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DEPARTMENT OF TAXES

Guide to the Offer in Compromise Program

What is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement between the taxpayer and the Vermont Department of Taxes
that settles a tax liability for payment of less than the full amount owed by the taxpayer on a debt that has
become final.
The Department will generally accept an OIC when it is unlikely that the tax liability can be collected in full,
and the amount offered reasonably reflects collection potential. An OIC is a legitimate alternative 1) to resolve
a final debt when a taxpayer has demonstrated economic hardship or 2) when the size of the debt requires a
lengthy installment agreement. Acceptance of an adequate offer will also result in creating a fresh start for the
taxpayer with the expectation all future filing and payment will be made when due.
The success of the OIC program will be assured only if taxpayers make adequate compromise proposals
consistent with their ability to pay, and the Department makes prompt and reasonable decisions. Taxpayers are
expected to provide reasonable documentation to verify their ability to pay.

What is the statutory basis for an Offer in What are the types of OIC?
Compromise? There are three types of OIC. It is important to pick
The statutory authority is in 32 V.S.A. § 5887(c): the type of offer that best matches your situation.
“Notwithstanding subsections (a) and (b) of this Note: When the taxpayer agrees with the liability,
section, the Commissioner may compromise a tax the type of OIC is then determined on the potential
liability arising under this title upon the grounds ability to pay the liability in full. If the taxpayer
of doubt as to liability or doubt as to collectability cannot pay the liability in full, then they should
or both. Upon acceptance by the Commissioner of submit a Doubt as to Collectability offer. However,
an offer in compromise, the liability of the taxpayer if potential exists to pay their liability in full, but the
in question is conclusively settled, and neither the collection of the liability would create an economic
taxpayer nor the Commissioner may reopen the case hardship, then they should submit an Economic
except by reason of falsification or concealment of Hardship offer.
assets by the taxpayer or mutual mistake of a material Type 1: Doubt as to Collectability
fact or if, in the opinion of the Commissioner, justice This type of OIC means that doubt exists the taxpayer
requires it. The decision of the Commissioner to could ever pay the full amount of tax liability owed.
reject an offer in compromise is not subject to review. The Department will consider this type of OIC when
The Commissioner may adopt rules regarding the the taxpayer is unable to pay the taxes in full either
procedures to be followed for the submission and by liquidating assets or through an installment
consideration of offers in compromise.” agreement that would accomplish repayment within a
reasonable timeframe. When applying for this type of
What is unique about an OIC?
OIC, the taxpayer must complete Form OIC-671, Offer
The OIC conclusively settles final tax liabilities. in Compromise Agreement, and also complete and
Neither you or the Commissioner of Taxes may submit one of the following forms:
reopen the case, unless it is determined there is
• Form OIC-672, Collection Information
falsification or concealment of assets by you or mutual
Statement for Businesses or
mistake of a material fact or if, in the opinion of the
Commissioner of Taxes, justice requires it. The OIC • Form OIC-673, Collection Information
is distinct and separate from an appeal of a proposed Statement for Wage Earners and Self-
tax assessment or denial of a claim for refund of taxes. Employed Individuals

Disclaimer: The information provided here is intended to be an overview
only. Vermont tax statutes, regulations, Vermont Department of Taxes
rulings, or court decisions supersede information presented here.
Rev. 12/2021 •Pub.GB-1160

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Type 2: Doubt as to Liability detailed explanation of circumstances with
This type of OIC means a legitimate doubt exists the offer.
the taxpayer owes part or all the assessed tax • You will file and pay all required returns
liability. When applying for this type of OIC, the when due while the offer is pending and in the
taxpayer must also include a computation of the future.
claimed corrected tax due, an explanation of how the
taxpayer arrived at the amount, and any verifying • You are not currently the subject of an open
documentation when submitting Form OIC-671, Offer bankruptcy proceeding.
in Compromise Agreement. • All estimated payments (if required) for the
Type 3: Economic Hardship current year have been paid to date.
This type of OIC means the taxpayer does not have • When required, you will include a good faith
any doubt the assessed amount is correct, and there payment equal to or greater than 5% of the
is potential to collect the full amount of the tax owed. current balance. No good faith payment is
However, this type differs from Type 1 because an required if you qualify for the Low Income
exceptional circumstance exists that would create an Certification.
economic hardship if the taxpayer had to repay the w For Low Income Certification, see Section
total amount owed. To be eligible for an OIC on this 4 of the Form OIC-671 for qualifications.
basis, a taxpayer must demonstrate that collection
of the tax would create an economic hardship. w In cases where extreme economic
When applying for this type of OIC, the taxpayer hardship or doubt as to collectability
must complete Form OIC-671, Offer in Compromise has been demonstrated, the Director or
Agreement, and also complete and submit one of the Assistant Director of Compliance may
following forms: waive the good faith payment.
• Form OIC-672, Collection Information • You have not been granted an OIC within the
Statement for Businesses or past five years.
• Form OIC-673, Collection Information If you answered “false” to any of these statements,
Statement for Wage Earners and Self- you are not eligible to submit an offer. Once you meet
Employed Individuals all the above conditions, you may submit an offer.
The taxpayer must also submit: Good faith payments are nonrefundable and will
be applied against the outstanding liability if the
• A written narrative explaining the taxpayer’s Department accepts your offer.
special circumstances and why paying the tax
liability in full would create an economic Do I need to have someone represent me in the
hardship; and process?
• Documentation that supports a claim of The Department does not require you have
economic hardship if the taxes were collected representation. The OIC Program is available to
in full. all taxpayers, with or without representation, who
meet the eligibility requirements. Department
Am I eligible? representatives are available to assist with
There are several basic requirements to qualify for an understanding the forms or information needed when
OIC. Please review the following statements. To meet submitting an OIC Agreement.
the basic requirements, you must be able to answer
“true” to each of the following statements for the How do I submit an offer?
Department to consider your offer request: 1. Review the Form OIC-671 Instructions—Offer
• The tax liability is final. in Compromise Agreement.
2. Complete Form OIC-671, Offer in Compromise
• You have filed all required returns.
Agreement, and (when required) the
Note: If you did not file a return for a prior
appropriate Collection Information Statement,
period because you believed you were not
forms OIC-672 or OIC-673.
legally required to file, you must submit a

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3. Provide all required documents. For offer amount calculated on the Collection Information
information on required documents, see the Statements forms (Box 7 on OIC-672 or Box 8 on
question “What are the types of OIC?” OIC-673), or, in the case of Doubt as to Liability offer,
4. Submit completed documents and (when the amount of tax due based on documentation
required) your good faith payment made provided with your OIC submission. With the
payable to the Vermont Department of Taxes to exception to the Doubt as to Liability offer, the
the following: minimum offer amount is defined as the net equity of
your assets, plus the amount the Department projects
Offer in Compromise Program could be collected based on your future income. An
Vermont Department of Taxes offer amount must exceed zero.
P.O. Box 429
Montpelier, VT 05601-0429
Remember, the shorter amount of time you
You must send a separate good faith payment propose to repay your offered amount,
with each offer. Please do not combine your the lower the offered amount can be.
good faith payment with any other tax
payments as this may delay processing of your
offer. Your offer will be rejected if the Department’s
financial analysis indicates you can pay a greater
Your offer will be returned to you if the good amount than offered or you can pay in full, either
faith payment and the required forms are not immediately or through an installment agreement.
properly submitted, or if your check is returned
for insufficient funds. How do I calculate the amount of my offer?
In Section 5 of the Form OIC-671 Instructions—Offer
What is a “Collection Information Statement,” in Compromise Agreement, on line 2 you must enter
and when do I need to complete it? the amount of your offer. Calculate the “Amount of
A Collection Information Statement is one of two my offer” depending on the type of offer you will
forms that gathers information related to your assets, submit.
expenses, and the calculation of the minimum offer
amount. Doubt as to Liability offer, the “Amount of
• For
my offer” is based on the tax due, considering
• If you are requesting either a Doubt as to the documentation you have provided with your
Collectability or Economic Hardship OIC submission.
offer, you must also complete Form OIC-
• For
672, Collection Information Statement for Doubt as to Collectibility or Economic
Businesses, or Form OIC-673, Collection Hardship offers, the “Amount of my offer” is
generally based on your ability to pay, with
Information Statement for Wage Earners and
consideration to your assets and expenses as
Self-Employed. The Collection Information
calculated on Forms OIC-672 (Section 5, Box 7)
Statement must be signed with
or OIC-673 (Section 7, Box 8) and included in the
appropriate identification numbers and all
Form OIC-671 Offer in Compromise Agreement.
sections completed.

Does making an offer guarantee it will be
Note: Items that do not apply to you should be
accepted?
noted with “N/A.”
No. The Department will review the information
• If the basis for your offer is Doubt as to you submit and your financial statements to assist in
Liability, the Collection Information Statement performing an audit of your financial condition as a
is not needed. You must instead include a part of the review process.
computation of the claimed corrected tax
due, an explanation of how you arrived at the What are some reasons my offer might be
amount, and any verifying documentation. rejected?
The Department expects an offer to be based on
How do I know how much to offer? factual information recorded in the documents at
Generally, an amount offered will be considered hand.
reasonable when it equals or exceeds the minimum
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Here are examples of reasons why your offered significance from your financial statement.
amount might be rejected or returned: • Trust Taxes—Trust Taxes, such as Sales,
• Excess Expenses—The Department uses Meals and Rooms, and Withholding taxes,
national collection financial standards are taxes collected or withheld by a taxpayer
produced by the IRS to determine maximum in “trust” for the State of Vermont. Your offer
allowable amounts for claimed expenses. may be rejected if your debt is based on taxes
Expenses that exceed these standards will be collected from others, but not remitted to the
adjusted to the maximum allowed. Department as required by law.
• Unnecessary Expenses—The Department • History of Non-Compliance—A history
reviews all expenses to determine if they are of regular or willful noncompliance with
“necessary,” using the following conditions: Vermont’s state tax laws may be grounds for
Necessary living expenses include, but are not rejection of your offer.
limited to:
Does the Department have to accept my offer?
w Rent or mortgage payments No. The law provides a taxpayer the opportunity to
w Heat or air conditioning submit an OIC to the Commissioner of Taxes, but in
w Transportation necessary for work or no way requires the offer to be accepted. The offer will
required travel be declined in any instance where the Commissioner
w Medical expenses of Taxes determines that acceptance is not in the best
w Reasonable food expenses interest of the state.
w Utilities (electricity, telephone)
Will offers for less than the calculated “Balance
Living expenses the Department considers to be paid” be considered?
unnecessary include, but are not limited to: Possibly. It depends on your specific circumstances.
w Private school tuition or college expenses When requesting an OIC, the most important thing
w Charitable contributions or voluntary to do is to provide truthful and complete information
retirement contributions to the Department. It is also important to respond
w Payments on credit cards to any follow-up questions in a timely manner. The
w Payments for cable or similar bills Department is committed to work with any taxpayer
w Vehicle expenses for multiple cars not who presents a reasonable OIC that is factually
necessary to meet work transportation supported.
needs
May I apply for an OIC if I have no funds to offer?
w Expenses for “toys” such as boats,
No. We will not accept a zero-dollar offer. If you
recreational vehicles, etc.
qualify for Low Income Certification, you do not
w Significant dining out expenses
need to include a good faith payment with your offer.
• Insufficient Documentation—You must prove Your offer must represent the most we can expect to
most items on the financial statement. Your collect over a reasonable period of time.
offer will be declined if you do not provide
sufficient documentation to support income, What documents do I send with my offer?
expenses, and other items claimed. q 1: Complete, sign, and submit the OIC Agreement,
Form OIC-671.
• Value of Property or Other Assets—
The Department will assess the value of q 2: Complete, sign, and submit the appropriate
all property and assets you own based Collection Information Statement.
on information readily available to the • If you are a wage earner or self-employed
Department. Your offer may be rejected if individual, complete, sign, and submit Form
the Department determines the value of the OIC-673.
property or assets are greater than shown on
your financial statement. • If you have a business, complete sign, and
submit Form OIC-672.
• Omitted Items—Your offer may be rejected
if you omit income, assets, or other items of
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q 3: Checklists detailing documents that need to be Will collections efforts stop after I submit an
submitted with your agreement are included on offer?
Forms OIC-671, OIC-672, and OIC-673. Please Not necessarily. There are certain circumstances
use the checklists to ensure you are submitting when the Department will suspend collection
all required documents. activities while we consider your offer. After an
offer is determined to be complete and is submitted
q 4: Certified check or money order for 5% of the
for processing, we will generally not act to initiate
amount owed as a good faith payment, unless
collection of the tax liability while we consider and
you qualify for Low Income Certification under
evaluate your offer. However, if an outside collection
Section 4 of Form OIC-671.
agency is handling your debt or if you have an
q 5: Attach Form PA-1, Power of Attorney, if you installment agreement, it is expected that you will
would like your attorney, accountant, or other continue to make timely payments. Additionally,
party to represent you and you do not have a automated collection actions, such as vendor payment,
current form on file with the Department. refunds, or other types of offsets, will continue.
q 6: Attach a copy of an IRS OIC and acceptance letter It is important to note the Department will not
or other IRS arrangements (if applicable). suspend collection if we determine that you submitted
an offer in order to delay collection or to jeopardize
What happens after I submit my offer? our ability to collect the tax.
First, the Department will review the OIC Agreement
for completeness within 15 days of receipt. If the OIC Will you release state tax liens after you accept
Agreement is complete, and required documents my offer?
have been provided, the Department will issue an We will release Vermont state tax liens once a debt is
acknowledgment letter advising you the agreement considered to be paid in full. If an OIC is accepted,
is being considered and will begin the process of the paid in full amount will be the amount agreed
evaluating your proposed agreement. upon.
If the OIC Agreement is not complete or additional
May I apply prior payments to the offered
information is needed, the Department will promptly
amount?
request the information from you. The additional
We cannot apply prior payments toward the offered
requested information needs to be received by the
amount. However, we consider prior payments and
Department within 30 days from the date of the
the offered amount compared to the total liability
request.
when evaluating your offer.
What do I need to do while my offer is pending
May I make payments on the offered amount?
review?
The Department allows for two types of repayment
If you are in an existing installment payment plan,
options:
you must continue to make payments until the OIC
Agreement request is determined. You must also file • Payment Option 1: Pay the offer in full within
and pay all required returns in a timely manner. 30 days.
• Payment Option 2: Pay the amount in
How long will it take to get a decision on my OIC?
full over a period of electronic ACH debit
We strive to accept or deny an offer within 60 days of
installments within a reasonable amount of
sending the acknowledgment letter. If your account is
time, generally not to exceed 36 months.
complex or additional information is required, it may
take up to 90 days. What will happen if my offer is accepted?
The Department will send a notification letter
My OIC has been accepted by the IRS. Will
advising your OIC agreement offer has been accepted.
Vermont automatically approve my offer? The letter will include the terms of the agreement and
No. The Vermont Department of Taxes will evaluate
any additional instructions related to the payment
your offer separately.
option you selected.

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What will happen if my offer is declined?           What are some of the things an OIC can do  
The Department will send you a notification letter  for you?
explaining to you the reason(s) why the offer       •  Settle all or any portion of a final tax liability, 
was denied. You should contact the Department       plus interest and penalties, for less than the 
immediately to arrange a suitable repayment plan    current outstanding amount
through a Department-approved Installment Payment 
                                                    •  Allow acceptance of a lump sum payment 
Agreement. 
                                                    to satisfy your liabilities for less than your 
Will the Department continue to offset refunds?     current outstanding balance
Yes. The Department will keep any refunds or        •  Satisfy the liability for less than your current 
offsets while the tax debt is open—even if there is balance with a short-term payment plan
an approved payment plan. Refunds and offsets 
are credited to your balance due as the Department  What are some of the things an OIC cannot do  
considers them to be payments you would otherwise   for you?
be required to make.                                •  Cancel or discharge your outstanding 
                                                    liabilities with no payment
Are there limitations on an OIC request?            •  Put your tax obligation on hold indefinitely
The short answer is “yes.” An OIC request:
                                                    •  Intervene when a legal action has been 
•  is not an appeal;
                                                    filed, such as a wage garnishment, bank 
•  does not extend the time to file an appeal       account levy, collection suit, or court-ordered 
to Vermont Department of Taxes or to the            appearance
Vermont courts; and 
•  does not result in you being considered in 
“good standing” for purposes of renewing a 
professional license or obtaining government 
contracts where “good standing” is required.

           Where do I submit an offer or request assistance for completing an offer? 

             Write us:  Offer in Compromise Program  
                        Vermont Department of Taxes  
                        PO Box 429  
                        Montpelier, VT 05601-0429

           Call us:     (802) 828-2518
           Email us:    tax.collections@vermont.gov

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