New York taxpayers who have unpaid federal tax liability can settle their IRS tax debt by negotiating a debt payment plan called Offer in Compromise (OIC) with the Internal Revenue Service. Offer in Compromise allows taxpayers to settle their debt for a fraction of the full payment amount. The Internal Revenue Service will negotiate with taxpayers hoping that accepting the Offer in Compromise will allow taxpayers to meet their future tax liability.

The Internal Revenue Service does not have to accept any Offer in Compromise offers. Currently the rate of acceptance at the initial OIC application level is 20-25%. New York taxpayers do not have legal recourse against the IRS and can not sue them if their Offer in Compromise is denied.

Interest and penalties will continue to accrue while the Offer in Compromise is being considered and the Internal Revenue Service will have detailed information about taxpayers financial data which they can use to continue debt collection if the Offer in Compromise is denied. New York taxpayers who are considering an Offer in Compromise should consult a tax professional such as an enrolled tax agent, tax accountant or tax attorney prior to making an Offer in Compromise to the Internal Revenue Service.

Qualifying for Offer in Compromise in New York

Not all Offer in Compromises will be accepted. The Internal Revenue Service will only consider an OIC if it meets one of the following criteria:

1. Doubt as to Liability-  New York taxpayers may qualify for an OIC if there is doubt to the amount of liability owed. This condition is not commonly met.
2. Doubt as to Collectibility- New York taxpayers may qualify for an Offer in Compromise if the Internal Revenue Service doubts they will be able to collect the IRS tax debt. Under this condition, there is not doubt as to the liability only the ability to collect the debt.
3. Effective Tax Administration- Under certain conditions the Internal Revenue Service will accept an Offer in Compromise offer for New York taxpayers if the Internal Revenue Service believes back tax debt collection will cause “an economic hardship which is inequitable and unfair”. This qualification is most frequently used for the elderly and the handicapped.

Rejection of Offer in Compromise in New York

Over 80% of the Offer in Compromise applications will not be accepted at the initial OIC application level. The Internal Revenue Service must send written notification to New York taxpayers explaining in written detail why their Offer in Compromise is not accepted and what amount the Internal Revenue Service would consider reasonable. The most frequent reason given for not accepting an Offer in Compromise offer is the offer is not high enough. New York taxpayers can request written information which is not provided by utilizing the Freedom of Information Act.

New York taxpayers who are considering an Offer In Compromise should contact a tax professional who can help with the initial Offer in Compromise offer and help complete the OIC appeal if necessary. Offer in Compromise Form 656 will only need to be filed a second time if the New York taxpayer’s financial data has dramatically changed or if the New York taxpayer has missed the OIC appeal deadline.

The Internal Revenue Service does not have to agree to negotiate or accept an Offer in Compromise appeal, but they frequently are willing to work with the New York taxpayer to settle IRS back tax debt.

Appealing an Offer in Compromise in New York

Negotiations to appeal an Offer in Compromise can be done with the administrator who initially reviewed the Offer in Compromise. If administrative negotiations fail, New York taxpayers can use the more formal OIC appeal process. New York taxpayers can appeal the Offer in Compromise by sending written notification to the Internal Revenue Service with in thirty days of receiving the Offer in Compromise denial letter.

Steps to file an Offer in Compromise

If a New York Taxpayer is considering Offer in Compromise to settle IRS tax debt the following tasks must be completed:

1. New York taxpayers will need to provide detailed financial information to the Internal Revenue Service.
2. All federal tax returns which have not been filed must be filed with the Internal Revenue Service.
3. Self-employed taxpayers must file tax payments and tax estimates quarterly.
4. All federal tax liability must be paid for the time frames not covered by the Offer in Compromise.

New York taxpayers must fill out the following forms for the Offer in Compromise offer:

1. IRS Form 656- Offer in Compromise. New York taxpayers must fill out Form 656 to provide the Internal Revenue Service with information about their financial status and their ability to pay their federal tax liability.
2. IRS Form 443 A- Collection Information Statement for Wage Earners and Self-Employed. This OIC form provides additional information about the New York taxpayers ability to pay their federal tax debt.
3. IRS Form 443-B- Collection Information Statement for Businesses. This OIC form is similar to the Internal Revenue Service Form 433-A and will need to be completed if the taxpayer’s business is included in the Offer Compromise offer.
4. IRS Form 656-A- Income Certification for Offer in Compromise Application Fee and Payment. New York taxpayers will need to complete this form if they are requesting the Offer in Compromise fee be waived.

New York Tax Professionals

New York residents who are considering an Offer in Compromise may want to consult with a tax professional with experience and knowledge about the federal tax code to help them make a good offer. Offer in Compromise is only one method used to repay federal tax debt and it may not be the best option for all New York taxpayers.

If you are an Arizona resident and you have unpaid back taxes or you have been contacted by the Internal Revenue Service for repayment of your federal tax debt obligations, it is important to contact an Arizona Tax Attorney to discuss debt settlement options.

The Internal Revenue Service knows the chances of collecting the full amount of federal tax debt owed to them declines the more time lapses, it is therefore in their best interest to collect tax payments as soon as possible.  With this in mind, the Internal Revenue Service has created a variety of programs to allow Arizona taxpayers to pay only a portion of their overdue taxes. One of these programs is called Offer in Compromise or “OIC”.

If you owe back taxes, penalties and interest, it is important to contact an Arizona Tax Attorney before the IRS contacts you. The Offer in Compromise is a formal process and should be done accurately. Your Arizona Tax Lawyer can:

• Help you complete the IRS Form 656, submit the Collection Information Statement and Form 433A.
• Review your tax debt situation
• Answer all questions related to the Offer in Compromise program
• Send all appropriate Offer in Compromise documents to the IRS.
• Work with the IRS to comply with their request in a timely manner and providing the appropriate documentation such as pay check stubs, bank records and vehicle information.

After you make your Offer in Compromise, the Internal Revenue Service has sole discretion as to whether or not they will choose to reduce your tax debt. Currently, less than half of the OIC applications are accepted. Interest on the outstanding federal tax debt continues to accrue while your Offer in Compromise is under review and if the Internal Revenue Service does not accept your offer, unfortunately, they will have all the information they need about your finances to continue aggressive collection efforts against you. For this reason, it is a good idea to talk to an Arizona Tax Lawyer. Hiring an Arizona tax Attorney can help protect you and increase the odds that the Offer in Compromise application will be accepted.

Qualifying for an Offer In Compromise in Arizona

Not everyone who submits an Offer in Compromise application will be accepted. Complaints have been made that the Offer in Compromise process can be expensive and require an extensive amount of paperwork. In addition, most offers are denied the first time and must be appealed. You must be able to show certain conditions exist to receive a favorable Offer in Compromise:

• Doubt as to Liability- If you disagree with the amount of tax debt the IRS states you owe, you may be eligible to file an Offer in Compromise to require the IRS to review the dispute. This condition is uncommon and is generally used after the taxpayer has failed to win an appeal, litigation or the time to appeal the assessment has expired.
• Doubt as to Collectibility- Given your current financial situation, if the IRS believes your tax bill is not collectable in the near future, they may accept your Offer in Compromise application.
• Effective Tax Administration- If you can prove paying your federal tax debt would create an “economic hardship which is unfair and inequitable” the IRS may accept your Offer in Compromise. This offer is rarely allowed and is used not when the collectibility or liability is in question, but only if there is an extenuating circumstance. Effective Tax Administration is most often used for the disabled and the elderly.

Rejection of Offer in Compromise Offers

The Internal Revenue Service will reject your Offer in Compromise if the offer is too low. They are required to send an written explanation to you outlining the reasons your offer was denied. In the IRS letter, they should state what amount they consider reasonable.  If they refuse to send you a copy of the report for your Offer in Compromise, you are legally able to access that information under the Freedom of Information Act.

If your offer is rejected, you can work with an Arizona Tax Attorney to resubmit your offer. Your tax attorney may have insight about your application and how to complete the information to make it better. You will not be required to submit a new Form 656 if your financial circumstances have not changed and you complete the new offer with in one month. If you offer is very different or your financial situation has changed, your tax lawyer can work with you to complete a new Form 656.

Appealing an Offer in Compromise

An Offer in Compromise can be formally appealed or you can contact the administrator who was responsible for the decision and talk to them. The Internal Revenue may be willing to negotiate further with you. Formal appeals can also be made by sending a letter to the IRS with in thirty days of receiving the denial letter.

Arizona Tax Attorneys can help you appeal your Offer in Compromise. If your Offer in Compromise is rejected it is important to contact a Tax Attorney prior to further negotiation. To ensure your Offer and Compromise appeal is reviewed you must:

• Provide accurate financial information in a timely manner to the Internal Revenue Service for review.
• All past tax returns must have been filed.
• You must have paid your required tax debt obligations for the current year. If you are self-employed the IRS will require all estimated tax payments to be made each quarter.

Unfortunately, the Internal Revenue Service has the legal right to deny you an appeal of your Offer in Compromise. The Internal Revenue Service can not be sued for not accepting your Offer in Compromise.

Arizona Tax Attorneys

An Arizona Tax Lawyer can help you complete your Offer in Compromise by helping file the forms and create an offer which is as low as possible. Tax Attorneys also can help make sure the Internal Revenue Service follows their outlined tax code regulations. Arizona Tax Lawyers can also provide you with clear honest answers about all the tax settlement options available for your financial situation.