Rule 100 Settlements: Settle Disputed State Taxes

Want to settle taxes for less than you owe in Washington? Unfortunately, the state does not have an offer in compromise program like the IRS does, but it does offer some taxpayers the ability to settle tax, interest, penalties, or denied refunds in cases of dispute. This is called a Rule 100 Settlement.

This program has specific eligibility criteria and an application process that significantly differ from the offer in compromise process in most states. That's why it's critical to work with a tax professional who has experience with the Washington Department of Revenue. To find help now, use TaxCure to search for a Washington-based tax pro.

Key takeaways

• Rule 100 settlement – make an offer to resolve disputed tax debt for less than owed.
• When it applies – if tax, interest, penalties, or denied refunds are under dispute.
• How to apply – if your dispute is under review, you can apply for a settlement with a letter or a form.

What is a Rule 100 settlement?

A Rule 100 settlement is the process the Washington Department of Revenue uses to let taxpayers settle taxes for less than owed. Because the state doesn't have personal income tax, these settlements typically apply to business taxes such as business & occupational tax, payroll tax, excise tax, and/or sales and use tax. However, individuals may also be able to apply if they have a dispute over estate tax, capital gains tax, use tax, or penalties.

How do Rule 100 settlements work?

These settlements start with a dispute. A taxpayer has a dispute with the Department, and they request a review. They may think that the tax assessed against them is incorrect, they may disagree with a penalty that has been assessed on their account, or they may believe that interest was miscalculated. Or they may have a dispute because they applied for a refund that was denied by the state. 

The state has a very specific review process for disputes, and there are several different types of reviews, including formal reviews and a few different informal reviews. However, at any point during the review, the taxpayer can request a Rule 100 settlement. 

Here are some example scenarios where taxpayers may request a Rule 100 settlement:

• Retailer penalized due to conflicting DOR advice.
• Contractor misclassified for B&O tax purposes.
• One-time, unusual transaction triggering a large use-tax assessment.

You cannot just request a settlement because you can't afford the bill, or you disagree with it. Instead, you need to start the review process first, and then you may apply for a settlement during the review process. 

Eligibility

The DOR will generally only consider a settlement if one or more of the following apply:

• The issue is nonrecurring.
• You received incorrect written information from the DOR -- for example, instructions that conflicted with the law.
• Applying the law would lead to harsh consequences. 
• There is legal uncertainty about the law -- in other words, if the case went to court, the result is not clear.

You cannot get a Rule 100 settlement because you can't afford to pay. In that case, you should contact the Department directly to ask about payment plans or hardship options.

If any of the following apply, you cannot get a Rule 100 settlement, and the DOR will not even consider your request if you apply:

• You argue that taxes or any statutes related to taxes are unconstitutional.
• You're litigating the issue with the Department already.
• You want a settlement so that you can avoid the cost of litigation. 

How to Apply for a Rule 100 Settlement

You must submit a written request to the Administrative Review and Hearings Division (ARHD) of the DOR. You can use Form 50 0006 or write a letter with the following details:

• Amount in dispute
• Why you qualify for a settlement
• How much you're offering to settle
• Why your offer is reasonable

Once you apply, the ARHD will let you know that they received your offer. If they refer your offer to the settlement track, the ARHD will prepare an agreement to solidify the settlement between you and the department. Once you sign the agreement and pay the offer, your dispute is resolved. 

If the ARHD does not put your offer in the settlement track, they will notify you. Then, your dispute will continue to move through the review process. 

Other Tax Debt Relief Options in Washington

If your case doesn't qualify for a settlement, you will have to complete the review process, and if you ultimately owe the tax debt, you may want to consider one of the following payment options:

• Payment plan – Contact your local DOR office to apply, and you may be able to set up a monthly payment plan. You must share financial details and agree to have payments automatically withdrawn from your account.
• Penalty waivers – You must reach out to the Department directly, and generally, they'll only waive penalties for reasonable cause, which means that events out of your control prevented you from paying.
• Hardship – The Department may be willing to stop collection actions against you if you establish financial hardship. However, you will continue to owe the debt, and they will probably file a state tax warrant against you.

To learn about the best options in your situation, reach out to a licensed tax professional today.

FAQs about Washington State Rule 100 settlements

Here are some questions that taxpayers commonly ask about these settlements. 

Is a Rule 100 settlement the same as a Washington offer in compromise?

No, a Rule 100 settlement gives taxpayers who have a dispute over their tax liability a chance to settle for less than owed. The WA DOR does not have an offer in compromise program. Most offer in compromise programs are based on an inability to pay, and that is not the case with Rule 100 settlements. 

Can I qualify if I can’t afford to pay?

No, you cannot qualify for a Rule 100 settlement just based on an inability to pay. Instead, you must have a dispute with the Department, and then you can apply for a settlement.

How long does the Rule 100 process take?

Processing time varies depending on where you are in the review process and the complexity of your claim. Typically, it takes several months or potentially even a year or more to deal with a dispute and settlement.

What if my Rule 100 offer is denied?

Then, the dispute will continue to go through the review process. If the state denies your dispute, you can generally appeal and take the issue to court.

Can I use Rule 100 for multiple tax periods?

Yes, you can apply for a Rule 100 settlement for any tax from any period that is under dispute. However, your dispute must meet certain eligibility rules to qualify.

Get Help With Washington Tax Problems Now

If you're having problems with the DOR, you need an experienced and high-quality tax professional. Use TaxCure to search for a pro today. Start your search now, and select the WA DOR to ensure you only see pros who have experience in this state. Then, narrow down the results even further by selecting your tax problem and desired solution. Don't wait – get relief today by reaching out to a tax pro.