Indiana State Offer In Compromise Overview & Details
Indiana’s Department of Revenue has a division called the Taxpayer Advocate Office (TAO). This office handles the Offer in Compromise program. The Offer in Compromise program provides taxpayers with the ability to settle their tax liabilities with the DOR for an amount less than what they owe. The financial condition of the taxpayer and their tax situation determine eligibility. In other words, if a taxpayer can pay in full, then they likely will not qualify. The Department of Revenue states that the taxpayer’s total taxes owed and their earnings potential are all factors in determining whether an offer is reasonable.
Indiana’s DOR provides three possible examples of taxpayers who may qualify for an Offer In Compromise:
- If the taxpayer encountered personal devastation due to a natural disaster or an economic event beyond their control
- If the taxpayer currently suffers from a significant sickness or an immediate family member does
- The taxpayer presently faces financial hardship or has financial problems
How to Apply for an Indiana OIC
Taxpayers who wish to file an Offer in Compromise must do so by filing Form FS-OIC, including all required attachments. Alternatively, taxpayers can submit a copy of an IRS Offer in Compromise application along with supporting documentation. Moreover, if the taxpayer had an OIC approved by the IRS, they can submit the IRS OIC application with the required documentation. They will also need to send proof they had an IRS liability at the time they filed the OIC with the IRS and the letter of approval from the IRS.
Collections Halted Once You Apply?
The DOR will not suspend collection activities while DOR evaluates an Offer in Compromise application. The Indiana Department of Revenue will keep any levy proceeds before an Offer in Compromise acceptance. The DOR will not release any professional license, tax liens, or permits until the taxpayer pays the full offer amount for any accepted OIC. Once the DOR places a lien on a taxpayer's vehicle, they can't sell it.
The first requirement that taxpayers should ensure they meet before beginning the application is that they are current on all tax return filings. The DOR will automatically deny the OIC application if a taxpayer is currently delinquent on any individual or business tax filings. Moreover, the taxpayer cannot be in bankruptcy. In other words, all bankruptcy filings must be discharged or dismissed already.
Next, taxpayers must ensure that they attach all supporting documentation that is requested to be filed with Form FS-OIC. The list of these documents, if applicable to the taxpayer, is detailed on the Form FS-OIC. The DOR will automatically reject an application that is submitted without all of the required supporting documentation. Examples of accepted documents are:
- Income-related documents: paystubs, profit and loss statements, government benefit letters, pension statements, and bank statements
- Expense-related documents: utility statements, credit card or loan statements, car payment bills, medical bills, etc.
- Account-related documents: bank statements, retirement statements, investment statements, etc.
Lastly, the DOR requires that taxpayers attach a statement explaining their specific circumstances that resulted in the inability to pay the taxes. The DOR calls this a Letter of Circumstance. This letter should include all pertinent facts that were the result of the liability becoming assessed including:
- the reasons or extenuating circumstances preventing the full payment or the ability to pay monthly, such as financial hardships or medical diagnosis or treatments
- and how the taxpayer intends to pay the settlement offer (if accepted).
Where to Mail Your OIC Application & Documents
The DOR and the TAO state that they will review OIC applications within 15 to 20 days. They ask that taxpayers send completed applications to:
Office of the Taxpayer Advocate
Indiana Department of Revenue
P.O. Box 6155
Indianapolis, IN 46206-6155
The Offer Amount
The Taxpayer Advocate Office (TAO) will consider whether the offer amount made by the taxpayer is reasonable and in the best interest of the State. Again, the TAO will evaluate if the offer is the largest possible the taxpayer can put forth or by which can be collected realistically.
If the DOR Accepts the Offer
If Indiana’s DOR accepts the offer, the taxpayer must sign a “legal and binding Offer in Compromise Agreement.” Furthermore, the DOR will generally expect the taxpayer to pay the agreed-upon settlement amount in full within 60 days. However, in some circumstances, a payment plan will be authorized by the TAO. If a payment plan is allowed, the taxpayer will be required to make a 20% down payment. Once DOR accepts the Offer in Compromise, it is contingent on the taxpayer filing all tax returns and paying all taxes that become due in a timely fashion moving forward. If a taxpayer fails to do this, then the DOR will cancel the settlement agreement. Moreover, it will reassess the original taxes owed, including back penalties, interest, and fees.
If a taxpayer does not qualify for an Offer in Compromise, the taxpayer or their representative can consider other tax resolution options. Above all, it is essential to work with a licensed tax professional when considering the Offer in Compromise option as the paperwork and process can be cumbersome. When in doubt, work with a licensed tax professional that has experience in resolving tax problems with Indiana's DOR. You can find a list here, or you can start your search below.
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.