Maryland 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 Maryland, as it states on their website, you must meet all of the following eligibility requirements:
- Two years must have passed since you became liable for all taxes due.
- You have incurred a delinquent tax liability that has resulted in an assessment.
- You have exhausted all other avenues of administrative appeal.
- You cannot make an offer in compromise if there is any issue remaining that can be appealed.
- You must be current with respect to all returns filed or required to be filed to the Comptroller’s Office.
- You must not be currently involved in an open bankruptcy proceeding.
- You are unlikely to be able to make payment in full any time in the foreseeable future due to your financial situation
- You either are without resources or unable to apply present and/or future resources to paying the outstanding tax liability.
- If this relates to a business tax, the business must have been closed for at least two years.
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:
- Form MD 656, Offer in Compromise
- Form MD 433-A, Collection Information Statement for Individuals
- 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 Maryland 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.