Under certain conditions, such as extreme financial hardship or inability to pay, the Department of Revenue may settle unpaid tax accounts for less than the full amount due. This applies to all taxes (including any penalty, interest, or fees) arising under Kentucky tax laws that are administered by the Department of Revenue.
An Offer in Settlement may be made under one or both of the following conditions:
- Doubt as to liability, for the amount owed
- Doubt as to collectibility (ability to pay the full amount owed)
An Offer in Settlement based on doubt as to liability must be supported by detailed evidence. The settlement amount that is accepted depends upon the degree of doubt found in each particular case.
If the offer is based on doubt as to collectibility, the taxpayer must provide documentation demonstrating inability to pay in full. The amount offered must meet or exceed the taxpayer's maximum ability to pay, taking into consideration earning potential and total equity in all assets. Tax obligations cannot be forgiven in their entirety, therefore, "zero" offers are not considered.
As part of the consideration for acceptance, taxpayers may be required to complete a written agreement promising to pay the Department of Revenue a percentage of future earnings. A written agreement may also be required to relinquish certain present or potential tax benefits. If an offer is accepted, taxpayers must remain current on all tax obligations for a period of five years from the date the offer is accepted or liabilities will be reinstated. The Department of Revenue will also offset refunds for any State or Federal taxes for tax periods through the end of the year the offer is accepted.
Submission of an Offer in Settlement does not automatically stop collection action. If there is any indication that the offer was filed to delay collection of the tax or that the delay would interfere with collecting the tax, collection efforts will continue during review of the offer.
To be considered for an Offer in Settlement, please complete the following forms:
You must initial and return Page 2 of the Offer in Settlement Form indicating that you have agreed to the terms and conditions outlined.
If you are self-employed or own a business, please complete the following forms:
Forward completed forms to:
The Department of Revenue
Division of Collections
P. O. Box 491
Frankfort, KY. 40602-0491
Attn: Offer in Settlement
Inquire about Offer in Settlement