Offer in Compromise
An offer in compromise (OIC) is an agreement between a taxpayer and the Missouri Department of Revenue (Department) that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the Department believes that the liability can be paid in full as a lump sum or through a payment agreement.
In most cases, the Department will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the Department measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.
An Offer in Compromise, when submitted for reason of Doubt as to Collectibility or under Effective Tax Administration - Economic Hardship(a) may be considered only after other payment options have been exhausted. If taxpayers are unable to pay their taxes in full, there are other payment options, such as monthly installment agreements or a loan from a financial institution, that must be explored before an Offer in Compromise can be submitted.
All tax returns in all tax types must be filed before the Offer in Compromise is considered. The Offer in Compromise must include tax due in all tax types. Any delinquency currently under bankruptcy can not be included in an Offer in Compromise.
You may propose an Offer in Compromise by submitting Form MO-656 to the Missouri Department of Revenue (Department). The offer must include a proposal to pay a sum of money and the reason for the offer. Missouri law provides the following three reasons as a basis for an Offer in Compromise:
- Doubt as to Liability: A legitimate doubt exists that the assessed liability is correct. Possible reasons to submit a doubt as to liability offer include:
- The taxpayer disputes the existence or amount of the correct tax liability;
- The taxpayer’s evidence wasn’t considered; or
- The taxpayer has new evidence.
- Doubt as to Collectibility: Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the statutory period for collection.
- Effective Tax Administration:
- Collection of the full liability will result in severe economic hardship to the taxpayer.
- Regardless of the taxpayer’s financial circumstances, exceptional circumstances include, but are not limited to, instances where the taxpayer’s failure to pay the taxes assessed is the result of circumstances beyond the reasonable control of the taxpayer and is not the result of negligence on the part of the taxpayer or
- Instances in which a reasonable person would not expect the assessment based on previous policy of the Department of Revenue or information provided to the taxpayer by the Department of Revenue.
Doubt as to Liability:
Documentation to verify why the tax is not due, for example, if taxpayer was a resident of another state, a copy of the other state return for the year(s) included in the Offer in Compromise, a copy of the other state driver’s license, copies of property/auto insurance, voter’s registration, to verify state of residency. If other reasons are in the explanation, any type of documentation to verify the reasons for not owing the tax.
Doubt as to Collectibility:
The taxpayer must submit all required documents and information on the Offer in Compromise checklist.
Effective Tax Administration:
- The taxpayer must submit all required documents and information on the Offer in Compromise checklist and information to verify long-term future economic hardship, such as decreased income due to retirement, health problems, or future care for a disabled dependent, loss of income due to theft or criminal activity.
- Information to verify why return was not filed or paid timely, such as illness (physical or mental), death, natural disasters, theft, fire, etc.
- Information to show basis for actions such as documentation of previous department policy.
You may refer to the Offer in Compromise Checklist to ensure all necessary information is included with your offer. Failure to provide the required information will result in denial of your offer.
If you owe for more than one tax type, send one Offer in Compromise listing all tax debts. All required tax returns need to be filed.
Payment is not required unless the Offer in Compromise is accepted and should be made according to the terms agreed upon in Step Four of Offer in Compromise. Payments sent with the Offer in Compromise will be applied to the account the Offer in Compromise was submitted for, however, acceptance of the payment does not constitute or establish acceptance of the Offer in Compromise.
No. The law does not provide a right of appeal for a rejected OIC.
Yes, the taxpayer does have the option of submitting another OIC if the previous offer was denied.
Offer in Compromise payments are non-refundable according to Section 32.378:2(1) of the Missouri Revised Statutes.
The special conditions are listed on the Offer in Compromise, Page 12Terms and Conditions. It is very important that these requirements are understood before submitting the offer.
Yes, however an offer will be rejected if:
- The offer is not considered to be fair and reasonable to other taxpayers and the Department.
- If any part of the application is incomplete, or any required documentation is not attached.
- If there are noncompliant filings in any tax type.
P.O. Box 1646
Jefferson City, MO 65105-1646