Tag Archives: Income tax

Offer in Compromise for Arizona State Tax Debt

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:

  1. 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.
  2. 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
  3. 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.
  4. 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
Attention: Bankruptcy/Litigation
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.

Offer in Compromise for Alabama Taxpayers

Offer in Compromise (OIC) is an agreement between the taxpayer and the Internal Revenue Service to negotiate and pay a tax liability for less than the total amount owed. The Internal Revenue Service will agree to an Offer in Compromise if a taxpayer meets certain criteria and is not in a position to pay their federal tax debt in full. The Internal Revenue Service will only agree to an Offer in Compromise when it considers the offer to be in the best interest of the federal government and the taxpayer.

Alabama taxpayers who have federal tax debt and are unable to pay, may want to contact a tax professional  such as a tax attorney or tax accountant to discuss all available tax settlement options. Failure to pay federal tax debt can result in heavy fines and penalties, bank account levies, repossession of personal property and wage garnishments. Do not wait to call for help. Tax professionals in Alabama are familiar with the debt collection tactics of the IRS and can help provide relief.

Offer in Compromise in Alabama

Alabama taxpayers may be able to pay a small percentage of their total Internal Revenue Service debt they owe through Offer in Compromise. Offer in Compromise is offered in Alabama and in all other states. The goal of Offer in Compromise is to help Alabama taxpayers meet their current tax debt obligations so they will be able to pay their future tax liability.

Approximately 20% of the OIC applications are approved in the initial review process. Hiring a tax professional who is more familiar with the submission process and the Offer in Compromise forms may help increase your chances.

Qualifying for Offer in Compromise in Alabama

  • Doubt as to Liability – Alabama residents who doubt the amount of their outstanding tax debt may be able to prove Doubt as to Liability. Taxpayers must submit an explanation to the IRS outlining why they doubt the liability amount. Taxpayers may want to discuss other less costly and difficult ways to review their tax debt liability with a tax professional with out filing for Offer in Compromise.
  • Doubt as to Collectibility- The Internal Revenue Service must believe there is a doubt that the tax debt will ever be collected. Under this condition, there is not a doubt as to the amount of tax liability only the ability to collect.
  • Effective Tax Administration- The Alabama resident is not disputing the amount of tax debt owed, only that collection of the federal tax liability would “create an economic hardship which is inequitable and unfair”. This is mainly used for the disabled and elderly.

Additionally Alabama residents must meet the following criteria:

  • Individuals can not have an open bankruptcy claim
  • All federal tax returns must be filed
  • Offer in Compromise fee of $150 must be paid or waived
  • All appropriate forms including forms 656, 433-A or/and form 433-B and all requested financial information must be submitted
  • Taxpayer must be current with income taxes for the current year or if self-employed they must be current with the estimated taxes due

Rejection of Offer in Compromise Offers in Alabama

The Internal Revenue Service is required to send the Alabama taxpayer written notification of the OIC denial and the reason the offer was denied. The most common reason most Offer in Compromise applications are denied is the IRS believes the offer is too low. In the denial letter, the Internal Revenue Service must indicate the amount they have determined to be reasonable. Alabama taxpayers have the right to access all information regarding their OIC under the Freedom Information Act.

If the Offer in Compromise application has been denied, a tax professional can help you appeal the decision. A new form 656 will not need re-submitted unless there has been a substantial change in your financial situation or you fail to make your new offer with in 30 days from the date of the denial.

Appealing an Offer in Compromise in Alabama

The OIC administrator who denied your first Offer in Compromise application may be the best place to start for negotiations. Failure to get a more favorable decision may require you to file a more formal appeal. A letter must be sent to the IRS with in 30 days of the denial letter to make a formal appeal. Tax professionals have the necessary experience to negotiate appeals. The IRS has the ability to refuse your Offer in Compromise and they can not be sued by Alabama taxpayers for failure to accept offers. To increase the chances that your Offer in Compromise application will be accepted, you must complete the following tasks:

  • Federal tax returns must be filed
  • Accurate and detailed financial records which are request by the IRS must be submitted
  • Self-employed individuals must make estimated quarterly tax payments
  • Federal tax debt for the previous years must be paid

Alabama Tax Professionals

Alabama taxpayers who are considering Offer in Compromise may want to contact a tax professional for help. Tax professionals who are familiar with the Offer in Compromise process will include enrolled tax agents, tax attorneys and tax accountants. If you are not able to file an Offer in Compromise, there may be other tax settlement options available. It is important to take immediate action if you have a federal tax liability and not wait for the Internal Revenue Service to find you.

Benefits of Offer in Compromise

  1. Temporarily stops debt collection efforts by the IRS
  2. Allows the Alabama taxpayer to potentially pay less than their original tax debt
  3. Can stop tax liens against property after the OIC is complete
  4. May allow the Alabama taxpayer to avoid filing personal bankruptcy
  5. Alabama residents may be able to eliminate the worry and fear associated with having a large tax liability and dealing with the IRS tax collectors.