Administrative Procedure

Administrative Procedure AP 634: Offers in Compromise

Date: 02/11/2022
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws

Table of Contents

634.1. In General

The Commissioner of Revenue is authorized to accept payment of less than a taxpayer's full tax liability in full and final settlement of that tax liability subject to certain restrictions.  G.L. c. 62C, § 37A.  DOR may consider an Offer in Compromise (Offer) only if there is serious doubt as to the collectibility of the tax owed.  This settlement authority is designed to achieve the least possible loss or cost to the Commonwealth with regard to its collection of taxes and fairness to the taxpayer.

An Offer may also be submitted by a person who has been determined to be personally liable (Responsible Person) for trustee taxes of a corporation, partnership or LLC (entity). See 830 CMR 62C.31A.1(13).

DOR may, but is not required to, accept an Offer.  A taxpayer has no right to such a settlement.

A taxpayer or Responsible Person considering filing an Offer should be aware of the following general rules:

As a condition for making an Offer, the Department will require the taxpayer to agree in writing to the extension of the statutory time to collect the tax liability while the Offer is being evaluated, and will require further extension of the statutory time on collections of the liability when an accepted Offer includes installment payments. If the Department rejects or the taxpayer withdraws the Offer, the time from the date the Offer was received by the Department or to the date of receipt of the withdrawal request to the date of notice of the rejection from the Department will be added to the statutory time to collect the tax under G.L. c. 62C, § 65. 

The Department may, but is not required to, suspend its collection process while it is reviewing the Offer. Interest and penalties will continue to accrue on any unpaid amounts, and the taxpayer will remain subject to other collection actions such as the filing of tax liens, offsets, and the intercept program.

Offers undergo an extensive Financial Audit by DOR. Furthermore, any Offer for over $20,000 less than the total amount owed or for less than half of the total amount owed must also be reviewed and approved by the Attorney General for the Commonwealth of Massachusetts.

Accepted Offer Agreements under this provision are not protected by the confidentiality provisions of G.L. c. 62C, § 21 and are open to public inspection upon request.  A list of accepted settlements is required to be published in DOR’s annual report.

Once an Offer Agreement takes effect, neither party may reopen the matter except for falsification or concealment of assets or mutual mistake of a material fact.

634.2. Offers Based on Doubt as to Liability

Offers based on doubt as to liability are not reviewed under G.L. c. 62C, § 37A. Taxpayers seeking to make a settlement on these grounds are directed to the Office of Appeals for action under G.L. c. 62C, § 37C. See AP 628 Resolution of Disputes at the Office of Appeals.

634.3. Offers Based on Doubt as to Collectibility

An Offer based on a taxpayer's inability to pay the total tax due must include the following documents. These documents will be reviewed by the Collections Bureau.

  • Form M-656 Offer in Compromise Application, completed and signed.
  • Form M-433-OIC, Statement of Financial Condition and Other Information, completed and signed.
  • Electronic Funds Transfer Authorization, if required.
  • Form M-2848 Power of Attorney and Declaration of Representative, completed and signed if someone is acting as a representative for the taxpayer.
  • The Offer must be accompanied by supporting documentation describing the taxpayer's financial circumstances, e.g., employment status, income, expenses, available assets, total liabilities, and any pertinent medical issue.
  • The Offer must be accompanied by an Initial Payment based on the payment option selected (20% of the Offer amount for a lump sum cash Offer or the first month’s payment for an installment payment Offer). The Initial Payment and payments received during the Financial Audit will not be returned to the taxpayer if the Offer is rejected or withdrawn and will be applied against the outstanding liability.

DOR will generally not accept an Offer on only a portion of the taxpayer’s liabilities. All unpaid liabilities should be included in the Offer or paid before the Offer is submitted.

All required documents should be scanned and submitted to:

doroicunit@dor.state.ma.us

If unable to send electronically, mail to:

Massachusetts Department of Revenue
Collections/OIC Unit
P.O. Box 7021
Boston, MA 02204


For further information, call the Collections Bureau at (617) 887-6400.

634.4. Offers in Compromise – Review Process

When the Offer application is received, the taxpayer’s status is appraised for Basic Eligibility for the Offer in Compromise program. A taxpayer does not meet the Basic Eligibility criteria if:

  • They have not filed all required Massachusetts tax returns and reports with DOR.
  • They have not paid the entire liability of the most recent tax year, or the last 12 months of returns.
  • They have not made all required estimated payments for the current year.
  • They have not received a final Notice of Assessment for all Massachusetts state taxes that are owed.
  • They actively dispute the amount of tax owed or that they are responsible to pay the tax liability.

Ineligible applicants will receive a letter from the Collections Bureau indicating that they are ineligible. Eligible applicants for the Offer in Compromise program will undergo a Financial Audit by the Collections Bureau. The taxpayer may be contacted during this audit for more information or clarification of information submitted.

Taxpayers in an active bankruptcy case should contact the Bankruptcy Unit to discuss their options before submitting an paperwork to OIC. While a taxpayer is in an active bankruptcy case, an Offer will not ordinarily be considered under this Administrative Procedure. Instead, the information provided by the taxpayer may be forwarded to the Bankruptcy Unit in conjunction with its management of the bankruptcy case.  

The Commissioner of Revenue and at least two Deputy Commissioners must approve and Offer. In appropriate cases, the Massachusetts Attorney General must also review the Offer.  DOR will notify the taxpayer in writing (either electronically or by mail) of acceptance or rejection of the Offer.

An Offer will be accepted only if DOR determines that serious doubt exists as to the collectibility of the tax.  Failure to establish such serious doubt, failure to comply with requests for information, or submission of false information will result in rejection of the Offer. Knowingly submitting false or fraudulent information may also lead to a fine or imprisonment, or both. Frivolous Offers and Offers submitted to delay the collection of taxes will be rejected immediately.  Rejection of an Offer is not a bar to submission of a later Offer by the taxpayer or the taxpayer's representative on the same liability, but on different terms.

634.5. Responsible Person's Offer in Compromise

Under regulation 830 CMR 62C.31A.1(13), a Responsible Person may make an Offer to the Commissioner under G.L. c. 62C, § 37A which is less than the amount of the Responsible Person assessment. The acceptance of an Offer from a Responsible Person discharges the liability for the Responsible Person assessment made against the settling Responsible Person. The effect of Responsible Person Offers upon the liability of the related entity and the liability of other Responsible Persons of the same related entity is discussed below in AP 634.5.1 and AP 634.5.2, respectively.

634.5.1. Effect of Responsible Person Offers in Compromise upon liability of related entity

Compromise of a Responsible Person's liability pursuant to G.L. c. 62C, § 37A discharges the liability of the entity (taxpayer) only up to the amount of the Responsible Person's payment.

634.5.2. Effect of Responsible Person Offers in Compromise upon liability of other Responsible Persons of the same entity

Compromise of the Responsible Person's liability pursuant to G.L. c. 62C, § 37A  discharges the liability of any other Responsible Person or persons only up to the amount of the Responsible Person's payment.

634.6. Effect of Offer in Compromise of an entity’s liability upon liability of Responsible Person(s) of that entity

Compromise of the liability of an entity (taxpayer) for the original assessment, which discharges the full liability of the taxpayer, also discharges the full liability of any Responsible Person(s) for the original assessment and the Responsible Person assessment.

 

REFERENCES:
G.L. c. 62C, §§ 21, 37A, 37C, 65
830 CMR 62C.31A.1
830 CMR 62C.31A.1(13)

AP 614: Power of Attorney
AP 628: Resolution of Disputes at the Office of Appeals

Form M-433-OIC: Statement of Financial Condition and Other Information
Form M-656: Offer in Compromise Application
Form M-2848: Power of Attorney and Declaration of Representative

Referenced Sources:
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