What Is a New York State Offer in Compromise?

A New York State Offer in Compromise (OIC) is a program that allows taxpayers to pay less than what they owe in back taxes to the State. It is designed to help taxpayers who cannot afford to pay their tax debt and are unlikely to be able to pay in the future, enabling them to settle their obligations and regain financial stability. While many taxpayers would like to obtain an OIC, there are stringent requirements and it is advisable to consult a tax attorney to determine whether you qualify and how to prepare the necessary paperwork to make your case.

How Does a New York State Offer in Compromise Work?

There are several stages involved in applying for an OIC, including the following:

• Eligibility Determination. The first step is to determine whether you meet the eligibility criteria set by the New York State Department of Taxation and Finance (DTF). To qualify, you must either be:
  • an individual or business that is insolvent or discharged in bankruptcy or
  • an individual (not a business) who is not insolvent or bankrupt, but payment in full would create undue economic hardship.

Generally, undue economic hardship occurs when a taxpayer is unable to pay reasonable basic living expenses, which are limited to expenses that provide for the health, welfare, and production of income for the taxpayer and his or her family.

• Application Submission. If you meet the eligibility requirements, you must complete and mail Form DTF-5 and either Form DTF-4.1 or Form DTF-4 as appropriate, and provide all requested documentation, including financial statements, income details, and asset information. If you are claiming hardship, you must provide a statement describing the hardship you are experiencing, along with any supporting documents. Online applications are available only to individual taxpayers with personal income tax debt of $15,000 or less who do not have an open formal protest for any tax liability or an open bankruptcy.
• Review and Evaluation. Once your application is received, the DTF will assess whether the amount you offered to pay reflects what could reasonably be collected from you over the next five to ten years. The agency will review and evaluate your finances, including assets, liabilities, monthly income, monthly expenses, and anticipated future income. In addition, it will look at your unique circumstances such as your age, employment status, employment history, medical conditions or disabilities that may affect your ability to work, and other relevant factors.
• If your application is deemed viable, the DTF may enter into negotiations to determine an acceptable compromise amount. This negotiation process involves a careful examination of your financial circumstances and the determination of a reasonable settlement that you can afford. Supporting documentation can make or break your offer.
• Acceptance and Payment. If the DTF accepts your offer, you will be required to make the agreed-upon payment within the specified timeframe. Depending on your financial situation, you may be able to make a lump-sum payment or establish an installment plan.

Do You Need a Tax Attorney to Obtain a New York State Offer in Compromise?

The OIC program provides an extraordinary opportunity to resolve your tax debt and get a fresh start. As a result, you want to ensure you present a strong case for relief. A tax lawyer can help you assess whether you qualify and if so, what amount to offer. In this way, you don’t waste time making an offer that won’t be accepted. You will also have someone to help you compile the supporting documentation and negotiate with the DTF, to assist you in obtaining the most favorable result.

If you owe back taxes to New York State, contact us for a consultation. We have over 25 years of experience helping taxpayers with offers in compromise and other tax relief programs.