Michigan will join over 40 other states that provide an Offer in Compromise program to its taxpayers. The bill HB 4003 was placed into law on July 16, 2014. Michigan has offered “Amnesty” programs in the past. The Amnesty program allowed taxpayers to fully pay the tax only. The penalties and interest were waived. However, an Offer in Compromise program is different. Taxpayers who are unable to pay their back taxes or legitimately do not owe the taxes, will be able to negotiate the tax, penalties, and interest.
Michigan Offer in Compromise Advantages
The Michigan Offer in Compromise will help many in Michigan. The following are 5 advantages of the Michigan Offer in Comprise Program for taxpayers that are unable to pay back state taxes.
1) Gives taxpayers a fresh start
2) Allows taxpayers to get back into compliance. That is filing all missing tax returns and start paying taxes again.
3) Frees Michigan taxpayers from the constant worries of getting wage/or bank levies
4) Provides the state more assurance that taxpayers participating in the Michigan Offer in Compromise program will correctly pay and file their taxes for the following 5 years. If they do not, the offer in compromise is revoked.
5) No longer limited to only setting up an installment agreement. The state may allow taxpayers to pay as little as $25 per month if the taxpayer can prove they are unable to pay. The problem with paying the bare minimum is the collection statue end date. The state generally has 6 years to collect on back taxes. Once the 6 years expired, the taxes are removed from collections. However, every time a payment is made the collection statue end date extends an other 6 years. This means you may be paying the bare minimum for rest of your life because you are extending the collection period with every payment! If you are in this situation, the Michigan Offer in Compromise will greatly help you.
Offer in Compromise is Good for Michigan
The program also makes sense for Michigan.
1) The state will be able to collect tax dollars they may otherwise never receive
2) Allows taxpayers to stop hiding and get back to paying state taxes
3) The state will spend less time searching for delinquent taxpayers. Taxpayers will voluntarily come forward to participate in the program.
4) Provides the state more assurance that taxpayers participate in the Michigan Offer in Compromise program will correctly pay and file their taxes going forward. If they do not, the offer in compromise is revoked.
For a detailed review of why the Michigan Offer in Compromise program makes good public policy sense, read the remarks of the Michigan Chamber of Commerce.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.