Mississippi DOR Offer in Compromise:
Settle Your State Tax Debt for Less

If your Mississippi state tax debt is so significant that you cannot pay it off, either in one lump sum or over time, it’s important to look into options that can help you resolve your debt, like an offer in compromise. 

If your offer in compromise application is accepted, you can pay off your debt for less than you owe. Learn more about what this program is, how it works, who qualifies, and what to expect from the application process. If you still have questions, don’t hesitate to contact the Damiens Law tax team for additional guidance.

Key Takeaways

• An offer in compromise allows you to settle your tax debt for less than you owe.
• There are strict qualifications for this program – you must prove that you don’t have enough disposable income or equity in assets to pay your tax debt in full.
• This tax relief option is available to both individuals and businesses, but it doesn’t automatically stop collection actions.
• Be prepared to provide in-depth financial records when applying for an offer in compromise.
• Completing an offer in compromise can be challenging. To protect yourself, get help from a tax professional during the process.

What Is an Offer in Compromise?

An offer in compromise aims to strike a balance between paying nothing at all and putting yourself through severe financial hardship to pay in full. By accepting less than what you owe, the state of Mississippi still receives something, and that may be more than they’d be able to recover even with liens, levies, and other aggressive collection actions. By allowing you to pay less than what you owe, this program also gives you the chance to get caught up on your tax debt.

Is it the Same as an IRS Offer in Compromise?

Although the name is the same, these are two different programs. If you want to settle both your state and federal tax debt, you’ll need to apply for the Mississippi Department of Revenue program and the IRS program separately. However, you may be able to save some time if you qualify for both—the Mississippi DOR accepts IRS Form 433-A or IRS Form 433-B in place of their required form.

Qualifying for an Offer in Compromise

Before beginning the offer in compromise application process, look into Mississippi’s eligibility requirements, which focus on your finances. These requirements are extensive and strict—if you don’t qualify, there’s generally no workaround. To qualify, you must be:

• Current with all required tax return filings (you must also commit to filing returns and paying all required taxes on time after submission).
• Not currently in bankruptcy proceedings.
• Unable to pay tax debt via payment plan or equity in assets.
• Dealing with tax debt that’s more than four years old and more than $3,000.
• Requesting the offer in compromise for a tax debt that didn’t come from collected, but unpaid, trust fund taxes, such as sales and use tax.
• Not dealing with tax debt that’s the result of criminal activity.

Even if you meet these requirements, the MS DOR may reject your offer in compromise if any of the following conditions exist:

• You have a history of tax noncompliance.
• You already obtained an offer in compromise from the DOR in the past.
• You can’t provide sufficient documentation to support your income, expense, and asset claims.

Application Process

If you’ve gone through the list of qualifications and you’re ready to begin the application process, you can download the appropriate form—either the Offer in Compromise Application for Individuals (there’s a different one for those who are self-employed and not self-employed) or the Offer in Compromise Application for Entities.

Individuals will need to provide their basic identifying information and details on their tax liabilities. The next section is the offer amount, but most people prefer to fill out the rest before calculating their offer amount. You must provide information on: 

• All sources of income
• Information on all vehicles owned by you and your spouse
• Personal household expenses
• Cash and investments
• All real estate you own
• Any valuable items you own

Perhaps the trickiest part of the application is calculating your offer. Your offer should be your monthly disposable income x 12, plus the market value of your assets. Your disposable income is equal to your income sources minus the allowable expenses listed on the application. 

The DOR typically follows IRS Collection Financial Standards when deciding which expenses are excluded from your calculation. The Offer in Compromise Application does include a worksheet that makes this easier. It included all exempt assets, including $75,000 in equity in your home and $10,000 in equity in a vehicle.

Business applicants must provide detailed information on their business assets, including vehicles, fixtures, and equipment. Business expenses and payments to creditors must also be included. 

Your offer amount should be equal to the business’s monthly disposable income x 12, plus the market value of the company’s assets. The entity application also has a worksheet that helps with the calculation of an offer.

When you submit your offer, you must include an initial payment of 20% of your offer or $100, whichever is greater. This amount is applied to your tax liability regardless of whether or not your offer is accepted.

Your application must be signed in the presence of a notary and have a signed waiver. Send everything to:

Office of Tax Enforcement
P.O. Box 23338
Jackson, MS 39225-3338

Alternatively, you can also submit your application in person to your nearest Department of Revenue District Office.

Supporting Documentation

It’s important to check the official instructions included with the application because the supporting documentation requirements are extensive. For example, an individual applicant has to include:

• A credit report no more than 30 days old;
• Three most recent pay stubs;
• Bank statements from the last 12 months; and 
• Copies of the individual’s most recent statements for every investment and retirement account they have.

This is just the start. The application instructions for individuals (and self-employed individuals) outline these requirements in detail, and businesses can look at the instructions for entities. This supporting documentation must be provided, or the Department of Revenue will reject your offer outright.

What to Do After Applying

After you submit your application, be sure you keep up with all required tax returns and payments. Falling behind will likely lead to your application getting rejected. Watch for any communication from the Department of Revenue in the mail, because offer submission doesn’t stop collection activities.

If you have an existing installment agreement, keep making payments until you know the outcome of your offer in compromise request. If you have a lien in place, it will remain in place until your application is accepted and you pay the amount offered.

How the MS DOR Assesses Your Application

The Department of Revenue thoroughly reviews every application, including all supporting documentation. They want to verify that you have exhausted every possible avenue of payment before requesting an offer in compromise. 

If you have assets, they’ll likely check their fair market value against what you reported on your application. They’ll also check your household expenses against your family size and ensure that your allowable expenses aren’t unreasonably high. 

If your offer is less than the calculation given earlier or there are discrepancies with your reported finances, your application will likely be rejected. If your offer genuinely reflects what you can pay and is equivalent to the calculation provided, the DOR may accept it.

What Happens After the DOR Receives Your Application

The Department of Revenue will notify you in writing of your acceptance or denial. If your offer is accepted, you must pay it by the due date on the letter. If your offer is rejected, the amount you paid as a down payment will be put toward your tax liability, and you remain liable for the remainder. An offer rejection can’t be appealed.

Other Payment Options

If an offer in compromise is not the best choice for you—either because you ran the numbers and you don’t qualify or because your offer was rejected—you may want to look into a Mississippi Department of Revenue installment agreement. 

This payment option does require you to pay in full, but it allows you to spread payments out over 12 months if you owe less than $3,000. If you owe more than that and have an installment agreement with the IRS, you can spread your payments out over five years.

How the Team at Damiens Law Can Help

At Damiens Law, we’re committed to finding the best tax resolution solution for every client. After completing a thorough assessment of your tax situation and finances, we’ll help you explore your payment options, collection actions you may face if you don’t take action, and our professional recommendations. 

If an offer in compromise is an option you choose to pursue, we’ll prepare your paperwork, ensure that all necessary documentation is included, and calculate your offer with your family’s needs in mind. Throughout this process, we’ll work to protect your assets from collection actions.

Tax debt is overwhelming, but addressing it doesn’t have to be. With Damien’s Law, you can feel empowered to settle your tax debt and start fresh. Call us at 601-476-2693 or reach out online to schedule a discovery call with our team of tax professionals.

Frequently Asked Questions

If I have an accepted OIC with the IRS, will my Mississippi offer in compromise get accepted?

While the programs are not connected, the qualifications are similar. Therefore, if your application was accepted by the IRS, you may have a better chance of an accepted offer with the MS Department of Revenue.

What if I have equity in my home or vehicle?

Individual taxpayers can exempt $75,000 of equity in their home and $10,000 of equity in their vehicle from their asset listings.

Can I appeal a rejected offer in compromise?

No. If the DOR rejects your offer in compromise request, you can’t appeal the decision.

Can I get my down payment back if my offer is rejected?

No. If your OIC is rejected, the Department of Revenue applies your down payment to your tax debt.

Can “trust fund” taxes be included in a Mississippi OIC?

No. An MS business isn’t eligible for an OIC if it collected, but did not remit, trust fund taxes.

 

Sources:

https://www.dor.ms.gov/sites/default/files/Laws%26Regs/Instructions%20for%20Individuals.pdf
https://www.dor.ms.gov/sites/default/files/Laws%26Regs/Instructions%20for%20Entities.pdf
https://www.dor.ms.gov/sites/default/files/Laws%26Regs/Offer%20in%20Compromise%20Application%20Individuals.pdf
https://www.dor.ms.gov/sites/default/files/Laws%26Regs/Offer%20in%20Compromise%20Application%20Entities.pdf