Petition for a Compromise of Taxes

Every year, millions of Americans get behind on paying their taxes. When someone can't pay the full amount they owe, it becomes a tax debt. To help people going through money problems, the IRS and some state tax offices have created ways to deal with tax debt. This article explains one option from the Wisconsin Department of Revenue called a "compromise of taxes."

What is a compromise of taxes?

In Wisconsin, a compromise of taxes is an agreement between you (the taxpayer) and the Wisconsin Department of Revenue (DOR). The agreement allows you to pay off your tax debt for less than the full amount you owe¹. It is also referred to as an “offer in compromise.”

Who qualifies for a compromise of taxes?

The DOR makes the final decision about whether you qualify for a compromise of taxes². Generally, to qualify, your resources must be so limited, or the total amount due must be so large, that you can never repay the full balance³. 

There are a handful of factors that the DOR looks at when deciding your ability to pay your tax debt and your qualification for a compromise of taxes⁴. Factors include:

• The amount of equity you have in real property (e.g., a home) and personal property (e.g., a car);
  Definition:  “Equity” is the current value of the property minus the amount of money you still owe in order to fully own the property⁵.
• Your past, present, and future earning potential;
  • Definition:  “Earning potential” is the amount of money you can expect to earn based on your skills, education, work experience, and the current job market.
• The priority of other creditors;
  • Definition:  “Priority of creditors” refers to the legal order in which your creditors need to be paid back.
• Whether your financial condition is likely temporary or permanent; and
• Your current lifestyle and ability to borrow.

Note that any legal entity that pays taxes can file a petition to the DOR for a compromise of taxes⁶. This means that an individual, corporation, limited liability company (LLC), partnership, and any other tax-paying legal entity could qualify.

I want to file a petition fir a compromise of taxes. Where do I start?

 First, it is important that you get the correct compromise form. Broadly speaking, Form A-212 (Offer in Compromise for Wage Earners and Self-Employed Individuals) is for individuals, and Form A-213 (Offer in Compromise for Business) is for businesses.

Both forms can be found on the DOR website. You may also request them:

• In person⁷
  • Madison Headquarters: 2135 Rimrock Road 53713
  • Milwaukee: 819 N Sixth St, Rm 408 53203-1606 (James Lovell St. entrance)
• By phone
  • (608) 266-7879
• In writing to the department
  • Wisconsin Department of Revenue
    P.O. Box 8949
    Madison, WI 53708
    DORIncome@wisconsin.gov

How complicated is the petition for compromise form? Do I need an accountant or a lawyer to help me complete it?

The form is made so that most people can complete it without professional assistance. However, if you have questions about the form or need assistance, a Wisconsin Department of Revenue agent can help you.

What paperwork and other information do I need to provide?

You need to provide a completed A-212 or A-213 compromise form (see above to see which form you should fill out).
Also be prepared to provide any attachments that the compromise form requires⁸. Here are some examples of documents you might need to have ready:

• Copies of billing statements as proof of expenses such as electric bills
• Loan repayment information for any debt listed
• Latest real estate tax bill

A list of required attachments can be found on the last page of the compromise form. You should use this as a checklist before submitting your petition.

Where do I send my completed petition?

Mail completed forms and any additional required documents to:

• Wisconsin Department of Revenue:
  PO Box 8901
  Madison, WI 53708-8901

What happens after I file a petition for compromise?

The Department of Revenue (DOR) will let you know when they get your completed petition. If anything is missing, they will ask you to send more information. Their goal is to review and decide on your fully completed petition within 90 days.

While you wait, interest will keep adding up on any unpaid taxes. If the Department of Revenue was already trying to collect the money when they got your petition, those actions will usually keep going. These actions can include taking money from your paycheck (called “wage garnishments”) or taking your property to cover the taxes you owe (called “levies”). Sometimes, the department decides it’s better for the state to stop these actions, but unless you get a notice saying they’ve stopped, you should expect them to continue.

While the department reviews your petition, it won’t start any new collection actions. However, it still has the right to place new tax liens on your property. A tax lien is a legal claim the government makes when you owe taxes.

How am I notified if my petition is accepted?

The DOR will send a written response letting you know that it:

• Accepts your offer
• Rejects your offer, but proposes a counteroffer
• Rejects your offer

What happens after my petition is accepted?

You have to pay the amount listed in the order. Unless you asked for more time, the payment is usually due within 10 days after it’s accepted. 

Once the department gets your full payment, it will clear your unpaid tax debts. This means that after you pay everything, you won’t owe any more taxes.

It’s important to check if your compromise order has any conditions (also called “contingencies”). For example, if your order depends on not having any new tax problems for two years, it means your tax debt won’t be cleared until:

1. You pay the agreed amount, and
2. You don’t miss any tax filings or payments for two years

I paid my compromise and met all conditions of the compromise order. What happens next?

For most people, this means the issue is completely resolved and won’t come up again. However, Wisconsin law gives the DOR the right to review your account to decide if:

• There are changes in your financial status that allow you to pay the amount that was previously forgiven; or
• You didn’t include your income or other assets in our compromise petition⁹

The Department of Revenue (DOR) can review your case for up to three years after you’ve paid the compromise amount. If they decide to check whether your compromise should be reopened, they will hold a hearing with you there.

Can I petition for a compromise more than once?

Yes. If you previously submitted a petition for compromise and the DOR did not accept your offer, you can submit another petition.

However, the DOR says that unless your financial condition has changed, or a significant amount of time has passed since you first submitted a petition, it will likely return the same decision¹⁰.

If my offer is denied, can I ask for a review of that decision?

Yes. You may request a second review of a rejected compromise to:

• MS 4-CMP-W
  Compliance Bureau Director
  Wisconsin Department of Revenue
  PO Box 8901
  Madison, WI 53708-8901

The request for a review must be in writing (i.e., not via phone call or an in-person visit). You should include any information that you think would cause the department to reconsider its rejection of your first offer

Citations:

1. Wis. Stat. Ann. § 71.92(3).
2. Id.
3. https://www.revenue.wi.gov/Pages/FAQS/ise-petcomp.aspx#petcomp1 (Question 2).
4. https://www.revenue.wi.gov/Pages/FAQS/ise-petcomp.aspx#petcomp1 (Question 7).
5. https://www.investopedia.com/terms/h/home_equity.asp
6. Id.
7. https://www.revenue.wi.gov/Pages/FAQS/ise-address.aspx
8. https://www.revenue.wi.gov/Pages/FAQS/ise-petcomp.aspx#petcomp1 (Question 6)
9. https://www.revenue.wi.gov/Pages/FAQS/ise-petcomp.aspx#petcomp1 (Question 11).
10. https://www.revenue.wi.gov/Pages/FAQS/ise-petcomp.aspx#petcomp1 (Question 15).