Mississippi State Offer in Compromise Overview
The Mississippi DOR, like the IRS, offers an Offer in Compromise (OIC) option. An Offer in Compromise is an agreement between the Mississippi DOR and the taxpayer to pay less than the total amount in taxes owed. The taxpayer should offer an amount that is in their best interests and the state. The offer should be in line with what the DOR deems to be the taxpayer’s ability to pay. Consequently, it is the Commissioner of Revenue that makes the recommendation as to whether to accept an amount less than the taxpayer owes. Both self-employed individuals, non-self-employed individuals, and entities can apply for an Offer in Compromise and the state provides guidelines and separate applications for each.
Offer in Compromise Eligibility Details and More
Before a taxpayer applies for an Offer in Compromise, it is essential to understand the eligibility requirements and guidelines provided by the DOR. Remember, if the Commissioner determines if the offer amount is not in the best interests of the state, then it will not be accepted. The offer amount has to be based on the taxpayer’s ability to pay. The taxpayer should not apply for an OIC to stall collection activities as the DOR will not suspend collection activities once the taxpayer files an OIC nor will the state release tax liens. In fact, interest will continue to accrue.
The Mississippi DOR provides instructions and applications specific to individuals (not self-employed), self-employed individuals, and entities. The guidelines slightly vary by the type of taxpayer applying for a Mississippi Offer in Compromise. Below we have provided guidance for individuals who are not self-employed.
Here are some of the eligibility details the Mississippi DOR provides:
- The taxpayer must file all tax returns due and continue to file on time. Moreover, the taxpayer must pay all future tax liabilities.
- The taxpayer cannot have an open bankruptcy proceeding
- Taxpayers must illustrate that they cannot pay their tax liabilities through a payment plan (installment agreement) or through equity in assets.
- The taxpayer’s tax liability must be at least 4 years or older and $3,000 or more. In other words, the state must have first tried to collect on the past-due tax liability so recent tax liabilities generally won’t be considered.
- If you or your business has Trust Fund Tax liabilities, the DOR will not consider the offer. Trust fund taxes include sales taxes and income taxes withheld on behalf of employees
- If the taxpayer accrued the tax liabilities from criminal activity, the DOR will reject the offer
- The offer may be rejected by the DOR if the taxpayer has a history of willful noncompliance with MS state tax laws
- The DOR will reject a taxpayer’s offer that does not provide sufficient financial documentation to support income, expenses, liabilities, and assets.
- Taxpayers with a previous OIC for another tax liability cannot submit another offer
- Complete the OIC application in full, the Commissioner may disregard incomplete applications
The Offer Amount
Generally, the minimum offer is equal to monthly disposable income multiplied by 12 and adding in the market value of non-necessary assets (market value of assets minus any liabilities associated with the assets). Non-necessary assets would include those assets generally exempt in a bankruptcy. The DOR determines monthly disposable income by subtracting monthly allowable expenses (necessary expenses) from monthly income. Some assets are not included in the calculation, such as Homestead up to $75,000 in equity, $10,000 of equity per vehicle per taxpayer, and personal property of up to $10,000. The MS DOR does provide worksheets to help taxpayers determine the offer amount.
Guidelines and Instructions
The MS DOR does provide guidance and instruction when filing for an Offer in Compromise. Individual taxpayers who are not self-employed must complete the application by completing all lines and if a question does not apply to write “n/a” or zero on the line. If the taxpayer is also submitting an OIC with the IRS, the DOR may accept a 433 (Federal) form instead. The taxpayer must include additional sheets of paper if there is not enough space to properly answer a question. The taxpayer must pay $100 or 20% of the offer amount (whichever is greater) with the application. The payment will go towards the tax liabilities regardless of whether the DOR accepts the Offer. Once complete the taxpayer can mail the application to:
- Mail the completed application to the address below:
- Office of Tax Enforcement
- P.O Box 2338
- Jackson, MS 39225
Also to note, the taxpayer must sign a waiver eliminating the confidentiality provisions of the Mississippi tax code. Because of the complexity of filing an offer in compromise, it is recommended you reach out to a licensed tax professional with experience in filing MS state offers in compromise. Go here to start your search today.
Process and Decisions
The Commissioner will conduct a thorough examination to ensure that you accurately detailed your financial situation and claimed only necessary allowable expenses.
The DOR will send the taxpayer a letter as to whether their offer was accepted. If accepted, the DOR letter acceptance letter will indicate the due date for the payment. However, once the taxpayer makes the payment, the DOR generally will release any related tax liens. If the Commissioner denies recommending the Offer to the governor, the taxpayer usually cannot appeal. According to Joseph Damiens, a tax attorney based in Mississippi, "Taxpayers should be very careful when filing an OIC with the Mississippi Department of Revenue, if you're denied on the initial offer, in most cases, the DOR will not entertain another offer for that taxpayer."
Due to the complexity of filing an Offer in Compromise with the state of Mississippi, it is highly recommended you reach out to a licensed tax professional such as a tax attorney, CPA, or EA who has experience with this type of resolution. You can find a list of tax professionals on TaxCure by visiting this link today.