If you owe the state of Connecticut back taxes and can't pay them all at once, the Connecticut Offer in Compromise program can help. The Connecticut Department of Revenue Services runs this program, which lets some taxpayers settle their state tax debts by formally offering to pay less than they owe.
An offer in compromise is usually only considered when your finances make it unlikely that you can pay off the debt in full. This is different from installment agreements or penalty relief options. It's a last resort for people going through real problems, not just small ones. The Connecticut process has requirements, forms, and review procedures, just like the IRS program, but different state rules run it.
This guide explains how the program works, who can join, and what you must send in. If you know how to apply for local taxes, like income, business, or other taxes, you can decide if an offer is right for you. If you don't qualify, we'll help you find different ways to get help. If you do apply, we'll help you get ready with confidence.
An offer in compromise is a legal deal between a taxpayer and a tax authority to pay off a tax debt for less than the full amount owed. This is something that the Connecticut Department of Revenue Services offers. You can use it to pay off different types of state tax debts, like income tax, business taxes, and other local tax debts.
This kind of deal isn't automatic or guaranteed. The Connecticut DRS will only look at an offer if you can show that paying your full tax bill would cause you too much financial trouble or if there is a fundamental disagreement about how much you owe. To be eligible, you must submit complete financial information, including proof of your monthly income, living expenses, available equity, and other assets.
An offer in compromise differs from a regular payment plan or installment agreement because it is meant for situations where the tax owed is unlikely to be paid in full, even with monthly payments. The state will examine your current and projected financial situation and decide what it can reasonably expect to collect. The DRS may accept your offer if it meets their requirements and shows you can collect the money.
Not every taxpayer can use this compromise option, but it can often help them pay less in taxes and pay off their long-overdue taxes.
While Connecticut’s Offer in Compromise program shares the same goal as the IRS version—resolving tax debt for less than the full amount owed—the two programs operate under different rules, forms, and administrative structures. Understanding the distinctions can help avoid confusion if you’ve previously dealt with federal tax liability or plan to address both state and federal issues.
Below is a comparison of key features:
Another key difference is the level of documentation and formality. The IRS has standardized procedures and timelines, while the Connecticut DRS relies more heavily on internal review by specific divisions. For instance, the Appellate Division reviews doubts about liability offers, while the Compliance Process Group manages offers based on inability to pay.
Also, the IRS allows offers based on effective tax administration, where paying in full would cause severe hardship despite having the means to do so. Connecticut does not explicitly provide for this category, which narrows the qualifying paths to financial hardship or audit disputes.
If you’re working to settle tax debt at the federal and state levels, you’ll need to file separate offers with each agency. Each uses different forms, reviews the information independently, and reaches separate decisions. Be sure your financial disclosure is accurate and consistent across both applications.
Not every taxpayer with a balance due will qualify for a Connecticut Offer in Compromise. The Department of Revenue Services considers only those who meet specific criteria, which vary depending on the type of offer submitted. If you know these requirements, you can figure out if an offer like this is a good way to pay off your state taxes.
Before you apply, you must meet the following baseline conditions:
Connecticut DRS will not accept offers from taxpayers actively hiding assets or withholding information. It's essential to be honest about your finances. If you try to lie about them, you could be automatically denied or have your money collected in the future.
The DRS will look closely at your financial situation when deciding whether or not to collect. This includes looking over:
Your offer must reflect what the DRS believes it can reasonably collect from you. The offer will likely be denied if they conclude that the full tax liability could be satisfied through a payment plan over time. The goal is to demonstrate that the remaining balance is uncollectible based on your current and projected ability to pay.
Taxpayers dealing with older liabilities, limited assets, and long-term financial hardship are often the strongest candidates for this type of relief. However, the DRS reviews each case individually and requires solid documentation to support any claims of hardship or financial inability.
Submitting an offer in compromise does not guarantee approval. The Connecticut Department of Revenue Services has outlined several circumstances in which it will generally reject such an offer. Understanding these scenarios can help you avoid common mistakes and improve your chances of acceptance.
Your offer will not be considered if you have not filed all required tax returns. This includes any unfiled individual income tax returns, business taxes, or other local tax obligations administered by the DRS.
The state will not review your offer if you are involved in bankruptcy or a criminal investigation for tax-related offenses. These must be resolved before an offer will be reviewed.
Failure to provide full financial disclosure is one of the most common reasons for rejection. If you omit bank statements, income records, or documentation of assets, the DRS may conclude that the offer lacks credibility.
If the DRS determines that the tax balance can be satisfied through an installment agreement or other payment options, your offer may be rejected. Offers are reserved for cases where complete collection is unlikely.
In cases where there is uncertainty about liability, timing is essential. The window for submitting this offer may have passed if you have formally assessed the tax or issued the final determination letter.
The DRS may deny your offer if it appears to be a tactic to delay enforcement. This includes cases where collection is in jeopardy or where taxpayers have a history of non-compliance.
Addressing these issues before submitting your application can fortify your position and prevent you from wasting time on an unaccepted offer.
Applying for a Connecticut Offer in Compromise requires careful preparation and attention to detail. Submitting an incomplete or incorrect application can delay the process or lead to rejection. Below is a step-by-step guide to help you prepare and submit your offer correctly.
Start by identifying the appropriate basis for your offer:
This decision will affect which division within the Connecticut Department of Revenue Services reviews your offer and what documentation you must include.
Connecticut requires full financial disclosure to evaluate your ability to pay. Collect the following documents:
If you intend to request a penalty abatement with your offer, ensure you have a clear explanation and evidence of reasonable cause.
The Connecticut DRS uses two different forms depending on the nature of your tax liability:
Be sure to complete all sections of the form. Incomplete forms are a common reason for delay or rejection.
Your offer must reflect what the state considers reasonable collection potential. Connecticut does not use a published formula like the IRS, but your calculation should consider:
Avoid submitting an unrealistically low offer. Connecticut will usually not accept offers that significantly undervalue your financial situation.
Where you send your offer depends on the type of compromise you're requesting:
After submission, the DRS may contact you for additional documents or clarification. Please respond promptly and ensure that all requested information is accurate. Delays in responding can slow the process or result in denial.
If your initial offer is rejected, the state may issue a counteroffer or provide feedback on the acceptable amount. You can revise and resubmit your offer with additional supporting documentation if needed.
Staying organized, transparent, and responsive throughout the application process gives your offer the best chance of acceptance.
Navigating a Connecticut Offer in Compromise—or any state tax relief process—can be complex, especially if you’re unfamiliar with the forms, rules, and financial documentation. In many cases, working with a tax professional can make a significant difference in the outcome of your application.
A tax professional experienced in Connecticut tax issues can help you:
This type of guidance is especially valuable if your case involves older liabilities, audit assessments, multiple years of unpaid taxes, or previous collection actions. It can also be helpful if you're simultaneously dealing with state and federal tax liability.
While not everyone needs formal representation, those with more complicated tax balances, unclear eligibility, or previous denials often benefit from having a professional advocate. In most instances, proper guidance reduces stress and increases the likelihood of a successful resolution.
Before you submit a formal offer in compromise to the Connecticut Department of Revenue Services, ensuring your application is complete is essential. Offers often face delays or denials due to missing documentation or incorrectly filed forms. Use the checklist below to prepare and organize everything you’ll need.
☐ All required Connecticut tax returns have been filed
☐ You are not in active bankruptcy proceedings
☐ You are not currently under criminal investigation for tax issues
☐ You have received a notice of assessment if the liability resulted from an audit assessment
☐ You’ve identified the correct offer type: doubt as to liability, collectability, or both
☐ You understand which DRS division (Appellate, Legal, or Compliance) handles your offer
☐ Completed Form CT-656 (business taxes) or Form CT-656a (individual taxes)
☐ Bank statements for all accounts (last 12 months)
☐ Pay stubs or income documentation for all household members
☐ Documentation of monthly living expenses (rent, utilities, transportation, etc.)
☐ Property deeds and recent valuations for real property and vehicles
☐ Investment, retirement, and other financial account statements
☐ Documentation of debts, loans, and other liabilities
☐ Copies of all relevant tax filings for the years involved
☐ The offer amount is calculated based on your financial disclosure and reflects the collection potential
☐ You’ve made copies of all documents for your records
☐ Application has been submitted to the correct DRS division
☐ You’re prepared to respond promptly to any additional information requests
☐ You’re continuing to file and pay current taxes while the offer is under review
Being thorough and organized improves your chances of accepting your offer and can help resolve your tax debt more efficiently.
The Connecticut Department of Revenue Services does not provide a timeline for reviewing an offer of compromise. Processing depends on the type of offer, the division reviewing it (such as the Appellate Division or Compliance Group), and whether all required financial disclosure has been submitted. In most instances, it may take several months, especially if CT DRS requests additional documents or clarification about your financial situation.
You may submit a Connecticut offer in compromise while under an existing payment plan. However, you must show that continuing monthly payments won’t fully resolve the tax liability. The Department of Revenue Services will evaluate your financial disclosure to determine whether such an offer better reflects collection potential. A tax professional experienced in state tax liabilities can help reassess your current plan and suggest an alternative resolution.
Should Connecticut DRS reject your compromise offer, you can file an appeal with the Superior Court within a month of receiving a final determination letter. Consider revising your formal offer and resubmitting it with more robust documentation. Connecticut DRS may also suggest a payment option, like an installment agreement, instead. Working with a tax professional in either scenario ensures the correct presentation of your remaining balance and documents.
Unlike the IRS, the Connecticut Department of Revenue Services does not require a down payment when submitting an offer in compromise. However, the requirements may change, and it’s recommended to confirm with CT DRS or consult a tax professional before filing. Your offer should reflect collection potential based on full financial disclosure, including income, real property, and available equity in other assets.
A Connecticut offer in compromise can cover income tax, business taxes (such as sales and use tax or withholding), and other local tax liabilities administered by the Department of Revenue Services. Federal tax liabilities and gift tax are not eligible under this state program. Each tax assessed must be formally assessed or based on an audit assessment and supported with documentation proving financial hardship or doubt as to liability.
Connecticut DRS generally reviews offers based on total tax liability, but you may request a penalty waiver separately. To qualify for penalty relief, you must pay all tax and interest and show reasonable cause. Requesting penalty abatement differs from a formal offer of compromise and may be more appropriate if you only seek relief from additional charges rather than the full tax debt.
Your offer should reflect what the Connecticut Department of Revenue Services can realistically collect. This includes an honest review of your monthly income, necessary living expenses, available equity in real property and other assets, and any liabilities owed. If the amount offered aligns with your collection potential and financial situation, CT DRS is more likely to accept it. A tax professional can help calculate a compromise based on these factors.
Schedule your free, confidential tax relief review today.
Copyright © 2025 Get Tax Relief Now
