Michigan offer in compromise (Michigan Department of Treasury)

Treasury's offer in compromise page lists three types: Each has its own application path on Treasury's site.

• Doubt as to collectability — "I am unable to pay the tax."
• Doubt as to liability — "I do not believe I owe the tax."
• OIC based on federal acceptance — for taxpayers who have received an accepted federal Offer in Compromise from the IRS.

According to Treasury's eligibility page, before submitting you must have filed all returns for all outstanding tax periods; your appeal rights must have expired (the ability to appeal at an informal conference or contest the debt before the Michigan Tax Tribunal or a court); the offer must not be submitted solely to delay collection, such as a levy; and there must be no open bankruptcy. Effective January 1, 2026, only debt assessed before you submit is reviewed, and debt assessed after Treasury acknowledges the offer must be paid in full or the offer may be deemed ineligible.

Effective April 1, 2025, applicants must use Form 5181CI, 5181CB, 5181F or 5181L; older versions make a submission ineligible. Treasury notes there may be different forms for an open business, a closed business, or individuals. For a doubt-as-to-liability offer, list every assessment you're asking to compromise. Treasury's forms page links the current versions.

You must include a payment of at least $100 or 20% of the offer, whichever is greater. Treasury's examples: a $100 offer requires $100; a $300 offer still requires $100; a $1,000 offer requires $200. The payment is nonrefundable, can't include expected refunds, levied funds or earlier payments, and is applied to your balance whether the offer is accepted, rejected or found ineligible. Pay by check or money order to "Michigan Department of Treasury-Offer in Compromise" with your account and assessment numbers, or by card through Collections eService.

The application must be signed even if a representative prepared it, and all liable parties must sign. For businesses, a representative with authority signs; for deceased or incapacitated individuals, a personal representative or other fiduciary signs with proof such as a durable power of attorney, guardianship order or probate letter of authority.

If your submission is eligible, Treasury sends a notice of acknowledgment and suspends collection actions such as levies while it reviews. If it's incomplete or doesn't meet the criteria, Treasury sends an Explanation of Ineligible Offer in Compromise Submission and collection continues. You can withdraw in writing; collection then resumes and the initial payment is applied to the balance, not refunded. Treasury's review process page explains acceptance and rejection steps.

Treasury's published guidelines describe how offers are evaluated, but we haven't summarized the evaluation formula here. Read the OIC guidelines directly or call the number on Treasury's contact page before relying on any estimate of what Michigan would accept.