Ohio Offer In Compromise: Eligibility, Requirements, & Process
The State of Ohio has established a formal Offer in Compromise program to allow some taxpayers to settle their delinquent tax debts for less than the amount they owe. The settlement will include not only delinquent tax due but also penalties, interest and any collection fees that may have accrued. The program is administered by the Attorney General’s office, with the consent of the Department of Taxation. The program has specific requirements that a taxpayer must meet to qualify.
Qualifying Circumstances for an Ohio Offer In Compromise
The program allows taxpayers the opportunity to settle their delinquent tax debt under three circumstances:
(1) economic hardship
(2) doubt as to liability, or
(3) in limited instances, a substantial probability that the claim, if collected, would be subject to refund under the respective agencies’ statutes, rules or regulations. The State of Ohio processes innocent spouse relief under the economic hardship Offer in Compromise program as well.
The Attorney General’s office only provides general guidance as to what specific criteria a taxpayer must meet to qualify for each of the three types of acceptable Offers in Compromise. They define an “economic hardship” as, “having insufficient assets and income to pay the full amount and that requiring full payment would cause a severe economic hardship.” They do not elaborate on how they view or calculate a severe economic hardship. Further, they define having “doubt as to liability” as, “the taxpayer having a belief that they do not owe the amount and/or did not receive service of the assessments.”
The guidance that the Attorney General’s office does provide is general eligibility requirements, submission requirements, and a list of financial documents that they require to be submitted. We discuss these items in more detail below.
For a taxpayer to be eligible for an Offer in Compromise, the following must be true:
- Delinquent tax debt must have been certified for collection to the Attorney General’s office for greater than one year
- The principal must be greater than $500 (except for innocent spouse)
- The taxpayer must not currently be in bankruptcy or have an administrative appeal pending with the Department of Taxation
The following are the requirements for submitting an Offer in Compromise:
- The taxpayer must complete and submit an Offer-in-Compromise application. Taxpayers can find the Offer in Compromise application here.
- The taxpayer must be current with all tax return filing and estimated payment requirements
- The taxpayer must sign the Offer-in-Compromise application, agreeing to all terms and conditions stated therein. Specifically:
- Disclosure of every obligation owed to the State of Ohio
- Payment of the proposed settlement amount, in full, within 60 days of execution of the Offer-in-Compromise agreement
- The taxpayer must agree to remain in continued compliance with all filing and estimated payment requirements for five years after the acceptance of the Offer-in-Compromise agreement. Failure to comply with this requirement will result in the reinstatement of the original delinquent tax debt, including accrued interest.
- The state requires full financial disclosure. A failure to fully and completely disclose and attach any information required by the Offer-in-Compromise Application may result in outright rejection or, if previously accepted, reinstatement of the full amount owed plus accrued interest.
- Also, the Attorney General’s office encourages applicants to submit all relevant information or documents that pertain to their specific situation, even if the Offer-in-Compromise Application does not explicitly request it.
The following is a list of documents that the State of Ohio requires to be included with the submission of an Offer-in-Compromise:
Copies of IRS OIC Documents and Tax Returns
- Copies of all Offer in Compromise forms and supporting documents submitted to the Internal Revenue Service, if applicable; including, all related notices received from the Internal Revenue Service
- Copies of the last two years’ Federal income tax returns, including all W-2’s, 1099’s, schedules and attachments
- Copies of the last two years’ State income tax returns including all W-2’s, 1099’s, schedules and attachments
- A credit report dated within the past year
- Copies of the last three months’ pay stubs or proof of income
- Copies of the last three months’ complete bank statements. This includes all open accounts at all banks, credit unions, and all other financial institutions
- Copies of the last three months’ complete credit card statements for any and all open credit cards
- Copies of all insurance policies and/or most recent renewal declaration pages, including homeowners, renters, automobile, etc.
- If applicable, a copy of an official statement of social security or other government benefits received
- If applicable, list any bankruptcy cases filed and attach copies of the discharge document
Other Financial & Miscellaneous Documents
- Applicant’s monthly budget including a list of all monthly income and a list of all monthly living expenses
- Provide copies of the current month’s bills for all budget items listed including lease agreements, mortgage statements, utility bills, car payments, etc.
- List of assets with copies of the last three months’ investment statements including IRA’s, 401k’s, stocks, bonds, etc.
- List of any other debt that is currently in collections, i.e. medical bills, credit cards, payday loans, utilities, etc.
- Documentation, if applicable, showing payment on the above debts
- Provide documentation and list any collection proceedings that have been filed against the applicant, including, but not limited to wage or bank garnishments
- List all civil or criminal cases, including court and case number, in which the applicant is a party
- List any professional licenses from any and all state or federal agencies
- Please specify if any of these licenses are impaired because of the applicant’s debt, or for any other reason
Filing Process and Considerations
The State of Ohio requires that the Offer in Compromise Application be submitted in paper copy only. Taxpayers should submit their application and supporting documents to the Office of the Attorney General, OIC Unit, 150 E. Gay Street, 21st Floor, Columbus, Ohio 43215.
Taxpayers should be aware that the submission of an Offer in Compromise Application does not prevent the Attorney General’s office from filing tax liens, tax refund offsets, or stay any pending enforced collection actions, including garnishments or foreclosures. However, the Attorney General’s office will not undertake any new enforced collection actions. Further, the filing of an Offer in Compromise application does not protect the taxpayer from otherwise making payments pursuant to a previously negotiated installment agreement.
Taxpayers should be aware that the Attorney General’s office reserves the right to use any information that is provided in the Offer in Compromise application for debt collection purposes.
Review and Determination
Preliminary Review At First
Once the Attorney General’s office has received the Offer in Compromise Application and supporting materials from the taxpayer they will conduct a preliminary review to ensure that all eligibility requirements, submission requirements and required supporting documentation have been met or included. If the application is incomplete, or if the taxpayer does not meet the eligibility or submission requirements, the application will be rejected without review. If particular documents do not exist, the taxpayer may submit the application with a notarized statement explaining why the records do not exist. The Attorney General’s office will base its recommendation on the information provided, however, the Department of Taxation may investigate further.
Next, the Attorney General’s office will perform a review of the application and issue a recommendation of acceptance, rejection or counter-offer. This, along with the application, is sent to the Department of Taxation for review. The Department of Taxation will also perform a review of the application and ultimately issue an acceptance, rejection or counter-offer.
What the AG and Department of Taxation Consider
The Attorney General’s Office and the Department of Taxation have stated they will consider all of the following during review of an Offer in Compromise application:
- Earning potential, current employment, and future employment/income
- All sources of income, past, present, and future
- Applicant’s age with respect to earning potential
- Borrowing potential
- Litigation, including tax litigation
- AG collection notes
- IRS and other state and local tax returns
- IRS or other states Offers in Compromise
- Whether the applicant has made a good faith attempt to pay the liability prior to submitting the Offer in Compromise application
- Whether the offer is sincere (rejections and counteroffers are not negotiable)
- Does the applicant have a history of tax compliance? The AG and Department of Taxation will generally reject outright any applicants who cannot demonstrate that they have filed and paid their taxes timely for at least two years.
- In cases of an active business applicant, the fairness to competitors
They further advise that, “[i]t is the burden of the applicant to prove each basis for the request for relief. If the applicant believes a specific issue should be considered, such as an ongoing medical condition or pending legal proceeding, documentary evidence in support of that issue, such as medical records and/or pleadings, must be submitted along with the application. Do not rely on the State to request information.”
The AG Will Issue A Decision in 3-6 Months
The Attorney General’s office will issue a notice to the taxpayer stating whether the Offer in Compromise Application has been accepted, rejected, or a counter-offer proposed. Taxpayers will usually receive this notice within 3-6 months after the filing of their Offer-in-Compromise. The taxpayer does not have the right to appeal a denial of an Offer-in-Compromise. However, they do have the ability to refile the application if their circumstances change.
Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.