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MARYLAND’S OFFER-IN-COMPROMISE PROGRAM Melinda Dunmire, Assistant to the Director Chair of OIC Case Review Board Andrew “Jay “ Maschas, Assistant Director MARYLAND’S OFFER-IN-COMPROMISE PROGRAM

Offer-In-Compromise – Statutory Authority Statutory Authority for Maryland’s Offer-In- Compromise program Maryland State Finance and Procurement Article § 6-219 Tax-General Article § 13-816

Offer-In-Compromise - Statutory Authority MD State Finance and Procurement Section 6-219 the Comptroller may settle a claim of the State that has been in arrears for at least 2 years Before settling a claim under this section, the Comptroller shall examine the claim thoroughly and shall be satisfied that the State could not collect the claim through legal process. To settle a claim so as best to serve the interests of the State, the Comptroller may abate, wholly or partly, the principal or interest that is due to the State. If a claim is settled without payment in full, the Comptroller shall keep a record that states the facts on which the settlement was based. The record shall be kept in the Office of the Comptroller

Offer-In-Compromise - Statutory Authority Tax-General Article § 13-816 (a) If a tax under this article is not paid when due, the Governor, tax collector, or Treasurer shall ask a qualified attorney who is a regular salaried employee of the Comptroller or the Attorney General to bring an action against the person responsible to pay the tax, unless a lien on real property sufficiently secures the tax or a judgment in the action would not be collectible. (b)(1) If a request is made under subsection (a) of this section, the attorney or the Attorney General shall bring the action. (c) If the attorney or Attorney General and the tax collector agree that the full amount of the claim is not collectible, the attorney or Attorney General may: (1) compromise the claim; (2) accept a lesser amount; and (3) issue a release of the claim or a satisfaction of the judgment.

Offer-in-Compromise - Overview Offer-in-Compromise (“OIC”) program is “used to resolve tax liabilities with the Comptroller when the taxpayer is unable to pay in full and all other efforts to resolve the liability have been unsuccessful.”

Offer-in-Compromise - Overview OIC Program is available for “all taxes administered by the Comptroller” which includes: Sales and Use Tax Individual Income Tax Admissions and Amusement Tax Corporation Income Tax Withholding Tax OIC is “not an appeal of the tax liability” TPs with appealable issues should file an appeal with H&A

Offer-in-Compromise – Eligibility Requirements TP incurred a delinquent tax liability that has resulted in an assessment. TP exhausted all other avenues of administrative appeal. TP cannot make an offer-in-compromise if there is any issue remaining that can be appealed. Two years must have passed since TP became liable for the tax. TP must be current with respect to all return filing requirements with the Comptroller’s Office. TP must not be currently involved in an open bankruptcy proceeding. TP is unlikely to be able to make payment in full any time in the foreseeable future due to TP’s financial situation. TP is either without resources or unable to apply present and/or future resources to paying the outstanding tax liability.

Offer-in-Compromise – Forms and Instructions Forms and Instructions available online at www.marylandtaxes.com Two sets of Forms Offer in Compromise Application – Form 656 http://forms.marylandtaxes.com/compliance_forms/656.pdf Collection Information Statement Individual – MD 433-A http://forms.marylandtaxes.com/compliance_forms/433-A.pdf Business – MD 433-B http://forms.marylandtaxes.com/compliance_forms/433-B.pdf

Offer-In-Compromise – Form MD 656 Item 1 – Name and Address of Taxpayer Item 2 , 3, 4 – SSN, EIN, or CR Number Item 5 – Tax Type and Tax Period Items 6 – Reason for OIC Doubt as to liability. If you believe you don't owe the amount due, you must include with Form MD 656 a detailed explanation of the reason(s) you believe you do not owe the tax. Insufficient resources. If you don't have enough assets or income to pay the full amount, you must include with Form MD 656 a complete financial statement, Form MD 433-A for individuals and/or Form MD 433-B for businesses. Economic or other hardship. If you have enough assets to pay the full amount, but believe that because of your exceptional circumstances requiring full payment would cause an economic hardship or would be unfair and inequitable, you must include with Form MD 656 a complete financial statement, Form MD 433-A and/or Form MD 433-B.

Offer-In-Compromise – Form MD 656 Item 7 – Offer to Pay, TP can submit: Payment in full with offer Deposit pending acceptance No Deposit (Payment to be made within ___ days $0.00 Offer Request for Payment Plan

Offer-in-Compromise – Form MD 656 Item 8 – Agree to Conditions Payment will be applied ‘in the best interests of the state.” Payment will refunded if the offer is declined unless TP agrees to writing to apply the payment to balance due. TP agrees to waive the right to appeal the tax liability if the offer is accepted. The Comptroller’s office can collect on the entire amount if the TP defaults on the accepted OIC offer. TP must stay in compliance for 3 years from date of acceptance Item 9 – Explanation of Circumstances Reasons for Requesting an Offer-In-Compromise Facts and Circumstances

Offer-in-Compromise – Collection Information Statements MD 433-A, Collection Information Statement for Individuals MD 433-B, Collection Information Statement for Businesses Does a business taxpayer need to submit both MD 433-A and MD 433-B? Is the business closed?

Offer-in-Compromise – When to Advise a TP to file an OIC? TP and Liability meet requirements: TP does not have available funds to full pay tax in full Liability is more than two years old or written off When Not to Advise a TP file an OIC Liability does not meet eligibility requirements TP can full pay liability without substantial hardship Liability may be resolved under penalty and interest waiver guidelines There is an appealable issue

Offer-in-Compromise – How do I submit the OIC? Submit Form MD 656 and MD 433-A and/or MD 433-B to: Offer in Compromise Program Comptroller of Maryland 301 West Preston Street, Room 203 Baltimore, Maryland 21201 For more information about the Offer in Compromise Program, email us at cdoic@comp.state.md.us or call 410- 767-1555 from Central Maryland or 1-888-674-0020 from elsewhere.

Offer-in-Compromise Program Considerations in Decisions Age – taxpayer & debt Health of taxpayer and family members supported by taxpayer Education Work history Employability Source of Income – Social Security Benefits vs. Wages Living Situation Reason for Tax Liability Past Compliance Past Bankruptcies Location of Taxpayer Liens Filed

Offer-in-Compromise - Review and Decision The Comptroller’s Office will review the documentation, the particular facts and circumstances, and account submitted with the original offer to determine whether the OIC offer should be accepted. If the Comptroller determines that your offer is acceptable, the TP will be notified in writing and payment, if necessary, will be requested from the TP. it is determined that an OIC offer is not acceptable but the Comptroller’s office would accept a higher amount, the TP will receive counteroffer in writing with the acceptable amount. If offer is declined, then the TP will receive notice of decline.

Offer-in-Compromise - Review and Decision All decisions under the Offer-in-Compromise Program are final and cannot be appealed. The taxpayer may make a counteroffer if the offer is declined. Must remain current with future filings for at least 3 years after Offer is accepted. Full liability will become due immediately for failure to be current.

Offer-in-Compromise vs. Hardship Liability Write-off Must meet requirements Use specified forms Decision is non-appealable Liability is permanently discharged Tax liens are released May be filed at any time Informal process Decision is non-appealable Liability is “written off” account, but not permanently discharged Tax liens remain in place Refunds & payments intercepted and applied to liability

Offer-in-Compromise Case Study #1 TP is 66 years old. She lives in an apartment in Maryland. TP receives social security income (“SSI”)of $1,200 per month. Her rent is $600 per month. Her expenses match her SSI income. TP writes that she has severe medical issues. TP owes $5,678.00 in individual income tax, interest, and penalty for tax years 1993 and 1994. The income tax due for both years is $1,500.00. TP offers $25.00 to resolve the liability.

Offer-in-Compromise Case Study #2 TP is 29 years old. TP lives with his parents in Maryland. TP is recently unemployed, but seeking employment. TP owes $1,250.00 in individual income tax, interest, and penalty for tax year 2014. TP owes income tax due to failure to withholding any taxes on wages earned during as a bartender. TP offers $0.00 and writes that he is currently unable to pay off liability and wants a fresh start.

Offer-in-Compromise Case Study #3 TP is 55 years old. TP lives in West Virginia with his wife and three children. TP works as a general manager at a retail shop. TP earns $42,000.00. Mrs. TP earns $27,000.00 as a clerk. TP had a business, ABC, Inc., in Maryland. However, TP lost his business due to the great recession in 2008. TP moved to West Virginia in 2010. ABC, Inc. owed $55,000.00 in sales and use tax, interest, and penalties for April 1, 2006 to July 30, 2008. A lien has been filed against TP as an officer of ABC, Inc. The account balance for ABC, Inc. has been written off by collections. Mrs. TP was not responsible. There have been no collections on the account since 2009 (income tax refund offset). TP offers $24,000.00 under a 24 month payment plan to resolve the liability. The sales and use tax due was $22,500.00.

Offer-in-Compromise Case Study #4 TP is 56 years old. TP lives in Maryland. TP is divorced with one child. TP has $250 in disposable monthly after subtracting expenses from income. TP works as a manager of a retail store for the past five years. TP had a federal AGI of $65,000. TP had a business, 301 Preston Construction, in Maryland. The TP has been assessed as an officer of 301 Preston Construction’s withholding tax liabilities exceed $45,000.00 for 2010 to 2013, plus penalties and interest, for a total of $90,000. A lien has been filed against the corporation and the individual TP. TP has not made a payment on the account. TP offers $10,000.00 to settle the withholding tax liability. TP will borrow the funds from his 401(k).