Overview of Minnesota Tax Payment Plan or Payment Agreement
When a taxpayer owes the state of Minnesota or receives a balance due notice from the Minnesota Department of Revenue (MDOR) and cannot pay in full, a payment plan or payment agreement can offer a taxpayer a way to pay their tax balance over time. If a taxpayer cannot reach a resolution via a Compromise with MDOR, usually the next option is to request a payment agreement. Agreeing to a payment agreement will allow the taxpayer to pay back the delinquent tax debt in installments without having to worry about enforced collection actions (e.g. tax levies) as long as they remain current with the agreed-upon terms.
How to Request a Payment Agreement With MDOR?
Taxpayers can request payment agreements themselves or leverage a third party such as a licensed tax professional. If a tax professional represents a taxpayer in front of MDOR, then MDOR will require a valid Power of Attorney.
Individual Payment Agreements
If a taxpayer did not receive a bill yet, they must contact MDOR directly via phone, email, or snail mail, in order to set up a payment agreement. If a taxpayer receives a tax bill and wants to request a payment agreement, they can use MDOR's online Payment Plan Agreement System. Taxpayers can request a payment agreement with the Department of Revenue via the online Payment Plan Agreement System. To start the process, taxpayer’s will need to have the following before they begin:
- Letter ID from tax bill
- Social Security Number
- Email Address
- Bank account details
- Household monthly expenses and income
Business Payment Agreements
Business payment agreements cannot set up a payment plan via the online Payment Plan Agreement System. Instead, businesses must contact MDOR by calling, emailing, or sending a letter. For businesses with sales tax permits, MDOR can revoke a permit if the business defaults on the payment agreement. Note, certain taxpayers cannot request a payment agreement. For example, if a taxpayer is in bankruptcy or has an active liquor license.
There is a $50 non-refundable fee to apply for a payment agreement. If MDOR cancels a payment plan and sets up a new one, the taxpayer will incur another $50 dollar fee.
The Department will review the submitted payment agreement request and make a decision based on the taxpayer's current financial situation. They may ask for the taxpayer to submit additional information to verify their financial situation detailing their income, expenses, and assets. MDOR leverages the same financial guidelines as the IRS. MDOR may require individuals to send a Personal Financial Statement or a C58P, and businesses to send a Business Financial Statement or C58B.
Approved Payment Agreement
The Department will send the taxpayer an official letter informing them on whether their request has been accepted or denied. If the Department accepts the request the taxpayer must sign and return the signature page of the formal agreement.
Denied Payment Agreement
If the Department denies the request, they will inform the taxpayer as to the reason and provide details for the ability to seek a reconsideration with the Taxpayer Rights Advocate.
When MDOR May Cancel a Payment Agreement
MDOR can cancel a payment agreement for many reasons. If a taxpayer fails to make a timely payment, fails to file a tax return and pay the tax due, or fails to provide MDOR with updated financial information, MDOR may cancel the agreement. MDOR may also cancel a payment agreement also if their financial situation changes for the better, or MDOR believes the collection of tax is in jeopardy.