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Who is eligible for an Offer in Compromise?

The Internal Revenue Service (IRS) and the Minnesota Department of Revenue recognize that not every taxpayer can pay off their tax bill. For whatever reason, a tax bill may simply be more than the taxpayer can afford. In certain situations, these taxpayers can qualify for an Offer in Compromise.

What is an Offer in Compromise? An Offer in Compromise (offer) is a legal agreement between the tax agency and the taxpayer. If approved, this agreement allows the taxpayer to settle a tax bill for less than is owed. If accepted, the taxpayer is no longer liable for the remaining balance and the tax agency receives at least a portion of the expected tax payment.

This is an option for both federal and Minnesota state tax debt.

Who can qualify? The IRS and Minnesota Department of Revenue have different criteria for a successful request.

The IRS requires the applicant to have filed all tax returns, received a tax bill and paid any required estimated taxes during the current year. If a business, the IRS also requires the business to have made all required federal tax deposits for the current quarter.

Minnesota’s Department of Revenue states it considers a “wide range of factors” when considering the offer. These factors include the applicant’s ability to pay, age and ability to earn future income, past payment history with the agency and if anyone else is liable for the debt.

How do I request an Offer in Compromise? Those who wish to propose an offer to a tax agency must fill out an application and send all requested paperwork along with a non-refundable deposit. The fee is $186 for an application with the IRS and $250 for an application with the Minnesota Department of Revenue.

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