Maine Offer in Compromise: What You Need to Know
An Offer in Compromise is an agreement between you and the State Government to settle your back taxes for less than you owe.
An Offer in Compromise is strictly based on numbers; basically, your income versus your expenses and the equity in your assets.
If you can prove to the State you do not have the ability to pay back your taxes in full before the Statute of Limitations expires, then you may be eligible to file an Offer in Compromise. However, it will depend on your Reasonable Collection Potential and how much time is left before Statute of Limitations on the debt expires.
Qualifying for an Offer in Compromise
To qualify for an OIC with the State of Maine, it states on the website:
The following requirements must be met before your offer will receive consideration:
1. You must generally have filed all tax returns due, or show why the returns do not need to be filed. This includes both individual income tax returns and all business-related tax returns for which you are responsible. Any settlement offer received while returns remain unfiled may be returned to you without action.
2. A settlement offer based wholly or partly on doubt as to liability requires a detailed explanation and should be accompanied by documents supporting your case. Remember that the essence of doubt as to liability is that under the relevant law, there is at least a reasonable argument that you don’t owe either all or part of the assessed tax.
3. An offer based wholly or partly on doubt as to collectability requires a complete and accurate personal financial statement. If you own or control a business, you may be required to submit financial statements for your business as well. Your statements must identify all of your income and all assets and liabilities. A financial statement later determined to be false in any material way may result in charges of perjury and may cause the agreement to be set aside and the debt reinstated.
The State Tax Assessor will never settle a tax liability if the assessor finds that the taxpayer has acted with intent to defraud. Frivolous offers and offers submitted to delay collection of tax will be rejected immediately.
Submitting Your Offer in Compromise
Much like the IRS and other states, you must submit all required supporting documents and failure to do so will result in your Offer being rejected. Their list of documents includes:
- The offer should be submitted in the form of a letter detailing what you are offering and why you believe that acceptance of the offer is in the best interest of the State of Maine. Include the following in your letter:
1. The exact amount offered, and any proposed terms or conditions associated with your offer.
2. If your offer is based on doubt as to liability, include a detailed explanation of why doubt exists and attach any available documents that show that you do not owe the amount assessed.
3. If your offer is based partly or wholly on doubt as to collectability, attach complete and accurate financial statements. Personal financial statements include the requirements that you attach a copy of your most recent federal income tax return and, unless you are self-employed, copies of two recent pay vouchers. - Income – Copies of paystubs, earnings statements, Social Security Administration benefit letters, pension statements, bank statements reflecting direct deposits, etc.
- Expenses – Copies of Utility statements, credit card or loan billings, medical bills, etc.
- Accounts – Copies of all statements for bank, retirement, and investment accounts.
Offer in Compromise Pros and Cons
The Pros of submitting an Offer to the State of Maine is they may allow your debt to be compromised and thereby removed.
The Cons are if the State rejects your Offer, it is not subject to administrative or judicial review.