Is it possible to settle with the Department?
Yes. The Department can settle tax disputes when appropriate.
When will the Department consider settlement?
The Department will consider settling if one or more of the following criteria are met:
- Tthe issue is nonrecurring.
- There is conflict between a statute, rule, or written instructions to the taxpayer.
- A strict application of the law would have harsh consequences.
- There is uncertainty to the outcome of the decision if it were presented in a court of law.
When will the Department not consider settlement?
The Department will not consider settlement if:
- The same issue is being litigated by the Department.
- You challenge a long-standing Department policy or rule.
- You present issues where relief cannot be given (such as to reduce the cost and inconvenience of litigation).
- You argue that a statute is unconstitutional.
What if I want to settle because I cannot afford to pay?
The Appeals Division will not consider settlements where the only reason is your inability to pay. In such cases, you should contact the Department's Compliance Division about a payment plan or other resolution based on financial hardship.
How do I propose settlement?
At any time you may submit a written proposal to the Administrative Law Judge (ALJ) handling your appeal. In your proposal, state:
- The amount in dispute
- Why your case should be settled
- The amount you are offering in settlement
- Why the amount you are offering is reasonable (A reasonable compromise offer is more likely to be accepted.)
What happens once I propose settlement?
In most cases, the ALJ will send your proposal through a review process within the Department.
- On larger dollar cases, your offer may need to be reviewed by a designee of the Director, which may include the Assistant Director, Deputy Director, or a manager in the Appeals division.
- For small claims cases, the ALJ as a designee of the Director, may accept an offer without further review.
- In some cases, the Department will make a counter offer.
What happens after a settlement agreement?
Once a settlement is made, a "closing agreement" is prepared by the ALJ. Both you and the Department must sign the agreement before the case is settled. Oral agreements are not valid or enforceable.
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