LANSING — Dowagiac’s state Rep. Sharon Tyler co-sponsored legislation that would allow taxpayers to compromise with the Department of Treasury on an existing tax liability.
“An Offer in Compromise settles a tax debt for less than the full amount owed,” Tyler, R-Niles, said. “The goal — both at the federal level now and, hopefully, in Michigan as well — is to help eligible taxpayers get a fresh start and clean up a messy tax history. Obviously, this benefits both sides of the equation.”
Called Offers in Compromise, these agreements between Michigan taxpayers and the Department of Treasury would settle a tax debt for less than the full amount owed. Under the proposed bill, taxpayers could seek Offers in Compromise if they believe that:
n Doubt exists as to the liability — A taxpayer can submit an Offer in Compromise based on a legitimate doubt that they owe all or part of a tax debt.
n Doubt exists as to the collectability — If a taxpayer agrees that they owe the taxes but cannot pay the tax debt in full, they can submit an Offer in Compromise to pay a smaller tax amount based on assets and income.
n Substantial probability exists that a compromise would further the fair and efficient administration of the tax — In this case, a taxpayer does not contest liability or collectability but can demonstrate that the collection of the debt would create an economic hardship. This Offer in Compromise program is available for any taxpayer, but is primarily used by individuals that are elderly or disabled, or have special extenuating circumstances.
“The IRS currently runs a program like this, and I believe that having something similar at the state level would increase revenue and provide a win-win situation for both the state and our taxpayers,” Tyler said.
House Bill 5519 will be considered by the House Tax Policy Committee.