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A Better Partnership


Jun 2015
June 09, 2015

Michigan's Offer in Compromise Program Provides Taxpayer Relief

Owing money to the Michigan Department of Treasury is no laughing matter – the state agency is notoriously aggressive in collecting tax debts. Michigan taxpayers have historically been limited to paying the full amount owed, contesting liability or entering into an installment payment plan to resolve outstanding tax liabilities with the state. Earlier this year, another important tool was added to the belt of Michigan taxpayers: the Offer in Compromise.

An Offer in Compromise is, quite simply, a way to settle a tax debt for less than the full amount owed. It is a well-known tool that has been available from the Internal Revenue Service for years. In June 2014, Gov. Rick Snyder finally brought Michigan into the mainstream by signing legislation (Mich. Comp. Law § 205.23a) allowing the state treasurer to compromise all or any part of a tax liability, including any related penalties and interest, starting January 1, 2015. The Michigan Department of Treasury has already published guidelines on the Offer in Compromise Program.

To qualify for an Offer in Compromise, you must meet each of the three following criteria:
  • You filed required returns for all tax periods;
  • You have been issued a final assessment by the Michigan Department of Treasury and the opportunity to contest and appeal the tax assessment must have expired; and
  • You cannot be in bankruptcy proceedings.
If you meet all of the above criteria, you may submit an Offer in Compromise to the Michigan Department of Treasury for one of the following three reasons:
  • You believe you do not owe the tax (doubt as to liability);
  • You believe that you cannot pay the tax (doubt as to collectability); or
  • The IRS has already approved an offer in compromise for the same tax period.
Michigan’s Offer in Compromise program allows taxpayers to either make one lump-sum payment within 30 days of the date the offer is accepted by the state treasurer, or monthly installment payments over five or fewer months. Remember that when you submit an Offer in Compromise, you must include a non-refundable initial payment equal to the greater of $100 or 20% of the total amount of your offer. If your Offer in Compromise is accepted, this amount is applied toward your total offer. If rejected, the balance of the unpaid taxes is applied to your outstanding tax liability.

While new, the state’s program provides a familiar tool for taxpayers and practitioners to resolve outstanding tax liabilities. The process is complicated and it is still unknown how accommodating the Department of Treasury will be in granting this relief. Working with an experienced tax attorney is the best way to increase your chances of success in resolving any tax liability.

If you have any questions regarding the Michigan Department of Treasury’s Offer in Compromise program, or any other tax matter, please contact one of our many experienced tax attorneys. For assistance with identifying the best Warner Norcross & Judd tax attorney for you, please call 616.752.2000.

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