New Hampshire Offer in Compromise Guide: Settle Your State Tax Debt

Introduction: What Is a New Hampshire Offer in Compromise?

If you owe taxes to the state of New Hampshire and can’t afford to pay the full amount, you may qualify for a tax relief option known as a Settlement Agreement Offer. The New Hampshire Department of Revenue Administration (NH DRA) runs this program, which lets some taxpayers pay off their tax debt for less than the full amount they owe. It works similarly to the federal Offer in Compromise program from the IRS but has its own rules and procedures specific to each state.

The Settlement Agreement Offer is for taxpayers having trouble paying their taxes or in other situations that make it impossible to pay them in full. The state may accept a lower payment that reflects your ability to pay instead of continuing to collect money through wage garnishment or asset seizure. This compromise program is designed to help people and businesses get their finances back on track while still paying their taxes in a fair and manageable way.

This guide will walk you through everything you need to know about applying for a settlement agreement offer in New Hampshire. You’ll learn who qualifies, how the process works, and how it compares to the IRS tax debt relief program. Whether you owe back taxes to the state, the IRS, or both, understanding your options can help you resolve your tax debt and avoid further penalties, interest, or collection activities.

Who Qualifies for a New Hampshire Settlement Agreement Offer

The New Hampshire Department of Revenue Administration reviews each offer for a settlement agreement independently. This is more flexible than the IRS, which has strict rules for who can qualify. However, applicants still need to meet the basic requirements to be considered.

Basic Eligibility Requirements

To qualify, taxpayers must meet the following conditions:

• Unpaid taxes, penalties, or interest
  You must owe tax debt to the NH DRA. This may include back taxes, accrued interest, or penalties on unpaid balances.
  
  
• Return filing compliance
  You must be current on all required tax returns. Missing returns may result in automatic rejection.
  
  
• Financial hardship
  You must demonstrate a specific financial situation that prevents you from paying your full tax liability. This can include limited monthly income, high expenses, or extraordinary circumstances.
  
  
• Genuine settlement effort
  The offer must reflect your best effort to settle the debt and represent the maximum amount the NH DRA could expect to recover.

Situations That May Qualify

Taxpayers may be eligible in the following scenarios:

• Paying the full tax bill would cause significant financial hardship.
  
  
• Your income or assets are not sufficient to satisfy the full amount.
  
  
• The cost of collection outweighs the expected recovery.
  
  
• You can no longer generate a regular income due to disability, age, or other factors.
  
  
• You previously attempted a payment plan or installment agreement without success. 

Being in debt or experiencing temporary financial stress does not automatically qualify you. You must prove you can't pay the full amount and that your offer is fair and realistic.

How to Apply: Step-by-Step Guide to the NH Process

Applying for a settlement agreement offer in New Hampshire involves preparing the correct form, collecting detailed financial records, and submitting a complete package to the NH DRA.

1. Obtain Form CD-410

To request a settlement agreement formally, you must complete Form CD-410. This form is available on the NH Department of Revenue Administration website or by request from the department.

2. Gather Supporting Documentation

Prepare the following documents before filling out the form:

• Copies of all outstanding tax notices
  
  
• The two most recent monthly bank statements for each account
  
  
• A copy of your most recent federal tax return (Form 1040)
  
  
• A financial statement for a business
  
  
• Any documentation showing financial hardship, such as medical bills or loss of income

3. Complete the Form

Form CD-410 will ask for:

• Personal or business identification details
  
  
• The total amount owed in taxes, interest, and penalties
  
  
• Your proposed offer amount
  
  
• A financial summary including income, expenses, assets, and liabilities
  
  
• An explanation of why you are unable to pay the full amount

Be clear, thorough, and accurate in your responses. Any inconsistencies may delay or result in rejection of your application.

4. Submit Your Application

Mail the completed Form CD-410 and all required documents to the NH DRA. Ensure the package is complete and organized to avoid delays.

5. Wait for a Response

According to NH Admin. Code § Rev 2909.03, the department must respond within 60 days. This may involve:

• A request for additional information, or
  
  
• A final decision on your offer
  
  

While your application is under review, comply with your tax obligations, including estimated tax payments and filing requirements.

Applying for a Federal Offer in Compromise with the IRS

You may need to apply separately for an IRS Offer in Compromise if you also owe federal taxes. This program is similar to the state option but requires stricter guidelines and specific federal forms.

Eligibility Requirements

To qualify for an IRS Offer in Compromise, you must meet several basic conditions:

• You must have filed all required tax returns. The IRS will not consider your offer if you have missing filings.
  
  
• You must be current on your estimated tax payments for the year you're applying.
  
  
• You cannot be in an open bankruptcy proceeding when you apply.
  
  
• As a business owner, you must have made all required tax deposits for the current and prior quarters.

The IRS will then evaluate your ability to pay based on your income, monthly expenses, assets, and overall financial situation.

Application Documents

Prepare the following:

• Form 656, Offer in Compromise
  
  
• Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses
  
  
• Supporting documentation for income, expenses, debts, and assets
  
  
• The $205 application fee (unless you qualify for the Low-Income Certification)
  
  
• An initial payment based on your chosen payment option
  

Payment Options

• Lump Sum Cash Offer: Submit 20% of your offer amount upfront. If accepted, pay the remainder in five or fewer payments.
  
  
• Periodic Payment Offer: Submit the first payment with your application and continue monthly payments while the offer is reviewed.

After Submission

Once submitted:

• The IRS will typically suspend collection activities while your Offer in Compromise is under review, meaning you may receive temporary relief from actions like wage garnishment or bank levies.
  
  
• Your application will be evaluated based on your income, expenses, assets, and overall financial condition to determine whether your offer represents the most the IRS can reasonably expect to collect.
  
  
• If your offer is rejected, you can appeal the decision by filing Form 13711 within 30 days of the rejection notice.

Meeting the IRS Offer in Compromise requirements may help you avoid more aggressive collection actions while resolving your tax debt. However, if your offer is accepted, you must comply with all future tax filings and payments.

Key Differences Between IRS and NH Settlement Programs

While the IRS and the New Hampshire Department of Revenue Administration offer programs to settle tax debt, their processes and requirements differ significantly. Understanding these differences is essential if you owe taxes at both the federal and state levels.

Program Name and Governing Authority

• The IRS program is called the Offer in Compromise and is administered by the Internal Revenue Service.
  
  
• New Hampshire refers to its program as a Settlement Agreement Offer, managed by the NH DRA.

Application Process

• The IRS requires Forms 656 and 433-A (OIC) or 433-B (OIC), depending on your taxpayer status.
  
  
• New Hampshire uses Form CD-410, which includes financial disclosure sections and requires supporting documentation.
  
  
• The IRS charges a $205 application fee unless the taxpayer qualifies for low-income certification. No application fee is specified under the New Hampshire program.

Payment Terms and Timelines

• The IRS typically allows lump-sum or periodic payments over 24 months or fewer.
  
  
• New Hampshire’s terms are not explicitly defined in public documents but may be negotiated based on your financial situation.

Decision and Compliance

• The IRS has a detailed appeal process and a five-year post-acceptance compliance period.
  
  
• The NH DRA has more discretion in evaluating offers and does not publish a fixed compliance period.

Each program evaluates your ability to pay and the reasonableness of your offer, but the IRS process is more standardized. New Hampshire’s case-by-case approach may offer more flexibility but requires careful documentation and explanation.

Why Offers Get Rejected—And How to Avoid It

Not all settlement offers are accepted. Understanding why offers are rejected can help you avoid common mistakes and submit a stronger application.

Common Rejection Reasons from the NH DRA

• The offer does not reflect the maximum likely recovery from the taxpayer.
  
  
• The taxpayer fails to provide supporting documentation, such as tax returns or bank statements.
  
  
• The taxpayer is not current with filing obligations.
  
  
• The financial information appears incomplete or inaccurate.
  
  
• The department finds no evidence of significant financial hardship.
  
  
• The offer seems insincere or designed to delay payment rather than resolve the debt.

Common Rejection Reasons from the IRS

• The IRS determines you can pay your full tax liability through an installment agreement or by liquidating assets.
  
  
• The offer amount is less than your reasonable collection potential.
  
  
• You claimed living expenses that the IRS considers excessive or unjustified.
  
  
• You did not file all required tax returns or are behind on estimated tax payments.
  
  
• You have recently transferred assets that could have been used to pay your debt.
  
  
• The application contains inconsistent or incomplete information.

How to Avoid Rejection

• Be honest and transparent about your financial condition.
  
  
• Offer an amount that realistically reflects what you can pay.
  
  
• Ensure all required tax returns are filed and estimated tax payments are current.
  
  
• Include every required document and organize them.
  
  
• Provide a clear explanation of extraordinary circumstances that justify your offer.

After You Apply: What to Expect Next

Once you submit your application for a Settlement Agreement Offer or IRS Offer in Compromise, the process enters a review phase. Understanding what happens next can help you stay compliant and avoid unnecessary delays.

NH DRA Process

Under NH Admin. Code § Rev 2909.03, the department must respond within 60 days of receiving your completed Form CD-410. The response may include:

• I am requesting additional information to clarify your financial condition.
  
  
• A final decision to accept or reject your offer.

The department can decide within 60 days of receiving the requested additional information.

IRS Process

The IRS typically takes several months to evaluate your offer. During this period:

• Collection activities are usually suspended.
  
  
• The IRS may contact you for clarification or to verify submitted documentation.
  
  
• You are expected to continue filing all required tax returns and making any current estimated tax payments.

Staying organized, responsive, and compliant during this stage increases the likelihood of a favorable outcome.

Final Checklist Before Submission

Before sending your Settlement Agreement Offer to the New Hampshire Department of Revenue Administration or an Offer in Compromise to the IRS, it’s essential to ensure your application is complete and accurate. A strong submission improves your chances of approval and helps prevent unnecessary delays.

Use the checklist below to confirm you're fully prepared:

• Verify eligibility
  Make sure you meet the basic program requirements. This includes having unpaid tax debt, being current on all required tax returns, and not being in an open bankruptcy proceeding.
  
  
• Organize supporting documentation
  Collect everything required, such as tax notices, bank statements, recent tax returns, proof of income, and financial hardship documents.
  
  
• Review all forms for accuracy.
  Double-check your entries on Form CD-410 (for New Hampshire) or Form 656 and Form 433-A/B (for IRS). Inaccurate or inconsistent information can lead to rejection.
  
  
• Make copies of everything.
  Keep a complete copy of your application and all documents for your records. This is especially helpful if follow-up questions arise.
  
  
• Submit to the correct address.
  Send your completed application to the designated agency and address listed in the instructions for each form. Use certified mail or a secure delivery method when possible.
  
  
• Stay compliant while under review.
  Continue to file your tax returns and make any required estimated tax payments. Falling behind during the review process may disqualify your offer.

Taking these steps helps demonstrate that you’re making a reasonable, good-faith effort to resolve your tax debt, giving your application the best chance of acceptance.

Frequently Asked Questions

What is the New Hampshire Offer in Compromise?

The New Hampshire Offer in Compromise, formally known as the Settlement Agreement Offer, allows eligible taxpayers to settle tax debt for less than the full amount owed. It’s a state-level compromise program managed by the NH Department of Revenue Administration. If you owe taxes and face financial hardship, this option may help you resolve your tax obligations and avoid further collection actions like wage garnishment or tax liens.

Can I apply for both state and IRS Offers in Compromise at the same time?

Yes, you can apply to both the New Hampshire program and the IRS Offer in Compromise simultaneously if you owe back taxes to both. Each agency evaluates your financial condition independently, using its forms and criteria. You’ll need to file separate applications, provide supporting documentation for each, and remain compliant with estimated tax payments and required tax returns throughout the review process.

What if I cannot pay the full amount offered at once?

The IRS allows five or fewer payments through a lump sum option or over time with a periodic payment plan. New Hampshire does not publish strict timelines, but they may consider similar payment options based on your financial situation. Always explain your ability to pay in your offer form, and be prepared to show income, expenses, and other factors affecting your financial hardship.

How do I qualify for an Offer in Compromise?

You may qualify if you cannot pay your full tax liability without causing significant financial hardship. The IRS and NH DRA evaluate monthly income, expenses, assets, and other circumstances. If you’re in an open bankruptcy proceeding, you do not qualify. Filing all required tax returns and staying current on tax payments are necessary before applying to settle tax debt.

What happens if my offer is rejected?

If your offer is rejected, you can usually appeal. For IRS offers, file Form 13711 within 30 days. Rejections may occur if your offer is too low, your financial condition suggests you cannot pay, or your documentation is incomplete. You may submit a new offer with stronger supporting documentation. Staying compliant and working with a tax professional can improve your chances of getting your offer accepted.

Will submitting an Offer in Compromise stop IRS collection actions?

In most cases, yes. Submitting an IRS Offer in Compromise suspends collection activities like levies or wage garnishment while your offer is under review. However, the IRS may still file a tax lien. To maintain this protection, you must remain current on estimated tax payments and avoid any lapses in required filings during the offer evaluation period. This temporary pause offers relief as you work to settle your tax debt.

Should I work with a tax relief company or an independent organization?

Working with a qualified tax professional or independent organization can help you navigate complex rules, gather supporting documentation, and prepare your offer forms accurately. While some tax relief companies may offer services, choosing one with a track record of success is essential. The Taxpayer Advocate Service is another helpful resource for understanding your rights if you're experiencing issues with the IRS collection process.