What is Offer in Compromise?
The Commissioner of DOR is authorized under Massachusetts General Laws, Chapter 62C, s 37A to accept a lesser amount than the tax liability owed if there is serious doubt as to whether the tax due can be collected, there is no intent to defraud, and accepting an offer is in the best interest of the Commonwealth. DOR has prepared the following information for accepting an Offer in Compromise (Offer) under this statute.
Preparing and submitting the Offer requires completion of detailed financial forms and providing supporting documentation. Although not required, taxpayers are strongly encouraged to consult with a tax professional before proceeding. If an accountant or attorney represents a taxpayer, Form M-2848: Power of Attorney must be submitted to the Department with the Offer in Compromise Application.
Instructions to Taxpayers
Although the Department evaluates each case based on its own unique set of facts and circumstances, the Department gives the following factors strong consideration:
- The taxpayer's ability to pay, as determined by the Department
- The amount of equity in the taxpayer's assets
- The taxpayer's present and future income and expenses
- The potential for changed circumstances
- Whether the Offer is in the best interest of the Commonwealth
- Whether the Offer contains fraudulent, misleading, or incomplete information.
Documents and Information to File
Listed below are the documents within the Offer in Compromise Application that are required when filing an Offer. All information must be filed in order for the Department to determine if the Offer can be processed:
- Form M-656 Offer in Compromise Application
- Form M-433-OIC Statement of Financial Condition and Other Information
- Electronic Funds Transfer Authorization Form
- Must be filed when an Installment Payment Option is made
- Supporting Documentation
- Refer to the Documentation Checklist in the Application Packet
- Form M-2848 Power of Attorney and Declaration of Representative
- Must be filed if someone is acting as a representative for the taxpayer
- Initial Payment
- An Initial Payment must be included 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.
- Taxpayers proposing an Installment Payment Offer must begin making installment payments while the Offer is under review.
- The Initial Payment and any payments received during the Financial Audit will not be returned if the Offer is rejected or withdrawn and will be applied against the outstanding liability.
The Minimum Offer Amount is a calculated amount that equals the net equity of the taxpayer’s current assets, plus a projected amount that could be collected from the taxpayer’s future income. The Minimum Offer Amount must equal or exceed $5,000. The ability to pay more than the Minimum Offer Amount, as determined by the Department, will result in rejection of the Offer.
After completing the forms required, email the Offer application to:
If unable so send electronically, mail to:
Massachusetts Department of Revenue
P.O. Box 7021
Boston, MA 02204
Contact the Collections Bureau at (617) 887-6400 if assistance is needed in completing the application.
Basic Eligibility Rules
DOR may, but is not required to, accept an Offer. A taxpayer has no right to such a settlement. DOR does not negotiate on any Offer; therefore taxpayers should put forth their best Offer with their application.
A taxpayer does not meet the Basic Eligibility to make an Offer and any submitted Offer will not be processed, and case will remain subject to collection activity, 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 12 months of tax returns that they were legally required to file
- 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.
Offers received where Basic Eligibility is met will be subject to Financial Audit.
The submission of an Offer will not stop DOR's normal collection process until Basic Eligibility is met and a Financial Audit of the application begins.
Interest and penalties will continue to accrue on any unpaid amounts.
The Financial Audit includes examining the taxpayer’s assets, liabilities, and ability to pay both immediately and over time. The taxpayer’s financial position and previous tax payment history are audited by the Department. The Financial Audit may take 5 – 6 months to be completed.
Taxpayers will be contacted if additional information or documentation is needed and must respond within the specified timeframe or the Offer may be rejected and the Initial Payment and any payments received during the Financial Audit will not be returned and will be applied against the outstanding liability.
Discovery actions by the Department will continue while the Financial Audit is being conducted. Discovery actions include, but are not limited to:
- Responsible Person determinations
- Return review.
Tax liens on your property will remain in place while your Offer is being evaluated. DOR will also continue to intercept and apply payments from sources including but not limited to gambling and lottery winnings, overpayments, offsets, refunds, insurance proceeds, and/or other governmental payments. Interest and penalties will continue to accrue on any unpaid amounts.
For the period during which the Offer is pending:
- The taxpayer must timely file and pay all required tax returns
- The legal amount of time allowed for the Commonwealth to collect the tax liability will be extended
- Taxpayers proposing an Installment Payment Offer must make installment payments while the Offer is under review.
- The taxpayer may withdraw the Offer at any time up until a determination is made on the application. However, if the Offer is withdrawn after Basic Eligibility has been determined, the Initial Payment and any payments received during the Financial Audit will not be returned and will be applied against the outstanding liability.
The following will result in the rejection of the Offer:
- The ability to pay the tax liability in full as determined by the Department, either immediately or on an installment payment agreement
- Failure to promptly comply with DOR requests for additional information within the specified timeframe or if insufficient documentation is provided
- Failure to make installment payments while the Offer is under review, if an Installment Payment Offer is proposed
- Submission of false or misleading information
- Failure to disclose material information
- Omission or undervaluation of income or assets on the application
- A history of regular or willful non-compliance with Massachusetts laws and tax laws
- A history of criminal tax fraud (conviction, guilty plea, or no contest plea).
The Attorney General for the Commonwealth of Massachusetts must review, and may object to, any Offer proposing to settle the liability for over $20,000 less than the total amount owed or for less than half of the total amount owed.
If the Offer is Accepted
Offers require the acceptance of the Commissioner of Revenue, and two Deputy Commissioners. Some Offers require the review of the Massachusetts Attorney General.
The taxpayer is required to sign a Settlement Agreement, which also requires the signature of the Commissioner of Revenue. Payment of the Offer must be made either by the payment due date as indicated on the Settlement Agreement or under an installment payment agreement.
The taxpayer’s name, and the amount of the settlement will be published and made public in the DOR Annual Report. Compromise agreements are not protected by the confidentiality provisions of the Massachusetts General Laws, Chapter 62C, §21.
The compromise agreement, signed by all parties and including the reasons for compromise, is:
- Public record, and
- Open to public inspection upon request.
Once an Offer takes effect, neither party may reopen the matter except for:
- Falsification or concealment of assets, or
- Mutual mistake of material fact.
If the Offer is Rejected
Offers may be rejected during the Financial Audit, denied by the Commissioner of Revenue or any of the two Deputy Commissioners, or objected to by the Massachusetts Attorney General.
The taxpayer will be notified if the Offer is rejected. The Initial Payment and any payments received during the Financial Audit will not be returned and will be applied against the outstanding liability. The taxpayer should immediately contact the DOR to arrange payment of the entire liability. If immediate payment of the entire liability is not possible, the taxpayer may request payment through a DOR approved installment payment agreement.
Offer in Compromise References
Offer in Compromise is guided by the following statutory and regulatory authority:
- Applicable Massachusetts General Laws
- Administrative Procedures
- Responsible Persons