State Tax Settlement Guide
If you owe back taxes to the IRS, there is a good chance you owe money to your state tax authority. Most people are not familiar with a possible tax settlement or Offer in Compromise for their state taxes. The following provides information on each state’s Offer in Compromise Program. Working with the state tax settlement experts from backtaxdebthelp.net will increase the odds that your state tax settlement will be accepted. Call us for a free quote at 888-412-2258.
You can submit an Offer in Compromise to the IRS, regardless of what state you live in. However, not all states offer an Offer in Compromise as a way to satisfy your state tax liability. Those who do not include:
- New Hampshire
- New Jersey, though the state does offer a similar program referred to as a Closing Agreement
- New Mexico, where the law requires that all tax debts are paid in full. However, you may want to pursue a payment plan.
- Pennsylvania, though the state does offer a Tax Forgiveness Program, which has very specific qualification requirements pertaining to family size and income. If you have any questions, contact 1-800-447-3020.
- South Carolina, but you can request an Installment Plan
- South Dakota
Before we go any further, here are a few helpful hints you should keep in mind, regardless of what state you live in.
- When submitting an Offer in Compromise, it is highly suggested that you send it via Certified Mail.
- You should retain a copy of all paperwork you are submitting for your own records.
- It is important to understand that all states (unless it is clearly stated below) continue to add penalties and interest until a decision has been made.
- Some states require that you submit a fee along with your Offer in Compromise. However, most will waive the fee if you meet the federal poverty guidelines. If you are not certain whether or not this waiver applies to you, the guidelines can be found here.
To apply for an Offer in Compromise, you must first have the attorney general’s approval. His contact information can be found here. The Department of Revenue (DOR) may agree to a compromise if:
- There is doubt over whether or not the taxpayer owes all or a portion of the debt.
- It is unlikely the DOR will be able to collect the entire amount owed.
The DOR also has the ability to compromise the penalties accrued with the attorney general’s approval. Be aware that is against Alaska law to hide or misrepresent your financial conditions or property holdings when applying for an Offer in Compromise.
Alaska allows you to give another person authority to represent you in tax matters before the DOR. You must complete Form 04-755, Alaska DOR Power of Attorney. However, the representative must meet one of the following criteria.
- A CPA licensed in any state
- A person enrolled to practice before the IRS and is currently in active status.
- An attorney-in-fact under a power of attorney who is in good standing in any state.
- A person in a special status with the taxpayer.
- Other individuals may be allowed at the DOR’s discretion.
If you are an Arizona taxpayer who is unable to fulfill your tax debt, you may present an Offer in Compromise to the DOR. This allows you to satisfy your debt for less than you owe. The amount you offer must reflect the maximum you are able to pay.
Before submitting an Offer in Compromise, ensure your income tax returns for the previous three years are filed. If you are a business owner, all licenses and business tax filings must be up-to-date.
To apply, you must complete the Statement of Offer and submit all required financial documents. You will need to provide the following information:
- The amount of your debt.
- The amount of your offer.
- The source of funds for the offer.
- How often the amount will be paid.
- You may also provide any other information that you feel is pertinent to your situation.
Before submitting your form, be sure it is signed by all responsible parties, such as your spouse or corporate officers. If all the information isn’t submit, it will delay the decision. Please note that any overpayments or refunds, as well as levy proceeds, received by the state before your offer is submitted will not be returned.
You will be notified in writing of the DOR’s decision. You do not have the right to content the tax liability amount. If your offer is accepted, you must stay in compliance with Arizona tax codes for at least three years.
The Arkansas DOR Finance and Administration Division (DFA) allows taxpayers who owe a tax debt the opportunity to pay an amount in compromise if:
- The taxpayer is insolvent, meaning their liabilities exceed their assets and/ or their expenses exceed their income.
- There is question over the amount due.
To submit an Offer in Compromise, you must complete Form 2000-4 Offers in Compromise, as well as all of the documents listed on page 6 of the form. The signed form must be mailed to the address on the document. It should not be faxed or emailed. In order for an Offer in Compromise to be considered, you must be up to date on your tax return filings.
All Offers in Compromise are decided on a case by case situation. You will be notified in writing of the decision. The decision is not subject to judicial or administrative review.
Arkansas allows you to give another person authority to represent you in tax matters before the FDA by submitting a Power of Attorney form. The POA can be an attorney, CPA, or any other person who agrees to your request.
The State of California Franchise Tax Board will evaluate your Offer in Compromise if you are unable to pay your non-disputed tax liability now or in the near future and meet the following requirements.
- You are up to date filing all your required tax returns.
- You agree with the Franchise Tax Board on the amount of liability you owe.
- You have given the Franchise Tax Board authorization to obtain your consumer credit report in an effort to verify your application information.
The Board admits they usually approve an offer when “the amount offered represents the most we can expect to collect within a reasonable period of time.” Be aware that California only accepts lump sum payments. You cannot submit a zero dollar offer. When submitting your Offer in Compromise, you will need to include these documents:
- Form FTB 4905PIT, Offer in Compromise for individuals
- Any additional documents requested on the form, such as verification of expenses and income
- If you are authorizing someone to work with the Franchise Tax Board on your behalf, you will all need to complete and submit Form FTB 3520, Power of Attorney.
In most cases, you will receive a decision within 90 days. Funds should only be submitted by money order or cashier’s check when the Franchise Tax Board requests payment. If approved, you may have to sign a collateral agreement. This agreement states that you will give a percentage of your income that exceeds any agreed upon threshold. Typically, this agreement lasts for 5 years. Any questions can be directed to the OIC group at 916-845-4787.
The Colorado Department of Revenue (DOR) will consider an Offer in Compromise if you meet the following criteria:
- You are not able to pay off your outstanding liabilities within the state’s required period of collection.
- You haven’t previously had an Offer in Compromise with the state to pay off past liabilities.
- You have not previously received tax relief. For example, a liability was written off due to being past the statute of limitations, discharged through bankruptcy, or you were granted innocent spouse relief.
- Your tax returns are filed through the current period.
- The IRS has approved an Offer in Compromise for the same years and liabilities.
When submitting an Offer in Compromise to the state of Colorado, you must include the following. If you do not, your request will not be considered.
- IRS Form 433 Collection Information Statement for Wage Earners and Self-Employed Individuals
- Fully completed Offer in Compromise Terms and Conditions with required signatures.
- Form DR 6596 Statement of Income and Expenses.
- Verification of the IRS’s acceptance of a submitted Offer in Compromise, a copy of IRS Form 656 that is stamped the IRS Received Date, and any other information you feel in important regarding your agreement with the IRS.
- An IRS “Record of Account” and proof you are paying your IRS Offer in Compromise
- Written disclosure detailing your marital status, filing status, and the transfer of any personal or real property, such as cash, cars, or title transfer of property.
- Written statement recounting the reasons that the DOR should consider an Offer in Compromise, along with your proposed offer.
The DOR will notify you in writing if your Offer in Compromise is accepted. You will be required to send in the full payment within 15 days from the notice’s date, unless the DOR specifically states differently. If you make a payment and the bank refuses to honor the check, your Offer in Compromise will be rescinded and you will be responsible for paying the full liability amount, as well as any penalties or interest.
The Connecticut Department of Revenue Services (DRS) does allow you to file for an Offer of Compromise if:
- You don’t deny the liability, but do lack the financial means needed to pay it off.
- In this case, you will submit Form CT-656a, Offer of Compromise, along with a full financial disclosure and any requested documents, to the Bureau Chief of the Compliance Process Group.
- You doubt the amount of the liability owed. This can only be filed after a notice of assessment has been issued. You need to complete Form CT-656a, Offer in Compromise and mail it, as well as any additional information requested, to:
- Director of the Appellate Division, if you have not received a final determination letter.
- Director of the Legal Division, if you have received a final determination letter and it has not been appealed to the Superior Court
- General Counsel, if you have received a final determination and have submitted your appeal to Superior Court
- You doubt both the collectability and amount of the liability. After completing Form CT-656a, Offer of Compromise and obtaining copies of other documents requests, you should submit your information to:
- Director of the Appellate Division, if you have not received a final determination letter.
- Director of the Legal Division, if you have received a final determination letter and it has not been appealed to the Superior Court
- General Counsel, if you have received a final determination and have submitted your appeal to Superior Court
The CT DRS will not consider Offer of Compromises if:
- You are behind filing all required tax returns.
- You are under criminal prosecution for a tax liability in the state of CT.
- You have filed for a voluntary bankruptcy or someone has filed an involuntary bankruptcy case against you.
- An audit assessment has been finalized.
- Amounts owed have not been formally assessed.
You will receive a letter of receipt. Once a decision has been made by the commissioner or his agent, an Offer of Compromise is considered final and not subject to review by the Superior Court. Any questions can be directed to 860-297-5962.
You may authorize someone to work with the DRS on your behalf by completing Form LGL-001, Power of Attorney.
In certain situations, the Delaware Department of Revenue (DOR) all agree to settle unpaid tax debts for less than the amount due. They include:
- An inability to pay the full debt amount. (If this is the result of poor health, documentations from your doctor should be included with your submission.)
- There is question offer the validity of the debt you owe.
However, the state will only consider an Offer in Compromise if you are up to date filing all of your past DE tax returns. In addition, you must have paid off the entire initial tax debt first. The Offer in Compromise only applies to penalties and interest.
To submit an Offer in Compromise, you must write a statement requesting a decrease in the penalties and interest associated with your account, as well as complete the State of Delaware Collection Information Statement, and send it to your account assignee (found on any correspondence you have previously received from the DOR). If you have previously compromised with the IRS, also submit a copy of the compromise acceptance and documentation of the amount owed to the IRS prior to the compromise. This can be mailed to:
Delaware Division of Revenue
ATTN: Your account assignee
820 N. French St.
Wilmington, DE 19801
In Delaware, compromises will not be considered or calculated from January 1 to April 30 of each year. If you are due a refund that year that will pay off the balance of your debt, it will be used.
It typically takes 2-3 months for a decision to be reached. If accepted, you must sign and return the agreement for the compromise to become valid. This certifies that you are agreeing to file your tax returns and pay any amount owed on time for the next 5 years. If you fail to do so, the agreement will be nullified and the amount deducted from the compromised amount will be added back for collection in full.
Georgia residents may qualify for an Offer in Compromise if it is unlikely the GA Department of Revenue (DOR) will be able to collect the full amount due and the amount offered is reasonable. To potentially qualify, you must be up to date on filing your tax returns, received a final notice of assessment from the state regarding the taxes you owe, and not be involved in an active or open bankruptcy case. If you meet the required circumstances and wish to apply, one or the following must apply to your situation.
- It is unlikely the DOR will be able to collect the entire amount otherwise.
- There is doubt that you owe any or part of the assessed liability amount.
- Economic hardship would apply. In this case, you do not deny that you owe the assessed amount and you do agree that it would be possible to collect the entire amount owed. However, doing so would result in a severe economic hardship. If you are filing for an Offer in Compromise based on economic hardship, you must submit:
- A written narrative detailing your special circumstances and how paying the liability would result in economic hardship, along with supporting documentation.
- Form CD-14C Collection Information Statement for Wage Earners and Self-Employed Individuals
When submitting an offer, you must also send in a $100.00 nonrefundable application fee in the form of a check or money order. In the event your offer is accepted, the fee will be treated as part of the offer. (If your total monthly income is at or below poverty levels established by the U.S. Department of Health and Services, this fee is waived.)
The state of Georgia also requires the following:
- Form OIC-1, including required signatures
- If you are claiming doubt of collectability of economic hardship, you must also submit Form CD-14C.
- If you are claiming doubt of liability, you must submit a computation of what you believe is the correct amount due, a detailed explanation of how you computed this amount, and any supporting documentation.
- Additional supporting documentation including:
- Last 2 paystubs of any wage earners
- Complete copies of last 3 bank statements
- Detailed information on any claims of special circumstances, such as statement of illness, copies of actual monthly expenses or out-of-pocket physician’s medical costs.
You may submit your offer at https://gtc.dor.ga.gov or mail it to:
Georgia Department of Revenue
Offer in Compromise Program
1800 Century Blvd., NE, Suite 9100
Atlanta, GA 30345
Prior to making a decision, the DOR will review your Offer in Compromise packet and request any additional information they feel is pertinent. The DOR will recommend to the State Revenue Commissioner whether or not the offer should be accepted.
If your offer is declined, you have 14 days to respond to the DOR and make payment arrangements for the entire liability amount. If your offer is accepted, the accepted offer must be paid in full by the date on the acceptance letter or under the terms in a payment installment plan.
Hawaii residents can submit an Offer in Compromise to the state of Hawaii Department of Taxation in an effort to settle their tax liability for less than the amount owed for two reasons.
- There is significant doubt that you owe the amount claimed by the Department.
- It is unlikely the state would be able to collect the full amount of the liability, as well as penalties and interest due because the taxpayer has no assets, has minimal future earnings potential, or has a chronic health condition (a physician’s report must accompany this).
To submit an Offer in Compromise, you must include the following:
- A completed and signed Form CM-1, Offer in Compromise.
- Form CM-2, Statement of Financial Condition and Other Information
- In addition, the collector assigned to your account may request further documents, such as paycheck stubs, copies of property deeds, etc., as needed.
When the offer is submitted and all required documentation has been received, the collector will make an initial decision as to whether the offer should be accepted or rejected. He/ she can also recommend acceptance with modifications, which are open to discussion. If the taxpayer and collector come to an agreement, the collector will prepare a summary for division supervisors and the Director of Taxation. If the Director signs off on the offer, it is sent to the Governor for the final approval.
The taxpayer receives notification of approval or rejection. If approved, a collateral agreement may be required. By signing this, the taxpayer agrees to file future returns on time and pay any amount owed in full or the compromise will be voided. Once the approved compromise amount has been paid off (either in a lump sum or through an installment agreement, all liens against the taxpayer will be released.
The Idaho Department of Revenue (DOR) allows residents to submit an Offer in Compromise to settle their tax liability for less than the amount owed if paying the full amount would cause a financial hardship or if there is doubt concerning the amount owed. To be eligible, you must:
- Have filed your tax returns through the current period.
- Not be involved in a bankruptcy proceeding.
Residents of Illinois can only submit an Offer in Compromise after the assessment of tax liability has become final and if it is unlikely the state will be able to collect the entire amount of the debt. You should only submit your best possible offer (whether in a lump sum or part of a payment plan), as the state denies almost 2/3rds of Offer in Compromise requests.
When submitting your Offer in Compromise, you must include the following:
- Completed and signed Form BOA-1, Board of Appeals Petition
- Form BOA-4, Financial Statement for individuals
- Copies of your last three federal and state tax returns
- Bank statements detailing the last six months’ worth of activity
- Last 2 paycheck stubs
- If you are also submitting (or have already) an Offer in Compromise to the IRS for a federal debt, you must include a copy of this offer, as well as disclose whether it was accepted or declined.
In IL, you have the option of having an individual represent you in any matters pertaining to the Department of Revenue. However, you will need to complete Form IL-2848, Power of Attorney and submit it with Form BOA-1.
You can submit your packet to:
Illinois Department of Revenue Board of Appeals
100 W Randolph St., Suite 7-339
Chicago, IL 60601-3274
You also have the option of downloading the forms and filing online by going to this site. The state doesn’t provide any information on how long it will take for you to be notified of a decision. You may contact the Board of Appeals at 312-814-3004 with any questions.
Indiana residents may submit an Offer in Compromise in an effort to settle their tax liability for less than the amount owed in the following situations:
- You are experiencing financial difficulties make it impossible to repay the entire amount.
- There is a terminal/ critical illness within your immediate family.
- You have experienced a personal devastation as the result of an uncontrollable economic event or natural disaster.
To file an Offer in Compromise, you must not have any active bankruptcy filings and be current on all tax returns. If a legal action has already been filed against you, such as a bank account levy, collection suit, wage garnishment, or court-ordered appearance, an Office in Compromise cannot interfere with these proceedings.
You will need to submit:
- Form FS-OIC (completed and signed) and attach all supported documentation as outlined in the form.
- A Letter of Circumstance that details why you were unable to pay your taxes at the time they were due and why you currently cannot make arrangements to pay off the entire liability.
- If you have been involved in a bankruptcy, a copy of the Bankruptcy Discharge or Dismissal Notice.
- A medical statement from your physician explaining your (or your immediate family member) medical diagnosis and prognosis, if applicable.
Your completed packet can be mailed to:
Office of the Taxpayer Advocate
Indiana Department of Revenue
P.O. Box 6155
Indianapolis, IN 46206-6155
It usually takes between 15-20 days for the DOR to process your submission. They will notify you of their decision. You may contact them at 317-232-4692.
The Iowa Department of Revenue (DOR) allows residents to submit an Offer in Compromise to settle their tax liability for less than the amount owed if paying the full amount would cause a financial hardship or if there is doubt concerning the amount owed.
In Kansas, the Department of Revenue (DOR) refers to an Offer in Compromise as a Petition for Abatement (PFA). This allows you to settle your tax liability for less than is owed because paying the entire amount is not financially possible. It can also be used if there is significant doubt about the validity of final tax liability. To qualify, you must:
- Be up to date on filing your tax returns.
- Have made all estimated tax payments for the current year.
- Not be involved in an active bankruptcy proceeding.
When submitting a PFA, you are required to choose from one of two payment options, as well as submit a $50 application fee and your initial payment.
- Option 1: You pay 20% of your total offer amount down and the remaining balance in five or fewer payments.
- Option 2: You pay the first payment with the offer and the balance is paid in accordance to the proposed terms of your offer.
To be considered for a PFA you must submit the following:
- Form CE-5, Collectability Petition for Abatement
- Form CE-3, Individual Income Financial Statement
- Form CE-7, Individual Tax Waiver of Confidentiality
- Any supporting documents
- A $50 application fee
- Your initial payment
You may call 785-296-6124 and select option 2 to obtain a secure email address or submit your offer to:
Kansas Department of Revenue
Problem Resolution Team
P.O. Box 12005
Topeka, KS 66601-3005
Once a decision has been made, it is final and is not subject to review. If your offer is not accepted, your application fee and any payments you made with the offer or after the offer was submitted will not be returned.
The Kentucky Department of Revenue (DOR) will consider allowing you to settle you tax liability for less than you owe if you have a balance of $3,000 or more and:
- You agree to the liability, but can sufficiently prove that the DOR will be unable to collect the full amount due to extreme financial hardship.
- You doubt the liability and have sufficient evidence to support your assertions.
To submit an Offer in Compromise (or Offer in Settlement as it is referred to by the DOR), the state requires that you:
- Be current on all estimated tax payments.
- Be compliant with filing all tax returns.
- Not be actively involved in bankruptcy proceedings.
When submitting your Offer in Compromise to the DOR, you will need to include the following.
- KY DOR Offer in Settlement Application
- Form 12A638(I), Statement of Financial Condition for Individuals
- $500 nonrefundable fee that will be applied to your liability
- A recent credit report
- Copy of most recent federal and state income tax returns (including all schedules, W-2s, and 1099’s)
- Copies of bank statements for last three months
- Proof of income for last three months
- Other supporting documents as outlined in the application
In Kentucky, you have the right to have the right to appoint anyone to act as your registered agent before the DOR. However, you must complete IRS Form 2848, Power of Attorney before the DOR will speak with your agent.
You will be notified of the DOR’s decision, though no specific timeline is available. If your offer is rejected, you may submit another offer. However, it is highly unlikely it will be considered unless the proposed amount has increased.
The Louisiana Department of Revenue (DOR) will consider an Offer in Compromise if:
- There is doubt of collectability.
- There is doubt of your liability.
- The administration and collection costs would exceed the amount of your liability.
- The liability is $500,000 or less, exclusive of penalties and taxes.
- You are not currently under criminal investigation or prosecution is pending.
As a general rule, the DOR will only consider lump-sum payment offers. However, in some circumstances, they will consider offers that require payments to be made over time based on future income.
To submit an Offer in Compromise, you will need the following:
- Offer in Compromise packet, as well as additional documents listed in the packet
- If you are claiming doubt of collectability, you are required to obtain a financial statement made under oath.
- 10% of the offered amount. This is non-refundable and will be applied to your debt if your offer is not accepted. When the amount is paid in full, all state liens will be released.
- Form R-7006, Power of Attorney and Declaration of Representative, if you choose to be represented by a CPA, attorney, other enrolled agent (person authorized to practice before the IRS, or family member)
It may take up to 6 months to receive a decision. During this time, interest and penalties will continue to accrue on the unpaid debt. You can contact the DOR with any questions at 855-307-3893 (Baton Rouge) or 855-307-3893 (NOLA).
While any taxpayer can submit an Offer in Compromise for any tax liability owed, it is entirely the decision of the State Tax Assessor whether or not it is accepted. To submit an offer you must meet the following requirements:
- Have filed all tax returns due.
- If applying based on doubt of liability (reasonable doubt you owe the amount assessed), you are required to send a detailed explanation, as well as any documents that support your argument.
- If applying based on doubt of collectability (doubt you will be able to pay the debt in the foreseeable future), you must submit a complete and accurate personal financial statement.
To submit your offer, you will need the following:
- A letter detailing what you are offering and why accepting this offer is in the state’s best interest. The letter should also include:
- The exact amount of the offer, as well as any proposed conditions/ terms.
- If you are claiming doubt of liability, an explanation of why doubt exists and supporting documents.
- If you are claiming doubt of collectability, a complete financial statement is required. The state does have Personal Finance Statement that you may find beneficial, but it is not required. In addition, a copy of your most recent federal tax returns and your two most recent paycheck stubs.
You may submit a certified check or money order with your offer. However, you have up to 30 days after your offer is approved to submit a single payment in cash, money order, or check that covers the compromised amount. In some cases, the state will allow you to set up a payment plan, which should be detailed in your offer.
You should submit your documents to:
Maine Revenue Services (MRS)
PO Box 1060
Augusta, ME 04332-1060
If you have an agent handling your case, write his/ her name in the lower left corner of the envelope.
Your offer may be accepted, rejected, or a counter offer may be presented. When an agreement is reached, the MRS will prepare an agreement for your signature, which will need to be returned.
To apply for an Offer in Compromise, you must meet the following requirements.
- You do not have the resources to pay off your entire tax liability at the present time and it is highly unlikely you will be able to make a payment in full in the foreseeable future due to your financial situation.
- You have used up all other administrative appeal options. (If any of your tax issues can be appealed, you cannot make an offer.)
- A period of two years must have passed since you became liable for the tax debt.
- You are not currently involved in a bankruptcy.
- All of your required tax returns have been filed.
Before submitting your Offer in Compromise, you will need to complete and sign the following forms, as well as obtain any requested documents listed on the forms.
- Form MD 656, Offer in Compromise
- Form MD 433-A, Individual Collection Information Statement
- If you are citing insufficient resources or economic hardship as your reason for requesting an Offer in Compromise, you will also need to include a complete financial statement.
- If you are citing doubt of liability, you must include a detailed explanation of why you feel you do not owe the amount.
Offers in Compromise should be mailed to:
Offer in Compromise Program
Comptroller of Maryland
301 West Preston St., Room 203
Baltimore, MD 21201
You will be notified of the decision, though no specific timeframe is available. All decisions are final and not open for appeal. If your offer is accepted, you must remain current on all tax filings for the next 3 years or you will become responsible for entire liability. In some cases, the Comptroller may determine your offer is insufficient and advise you of an amount that would be deemed acceptable. Questions can be directed to 410-767-1557.
The MA Department of Revenue (DOR) accepts Offers in Settlement and has an informative pamphlet available to guide you through the process of coming up with an acceptable offer. If you plan to submit an offer, your tax return filings should be up to date. In addition, all liabilities not included in the offer must be paid before the offer will be reviewed.
The forms and documents you will need to submit with your offer include:
- Form M-656, Offer in Settlement
- Form M-433-OIS, Statement of Financial Condition
- Form OIS/ AB, Taxpayer’s Consent
- If you plan to have someone else represent you in matters regarding the DOR, you will also need to complete Form M-2848, Power of Attorney and Declaration of Representative. This can be revoked at any time.
- Additional documents, such as paycheck stubs, mortgage statements, and more may also be requested.
You can submit your information to:
MA Department of Revenue
218 South Main Street
Fall River, MA 02721
Attn: Collections/ Offer in Settlement
If the liability will be reduced by more than half, or by more than $20,000, the Attorney General must review the settlement offer for final approval. It may take up to a minimum of 180 days for a decision to be reached. You will receive an acceptance or denial letter. Any questions can be directed to 617-887-6400.
The Michigan Department of Treasury began offering an Offer in Compromise program in 2015. You may qualify if:
- There is doubt about the collectability of your liability.
- There is doubt about your liability for the amount of the debt.
- You have a federal Offer in Compromise in place for the same tax years.
You may not submit an offer if you are currently in the middle of a bankruptcy proceeding or if the tax liability in the offer hasn’t been assessed by the Department of Treasury.
When an offer is pending, the state will not levy any assets or property mentioned in the offer, but penalties and interest will continue to accrue on the liability. When proposing an Offer in Compromise, the state limits residents to three payment options. They only take effect when the offer has been accepted and include:
- Lump sum payment of the proposed amount
- Payment in 5 or less unequal monthly installments
- Equal monthly payments spread over 6 or more months.
When submitting your Offer in Compromise, you will need to include the following:
- Form 5181, Offer in Compliance
- If you are applying based on an accepted federal Offer in Compromise, you will need to fill out and follow the instructions on Form 5182, Schedule 1- Information Supporting a Request.
- If you are claiming doubt of liability, Form 5185, Schedule 3 – OIC Based on Doubt as to Liability should be included.
- A fee of $100 or 20% of the offer, whichever one is greater. This should be sent in the form of a check or money order and be made payable to State of Michigan – Offer in Compromise.
- Offer in Compromise Checklist
When you have everything together, you should mail it to:
Michigan Department of Treasury
Offer in Compromise
PO Box 30190
Lansing, MI 48909
You will be notified in writing once a decision has been reached. If your offer is rejected and you believe it was the result of Treasury personnel error, adoption of a wrong principle, or fraud, you may request an Administrative Review of Rejected Offer (Form 5186). Your request must be received within 30 days of the date on the rejection letter.
The Minnesota Department of Revenue (DOR) will consider an Offer in Compromise in extraordinary situations only. The DOR clearly states that lack of funds is not enough to justify a Compromise in Offer. In almost all cases, the DOR requires that the compromised offer be paid in a single lump sum.
You will need to fill out and/ or obtain the following before submitting your Offer in Compromise request.
- Form C58C, Compromise Application, including the attached Compromise Questionnaire, which asks for your compromise offer, when it will be paid, the source of the funds, and other information. (If the form is incomplete, it will be denied.) You must submit an offer that indicates the maximum amount you can pay. In instances of financial hardship, you may submit an offer of zero dollars.
- A $250 nonrefundable deposit in the form of a check made payable to the Commissioner of Revenue. In cases of financial hardship, this fee may be waived. You will need to submit a written explanation, along with supporting documentation, with your application.
- Additional information listed on Form C58C, suck as bank information, income and expense verification, and loan denials from a minimum of 2 financial institutes that include the maximum amount they are willing to loan you.
- If you want someone to represent you in front of the DOR, you will need to complete Form REV184, Power of Attorney. Only an individual who is eligible to practice before the DOR can represent you.
Your application, fee, and paperwork should be mailed to:
PO Box 64447-CMP
St. Paul, MN 55164-0447
In most cases, a decision is made within 60 to 90 days. If approved, you will receive a written compromise agreement that must be signed and returned. You will need to include your payment in the form of a money order or cashier’s check. Any liens will be released within 30 days of the payment being processed. If you have any questions, the DOR can be contacted at 651-556-3003 or 1-800-657-5116.
Once a decision has been made, there are no formal rights to an appeal. However, you can submit a reconsideration request to:
Taxpayer Rights Advocate Office
PO Box 7335
St. Paul, MN 55107-7335
The Missouri Department of Revenue has an online booklet available to help taxpayers through the process of filing an Offer in Compromise. In order to qualify, you must be able to prove:
- Doubt of liability, or a belief that you do not owe the liability, as well as supporting documentation.
- Doubt of collectability, or an inability at the present time to pay off the full amount
- That a severe economic hardship will result if the entire debt is collected.
When making your offer, the amount must be more than zero if you are claiming doubt of collectability. If you intend to pay within 30 days of receiving your decision, check cash offer on Form MO-656. If it will take you more than 30 days to make the payment, select short-term deferred payment.
To apply, you must submit the following:
- Form MO-656, Offer in Compromise
- Any additional documentation outlined on the form, such as bank statements. If the debt is less than $50,000, you will need 3 months of statements, while you will need 6 months if your debt exceeds this amount.
- If you choose to have someone handle your Offer in Compromise for you, you will need to complete Form 2827, Power of Attorney.
Your forms and accompanying paperwork should be mailed to:
PO Box 1646
Jefferson City, MO 65105-1646
The state does not offer a timeframe for decisions. You will be notified in writing when one is made. If accepted, you must remain complaint with your tax filings and payment requirements over the next three years or you will be held responsible for the original amount, as well as accrued interest. Rejected offers are not subject to appeal. To contact the DOR, call 573-751-7200.
The Montana Department of Revenue (DOR) offers minimal information on requests for Offer in Compromises except to say that it allows taxpayers to pay a lump sum payment that is less than the original tax liability. You can request an Offer in Compromise by writing an explanation as to why you are unable to pay your entire tax liability and submitting it to:
Montana Department of Revenue
PO Box 6308
Helena, MT 59604
The state doesn’t provide a timeframe for decisions. For any questions, you can contact the DOR at 1-866-859-3354 or 406-444-6900.
The Nebraska Department of Revenue (DOR) allows you to submit an Offer in Compromise for less than the amount of the tax liability you owe provided you meet the following criteria:
- You aren’t disputing the tax liability itself, as well as interest, penalties, and costs involved.
- You are not currently in the process of a bankruptcy proceeding.
The DOR doesn’t have specific forms for requesting an Offer in Compromise. Instead, you should write a statement detailing why you are unable to pay off your liability, as well as a proposal for a compromised amount. Your statement and attached proposal can be submitted to:
Nebraska Department of Revenue
PO Box 94818
Lincoln, NE 68509-4818
You can contact the DOR by calling 402-471-5729 or 1-800-742-7474.
The Nevada Tax Commission (NTC) allows you to submit an Offer in Compromise for the following reasons:
- There is doubt they will be able to collect the debt. In this situation, you will need to complete the Nevada NTC Personal Financial Statement and submit any requested attachments as listed as the bottom of the statement.
- There is doubt of liability. In this case, you will need to submit a written statement detailing why you do not feel you are responsible for the tax liability and provide what you believe is the correct amount of tax, interest, and penalties you are responsible for.
- There are exceptional circumstances involved and having to pay the entire liability would create a hardship or be inequitable and unfair.
Offers can be submitted as a lump sum payment or in the form of an installment plan. However, before making an offer, you must make certain you have exhausted all administrative petition rights. To submit your request, you will need the following:
- Nevada Offer in Compromise form, as well as any documents requested on the form
- Offer in Compromise Waiver of Limitation form
- Nevada NTC Personal Financial Statement, if you are claiming that it would be impossible for the NTC to collect the entire amount.
- A written statement, if you doubt the amount of the liability.
- In the event the NTC contacts you and requests additional information, you must submit it within 30 days or your offer will not be processed.
The NTC requests that forms/documents be emailed as an attachment to firstname.lastname@example.org with “Offer of Compromise” in the subject line. The NTC will contact you when they have received your offer.
If your offer is accepted you must file all tax returns and pay any required taxes on time for the next 5 years or until the offer has been paid in full. If you fail to do so, you may become responsible for the original amount, as well as interest. The NTC can be contacted at 1-866-962-3707.
The NY Department of Taxation and Finance (DTF) does offer an Offer in Compromise program for financially distressed individuals who can pay a reasonable portion of their current tax liabilities. To qualify, you must meet the following criteria:
- You have been discharged in a bankruptcy proceeding or have been proven to be insolvent.
- Submitting a payment in full would result in undue economic hardship.
- You doubt the liability amount.
Although the DTF does state they are in the process of updating their forms, this is currently what you will need to submit when applying for an Offer in Compromise:
- Form DTF-4, Offer in Compromise For Liabilities Not Fixed and Final and Subject to Administrative Review This form should only be used if your liability has not been declared final.
- Form DTF-4.1, Offer in Compromise for Fixed and Final Liability
- Form DTF-5, Statement of Financial Condition and Other Information, as well as the list of documents requested on the final page of the form.
- If you requesting relief from economic hardship, you will also need to include a statement that details the economic hardship you would experience if made to pay the liability in full, as well as any supporting documents.
The DTF requests that you submit your forms and additional documents (along with one additional copy of each form) to:
Offer in Compromise Program
PO Box 5100
Albany, NY 12205-0100
The state does not offer a decision timeframe. If your offer is accepted, you may be asked to sign a collateral agreement to ensure you are compliant and your liability is collected to the fullest extent possible. You are only allowed to submit one Offer in Compromise for a certain period, whether your offer is accepted or not. You can contact the Offer in Compromise Program with any questions at 518-457-9086.
The North Carolina Department of Revenue does offer an Offer in Compromise booklet designed to walk you through the application process, explain what is evaluated when determining whether an offer is accepted or denied, and answer any questions you may have. You can only file an Offer in Compromise if the DOR has completed a final assessment of your liability. All offers must exceed $1.
To submit your Offer in Compromise, you will need the following:
- Form OIC 100, Offer in Compromise
- Form OIC-1062, Collection Information Statement for Individuals. All sections on Form OIC 100 and 1062 should be completed. If something does not apply, write “N/A.”
- Form OIC 102, Third Party Affirmation of Offered Amount, only if your source of funds is “third party.”
- Complete copy of last 3 bank statements (all accounts) and complete copy of last 2 federal tax returns.
- If employed, last 2 months paycheck stubs
- Substantiation of claimed expenses and special circumstances
- Any additional information you feel is pertinent to your request
- 20% of your proposed compromise amount in the form of a certified check. If your income falls below the federal poverty guidelines or you are submitting Form OIC 102, an exception may be made.
You should submit your offer to the service center serving the county you reside in. This information can be found on page 7 of the booklet.
The 52nd Biennial Reports states that the Tax Commissioner has the ability to do the following:
“14. May waive, upon a showing of good cause, any and all tax due. A lien must have been filed against the debtor’s property and the Attorney General must approve the waiver. Further, a debtor’s individual income tax liability may be reduced based upon a federal offer in compromise.”
However, it does not offer any information on how you would go about doing this. Additionally, there is no information on the Office of State Tax Commissioner’s website regarding this. You can contact the Individual Income Tax Division at 701-328-1247 with any questions.
The Ohio Attorney General has prepared a packet that offers information on the Offer in Compromise Program and contains all of the forms needed to submit your offer. Based on the instructions, the packet should be printed, completed, and signed. If you fail to complete all of the required forms and/ or send in the additional documents requested on pages 6-7, your Offer in Compromise will immediately be rejected.
You should not attempt to email or fax your packet. Instead, everything should be mailed to:
Ohio Attorney General
Collections- Offer in Compromise
150 E. Gay St. – 21st Floor
Columbus, OH 43215
If your offer is accepted, you must submit the entire amount in the form of a money order or certified check within 60 days of date on the letter of acceptance unless the Attorney General has agreed to a different payment arrangement.
The Oklahoma Tax Commission allows residents to file an Application for Settlement of Tax Liability. If you meet the following requirements, you are eligible to apply:
- Your tax liability is final.
- You have exhausted all appeals and administrative remedies.
- You are current with all your required tax filings.
- You are not involved in an open bankruptcy proceeding.
- You are not under investigation or awaiting prosecution by the state for a tax related crime.
If you meet these criteria, you should print out the 28-page Application for Settlement of Tax Liability, which includes all forms you will need to complete, as well as easy to follow instructions for submitting your application and the address it should be mailed to. Be aware that the application will be declined if you fail to fully fill out all the forms and/ or submit the requested additional documentation.
If your application is denied, you will be notified by mail. According to Oklahoma law, there is no provision for appeal if your application is denied.
The Oregon Department of Revenue does accept Settlement Offers in the event you are unable to pay your entire tax liability. However, you must meet all of the following conditions to qualify:
- You’re not involved in litigation or bankruptcy.
- You don’t have the income or assets to pay your liability in full.
- You can’t sell your assets or borrow against them to pay your liability in full.
- You have not completed another settlement offer since October 1, 2001.
- You are not appealing your tax debts.
- You have filed all required Oregon tax returns.
If you would like to make an offer, you should print out the Oregon Settlement Offer Application. This packet includes all of the forms, as well as a list of the supporting documentation you will need to submit an offer. When you submit your application, you are required to send in a nonrefundable payment that is equal to 5% of your settlement offer amount. This can be paid via money order, cashier’s check, or cash.
In most cases, a decision is made within 30 days. You will be notified in writing of the decision. If accepted, you will have 10 days to pay the entire settlement amount. If you are unable to do this, you may request a payment plan that is spread across six months. If your settlement is denied, it cannot be appealed. However, you do have the option of filing another application along with a 5% payment of your newly proposed settlement amount. If you have any questions, you can call 503-945-8824. Ask to speak with a settlement offer agent.
The Rhode Island Division of Taxation does allow you to submit an offer to compromise any tax, fees, penalties, interest, or other charges that are deemed uncollectable, illegal, or excessive by the Tax Administrator and Director of Administration.
To make an Offer in Compromise, you will need to do the complete the following and submit it:
- Form RI-656, Offer in Compromise
- Form RI-433A, Collection Information Statement for Wage Earners and Self-Employed Individuals
- Prepare a written request that includes:
- The type of tax
- Amount of abatement you are request
- The reason for your abatement request
- Any information related to an Offer in Compromise you have submitted to the IRS
This information should be signed and mailed to:
State of Rhode Island
Department of Revenue
Division of Taxation
One Capitol Hill
Providence, RI 02908-5812
You will be notified in writing when a decision is made. If accepted, you must pay the full amount within 30 days of the date on the acceptance notification. If rejected, any payment remitted with the offer will be returned to you without interest.
The Tennessee Department of Revenue (DOR) has compiled an Offer in Compromise Application that is available online and at the DOR. This packet includes all of the forms you need to submit an offer, as well as instructions for completing and mailing them. On page 18, you will find a list of additional documentation you will need to attach to your application. The packet also includes a list of mailing addresses where you should mail your completed forms for consideration, depending on where you live.
The DOR will notify you by mail whether your application is accepted or denied. If accepted, you must pay your proposed settlement amount by the date listed on your acceptance letter. If you fail to comply with the terms of the agreement, it may be voided and you will be held responsible for the full amount due. If declined, you will need to make arrangements to pay your debt. TN law does not include a provision for appealing a denied offer.
You will need to do the following before submitting an offer:
- Complete Form TC-410, Utah Offer Request
- Complete Form TC-805, Collection Information for Individuals
- Obtain the supporting documents requested on page 2-3 of the booklet.
To determine where you should mail your offer request, see page 5 of the booklet.
The Utah State Tax Commission has prepared this information sheet regarding Offers in Compromise, as well as a complete Offer in Compromise Booklet. You may be eligible for consideration of an offer if you meet the following:
- You can provide proof, including financial records and statements, that you cannot pay the entire tax liability in full, within a timely manner.
- You can provide proof that you don’t owe the amount of tax liabilities due, based on substantiated information.
- You have filed all your required tax returns.
- You’re not involved in a bankruptcy proceeding.
- You have exhausted all payment options with the Tax Commission.
The booklet provides detailed information on how to file your Offer in Compromise. It contains all the forms you will need to complete, as well as a list of all supporting documentation you will should send on pages 3-5. On page 5 of the booklet, you can determine where you should mail your offer.
The state will not attempt to collect your liability while evaluating your offer.
The Tax Commission may determine that your offer amount should be higher to justify acceptance. In this case, you will receive a Notice of Proposed Offer Request Amendments letter and 30 days to amend your offer.
You will be notified in writing of the decision. If accepted, your payment must be made by the date listed on the acceptable letter. If your offer is rejected, the letter will provide an explanation and you will be given the opportunity to request a review. Once the Taxpayer Services Division Management has reviewed your request, a final written decision will be issued. This is final and cannot be appealed.
According to the VT General Assembly,
“(4) the taxpayer may propose a collection alternative, including a payment plan or offer in compromise, but only if there has been a change in the taxpayer’s Vermont tax liability based on a change in his or her federal tax liability since the Vermont liability was assessed.”
However, the Department of Taxation does not provide information on how to file an Offer in Compromise. You can contact the Collections department at 802-828-2518 to determine how you should proceed.
The Virginia Department of Taxation will consider an Offer in Compromise in the following situations.
- You are unable to pay the bill (doubt of collectability), which can be supported with a current financial statement.
- You question the amount of your liability (doubt of liability) and can provide a detailed explanation as to why.
- You may request a Waiver of Penalty if extenuating circumstances caused you to file late or make a late payment. In cases of doubtful collectability, taxes and interest may be waived.
To submit your offer, you will need the following forms and information:
- VA Offer in Compromise Individual Request for Settlement and attach supporting documents
- VA Financial Information Statement
You can submit your offer, including completed and signed forms and attachments, to:
VA Department of Taxation ATTN: CICT
PO BOX 2475
Richmond, VA 23218-2475
You will receive a letter once a decision has been made, though the state doesn’t offer a timeframe for how long this may be. If accepted, you must meet all the terms outlined in the letter or the acceptance will be voided. If denied, you may resubmit your Offer in Compromise if there is new/ additional information that should be considered. For any questions, you can call 804-367-8031.
According to the Washington State Department of Revenue (DOR), Rule 100 allows the DOR to settle tax disputes in the following situations:
- This is a nonrecurring issue.
- Strictly following tax collection laws could have harsh consequences.
- There is conflict between a rule, statue, or written instructions to the taxpayer.
- It is uncertain what the decision would be if the situation were presented in front of a court of law.
The DOR does not consider settlements if the reason for your request is an inability to pay. You may contact the Compliance Division regarding a payment plan or other resolution.
To submit an offer to the Administrative Review and Hearings Division (ARHD), you should complete the following:
You should mail the above forms and any additionally requested information to:
Department of Revenue
Administrative Review & Hearings Division
PO Box 47460
Olympia, WA 98504-7460
Collection efforts will be suspended during the review process. The ARHD will inform you when your offer has been received. If your offer is accepted, the ARHD will prepare a Closing Agreement, which specifically states the terms of the settlement and must be signed by yourself and the DOR before your dispute is considered to be settled. You can contact the DOR ARHD at 360-534-1335 with any questions.
The West Virginia State Tax Department will consider an Offer in Compromise if:
- There is sufficient doubt the liability can be collected in full.
- There is doubt as to whether you owe the liability.
In order to submit an offer, you must have filed all of your required tax returns. While your offer is pending, the collection period will be suspended. You may submit an offer in a lump sum payment or a payment plan, which cannot exceed 2 years.
To file your offer, you will need to complete, sign, and submit the following:
- Form CD-3, Offer in Compromise
- Form 433A, Collection Information Statement for Individuals, along with any substantiating documentation
- If you intend to have someone represent you in matters with the State Tax Department, you should also complete and submit Form WV-2848, Authorization of Power of Attorney.
You should mail your Offer in Compromise request, along with all required forms and additional documentation to:
Office of Tax Appeals
1012 Kanawha Blvd. E. Suite 300
Charleston, WV 25301
The State Tax Department does not offer a timeframe for decisions. To check the status of your offer or for any questions, you can call 304-558-333, 304-558-1666, or 1-800-982-8297.
The Wisconsin Department of Revenue (DOR) allows you to submit an Offer in Compromise if your tax liability is so large that you could never repay the entire amount, even over a period of time. To submit an offer, you will need to do the following:
- Complete Petition for Compromise of Taxes Based on Inability to Pay
- Obtain all of the supporting documents requested on the Petition for Compromise Application Checklist. The checklist must be submitted with your Petition or your application will be considered incomplete.
You can submit your offer to the collection agent you have already been working with. If you have not been assigned an agent, you should submit your offer to the district office closest to you. (This information can be found on the last page of the petition.)
In most cases, the DOR will make a decision within 45-90 days of receiving your paperwork. There are three possible scenarios:
- Your offer is accepted. In this case, you must submit the full amount of your accepted offer within 10 days of the date on the acceptance letter or in an installment plan approved by the DOR.
- Your offer is rejected, but the DOR proposes a counteroffer.
- Your offer is rejected and you are referred to a collection agent to determine your best option for paying your liability. If your offer is rejected, you do have the option of refiling a new petition. However, it is unlikely to be approved unless your financial situation has deteriorated or you are suggesting a higher offer.
You can contact the DOR at 608-266-2486 with any questions.
District of Columbia
The District of Columbia Office of Tax and Revenue will consider an Offer in Compromise if you meet the following requirements:
- You lack the resources to pay your outstanding liability.
- You are unlikely to be able to pay off your entire liability within the statute of limitations (10 years).
- You are not involved in an open bankruptcy proceeding.
- You have exhausted all other avenues of appeal.
- You hare current in filing all of your required tax returns.
The District of Columbia has prepared an Offer in Compromise booklet, which includes information on all forms you should complete, such as:
The booklet also provides a list of additional documents you are required to submit, instructions for determining the amount of your Offer, and the mailing address you should send everything to. In DC, if you are submitting a lump sum offer, you must include a certified check, money order, or credit card information for 100% of the amount you are offering. If you are requesting periodic payments, you must submit a 20% first payment with your packet.
You will be notified by mail regarding your offer’s acceptance or denial, though no timeframe is provided. If your offer is rejected, you may submit another offer with different payment terms within 30 days of the date on the denial letter.