NYS Offer in Compromise May Help Settle Your NY Back Tax Debt

nys offer in compromise

You are at the right place if you have questions about settling your tax debt with the New York State Department of Taxation and Finance and you want to learn how to do so with a NYS Offer in Compromise.

Experienced New York tax attorney Charles Rosselli addresses the most common questions about settling your back tax liability with New York State with an offer in compromise.

What is an NYS Offer in Compromise?

Under the NY Tax Law, a NYS offer in compromise is a program that allows a taxpayer to reduce the overall tax debt that is owed to New York State by offering a "reasonable amount" to settle the tax debt.

What is a "Reasonable Monetary Offer" ?

A reasonable offer in the eyes of New York State is based upon a two part test. In particular, New York State will look at it’s ability to collect the tax debt (collectability) and your financial circumstances.

With regard to collectability, New York State will look at it’s ability to collect the tax debt within a reasonable period of time.

The amount that is offered to New York State cannot be a lesser amount that NYS can expect to collect from you through asset seizures, income executions, and bank levies.

In other words, If New York State determines that it can collect a greater amount from you through the above legal channels as opposed to the offer that you propose, then your offer will be rejected.

New York State will typically look at your employment status , wages, bank accounts, etc. to make this evaluation.

With regard to your financial circumstances, New York State must consider you insolvent to accept your offer. This means that the value of your assets must be less than your overall tax liability.

What You Must Submit with an Offer

Negotiating with the New York State Department of Taxation and Finance is based upon detailed review of form DTF-5 Statement of Financial Condition.

Under the penalties of perjury, you will have to attest to your income, expenses, assets, etc. and provide documentation regarding same.

You will likely have to also provide the following documentation: tax returns, real estate documents, all bank statements, leases, loan agreements, etc.

As you can see, negotiating with the taxing authorities is based upon thorough preparation. It’s not like negotiating a car purchase, where the car dealer is looking to “ move some cars off the lot. ”

Why Your Offer May Be Rejected

Submitting an Offer in Compromise should be based upon a thorough knowledge of the tax law. As such, many offers can be rejected for the following reasons:

  1. You do not meet the statutory requirements as set forth in the NYS tax law.
  2. You submitted false information to the taxing authority.
  3. You submitted a frivolous offer in compromise.
  4. You did not disclose all of your financial information.
  5. You transferred assets to someone else for less of fair market value.
  6. Your tax liability arose as a result of a crime for which you have plead or have been found guilty.

The Difference Between an IRS & NYS Offer in Compromise

An IRS Offer in Compromise is based upon the federal tax laws. It would be used for the purposes of attempting to lower a liability with the Internal Revenue Service.

The rules are different than the New York State Offer in Compromise Program.

A separate offer will have to submitted to the Internal Revenue Service and to New York State.

As such, it is recommended that you seek counsel from a New York tax attorney that handles both federal and NYS tax debt matters if you have both an IRS and New York State tax debt issue.

How Long Does It Take To Get a Decision 

It can take anywhere from three to six months before a decision is received from the New York State Department of Taxation and Finance.

Will an Offer Reduce the Trust Fund Tax Liabilities of My Business?

Typically, if you owe sales tax or some other form of withholding tax, you will have to pay the underlying tax liability. You may be able to settle the penalties and interest.

There are also instances where the New York State Department of Taxation and Finance will accept a lesser amount if it is in the best interests of all the parities.

If you have been deemed a responsible person for the taxes of the business, you can file an offer in compromise on your own behalf.

If the offer is accepted, it will lower the overall liability of the business by the amount of your accepted offer. The remaining business owners, if any, will still be responsible for their portion of the tax debt.

Should I file a Joint OIC with my Spouse?

If you filed a joint tax return, you are likely jointly and severally liable for the tax liability. If you are jointly liable, you can file a joint offer with your spouse.

If you are not been held liable for the spouse, then there is no reason for you to file with your spouse.

If you only an offer for yourself and not your spouse and your offer is accepted, then your spouse will be still be responsible for the tax debt.

What You Must Do If  Your Offer is Accepted

If you offer is accepted, you are not of the woods yet. First, you must remain in compliance with the tax laws for the next 5 years-- think of as “tax probation.”

Remaining in compliance with the tax law means filing all your tax returns on time and not incurring any unpaid tax liabilities.

There are some other restrictions that you should discuss with your tax attorney to determine the best route to settling your tax debt.

Why You May Need Help with Your NYS Offer in Compromise

In order to get an NYS offer in compromise accepted, you will need thorough knowledge of the New York tax law; advocacy skills; and meticulous preparation. 

Although this article cannot advise you as to advocate your position under the law, here are some documentation that you will need to begin putting together for your meeting with a tax attorney:  w

  1. Documentation to support your finances 
  2. If you have expenses that are large, documentation why these expenses are reasonable and necessary
  3. If you own a home, a recent appraisal of your home as well as a current mortgage payoff letter so that you can show that your mortgage is in excess of any equity in your home
  4. Copies of recent bank statements

There are different strategies that can be employed if you have both IRS as well as New York State tax debt.

If you have questions about submitting a NYS Offer in Compromise and seeking legal counsel from a qualified NY tax attorney about either your IRS or New York State tax matter, we welcome your call at the Tax Problem Law Center.

Charles Rosselli, Esq.

Charles Rosselli, Esq., founder of the Tax Problem Law Center, is a New York tax attorney that focuses on helping individuals and businesses throughout New York & nationwide solve their IRS and NYS state problems.