Michigan to institute offer-in-compromise program

  • November 6, 2014
  • Paul Carter CPA

200px-Seal_of_Michigan_svgOn January 1, 2015, the State of Michigan will institute an “offer-in-compromise” program similar to the IRS. This program is intended for taxpayers with severe financial hardship and extenuating circumstances. It will allow taxpayers to request a tax debt settlement for less than the amount due using any one of three specific criteria in the law:

  1. A doubt exists as to the liability based on evidence provided by the taxpayer.
  2. The taxpayer provides information to show they have an inability to pay the tax due.
  3. A federal offer-in-compromise has been given for the same tax year(s).

One provision is if the taxpayer has a compromise with the IRS under section 7122 for the same year, the State of Michigan will accept one with the same relationship of total to compromised amount. If the federal offer-in-compromise is 20% of the original amount, then Michigan will accept 20% of the state amount.

Treasury is developing application materials that will be made available in the late fall of 2014. Applications will not be accepted until January 1, 2015. The program will be designed to enable taxpayers to work directly with Treasury in obtaining an offer-in-compromise. Currently, the Department has no other information or guidance to provide about this program but will update this site as the program is developed.