Wednesday, October 29, 2008

The IRS was nor required to withdraw the notice of federal tax lien with respect to an unpaid tax liability. Under Code Sec. 6322, the lien arose by operation of law as of the date the unpaid tax liability was assessed, and once imposed continued until the lien was either satisfied or became legally unenforceable. The taxpayer had entered into an offer-in-compromise (which the IRS accepted prior to issuing the assessment) and begun making the required monthly payments. However, the IRS was not required to release the federal tax lien until the entire amount of the offer-in-compromise was satisfied. In addition, the notice of lien was not filed prematurely or in violation of any IRS procedures, it protected the government's interest against other creditors, and the notice of balance due under Code Sec. 6203(a) issued to the taxpayer constituted a reasonable effort to advise the taxpayer, as required by Part 5.12.2.3(1) of the Internal Revenue Manual, that a notice of lien may be filed. Consistent with section 6325(a)(1), part 5.17.2.7.3(2) of the IRM (Oct. 31, 2000) provides that "A Certificate of Release of the federal tax lien is authorized" where the "amount assessed (plus interest) is paid.







Nacoleon James Hillsman, Jr. v. Commissioner. TC Memo. 2008-240, October 28, 2008.







MEMORANDUM OPINION



CHIECHI, Judge: This case is before the Court on respondent's motion for summary judgment as supplemented. 1 We shall grant respondent's motion.





Background



The record establishes and/or the parties do not dispute the following.



Petitioner's address shown in the petition in this case was in Chicago, Illinois.



On December 30, 2002, respondent prepared a substitute for return for petitioner's taxable year 1999.



On September 19, 2005, petitioner filed a Federal income tax (tax) return for his taxable year 1999 (1999 return). In that return, petitioner showed total tax of $37,819 and tax due of $29,052. When petitioner filed his 1999 return, he did not pay the tax due shown in that return.



On February 6, 2006, respondent assessed the total tax shown in petitioner's 1999 return, additions to tax under sections 6651(a)(1) 2 and 6654(a) of $6,943 and $1,280, respectively, and interest as provided by law of $14,051.07 for petitioner's taxable year 1999. 3 (We shall refer to any unpaid assessed amounts with respect to petitioner's taxable year 1999, as well as interest as provided by law accrued after February 6, 2006, as petitioner's unpaid 1999 liability.)



On February 6, 2006, respondent issued to petitioner a notice of balance due with respect to petitioner's unpaid 1999 liability.



On April 15, 2006, respondent issued to petitioner a final notice of intent to levy and notice of your right to a hearing (notice of intent to levy) with respect to petitioner's unpaid 1999 liability. 4



On June 7, 2006, petitioner submitted to respondent Form 656, Offer in Compromise, in which petitioner offered to compromise petitioner's unpaid 1999 liability (petitioner's June 7, 2006 offer-in-compromise). In that form, petitioner offered to compromise that liability by paying $11,716 over a 24-month period. On July 19, 2006, respondent rejected petitioner's June 7, 2006 offer-in-compromise.



On July 20, 2006, respondent filed a notice of Federal tax lien with respect to petitioner's unpaid 1999 liability. On July 21, 2006, respondent issued to petitioner a notice of Federal tax lien filing and your right to a hearing under IRC 6320 (notice of tax lien) with respect to petitioner's unpaid 1999 liability.



On August 18, 2006, petitioner submitted to respondent Form 13711, Request for Appeal of Offer in Compromise, in which he appealed respondent's rejection of petitioner's June 7, 2006 offer-in-compromise.



On August 28, 2006, petitioner timely submitted to respondent Form 12153, Request for a Collection Due Process Hearing (petitioner's Form 12153), with respect to the notice of tax lien. In that form, petitioner indicated his disagreement with the notice of tax lien and requested a hearing with the Appeals Office. In petitioner's Form 12153, petitioner stated in pertinent part: "My initial Offer in Compromise * * * has been forwarded to the Office of Appeals. A final determination regarding the outcome has not been issued, therefore, the Federal Tax Lien should be removed until * * * final resolution has been issued."



By letter dated October 19, 2006, a settlement officer with the Appeals Office who was assigned petitioner's Form 12153 (settlement officer) acknowledged receipt of that form. That letter stated in pertinent part:



I have scheduled a telephone conference call for you on November 21, 2006 at 9:00AM [sic]. This call will be your primary opportunity to discuss with me the reasons you disagree with the collection action and/or to discuss alternatives to the collection action.



On or about November 30, 2006, the settlement officer sent petitioner a letter that stated in pertinent part:



I sent you a letter offering you a telephonic Collection Due Process conference. The conference was scheduled for 11/21/2006.



I confirmed your rejected offer has been assigned to someone in the New York Appeals Office. I will reschedule your due process hearing on the filed tax lien for January 2 * * * [illegible], 2006 [sic] @ 10:00AM [sic]. I hope that a decision would have been made on the offer before the scheduled hearing date. * * * At this time, the Appeals Office will not recommend a release of the tax lien.



Once I complete your hearing on the tax lien issue we will make a determination in the Collection Due Process hearing you requested by reviewing the Collection administrative file and whatever information you have already provided.



On a date not disclosed by the record, petitioner made a so-called short-term deferred payment offer 5 of $15,000.02 to be paid over a period of 24 months to compromise petitioner's unpaid 1999 liability. On January 24, 2007, respondent accepted that offer (petitioner's accepted offer-in-compromise).



On April 23, 2007, the Appeals Office issued to petitioner a notice of determination concerning collection action(s) under section 6320 and/or 6330 (notice of determination) with respect to petitioner's taxable year 1999. That notice stated in pertinent part:





Summary of Determination



Based on all the documents that were presented we determined the filing of the tax lien was appropriate. The Service followed all applicable procedures and guidelines in the filing of the Notice of Federal Tax Lien.



Since the filing of the tax lien your offer-in-compro-mise was submitted for acceptance. The Offer Unit determined the amount offered was adequate. The tax lien will be released once you have met the terms of the offer-in-compromise.



The notice of determination included an attachment that stated in pertinent part:





SUMMARY AND RECOMMENDATION



You requested a hearing from Appeals under the provisions of Internal Revenue Code (IRC) [section] 6320 on the above income tax periods. The Form 12153, Request for a Due Process Hearing was timely filed. You were provided the opportunity to a telephone, correspondence or face-to-face hearing. A telephone hearing was conducted.



The Internal Revenue Service followed all legal and administrative requirements in filing the tax lien against you. It was determined that this action was the most efficient collection method when the Notice of Federal Tax Lien was requested.



The Offer Unit filed the offer [sic] after rejecting your submitted offer-in-compromise. You filed a timely appeal with the Offer Unit protesting the rejection. The Offer Unit reinvestigated your offer and has recommended acceptance of your offer. The tax lien will be released as soon as the terms of the offer are met.





BRIEF BACKGROUND



A tax lien was filed against you because of your outstanding tax liability amount. Your income tax return was prepared by the Service because you neglected to file the tax return.



You filed an offer-in-compromise to resolve the tax liability. Your offer was rejected and you filed a timely appeal protesting the rejection. The Settlement Officer contacted the Offer Unit on the status of your offer. The Settlement Officer was notified your offer was recommended and submitted for approval.





DISCUSSION AND ANALYSIS



Verification of legal procedural requirements:



Appeals has obtained verification from the IRS office collecting the tax that the requirements of any applicable law, regulation or administrative procedure with respect to the proposed levy or NFTL filing 6 have been met. Computer records indicate that the notice and demand, notice of intent to levy and/or notice of federal tax lien filing, and notice of a right to a Collection Due Process hearing were issued.



Assessment was properly made per IRC § 6201 for each tax and period listed on the CDP notice.



The notice and demand for payment letter was mailed to the taxpayer's last known [address.]



IRC [section] 6321 states that a statutory lien arises when a taxpayer neglects or refuses to pay a tax liability after notice demand [sic] and demand. To be valid against third parties except government entities, notice of the lien must be filed in the proper place for filing per IRC [section] 6323(a) and (f). A review of your account indicates that you neglected or refused to pay after notice and demand.



IRC [section] 6323(j) allows the Internal Revenue Service to withdraw a Notice of Federal Tax Lien (NFTL). A NFTL may be withdrawn if the filing of the notice was premature or otherwise not in accordance with the Service's administrative procedures, if the taxpayer entered into an [installment] payment agreement under Section 6159 to satisfy the tax liability for which the lien was imposed by means of the agreement unless such agreement provides otherwise, if withdrawal of such notice will facilitate the collection of the tax liability, or if with the consent of the taxpayer or National Taxpayer Advocate, the withdrawal of the notice would not [sic] be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States (as determined by the IRS).



® The filing of the NFTL was not premature and followed administrative guidelines.



® There was no [installment] payment agreement [under section 6159] or the agreement provided for the filing of the NFTL.



® Neither the taxpayer nor Appeals contends that withdrawal would facilitate collection.



Withdrawal is considered not to be in the best interest of the Government.



There was a balance due when the CDP levy notice was issued or when the NFTL filing was requested.





Prior involvement:



I had no prior involvement with respect to the specific tax periods either in Appeals or Compliance Collection.





Collection statute verification:



The collection statute has been suspended; the collection period allowed by statute to collect these taxes has been suspended by the appropriate computer codes for the tax periods at issue.



Collection followed all legal procedural requirements and the actions taken or proposed were appropriate under the circumstances.





Issues raised by the taxpayer





Collection Alternatives Offered by Taxpayer



Your due process request form indicated your initial offer was rejected and you appealed the decision. You believe the filing of the tax lien was premature and the tax lien should be removed until a final resolution was made on your offer.



A review of your account revealed you had an outstanding tax liability totaling over $50,000.00. Because of your outstanding tax liability amount and the rejection of your offer, the filing of the tax lien was not premature.



A telephone hearing was conducted with you and you notified the Settlement Officer that your offer has been approved. The Settlement Officer contacted the Offer Unit, Ms. Smeck and verified the acceptance of your offer.



You were notified the tax lien would be released once the terms of your offer were met. Because you chose not to sign the Waiver form this determination letter was issued to you.





Challenges to the Existence of Amount of Liability



You did not challenge the liability at your hearing.



You raised no other relevant issues.





Balancing of need for efficient collection with taxpayer concern that the collection action be no more intrusive than necessary.



The tax lien will not be withdrawn by Appeals and is believed to be [the] most appropriate action. IRC [sections] 6320 and 6330 require that the Appeals Office consider whether a proposed collection action balances the need for efficient collection of taxes with the legitimate concern that any collection be no more intrusive than necessary. The filing of the tax lien was determined to be the most effective method of collection when it was filed.



The tax lien will be released as soon as the terms of your offer are met.



As of April 23, 2007, the date on which the Appeals Office issued to petitioner the notice of determination, petitioner had not begun making the 24 monthly payments required under the terms of petitioner's accepted offer-in-compromise. Since May 18, 2007, petitioner has made, and as of August 4, 2008, has continued to make, those required monthly payments.





Discussion



The Court may grant summary judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994). We conclude that there are no genuine issues of material fact regarding the questions raised in respondent's motion.



In petitioner's response to respondent's motion, petitioner does not dispute the existence or the amount of petitioner's unpaid 1999 liability. Where, as is the case here, the validity of the underlying tax liability is not properly placed at issue, the Court will review the determination of the Commissioner for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).



It is petitioner's position that the Appeals Office abused its discretion in determining in the notice of determination to sustain the Federal tax lien with respect to petitioner's unpaid 1999 liability and the filing of the notice of that lien. 7 According to petitioner, the Federal tax lien with respect to that liability "was pre-maturely placed on my account" and should be "removed" because he has been making the payments required under the terms of petitioner's accepted offer-in-compromise.



Section 6321 provides:



SEC. 6321. LIEN FOR TAXES.



If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.



Section 6322 provides that "the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed * * * is satisfied or becomes unenforceable by reason of lapse of time." As pertinent here, section 6325(a)(1) provides that the Secretary of the Treasury shall issue a certificate of release of a Federal tax lien no later than 30 days after the day on which the "Secretary finds that the liability for the amount assessed, together with all interest in respect thereof, has been fully satisfied or has become legally unenforceable".



Consistent with section 6325(a)(1), part 5.17.2.7.3(2) of the IRM (Oct. 31, 2000) provides that "A Certificate of Release of the federal tax lien is authorized" where, inter alia, the "amount assessed (plus interest) is paid." Part 5.17.2.7.3.2(1) of the IRM (Oct. 31, 2000) provides in pertinent part:



(1) When the Service accepts an offer in compromise, * * * the lien against the taxpayer is released, provided that all of the following conditions are met:



a. It is a cash offer, or all installments under the terms of the offer, including any accrued interest, have been paid.



If a taxpayer makes a cash offer to compromise a tax liability, the offer amount must be paid within 90 days after the date on which the Commissioner accepts the offer. IRM pt. 5.8.1.9.4(3) (Sept. 1, 2005).



On February 6, 2006, respondent assessed petitioner's unpaid 1999 liability and issued to petitioner a notice of balance due with respect to that liability. On that date, a Federal tax lien arose by operation of law in favor of the United States on all property and rights to property belonging to petitioner with respect to petitioner's unpaid 1999 liability. See sec. 6322. On a date not disclosed by the record, petitioner made a short- term deferred payment offer of $15,000.02 to compromise that liability. 8 Pursuant to that offer, petitioner agreed to pay $15,000.02 in 24 monthly payments to commence after written notice of respondent's acceptance of that offered amount. On January 24, 2007, respondent accepted petitioner's offer of $15,000.02 to compromise petitioner's unpaid 1999 liability. As of April 23, 2007, the date on which the Appeals Office issued to petitioner the notice of determination, petitioner had not made all of the 24 monthly payments required under the terms of petitioner's accepted offer-in-compromise. We conclude that respondent was not required to release the Federal tax lien with respect to petitioner's unpaid 1999 liability. 9 See sec. 6325(a)(1); IRM pt. 5.17.2.7.3(2), 5.17.2.7.3.2(1).



Nor was respondent required to withdraw the notice of Federal tax lien filed with respect to petitioner's unpaid 1999 liability. Section 6323(a) provides that the "lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary." When respondent assessed petitioner's unpaid 1999 liability on February 6, 2006, a Federal tax lien arose by operation of law in favor of the United States on all property and rights to property belonging to petitioner with respect to petitioner's unpaid 1999 liability. Pursuant to section 6323(a), on July 20, 2006, respondent filed a notice of Federal tax lien with respect to that liability in order to protect respondent's interest in petitioner's property against other creditors of petitioner. 10



Section 6323(j)(1) provides in pertinent part:



(1) In general. --The Secretary may withdraw a notice of a lien filed under this section * * * if the Secretary determines that --



(A) the filing of such notice was premature or otherwise not in accordance with administrative procedures of the Secretary * * *



We conclude that the filing of the notice of Federal tax lien with respect to petitioner's unpaid 1999 liability was not premature.



We also conclude that the filing of the notice of Federal tax lien with respect to petitioner's unpaid 1999 liability was otherwise "in accordance with administrative procedures of the Secretary". Cf. sec. 6323(j)(1)(A). Part 5.12.2.3(1) of the IRM (May 20, 2005) provides that the Commissioner must make reasonable efforts to contact a taxpayer before filing a notice of Federal tax lien in order to advise the taxpayer that such a notice may be filed if the taxpayer does not make full payment of a tax liability when requested. Part 5.12.2.3(1) of the IRM further provides that the issuance of a notice of balance due under section 6303(a) constitutes reasonable efforts to contact the taxpayer. Before filing the notice of Federal tax lien, respondent issued to petitioner a notice of balance due with respect to petitioner's unpaid 1999 liability and thereby made reasonable efforts to contact him, as required by the Internal Revenue Manual.



Based upon our examination of the entire record before us, we find that the Appeals Office did not abuse its discretion in making the determinations in the notice of determination with respect to petitioner's taxable year 1999.



We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot.



On the record before us, we shall grant respondent's motion.



To reflect the foregoing,



An order granting respondent's motion and decision for respondent will be entered.


1 Respondent filed a declaration of Appeals Team Manager Debra Dufek in support of respondent's motion for summary judgment (respondent's declaration). We shall refer collectively to respondent's motion for summary judgment as supplemented and respondent's declaration as respondent's motion.

2 All section references are to the Internal Revenue Code in effect at all relevant times. All Rule references are to the Tax Court Rules of Practice and Procedure.

3 On Apr. 15, 2006, respondent credited a refund of $1,402 due to petitioner for his taxable year 2005 against the liability for petitioner's taxable year 1999.

4 The record does not establish that petitioner requested a hearing with respondent's Appeals Office (Appeals Office) with respect to the notice of intent to levy.

5 The term "short-term deferred payment offer" refers to an amount that a taxpayer offers to compromise the taxpayer's tax liability and that is to be paid in more than 90 days, but within 24 months, after written notice of acceptance by the Commissioner of Internal Revenue (Commissioner) of the offered amount. See Internal Revenue Manual (IRM) pt. 5.8.1.9.4(3) (Sept. 1, 2005).

6 See supra note 4. Although the notice of determination refers to "the proposed levy or NFTL filing", the only collection action that the Appeals Office sustained in that notice was the filing of the notice of Federal tax lien with respect to petitioner's taxable year 1999.

7 In the notice of determination, the Appeals Office determined that "The tax lien will be released once * * * [petitioner has] met the terms of the offer-in-compromise." The Appeals Office also determined in the notice of determination that respondent followed all applicable procedures and guidelines in filing the notice of Federal tax lien with respect to petitioner's unpaid 1999 liability and that withdrawal of that notice is not appropriate at this time.

8 Thus, petitioner's offer was not a cash offer.

9 Form 656, Offer in Compromise, indicates that, where the Commissioner has accepted an offer to compromise a tax liability, the taxpayer remains liable for that liability until the taxpayer has satisfied all of the terms of the offer-in-compromise. See IRM pt. 5.9.4.9.1(1) (Jan. 1, 2006). Petitioner remains liable for petitioner's unpaid 1999 liability until he satisfies all of the terms of petitioner's accepted offer-in-compromise.

10 See also pt. 5.12.2.4.1(1) of the IRM (May 20, 2005) (generally a notice of Federal tax lien should be filed if "the aggregate * * * [unpaid balance of assessment] is $5,000 or more"). As of the date on which respondent filed the notice of Federal tax lien with respect to petitioner's unpaid 1999 liability, petitioner's unpaid 1999 liability was substantially in excess of $5,000.

Tuesday, October 28, 2008

Missouri Offer in Compromise

How do I submit an Offer in Compromise proposal?
You may request an Offer in Compromise (OIC) by submitting a letter to the Missouri Department of Revenue (department).

The offer must include a proposal to pay a sum of money. Missouri law provides three reasons as a basis for an OIC: doubt as to collectibility, doubt as to liability, or to promote effective tax administration.
Depending upon the basis of the offer, the following information must be included:
• A completed Form MO-656 . http://dor.mo.gov/tax/personal/individual/forms/2007/m656f.pdf
• If submitting an OIC based upon doubt as to collectibility, complete a Collection Information Statement, Federal Form 433A and/or B . http://www.irs.gov/pub/irs-pdf/f433a.pdf
• If the OIC is based upon doubt as to liability, enclose any relevant documentation or information supporting your claim.
• If your offer is based upon effective tax administration, state how acceptance promotes effective tax administration.
Where do I send a proposal for an Offer in Compromise?
An OIC may be submitted to the address on the balance due notice.
Corporate Income Tax:
Corporate Tax
P.O. Box 3365
Jefferson City, MO 65105-3365
Individual Income Tax:
Personal Tax
P.O. Box 385
Jefferson City, MO 65105-0385
Sales/Use Tax:
Sales Tax
P.O. Box 3390
Jefferson City, MO 65105-3390
Withholding Tax:
Withholding Tax
P.O. Box 3375
Jefferson City, MO 65105-3375
What if I owe for more than one type of tax?
If you owe for more than one tax type, send one OIC to any appropriate address. The OIC should list all tax debts.
Can I appeal if the department rejects my offer?
Georgia Offer in Compromise

Offers in Compromise Business & Personal Taxes - Forms

Please be advised of the following policy changes to the Offer in Compromise Program effective July 1, 2005:

Notice: $100 Processing Fee Required as of July 1, 2005

Any payment submitted with an offer will be applied as a partial payment to the tax debt. The payment will not be refunded if the offer is declined or withdrawn.
Payment of an accepted offer must be made within 30 days of notification of acceptance.
Statutory collection activity will not be suspended while an offer is pending.
Taxpayers are restricted to one offer application only in a 10 year period.
Taxpayers must remain in compliance for filing and paying any required state tax return for ten years following offer acceptance.
Only applications with a revision date of 7/05 or later will be accepted after 9/1/2005.
Notice: $100 Processing Fee Required as of July 1, 2005

Effective July 1, 2005, a processing fee of $100 must accompany all Offer in Compromise applications submitted on Form OIC-1. The application fee does not apply to individuals whose income falls at or below levels based on poverty guidelines established by the U.S. Department of Health and Human Services (HHS) under authority of section 673(2) of the Omnibus Reconciliation Act of 1981 (95 Stat. 357, 511). The exception for taxpayers with incomes below these levels only applies to individuals; it does not apply to other entities such as corporations, proprietorships or partnerships.

Your offer must include the $100 application fee or a completed Form OIC-11 (Income Certification of Offer in Compromise Application Fee), if you are requesting an exception of the fee because of your income. Offers received without the $100 fee or a completed OIC-11 will not be accepted for processing. Any payment over and above the $100 fee made with the offer will be applied as a partial payment to the applicant’s tax liability regardless of the disposition of the offer. The application fee is nonrefundable and will be credited to the tax debt only if the offer is accepted. The application fee will not be credited to the tax debt if the offer is declined.

Monday, October 27, 2008

California offer in compromise questions and answers.

I had a case where special circumstances were taken into account (age and health).



Questions and Answers | Personal Income Tax - OIC FTB Application (4905PIT) - OIC Multi-Agency Application (DE 999CA) | Business Entities Tax - OIC FTB Application (4905BE)

What you should know before preparing an Offer in Compromise

Are you an Offer in Compromise candidate?

If you are an individual or business taxpayer that does not have the income, assets, or means to pay your tax liability now or in the foreseeable future, you may be a candidate. The Offer in Compromise program allows you to offer a lesser amount for payment of a non-disputed final tax liability.

Generally, we approve an Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.

Although we evaluate each case based on its own unique set of facts and circumstances, we give the following factors strong consideration:

The taxpayer's ability to pay.
The amount of equity in the taxpayer's assets.
The taxpayer's present and future income.
The taxpayer's present and future expenses.
The potential for changed circumstances.
Whether the offer is in the best interest of the state.
Can we process your application?

We will only process your Offer in Compromise application if you have done all of the following:

You have filed all of the required tax returns. If you have no filing requirement, note it on the application.
You have fully completed the Offer in Compromise application, and provided all supporting documentation.
You agreed with the Franchise Tax Board on the amount of tax that you owe.
You authorized the Franchise Tax board to obtain your consumer credit report and to investigate and verify the information you provided on the application.
Will a collateral agreement be required?

Upon approval, we may require you to enter into a collateral agreement for a term of five years. Generally, a collateral agreement will be required if you have significant potential for increased earnings. A collateral agreement requires you to:

Pay us a percentage of your future earnings that exceed an agreed upon threshold.
Are collections suspended?

Collection activity is not automatically suspended. If delaying collection activity jeopardizes our ability to collect the tax, we may continue with collection efforts. Interest will continue to accrue.

When should offered funds be submitted?

You should not submit the offered funds until we request them. When we do ask for the funds, submit them by cashiers check or money order.

What documentation is required with the application?

For a check list of required items:

Personal Income Tax - see page 3 of FTB 4905PIT
Business Income Tax - see page 4 of FTB 4905BE
Questions and Answers

What does the Franchise Tax Board consider a fair offer in relation to the amount due?
How long will it take to get a decision on my Offer in Compromise?
Can I make payments on the offered amount?
Can I apply prior payments to the offered amount?
My Internal Revenue Service Offer in Compromise has been accepted. Will the Franchise Tax Board automatically approve my offer?
If the Franchise Tax Board determines that my offer is not acceptable, will I be contacted?
Will state tax liens be released if my offer is accepted?
Do I need to have someone represent me?
Can I get relief from the tax liability by filing bankruptcy?
Can I apply for an Offer in Compromise if I have no funds to offer?
What is a collateral agreement?
If my offer is approved, will I have to sign a collateral agreement?
I am single now. If I marry while the collateral agreement is in effect, how will this affect me?
Can I complete one application if I owe the Employment Development Department, Board of Equalization, or the Franchise Tax Board?
What does the Franchise Tax Board consider a fair offer in relation to the amount due?
Generally, an offer will be accepted when the amount offered is the most the Franchise Tax Board can expect to collect within a reasonable period of time.

How long will it take to get a decision on my Offer in Compromise?
Generally, if we accept your offer for processing, we will have a decision to you within 90 days after receiving your offer. If your account is more complex, it may take longer than 90 days.

Can I make payments on the offered amount?
No. We require a lump sum payment of the offered amount.

Can I apply prior payments to the offered amount?
We cannot apply prior payments toward the offered amount. However, we will consider prior payments and the offered amount compared to the total liability when evaluating your offer.

My Internal Revenue Service Offer in Compromise has been accepted. Will the Franchise Tax Board automatically approve my offer?
No. We will evaluate your Franchise Tax Board offer separately from your Internal Revenue Service offer.

If the Franchise Tax Board determines that my offer is not acceptable, will I be contacted?
Yes. We will contact you to discuss your account and to determine the most appropriate resolution. For example, if it is determined that you will have the ability to make monthly payments that will exceed the amount offered, we will work with you to establish an installment agreement.

Will state tax liens be released if the Franchise Tax Board accepts my offer?
Generally, we release state tax liens upon final approval of your Offer in Compromise.

Do I need to have someone represent me?
Representation is not required. The Offer in Compromise program is available to all taxpayers, whether or not they are represented.

Can I get relief from the tax liability by filing bankruptcy?
Part or all of your taxes may be dischargeable under the bankruptcy code. If this is a consideration, you may want to seek legal advice.

Can I apply for an Offer in Compromise if I have no funds to offer?
No. We will not accept a zero dollar offer. Your offer must represent the most the Franchise Tax Board can expect to collect over a reasonable period of time.

What is a collateral agreement?
A collateral agreement is a contractual agreement between you and the Franchise Tax Board. By signing the agreement, you agree to pledge to us a percentage of income that exceeds an agreed upon threshold. Generally, the collateral agreement period is five years.

If my offer is approved, will I have to sign a collateral agreement?
If you are on a fixed income or have limited potential for increased earnings, a collateral agreement will generally not be required.

I am single now. If I marry while the collateral agreement is in effect, how will this affect me?
If you marry or enter into a Registered Domestic Partnership (RDP) while the collateral agreement is in effect, we will review any joint tax returns you are required to file. Generally, we consider your joint annual income in the collateral agreement. If you are married or a RDP filing separately, the evaluation will be based on your separate income.

Can I complete one application if I owe the Employment Development Department, the Board of Equalization, or the Franchise Tax Board?
To relieve some of the paperwork burden for taxpayers or their representatives, the State's three taxing agencies developed a single offer in compromise application. Individual taxpayers can use
DE 999CA (OIC Multi-Agency Application) to apply with any or all of the three agencies.

Offer in Compromise (OIC) applications:

Personal Income Tax (Individuals)
OIC FTB Application - FTB 4905PIT
OIC Multi-Agency Application - DE 999CA
Business Income Tax
OIC FTB Application - FTB 4905BE
By telephone:
Call 1-(800)-338-0505
Select personal income tax form requests
Enter Code 971 when prompted
For more information:

Call (916) 845-4787

Sunday, October 26, 2008

Maryland Offer in Compromise Tax Liability Resolution Program

The Offer in Compromise Program is used to resolve tax liabilities with the Comptroller when the taxpayer is unable to pay in full and all other efforts to resolve the liability have been unsuccessful. This program can be used for all taxes administered by the Comptroller including the Admissions and Amusement Tax, Income Tax, Sales and Use Tax and Withholding Tax.


The Offer in Compromise Program is not an appeal of the taxpayer's liability. Instead, under the program we look at your available resources, consider the resources in the light of your circumstances, and arrive at an equitable resolution of your liability by considering a reduction or abatement of the amount due.
In order to apply for this program you must meet certain eligibility requirements and you must submit Form MD656 to:


Offer in Compromise Program
Comptroller of Maryland
301 West Preston Street, Room 203
Baltimore, Maryland 21201


Eligibility Requirements for Offers in Compromise Program
Before you can apply to this program, you must meet the following requirements:
• You have incurred a delinquent tax liability that has resulted in an assessment.
• You have exhausted all other avenues of administrative appeal.
• You cannot make an offer in compromise if there is any issue remaining that can be appealed.
• Two years must have passed since you became liable for the tax.
• You must be current with respect to all returns filed or required to be filed to the Comptroller's Office.
• You must not be currently involved in an open bankruptcy proceeding.
• You are unlikely to be able to make payment in full any time in the foreseeable future due to your financial situation.
• You either are without resources or unable to apply present and/or future resources to paying the outstanding tax liability.
Offer in Compromise Tax Liability Resolution Program
What is the Comptroller of Maryland's Offer in Compromise Program?
The Offer in Compromise Program is used to resolve tax liabilities for admissions and amusement tax, income tax, sales and use tax, employer withholding tax, or any other tax administered by the Comptroller's Office when the taxpayer is unable to pay in full and all other efforts to resolve the liability have been unsuccessful.
The Offer in Compromise Program is not an appeal of the taxpayer's liability. Instead, under the program, the Comptroller's Office looks at the taxpayer's available resources, considers the resources in the light of the taxpayer's circumstances, and arrives at an equitable resolution of the taxpayer's liability by considering a reduction or abatement of the amount due. See Section 6-219 of the State Finance and Procurement Article, Annotated Code of Maryland.
When can I resolve my liability under the Offer in Compromise Program?
Before you can apply to this program, you must meet the following requirements:
• You have incurred a delinquent tax liability that has resulted in an assessment.
• You have exhausted all other avenues of administrative appeal. You cannot make an offer in compromise if there is any issue remaining which can be appealed.
• Two years must have passed since you became liable for the tax.
• You must be current with respect to all returns filed or required to be filed to the Comptroller's Office.
• You must not be currently involved in an open bankruptcy proceeding.
• You are unlikely to be able to make payment in full any time in the foreseeable future due to your financial situation. You either are without resources or unable to apply present and/or future resources to paying the outstanding tax liability.
How can I apply for an Offer in Compromise?
To apply for an Offer in Compromise, taxpayers must submit Form MD 656 to:
Offer in Compromise Program
Comptroller of Maryland
301 West Preston Street, Rm. 203
Baltimore, Maryland 21201
When you complete Form MD 656, you should address all of the reasons you believe you cannot, or should not, pay the full amount due. You should offer an amount you are able to pay. A mere unwillingness to pay will not excuse you. The Comptroller will consider the following circumstances when deciding whether or not to accept an Offer in Compromise:
• Doubt as to liability. If you believe you don't owe the amount due, you must include with Form MD 656 a detailed explanation of the reason(s) you believe you do not owe the tax.
• Insufficient resources. If you don't have enough assets or income to pay the full amount, you must include with Form MD 656 a complete financial statement, Form MD 433-A for individuals and/or Form MD 433-B for businesses.
• Economic or other hardship. If you have enough assets to pay the full amount, but believe that because of your exceptional circumstances requiring full payment would cause an economic hardship or would be unfair and inequitable, you must include with Form MD 656 a complete financial statement, Form MD 433-A and/or Form MD 433-B.
Will my application be kept confidential?
Yes, All materials and statements submitted under the Offer in Compromise Program will remain confidential.
What are the Comptroller's procedures for Offers in Compromise?
All decisions under the Offer in Compromise Program are final and cannot be appealed. For this reason, you should carefully consider the facts and arguments you submit with the original offer.
You must remain current with respect to future filings for at least three years after the Offer in Compromise is accepted. If you do not, the full liability will become due immediately, and the comptroller will take all necessary action to collect.
The Comptroller's Office will review the Offer in Compromise and determine if there is sufficient reason for a reduction or abatement of the assessment.
If we determine that no grounds for adjustment exist, then you will be notified that your offer has been declined. The Comptroller's Office will consider another offer in compromise if circumstances change. If we determine that grounds for adjustment exist but that the amount offered is insufficient, we may advise you to increase your offer to an acceptable amount. If we determine that your offer is acceptable, you will be notified so payment can be made.
West Virginia State Tax Department Offer In Compromise Form CD-3 (Revised 4/05)

Taxpayer RepresentativeNames and Address of TaxpayerSocial Security or Tax Identification NumberName: Address Phone To: State Tax Commissioner Date Amount of Offer $ Total Liability$[1]This offer is submitted by the taxpayer to compromise a state tax liability for the following taxes and periods: TYPE TAXPERIODSTAXINTERESTADDITIONSTOTAL[2]The total amount of $__________________ is offered to compromise this liability. The total amount will be paid as follows: a) Initial Payment (with this offer): $_____________ b) Payment on Acceptance of Offer: $____________ c) Monthly Payment: $_______________ for ________ Month Interest at the legal rate under W. Va. Code §11-10-17 will accrue on the balance, if any, until it is paid in full. As a part of the consideration for this offer, the Taxpayer agrees that:[3]The State shall retain all payments and credits made to this liability prior to submission of this offer, and the State shall retain any overpayments or refunds to which the taxpayer may be entitled for periods extending to the end of the year in which this offer is accepted, or until the amount of the offer is paid in full. Any such refund received by the taxpayer after this offer is filed will be returned immediately.[4] All payments made under the terms of this offer shall be applied in the best interest of the State. [5]Upon acceptance of this offer, the taxpayers will have no right to contest the amount of the liability compromised. [6]If there is a default in any payment or other terms, including Item B, the State may collect the entire unpaid balance of the offer, or may disregard the amount of the offer and apply all amounts previously paid under the offer against the liability sought to be compromised and, without further notice of any kind, assess and collect the total liability.[7]The taxpayer agrees to the suspension of the period of limitations on assessment and collection until the total amount of the offer is paid, and there is full compliance with all terms and conditions of the compromise and for one year thereafter. Any compromise shall constitute an agreement to extend the statutes of limitation under Code §11-10-15(c)(1) and §11-10-16(e). [8]Any compromise is conditioned upon the taxpayer timely complying with all state tax laws regarding filing returns and payment of taxes for a period of 5 years after the offer is accepted. [9]A financial statement (433A and/or 433B), and a statement of the facts and reasons as grounds for this compromise, must be attached. [10] The taxpayer remains liable for the full amount of the liability, unless and until the offer is accepted in writing by the Commissioner or a delegated official, and there has been full compliance with the terms of the offer. Under penalties of perjury, I declare that I (we) have examined this offer, including accompanying statements, and to best of my (our) knowledge and belief it is true and correct and complete, and that I am authorized to make this offer on behalf of the taxpayer. Name of Taxpayer(s) ByIts Signature Date
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OFFERS IN COMPROMISE - INSTRUCTIONSAuthorityW. Va. Code §11-10-5q(c) allows the State Tax Commissioner to compromise a tax liability, which includes all tax, penalty, interest, or additions to tax.Reason for CompromiseWe are allowed to compromise a liability for one or both of the following two (2) reasons: (1) doubt as to whether the taxpayer owes the liability; (2) doubt that we can collect the full amount of the liability. This form and instructions is only used in cases of doubt as to collectibility.PolicyWe will accept an offer in compromise when it is unlikely that we can collect the tax liability in full, and the amount offered reasonably reflects the amount we can collect. An offer in compromise is a legitimate alternative to declaring a case as currently not collectible or to a long-term installment agreement. Our goal is to collect what is potentially collectible at the earliestpossible time and at the least cost to the State.The success of the compromise will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay the State. Taxpayers are expected to providereasonable documentation to verify their ability to pay. The goal is a compromise which is in the best interest of both the taxpayer and the State. Where an offer in compromise appears to be a workable solution, the employee assigned the case will discuss the compromise with the taxpayer and, when necessary, assist in preparing the required forms. The taxpayer will be responsible for making the first offer for compromise.Practical ConsiderationIt is the taxpayer's responsibility to show us why it would be in our best interest to accept your proposal. When we consider your offer we ask the following questions: (1) Could we collectthe amount owed through liquidation of your assets or through an installment agreement? (2) Could we collect more from your assets and future income than is offered? (3) Would collection in the future result in more payment than is offered? (4) Would the public believe that the acceptance of your offer was a reasonable action? The fact that you have no assets or income at this time from which the State could collect the liability does not mean that the State should simply accept any offer because it is all we can collect now. It would generally be better for us to reject a nominal amount and wait to see what collection potential would arise during the remainder of our ten-year collection period.Additional ConsiderationWe believe that you benefit if we accept your offer because you can manage your finances without the burden of a tax liability. Therefore, we may require either: (1) A written agreementthat will require you to pay a percentage of future earnings; and/or (2) A written agreement to give up present or future tax refunds.Tax Compliance(1) We will not accept your offer if you have not filed all tax returns. (2) We will also require that the taxpayer comply with all future filing and payment requirements. The terms of the offer require future compliance for a period of five (5) years.Collection and PaymentsThe submission of an offer does not automatically suspend collection. If it appears the offer was filed to delay collection of the tax or that delay would hinder our ability to collect the tax,we will continue collection efforts. If you have agreed to make installment payments before you made the offer, those payments should continue.Special Instructions for Offer in Compromise Form(1) The Offer in Compromise form must be used to submit an offer. The form must be filed with the Compliance Division. If you have been working with a specific employee on your case,file the offer with that employee.(2) Your full name, address and taxpayer identification number(s) must be entered at the top of the Offer form. If this is a joint liability (husband and wife) and both wish to make an offer,both names must be shown. If you are individually liable for a liability and are also jointly liable for another liability, and only one person is submitting an offer, only one offer must be submitted. If you are individually liable for one liability and jointly liable for another and both joint parties are submitting an offer, two (2) Offers must be submitted, one (1) for separate liabilityand one (1) for the joint liability.(3) You must list all liabilities to be compromised in item (1). The types of tax, the periods, and the amounts must be specifically identified.(4) The total amount you offer must be entered in item (2). The amount must not include any amount which has already been paid or collected on the liability. The amount submitted withthe offer is entered in 2(a); the amount is to be paid on acceptance of the offer is entered in (2) (b) and any amount to be paid in installments, is entered in 2(c) in item 2. You should pay the amount of the offer in the shortest time possible, or we will reject your offer. Under no circumstances should the payment extend beyond two (2) years. Interest is due at the legal rate from the date of acceptance to the date of full payment.(5) You must state in detail in item (9) why the State should accept your offer. Attach additional pages as necessary. Describes in detail why you believe the State cannot collect more than offered from your assets and your present and future income.(6) The taxpayer(s) must sign and date the offer. If a person other than the taxpayer signs the offer, a power of attorney must be submitted with the offer.(7) Form 433-A, Collection Information Statement for Individuals and/or Form 433-B Collection Information Statement for Business must accompany the Offer. A sole proprietorship liability requires 433-A for the individual and 433-B for the business. A business tax liability requires a 433-B for the business, and 433-A for the sole proprietor, partner(s) or responsible officer(s) seeking a compromise of personal liability. All blocks on forms 433-A and 433-B must be completed. When you submit Form 433-A and/or 433-B, documentation should be submitted to verify values of assets, encumbrances and income and expense information listed on the collection information statement.What You Are Agreeing ToPlease read the Offer in Compromise Form carefully so that you understand that you are agreeing to: (1) The period for collection is suspended while the offer is pending, while any amount offered remains unpaid, and for one (1) year after all terms and conditions of the offer are fulfilled.(2) You won't contest or appeal the amount of the liability if your offer is accepted.(3) You give up of overpayments (refunds) for all tax periods through the year the offer is accepted, and until the amount of the offer is paid in full.(4) The collection of the entire tax liability, if you do not comply with all the terms of the offer, i.e. payment, future compliance.
New York State Offer in Compromise Program

Offer in Compromise Program

The New York State Offer in Compromise Program allows qualifying, financially distressed taxpayers the opportunity to putoverwhelming tax liabilities behind them by paying a reasonableamount in compromise.

The Tax Department will not necessarily,however, accept every offer in compromise (also referred to asoffer throughout this publication).The Commissioner of Taxation and Finance is empowered tocompromise taxes for qualifying taxpayers under Tax Lawsections 171.15th, for liabilities considered fixed and final;171.18th-a, for liabilities still subject to administrative review;and 171.18th-d, for certain joint personal income tax liabilities.Under section 171.15th, if the tax portion of the liability is morethan $100,000 (not including penalties and interest),compromises must be approved by a New York State SupremeCourt justice. Other standards set forth in the Tax Law, andrequirements in Parts 5000 and 5005 of the New York StateOfficial Compilation of Codes, Rules, and Regulations(NYCRR), are described below.In most cases, to be eligible for an offer in compromise,taxpayers must be insolvent (liabilities exceed assets), and theTax Department’s ability to collect more than the amount offeredmust be in doubt. In addition, taxpayers making an offer musthave filed all applicable New York State tax returns.The taxpayer should make a reasonable monetary offer basedon his or her financial situation. If an offer is withdrawn orrejected, any money sent in by the taxpayer with the offer incompromise will be promptly refunded without interest or, atthe taxpayer’s request, applied to the tax liability. In addition,collection activities may continue while an offer is under review.InsolvencyA taxpayer is considered insolvent when the taxpayer’sliabilities, including tax liabilities, exceed the fair market value ofhis or her assets.The taxpayer must conclusively demonstratethis insolvency.

Collectibility

The department, after an evaluation, determines an amount thatit realistically expects could be collected within a reasonableperiod of time from the taxpayer’s assets.The amountacceptable in compromise cannot be less than what could beexpected to be collected from the taxpayer over that periodthrough legal proceedings, such as levies, income executions,and seizures.Offer in compromise formsForm DTF-4, Offer in Compromise, or DTF-4.1, Offer inCompromise – Fully Determined Liability, must be filed torequest an offer in compromise.A completed Form DTF-5, Statement of Financial Condition andOther Information, must be submitted with the last three yearsof federal income tax returns, a credit report less than 30 daysold, the last 12 months of bank statements, and Form DTF-4 orDTF-4.1 to:NYS TAX DEPARTMENTOIC PROGRAMPO BOX 5100ALBANY NY 12205-0100Offers in compromise when the liabilities areconsidered fixed and final (Tax Law section 171.15th)Offers under this subdivision apply to tax liabilities for whichfurther administrative or judicial review is not available.Therefore, the primary consideration is collectibility. An offerwould be considered if the taxpayer has been discharged frombankruptcy within the last year or is shown to be insolvent.Theamount accepted cannot be less than what could realistically beexpected to be collected from the taxpayer through legalproceedings.Offers in compromise when the liabilities are stillsubject to administrative review (Tax Lawsection 171.18th-a)Offers under this subdivision apply to tax liabilities that are stillsubject to administrative review, and are not fixed and final. Theoffer may be based on doubt as to the taxpayer’s liability for thetaxes due, or doubt as to the taxpayer’s ability to pay the taxesdue, in full, over a reasonable period.Trust tax liabilitiesFor trust tax liabilities (e.g., withholding tax, sales tax), anamount less than the tax amount owed, exclusive of penaltiesand interest, will not normally be accepted. However, uponevaluation of the facts of the specific case, the department maydetermine that a lesser amount is acceptable if it is in the bestinterest of all parties concerned.The department considerswhether the business is still in operation, and whether the trusttaxes were actually collected.Joint income tax liabilitiesFor joint income tax liabilities, the taxpayers may file an offerjointly on one Form DTF-4 or DTF-4.1, or may each file aseparate offer. If only one taxpayer’s offer is accepted and paid,the remaining taxpayer continues to be liable for the outstandingbalance of the liability. An accepted offer forgives furtherpayment only for the taxpayer whose offer was accepted.Responsible personA taxpayer assessed as a responsible person liable for thecollection and payment of trust taxes for a business maycompromise his or her trust tax liability separately from thebusiness. Any or all of the responsible persons may apply for anindividual offer in compromise.The department will make aseparate determination on each offer, based on thecircumstances of each responsible person who applies. If theoffer is accepted, the payments made toward the offer willreduce the business’s liability by that same amount. While thetaxpayer’s responsible person assessments are abated upon fullpayment of the accepted offer, the business’s assessments andthe assessments of any other responsible person will remainopen and collectible, less all payments made under the offer.If a business applies for an offer in compromise and theresponsible persons do not apply individually, acceptance of the
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Internet access:www.nystax.govAccess our Answer Center for answers tofrequently-asked questions; check your refund status;check your estimated tax account; download forms,publications; get tax updates and other information.Fax-on-demand forms: Forms areavailable 24 hours a day,7 days a week.1 800 748-3676Telephone assistance is available from 8:00 A.M.to 5:00 P.M.(eastern time), Monday through Friday.Refund status:1 800 443-3200(Automated service for refund status is available24 hours a day, 7 days a week.)To order forms and publications:1 800 462-8100Personal Income Tax Information Center:1 800 225-5829From areas outside the U.S. and outside Canada:(518) 485-6800Hearing and speech impaired: (telecommunications device for the deaf(TDD) callers only): 1 800 634-2110 (8:00 A.M. to 5:00 P.M., eastern time).Persons with disabilities: In compliance with theAmericans with Disabilities Act, we will ensure that ourlobbies, offices, meeting rooms, and other facilities areaccessible to persons with disabilities. If you havequestions about special accommodations for persons with disabilities,please call 1 800 225-5829.Need help?business’s offer would have no effect on a responsible person’sliability other than reducing his or her individual liability by anamount equal to that paid by the business.Offers in compromise when the liabilities concerncertain joint personal income tax liabilities(Tax Law section 171.18th-d)To qualify for an offer under this subdivision, a taxpayer musthave a liability on a previously filed joint income tax return and,at the time of the offer, the taxpayer and his or her spouse mustbe separated under a decree of divorce or separatemaintenance or a written separation agreement, or a judicialdecree of separation, or living apart and not considered marriedunder section 7703(b) of the Internal Revenue Code. It mustalso be determined that the collection of the spouse’s share ofthe liability from the taxpayer cannot be accomplished within areasonable period without imposing substantial economichardship on the taxpayer.Offer in compromise withdrawalThe taxpayer or the taxpayer’s representative may withdraw anoffer before an official review has been completed and before afinal decision has been made on the offer. In some cases, suchas when a taxpayer fails to supply requested information, thedepartment considers the offer to be withdrawn as incompleteand advises the taxpayer in writing of the decision.Offer in compromise acceptanceUpon acceptance of an offer, written notification will beprovided to the taxpayer or the taxpayer’s designatedrepresentative specifying the terms and conditions. Under theterms of the accepted offer, the taxpayer agrees to remainfully compliant with all Tax Law requirements, including filingreturns and paying tax when required for the next five years.Any state tax refunds payable to the taxpayer for periodsprior to and including the calendar year in which the offer isaccepted will be applied to the original outstanding liability.Any excess will be refunded to the taxpayer.Offer in compromise rejectionWritten notification is provided if an offer is rejected.Examples of reasons for rejection include, but are not limitedto:• The taxpayer does not meet the statutory requirements setforth in the New York State Tax Law.• The taxpayer submits false or misleading information.• The taxpayer submits a frivolous offer.• The taxpayer fails to make full financial disclosure.• There is evidence that assets were transferred for less thanthe fair market value.• The taxpayer shows a lack of a good faith effort to repaythe liability.• The tax liability sought to be compromised directly relatesto a crime for which the taxpayer has pleaded or beenfound guilty.Publication 220 (6/04) (back)Depending on the circumstances, the department mayreconsider a rejected offer if there is a material change in thetaxpayer’s circumstances, if the department misinterpretedinformation contained in the original offer, or if the taxpayeroffers a substantial increase in the amount that was originallyoffered.Defaulted offersIf a taxpayer fails to abide by all of the terms and conditions ofthe offer in compromise, the offer is in default. Upon default andrevocation, the original liability is reinstated, including allappropriate penalty and interest, minus any payments receivedon the offer.Offers made to the Internal Revenue ServiceThe New York State Offer in Compromise Program is distinctfrom similar programs offered by the federal government. Forexample, the guidelines for the acceptance of offers differ.However, the department will accept a copy of the federal offerin compromise collection information statement as part of theapplication process.If you have questions about the NewYork State Offer inCompromise Program, please call (518) 457-9086 from8:00 a.m. to 4:25 p.m. (eastern time), Monday through Friday.For forms and other information, see Need help? below.
Utah offer in compromise

Publication 22Revised 1/04General Information

An Offer in Compromise is the settlement of a tax liability for less than full payment when it is determined that no other means is available to the Tax Commission to collect the full amount. The taxpayer has the burden of proof to establish the grounds of the settlement, and must provide sufficient documentation to prove the case.It is the policy of the Utah State Tax Commission to imple-ment the Offer in Compromise procedure in a fair and expe-ditious manner.The taxpayer does not have a legal right to have a tax liability settled through an Offer in Compromise.Who Qualifies?The following provides helpful information about the Offer in Compromise procedure of the Utah State Tax Commission.When an analysis of taxpayer’s assets, liabilities, income and expenses shows that a liability cannot realistically be paid in full in the foreseeable future, an offer in compromise may be considered.An Offer in Compromise must cover the liability for tax, penalty and interest for the taxpayer’s entire account. If the offer is accepted by the Tax Commission, the liability for the period(s) covered by the offer are conclusively and finally settled (with the exception of future audits).When an offer is submitted and there is no reason to believethat collection of the tax liability sought to be compromised would be jeopardized, collection activity is normally suspend-ed. However, the submission of an offer is not an automatic stay, particularly if the proposal is frivolous or appears to be a delaying tactic.If an offer is accepted, the taxpayer will be notified in writing. Allaction prior to that point constitutes a recommendation only.Offer in Compromise ProceduresA request for an Offer in Compromise must contain the fol-lowing documentation before it will be considered:• A signed statement from the taxpayer requesting the offer, detailing the terms of the offer, and providing the grounds for its acceptance.• A current financial statement from the taxpayer.• Written evidence to support the offer. Oral statements are not considered tangible evidence on which to base a deci-sion.Once a complete offer in compromise proposal has been received, the Tax Commission will:• Review the reason for the request and the documentation provided.• Determine if more documentation is needed to consider the request. If additional information is required, the tax-payer will be asked to provide the necessary documenta-tion.• Conduct an investigation to determine the appropriate decision.Capacity to PayAn offer must reflect the taxpayer’s maximum capacity to pay.The following circumstances are considered in making that determination:• Liquidation of assets and payments from present and futureincome will not result in full payment of the tax liability.• A non-liable spouse has property which he or she may be willing to utilize in order to secure a compromise of the spouse’s tax debt.• A non-liable third party may be interested in purchasing the taxpayer’s business assets.• The taxpayer is selling an interest in assets, against which collection action cannot be taken.
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page 222• Amounts that may be collectable through the successor liability or personal assessments programs.• Collateral agreements may be secured as additional con-sideration for acceptance of the offer.Collateral AgreementsIf a collateral agreement is needed for an offer to be ap-proved, the taxpayer will be notified. Collateral agreements may provide for:• Payments from future income.• Waiver of net operating loss or unused investment credit carrybacks or carryovers.• Waiver of bad debt loss or other deductions.Approved OffersIf the offer is approved, the taxpayer will be notified in writing.The taxpayer will be given an appropriate amount of time inwhich to submit the amount of the offer to the Tax Commission.If the offer is approved, the taxpayer may be required to waive certain refunds or credits. These refunds or credits cover periods that end before, within, or as of the end of the calendar year in which the offer is accepted. Offsets are lim-ited to the difference between the tax liability and the amount of the offer accepted and paid.Denied OffersAn offer will be denied if any of the following circumstances are found:• There is no question as to the collectability. (The taxpayer can pay the account in full, via assets, payment agree-ment, etc.)• The offer is determined to be frivolous.• The offer was filed merely to delay collection action.• The taxpayer has submitted an amended offer which is not significantly different from a previously denied offer.The taxpayer will be notified, in writing, that the offer has been denied. The taxpayer may submit a new or amended offer. The new or amended offer will be considered if it re-solves all issues which caused the prior offer to be denied.Amending an OfferAn amended offer changes the amount and/or terms of the Offer in Compromise. Taxpayers may amend an offer by:• Making and initialing a change on the original offer.• Submitting a separate statement outlining the change.• Submitting a new offer.If the taxpayer amends an offer by submitting a separate statement, the statement should be signed, dated, and prop-erly referenced to the original offer.
MAINE OFFER IN COMPROMISE

Generally.

The State Tax Assessor has the authority under 36 MRSA §143 to settle (compromise) any tax liability owed to the State of Maine. While anyone with an existing tax debt may submit an offer in compromise of that debt, the Assessor’s authority is wholly discretionary; no taxpayer has a right to settle a state tax debt. A settlement must be grounded upon doubt as to liability, doubt as to collectibility or both. Please note the following:

“Tax liability” means all of the tax, interest, and penalties owed by the taxpayer. In some cases, it may also include certain fees and costs.
“Doubt as to liability” means there is reasonable doubt that you legally owe all of the tax liability that has been assessed, based upon the facts and circumstances of the specific case.

“Doubt as to collectibility” means there is doubt that you are able to pay the debt in the foreseeable future; or the risk that the debt will become uncollectible is sufficient to warrant acceptance of less than the full amount owed.

Requirements for submitting an offer.
The following requirements must be met before your offer will receive consideration:

You must generally have filed all tax returns due, or show why the returns do not need to be filed. This includes both individual income tax returns and all business-related tax returns for which you are responsible.

A settlement offer based wholly or partly on doubt as to liability requires a detailed explanation and should be accompanied by documents supporting your case. Remember that the essence of doubt as to liability is that under the relevant law, there is at least a reasonable argument that you don’t owe either all or part of the assessed tax.

An offer based wholly or partly on doubt as to collectibility requires a complete and accurate personal financial statement. If you own or control a business, you may be required to submit financial statements for your business as well. Your statements must identify all of your income and all assets and liabilities. A financial statement later determined to be false in any material way may result in charges of perjury and may cause the agreement to be set aside and the debt reinstated.

The State Tax Assessor will never settle a tax liability if the assessor finds that the taxpayer has acted with intent to defraud. Frivolous offers and offers submitted to delay collection of tax will be rejected immediately.


Factors considered.
The State Tax Assessor considers many factors in determining whether or not to accept an offer in compromise. Each case is evaluated on its own merits; Maine Revenue Services (MRS) does not employ a formula in considering offers. In one case a payment offer of 20% of the tax debt may be deemed acceptable, while in another payment of 50% may be considered in the State’s best interests, and in yet a third, MRS may not settle for less than payment of all tax principal, together with some or all accrued interest – or may decide not to compromise the debt at all. When determining whether to accept a compromise offer based wholly or partly on doubt as to liability, the following factors will be considered:


The likelihood of the State prevailing on the issue were it to be litigated;
Any ambiguity in the applicable laws or rules, as demonstrated by both the laws and rules themselves and the common interpretation and application of the same among tax practitioners and/or similarly-situated taxpayers; and
Whether tax was collected but not remitted to the State by the taxpayer.
In addition, the following factors are important:

Repeated non-compliance or attempts to avoid paying a tax obligation over time;
Evidence that the taxpayer has the ability to pay the tax in full or to pay significantly more than the amount offered, either by liquidating assets, including pension funds, or by means of a payment agreement over a reasonable period of time;
The potential for an increase in the taxpayer’s earnings, the value of their assets or a decrease in expenses or the value of liabilities, particularly when collection activity has been pursued for only a limited period of time;
The omission of information about assets or income on present or previously-submitted financial statements, or a failure to respond to requests to clarify or document information on the financial statement;
Prior attempts by MRS to collect the tax. Generally, the longer and more thorough the history of collection activity by MRS, the more likely the collectibility of the account will be considered doubtful.

Where to send the offer:
Mail the offer to the address noted below. You may attach a check payable to the Treasurer, State of Maine, together with any supporting documents.


Maine Revenue Services
Compliance Division
PO Box 9113
Augusta, ME 04332-9113

If you know the name of the examiner or agent handling your case, please include his/her name in the lower left hand corner of the envelope.


Collection actions.
Merely submitting an offer will not stop ongoing collection operations. If your offer is based on doubt as to liability, you may request that collection operations be suspended while the offer is being considered, but the Assessor is not required to honor your request.

Acceptance or rejection. MRS may accept your offer as presented, may make a counteroffer of an acceptable amount or may reject your offer without explanation. A decision to reject your offer is not subject to administrative or judicial review under 36 MRSA §151. Generally, you will be notified of the decision by mail.

If an agreement is reached, MRS will prepare a written agreement for your signature. When the agreement has been signed and returned, it will be authenticated on behalf of the State Tax Assessor and a copy provided for your permanent records. Keep the copy in a safe place along with evidence of payment.


Interim billing.
You will remain responsible for the entire tax liability until all terms and conditions of the agreement have been met. MRS will not alter its records and normal billing will continue during the time your offer is under consideration and completion of the terms and conditions is pending.

Form and amount of offer. The offer should be submitted in the form of a letter detailing what you are offering and why you believe that acceptance of the offer is in the best interest of the State of Maine . Include the following in your letter:

The exact amount offered and any proposed terms or conditions associated with your offer.
If your offer is based on doubt as to liability, include a detailed explanation of why doubt exists and attach any available documents that show that you do not owe the amount assessed.
If your offer is based partly or wholly on doubt as to collectibility, attach complete and accurate financial statements. Personal financial statements include the requirements that you attach a copy of your most recent federal income tax return and, unless you are self-employed, copies of two recent pay vouchers.
Upon request, MRS will provide you with a detailed breakdown showing how much you owe by account and period. Further, a list of unfiled returns will be provided for all known accounts.


Payment.
The preferred method of payment for any offer is a single payment in cash, certified or bank check or money order within 30 days of reaching an agreement to compromise a tax liability. When necessary, the terms of your offer may include installment payments over a specific period of time. Your ability to pay the debt will govern whether installment payments are acceptable.

Refunds, state or federal, will be offset against state tax debts. A refund received or setoff before completion of the terms and conditions of the agreement will not be counted towards the agreement amount unless specifically included in the agreement. Generally, to be included in the agreement, you must provide evidence of the amount of any expected refund.
Installment payments received prior to submission of the offer or while the offer is being considered may not be counted against the agreement amount unless specifically included in the agreement. Similarly, payments received from levies issued prior to receipt of your offer and received after the agreement has been reached will not be applied against the agreement amount unless specifically included in the agreement. MRS will not collect more than the full amount of tax, interest and penalty that is owed.

Responsible individuals and business successors.
In some cases an individual taxpayer may be assessed as a “responsible individual” for the tax debts of a corporation, partnership or other business entity. A person who has purchased a business that owes state withholding and sales taxes may also be assessed for some or all of those taxes if the buyer has failed to set aside money from the purchase price. In some cases, more than one person will be held responsible for the same debts and collection steps may be taken against them jointly and severally. Your offer will normally be construed to relate only to your own individual responsibility for the tax debt. If an agreement is reached in which an amount of the “responsible individual” debt remains after the terms and conditions have been completed, MRS may continue collection action against the other responsible individuals in order to recover the remainder of the debt. If you intend that your offer satisfy the debt for all responsible individuals, you must clearly state that as a condition of your offer. If acceptable to the State, this condition will be included in the agreement prepared for your signature.

Liens. Liens filed in registries of deeds or with the Maine Secretary of State will not be released until all conditions of the agreement have been met. If you need the liens released immediately upon payment, make the payment by bank check and request copies of the lien releases be sent to you.


Bankruptcy.
If you are the debtor in a Chapter 7 bankruptcy proceeding, MRS generally will not consider an offer in compromise until you have received a discharge from the Bankruptcy Court. If you are in a Chapter 13 or Chapter 11 case and want to submit an offer in compromise, the matter will be referred to the MRS General Counsel.


Conclusively settled.
Upon acceptance by the State Tax Assessor, your liability will be conclusively settled and neither you nor MRS may reopen the case unless there has been falsification or concealment of assets on your part or there has been a mutual mistake of a material fact. The State Tax Assessor has discretionary authority to reopen the case if justice requires.


Default.
If you default on the agreement, you will be held responsible for the full amount of your tax liability including any additional interest or penalty accruals. Upon default, any payments made will be applied against your original tax liability and enforced collection measures may be used, without further warning, to collect the balance of the debt.


Hypothetical Examples.
Example 1: John has a history of repeatedly failing to file his tax returns, being audited and paying up only after the audit. This time, John submits an offer in compromise instead of paying the bill in full. The offer may be rejected if John’s compliance history indicates he will continue his historical pattern.
Example 2: Jane has rebuffed all collection efforts until a notice of intent to revoke her seller’s certificate is delivered to her business. Jane files an offer in compromise proposing to pay part of the amount owed two years after acceptance in full settlement of the liability. This offer may be rejected as another attempt to avoid payment of the taxes due.
Example 3: Mike is the owner and manager of Mike’s Pub. Upon being assessed by the state as a responsible person for the unpaid sales and withholding taxes, he transfers title to his house to his wife for nominal consideration; he doesn’t appeal the assessment but ultimately submits an offer in compromise, and doesn’t list the house as an asset. This offer may be rejected based on the apparent attempt to place assets beyond the State’s reach.
Example 4: Paul has a retirement account worth $1,000,000 which is protected from his creditors but from which he is receiving monthly payments. He has the ability to withdraw funds if he chooses to pay his $50,000 tax bill. He proposes to make an offer in compromise using funds received on a monthly basis from his retirement plan although he could pay in full by making a withdrawal. This offer is likely to be rejected based on his ability to pay in full.
Example 5: Helen has minimal assets but has a job that currently pays her $6,000 per month with the potential for her to earn more. Her normal living expenses are $3,500 although she is also paying $2,500 per month for the remainder of the year to settle a Federal tax obligation. Helen’s offer in compromise on her $50,000 tax bill is likely to be rejected, as she could make a payment agreement that would allow her to pay in full fairly quickly once her IRS obligation is met.
Example 6: Judy was the general manager and responsible officer for XYZ Inc., which has just been forced into Chapter 7 Bankruptcy. Judy is personally responsible for some unpaid sales and withholding taxes. She is also liable, as a guarantor, for most of XYZ’s bank debt and the bank has a lien on her home to secure this. An offer in compromise submitted by Judy at this point may be rejected as premature because of the difficulty in evaluating what her earnings will be over the next several years and the difficulty in evaluating the value of her assets until the corporate bankruptcy is completed.
Example 7: Heather submitted an offer in compromise failing to disclose her ownership of an expensive sports car. MRS discovered this during an investigation of her financial status and her offer was rejected. Heather files a new, increased, offer with a new financial statement that does list the automobile. This new offer may be rejected because of the prior deliberate omission; the State Tax Assessor must be able to rely on the information provided.
Example 8: James submitted a financial statement, which listed monthly expenses of $3,700 and monthly income of $1,900 from his business and $1,800 in gifts from friends and relatives. When asked to document the monthly gifts, James failed to do so other than to reiterate that every month he did receive $1,800 from unnamed sources. James’s offer in compromise may be rejected due to unresolved doubts about the accuracy of the information he has submitted.
Example 9: Sarah files for Chapter 7 and submits an offer in compromise. The offer will be rejected. Sarah may submit a new offer in compromise after the bankruptcy is completed. Sarah’s ability to pay the taxes may be increased by the discharge of her other liabilities.
Example 10: ABC Sports Cards has been collecting but not paying over the sales tax for 2 years. They finally file delinquent returns along with an offer in compromise proposing to pay only 25% of the amount collected. Due to the nature of the tax, this offer may be rejected as not being in the best interest of the State of Maine.
Use the following address for Rapid Delivery: For Express Mail, Courier and Package Delivery Services:


Maine Revenue Services
Compliance Division (Cummings)
26 Edison Drive
Augusta , ME 04330

CONTACT:
TELEPHONE: (207) 624-9595
FAX:(207) 287-6627
Offer in Compromise
The State of Ohio has established a formal Offer in Compromise Program with respect to claims certified by various state agencies, including the State of Ohio, Department of Taxation, to the Office of the Attorney General for collection. Pursuant to Ohio Revised Code §131.02 and 5703.06, the Offer in Compromise Program allows the Attorney General with the consent of the state agency to compromise a claim for less than the tax, premium or principal liability, without reference to penalties or interest, due to (1) economic hardship, (2) doubt as to liability, or (3) in limited instances, a substantial probability that the claim, if collected, would be subject to refund under the respective agencies' statutes, rules or regulations. (The State of Ohio, Department of Taxation could not previously compromise a claim for less than the tax amount.) To the extent an individual or entity (including innocent spouse) seeks only to waive all or a portion of penalty or interest, such request may be processed through the Office of the Attorney General.
Delaware Offer in Compromise

OFFER IN COMPROMISE
Submitting An Offer In Compromise -

In some accounts, the amount of accruing penalties and interest is so large that the monthly payments may never pay off the tax. An Offer in Compromise may be a practical way for you to resolve your outstanding tax bill. Under certain conditions the DE DOR will settle unpaid accounts for less than the full amount of the balance due. This applies to all tax types arising under the DE DOR administration.

How To File An Offer In Compromise

An Offer in Compromise must be made in writing, addressed to the attention of your account assignee, Delaware Division of Revenue, 820 N. French Street, Wilmington, Delaware 19801, requesting a reduction in the penalty and interest on your account.

A collection information statement must be completed and returned. This can be mailed to you or obtained from The Delaware Division of Revenue web site.

All past tax returns must be filed with DE DOR before an Offer would be considered.

Grounds For Filing An Offer In Compromise - You can submit a letter for an Offer in Compromise if it is made on one or both of the following grounds:

(1) Doubt as to the liability for the amount owed;
or
(2) Doubt as to your ability to fully pay the amount owed. (If this is due to health reasons, documentation from your physician should also be submitted.)
Upon receipt of your letter, your account is forwarded for calculation of a compromise amount. Please allow 2 to 3 months. If you have previously compromised with the Internal Revenue Service, include a copy of that compromise acceptance and documentation of the total due to the IRS before the compromise. This will make a difference in the method used to calculate the amount of the compromise.

Due to the fact that compromises are given under the assumption that the debt can not be paid in full, if you live in the State of Delaware, or a State that Delaware has an agreement with to intercept refunds, compromises are not calculated January 1 through April 30th. If your refund will pay the balance due, then it is assumed you have the ability to pay. Once you file your current year return and provide a copy of your current year federal return, a compromise will be considered.

Agreement of an Offer In Compromise

Upon receipt of the offer in compromise agreement, you are required to sign and return the agreement to make the compromise valid. When signing this agreement, you agree to file, timely, and pay all future tax returns for the next 5 years.

If you do not file your taxes timely, any amount abated from your account due to the compromise will be added back and collected in full. If a tax lien had been satisfied, it will be stricken in the court and remain valid on your credit record until the amount is paid in full.

If you file timely but are not able to pay the balance in full, you must enter in to a payment plan to keep your compromise valid. Any default in the payment plan may make your compromise null and void. No compromise will be given on any future tax liabilities.

Note: Submission of an Offer in Compromise does not automatically stop collection action on your account. If there is any indication that you filed the offer simply to delay collection of the tax or that the delay would interfere with collecting tax, we will immediately continue our collection efforts.
What is an Offer in Compromise

What You Must Know Before You File an Offer in Compromise

Do You Qualify for an Offer in Compromise

How to File an Offer in Compromise

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

Taxpayers should beware of promoters’ claims that tax debts can be settled through the offer in compromise program for "pennies on the dollar".

Three Types of OICs

The IRS may accept an offer in compromise based on three grounds:

1. Doubt as to Collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayer’s monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.

2. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.

3. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Example: Mr. & Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct.

OIC Payment Options
In general, a taxpayer must submit a $150 application fee and initial payment along with the Form 656, Offer in Compromise. Taxpayers may chose to pay their offer in compromise in one of three payment options:

1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance. A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656.

If the offer will be paid in 5 or fewer installments in 5 months or less, use the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less.

If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, use the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less.

If the offer will be paid in 5 or fewer installments in more than 24 months, use the realizable value of assets plus the amount that could be collected over the time remaining on the statute.

2. Short Term Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation.

The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less.

3. Deferred Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the investigation.

The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection.

The IRS is not bound by either the offer amount or the terms proposed by the taxpayer. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be recommended for acceptance.

An offer in compromise payment options comparison table is available for taxpayers to compare the requirements associated with each payment option.

Payments and Application Fees
When filing an offer in compromise, two separate remittance documents should be sent, one for the application fee and the other for the required offer payment. All payments should be made by check or money order made payable to the United States Treasury. Practitioners who file multiple OICs at the same time should not combine application fees for multiple clients.

The Form 656-PPV, Offer in Compromise Payment Voucher, included in the Form 656, should be completed and attached to any periodic payment(s) that becomes due. Failure to submit any required periodic payments, after the initial payment has been submitted, will result in the offer being declared withdrawn. For offers originally sent to Holtsville, NY, send payments to: P.O. Box 9011, Holtsville, NY 11742. For offers originally sent to Memphis, TN, send payments to: AMC Stop 880, P.O. Box 30834, Memphis, TN 38130-0634.

The OIC application fee reduces the assessed tax or other amounts due. The application fee will be returned if the OIC is deemed not to be processable. Unless the offer in compromise has been submitted under doubt as to liability or a completed Form 656-A and Offer in Compromise Application Fee and Payment Worksheet is included with the Form 656, the $150 application fee must be included with the offer or the IRS will return the offer.
All Taxpayers Do Not Qualify for an Offer in Compromise

Absent special circumstances, if you have the ability to fully pay your tax liability in a lump sum or via an installment agreement, an offer in compromise will not be accepted.

Offer in Compromise Payments are Non-refundable

The IRS considers the 20 percent payment for a lump sum offer and any periodic payments as “payments on tax” and are not refundable, regardless of whether the offer is declared not-processable or is later returned, withdrawn, rejected or terminated by the IRS.

Federal Tax Liens are Not Released

If there is a Notice of Federal Tax Lien on record prior to acceptance of the offer, the lien is not released until the OIC terms are satisfied or until the liability is paid, whichever comes first. A Notice of Federal Tax Lien may be filed during the course of the OIC investigation.

Payments May be Designated

You may designate in writing how the IRS should apply payments made with the filing of the offer and while an offer is under investigation. Without a written designation, payments will be applied to the tax liability and in the government’s best interest. The $150 application fee cannot be designated, but is applied to the tax liability and in the government’s best interest.

Refunds

The IRS will keep any refund, including interest due, because of an overpayment of any tax or other liability, for tax periods extending through the calendar year the IRS accepts the OIC.

Exception: Offers submitted under the basis of doubt as to liability.

Levies

The IRS will keep all payments and credits made, received or applied to the total original tax liability before the OIC was submitted. The IRS may also keep any proceeds from a levy that was served prior to the submission of an OIC, but which were not received at the time the OIC was submitted.

Statutory Period for Collection Suspended

The statutory period for collection is suspended during the period that the OIC is under consideration (pending) and is further suspended if the OIC is rejected by the IRS and you appeal the rejection.

Five Year Compliance

If your offer is accepted, you must timely file all tax returns and timely pay all tax for five years or until the offered amount is paid in full, whichever period is longer. Failure to adhere to these terms will result in default of the offer and the IRS may then collect the amounts originally owed plus penalties and interest.

OIC Payment and Application Fee Exceptions

If you qualify for a low-income exception waiver or you submit a doubt as to liability offer you are exempt from the $150 application fee and any OIC payments due upon submission of the OIC or during the course of the investigation. The low income waiver does not apply to businesses.

Appeal

If your OIC is rejected, you will have the opportunity to file an appeal which will be heard by the IRS Office of Appeals. There are no appeal rights associated with offers that are returned, withdrawn or terminated.

Approved Installment Agreement

If you have an approved installment agreement and submit a periodic payment offer, you are not required to continue to make the installment agreement payments while the offer is being investigated. You will, however, be required to make the OIC periodic payments as they become due.

Mandatory Acceptance

Per IRC 7122(f), the IRS will deem an offer “accepted” if it is not withdrawn, returned or rejected within 24 months of the IRS receipt date. If a liability included in the offer amount is disputed in any judicial proceeding, that time period is omitted from calculating the 24-month time frame.