Skip to main content

OIC Guidelines

Submitting an Offer in Compromise

  1. A taxpayer must submit an offer in compromise on Michigan Offer in Compromise (Form 5181). The taxpayer must state on the form the amount the taxpayer offers to pay on the tax debt as a compromise, and the taxpayer must submit all documents and information requested on Form 5181.
  2. At the time of submission of the Michigan Offer in Compromise, the taxpayer must submit a non-refundable initial payment of $100.00 or 20% of the taxpayer’s offer listed on Form 5181, whichever is greater. Treasury will apply the payment toward the outstanding tax debt.
    For example, if the offer to compromise the tax debt is $5,000.00, the initial offer payment in the amount of $1,000.00 ($5,000.00 x .2 [20%] = $1,000.00) is required.
  3. An offer in compromise that does not provide all required documents and/or the correct initial offer payment, is ineligible and will not be reviewed.
    1. Payments received with the offer in compromise submission will be applied to the taxpayer’s outstanding tax debt and will not be returned or refunded to the taxpayer if the offer in compromise is considered ineligible.
  4. At the time a taxpayer submits an offer in compromise to Treasury, all of the following must be true:
    1. The taxpayer must have filed returns for all taxes for all outstanding tax periods. An exception to this is where the taxpayer is personally assessed as a responsible person for the underlying tax debt of a business entity under MCL 205.27a or the taxpayer is a successor to the underlying tax debt under MCL 205.27a. Refer to 1.8 of the Guidelines for the conditions on which this exception may apply.
    2. In the case of an offer in compromise based on doubt as to liability, the taxpayer’s opportunities to contest the tax debt in Treasury’s informal conference process and to appeal the assessed tax liability to the Michigan Tax Tribunal or a court must have expired. An offer in compromise based on doubt as to collectability or receipt of an accepted federal offer in compromise may be submitted prior to the expiration of the taxpayer’s opportunities to contest the tax debt.
    3. The taxpayer must have been assessed for the tax liabilities specified in the offer in compromise.
    4. The taxpayer must have no open bankruptcy proceedings.
    5. The taxpayer must agree to all of the conditions of the offer in compromise contained in Form 5181. By signing the Form under penalty of perjury, the taxpayer acknowledges that the offer, including required documentation, is true, correct and complete to the best of the signer’s knowledge and belief. To be considered eligible, Form 5181 must be signed.
    6. Each taxpayer who is a party to the offer in compromise must personally sign Form 5181.
      1. A Form 5181 submitted by a business entity must be signed by a representative who has authority to act on the business entity’s behalf.
      2. A Form 5181 submitted by the estate of a deceased taxpayer must be signed by the personal representative, administrator, executor or other authorized fiduciary for the estate. A representative signing on behalf of a taxpayer that is incapacitated, legally deemed incompetent, or deceased must submit proof that the representative is authorized to sign the offer in compromise. Proof includes a durable power of attorney, order of guardianship, letter of authority from a probate court or other legally recognized document of authority.
    7. A legally competent taxpayer who is a party to the offer in compromise must personally sign an offer in compromise even if a third-party designated representative has been authorized to discuss the offer in compromise or receive information in connection with the offer in compromise.
  5. An offer in compromise may propose the following types of payment:
    1. payment of a lump sum amount;
    2. payment in 5 or fewer equal monthly installments after acceptance of the offer in compromise; or
    3. payment in equal monthly installments made over a period of 6 months to 24 months, after acceptance of the offer in compromise.
  6. A taxpayer is expected to pay the entire amount of the accepted offer in compromise in as short a time as reasonably possible.
  7. Acceptable payment terms are determined by Treasury and will not be limited to those proposed by the taxpayer. Payment term options are provided on Form 5181.
  8. Submission of an offer in compromise does not suspend interest or penalties from accruing on the outstanding tax liability.
Previous  |  Next