Understanding the Oregon Offer in Compromise: Your Path to Tax Relief

If you’re struggling with unpaid state taxes in Oregon, the Department of Revenue offers a potential solution called a Settlement Offer. This program, similar to the IRS offer in compromise, allows eligible taxpayers to settle their tax debt for less than the full amount owed. It's designed for individuals experiencing genuine financial hardship who cannot afford to pay their full tax liability.

Oregon’s program focuses on helping working-class and middle-income taxpayers who cannot resolve their tax debt through traditional methods like a payment plan or wage garnishment. It considers your financial condition, income, assets, and other factors to determine whether a reduced offer is in the state’s best interest. While the process can be complex and document-heavy, it may lead to substantial tax debt relief for those who qualify.

This guide explains how the compromise program works in Oregon, including who is eligible, how to apply, and what happens after submission. Whether you owe back taxes, are self-employed, or seek help resolving tax debt, this resource will help you navigate the settlement process confidently and clearly.

What Is a Settlement Offer in Oregon?

A settlement offer is Oregon’s version of what the IRS calls an offer in compromise. It allows qualifying taxpayers to settle their tax debt for less than the full amount they owe. This option is available to individuals who demonstrate financial hardship and show that paying the full tax liability is unrealistic based on their income, assets, and overall financial condition.

The Oregon Department of Revenue uses the Settlement Offer program to resolve tax accounts in a way that balances the taxpayer’s ability to pay with the state’s interest in collecting what it can. Instead of continuing collection activities that are unlikely to succeed, the department may accept a lower amount that reflects your true financial capacity. This program is only available to individuals, not active businesses, and is typically used when no other collection alternatives are reasonable.

Key characteristics of Oregon’s Settlement Offer program include:

Purpose: To resolve tax debt in cases where paying the full amount would cause significant financial hardship.
Eligibility: Only taxpayers who have filed all required tax returns and have no open bankruptcy proceeding or active appeal may apply.
Offer Amount: Your offer must be based on your monthly income, allowable expenses, and the value of your assets.
No Appeals Process: You cannot appeal the decision if your offer is denied. However, you may submit a new application with updated information and a 5 percent payment.
One-Time Opportunity: While resubmissions are allowed, each attempt requires a new application, supporting documentation, and payment.

This compromise program is not designed to help taxpayers avoid legitimate obligations. Instead, it offers a practical solution to settle tax debt when full payment is unlikely. If you qualify, it may be your best opportunity to resolve outstanding taxes and move forward financially.

Who Qualifies for the Oregon Offer in Compromise?

Oregon's Settlement Offer program does not help everyone who owes taxes. The Department of Revenue has clear rules to ensure that only people who can't pay their full tax bill can get help. This program is mostly for people with real money problems, not businesses that are still open.

Eligibility Requirements

To be eligible, you must meet all of the following:

You have filed all required tax returns for every tax year and type.
You are not in an open bankruptcy proceeding or involved in litigation.
You do not have an active appeal with the Oregon Department of Revenue.
Your right to challenge the tax assessment has already expired.
Your assets are worth less than you owe, and you cannot sell or borrow against them to pay your debt.
Your income is limited, such as receiving a fixed income, public assistance, or a significantly reduced monthly income.
You do not have enough income or assets to pay your full tax debt, even with a payment plan.
If applying for someone who has passed away, the estate must not be in open probate.

Who Is Not Eligible

You are not eligible for a settlement offer if:

You have not filed all of your required tax returns.
You are currently in bankruptcy, or your case is still open.
You have an active appeal with the Department of Revenue.
You are a business owner with an open or operating business.
You can pay the full amount of your tax debt through other means.

Self-Assessment Questions

Before applying, ask yourself the following:

Do you rely on Social Security, disability, or public assistance as your main income?
Are you over age 60 with limited assets or savings?
Is your only major asset your home?
Is your tax debt more than seven years old?

You may qualify if you answer yes to two or more of these. It’s a good idea to contact the Oregon Department of Revenue or the taxpayer advocate service before starting your application.

How Oregon’s Program Compares to the IRS Offer in Compromise

Oregon’s Settlement Offer is similar to the federal IRS offer in compromise, but there are important differences that taxpayers should understand. Both programs allow you to settle your tax debt for less than the full amount, but they follow different rules, timelines, and eligibility guidelines.

Key Differences Between the Two Programs

The IRS allows appeals if your offer is denied. Oregon does not offer an appeal process. If your offer is rejected, you must submit a new application.
Oregon does not charge an application fee, but you must include a non-refundable payment equal to 5 percent of your offer. The IRS charges a $205 application fee unless you qualify for a low-income waiver.
Oregon requires you to pay your offer in full within 30 days or over 12 monthly payments. The IRS allows lump sum offers with five or fewer payments or longer plans with up to 24 monthly payments.
Oregon only accepts applications from individuals. The IRS offers are available to both individuals and businesses.
Tax liens are released in Oregon only after you complete a three-year compliance period. The IRS releases liens once all terms of your offer are fully met.

Knowing these differences can help you decide whether to apply for Oregon’s compromise program, the IRS version, or both—depending on where you owe.

Step-by-Step Guide to Applying for a Settlement Offer

If you qualify for the Oregon Settlement Offer program, the next step is to complete the application. This process takes time and requires careful preparation. You must complete specific forms, gather financial records, calculate your offer, and submit everything together.

Step 1: Complete the Required Forms

You will need:

Form OR-SO is the official Settlement Offer Application. You’ll use this to explain your financial situation and how much you can offer to pay.
Form OR-AUTH-REP or OR-AUTH-INFO if you want someone to represent you or receive updates about your tax case. These are optional.

These forms are found on the Oregon Department of Revenue’s website.

Step 2: Gather Supporting Documents

You must include documents that show your current financial condition. These help the state verify that your offer is fair.

Include the following:

Bank statements for the last three months for all personal accounts.
Pay stubs or income statements for the last three months.
Proof of other income, such as Social Security, disability, or child support.
Bills or receipts that show your monthly household expenses.
Statements that show the value of your assets (like a home or vehicle) and any loans tied to them.

If you are self-employed, you will also need:

A profit and loss statement that shows how much money you made and spent this year.
Bank statements for your business for the last six months.
A general ledger that shows how much money a business spends.
Papers that show any loans you are paying as a business cost.

Step 3: Submit Your Application and Payment

After completing your forms:

Double-check that everything is filled out and signed.
Calculate your offer amount using the instructions on Form OR-SOA.
Include a payment equal to 5 percent of your offer. This payment is nonrefundable.
Submit your complete package by mail or in person. Mail it to:
Oregon Department of Revenue
PO Box 14725, Salem, OR 97309-5018

You can also hand-deliver it to a DOR field office.

Payments must be made by money order, cashier’s check, or cash. Zero-dollar offers will not be accepted.

Step 4: Prepare for Time and Follow-Up

You should set aside at least three hours to complete your application. Gathering documents and filling out the form may take longer if your financial situation is complex. If anything is missing, your application may be returned, causing delays.

How the Oregon Department of Revenue Evaluates Your Offer

Once the Department of Revenue receives your completed application, it will review your financial information to determine whether your offer represents the most the state could reasonably collect. This evaluation is based on your income, expenses, assets, and other financial details.

What the State Looks At

The department will review your monthly income and essential living expenses to calculate your net disposable income. This is the money you have left after paying for necessities like housing, utilities, and groceries.
It will assess the value of your assets, including bank accounts, vehicles, real estate, and other property.
The state will estimate your future earning potential, especially if your income is expected to increase.
It will consider whether you can borrow or sell assets to pay part or all of your tax debt.
Your financial condition must show that paying the full amount of your tax bill would create a financial hardship.

How the Offer Amount Is Calculated

Oregon uses a specific formula to determine the minimum offer it will consider:

Multiply your monthly disposable income by 12.
Multiply the value of your assets and real property equity by 0.75.
Add both amounts together to get your total settlement offer.

For example, if you have $400 in monthly disposable income and $8,000 in assets:

$400 × 12 = $4,800
$8,000 × 0.75 = $6,000
Total offer amount = $10,800

When sending your application, you must submit a payment equal to 5 percent of this total. If your offer does not meet this formula or lacks supporting documentation, the department may reject it.

Why Offers Are Accepted or Rejected

Understanding why offers are approved or denied can help you avoid mistakes and improve your chances of success. The Department of Revenue considers several factors when reviewing your application.

When Offers Are Accepted

An offer may be accepted if:

Your financial situation clearly shows you cannot pay the full tax liability.
The offer reflects the most the state could expect to collect, considering your income, expenses, and assets.
You have no significant equity in your home, car, or other valuable property.
You can show that you cannot borrow funds to cover your tax debt.
You have submitted all required forms and supporting documentation.

When Offers Are Rejected

An offer may be rejected for any of the following reasons:

The application is missing required documents or signatures.
You did not include the required 5 percent payment.
The financial information you provided shows you can afford to pay more.
You failed to calculate the offer correctly using the required formula.
You have unfiled tax returns or are currently in bankruptcy.
You included debt from an open business, which is not allowed.

If your offer is denied, you will receive a letter explaining the reasons. However, you cannot appeal the decision; you can submit a new application.

What to Do If Your Settlement Offer Is Denied

Oregon’s Settlement Offer program does not allow appeals. If your offer is denied, the decision is final. However, you are allowed to submit a new application at any time.

Steps to Take If You’re Denied

Review the denial letter carefully: It will explain why your offer was rejected.
Address the issues: Ensure your next application includes everything missing the first time, such as forms, signatures, or financial documents.
Update your financial information: If your financial condition has changed—such as a drop in income or new expenses—include documentation that shows your situation has worsened.
Adjust your offer amount if needed: If the department believes you could pay more, consider increasing your offer to a reasonable amount supported by your financial data.
Prepare a new 5 percent payment: Each new application must include a separate, non-refundable payment based on your updated offer amount.

Submitting a stronger second application can improve your chances of approval. If you are unsure how to proceed, you may want to contact a tax professional or speak with someone from the taxpayer advocate service for help.

Final Application Checklist

Before you submit your Oregon Settlement Offer application, take time to review everything carefully. Missing forms, incomplete information, or missing payments can cause delays or lead to a rejected offer. Use the checklist below to ensure you’ve included everything the Department of Revenue requires.

Confirm Eligibility

You meet all program requirements and are not in an open bankruptcy proceeding.
You have filed all required tax returns for all tax years and types.

Complete and Sign the Required Forms

The OR-SOA form is filled out completely and signed.
If applicable, Form OR-AUTH-REP or OR-AUTH-INFO is included.

Calculate and Include the Payment

You correctly calculated your offer amount using the formula on the application.
You included a payment equal to 5 percent of the offer amount.
The payment is made by money order, cashier’s check, or cash (no personal checks).

Include All Required Financial Documents

Personal bank statements from the past three months.
Pay stubs or income statements for the past three months.
Proof of other income sources, such as Social Security or public assistance.
Receipts or bills showing household expenses.
Asset verification, including mortgage or loan statements.

If You Are Self-Employed

A profit and loss statement for the current year.
Business bank statements for the past six months.
A general ledger showing actual business expenses.
Copies of business loan statements, if any.

Final Steps

Make a copy of your full application package for your records.
Mail or deliver the complete application and payment to the Oregon Department of Revenue.

Submitting a complete, accurate application improves your chances of acceptance and avoids unnecessary delays.

Frequently Asked Questions

What is the Oregon Offer in Compromise, and who is eligible?

The Oregon offer in compromise is a state-run compromise program that allows eligible taxpayers to settle their tax debt for less than the full amount owed. To qualify, you must have filed all required tax returns and demonstrate financial hardship. The program considers your monthly income, assets, and ability to pay. Taxpayers in an open bankruptcy proceeding or with an active appeal do not qualify.

Will making estimated tax payments help if I apply for a settlement?

Yes, making estimated tax payments shows the Oregon Department of Revenue that you're taking steps to resolve your tax debt. Staying current on tax payments, including estimated taxes, helps support your application by proving you are trying to pay your taxes moving forward. This is especially important if you are self-employed or no longer subject to regular withholding.

How do I calculate the amount of my offer to settle my tax debt?

To settle your tax debt, Oregon requires you to calculate your offer based on your financial condition to settle your tax debt. Multiply your net monthly income by 12, then add 75% of the value of your assets. This formula ensures your offer reflects what the government could realistically collect. Your application and supporting documentation confirming your financial hardship must include the final amount.

Can I apply for a settlement if I owe Oregon and the IRS back taxes?

Yes, but you must apply separately. The Oregon offer in compromise and the IRS offer in compromise OIC are two different programs. If you owe back taxes to both, you must file individual applications and meet the eligibility rules for each. The IRS and Oregon collection processes operate independently, and each evaluates tax liability and assets under separate guidelines.

What happens if the Oregon Department of Revenue denies my offer?

You cannot appeal through the Oregon system if your offer is denied. However, you may resubmit a new application with updated supporting documentation and another 5% payment. Review the reasons for denial, update your financial information, and recalculate your offer amount. The taxpayer advocate service or a tax professional may help you strengthen your next submission and improve your chances of approval.

How does Oregon determine whether to accept an offer in compromise?

Oregon evaluates each offer using multiple factors, including your monthly income, reasonable expenses, available assets, and other factors affecting your financial condition. If the Department of Revenue believes your offer reflects the most it can expect to collect, it may accept the proposal. The state must also consider whether acceptance is in its best interest and whether you meet all payment requirements.

Can I choose a payment plan instead of the offer in compromise?

Yes, if you do not qualify for the Oregon Compromise program, a payment plan may still be an option to resolve your tax debt. A payment plan allows you to make monthly payments on your tax bill. While interest charges and penalties may continue, it can help avoid aggressive collection activities. You should contact the Department of Revenue to discuss the best way to settle your account.

Understanding the Oregon Offer in Compromise: A Guide to Tax Relief