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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 he or she 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. 04/2019 •Pub.GB-1160

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Type 2: Doubt as to Liability legally required to file, you must submit a
This type of OIC means a legitimate doubt exists detailed explanation of circumstances with
the taxpayer owes part or all the assessed tax the offer.
liability. When applying for this type of OIC, the • You will file and pay all required returns
taxpayer must also include a computation of the when due while the offer is pending and in the
claimed corrected tax due, an explanation of how the future.
taxpayer arrived at the amount, and any verifying
documentation when submitting Form OIC-671, Offer • You are not currently the subject of an open
in Compromise Agreement. bankruptcy proceeding.
Type 3: Economic Hardship • All estimated payments (if required) for the
This type of OIC means the taxpayer does not have current year have been paid to date.
any doubt the assessed amount is correct, and there • When required, you will include a good faith
is potential to collect the full amount of the tax owed. payment equal to or greater than 5% of the
However, this type differs from Type 1 because an original assessment balance. No good faith
exceptional circumstance exists that would create an payment is required if you qualify for the Low
economic hardship if the taxpayer had to repay the Income Certification.
total amount owed. To be eligible for an OIC on this w For Low Income Certification, see Section
basis, a taxpayer must demonstrate that collection 4 of the Form OIC-671 for qualifications.
of the tax would create an economic hardship.
When applying for this type of OIC, the taxpayer w In cases where extreme economic
must complete Form OIC-671, Offer in Compromise hardship or doubt as to collectability
Agreement, and also complete and submit one of the has been demonstrated, the Director or
following forms: Assistant Director of Compliance may
waive the good faith payment.
• Form OIC-672 , Collection Information
Statement for Businesses or • You have not been granted an OIC within the
past five years.
• Form OIC-673, Collection Information
Statement for Wage Earners and Self- If you answered “false” to any of these statements,
Employed Individuals you are not eligible to submit an offer. Once you meet
all the above conditions, you may submit an offer.
The taxpayer must also submit:
• A written narrative explaining the taxpayer’s Do I need to have someone represent me in the
special circumstances and why paying the tax process?
liability in full would create an economic The Department does not require you have
hardship; and representation. The OIC Program is available to
all taxpayers, with or without representation, who
• Documentation that supports a claim of
meet the eligibility requirements. Department
economic hardship if the taxes were collected
representatives are available to assist with
in full.
understanding the forms or information needed when
Am I eligible? submitting an OIC Agreement.
There are several basic requirements to qualify for an
How do I submit an offer?
OIC. Please review the following statements. To meet
1. Review the Form OIC-671 Instructions—Offer
the basic requirements, you must be able to answer
in Compromise Agreement.
“true” to each of the following statements for the
2. Complete Form OIC-671, Offer in Compromise
Department to consider your offer request:
Agreement, and the appropriate Collection
• The tax liability is final or the proposed
Information Statement, forms OIC-672 or OIC-
agreement is made to settle an appeal in
673
progress.
3. Provide all required documents. For
• You have filed all required returns.
information on required documents, see the
Note: If you did not file a return for a prior
question “What are the types of OIC?”
period because you believed you were not
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4.   Submit completed documents and (when              OIC-673). The minimum offer amount is defined as 
required) your good faith payment made                 the net equity of your assets, plus the amount the 
payable to the Vermont Department of Taxes to          Department projects could be collected based on your 
the following:                                         future income. An offer amount must exceed zero. 
Offer in Compromise Program 
Vermont Department of Taxes                            Remember, the shorter amount of time you  
P.O. Box 429                                             propose to repay your offered amount,  
Montpelier, VT 05601-0429                                the lower the offered amount can be. 
You must send a separate good faith payment 
with each offer. Please do not combine your            Your offer will be rejected if the Department’s  
good faith payment with any other tax                  financial analysis indicates you can pay a greater 
payments as this may delay processing of your          amount than offered or you can pay in full, either 
offer.                                                 immediately or through an installment agreement. 
Your offer will be returned to you if the good 
                                                       What is a “Minimum Offer Amount”?
faith payment and the required forms are not 
                                                       A “Minimum Offer Amount” is the amount you 
properly submitted, or if your check is returned 
                                                       propose to pay in settlement of your balance due the 
for insufficient funds. 
                                                       Department. The Minimum Offer Amount is less than 
What is a “Collection Information Statement,”          the full amount owed and is generally based on your 
                                                       ability to pay, with consideration to your assets and 
and when do I need to complete it?
                                                       expenses. The amount of time you propose to repay 
A Collection Information Statement is one of two 
                                                       the offered amount also has an impact on the  
forms that gathers information related to your assets, 
                                                       Minimum Offer Amount. The shorter amount of time 
expenses, and the calculation of the minimum offer 
                                                       you propose to repay your offered amount, the lower 
amount.
                                                       the offered amount can be. 
•  If you are requesting either a Doubt as to  
                                                       Your Minimum Offer Amount is calculated on 
Collectability or Economic Hardship 
                                                       Forms OIC-672 (Section 5, Box 7) or OIC-673 (Section 
offer, you must also complete Form OIC-
                                                       7, Box 8) and included in the Form OIC-671 Offer in 
672, Collection Information Statement for 
                                                       Compromise Agreement.
Businesses, or Form OIC-673, Collection 
Information Statement for Wage Earners of 
                                                       Does offering the Minimum Offer Amount  
Self-Employed. The Collection Information 
                                                       guarantee acceptance of my offer? 
Statement must be signed with  
                                                       No. The Department will use your financial  
appropriate identification numbers and all 
                                                       statements to assist in performing an audit of your 
sections completed.  
                                                       financial condition as a part of the review process. 
 
Note: Items that do not apply to you should be         What are some reasons my offer might be  
noted with “N/A.”                                      rejected?
•  If your basis for your offer is Doubt as to         The Department expects an offer to be based on  
Liability, the Collection Information Statement        factual information recorded in the documents. Here 
is not needed. Instead you must include a              are examples of reasons why your offered amount 
computation of the claimed corrected tax               might be rejected or returned: 
due, an explanation of how you arrived at the          • Excess Expenses—The Department uses  
amount, and any verifying documentation.                 national collection financial standards 
                                                         produced by the IRS to determine maximum 
How do I know how much to offer?
                                                         allowable amounts for claimed expenses. 
Generally, an amount offered will be considered 
                                                         Expenses that exceed these standards will be 
reasonable when it equals or exceeds the minimum 
                                                         adjusted to the maximum allowed.
offer amount calculated on the Collection Information 
Statements forms (Box 7 on OIC-672 or Box 8 on         • Unnecessary Expenses—The Department 

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reviews all expenses to determine if they are • History of Non-Compliance—A history
“necessary,” using the following conditions: of regular or willful noncompliance with
Necessary living expenses include, but are not Vermont’s state tax laws may be grounds for
limited to: rejection of your offer.

w Rent or mortgage payments Does the Department have to accept my offer?
w Heat or air conditioning No. The law provides a taxpayer the opportunity to
w Transportation necessary for work or submit an OIC to the Commissioner of Taxes, but in
required travel no way requires the offer to be accepted. The offer will
w Medical expenses be declined in any instance where the Commissioner
w Reasonable food expenses of Taxes determines that acceptance is not in the best
w Utilities (electric, telephone) interest of the state.

Living expenses the Department considers Will offers for less than the Minimum Offer
unnecessary include, but are not limited to: Amount be considered?
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
w Expenses for “toys” such as boats, May I apply for an OIC if I have no funds to offer?
recreational vehicles, etc. No. We will not accept a zero-dollar offer. If you
w Significant dining out expenses qualify for Low Income Certification, you do not
• Insufficient Documentation—You must prove need to include a good faith payment with your offer.
most items on the financial statement. Your Your offer must represent the most we can expect to
offer will be declined if you do not provide collect over a reasonable period of time.
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,
• Value of Property or Other Assets— Form OIC-671.
The Department will assess the value of
all property and assets you own based q 2: Complete, sign, and submit the appropriate
on information readily available to the Collection Information Statement.
Department. Your offer may be rejected if • If you are a wage earner or self-employed
the Department determines the value of the individual, complete, sign, and submit Form
property or assets are greater than shown on OIC-673.
your financial statement.
• If you have a business, complete sign, and
• Omitted Items—Your offer may be rejected submit Form OIC-672.
if you omit income, assets, or other items of
q 3: Checklists detailing documents that need to be
significance from your financial statement.
submitted with your agreement are included on
• Trust Taxes—Trust Taxes, such as Sales, Forms OIC-671, OIC-672, and OIC-673. Please
Meals and Rooms, and Withholding taxes, use the checklists to ensure you are submitting
are taxes collected or withheld by a taxpayer all required documents.
in “trust” for the State of Vermont. Your offer
q 4: Certified check or money order for 5% of the
may be rejected if your debt is based on taxes
amount owed as a good faith payment, unless
collected from others, but not remitted to the
you qualify for Low Income Certification
Department as required by law.
under Section 4 of Form OIC-671. This is non-
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refundable and will be applied against the continue to make timely payments. Additionally,
outstanding liability if the Department accepts automated collection actions, such as vendor payment,
your offer. refunds, or other types of offsets, will continue.
q 5: Attach Form PA-1, Power of Attorney, if you It is important to note the Department will not
would like your attorney, accountant, or other suspend collection if we determine that you submitted
party to represent you and you do not have a an offer to delay collection or cause a delay, which
current form on file with the Department. will jeopardize our ability to collect the tax.

q 6: Attach a copy of an IRS OIC and acceptance letter Will you release state tax liens after you accept
or other IRS arrangements (if applicable). my offer?
We will release Vermont state tax liens once a debt is
What happens after I submit my offer?
considered to be paid in full. If an OIC is accepted,
First, the Department will review the OIC Agreement
the paid in full amount will be the amount agreed
for completeness within 15 days of receipt. If the OIC
upon.
Agreement is complete, the Department will issue an
acknowledgment letter advising you the agreement is May I apply prior payments to the offered
being considered and begin the process of evaluating amount?
your proposed agreement. We cannot apply prior payments toward the offered
If the OIC Agreement is not complete or additional amount. However, we consider prior payments and
information is needed, the Department will promptly the offered amount compared to the total liability
request the information from you. The additional when evaluating your offer.
requested information needs to be received by the
Department within 30 days from the date of the May I make payments on the offered amount?
request. The Department allows for two types of repayment
options:
What do I need to do while my offer is pending • Payment Option 1: Pay the offer in full within
review? 30 days.
If you are in an existing installment payment plan,
you must continue to make payments until the OIC Payment Option 2: Pay the amount in
•
full over a period of electronic ACH debit
Agreement request is determined. You must also file
installments within a reasonable amount of
and pay all required returns in a timely manner.
time, generally not to exceed 36 months.
How long will it take to get a decision on my OIC?
We strive to accept or deny an offer within 60 days of What will happen if my offer is accepted?
The Department will send a notification letter
sending the acknowledgment letter. If your account is
advising your OIC agreement offer has been accepted.
complex or additional information is required, it may
The letter will include the terms of the agreement and
take up to 90 days.
any additional instructions related to the payment
My OIC has been accepted by the IRS. Will option you selected.
Vermont automatically approve my offer?
What will happen if my offer is declined?
No. The Vermont Department of Taxes will evaluate
The Department will send you a notification letter
your offer separately.
explaining to you the reason(s) why the offer
Will collections effort stop after I submit an offer? was denied. You should contact the Department
Not necessarily. There are certain circumstances immediately to arrange a suitable repayment plan
when the Department will suspend collection through a Department-approved Installment Payment
activities while we consider your offer. After an Agreement.
offer is determined to be complete and submitted
Will the Department continue to offset refunds?
for processing, we will generally not act to initiate
Yes. The Department will keep any refunds or
collection of the tax liability while we consider
offsets while the tax debt is open—even if there is
and evaluate your offer. However, if you have an
an approved payment plan. Refunds and offsets
installment agreement, it is expected that you will
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are credited to your balance due as the Department     current outstanding amount
considers them to be payments you would otherwise      •  Allow acceptance of a lump sum payment 
be required to make.                                   to satisfy your liabilities for less than your 
                                                       current outstanding balance
Are there limitations on an OIC request?
The short answer is “yes.” An OIC request:             •  Satisfy the liability for less than your current 
                                                       balance with a short-term payment plan
•  is not an appeal;
•  does not extend the time to file an appeal          What are some of the things an OIC cannot do  
to Vermont Department of Taxes or to the               for you?
Vermont courts; and                                    •  Cancel or discharge your outstanding 
•  it does not result in you being considered in       liabilities with no payment
“good standing” for purposes of renewing a             •  Put your tax obligation on hold indefinitely
professional license.
                                                       •  Intervene when a legal action has been 
What are some of the things an OIC can do              filed, such as a wage garnishment, bank 
                                                       account levy, collection suit, or court-ordered 
for you?
•  Settle all or any portion of a final tax liability, appearance
plus interest and penalties, for less than the 

         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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