New York State Tax Relief Program

The New York State tax relief program offers options for people who owe back taxes. The Department of Taxation and Finance (DTF) is known for being fair and consistent. Some programs let you pay over time.

Others help you settle for less if you’re facing financial hardship. This guide outlines your options and explains what happens if you don’t pay. Since rules can change, it’s best to speak with a licensed tax professional.

What Are the Best Tax Relief Firms in New York?

The best tax relief firms in New York include a range of firms led by licensed tax professionals. These companies focus on helping clients find customized solutions to their tax problems, whether they're dealing with the IRS, the NY DTF, or any other state revenue agency. When looking for a tax relief firm, you may want to stay away from the big nationwide firms that use a business model based on large marketing budgets and aggressive sales teams. Instead, you want a local firm with visible tax professionals, a history of solid customer reviews, and a commitment to honesty and transparency. Check out our post on New York's best tax relief firms. 

Contact the New York State Department of Taxation and Finance:

• Individual Taxpayer Assistance: 518-457-5181
• Business Taxpayer Assistance: 518-457-5434
• General Inquiries: 518-485-6027
• Collections Number: 518-457-5434
• Offer in Compromise: 518-591-5000
• Website: https://www.tax.ny.gov/

NY State Individual Tax Resolution Options

How to Pay Taxes in New York

You can pay your taxes online, through the mail, over the phone, or even in person. Our guide to how to pay NY state taxes covers the options and looks at deadlines for state tax payments.

NY Installment Payment Agreement (IPA)

DTF offers payment plans for taxpayers who can’t pay in full. They review your history, finances, and whether you meet their rules before approving an IPA. You’ll make monthly payments, but interest and penalties keep adding up. Most plans give you up to 72 months to pay, usually through direct debit.

Read more here about the different IPAs available and how to apply.

12-Month Currently Not Collectible Status (Hardship)

If you don’t qualify for an IPA, you can apply for hardship status under the New York State tax relief program. It usually lasts one year.

You’ll need to file a form and update your financial info each year. This option works well for retirees or those with disabilities because their income likely won’t change. The state often files a tax lien or warrants during this time.

It is comparable to obtaining a CNC status from the IRS. Unlike the IRS, the DTF does not publicly discuss this option, and there are no formal procedures. However, it is available for taxpayers facing difficult situations. For example, unemployment, illness, family issues, fire or floods, and severe decreases in income.

Innocent Spouse Relief (ISR)

NYS does offer Innocent Spouse Relief as an option for spouses or former spouses who filed a joint tax return. There are three types of innocent spouse relief options available:

• Innocent Spouse Relief
• Separation of Liability
• Equitable Relief

Generally, ISR is best for spouses or former spouses who did not know and had no reason to know a joint tax return they signed had an omission or error. Furthermore, the spouse believes that DTF should not hold him or she responsible for the understatement of tax.

NY Business Tax Options

In NY state, withholding tax and sales taxes are “trust” fund taxes. Businesses collect them from customers or employees and must send them to the state. Unpaid trust taxes are serious, and New York handles these cases individually. Below are common options for businesses with NYS tax debt.

Installment Payment Agreement – IPA

In most cases, NY State requires a down payment of around 20% before they agree to an IPA. However, DTF may still grant an IPAs without a down payment.

Offer In Compromise – OIC

The New York State tax relief program offers an OIC, like the IRS version. NY is more selective about who qualifies. It’s open to individuals or businesses that are insolvent or discharged through bankruptcy.

Some solvent taxpayers may also qualify if paying would cause undue economic hardship. The offer must reflect your asset equity and future disposable income.

For businesses, NY usually won’t accept an offer for less than the amount of trust fund taxes owed. You may be able to settle the principal and exclude penalties and interest. However, income taxes follow different rules. A “responsible person” personally assessed for business tax debt may still apply for an OIC if they meet the financial requirements.

Read more here about the NYS offer in compromise program, who qualifies, and how to apply.

Voluntary Disclosure Program

The NY Department of Taxation and Finance runs a Voluntary Disclosure and Compliance Program, like a permanent NYS tax forgiveness program. If you owe NYS back taxes or have unfiled returns, you can catch up without penalties or criminal charges.

To apply, you must contact the department and outline which taxes you owe. Then, pay what you owe and agree to stay current.

You can apply for voluntary disclosure online or contact a tax professional to help you. If you have undisclosed investments in a Passive Foreign Investment Company, don’t file returns yet. Wait for DTF instructions after applying.

NY State Tax Audits

A New York State audit can be stressful. The DTF may audit you for unfiled returns, unreported income, or mismatched IRS data. Residency audits are also common. You’ll need to prove your return is accurate and may have to challenge the auditor’s claims. Mistakes can lead to surprise tax bills. Getting NY tax help from a professional can make the process easier and protect you from extra liability.

NY State Statute of Limitations for Tax Collection

New York or the DTF has 20 years to collect tax liabilities. It is 20 years from the date the DTF could file a warrant. While the IRS has ten years to legally collect the taxes, NY State has 20 years.

The first date a warrant can be filed is different depending on the situation:

• If there is no right to a hearing, the deadline starts the day after the payment demand letter states.
• If there is a right to a hearing, it would be the first day after the deadline to request a hearing.

Remember, NY State and the taxpayer can agree to extend the time to collect on a tax warrant.

New York State Debt Collection Actions

New York State has up to 20 years to collect NYS back taxes. The best move is to work with a tax pro and choose a New York State tax relief program that fits your situation. But what if you don’t pay? Here's how the Department of Taxation and Finance can collect your debt through enforcement.

New York State Tax Warrant

A New York State tax warrant is a lien against your real or personal property. It gives the state the right to seize your property and garnish your wages.

Even without a seizure, a tax warrant can hurt your ability to get loans or buy and sell property. If you sell while a warrant is active, the state can take the proceeds—up to the full tax bill plus interest, penalties, and fees. Once filed, a warrant is hard to remove unless you pay in full. The best option is to settle your NYS taxes owed before the Department of Taxation and Finance issues a warrant.

Tax Levies in New York

A levy is typically the next step after a tax warrant. A levy is when the New York DTF seizes your bank accounts. The state will contact your bank and give them a 90-day warning. If you don't pay your tax liability, the bank will send the funds in your account to the state at the end of the 90 days.

In New York, the state generally uses the term "tax levy" to refer to bank account levies. When the state levies physical assets, it refers to the process as a seizure. When it levies wages, it uses the phrase income execution.

Income Executions

An income execution lets the state take part of your wages to pay your tax bill. First, they’ll ask you to pay 10% of your gross wages or 25% of your disposable income each payday. If you don’t, they’ll send the order to your employer, who will then withhold the money and send it to the state. Other states call this wage garnishment.

Seizures

After New York State files a tax warrant, it may seize your assets and sell them at auction. The state can take personal and business assets. If the state seizes business assets, it can change the locks, block access, and take all equipment, inventory, and merchandise.

NY Driver License Suspension

If you owe over $10,000 in NY state back taxes, the state can suspend your driver's license. You'll get a Notice of Proposed Driver’s License Suspension. You can stop the suspension by paying in full or setting up a payment plan. If you have a commercial license, you may be exempt.

You may also qualify for an exemption if:

• your wages are garnished
• you pay child support
• you receive public assistance
• you get SSI

Private Debt Collection for New York State Back Taxes

If you don’t pay, the state may send your case to a private debt collector. You’ll receive letter DTF-975.1 to notify you. To confirm the agency is legitimate, ask for your case ID or contact the Department of Taxation and Finance. As of 2022, New York uses Coast Professional, Inc., based in West Monroe, Louisiana.

Tax Refund Offsets

Why didn't I receive my NY tax refund? If you owe NYS back taxes, the state can take your refund. It can also keep refunds to cover IRS or other agency debts through the tax refund offset program. You usually can’t recover offsets.

If you filed jointly and the debt was only your spouse’s, you can file Form IT-280 (Nonobligated Spouse Allocation) to apply.

Contacting the New York State Department of Taxation 

You can reach the NY Department of Taxation and Finance in several ways. Since they may not always take calls, Online Services is often the fastest and most effective option. It works well for responding to notices, bills, or other tax-related needs. 

• Online Services

  The fastest way to manage your NY taxes. After creating an account, you can pay bills, respond to notices, change addresses, file or apply for relief programs, and set up payment plans. Suitable for individuals, businesses, tax pros, and fiduciaries. 

• Contact by Phone

  You can call the department, but they may not take calls during busy times or when short-staffed. Notices usually include a phone number and PIN, though reaching a live agent isn't guaranteed. You can find a list of telephone numbers and hours of operation for individuals here and for businesses here. 

• By Fax

   Letters or notices often include a specific fax number for sending documents. Don’t use just any number online; the fax number must match the one on your notice.

Get Help With Back Taxes and Other Tax Problems in New York

If you are struggling with New York State back taxes, it is generally a good idea to connect with a licensed tax professional or a tax firm with experience resolving NY tax problems found in the link or start your search below. You can also find the top-rated tax professionals by license type below. Keep in mind that often your regular CPA can't help with New York tax problems and to protect yourself financially, you may need to bring in a specialist to help you. Check out these links to tax pros based in New York who focus on tax problem resolution:

• New York Tax Attorneys
  • New York, New York Tax Attorneys
• New York CPAs
• New York Enrolled Agents
  • Brooklyn, New York Enrolled Agents
  • New York, New York Enrolled Agents
  • Rochester, New York Enrolled Agents
  • Rye, New York Enrolled Agents
• Tax Professionals in NY that help with tax problems

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

New York State Tax Frequently Asked Questions

What happens if I can't pay my NY state taxes?

If you can’t pay NY state taxes, the DTF may issue a tax warrant, seize bank accounts, garnish wages, or suspend your driver’s license for debts over $10,000. You can apply for a payment plan, hardship status, or an Offer in Compromise to manage the debt.

What deductions can lower my NY back tax bill?

You may be able to lower your New York back tax bill by amending past returns to claim missed deductions or credits. The New York Department of Taxation and Finance also offers programs such as penalty abatements and an Offer in Compromise, which can reduce or settle your balance if you qualify. A tax professional experienced in New York tax cases can help determine the best path for your situation.

Does New York offer tax amnesty for back taxes?

Beyond the Voluntary Disclosure Program, New York occasionally runs limited amnesty programs waiving penalties for specific taxes or periods. These are not permanent and require full payment.

Can bankruptcy help with NY state tax debt?

Bankruptcy may discharge some NY income taxes if they’re over three years old and meet specific criteria, but trust fund taxes are harder to discharge. It’s a complex option requiring legal expertise.

Should I hire a tax attorney or CPA for NY back taxes?

Both tax attorneys and CPAs can help with New York back tax issues, including audits, warrants, and offers in compromise. Attorneys can represent you in court and provide legal protection, while experienced CPAs can handle most DTF tax problems and negotiations. The key is finding a local professional you trust who has proven experience with cases like yours.

How much does a tax pro cost for NY back tax issues?

Most New York back tax cases cost between $1,500 and $6,000, depending on the complexity of your situation and the type of resolution needed. More involved cases, such as audits or offers in compromise, typically fall on the higher end of that range.

Can I settle NY business taxes if I’m still solvent?

Solvent businesses may qualify for an OIC if paying in full causes undue hardship, but DTF prioritizes trust fund taxes (e.g., sales, withholding).

A Review of Common Maryland State Tax Resolution Options

Dealing with Maryland back taxes? If you have delinquent tax liabilities in the State of Maryland, some options can help you avoid collection actions and save you money. Short of making a lump sum payment to satisfy the taxes in full, in Maryland, here are some standard tax resolution options:

• Enter into an Individual Payment Agreement
• Submit an Offer in Compromise (OIC)
• Request Penalty Abatement
• Request Innocent Spouse Relief
• Request Hardship Status (short-term)

We discuss these options in some more detail below. However, realize these are not an exhaustive set of options. Therefore, work with a professional tax firm or licensed tax professional to ensure you understand all tax options.

Contact the Maryland Comptroller:

• Individual Tax Issues: 410-260-7980
• Business Tax Issues: 410-260-7980
• General Inquiries: 410-260-7980
• Collections: 410-260-7980
• Website: https://taxes.marylandtaxes.gov/

Who is Responsible for Collecting Taxes in the State of Maryland?

In the State of Maryland, the Office of the Comptroller is the entity responsible for collecting taxes. In fact, Maryland is one of only nine states that use the title of Comptroller – an archaic term meaning “financial officer.” The Office of the Comptroller collects some $16 billion each year in state taxes. Furthermore, in addition to individual and business income tax, some other forms of taxes that the Comptroller collects include sales and use, estates, admissions, and amusement, and alcohol and tobacco.

If you owe back taxes in Maryland, the Comptroller is the entity that will attempt to collect. However, the Comptroller may assign some cases to an external collection agency instead.  The Comptroller’s initial collection efforts will consist of a formal notice (Personal Income Tax Balance Due Notice) advising you of the back taxes and requesting payment. Many taxpayers make the mistake of ignoring these notices, which can result in more aggressive collection efforts down the road.

What Can the Comptroller do if I Fail to Pay Back Taxes?

Like the Internal Revenue Service (IRS), the Comptroller has broad collection powers. As stated in the previous section, the Comptroller’s initial collection efforts will consist of a series of written letters demanding payment. Consequently, if you fail to pay the balance or work out another payment arrangement, the Comptroller will attempt to collect the taxes.

The Comptroller’s office can do any of the following to collect:

• File a tax lien against your property
• Garnish your wages (wage garnishment)
• Execute a bank levy
• Prevent you from renewing your driver’s license or vehicle registration
• Prevent you from renewing a professional, occupational, or business license
• Take your state or federal income tax refunds
• Publish a list online listing your name as a delinquent taxpayer
• Take other legal actions against you

In addition to the above, the Comptroller can charge you 13% interest per year and up to 25% in penalties until the taxpayer pays the taxes in full.

Time for the Comptroller to Assess and Collect Maryland Back Taxes?

The Comptroller’s ability to collect back taxes is generally not limited. The Statute of Limitations (SOL) is essentially a period prescribed by law in which certain kinds of legal action must be brought. If the claim in a timely fashion, it will be waived forever. With regards to assessing taxes in Maryland, usually, the Comptroller’s Office has three years to make an income tax assessment from:

• the date the taxpayer files the return or
• from when the taxes were initially due, whichever is later

In some cases, MD may make an income tax assessment at any time if:

• If the taxpayer files a false tax return with the intent to evade the tax
• The taxpayer makes a willful attempt to evade the tax
• The taxpayer does not file a tax return when it is required
• MD state receives an incomplete tax return for the taxpayer
• A report of federal adjustment is not filed within 90 days of issuance. If the taxpayer does file in these 90 days, the Comptroller must assess within one year after receiving the report.

Statute of Limitations on Collections

With regards to the statute of limitations on collection for income tax, you could not wait out Maryland.  In theory, the collection SOL is seven years from the date of assessment, but for all practical purposes, there was no SOL until recently. Why? Once the state filed a tax lien, they could not collect indefinitely unless the tax lien became satisfied or released. Governor Hogan signed a new law (effective July 1st, 2019) stating that certain tax liens on personal or real property would terminate 20 years from the date of assessment. Therefore, there is a 20 year SOL. Exceptions include whether the law specifies another time or for if it is for inheritance tax. Moreover, the new law does not specify if the changes take effect retroactively.

What are my Options if I Owe Back Taxes in the State of Maryland?

If you or your business owe back taxes to the Comptroller, you have options that can help you avoid or cease the collection actions listed above. The following options apply if you owe the amount that the Comptroller is claiming. If you receive a notice from the Comptroller’s Office and you do not agree that you owe the taxes, or if the amount is incorrect, you have the right to appeal the assessment. Taxpayers must file appeals within 30 days of receiving the initial notice from the Comptroller. Following the appeal, the Comptroller will hold an informal hearing to consider the merits. If the Comptroller rules against you, you have the right to appeal the decision to the Maryland Tax Court.

If you owe back taxes, there are several options available to you. The availability and usefulness of each remedy depend primarily on your personal and financial circumstances. If you are unsure which option is the best for you, consult with an experienced Maryland tax professional.

Individual Payment Agreement

In similarity to the IRS, the state of Maryland allows taxpayers to pay off their taxes over time in some instances. An Individual Payment Agreement will enable you to pay off past due MD taxes over a series of months. While short-term repayment plans are generally freely given, more extended duration plans can present more of a challenge. The most crucial factor the Comptroller will consider when applying for an Individual Payment Agreement is your ability to pay the outstanding taxes. You may be required to complete a Collection Information Statement (MD 433-A) when applying. The statement requires a detailed list of your assets and income.

Repayment terms can vary. Durations of 36 to 60 months are possible. Generally, if you don’t have a lien, you can get a 36-month payment plan with no financial required (MD 433-A). If you already have a tax lien, taxpayers can set up a 60-month payment plan with no financials.  In cases involving financial hardship, the state may grant repayment terms of up to 99 months but usually requires manager approval. You can read more about payment plans here.

Offer in Compromise

An Offer in Compromise (OIC) allows qualified taxpayers to pay a settled amount for less than the total amount of the taxes owed. Unlike Individual Payment Agreements where you repay the full balance over time, an OIC is a form of lump-sum payment arrangement. Most importantly, the OIC program applies to all tax types handled by the state. The significant advantage that an OIC has over other remedies is the Comptroller will agree to accept a lesser amount, potentially saving you a lot of money.

Not every taxpayer is eligible for Maryland’s Offer in Compromise program. The state has specific requirements. For example, the OIC program has time limitations. Moreover, it requires all tax returns filed, and the taxpayer must have exhausted other options to resolve their tax liabilities.

You could apply for an OIC if you doubt you owe, doubt the state will collect what they owe, or if you would face financial hardship if you paid.  To apply for an OIC, you must submit several forms, such as an Offer in Compromise Application (Form 656) and a Collection Information Statement. Furthermore, you must comply with some critical procedural requirements. Also, the Comptroller’s Office will likely ask for supporting documentation, like credit card statements, pay stubs, and bank statements.

If you are eligible, an OIC may be the best option to help you affordably resolve your taxes.

Penalty Abatement

As mentioned above, the Comptroller can tack on an additional 25% in penalties to your outstanding taxes. As a result, tax penalties can make it very difficult for you to pay off what is owed, not to mention you will end up paying much more. It is possible to have penalties abated in full or in part. Generally, to qualify for penalty abatement, you will need to demonstrate sufficient grounds for your inability to pay. Some examples include unemployment, major health issues, and even the loss of tax records due to a natural disaster. While you will still be required to repay the outstanding principal balance, penalty abatement can save you a lot of money and help pay off your balance faster.

Innocent Spouse Relief (ISR)

Innocent Spouse Relief is a remedy available when your back taxes are the result of your spouse’s errors or fraud. You must show that you were not aware of the mistakes at the time that you signed your return and that you were not otherwise involved in the misconduct. If you meet the requirements, you may not owe any back taxes to the Comptroller.

The Comptroller generally mirrors the decision the IRS made with regards to Innocent Spouse Relief. In other words, to request ISR from the Comptroller, you need to send the letter showing the IRS determination on the matter.

If you owe back taxes to the State of Maryland and are unsure of your rights, contact an experienced Maryland tax professional today for assistance.

Hardship Status

Unlike the IRS, a hardship status granted from the Comptroller does not last very long. Generally, hardship status will last only for a few weeks or months. The taxpayer usually must complete the appropriate 433 Form and submit it with other documentation to substantiate certain financial information. It requires managerial approval.

What About Sales and Use Taxes?

With sales and use taxes, or trust fund taxes, Maryland state may allow taxpayers to enter into a payment plan or consider an offer in compromise. Above all, it usually depends on the taxpayer’s tax and financial situation. However, generally, some tax professionals will say to at least offer the amount you owe in taxes as your offer (the tax amount). You can pay off the offer sometimes over a period of years.

Connect With Tax Professionals When In Doubt

A licensed tax professional will have your best interests at heart in determining the best tax resolution for your situation. Certainly, the state wants you to pay as much as possible and as quickly as possible. Having an experienced tax resolution professional working on your behalf can save you money and stress. You can find a list of tax professionals that resolve Maryland state tax problems here.

Maryland State Offer In Compromise Summary & Details

If you owe back taxes in the State of Maryland, an Offer in Compromise (OIC) can be a great option. Not only can you cease collection actions, but you could potentially save a significant amount of money. In this article, we discuss OICs, including the relevant procedures and the benefits of obtaining an MD OIC.

What is a Maryland State Offer In Compromise?

An Offer in Compromise (OIC) is a remedy for qualified individuals with back taxes to pay a settled amount for less than the total amount of the taxes owed. Maryland’s OIC program has similarities to the Internal Revenue Service’s (IRS) Offer in Compromise program. There are, however, some essential procedural differences between the two programs. For example, Maryland may not leverage the same financial standards the IRS uses in determining a taxpayer’s ability to pay.

What Types of Taxes are Eligible for an Offer in Compromise? Benefits?

In Maryland, the State Comptroller is the entity responsible for administering and collecting all taxes. The Offer in Compromise program can be used to settle any outstanding taxes owed to the Comptroller’s Office. Examples of commonly owed taxes include, but are not limited to, Income Tax, Sales and Use Tax, Admissions and Amusement Tax, and Withholding Taxes. Thus, the OIC program has widespread application throughout the State, helping both individuals and businesses to get out of tax liabilities and to avoid collection action.

Generally, with repayment plans, taxpayers are required to repay the entire outstanding balance of the taxes (not to mention interest and penalties). However, with an OIC, it is a form of lump-sum settlement that can result in saving thousands of dollars. Also, those taxpayers subject to collection actions by the Comptroller, such as garnishments or tax liens, can potentially cease such costly efforts.

Who is Eligible for an Offer in Compromise in Maryland?

A taxpayer can apply for a Maryland OIC based on a few reasons:

• doubt as to liability
• doubt as to collectibility (insufficient resources)
• Economic or other hardship

With regards to the two last reasons above, eligibility for an OIC in Maryland largely depends on the taxpayer’s financial situation and resources. Several formal requirements must be satisfied to qualify for an OIC:

• You have a delinquent tax liability and have received an assessment from the Comptroller’s Office;
• You have exhausted all possibilities for an administrative appeal. If there are any open issues that you can appeal, then you cannot apply for an OIC;
• At least two years must have passed since the state assessed the taxes;
• The taxpayer must have filed all returns for prior years;
• You cannot be involved in a pending bankruptcy case of any kind;
• You lack the financial means to make payment in full at any time in the foreseeable future; and
• You lack resources or are unable to apply your present and future resources to paying off your outstanding tax liability.

Every taxpayer’s financial circumstances are different. If you are unsure whether you are eligible to apply for an OIC with the Comptroller, contact an experienced Maryland tax professional.

When Should a Taxpayer Apply for an Offer in Compromise Over Other Tax Resolutions?

The eligibility requirements discussed above allude to the circumstances in which a taxpayer should apply for an OIC. There are generally three reasons that taxpayers can seek an OIC. The first, known as doubt as to liability, is where you do not believe that you owe the Comptroller the assessed amount. The second is known as doubt as to collectability. Fundamentally, the taxpayer believes he or she owes the tax but lacks the financial resources to pay the tax amount in full. Finally, an OIC can be submitted based on economic or other hardship. It occurs where the taxpayer may have sufficient resources to pay the total amount, but doing so would cause financial hardship or would be unfair.

As a practical matter, if a taxpayer is eligible, it is generally advisable to pursue an OIC over other remedies like repayment plans due to the potential for a reduction of the outstanding balance.

What Forms Does the Taxpayer Need to Complete to Apply for an OIC?

To apply for an OIC in Maryland, a taxpayer must complete two sets of forms. The first is an Offer in Compromise Application (Form 656). Form 656 requires the taxpayer to list his or her personal information, the applicable tax and period, select one or more of the three reasons for submitting an OIC (discussed above), and the proposed payment terms of the OIC. The taxpayer must also list the reasons for applying for the OIC.

The taxpayer must also complete a second form called the Collection Information Statement (CIS). For individual taxpayers, the appropriate CIS form is MD 433-A. Businesses must use Form MD 433-B. Both tax forms require the taxpayer to list detailed financial information. The purpose of a Collection Information Statement is for the Comptroller to analyze a taxpayer’s financial condition to determine whether or not the taxpayer is eligible for an OIC and if so, whether or not to accept the offer.

Are Any other Forms Required?

As a general matter, the Comptroller will want to see documents supporting the information listed on the Collection Information Statement. Depending on the taxpayer’s income, expenses and assets, such docs can include bank statements, pay stubs, credit card statements, car loan statements, mortgage loan statements, student loan statements, plus many others. For this reason, it is vital to accurately and fully complete all forms.

How Do I Apply for an Offer in Compromise?

To apply for an OIC, the taxpayer must submit Form 656 and Form MD 433-A (If a business use MD 433-B) to the Comptroller. Item 7 on the OIC form requires the taxpayer to specify how payment will be made. The taxpayer has several choices:

• Payment in full with the offer;
• A deposit pending acceptance by the Comptroller;
• No deposit with payment to be made within a specified period;
• $0.00 offer; and
• A request for a payment plan

The taxpayer must file all required forms and make payments, if any, to the Comptroller at the following address:

Offer in Compromise Program
Comptroller of Maryland
301 West Preston Street, Room 203
Baltimore, MD 21201

What Will the Comptroller Do Once it Receives My OIC?

The Comptroller will review your OIC and Information Statement to determine whether you are eligible for an OIC. If the taxpayer meets the initial requirements, the Comptroller will take a more detailed look at the taxpayer’s circumstances to see whether an OIC is warranted. Some of the factors the Comptroller considers:

• Taxpayer’s health, age, and amount owed;
• Number of family members supported;
• Level of Education;
• Work history;
• Location of the taxpayer
• Source of income;
• Reasons for the tax liability;
• Past tax compliance; and
• Whether the state filed tax liens

Comptroller Will Review the Taxpayer’s Financial Situation

The Comptroller will take a detailed look at your income and expenses. Unlike the IRS, which has set numbers for housing and living standards, Maryland does not have its own Collection Financial Standards. However, at the Comptroller’s discretion, they may allow the taxpayer to claim the IRS limits.

If the Comptroller accepts your OIC, the taxpayer gets notified and placed on a three-year probationary period. It means you must make all scheduled payments on time and file all future tax returns on time. In other words, remain current with tax filing for three years. If you fail to abide by these terms, the Comptroller can demand that you pay the full amount of the outstanding taxes, including interest and penalties. Moreover, the Comptroller will likely commence collection action.

What If the Comptroller Accepts the OIC?

If your OIC application is accepted, you must pay the settlement by the date noted in your agreement. You must also stay compliant with future tax filing and payment obligations. In exchange for you paying, the settlement, the state will stop all involuntary collection actions including wage garnishments, asset seizures, and denial of driver's license renewals.

It is important to note that even if your OIC is accepted, the Comptroller can still attach a lien against your property. The tax lien serves to protect the Comptroller’s interests. Should the taxpayer timely make all payments under the OIC, the Comptroller will release all tax liens.

What If the Comptroller Denies the OIC?

If the state denies your OIC, the Comptroller may send you a written notice to submit a higher offer. The Comptroller may flat-out refuse an OIC. Such a decision can have consequences for the taxpayer. First, the Comptroller can elect to keep your down payment and apply it towards the outstanding balance. Secondly, the Comptroller’s decision is final, and the taxpayer cannot appeal. You may, however, be able to submit another OIC at a later date if your circumstances have changed. Thus, it is essential to make your first OIC a good one.

Help With a Maryland Offer in Compromise and TaxCure

If the taxpayer’s OIC gets denied, there may be other remedies available to such as a repayment plan. If you are unsure of your options, consult with an experienced Maryland tax professional. Above all, if you decide to pursue an Offer In Compromise with the State of Maryland, work with a licensed tax professional that has experience. Above all tax resolutions, applying for an OIC takes time, and it is one resolution whereby having a tax professional on your side can make a world of difference. At TaxCure, we have a large network of licensed tax professionals and only particular professionals have experience with Maryland OICs. Our algorithm has ranked the professionals that have the most experience with this type of solution, you can view top Maryland's Offer in Compromise professionals here, or start your search below.

Overview of Maryland State Tax Payment Plans

The State of Maryland, like the Internal Revenue Service (IRS), can be aggressive in its efforts to collect back taxes. The Comptroller of Maryland is the entity that is responsible for collecting state taxes. If you did not pay your MD taxes in full or did not file a Maryland tax return (and you should have), you may receive a notice from the Comptroller’s Office. Many taxpayers make the mistake of ignoring the initial letter from the Comptroller. As a result, the balance can grow exponentially due to penalties and interest. Also, the Comptroller’s collection efforts will likely become far more aggressive. Many taxpayers are unaware that there are options available to them to both avoid, or cease, the collection process and repay their past-due taxes. One of those options is a Maryland tax payment plan.

What is a payment plan? What term does the state use?

A taxpayer that owes past-due state taxes in Maryland can set up an Individual Payment Agreement with the Comptroller’s Office. Much like an IRS Installment Agreement, an Individual Payment Agreement allows a taxpayer to pay their tax liabilities off over time. You will receive a notice from the Comptroller’s Office informing you of the balance owed in back taxes. Once you receive a notice from the Comptroller, below are some options you have:

• Do Nothing
• Pay the tax balance in full
• File an Appeal
• Set up an Individual Payment Agreement
• Apply for an offer in compromise (if eligible)
• You can find other options here

Do Nothing

Doing nothing is easily the worst option. Not only will you face the possibility of significant collection proceedings, such as a garnishment or bank levy, but you will incur interest and penalties. The Comptroller can charge you double-digit interest per year and up to 25% in tax penalties. Over time the past due balance can grow substantially, making it far more difficult for taxpayers to get caught up.

Paying in Full

Paying the past due balance in full is a great option. Not only will you avoid collection proceedings and penalties, but you can quickly put the matter behind you. However, paying past-due taxes in full is often not a realistic possibility for most taxpayers.

File an Appeal

Like the IRS, the Comptroller grants taxpayers the right to appeal tax assessments. Taxpayers must file an appeal within 30 days of receiving the initial notice from the Comptroller. The Comptroller will hold an informal hearing to consider your appeal. If the Comptroller rules against you, you have the right to appeal the matter to the Maryland Tax Court. Appeals are useful if you believe the assessed amount is incorrect. They also have the added benefit of buying additional time since the Comptroller will not take collection action while an appeal is pending.

Set Up a Payment Plan

Setting up an Individual Payment Agreement is often the most feasible and best option for taxpayers. The durations of payment plans vary depending on both the taxpayer’s financial situation and the stage of the collection proceedings.

Consider an Offer in Compromise (OIC)

Not everyone qualifies for an Offer in Compromise. A taxpayer may consider an Offer In Compromise if he or she doubts the tax liability is correct. Many taxpayers file for an OIC because they don’t believe they can pay off their tax liabilities or if paying it would create an economic hardship. Taxpayers who cannot pay MD state in full should work with a licensed and experienced tax professional in Maryland. You can read more about an MD offer in compromise by visiting the link above.

Common durations for an MD tax payment plan?

While the Comptroller’s Office is readily amendable to short-term repayment plans, more extended duration plans can be more challenging. Payment plans range from 2 to 99 months. Typically, the Comptroller’s Office will consider your ability to pay before agreeing to a long-term repayment plan. Individual taxpayers may be required to complete and submit a Collection Information Statement (MD 433-A) to the Comptroller’s Office. Businesses would use Form MD 433-B. Both forms require a detailed list of the taxpayer’s assets and income. While there are no set durations for repayment plans publicly stated, the following are some guidelines:

• No Existing Lien and Form 433-A  – Up to 36 Months
• Existing Lien and No Form 433-A – Up to 60 Months
•  Form 433-A Submitted Documenting Financial Hardship – up to 99 Months (Note: Requires Manager Approval)

In some cases, Maryland may require a down payment before granting a payment plan. In many cases, individuals have had the down payment requirement waived. However, businesses have a tougher time getting this policy waived.

For more information on durations of tax payment plans consult with an experienced tax professional.

Can a Payment Plan Help You Get Drivers License Renewal?

One of the primary motivations for taxpayers to get caught up on back taxes is an inability to renew a Maryland driver’s license or vehicle registration. State law requires that both individual taxpayers and businesses that have outstanding taxes or unemployment insurance contributions satisfy those liabilites before Motor Vehicle Administration (MVA) renewal.

A payment plan can be an indispensable tool to renew your driver’s license and registration. If your driver’s license currently has an MVA hold, you can get it released by setting up an Individual Payment Agreement. Generally, to remove an MVA hold, a taxpayer is expected to make a down payment between 10% and 50% of the outstanding taxes. The taxpayer is required to make the payment in person and will be given a receipt to provide to MVA to obtain a release. A down payment of less than 10% may be possible for those taxpayers than enter into a 99-month repayment plan. Like the 99-month payment plan, the reduced down payment also requires manager approval.

For those taxpayers that get a second, or even third, MVA hold, the required down payment usually increases substantially. With a second MVA hold, the minimum down payment to obtain a release is 25%. For the third MVA hold, the minimum down payment amount increases to 50%. Again, many of these numbers are based on experience and may change. When in doubt, consult with a tax professional.

Payment Plans for Business Taxes

Businesses may be allowed to set up payment plans on some business taxes in Maryland, such as sales and use tax. Typically, you must be able to pay off the tax, penalties, and interest within six months. To apply, contact the DOR's Small Business department at cdcollectionbizz@marylandtaxes.gov.

Negative consequences that can ensue from obtaining a Maryland tax payment plan?

Tax repayment plans can be an essential tool to help taxpayers resolve back taxes. However, it is critical to note that merely entering into a tax payment plan does not prevent the Comptroller from taking further collection action. For payment plans under six months, the Comptroller will typically not file a lien against the taxpayer’s property. However, for longer-term tax payment plans, the Comptroller could file a tax lien. A tax lien can attach to all of the taxpayer’s assets, as well as property acquired in the future. The Comptroller will file a notice of tax lien with the clerk of the circuit court in the county where the taxpayer resides.

A tax lien can make disposing or selling of property difficult. Also, the tax lien is a public record and may limit the taxpayer’s ability to obtain credit. Moreover, interest can continue to accrue during the life of the repayment plan, although at a significantly reduced rate.

Various ways someone can apply for a Maryland tax payment plan

Typically, the Comptroller will send you a notice informing you that you owe back taxes. The notice will provide instructions to set up an Individual Payment Agreement. The easiest way to set up a payment plan is to visit the Comptroller’s website. Taxpayers can set up payment agreements online. You will need the notice number from one of the notices that you received from the Comptroller’s Office. Without this number, you will be unable to complete the process online.

As mentioned above, to qualify for a longer-term repayment plan, you may be required to complete a Collection Information Statement. Once the state of Maryland accepts a payment plan, the taxpayer can make payments by a personal check, money order, or credit card. Taxpayers can also set up a recurring payment plan which will deduct a predetermined amount from your bank account on the same day each month. Recurring payment plans are a good option since missing payments can result in a default and cancelation of your payment plan.

What factors could lead to a payment plan being defaulted automatically or denied by the state?

If you enter into a repayment plan and miss any scheduled payment, it could result in the cancellation of your repayment plan. Once canceled, the outstanding balance will begin incurring substantial interest and penalties. The Comptroller’s Office will likely resume collection efforts.

The denial of your repayment plan could happen if the Comptroller determines that you have sufficient assets or disposable income to satisfy your taxes. Obtaining a Maryland Tax Payment Plan can be confusing for those unfamiliar with the process.

Best practices for contacting the comptroller?

If you call the Comptroller to set up a payment plan or for another reason, be polite. Moreover, ensure you take note of the name of the representative you speak with on the phone. For help with a tax payment plan or to understand your best tax options, request reach out to a licensed tax professional with experience in resolving Maryland state tax issues. A tax firm or licensed tax professional can help you navigate to your best tax resolution. Or you can start your search below.

State of Georgia Tax Payment Plans Overview

Payment Agreement (Installment Agreement)

Georgia’s Department of Revenue (DOR) offers taxpayers who owe GA state income taxes payment plans for those that cannot pay in full. The DOR refers to these payment agreements also as an Installment Agreement.  These agreements provide taxpayers the ability to pay off their tax balance over a series of monthly payments. Payment plan agreements generally do not have durations longer than 60 months and they must satisfy penalties and interest. Taxpayers can request a payment plan, however, situations exist whereby a taxpayer will not qualify.

Situations Where DOR Will Not Approve a Payment Plan

Just like most state tax payment agreements, the DOR has a list of situations for when they will not approve a payment agreement or installment agreement.

In order for the DOR to review a request for a Payment Agreement the following must be met:

• The taxpayer must not be in bankruptcy,
• The taxpayer must not have a pending Offer-in-Compromise application filed,
• All of the taxpayer’s state tax returns required to be filed must be filed (usually the last five years), and
• The delinquent taxes owed must not have been assigned to a private collection firm
• The taxpayer must agree and meet all future tax obligations (estimated taxes on time, filing on time)

How to Request and Set Up a Payment Plan With DOR

Individuals and businesses who owe the state of Georgia can set up a payment plan in a few different ways. The state requires a minimum payment amount of $25 dollar per month.  DOR doesn’t seem to have set a liability limit threshold (like the IRS does) in requesting a tax payment plan. Moreover, taxpayers should always consider other alternatives since interest and the late payment penalty continues to accrue.

Leverage a Licensed Tax Professional

Taxpayers can reach out to a licensed tax professional who has experience resolving tax problems with Georgia's DOR. Using a tax professional will not only generally reduce the amount of time required by the taxpayer, but it will also generally lead to better results.

Submit a Request Through the Georgia Tax center

The DOR provides taxpayers a way to request a payment agreement online. Taxpayers can request their payment plan online using the Georgia Tax Center. Once logged into the system, individuals and businesses can propose a payment amount and schedule.

With payment sent by electronic funds transfer (EFT), DOR charges a $50 dollar fee to set up the payment agreement. If the taxpayer remits monthly payments via paper check, the setup fee rises to $100. If the taxpayer qualifies as low-income, the DOR may reduce the fee to $25 dollars. In either case, the fee is non-refundable and gets added to the taxpayer’s overall tax balance in figuring out the monthly payment amount.

Submit a Paper Application

DOR encourages taxpayers to use the Georgia Tax Center to request a payment plan. However, they will accept paper applications that taxpayers can mail. Although the paper application doesn’t seem to be up to date with the 60-month new duration threshold, taxpayers can still utilize it. Taxpayers can find the paper application here.

Once complete, taxpayers can mail the request to:

Georgia Department of Revenue
Processing Center
PO Box 740396″
Atlanta, GA 30374-0396

Notification of An Accepted Payment Plan Agreement

Whether utilizing the online or paper application, the DOR will notify the taxpayer if they accept or deny their payment plan. The DOR states that taxpayers should expect to be notified as to the status of their Payment Agreement applications within 30 days after the DOR has received the application. If the DOR accepts the proposal, the taxpayer gets notified via mail. The letter will include the duration (number of monthly payments). It will also tell the taxpayer the amount of each monthly payment, and when the taxpayer must make the first payment.

Additional Notes

Interest will continue to accrue on the taxes owed. The DOR may still confiscate state or federal refunds, and it can issue a state tax execution (also known as a tax lien). However, all other forms of enforced collection will be suspended as long as the taxpayer stays current with the terms of the payment agreement.

Modifying An Existing GA Tax Payment Plan

If a taxpayer accrues a new balance or cannot make the monthly minimum payment on their existing agreement, DOR usually requires a new agreement. In this case, the DOR charges the taxpayer with a new setup fee. However, if the taxpayer simply needs to change their bank and routing number, they must notify DOR at 404-417-2122 at least five days before the next draft.

Insufficient Funds

If the taxpayer has a check or draft fail for insufficient funds, the taxpayer will receive a “Cure/In Grace letter.” The letter will let them know when payment is due by with an additional $25 dollar return fee to prevent the agreement from going into default.

In summary, the DOR offers payment agreements for both businesses and individuals. DOR gives GA state taxpayers this option if they cannot pay their balance in full. When in doubt, leverage a licensed tax professional by starting a search below or contact the DOR directly.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.

Georgia State Tax Resolution Options for Taxes Owed

Common GA Tax Resolutions

The Georgia Department of Revenue (the “DOR”) is responsible for collecting all the State’s taxes, including the income tax.

Once a tax liability becomes due through a taxpayer filing a tax return with no payment, or an audit assessment, the DOR will mail an Official Assessment. The taxpayer has 30 days to either pay or appeal the Official Assessment. If the taxpayer does not pay or appeal within 30 days, then the DOR will issue a State Tax Execution and impose a 20% collection fee. The DOR records the State Tax Execution in the county public records – which acts as a lien on the taxpayer’s property. Further, after the issuance of a State Tax Execution, the DOR may begin enforced collection actions.

Enforced collection actions include garnishment, the seizure, and sale of personal property, a levy placed on bank accounts, Treasury Refund Offsets (seizure of federal tax refunds), and the use of collection agencies. Therefore, it is essential for taxpayers with delinquent taxes to attempt to resolve their outstanding liabilities.

Taxpayers who owe delinquent income taxes to the State of Georgia have a few main options available to reach a reasonable resolution. Although not exhaustive, here a few options:

Payment Agreement (Installment Agreement)

• A payment agreement/installment agreement is an arrangement where the taxpayer reaches a deal with the DOR to make monthly payments until they pay in full the past due tax liability. Generally, the DOR will offer payment plans or installment agreements for up to 60 months. In other words, taxpayers must pay off the balance, including interest and penalties within 60 months.

Offer-in-Compromise

• A Georgia Offer-in-Compromise is an agreement where the taxpayer agrees to pay a lump sum in settlement of the entire tax liability. The program offered by the DOR is very similar to the Offer In Compromise program provided by the IRS. Not all taxpayers meet eligibility standards as the DOR has specific requirements that the taxpayer must meet. Taxpayers in many cases can end up settling their tax liabilities for less than they owe.

Penalty Abatement

• Penalty abatement is a request asking the DOR to waive some, or all, of the assessed tax penalties. In similarity to the IRS, “reasonable cause” must exist. In other words, willful neglect or disregard of law does not constitute reasonable cause. Reasonable cause exists when circumstances outside of the taxpayer’s control lead to non-compliance.

Georgia Department of Revenue Contact Information

Alternative Options That May Be Available

Innocent Spouse Relief

The State of Georgia offers Relief from Joint Liability for certain taxpayers who filed joint returns. Innocent Spouse Relief is available in certain circumstances to taxpayers whose taxes owed attributable to their spouse. Taxpayers who file jointly are both responsible for the joint tax liability. Therefore, in certain situations, the DOR may relieve one taxpayer on the joint tax return if he or she is not responsible for failing to pay or report the tax due on a joint income tax return.

A taxpayer must meet the following conditions for Innocent Spouse Relief eligibility:

• A joint tax return that resulted in additional tax liabilities because the income of one person was reported incorrectly or not reported at all
• The individual seeking relief can prove he or she had no knowledge and reason to know income was not reported or erroneously reported; and
• Under the circumstances, it is unfair to hold the person accountable for tax on the omitted or incorrectly reported income.
• Tax taxpayer has already obtained relief from a Federal taxes owed under Section 6015 of the Internal Revenue Code

The DOR generally will not consider a person for Innocent Spouse Relief unless the individual was treated as an Innocent Spouse under IRS guidelines.  Therefore, to request Innocent Spouse Relief taxpayers are instructed to contact the DOR at 877-423-6711, and the information needed to submit a relief request will be given to them. The taxpayer must provide documentation establishing the IRS granted relief for the tax period in question.

Appeal Rights

As discussed herein, the taxpayer may appeal Proposed Assessments via the internal DOR protest process. Further, taxpayers may appeal Official Assessments and State Tax Liens to the GTT. The GTT generally has jurisdiction over appeals of tax matters involving the DOR. It includes the authority to review decisions of the DOR concerning all of Georgia’s taxes. Taxpayers can appeal further the decisions of the GTT to a local Georgia Superior court. Furthermore, under certain circumstances, taxpayers may appeal directly to a Georgia Superior court.

Challenge the Assessment/State Tax Execution

Proposed Assessments: If the taxpayer has a proposed assessment for additional income tax due, they may file a protest with the DOR within 30 days from the date of the proposed assessment. Taxpayers can request this protest online via their Georgia Tax Center accounts or by mail (complete the following form). Taxpayers cannot appeal proposed assessments to the Georgia Tax Tribunal.

Official Assessments: Official assessments can be appealed to the Georgia Tax Tribunal (GTT) or in a local Georgia Superior court within 30 days from the issue date on the official assessment notice.

State Tax Execution: As discussed above, if a taxpayer does not appeal or pay an official assessment within the 30 days the DOR may issue a state tax execution (a state tax lien). Taxpayers can appeal this action with either the GTT or in an appropriate Georgia Superior court.

Taxpayers can find more information regarding filing appeals with the GTT here. While taxpayers have the option to file in Georgia Superior court, there are particular requirements for doing so. Taxpayers considering this option should consult with an attorney.

The Georgia Voluntary Disclosure Agreements

The DOR has a Voluntary Disclosure Agreement (VDA) program designed for taxpayers who have had no contact by the DOR and have unfiled or underreported unpaid taxes. If these taxpayers come forward, they will usually receive a waiver of all penalties and an extended time limit to pay their back taxes. The DOR refers to this extended period as the “look-back period,” which DOR usually grants for three years.

Taxpayers who believe they qualify for this program should apply via mail or e-mail. Taxpayers can find more information on the application process and procedures for filing a VDA program application here.

Bankruptcy

Bankruptcy is not inexpensive. Taxpayers with substantial personal liabilities in addition to taxes owed may want to consider this option. Generally, taxpayers can discharge some state taxes owed through bankruptcy proceedings. Therefore, taxpayers should contact an experienced tax and bankruptcy attorney to pursue this option.

The Statute of Limitations (SOL)

A taxpayer should first determine their legal rights concerning Georgia law concerning the statute of limitation rules for the collection of unpaid taxes. In Georgia, the DOR has seven years from the date of assessment to file a lien if the assessment was issued before February 21, 2018. The DOR has five years from the date of assessment to file a tax lien if the assessment was issued on or after February 21, 2018. Once the DOR files a tax lien, they have ten years from that date to collect the unpaid taxes. The 10-year time clock may be tolled (paused) under certain circumstances. For example, when the taxpayer is in a Payment Agreement with the DOR or when the taxpayer has filed bankruptcy.

Lien Releases

The DOR will only release a tax lien after they have received confirmation that the past due liability has been paid in full or satisfied via an approved Offer-in-Compromise payment. However, you may be able to get a partial release or a lien subordination. Check out our guide to GA tax liens to learn more. 

Practical Considerations

As a useful tip, the taxpayer should not hesitate to raise disagreements to a supervisor within the DOR. Often, a different person and the authority and experience of a supervisor can help resolve tax issues amicably.

Additionally, Georgia has a Taxpayer Resolution Unit that serves to ensure that taxpayer rights are protected and that they receive timely and courteous service from the DOR. The Taxpayer Resolution Unit states that if all administrative options have been exhausted, they can help facilitate rapid and equitable resolution. Taxpayers can contact the Taxpayer Resolution Unit at taxpayer.resolution@dor.ga.gov.

Conclusion

Taxpayers have many options to resolve outstanding tax liabilities with the State of Georgia. As a result, taxpayers should resolve taxes owed sooner rather than later. The longer a taxpayer takes to resolve unpaid tax liabilities, the higher penalties and interest go. Therefore, taxpayers should consult with a tax professional that has experience with the Georgia Department of Revenue.  A licensed tax professional can help taxpayers navigate possible options and find the most appropriate plan of action. 

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

AZ State Tax Payment Plan: An Option If You Can’t Pay in Full

A tax payment plan or installment payment agreement is the Arizona Department of Revenue’s (ADOR) version of an IRS installment agreement. A taxpayer may consider a payment plan if they do not have funds to pay the ADOR at once but can afford to pay over time. A taxpayer can propose to pay a certain amount every month until the liability is paid.

Duration of the AZ State Payment Arrangement

ADOR sets the length or duration of an AZ payment arrangement by the taxpayer’s total liabilities.  Below you find a breakdown of the details:

AZ Tax Payment Arrangement Durations

Amount Owed	Duration
$100 or Less	None. Must pay in full.
$101 to $1000	6 Months
$1001 to $2500	9 Months
$2501 to $4999	12 Months
$5,000 or More	May have to call but generally up to 24 months

 

If a taxpayer owes $100 or less, he or she must pay in full.  For balances between $101 and $1,000, the taxpayer may pay in a 6-month installment plan.  If the taxpayer owes between $1,001 to $2,500, he or she may pay in a 12-month installment plan.  If the taxpayer owes $5,000 or more, he or she should call the Arizona Department of Revenue at (602) 542-5551 to set up an individualized payment plan or have a tax professional work on their behalf.  Generally, ADOR will allow up to a 24-month payment plan for larger liability amounts.

Some Guidelines and Requirements

Collection Information Statement

To approve a payment arrangement, ADOR may ask the taxpayer to complete a Collection Information Statement (CIS) before granting an installment agreement.  Consequently, a CIS or the written financial statement helps ADOR assess the taxpayer’s monthly income, expenses, assets, and liabilities. The form helps them understand how the taxpayer can pay. If ADOR thinks the taxpayer can secure a loan to pay off their tax liabilities, they may ask the taxpayer to do so. If the taxpayer can show that they cannot afford to pay their tax liabilities in full, ADOR may grant a payment arrangement.

The ADOR may review payment arrangements at any time and ask for updated financial information.

30 Days to File All Delinquent Tax Returns

The ADOR provides taxpayers 30 days to file all delinquent tax returns. Taxpayers can find returns and forms here.

Other Important Considerations

• Taxpayers need to make payments on www.AZtaxes.gov
• The taxpayer needs to make all payments on time. If a taxpayer cannot pay on time, they will need to contact ADOR asap.
• ADOR may file a tax lien in certain situations
• Interest still accrues during the payment arrangement
• Refund offsets will occur and ADOR will apply it to the taxpayer’s delinquent tax liability
• The taxpayer cannot add future tax balances to the agreement
• ADOR will cancel the payment arrangement for returned payment or insufficient funds
• Defaulting on the payment plan may lead the ADOR to pursue enforcement actions such as filing a levying a taxpayer’s wages, bank accounts or other assets.

Applying for an AZ Payment Arrangement

A taxpayer can apply for a payment plan by filling out an Individual Income Tax Installment Agreement Request form 140-IA or by requesting a payment plan online).  The ADOR may ask the taxpayer to provide detailed financial information such as income and employer, spouse’s income and employer, number of dependents, expenses, and banking information.  They may also be asked to provide a complete written financial statement, known as the Collection Information Statement (as discussed above).

Taxpayers should send their completed applications to the Arizona Department of Revenue via fax at (602) 542-4771 or by mail to:

Arizona Department of Revenue
Collections District
PO BOX 29070
Phoenix, Arizona 85038-9070.

An agent of ADOR may call and ask for more information. A licensed tax professional can also help you set up a payment arrangement and help you file any delinquent tax returns. There are no application or processing fees to apply for a payment arrangement.

Notification of Acceptance or Denial

Taxpayers will receive a letter to notify them if ADOR has approved their payment plan request. The taxpayer needs to pay their monthly installment payment on the date they proposed on the form until the taxpayer receives a confirmation letter. An agent of ADOR may call and ask for more information.

There are no application or processing fees to apply for a payment arrangement.

If a taxpayer’s request to pay in installments is denied, he or she has the right to petition the Taxpayer Assistance Office to review the decision.  The Taxpayer Assistance Office has the authority to change the Department of Revenue’s decision. The taxpayer can also consider other tax resolution options.

Altering, Modifying, or Terminating a Payment Arrangement

As stated above, ADOR can change, modify, or terminate an installment payment arrangement for many reasons. Here are some reasons ADOR make take such actions:

• If you fail to make an installment payment or a payment when a tax liability is due.
• You fail to file a tax return or a report on time
• ADOR makes a request for further information and the taxpayer fails to comply within 30 days
• The ADOR feels the collection of tax is in jeopardy

If a taxpayer disagrees with a decision by the ADOR regarding a payment plan determination, the taxpayer can petition the Problem Resolution Officer.

In Conclusion

Without a doubt, one potential option for taxpayers who can’t pay in full consists of a monthly installment plan or tax payment plan with ADOR. As a practical tip, working with a licensed tax professional can help taxpayers reach the best resolution. For example, the taxpayer may want to consider an Offer in Compromise, a TAO, Innocent Spouse Relief, among other options. Leverage the search below or click here to find tax professionals with experience in working with the Arizona Department of Revenue.

Disclaimer: The content on this website is for educational purposes only. It does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Arizona Offer in Compromise Overview

If a taxpayer does not have the financial resources available to pay their tax liability, they may want to consider applying for an Offer in Compromise (OIC) over other options. Specifically, an Offer in Compromise is a proposal from an Arizona taxpayer to pay the Arizona Department of Revenue (ADOR) a smaller amount than they owe in full satisfaction of their tax liability.

An offer in compromise works by submitting an Offer in Compromise Statement of Offer form along with other documentation.  Therefore, if the Arizona Department of Revenue accepts a taxpayer’s offer and they fulfill the terms of the agreement, the ADOR will discharge forgive the taxpayer’s remaining tax liability. A person may apply for an Offer in Compromise over other resolution options if they owe more tax than they have the ability to pay. Alternatively, you can contact a licensed tax professional to check balances as well.

Eligibility Questions for an OIC Provided by ADOR

The Arizona Department of Revenue advises taxpayers to ask themselves the following questions:

• Do I receive Social Security income, Social Security disability, pension payments or public assistance?
• Am I over age 60?
• Are my total assets worth less than I owe?
• Have I had a significant reduction in income?
• Is my tax owed older than seven years?
• Are my tax returns in full filing compliance?
• Is the business that I was a principal member of defunct and closed?

If a taxpayer answers yes to two or more of these questions, he or she may be eligible for an Offer in Compromise.

Qualifying for an Arizona Offer In Compromise

To qualify for an Offer in Compromise, a taxpayer must meet the criteria set forth in Arizona Revised Statutes (ARS) § 42-1004.B.  ADOR must deem the liability uncollectible or the administrative costs of the collection must exceed the amount of the liability.

To be eligible for an Offer in Compromise, a taxpayer must be in full reporting compliance.  All income tax returns for the last three years must be filed.  If you are operating a business, all business tax filings and licenses must be current.

When taxpayer signs and submits their offer, they agree to the waiver and suspension of any statutory periods of limitations for assessment and collections of the tax liability while:

• the Offer in Compromise is pending
• during the time the offered amount remains unpaid, and
• for one year after the satisfaction of the terms of the agreement.

Applying for an AZ Offer In Compromise

To apply for an offer in compromise, a taxpayer needs to complete the Statement of Offer and send it with any appropriate attachments to the ADOR.  It can be delivered in person, given to any field representative, emailed, or mailed to:

Arizona Department of Revenue
Attention: Field Collections
PO Box 29070
Phoenix, AZ 85038-9070
Telephone: (602) 716-7787
Email: oicprocessing@azdor.gov

Taxpayers or their representatives must complete the application for an Offer in Compromise of individual and/or business tax liabilities. Taxpayers need to make an offer amount and indicate how they will pay the offer including the source of funds. Moreover, taxpayers should indicate any tax liabilities with the IRS and the current status of the account. There are no application fees associated with an AZ Offer in Compromise.

Further Guidance for Businesses

Businesses need to include a signed Statement of Offer, with all responsible parties signing like a partner or corporate officer(s), including:

• a completed Collection Information Statements (financial statement business – Form 10847) and attachments
• a copy of your last federal return,
• a copy of the taxpayer’s IRS Offer-in-Compromise agreement (if applicable),
• all bank statements 90 days prior to the close of operations for all bank accounts held,
• and copies of credit card statements for all credit cards held.

OIC Guidance for Individuals

Individuals need to provide a signed Statement of Offer. All responsible parties must sign (for example, a spouse). Moreover, the taxpayer(s) need to include the following:

• a completed Collection Information Statements (financial statement personal – Form 10896) and attachments
• social security statement of benefits or disability income for all submitting parties
• copies of the taxpayer’s last federal tax return for all submitting parties
• a copy of the taxpayer’s IRS Offer-in-Compromise agreement (if applicable),
• last three consecutive pay stubs for all parties submitting the offer,
• all bank statements for the last 90 days for all bank accounts held by all submitting parties
• copies of medical bills not covered by insurance,
• statements for court-ordered restitution, fines, child support, alimony, and student loans
• statement of any applicable prognosis from a doctor,
• copies of credit card statements for the last 90 days for credit cards held by all submitting parties,
• list of accounts receivable,
• copy or rental/lease agreements for property the taxpayer owns and leases, and
• copies or statements of dividend, trust income, 401K, or other retirement accounts for all submitting parties.

AZ Offer In Compromise Formula

Arizona does not specify the exact formula that it uses to determine if an offer is sufficient, but the ADOR requires that you include a copy of your IRS Offer-in-Compromise agreement with your application. The state most likely takes the IRS Offer In Compromise formula into consideration.

The IRS calculates an acceptable Offer In Compromise amount by first calculating how much they think you can pay them every month through an installment agreement by looking at your paystubs or profit and loss statement and subtracting your reasonable living expenses.  The result is your monthly cash flow.

If you can pay the IRS the settlement amount within five months after acceptance, the IRS values your monthly cash flow by multiplying it by 12.  If you cannot pay the settlement off within five months, the IRS will grant you 24 months to pay. However, they will instead multiply your monthly cash flow by 24.  The IRS will also look at the value of all of your assets, and discount most assets by a value of 20%.  Your cash flow multiplied by 12 or 24 (depending on the time in which you could pay the IRS) plus your asset value is the minimum amount that the IRS will typically be willing to accept.

Other Considerations Regarding an AZ OIC

ADOR will notify the taxpayer of acceptance or denial via snail mail. Furthermore, if an offer in compromise is rejected, there is no right to contest the amount of the tax liability in court or otherwise. An Offer in Compromise can be paid in full or paid in full within 30, 60, or 90 days of the acceptance of the offer.  If the taxpayer was previously on an AZ Installment Agreement or payment plan, the taxpayer must continue to make payments until written notification of an OIC acceptance. Installment agreement payments do not count toward the offer amount. Moreover, the state will take any amounts due to the taxpayer for overpayments of tax before the OIC is fully satisfied.

While ADOR reviews a taxpayer’s OIC,  the Arizona Department of Revenue may withhold activities unless the department finds that collection may be jeopardized by a delay.  The decision to resume collection activities, including the filing of liens, may be appealed to a Problem Resolution Officer.  The decision of the Problem Resolution officer is final.

If a taxpayer is denied an offer in compromise, he or she may want to pursue a Payment Arrangement to pay in installments over a specific period of time.

Conclusion

Taxpayers who cannot meet the terms of an AZ installment payment plan may want to consider an Arizona OIC. Moreover, because of the complex paperwork and cumbersome process, taxpayers should work with a licensed tax professional or tax relief firm. To see if you are a good candidate for an Offer in Compromise. To find a tax professional with experience in resolving Arizona state tax issues with an Offer in Compromise, visit here, otherwise start your search below.

Disclaimer: The content on this website is for educational purposes only. Moreover, it does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Summary of Michigan’s Offer In Compromise Program

Whenever feasible, you should pay your MI state taxes in full, but sometimes, that's just not possible. If you get behind, don't ignore the situation or you may risk wage garnishments and asset seizures. Instead, look into options such as an offer in compromise.

Michigan's delinquent taxpayers should consider whether they qualify for Michigan’s Offer in Compromise (OIC) program. An OIC is a settlement program where the DOT will accept an amount that is less than what the taxpayer currently owes. However, the taxpayer must meet specific requirements. We discuss these requirements in more detail below. Let’s review first some general rules related to the OIC application process.

General Rules Regarding an MI OIC

The settlement will include delinquent tax, interest, and any accrued collection fees. The DOT will accept OIC applications that offer either a lump-sum payment, a payment in 5 or fewer, equal or unequal, monthly payments, or equal monthly payments made over six months or more, but not more than 24 months, absent special circumstances. Further, the DOT may accept an OIC but only with the taxpayer’s agreement to abide by certain conditions. The submission of an OIC will stop enforced collection actions while the OIC is pending a determination. However, it does not stop penalties and interest from accruing. Moreover, the six-year statute for collection will be tolled (suspended) while an OIC application is pending.

Michigan Offer In Compromise Eligibility

The DOT states that at least one of the following must exist for a taxpayer to be eligible for a Michigan OIC:

1. The IRS has already accepted an OIC for the same tax periods and tax types in question.
2. The taxpayer can establish that there is a doubt as to the collectability of the taxes owed, or
3. The taxpayer can establish that there is a doubt that the liability exists.

For most delinquent taxpayers, the eligibility criteria will depend on whether doubt as to collectability exists. However, the submission requirements and required documents for each eligibility criterion above will be discussed in more detail below.

OIC Submission Requirements

The following are the requirements for submitting an Offer in Compromise:

• The taxpayer must complete and submit Form 5181, Michigan Offer in Compromise, and state the OIC amount they offer to pay.
• The taxpayer must make a non-refundable down payment of $100 or 20% of the OIC amount, whichever is greater.
• All tax periods specified in the OIC application must be delinquent tax liabilities that have already been assessed.
• The taxpayer must not have ongoing bankruptcy proceedings.
• The taxpayer must be current and in compliance with all tax filing and payment obligations.
• If the basis for the OIC is “doubt as to liability,” all opportunities to contest the liability must have expired.
• Each taxpayer who is party to the Offer-in-Compromise must personally sign the application under penalties of perjury.

The taxpayer will receive a notice in writing that the DOT has received the OIC application. If the OIC is deemed by the DOT to be incomplete, the DOT may either reject the OIC or reach out to the taxpayer to seek the additional information that is required. It is essential for taxpayers to remember that the 20% deposit is non-refundable. Meaning, if the DOT rejects an OIC for being incomplete, the taxpayer will lose that deposit. The money will be applied against the taxes owed. However, the taxpayer will have to submit a new OIC application with a new 20% deposit. Therefore, it is crucial for taxpayers to make sure that they submit all required documentation so that the DOT does not reject their OIC application for being incomplete before a review is even conducted.

OIC Required Documents

The following is a list of documents that the State of Michigan requires to be included with the submission of an Offer-in-Compromise Application or Form 5181, Michigan Offer in Compromise, based on Eligibility criteria 1, Accepted Federal OIC:

• Completed Form 5181 – Offer in Compromise
• Completed Form 5182 – OIC Schedule 1
• A copy of the IRS accepted OIC (Form 656), including any addendums or revisions.
• An IRS acceptance letter copy for an OIC
• For each tax period and tax type included on the IRS Form 656, DOT will require a copy of IRS Form 1040 Account Transcripts

Required Documents Based on Doubt as to Collectability

The following is a list of documents that the State of Michigan requires with the submission of an Offer in Compromise Application or Form 5181, Michigan Offer in Compromise, based on Eligibility criteria 2, Doubt as to Collectability:

• Completed Form 5181 – Offer in Compromise
• Completed Form 5183 – OIC Schedule 2A (Individuals) Collection Information Statement for an OIC based on Doubt as to Collectability
• Copies from each employer (if applicable) of the last three months recent earnings statement
• Bank statement copies for all accounts for the previous or most recent three months
• List of all stocks, bonds, or other securities/investments owned. Include the current value of each as well.
• Most recent statements any life insurance policies with a cash value or cash loan value
• List of all real estate owned, in whole or in part, with appraisals and payoff statements for any mortgages.
• Recent statements with payoff information, from any lending institutions or creditors that clearly indicates the current balance owed and payment schedule
• A complete inventory of asset-bearing items, with fair market values, contained in all safe deposit boxes
• For the past six years, a copy of any judgments or legal decrees, including bankruptcy
• Self-employed or individuals with interest in a business:
  • Must include a list with the fair market value for all business assets
  • An Accounts receivables list showing the amount due, the payer, account age, and status
  • A list showing all businesses in which the taxpayer has an interest, including ownership percentage in each
• Other attachments as listed on the forms (utility bills, court orders, etc.)

Required Documents Based on Doubt as to Liability

The following is a list of documents that the State of Michigan requires to be included with the submission of an Offer in Compromise Application or Form 5181, Michigan Offer in Compromise, based on Eligibility criteria 3, Doubt as to Liability:

• Completed Form 5181 – Offer in Compromise
• Completed Form 5185 – OIC Schedule 3 – Offer in Compromise Based on Doubt as to Liability
• An explanation of why the taxpayer does not owe all or any part of the tax and any supporting documentation

The taxpayer should mail all forms, schedules, supporting documentation, and the 20% down payment to:

Michigan Department of Treasury
Offer in Compromise
PO Box 30190
Lansing, MI 48909.

Review and Determination

Once the DOT receives an OIC application, they conduct an intake review and will assign the OIC application to an appropriate department depending on the basis for the OIC. This DOT department will then conduct a complete review and notify the taxpayer as to acceptance, acceptance with conditions, or rejection. The next paragraph provides general guidance that is provided by the DOT concerning their review under each of the criteria for OIC submission.

General DOT Review Guidance for Each of the Criteria

Criteria One – Accepted Federal OIC

When reviewing a submitted OIC based on criteria 1, Accepted Federal OIC, the DOT states that they generally will accept the OIC. However, they will typically not accept it when the circumstances for the grant of the federal OIC no longer exist or are now irrelevant or have no bearing on the taxpayer’s taxes owed to Michigan.

Criteria Two – Doubt as to Collectability

When reviewing a submitted OIC based on criteria 2, Doubt as to Collectability, the DOT states that doubt as to collectability will exist if the taxpayer can establish that:

• the amount of the OIC payment is the most that can be expected to be paid or collected from the taxpayer’s present assets or income, and
• the “taxpayer does not have reasonable prospects of acquiring increased income or assets within a reasonable period of time that would enable the taxpayer to pay more of the taxes owed than the amount offered.”

Criteria Three – Doubt as to Liability

When reviewing a submitted OIC based on criteria 3, Doubt as to Liability, the DOT states that doubt as to liability exists if the DOT concludes, based on the review of the evidence, that the taxpayer would have prevailed in a contested case if the taxpayer’s appeal rights had not expired.

Notifying the Taxpayer

The DOT will send a letter to the taxpayer via mail as to their determination. Furthermore,  if the DOT accepts the OIC or accepts it with conditions, the acceptance letter will state the reasons for acceptance, list the proposed conditions if any, and state the payment terms of the accepted OIC. If the DOT rejects the OIC, the rejection letter will state the reasons for rejection and provide the taxpayer with information regarding his/her ability to appeal the rejection.

Appealing an MI Rejected Offer in Compromise

When the taxpayer has received a rejection of their proposed OIC they may request an “independent review.” This is the only method for appealing a rejected OIC application in the state of Michigan. To make this request the taxpayer must file Form 5186 – Request for Independent Administrative Review of Rejected Offer in Compromise. The taxpayer has 30 days from the date on the rejection letter to file this request. An “independent review” is a form of administrative appeal which asks the DOT Office of Legal Affairs to review the determination. This review, however, will only set aside an OIC rejection if the taxpayer can establish the rejection was the result of fraud or adoption of a wrong principle or error of law by the DOT. Naturally, this is a high standard to meet.

Leveraging a Tax Professional

Most taxpayers will find the process of applying for a Michigan Offer in Compromise cumbersome. Therefore, because of the time involved in applying for a Michigan OIC, taxpayers should first check their eligibility. They can do so by reaching out to a licensed tax professional with experience in working with Michigan’s DOT. You can find a list of tax professionals who resolve Michigan state tax problems here, or you can start your search below. If you are unable to pursue an Offer in Compromise, consider an installment agreement or payment plan among other options.

Disclaimer

Reading this article does not create an attorney-client relationship. Moreover, this article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction. Therefore, if you are facing Michigan back taxes problems, contact a licensed tax professional.

Details Regarding Michigan’s Installment Agreement

Taxpayers (individuals and businesses) who cannot pay Michigan income taxes in full may want to consider an installment agreement (IA). The Michigan Department of Treasury (DOT) offers installment agreements or payment plans. An installment agreement is simply a payment plan with the DOT that allows the taxpayer to make monthly payments on the taxes owed. However, taxpayers who pursue this option need to consider the interest and penalties that continue to accrue. Taxpayers who cannot pay in full should compare the installment agreement option costs with other alternatives. For example, personal loans, home-equity loans, and borrowing from friends and family.  Taxpayers who have had a Michigan offer in compromise (OIC) rejected or who do not meet the OIC requirements may also want to consider an installment agreement.

Suspension of Enforced Collections

While the taxpayer actively has an installment agreement with the DOT, the DOT will suspend all enforced collection actions. However, if the state of Michigan has not already filed a tax lien at the time the taxpayer applies for the installment agreement, the DOT will file it with the acceptance of the installment agreement. Further, penalties and interest will continue to accrue. The DOT will also apply income tax refunds (offsets) or any credits to the taxpayer’s liability. If a taxpayer with an active installment agreement later submits an Offer in Compromise and the DOT confirms receipt, the taxpayer does not need to make installment agreement payments while the OIC is pending.

Installment Agreement Durations

The taxpayer (business or individual) needs to receive Form 168 – Intent to Assess, or Form 168 – Final Assessment from the CSB (Collection Services Bureau), to meet one of the eligibility standards for an Installment Agreement. Moreover, it is advised that the taxpayer file all unfiled tax returns to ensure all tax liabilities are included within the installment agreement. Lastly, if a taxpayer still has an open bankruptcy, the DOT cannot set up an installment agreement.

24-Month Installment Agreements

The DOT will accept all installment agreement applications without further financial inquiry where the taxpayer will pay the taxes owed in full within 24 months. In other words, the taxpayer does not need to substantiate expenses and income. The DOT does not provide a liability threshold for setting up this plan. As discussed above, penalties and interest will continue to accrue. Furthermore, the taxpayer needs to complete Form 990 – Installment Agreement. The taxpayer will need to propose a payment amount for approval and make payments as proposed during the period for which the DOT reviews the IA.

Installment Agreements Longer Than 24-Months

For installment agreement requests where the taxpayer will not pay the taxes owed in full within 24 months, the DOT will conduct a financial review of the taxpayer. Individual taxpayers need to file Form 990 and Form 3189 – Collection Information Statement – Individual with the installment agreement application. The DOT will use the information contained in Form 3189 to conduct a financial analysis. The financial analysis helps the DOT determine the maximum amount that the taxpayer can afford to pay per month. The DOT leverages “Financial Standards” similar to what the IRS uses for housing, utilities, food,  housekeeping supplies, apparel, and so forth. Taxpayers can find the DOT’s Financial Standards here.

Where to Mail the Installment Agreement Request

Taxpayers should mail the installment agreement application to:

State of Michigan – OC
PO Box 30199
Lansing, MI 48909.

The taxpayer can also call 517-241-5060. Alternatively, they can connect with a licensed tax professional to have them set up a plan on their behalf. If the Michigan Accounts Receivable Collection System contacted the taxpayer, the taxpayer should contact them directly to request or set up an installment agreement.

Taxpayer Notification and Other Factors

Once the DOT approves an IA request, the taxpayer will receive a confirmation letter. The confirmation letter describes the due date, the monthly payment amount, and includes payment coupons. Taxpayers paying by check or money order, need to make the check out to the “State of Michigan – OC” and include their account number on their check. The account number may be a social security number, FEIN, or DOT account number. Taxpayers can also pay by ETF or electronic funds transfer. If taxpayers prefer this method of payment, they need to fill out Form 3798 and include it with the Installment Agreement submission. Lastly, taxpayers can make installment agreement payments via the web as well.

If the taxpayer receives a rejection letter, the letter will direct the taxpayer as to how to proceed.

Have a Licensed Tax Professional Negotiate For You

If a taxpayer owes the state of Michigan back taxes, working with a tax professional can simplify the process. A tax pro can assess if an IA is the best option to pursue based on the taxpayer’s tax and financial situation. If you need an IA for longer than 2 years, the DOT will consider your income, expenses, and assets. It is essential to ensure taxpayers accurately present their financial information to the DOT. The DOT will utilize this information to determine what you can afford. To request a free quote or a tax consultation with a tax professional that has experience with Michigan State tax issues, click here, or start your search below.

Disclaimer

Reading this article does not create an attorney-client relationship. Moreover, this article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction. If you are facing Michigan back taxes problems, contact a licensed tax professional.