Benjamin Franklin once said, “In this world, nothing is certain, except death and taxes.” However, changes in the tax laws are proving that famous quote wrong. A Michigan Offer in Compromise allows you to negotiate an amount less than what you owe to the State of Michigan.
Do I Qualify for a Michigan Offer in Compromise?
As an individual, there are three ways to qualify with the state.
Doubt of Liability: The tax debt does not belong to you. It may belong to a former spouse, someone with a similar name, or even is simply a clerical error.
Doubt of Collectability: You are unable to pay the tax debt and attempting to would be a severe burden on your family. This situation is expected to be long term.
Federal Offer in Compromise: If you have an approved Offer in Compromise from the Internal Revenue Service for the same tax years, the State of Michigan will work with you. Usually this means accepting the same percentage discount that the federal government did on the debt you owed to them.
Once you have determined your eligibility, contact a tax lawyer in Michigan. Together you can fill out the appropriate forms to file. You will need to provide proof as to why you do not believe that owe the money, complete a worksheet proving payment would bring economic hardship to your family, or proof of an accepted Offer in Compromise with the federal government.
You will also complete Form 5181 with your tax attorney. This form states the amount you are willing to pay. Your attorney can help you determine an appropriate offer amount.
In addition to attorney fees, you must be prepared to offer a 20 percent down payment on your offer. In other words, if you are offering $1,000 on a $10,000 tax debt, you must enclose $200 (20 percent of $1,000) with your offer.
Be aware that this payment is non-refundable, even if your offer is denied. It will, however, be applied to your total debt owed no matter what the result.
What Can I Expect Next? How Long Does It Take to be Approved?
While the program can be a lifeline for many taxpayers in over their heads, it is not a quick process. Depending on how busy the state of Michigan is, it can take up to six months to process.