An Offer in Compromise is a request to settle a tax debt for less than the full amount you owe. The Revenue Division of the Arkansas Department of Finance and Administration (DFA) runs this program.
You may be able to apply if you cannot pay your tax debt now and do not expect to be able to pay over time in installments. You must not have the income, assets, or other means to pay it in full. Payment in full includes paying with a single, lump-sum payment or paying in installments with a payment plan. The debt must also be one you do not dispute, and it must be final.
The rules for this program are 26 CAR §§ 5-101 through 5-107. You can read them in the Settlement or Compromise of Tax Liabilities Rules attachment at the bottom of this page. They allow DFA to settle a tax debt when you cannot pay it because you are “insolvent” (see definition below). They also set the guidelines DFA uses to review your offer.
To be considered, you must meet the qualifications listed in the rules. You must also send in an application with all the required documents. Use the forms listed below. The Offer in Compromise Application Checklist tells you which documents to include. If your application is missing anything DFA asked for, DFA will withdraw it from review.
When you can apply
To apply you must be insolvent and the tax debt must be final.
A tax debt is final when you can no longer challenge it by protesting with the Tax Appeals Commission or in court.
Insolvent has a set meaning under 26 CAR § 5-101. You are insolvent if either of these is true:
- You cannot pay your debts as they fall due in the usual course of business.
- Your debts are more than the reasonable market value of the things you own.
To determine whether you are insolvent, DFA looks at what you can pay now and what you are likely to be able to pay over time in installments.
Before you apply, you must file every tax return or report you are required to file. If you are not required to file, say so on your application or checklist.
Additional Information
Some private advertisements may promise to settle tax debts for “pennies on the dollar,” but settlements are approved only in extraordinary circumstances. Approval is not guaranteed. You may submit an offer if you have an existing tax debt, but the Department’s authority to accept one is discretionary — you do not have a right to settle a state tax debt. A lack of funds alone does not justify a compromise. You bear the burden of establishing that you meet the qualifications for a settlement, and your offer must reasonably reflect the most you are able to pay in order to be accepted. In evaluating your offer, the Department will calculate your maximum current income, earning potential, and other related factors. The Revenue Division does not automatically accept every Offer in Compromise. Each case is evaluated on its own unique facts and circumstances. If your offer is rejected, there are no formal appeal rights regarding that decision.
If you need help filing your Offer in Compromise, please contact the Problem Resolution and Tax Information Office at 501-682-7751, 8:00 a.m. to 5:00 p.m. (Central time), Monday through Friday.
Payment Plan Agreements
If you are not insolvent (as defined above) but do not have the financial resources to pay your tax liability in full at the present time, you may request a payment plan agreement, which lets you pay the liability — including penalty and interest — over a period of time. Granting a payment plan is not automatic. Each request is considered on a case-by-case basis and includes a review of all facts surrounding the liability. Additional interest is computed on your outstanding liability during the installment period. DFA will file a Certificate of Indebtedness (“lien”) as required by law. If you default on any of the terms, your payment plan agreement will be canceled, and other collection measures will be pursued to collect the debt.
To find out whether you qualify for a payment plan agreement, please contact the Collections Section at 501-682-5000 or 1-800-292-9829, or set up a Payment Agreement yourself in ATAP at https://atap.arkansas.gov/_/
| Application/Instructions/Rules | |
|---|---|
| Settlement or Compromise of Tax Liabilities Rules | 08/06/2026 |
| Offers in Compromise (OIC) Application Instructions and Checklist | 08/06/2026 |