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Offer in Compromise

Disclaimer:

The information page is intended to provide an overview only. Indiana tax statutes, regulations, Indiana Department of Revenue rulings or court decisions supersede information provided in this guide.

What is an OIC?

  • An OIC is a formal agreement between you (the taxpayer), and DOR to settle a tax liability for less than the full amount owed.
  • The program is to be handled and administered solely by the TAO.
  • An OIC is based on the taxpayer’s ability to pay and DOR’s assessment of collection potential in the best interest of the State.
  • Submitting an OIC does NOT guarantee acceptance.
  • The OIC Program is available free of charge to all taxpayers, with or without representation, who meet the eligibility requirements. If you would like representation by an attorney, accountant or another party, you must complete and attach Form POA-1, Power of Attorney, when you submit your application.

Types of Offers

  1. Doubt as to Collectability
    • There is doubt that the taxpayer could ever pay the full amount of tax liability owed. TAO will consider this either by liquidating assets or through an installment agreement that would allow for repayment within a reasonable timeframe.
  2. Economic Hardship
    • There is potential that the taxpayer can pay the full amount of tax liability owed; however, there is a circumstance that exists that would create an economic hardship.
      To be eligible on this basis, the taxpayer must demonstrate that collecting the tax would create an economic hardship.

For additional information such as an eligibility checklist, evaluation criteria, special circumstances, and payment options—refer to the full Offer in Compromise Guide.

Step 1 – Gather Financial Information

  • This would include cash, investments, assets, income, expenses, debts, and information about your entire household’s gross monthly income and expenses.

Step 2 – Fill out Form CIS-I

  • Form CIS-I: Collection Information Statement for Wage Earners and Self-Employed Individuals

Step 3 – Fill out Form CIS-B

  • Form CIS-B: Collection Information Statement for Businesses
  • Fill out this form ONLY if you own a business that is not a sole proprietorship.

Step 4 – Submit Application

  • Via mail:
    Taxpayer Advocate Office
    Indiana Department of Revenue
    P.O. Box 6155
    Indianapolis, IN 46206-6155
  • Via fax: 317-232-5425
  • Via email: taxadvocate@dor.in.gov

Keep a copy for your records.

For additional information such as an eligibility checklist, evaluation criteria, special circumstances, and payment options—refer to the full Offer in Compromise Guide.

Final Decisions

  • TAO will review the application for completion within two business days of receipt and contact you to confirm or request additional information. If the application is complete, TAO will begin the process of evaluating your proposed agreement.
  • Penalties and interest will continue to accrue during consideration of your OIC.
  • Accepted: If your OIC is accepted, TAO will send an agreement letter (via mail or approved electronic communication) with terms of the agreement, and any additional instructions related to the payment option you selected. You must fulfill all your tax filing and payment obligations for the next five years after your OIC is accepted (including any extensions).
  • Denied: If your OIC is denied, TAO will send you a notification letter informing you why your application was denied and closed.
  • TAO’s decision on all matters is final. There is no appeal.

For additional information such as an eligibility checklist, evaluation criteria, special circumstances, and payment options—refer to the full Offer in Compromise Guide.

FAQ’s

  • What is an Offer in Compromise (OIC)?
    • An OIC is a formal agreement between you (the taxpayer), and DOR to settle a tax liability for less than the full amount owed.
    • An OIC is separate from an appeal of a proposed tax assessment or denial of a claim for refund of taxes.
    • The Commissioner may adopt rules regarding the procedures to be followed for the submission and consideration of offers in compromise.
  • Do I need to have someone represent me in the process?

    DOR does not require you to have representation. The OIC program is available, for free, to all taxpayers who meet the eligibility requirements.

  • What happens when my spouse and I owe joint and separate tax debts?

    If you and your spouse have joint tax debt(s) and/or are responsible for separate tax debt(s), you will each need to send in a separate Form CIS-I and, if applicable, Form CIS-B. Both of you will need to provide separate lists of your individual and any separate tax debts.

  • How do I file an OIC if I owe Individual and Business tax debt?

    If you have individual and business tax debt that you wish to compromise, you must send in two forms. Complete Form CIS-I for individual tax debts and Form CIS-B for business tax debts.

    • Business tax debt for open and operational businesses may not be considered for an OIC unless all options have been exhausted with our Payment Services department.
  • How are trust taxes treated in an OIC?

    Trust taxes are collected from a taxpayer on behalf of the state and then paid to the state. These include income taxes withheld from an employee’s wages, retail sales tax, food and beverage tax, county innkeeper’s tax, etc. These taxes are held ‘in trust’ on behalf of the state.

  • What is an “Offer Amount?”

    An “Offer Amount” is the amount you propose to settle your balance due to DOR, and it may be less than the full amount owed as it is generally based on your ability to pay, with consideration to your assets and expenses.

  • How do I know how much to offer?

    The minimum offer should exceed zero and be considered a “good faith” offer based on what you can pay considering your income and what DOR considers necessary expenses.

    • DOR will not accept an offer if you can pay your tax debt in full or through an installment agreement and/or equity in assets.
  • Does offering the minimum offer amount guarantee acceptance of my offer?

    No. Acceptance of an offer depends on your specific circumstances. DOR will use your financial statements to assist in auditing your financial condition as a part of the review process.

  • May I apply for an OIC if I have no funds to offer?
    • Yes, however, you must submit an offer above zero dollars.
    • The Form CIS-I and/or CIS-B must demonstrate you have the ability to pay the settled upon amount in full or satisfy the OIC through a monthly payment plan agreement,
  • What is a state tax lien, and will you release it after you accept my offer?

    A lien is a legal claim to a debtor’s property or assets, often used as collateral for a debt.

    • When you don’t pay your bill for taxes due, a lien is placed on your property.

    DOR will release Indiana state tax liens once a debt is paid in full.

    • If an OIC is accepted, the paid in full amount will be considered the amount agreed upon.
  • How does bankruptcy, open audit, or innocent spouse claim affect my OIC?
    • If you currently have any open audit or outstanding innocent spouse claim, wait for those issues to be resolved before you submit an OIC.
    • If you or your business is currently in an open bankruptcy proceeding, you are not eligible to apply for an OIC. Any resolution of your outstanding tax debts must take place within the context of your bankruptcy proceeding.
    • If you are not sure of your bankruptcy status, contact the Bankruptcy team at 317-232-2289.

    Be prepared to provide your bankruptcy case number and/or Taxpayer Identification Number.

  • My OIC has been accepted by the IRS. Will Indiana automatically approve my offer?

    No. Indiana state laws are separate from IRS consideration and qualification standards.

  • May I apply prior payments to the offered amount?

    DOR cannot apply prior payments toward the offered amount.