In the state of Arizona, if you owe state taxes and the taxes are determined to be uncollectible or the state determines the cost of collection exceeds the amount of the liability owed, Offer in Compromise may be an option to settle your state tax liability.
The Arizona state Offer in Comprise program for settling tax liability is not unlike the program offered by the Internal Revenue Service to pay federal tax debt. Offer in Compromise will allow the Arizona taxpayer to pay a reduced amount and eliminate their tax liability, but also increases the likelihood the taxpayer will stay current on future state tax payments.
Offer in Compromises will only be accepted if you meet the following criterion:
- All income tax returns for the previous three years must be completed.
- For businesses, all licenses and tax filings must be current.
Completing an Offer In Compromise
One of the first steps in Offer in Compromise is to discuss your tax liability and financial situation with an Arizona Tax Attorney. Tax Attorneys are familiar with all the tax settlement options and can discuss the pros and cons of each. To complete an Offer in Compromise for state tax liability you will need to complete the following tasks:
- Review the information in the Arizona Offer in Compromise booklet and make sure you understand all of the financial forms. An Arizona Tax Lawyer will be able to answer your questions about these forms.
- Complete the Statement of Offer form. Verify all the information is complete. Failure to complete the forms accurately may delay processing. A Revenue Officer and the Arizona Department of Revenue can provide the balance of the Arizona state taxes you owe. Their phone number is: 602-716-7787
- Determine the amount that you can pay. Forms will not be accepted with out an offer. Offers should reflect the maximum capacity you have to pay. It may be necessary to contact an Arizona Tax Attorney who can provide information about reasonable offers given your current financial situation. Information about how you will pay the tax debt and the source of your funds should be included on your Statement of Offer form. In addition you must list all the federal tax liability you owe to the Internal Revenue Service, complete a financial statement and have all of the responsible parties sign the Statement of Offer.
- Deliver your Offer in Compromise forms- Forms can be hand delivered to any location of the Arizona Office of Revenue Services, delivered to a field representative or mailed to the Arizona Office of Revenue Services.
Arizona Department of Revenue
PO Box 29070
Phoenix, AZ 85038-9070
The Offer in Compromise will only apply to the current tax liability at the time you complete and submit the form. If the Arizona Department of Revenue may determine you owe additional taxes through audits or amended returns. Failure to pay additional state taxes could result in aggressive collection tactics by the department.
You are responsible for the total amount of Arizona state tax liability until the Arizona Department of Revenue accepts the Offer in Compromise in writing, and you have met the conditions of the Offer in Compromise offer. Failure to meet your obligations under the accepted Offer in Compromise will allow the Arizona Department of Revenue to void the Offer in Compromise and continue their collection efforts for the state tax liability with accrued interest.
Information Required for Offer in Compromise
- Collection of Statement Form must be completed
- Statement of Offer form must be completed and signed
- Three consecutive pay stubs for all parties involved in the Offer in Compromise
- Bank Statements for the last 90 days
- All medical bills (not covered by insurance)
- Copy of your federal tax return and copies of any Offer in Compromise agreements with the Internal Revenue Service (if applicable)
- Information for any federal disability benefits or income
- Current and prior year income and commission statements
- Credit card bills for the last three months
- All student loan agreements
- Copy of rental or lease agreements for all properties your own
- Information for all retirement accounts including: 401K, pension, dividends, trust information
- Information for all accounts receivables
- Current medical diagnosis if relevant to your Offer in Compromise
Processing an Arizona state Offer in Compromise
It could take up to 90 days to process your Offer in Compromise. It is not unusual to have to provide additional information to complete the processing of your offer. The Arizona Department of Revenue will send written notification if the Offer in Compromise has been accepted. Offers can be withdrawn by calling the Arizona Department Revenue Office and speaking to a Revenue Officer.
Collection efforts may be suspended while your Offer in Compromise is under review unless collection is jeopardized by a delay. It is possible to appeal the decision to continue collections by contacting the Problem Resolution Officer. Unfortunately, their decision is final for the taxpayer.