up to you to know your rights and the tax code. Ignorance of Minnesota tax laws is not an acceptable defense in most cases.
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