How the New York State’s Offer in Compromise Program Aids Taxpayers

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Annie Beverly
Annie Beverly
January 29, 2019

  • Making an offer in compromise is an option if the amount of debt you owe in taxes to the state of New York is causing undue economic hardship.
  • An offer in compromise allows you to pay an agreed-upon amount to the state, which is accepted as payment in full.
  • Only certain individuals are eligible to take part in the program. Those who aren’t eligible may qualify for a payment plan option.

 

The state of New York has a program in place designed to help its financially distressed residents who are unable to pay the full amount of their tax debt. This program is called the Offer in Compromise program, and it is handled through the Department of Taxation and Finance. Learn more about this program and whether it may be a fit for you if you are struggling to pay state taxes.

How an Offer in Compromise Works

An offer in compromise is an offer made by a taxpayer to pay a portion of their owed tax debt, which the state of New York would accept as payment in full. The Department of Taxation and Finance will only consider an offer in compromise from the following:

How the New York State’s Offer in Compromise Program Aids Taxpayers
  • Individuals and businesses whose debt has been discharged in bankruptcy or who are insolvent.
  • Individuals who are not bankrupt or insolvent, if paying the total amount owed would create undue economic hardship.

Businesses cannot submit an offer in compromise if the inability to pay the debt is due to undue economic hardship. However, if an individual is responsible for business debts and taxes, that person could qualify under the undue economic hardship option of the program. Those who do not qualify for an offer in compromise may be able to take advantage of the state’s payment plan option. State officials will work with you to help you resolve your outstanding debt through an affordable monthly payment.

If the state of New York believes that collecting the total amount owed will be difficult or impossible, it is more likely to accept an offer in compromise.

Applying for an Offer in Compromise

If you meet the criteria for New York state’s offer in compromise program, you will need to follow the required steps to submit your offer. The Department of Taxation and Finance officials will review each application to make sure that those seeking relief from their financial burdens receive full consideration. During this review, officials will analyze whether accepting the offer is in the best interest of the other taxpayers, as well as the state. Not all offers will be accepted, so it’s important to understand this before you go into the process.

The first step to apply for an offer in compromise is to complete state Form DTF-5. You also need to fill out Form DTF-4.1 or Form DTF-4, depending on which applies. Form DTF-4.1 is more commonly used by applicants and is for fixed and final liabilities. Form DTF-4 is for liabilities that are not fixed and final and are subject to an administrative review.

After you complete both required forms, you will need to gather quite a number of your own personal financial documents, including the following:

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  • Federal and state tax returns for the last three years, including all applicable statements and schedules.
  • A credit report dated within the last 30 days.
  • All brokerage, bank, and retirement account statements for the last 12 months.
  • Any other supporting documentation.

If you were not required to file taxes in the state of New York or with the federal government for any reason within the last three years, you will need to include an explanation of why that is the case along with your documents. For those submitting an offer in compromise due to financial hardship, the final piece of required documentation is a letter that describes the economic hardship conditions you are facing, along with any supporting details in regard to your financial strain.

Mail all of the documents and completed forms to the following address:

New York State Tax Department
CED Offer in Compromise Unit
W A Harriman Campus
Albany, NY 12227-5100

If state officials require any additional documentation during the review process, they will request it via mail. Make sure to respond to the requests within the timeframe provided to avoid having your submission be rejected or returned. If you do not respond within a reasonable amount of time, the Department of Taxation and Finance will consider the application to be withdrawn. You can electively withdraw your request at any time.

What If My Offer Is Rejected?

Aside from failure to respond, which would result in a withdrawal of your offer, the process has two outcomes. The first is acceptance, which means you can pay the amount you outlined in your offer, and your debt will be absolved with the state of New York. In this case, the state will also apply any funds payable, credits, offsets, and tax refunds to the original outstanding liability.

The second outcome is rejection, which means the state is not accepting your offer. You will receive notification of the rejection in writing, and the document will include the reason your offer was rejected. Examples of rejection reasons include the following:

  • The liability is related to a crime to which you were found or pleaded guilty.
  • An acceptance would undermine voluntary compliance with tax laws.
  • You do not meet the requirements of the laws of the state.
  • You didn’t make a full financial disclosure.
  • You submitted misleading or false information.
  • You show a lack of a good faith effort to pay back your debt.
  • Evidence exists that you transferred your assets after learning of the debt.
  • An acceptance would not be in the state’s best interest.

If your offer is rejected, you may request reconsideration if the circumstances have materially changed, you are willing to substantially increase the offer, or any of the information was misinterpreted by the state.

Struggling under the weight of financial strain and debt can be overwhelming. If you’re not sure where to turn for help, Solvable has options that can free you of your debt and help you get your finances back on track. Learn more about the tax debt options, including helpful resources and personalized education, available from Solvable.

 

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