When there is a tax debt owed, tax professionals can assist their clients in working out an Offer in Compromise (OIC). This is where the taxpayer and tax collector come to a legal agreement for payment that is often less than what is due but ensures collectibility. This can be done on the federal level, as well as in most states.
State-specific, non-federal offers in compromise are a useful tool for tax practitioners because generally, clients will also have state and local tax issues along with their federal tax issues. It is important to be aware of the rules and procedures in your home state, as well as any other areas where you practice.
Not all states have Offer in Compromise as an option. The following states currently have no OIC options to resolve tax debt:
- New Mexico
- North Dakota
- South Carolina
- South Dakota
The other thirty-eight states do offer OIC as one option for taxpayers to settle their tax debt for less than what they owe. Tax practitioners should thoroughly research state and local rules in their region in order to ensure that their clients are receiving the best possible information before submitting their OICs. Here is a list of the state-specific offers in compromise. If you’re looking for tips for getting a federal OIC accepted, check out this blog post.
Arizona: After meeting the eligibility criteria outlined in the Arizona Department of Revenue’s website and booklet, taxpayers have an opportunity to work out an offer (Arizona Revised Statute (ARS) §42-1004.B).
Arkansas: To check out the requirements on who may qualify for Offer in Compromise, contact the Arkansas Revenue Division of the Department of Finance and Administration and request Form 2000-4.
California: Taxpayers can consult the California State Franchise Tax Board for more details on whether they qualify for Offer in Compromise, via their Offer in Compromise Booklet and Application for Individuals or their Offer in Compromise Booklet and Application for Business Entities.
Colorado: Detailed information is provided to interested taxpayers and tax professionals about offers in compromise at the Colorado Department of Revenue website.
Connecticut: When it comes to outlining the steps for making an offer, the State of Connecticut Department of Revenue Services provides helpful information via online publications.
Delaware: In this state, OICs are only available to taxpayers who are filing for bankruptcy— details available at the Delaware Division of Revenue website.
Hawaii: Those who seek an OIC while living in Hawaii can contact the State of Hawaii Department of Taxation and request Form CM-1 after determining if they qualify.
Illinois: As outlined in Title 86 Part 210 Section 210.115 of the Illinois Department of Revenue Regulations, taxpayers may petition for Offer in Compromise in order to settle state tax debt.
Indiana: The first stop for taxpayers interested in an OIC is the website of the Indiana Department of Revenue, where they can access Form FS-OIC.
Iowa: Offer in Compromise information is located on the Iowa Dept. of Revenue website, where taxpayers can access general information, eligibility requirements and forms.
Kansas: While the Kansas Department of Revenue doesn’t strictly allow taxpayers an Offer in Compromise option, they provide for a similar process with the appropriate forms available online.
Kentucky: Residents of this state may contact the Kentucky Dept. of Revenue to explore whether they are eligible for an Offer in Compromise, and then use Form 12A018 to submit an offer.
Louisiana: Submitting an OIC application to the Louisiana Department of Revenue means downloading and completing the forms as provided in their helpful online booklet.
Maine: To determine who qualifies for Offer in Compromise, the Maine Department of Administrative and Financial Services gives details on their website about eligibility, forms, and the application process.
Maryland: As in most states, taxpayers can learn all they need to know about Maryland’s Offer in Compromise policies via the Maryland Department of Revenue’s helpful website.
Massachusetts: The state accepts offers (per Massachusetts General Laws, Chapter 62C, s 37A) from eligible taxpayers, once they follow the instructions as provided by the Massachusetts Department of Revenue via their website.
Michigan: Residents here can apply for an OIC by looking up the Michigan Department of Treasury website to access the outline of the process and the appropriate forms.
Minnesota: Similar to many other states, the Minnesota Department of Revenue offers forms for taxpayers to use to start their application for an Offer in Compromise, including Form C58C.
Mississippi: Only recently has the Mississippi Department of Revenue allowed residents of the state to take care of their tax debt via Offer in Compromise. The application form is available on its website.
Missouri: The Frequently Asked Questions section on the Missouri Department of Revenue’s website is an excellent place for taxpayers to start learning how to apply for an Offer in Compromise for their personal state income tax debt.
Nebraska: In this state, each OIC is considered on its own merits according to state statute, but the process can only be instigated by the state, as outlined on the Nebraska Department of Revenue website.
Nevada: As there is no state income tax for residents, most people won’t need to worry about an Offer in Compromise, but if they need more information, the Nevada Department of Taxation offers a helpful form.
New Hampshire: Using Form CD-410, taxpayers can work with the New Hampshire Department of Revenue on an Offer in Compromise through a Settlement Agreement Offer.
New Jersey: When taxpayers want to explore a process similar to an offer in compromise with the New Jersey Department of Revenue, they can use Form 906 to get started.
New York: There is all kinds of information regarding offers in compromise for taxpayers via the website of the New York State Department of Taxation and Finance, including forms, resources and additional help.
North Carolina: To settle any tax liability with their state income taxes, residents of North Carolina can contact the NC Department of Revenue for a booklet that provides more instruction, both for individuals and businesses.
Ohio: Residents of the state can turn to the Ohio Department of Taxation to learn more about its Offer in Compromise program.
Oklahoma: The compliance division of the Oklahoma Tax Commission allows for Offer in Compromise through their Application for Settlement of Tax Liability.
Oregon: The Oregon Department of Revenue has produced a helpful packet of information for taxpayers, including details on offers in compromise.
Pennsylvania: When a taxpayer deals with the Pennsylvania Department of Revenue, they must use Form DBA-10 to start an offer in compromise.
Rhode Island: Read more about how the Rhode Island Division of Taxation deals with offers in compromise at their website and get links to different forms.
Tennessee: Visit the Tennessee Department of Revenue website, which provides an offer in compromise booklet that outlines the process in full.
Utah: Taxpayers in Utah can work out an offer with the Utah State Tax Commission after filling out an Offer in Compromise Request via Form TC-410.
Virginia: When it comes to Offer in Compromise, residents can visit the website of the Virginia Tax Agency for information and forms.
Washington: Although it isn’t known as an offer in compromise, the Washington Department of Revenue allows residents to utilize Rule 100, which is a settlement process for tax debt.
West Virginia: Form CD-3 is all it takes for taxpayers in West Virginia to work with their state tax department on an OIC.
Want more tips and information on successfully negotiating federal offers in compromise? Check out our foolproof guide to getting your Offer in Compromise accepted by the IRS.