I written many times about IRS Offer in Compromise or (OIC) but not everyone knows that the State of Maryland also has their own OIC. The rules are a bit different but in theory the plans are the same. The taxpayer is unable to pay their full balance and they make an offer.
What types of taxes can be included in a state OIC?
The State of Maryland Offer in Compromise program can be used for all taxes administered by the State Comptroller. Those taxes may include: Admissions and Amusement Tax, Income Tax, Sales and Use Tax, and Withholding Tax.
When can I apply for an Offer?
Unlike the IRS, the State of Maryland not only requires that all your taxes be completed, but that they have been processed for two years. In other words, two years must have passed since you became “liable” for the taxes owed. Additionally you must have exhausted all other avenues for resolving this tax matter.
The allowable limits
When it comes to housing and living standards, the IRS sets up allowable monthly expenses. However, Maryland does not use the same numbers and values when determining your eligibility to repay. Depending on the representative that you get, they may let you use the IRS standards for a State OIC.
Reasons to apply for an OIC
The first possible reason is doubt as to liability. Doubt as to liability means you do not think you owe that amount. Next is the doubt as to collectibility. This means you think you do owe the amount but know you will not be able to repay the State of Maryland. Finally, you can submit an OIC based on hardship. This means you may be able to pay the balance owed back but doing so would create a financial hardship.
Submitting a payment with you offer
When submitting an OIC to the State of Maryland, you are going to send all the forms along with your down payment. Now even if this offer is not accepted, understand that you will not be getting these funds back and they will be applied to your balance.
Please understand if you have an offer with the IRS or with the State of Maryland, you are on a “probationary” period for the next three years after your offer is accepted. This means you must stay compliant by filing and paying your taxes on time. If you fail to keep up with this or any other terms of your agreement, the State may immediately take action with no additional notice. Some examples of those actions may be filing suit, levying your accounts, and reinstating your full balance owed.
The Bottom Line
All decisions on your State of Maryland Offer in Compromise are final and and cannot be appealed. This means you must make sure your offer is a good one and has merit. You don’t want to get this wrong and lose your chances to abate or reduce your big Maryland Tax Bill .