The Missouri Department of Revenue's Offer in Compromise (OIC) program can help taxpayers who can't pay all of their Missouri state taxes. This program lets certain people and businesses pay off their tax debts for less than the full amount owed, depending on their financial situation or legal issues.
The Missouri Offer in Compromise is for people who are having a hard time paying their taxes, who have good reason to believe that their assessed liability is wrong, or who are in unusual situations that make it impossible for them to pay in full. The OIC program is different from temporary payment plans because it permanently solves the problem by lowering the balance. The program is similar to the federal offer in compromise run by the Internal Revenue Service, but Missouri's rules for how the program works, who can apply, and what documents are needed are different.
This guide explains how the Missouri OIC program works and what you need to do to be a part of it. It provides a detailed explanation of who qualifies, how to apply, what documentation must be submitted, and how the Department evaluates requests. The information presented is intended to assist taxpayers—whether self-employed, retired, or experiencing long-term financial hardship—in determining their eligibility and pursuing an appropriate resolution to their state tax obligations.
The Missouri Offer in Compromise program is a state-administered tax relief option that allows qualifying taxpayers to settle their tax debt for less than the full amount owed. Authorized under Section 32.378 of the Missouri Revised Statutes, this compromise program is designed for individuals and businesses facing financial hardship, legal disputes over tax liability, or other exceptional circumstances that make full payment unfeasible.
This program is not the same as a payment plan or installment agreement, which allows taxpayers to spread their tax bill over time. Instead, an accepted offer permanently resolves the tax debt for a reduced amount. The Missouri Department of Revenue carefully evaluates each application to ensure that accepting a lower payment is in the state's best interest and fair to other taxpayers. Applicants must demonstrate that collecting the full balance would be unreasonable based on their financial condition, income, and assets.
The key features of the Missouri Offer in Compromise are as follows:
The Missouri Offer in Compromise provides a legal avenue for taxpayers to resolve their state tax liability and regain financial stability—especially when traditional payment options are out of reach.
Although the Missouri Department of Revenue and the Internal Revenue Service offer a compromise program to help taxpayers settle tax debt, there are key differences in how each agency administers its Offer in Compromise (OIC). Understanding these distinctions is critical for managing your overall tax liability if you owe state and federal taxes.
If you owe taxes to both agencies, you must apply separately to the Missouri Department of Revenue and the IRS. Approval from one agency does not influence the outcome of the other. Be sure to carefully follow each agency’s process and submit all required documentation.
The Missouri Department of Revenue evaluates Offer in Compromise applications based on specific legal and financial grounds. You must provide an apparent reason for your request and include documentation that supports your financial condition or legal argument.
The state will consider your offer under one or more of the following categories:
This applies when there is a legitimate question about whether the tax amount assessed is owed. You may qualify if:
This applies when your financial condition makes it unlikely that you will ever be able to pay the full amount of your tax debt. You may qualify if:
This applies when collecting the full tax debt would be unfair or create significant hardship, even if the debt is legally owed and collectible. You may qualify if:
Identifying and explaining your reason for compromise strengthens your application. Supporting documentation, such as bank account statements, medical records, or a hardship statement, can help validate your request and improve your chance of approval.
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To apply for Missouri’s simplified Offer in Compromise process using Form MO-656A, your household income must fall below the limits defined by federal poverty guidelines. These thresholds determine whether you qualify as a low-income taxpayer, which can reduce the documentation required and improve your chances of approval.
If your household consists of one person, your annual income must be less than $15,950 to meet the 125% poverty level or less than $25,520 to meet the 200% threshold.
For a two-person household, the income limit is $21,550 at 125% of the poverty level and $34,480 at 200%.
If three people are in your household, your annual income must be under $27,150 for the 125% level or under $43,440 for the 200% level.
A four-person household qualifies if total annual income is below $32,750 for the 125% threshold or below $52,400 for the 200% threshold.
For a household of five people, income must not exceed $38,350 at 125% or $61,360 at 200% of the federal poverty level.
If your income falls within these ranges based on your family size, you may be eligible for low-income consideration. This could allow you to settle your tax debt through a streamlined process that does not require as much financial documentation.
Applying to settle your Missouri tax debt through the Offer in Compromise program requires careful preparation. A complete, well-documented application gives you the best chance of success.
All forms are available through the Missouri Department of Revenue website.
Before filing, you must collect detailed documents that demonstrate your financial hardship and inability to pay:
Provide complete information across all sections:
Include a clear explanation of your reason for requesting an Offer in Compromise:
Submit your completed form and documentation using one of the following methods:
After submitting your Offer in Compromise, the Missouri Department of Revenue will conduct a full review to determine whether settling your tax debt is in the state's best interest. The length of this process can vary based on the complexity of your case.
During the review:
Keeping communication open and responding quickly to department requests can improve your chances of success and avoid delays.
Submitting an Offer in Compromise is a serious legal and financial step. Many applications are rejected not because the taxpayer doesn't qualify, but because of avoidable errors. Understanding these common mistakes can increase your chances of approval and prevent unnecessary delays.
Avoiding these errors can strengthen your application and demonstrate to the Missouri Department of Revenue that your request is reasonable, credible, and in good faith.
Before submitting your application, use the checklist below to confirm that your Offer in Compromise is complete. A thorough and organized submission improves your chances of success.
A complete and well-documented submission shows the department that you're serious about resolving your tax debt and can help avoid unnecessary delays or rejections.
The Missouri Offer in Compromise is a tax relief program that allows qualifying taxpayers to settle their tax debt for less than the full amount owed. To qualify, you must have filed all required tax returns and prove that paying the total amount would cause financial hardship. This compromise program is often used when taxpayers cannot fully pay their tax bill and want to resolve the balance permanently.
Yes, but you must apply to each agency separately. The Missouri Department of Revenue and the Internal Revenue Service have independent offer in compromise programs with different forms and procedures. Owing to both state and IRS tax debt, it does not disqualify you, but acceptance by one agency does not guarantee that the other will accept your offer. You’ll need to show financial hardship for each.
Missouri may continue to collect owed taxes even while reviewing your offer. Unlike the IRS, which often pauses collection, Missouri can issue liens or wage garnishment if it serves the state’s best interest. Submit your offer as early as possible to prevent further penalties or fees and maintain open communication. Payments made during review will be applied to your tax liability, whether your offer is accepted.
The state evaluates your financial condition, monthly income, assets, and ability to pay. The department reviews your bank account balances, deductions, and any extraordinary circumstances like disability benefits or social security retirement income. If the offer amount reflects what you can reasonably pay and aligns with state guidelines, the Missouri Department of Revenue may accept it. This process ensures fairness to all taxpayers while protecting state revenue.
Missouri’s offer-in-compromise process does not require an application fee or initial payment. However, if you include a payment when you file, the Department will apply it to your account balance—even if the offer is denied. This process differs from the IRS, which typically requires a partial payment upfront unless the taxpayer qualifies for low-income status or submits their request through a recognized taxpayer advocate service.
If your offer is rejected, you cannot appeal the decision in Missouri. However, you may submit a new request with a revised amount or updated financial details. Consider whether your income, tax liability, or expenses have changed. A tax relief company or independent organization may help you review the reasons for rejection and guide you through the process. Your payments and documents must be updated before you reapply.
Yes, self-employed individuals and those receiving disability benefits may still qualify if they meet eligibility requirements. You must show that your income is limited, your financial hardship is ongoing, and you cannot settle your tax debt through regular payments. The department will review your financial documents, including tax returns and bank account records, to determine whether accepting your offer is in the state's best interest.