If you are buying a business, you should be very cautious about any taxes that might be owed by the seller. Rather than relying on the seller for a candid disclosure of tax liabilities, you can have the seller sign a written waiver of confidentiality that you can file with the Michigan Department of Treasury.

Effective February 19, 2014, the law requires the Michigan Department of Treasury, within 60 days of the receipt of the waiver, to release a business’s known or estimated tax liability so that the seller can establish an escrow account for the payment of those taxes.

When You May Be Liable

If it believes that a tax return does not supply sufficient  information for an accurate determination of the amount owed, the Department of Treasury may make an estimate based on other available information. If the purchaser fails to comply with the escrow requirements, he can be personally liable for the payment of the taxes, interest and penalties.

When You Are Protected

However, if the purchaser complies with the escrow requirement, he cannot be held labile for more than the amount estimated by the Department of Treasury. Similarly, the purchaser cannot be held liable if the Treasury Department fails to provide the requested information within the 60 days required by law.

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