What You Need to Know About MN Payment Agreements

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Address: 6040 Main Street, Suite 102, Rockford, MN, 55373, USA
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Minnesota Tax Payment Agreements: What You Need To Know

Having unpaid taxes with the IRS is a challenging problem to face, given the tax collection tools at its disposal, such as tax liens and levies. But if you owe money to the IRS, there’s a chance you also owe money to the Minnesota Department of Revenue (DOR), and it has equally effective tax collection tools at its disposal.

However, like the IRS, the MN DOR understands that many taxpayers with unresolved tax bills can’t afford to make a lump sum payment to resolve their tax cases. As a result, the Minnesota DOR offers payment agreements that allow eligible Minnesota taxpayers the opportunity to pay their tax debts over time with installment payments. These payment plans can help avoid collections by the MN DOR, which can include wage garnishment and bank levies.

The tax professionals at BestTaxPro™ have over 130 years of combined tax resolution experience. They’re well-positioned to examine your tax situation to confirm if a Minnesota payment plan is right for you, and if so, help you apply for one.

Key Takeaways

MN payment agreement – make monthly payments on state tax debt.
Eligibility – businesses and individuals can apply, but may need to provide financial details.
Application tips – provide all requested financial information, as incomplete forms are a common reason for rejection.
What to expect – the state can terminate your agreement if you miss a payment or incur new tax debt.
Other resolution options for MN tax debt – financial hardship, compromise, penalty abatement, collection suspension, innocent spouse relief, and bankruptcy.

What Is a Minnesota DOR Payment Agreement?

A payment agreement allows Minnesota taxpayers to make installment payments to pay off their state tax balances over a period of time instead of in one lump sum. Although the IRS offers multiple pay-over-time options to taxpayers, such as payment plans (short-term) and installment agreements (long-term), the MN DOR doesn’t.

Instead, the primary thing that differentiates one payment agreement from another is the type of taxpayer applying for it.

Who’s Eligible for a Minnesota DOR Payment Plan?

Both individuals and businesses may apply for a MN payment agreement. The primary differences between business and individual payment agreements are the application processes, the information needed to apply, and potential consequences for defaulting on a payment agreement.

How to Request a Department of Revenue Installment Agreement

The application process depends on whether you’re an individual or a business taxpayer, but they have several similarities. The following is an overview of both processes.

Payment Agreement Request Process for Individuals

You can request a payment agreement online using the Payment Plan Agreement System. This can only be used after you receive a tax bill from the MN DOR.

If you haven’t yet received a bill, you can still ask for a payment agreement, but you must do so over the phone, by mail, or through email. To apply online, you’ll need to provide the following information:

The letter ID located on the tax bill received.
Your Social Security number
Your current email address
Your bank account information
A breakdown of your monthly income and expenses

After your initial request, you may also have to complete Form C58P, Personal Financial Statement, along with producing supporting documentation. One thing of note about this form is that you’re allowed to apply for a payment agreement without providing all of the information requested on this form. However, if you leave out information, the MN Department of Revenue is far less likely to grant your request for a payment agreement.

When you contact us, we’ll start with a consultation to get a sense of what you’re facing and the resolution options available to you. Then, we’ll customize an action plan based on your unique set of circumstances and your personal/business goals. We’ll also help you figure out how to avoid future tax problems and stay in compliance with the state.

Payment Agreement Request Process for Businesses

Whether you owe state payroll tax, corporation franchise tax, sales tax, or any other state business taxes, the only way to request a payment agreement as a business taxpayer is to do so by mail, phone, or email. The information needed to apply can be found on Form C58B, Business Financial Statement. Some of the more notable pieces of information needed include:

Minnesota tax identification number
Federal employer identification number
A list of business licenses
A list of business bank accounts and other assets
Identification and contact information of key individuals of the business
A list of payment processors used by the business
A list of accounts payable and accounts receivable

As is the case with Form C58P, you aren’t required to provide all the requested information from this form to the MN DOR. However, not doing so reduces your chances of having the DOR approve the payment agreement request.

When you work with BestTaxPro™, you get direct access to an experienced, licensed tax professional. You don’t have to worry about unlicensed call center sales reps dealing with your case or harassing you to sign up for services you don’t need. We provide one-on-one attention and custom solutions to all of our clients.

What You Need to Know About MN Payment Agreements

What Happens After Getting Approved for a Minnesota Payment Agreement?

Once approved, you’ll be required to pay a $50.00 fee. Until you pay this fee, your payment agreement isn’t in effect. Additionally, this fee doesn’t get applied to your outstanding tax balance.

While making payments, understand that the MN Department of Revenue may still file a lien against you or your business’s assets. They may do this to protect their financial interests in case of default. Also, any tax refunds may be applied to your tax debt instead of being sent to you. If this happens, the balance is reduced, and the payment agreement may end earlier than originally planned.

Finally, one thing to expect after entering into a payment agreement is that you don’t need to deal with any tax levies. As long as you’re making payments as required, the DOR won’t seize your assets.

Reasons the MN DOR May Deny Your Payment Plan Request

Most payment agreement rejections are the result of taxpayers not providing all of the information requested by the DOR. If your request is rejected, you’ll receive a letter from the DOR identifying the reasons for the rejection and explaining how you can ask for reconsideration from the Taxpayer Rights Advocate.

The Minnesota DOR might also reject your payment plan request if you provide false information, are in bankruptcy, or are a business with an active liquor license.

Improving Your Chances of Getting a Payment Agreement

One of the best ways to increase your chances of approval while also limiting the disclosure of private financial information is to consult with a Minnesota tax pro who has experience handling tax debts with the MN DOR. They can help you decide what information must be provided, discuss other tax resolution options that might be better for you, or what you should do if the DOR rejects your payment agreement request.

What If You Can’t Afford a MN Payment Plan?

For some taxpayers, getting the MN DOR to approve a payment plan request isn’t the issue. Rather, it’s being able to afford the installment payments calculated by the DOR after receiving the financial information.

In essence, the DOR looks at your income and expenses to calculate how much “extra” money you have available to make tax payments. When conducting this analysis, the DOR will use similar financial standards as the IRS. These standards outline how much the tax agencies think you should be spending on essential living expenses, and if you’re spending more than these amounts, they’ll want you to reduce your expenses so that you can allocate more of your income to your tax repayments.

If it turns out that the proposed payments are more than you can afford, you have other tax relief options, such as:

A compromise (this is similar to the IRS’s offer in compromise)
Filing bankruptcy (the MN DOR will sometimes discharge certain tax debts in bankruptcy proceedings)
Financial hardship
A collection suspension
Penalty abatement
The Innocent Spouse Program

Talk with a tax pro to learn how to apply for these programs and to see how they can help you avoid unwanted collection actions from the MN DOR.

Reasons the Minnesota DOR Might Cancel an Existing Payment Agreement

Even though the MN Department of Revenue agrees to a payment agreement, they reserve the right to cancel it in certain situations. They might do this if one or more of the following conditions exist:

You fail to make payments on time.
You fail to file a required tax return or pay the taxes owed.
Your financial situation improves.
You fail to provide updated financial information to the DOR upon request.
The DOR believes there’s a risk they’ll be unable to collect the full unpaid tax amount if the payment agreement is allowed to continue (in other words, collection of the tax balance is in jeopardy).

If the DOR cancels a payment agreement, it must provide you with at least two weeks’ notice before terminating the arrangement. This notice will also inform you of your right to request reconsideration of the termination. This two-week notice requirement doesn’t apply if the payment agreement is terminated because the tax balance collection is in jeopardy.

In addition to the loss of the payment agreement, business taxpayers who default on a payment agreement risk having their sales tax permit revoked.

Need Help With the Payment Agreement Process?

Minnesota payment agreements offer a helpful solution to unresolved state tax debts, but they may not always be possible or the best option for your situation. And for scenarios where they are, there are nuances during the request process, especially when applying as a business taxpayer.

If you owe back taxes to the Minnesota Department of Revenue or the IRS, contact BestTaxPro™, LLC using our online contact form or by calling 763-477-4205. We offer free consultations, and our team of tax professionals consists of enrolled agents, tax attorneys, and former IRS employees with many years of tax resolution and collection experience.

Get Help With MN Tax Problems Now!

Waiting will not make your tax problems go away – in most cases, procrastination causes tax problems to get worse and puts you at risk of more penalties and unwanted collection actions. Protect yourself, your finances, and your business by reaching out for help now.

To get help now, call us at (763) 477-4205, fill out the online contact form, or stop by our Rockford, MN office to chat. We’ll start with a consultation and help you figure out the best way to permanently resolve your state or tax issues.

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