On January 1, 2015, the State of Michigan launched its new Offer in Compromise (OIC) program (learn more about OICs by clicking here). This program is designed to allow eligible taxpayers to compromise their current outstanding tax debts for an amount less than they owe. Both individuals and businesses are eligible to apply for this new program.

Three options for compromising tax debt

Taxpayers will allow to compromise the payment of a tax, unpaid account, or amount due to the State of Michigan if they qualify by one of the three ways:

A federal offer has been granted for the same tax years

• Doubt as to Collectability
• Doubt as to Liability
• Based on Receipt of a Federal Offer in Compromise

An Offer in Compromise based on Receipt of a Federal Offer in Compromise allows a taxpayer to request that the State compromise their tax debt based on the fact that the IRS has already reviewed and accepted a federal offer on the same periods. Proof of the accepted offer must be submitted with the State offer.

Based on Doubt as to Collectability

An Offer in Compromise Doubt as to Collectability (OIC-DATC) applies to taxpayers who, based upon a financial hardship, are unable to pay their tax debt in full. An OIC-DATC requires a taxpayer to submit full financial information regarding their monthly income, monthly expenses, and current assets. Using this information, the State will determine whether a hardship exists that warrants a compromise of the debt.

Based on Doubt as to Liability

An Offer in Compromise Doubt as to Liability applies when a taxpayer does not believe that they owe the underlying debt. For this type of offer, a taxpayer must submit a statement of why they do not believe that they owe the debt and substantiation supporting their claim.

Once an offer has been submitted, the State may accept, reject, or adjust the amount that they are willing to accept for an offer. Once an offer is accepted, the taxpayer must meet all of the conditions of the offer or they are subject to default. If an offer is defaulted, the taxpayer will be responsible for the full amount of the tax and all accrued interest and penalties.

Although not all taxpayers will qualify for the State’s new offer program, for those that do qualify, an Offer in Compromise presents a great option for taxpayers to resolve their State tax liabilities for less than they currently owe.

If you have more questions, please check out FAQ about the Michigan Offer in Compromise program or contact us at 877-829-2455 to see if you qualify for the program or schedule a initial consultation online.