Why Michigan Needs to Abolish MARCS Tax Collection System | Ayar Law


Reform is Necessary for Michigan’s System for Collecting Back Taxes

MARCS back tax collection service shows no mercy toward Michigan taxpayers. blog 14Anybody who thinks dealing with the IRS tax collectors is rough should try for once dealing with the tax collectors for the Michigan Department of treasury. Unlike the IRS, the Michigan Department of Treasury outsources most of its tax collections to a third-party debt collector. Michigan uses a for-profit debt collection agency called GC Services, which operates its Michigan back tax collections under the name Michigan Accounts Receivable Collection System (MARCS). I tend to be a strong supporter of reducing the size and scope of government by privatizing as many public functions as feasible, and I am not ideologically opposed to privatizing the collection of Michigan back taxes. However, the system Michigan has in place for collecting back taxes is an abomination and reform is necessary. Like most other debt collection agencies, MARCS earns a certain percentage of the taxes it is able to collect. This gives them an incentive to take any legal actions at their disposal to collect as much money as possible. As a quasi-governmental entity, MARCS has been given far more power and authority than any other private entity to collect Michigan’s tax debt. MARCS acts as an agent of the state and has most of the Treasury’s collection power at its disposal. They have the power to levy a person’s bank account without a court order. They can issue garnishments directly to employers without having to first go to court. They can garnish much more of your pay than any other debt collection agency. Every dollar they force someone to pay adds to their bottom-line and pads the pockets of the company’s owners and employees. This system has to change. No private company should be given the powers of the State to force individuals to pay them and make money doing so. MARCS has been given the power to ruin people’s lives just to make a profit. Most people can’t even turn to the bankruptcy court for protection because most taxes are non-dischargeable in bankruptcy. (Read more about discharging taxes in bankruptcy)

An Example from My Practice

I once had a client who was behind on his Michigan taxes come to see me. Al was a $30,000 / year employee at Ford Motor Company, working on the assembly line. He used his income to provide a very meager life for himself and his sick, old mother. Al only owed roughly $8,000 in back taxes to the State of Michigan. The reason he owed Michigan back taxes was, for a couple years, he did not have enough tax withheld from his paycheck and didn’t have enough money to pay his taxes when they were due. He was not a tax cheat, just a hard-working man who happened to fall behind on his taxes, like so many of us these days. Al made the mistake of ignoring the collection notices he would get, not all that uncommon of a response. Because he failed to respond to the notices, MARCS did the only thing they could to get his attention: garnished his wages. Wage by private creditors are generally for a maximum of 25% of the debtor’s take- home pay, which would have been bad enough. However, because MARCS is not like any other debt collection agency, they are not limited to the standard 25% garnishment. MARCS issued a garnishment for 100% of Al’s pay. While the garnishment was in place, Al’s net take-home pay was 0. This was one of my first cases with MARCS, as I had just moved to the area from California. I figured this was no problem. I would do what I had done so many times before with the IRS and State of California: call the State and prove to them that Al could not afford to pay them and get him placed on non-collectible status. The garnishment would be released in a matter of days. I couldn’t have been more wrong. After many phone calls to MARCS, they wouldn’t budge. One man I dealt with even asked me, rhetorically: “Why would I release a garnishment that’s making us money and just let Al get on non-collectible status?” I was immediately taken aback by his response. I offered to send in Al’s bank statements, check stubs, and proof of his monthly expenses to show that he needed all of his earnings to survive. MARCS told me that they needed 30 days to review the financials and get back to me, and they would keep the garnishment in place in the meantime. It didn’t matter to them that, after the first check was garnished, Al couldn’t pay his next month’s bills. Or, that without his next paycheck he wouldn’t have enough money to put gas in his car to get to work. Or, that if Al couldn’t get to work, there wouldn’t be a third paycheck for him to garnish. All that MARCS seemed to care about was getting the most amount of money in the shortest amount of time possible, no matter the consequences. I finally got MARCS to release the garnishment on the condition that Al agree to pay off his balance over two years by making roughly $400 monthly payments. I knew there was no way Al could pay that kind of money: he couldn’t even pay his own bills. My plan was to get the payment plan in place to get the garnishment released, then get the financials looked at so the payment would be reduced before Al defaulted. After submitting the financials and trying to re-negotiate Al’s monthly payment, MARCS said they were being ‘generous’ by allowing him a $400 monthly agreement. Their position was that that he could afford to pay around $1,500 a month. They wouldn’t give him an allowance to pay the monthly bills at the house because all the accounts were in his mother’s name, so he was not legally obligated to pay them. They didn’t care that his mother was too old and ill to support herself, so Al was paying the bills. I immediately contacted the Michigan Taxpayer Advocate, who is supposed to be the ‘taxpayer’s voice’ at the Michigan Department of Treasury. When I explained the situation, they told me they couldn’t do anything because everything they had done to Al was “legal.” I am appalled that the State of Michigan actually condones these types of collections. This needs to change, or more innocent people like Al will be left with nothing. If you owe the state of Michigan back taxes, do something about it before it’s too late. Give us a call, or send us an email here. [author] [author_image timthumb=’off’]https://www.ayarlaw.com/wp-content/uploads/2013/02/venar-about-sm.jpg[/author_image] [author_info]Michigan tax lawyer, Venar R. Ayar, founder of Ayar Law Group, holds ten years of experience as an accounting specialist and tax lawyer. He earned his Juris Doctor at the University of San Diego School of Law, receiving a Master of Laws in Taxation—the highest degree available in tax. His main focus has become Michigan tax resolution as well as IRS tax resolution, including individual and business tax matters; tax planning, tax compliance and white-collar criminal defense. His business background has helped him to become personable and understanding in his work. Representing clients before the IRS, Ayar’s practice and experience has proved him as an honest and dedicated leader in the realm of Michigan tax lawyers. Click here to contact your Michigan tax lawyer, Venar Ayar. [/author_info] [/author]

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.