Tax Forgiveness in Missouri

Missouri tax forgiveness options

Missouri offers several options to help you get back on track if you’ve fallen behind on paying state taxes. These programs aren’t in place to erase your tax debt, but they can provide crucial support to help you get back on track financially.

The Missouri Department of Revenue offers installment plans designed to provide you with additional time to pay your state taxes. The state also offers a more formal tax relief program in the form of an offer in compromise (OIC). An OIC can reduce your tax liability if you meet the eligibility requirements.

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Offer in compromise

Missouri’s offer in compromise program forgives some tax debt in extreme circumstances. You’ll have to submit an application to be considered, and if you’re approved for an offer in compromise, you’ll be able to settle your Missouri state tax debt for less than you owe.

To qualify for an offer in compromise in Missouri, you must show that one of the following applies to your situation:

• Doubt as to collectibility: You must provide financial documentation that proves you’re unable to realistically pay your full tax debt.
• Doubt as to liability: If you think the tax debt or penalties are unfair or that they don’t belong to you, you have the burden of proof to show this is the case.

Penalty abatement

Some states, such as California, offer a one-time penalty abatement to individual taxpayers without the necessity of explaining why penalty relief is needed. While penalty abatement may be available in some circumstances in the state of Missouri, you’ll have to prove reasonable cause to the state.

Reasonable cause means you had a valid and unavoidable reason for falling behind on your taxes and accruing penalties. Commonly accepted abatement reasons include illness, death or job loss. It’s important to note that Missouri does not offer abatement for interest accrued, only penalties.

Innocent spouse

In Missouri, as in many states and at the federal level, a spouse isn’t automatically held personally liable for their partner’s tax mishaps. To qualify for innocent spouse tax relief in Missouri, you must first apply for it with the IRS using IRS Form 8857. Then, the decision made at the federal level will also apply to your Missouri state taxes.

Installment plans

Missouri also offers the option to pay overdue state taxes over time using a payment plan. This option is available to residents who are current on all tax filings from the past five years. You’ll have no more than 36 months to repay your tax debt, and the state often requires residents to explore this option before applying for an offer in compromise.

Below are standard agreement features you should know if you’re considering a state tax installment plan in Missouri:

• You must be up to date on all federal and state tax filings.
• Each monthly payment must be at least $50; in other words, the amount of debt must be sufficiently large.
• You may be required to make a 25% down payment.
• You'll be charged interest, usually at a rate between 3% and 7%.

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Missouri voluntary disclosure agreements

If you live in Missouri and haven’t filed your tax returns in a timely manner, you can voluntarily disclose this information to the Missouri Department of Revenue. If you do this before the state catches your error, you can benefit from a waiver of penalties, as well as a 60-day period for the determination of liability and to prepare your returns.

In addition to voluntarily self-reporting your failure to file your tax return, you must not currently be under audit. You must also not have filed an incorrect or unreported tax return for the same return for which you’re seeking a voluntary disclosure agreement.

Missouri offer in compromise eligibility

You may be eligible to apply for an offer in compromise, but that does not guarantee the state will accept your offer. You should meet the following minimum requirements:

• You owe taxes to the state of Missouri.
• You’re unable to pay your tax debt due to serious extenuating circumstances.
• You are current on all tax filings in Missouri.
• You do not have an open bankruptcy proceeding.
• You are able to submit all supporting documentation that clearly demonstrates your inability to pay.

Missouri offer in compromise application steps

To apply for an offer in compromise in Missouri, you’ll begin with Form MO-656. This comprehensive form collects personal, financial and employment information that helps the state make a decision. It contains a section where you’ll make your proposal to the state, and a separate place for you to include any pertinent information regarding your inability to pay Missouri state taxes.

Missouri residents with low incomes (up to 200% of the poverty level) or those on a fixed income, dealing with a medical hardship or receiving public assistance can have a more streamlined application process by filling out Form MO-656A instead of the standard MO-656 form.

Once you sign and submit your offer in compromise form along with any documentation that supports your case, you’ll wait for the state to make a decision. You’ll be notified by mail whether Missouri will reduce a portion of your state tax liability.

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