Mississippi DOR Collections: What The State Can Legally Do to Collect Taxes

If you don't pay individual or business taxes in Mississippi, you may face Department of Revenue (DOR) Collections. The MS DOR has the right to involuntarily collect taxes from both individuals and businesses using tax liens, wage garnishments, and levies. 

Learn more about what to expect from the process and look at what the Department can legally take.

Key takeaways

• Tax liens – attach to all assets owned by the taxpayer, last for seven years, unless refiled.
• Wage garnishment – your employer must send a portion of your wages to the state until the tax is paid in full.
• Bank levy – a one-time levy that attaches to the funds in your account on the day of the levy, up to the amount of the tax debt plus interest and penalties.
• Asset seizure – the DOR can seize investment accounts and real or personal property from individuals or businesses. 
• How to protect yourself – work with an experienced tax professional based in Mississippi.

When do state tax collections start?

The Mississippi DOR starts adding interest and penalties on the very first day you're late. If you file late, interest and penalties are backdated to the original due date. 

Other collection actions may start 60 days after the Department mails you an assessment notice. If you don't pay or appeal within that time frame, the DOR can move forward with involuntary collections as detailed below.

Interest and penalties

If you pay late, the state assesses interest at a rate of 0.5% per month and penalties at a rate of 0.5% per month. The penalties cap out at 25%, but there's no cap on the interest. 

For example, if you owe $10,000, the monthly interest is $50, and the penalty is $50. The penalty caps out at $2500, but the interest continues to accrue until the debt is paid off. 

Mississippi state tax lien

The DOR will file a tax lien against your assets if you don't pay your state taxes. The lien gets filed in the State Tax Lien registry online. The DOR doesn't need to specifically alert you before filing the lien, but they must send you an assessment and demand for payment to your last known address at least 60 days before filing the lien. 

Tax liens attach to all of your assets, complicating sales, transfers, or even using the asset as collateral on a loan. Once the lien is filed, the State can move forward with a warrant to garnish your wages, levy your bank account, or seize other assets. 

Does the DOR file tax liens in your county?

No, as of 2015, the DOR files all tax liens with the online State Tax Lien registry. In the past, the DOR filed tax liens with the circuit clerk's office in the county or counties where the taxpayer owns property.

How to resolve a tax lien

There are several ways to resolve a tax lien, including:

• Pay in full – if you pay in full, the DOR will release the tax lien, meaning that you have no obligation to pay it, but proof of the lien may continue to exist in the public record. If you pay with cash or a cashier's check, the lien is released the next day. Otherwise, it takes about 15 days.
• Request a withdrawal – Once the lien is released, you can ask to have it withdrawn from the public record. The State may be willing to withdraw some liens if you owe under a certain threshold and set up a qualifying payment plan, but that tends to be rare.
• Ask for a discharge – A discharge removes the lien from a specific piece of property. For example, if the property is worthless and the DOR agrees to let you transfer it to another party. Or you may qualify for a discharge if you want to sell an asset and you use the proceeds from the sale to cover part of your tax debt.
• Take out a loan and the DOR to agree to subordination – The DOR may agree to subordinate its lien, for example, if you take out a loan against an asset to pay off your tax debt. Most lenders will only give you a collateral-based loan if their lien has priority over the DOR's lien.
• Prove error – If a lien is filed in the wrong amount, against the wrong assets, or in a situation where the DOR didn't follow the correct protocol, you may be able to get it released.

Tax liens last seven years in Mississippi, but the DOR can re-enroll them for an additional seven years. To protect your assets, you should attempt to resolve the lien as soon as possible.

Wage garnishment

The DOR can garnish your wages for unpaid taxes. If that happens, they will send a garnishment notice to your employer, instructing them to withhold money from your paychecks and send it to the DOR. Garnishments last until the tax debt is paid in full. 

Federal law prohibits employers from firing you due to a single wage garnishment, but there is no law against terminating an employee for multiple garnishments.

How much of your wages can be garnished in Mississippi?

The Mississippi DOR can garnish up to 25% of your wages for unpaid taxes. However, if the garnishment prevents you from paying necessary living expenses, the DOR may need to reduce the amount of the garnishment. Contact a tax professional as soon as possible to protect yourself.

Bank levies in Mississippi

The MS DOR may also levy your bank account for unpaid taxes. The Department will contact your bank, and then, the bank will freeze the funds in your account up to the amount of the tax due, plus interest and penalties. The bank will not consider any outstanding checks or automatic payments that are due to come out of your account – if you don't have sufficient funds to cover those amounts, they will typically be returned or cause your account to overdraft. 

For example, say you have $10,000 in your bank account and you owe $20,000 to the state. If the DOR sends a levy notice to the bank, the bank will freeze the full $10,000. Then, imagine the next day that you have an automatic payment for $1000. The bank will either return the payment or accept it and charge you an overdraft fee. 

The bank will hold onto the frozen funds for a short period of time to allow you to contact them if an error has occurred. Once that time has passed, the bank will send the money to the DOR. This is called a one-time levy, and if it doesn't cover your full amount due, the DOR must initiate an additional levy. 

Imagine that three days after the DOR bank levy, you get a direct deposit of $5000. Those funds are not affected by the levy because they came in after the levy was initiated. To get those funds, the DOR would need to initiate another bank levy.

Asset seizure

Wages and bank accounts are the most common asset seizures for unpaid state taxes in Mississippi, but the state may also go after other assets, including:

• Personal property – Vehicles, RVs, ATVs, etc.
• Business property – Inventory, fixtures, supplies, cash registers, etc.
• Real estate – Personal or business real estate, including commercial and industrial real estate, vacant lots, investment properties, second homes, or even your primary residence if certain conditions are met.
• Funds owed to you by third parties – Rent owed to you from tenants, payments from clients (for example, if you're paid as a 1099 contractor), transfers from payment processing software if you accept credit cards, etc.
• Investment accounts – Investment or retirement accounts, including 401(k)s and IRAs.

If the DOR takes physical assets, they will auction them off for sale and apply the proceeds to the tax debt. There may be ways for you to redeem (buy back with interest and penalties) some seized property for a limited amount of time. 

Can the MS DOR seize Social Security payments?

Yes, the MS DOR may be able to seize a portion of your Social Security retirement, survivor's, or disability payments. But the state must leave you enough to live on. The DOR cannot take survivor's payments to children.

Assets the DOR cannot seize

Certain assets are exempt from seizure in Mississippi, as well as most other states. Here are some of the assets that are typically safe from seizure:

• Court-ordered child support
• Worker's comp payments
• Supplemental Security Income (SSI)
• Primary residence up to a certain value
• Primary vehicle up to a certain value
• Personal property – for example, clothing and books – up to a certain value
• Tools of the trade or other work-related items
• Exempt wages – you get to keep an exempt portion of your wages for essential living expenses.

If you believe that the DOR is targeting assets that are exempt from seizure, you should appeal as soon as you can, but for the best results, you should work with a tax professional. 

Sometimes, the distinctions can be murky. Say, for example, that the DOR levies your bank account, but there were exempt funds in the account. That can be considered a mistake, and once alerted, the DOR must remove the bank levy. However, some exempt funds are no longer exempt if they're in your bank account for a certain period of time. 

These complexities are why it's key to work with an experienced tax resolution professional.

FAQs about MS DOR collections

What collection actions can the Mississippi DOR take?

The DOR can file tax liens, garnish wages, levy bank accounts, and seize assets. The DOR can also assess personal liability against individuals for corporate taxes.

Can the DOR hold individuals liable for business taxes?

Yes, the DOR can hold individuals liable for state taxes owed by a corporation. Even if the corporation stops operating and/or files for bankruptcy, the state can still hold individual owners/shareholders responsible for the unpaid state taxes. This includes sales tax, use tax, corporate tax, and withholding tax.

How do I deal with Mississippi DOR collections?

To deal with DOR collections, be proactive. Make payment arrangements as soon as you know that you owe a balance. If the state is threatening involuntary collections, appeal whenever possible and try to set up payment arrangements. If you're in the midst of a collection action, use TaxCure to find an experienced tax professional.

What if I can’t pay my Mississippi taxes?

If you can't afford to pay your state taxes, there are many resolution options in Mississippi. Consider applying for a payment plan or an offer in compromise.

Can I settle my tax debt with the Mississippi DOR?

Possibly, if you don't have enough disposable income or equity in your assets to pay your tax liability in full, the DOR may let you settle through an offer in compromise. You can apply for both business and personal taxes. 

Get help with MS tax collections.

You don't have to deal with the Mississippi Department of Revenue on your own, and to protect your finances, you should work with a professional. Don't call the big-name firms you see online or on TV. Instead, reach out to a local pro. 

They'll work with you to resolve your state or IRS tax problems with a customized solution based on your unique tax problem. Don't wait – use TaxCure to find a licensed professional today. Here are more tips on how to use this site. Or check out these links to MS-based tax pros:

• Mississippi tax relief professionals
• MS tax relief attorneys
• Mississippi enrolled agents
• Tax pros with MS DOR experience