An offer in compromise (OIC) is a deal between a California taxpayer and the Internal Revenue Service (IRS) or the Franchise Tax Board (FTB) to pay off a tax debt for less than the full amount. The agreement will not be accepted automatically, as the taxpayer must meet specific requirements when applying for an OIC. These eligibility requirements vary depending on whether the taxpayer is applying to the IRS or the FTB, his or her financial circumstances, and other factors. The California offer in compromise attorneys at NewPoint Law Group, LLP explain how an OIC works, how to qualify for an OIC, and the OIC process in California.
FTB Eligibility Requirements for an OIC in California
A stated above, an OIC is an agreement made between the FTB or IRS and a taxpayer to pay off tax debt for less than the amount that the taxpayer owes. However, specific criteria must be met for an individual to be granted an OIC. For example, the FTB notes that the taxpayer must lack the financial ability to pay the full tax debt “now or in the foreseeable future.” The IRS considers similar factors when determining whether the tax debt creates sufficient hardship to justify an OIC.
You may be eligible for an FTB OIC if you (1) make a “fair” payment offer, and (2) can pay the amount “within a reasonable period of time.” Every OIC request will be evaluated on a case-by-case basis, considering criteria such as:
The taxpayer’s financial resources, including income and assets, as well as his or her expenses
Whether the offer would be in the state’s best interests
Whether there will be any foreseeable changes in the taxpayer’s financial circumstances, such as a promotion or job loss
As you can see, the FTB will carefully evaluate your financial circumstances and the ability you have as a taxpayer to pay your tax liability. Upon reviewing your application materials, the FTB should approve or deny the OIC application within approximately four months. Keep in mind that even if the IRS has accepted your OIC, it will still need to undergo separate evaluation by the FTB – which may reject your offer.
An OIC does not completely wipe out tax debt, but can help to alleviate the financial strain caused by tax liabilities. In rare cases, bankruptcy may eliminate income tax debt, but only under specific circumstances. If you are facing difficulties with unpaid state or federal income tax debt, you should consult with an experienced Roseville tax law attorney or tax bankruptcy attorney.
What is the Process for an OIC in California?
First and foremost, you need to make sure you have filed your income tax return with the state. If a taxpayer has unfiled tax returns, the FTB will not evaluate a request for an OIC.
Generally, once the FTB has accepted an application for an OIC, it could take up to 120 days to provide a taxpayer with a decision. Once the FTB finishes reviewing a taxpayer’s claim, the FTB will notify the taxpayer and provide him or her with further instructions.
If your OIC is approved, the FTB has the right to require you to enter into a collateral agreement. This agreement is needed if the FTB believes “you have significant potential for increased earnings.” The period of the collateral agreement is generally five years.
What Documents Do You Need to Apply for an FTB OIC?
The documents needed to apply for an OIC in California are listed in online checklists titled FTB-4905PIT, which is meant for individual taxpayers, and FTB 4905BE, which is meant for business entities. To provide a few examples from FTB-4905PIT, an individual who wishes to apply for an FTB OIC will need to gather and submit the following:
Bank statements
Medical information, where applicable
Mortgage statements, where applicable
Proof of income, such as pay stubs
Proof of expenses, such as bills
Rental agreements or lease agreements
Your IRS OIC application
Keep in mind that this is not the full list of application materials. Taxpayers should reference the aforementioned documents and consult with an experienced tax resolution attorney for guidance.
Roseville Tax Attorneys for IRS and FTB Offers in Compromise
The Franchise Tax Board is very clear when it comes to the requirements to complete an OIC request successfully. It is of the utmost importance that you comply in order to make sure that your application is as strong and as thorough as possible. Failure to provide accurate and complete information can lead to unnecessary delays and further financial difficulty.
A skilled and experienced tax attorney from NewPoint Law Group, LLP can guide you through the entire OIC process. If you need assistance applying for an OIC or exploring other approaches to tax debt relief, our firm is here to provide support. For a free consultation with our Roseville tax lawyers, call our law offices at (800) 358-0305 today, or contact us online.
What is an Offer in Compromise in California?
An offer in compromise (OIC) is a deal between a California taxpayer and the Internal Revenue Service (IRS) or the Franchise Tax Board (FTB) to pay off a tax debt for less than the full amount. The agreement will not be accepted automatically, as the taxpayer must meet specific requirements when applying for an OIC. These eligibility requirements vary depending on whether the taxpayer is applying to the IRS or the FTB, his or her financial circumstances, and other factors. The California offer in compromise attorneys at NewPoint Law Group, LLP explain how an OIC works, how to qualify for an OIC, and the OIC process in California.
FTB Eligibility Requirements for an OIC in California
A stated above, an OIC is an agreement made between the FTB or IRS and a taxpayer to pay off tax debt for less than the amount that the taxpayer owes. However, specific criteria must be met for an individual to be granted an OIC. For example, the FTB notes that the taxpayer must lack the financial ability to pay the full tax debt “now or in the foreseeable future.” The IRS considers similar factors when determining whether the tax debt creates sufficient hardship to justify an OIC.
You may be eligible for an FTB OIC if you (1) make a “fair” payment offer, and (2) can pay the amount “within a reasonable period of time.” Every OIC request will be evaluated on a case-by-case basis, considering criteria such as:
The taxpayer’s financial resources, including income and assets, as well as his or her expenses
Whether the offer would be in the state’s best interests
Whether there will be any foreseeable changes in the taxpayer’s financial circumstances, such as a promotion or job loss
As you can see, the FTB will carefully evaluate your financial circumstances and the ability you have as a taxpayer to pay your tax liability. Upon reviewing your application materials, the FTB should approve or deny the OIC application within approximately four months. Keep in mind that even if the IRS has accepted your OIC, it will still need to undergo separate evaluation by the FTB – which may reject your offer.
An OIC does not completely wipe out tax debt, but can help to alleviate the financial strain caused by tax liabilities. In rare cases, bankruptcy may eliminate income tax debt, but only under specific circumstances. If you are facing difficulties with unpaid state or federal income tax debt, you should consult with an experienced Roseville tax law attorney or tax bankruptcy attorney.
What is the Process for an OIC in California?
First and foremost, you need to make sure you hav e filed your income tax return with the state. If a taxpayer has unfiled tax returns, the FTB will not evaluate a request for an OIC.
Generally, once the FTB has accepted an application for an OIC, it could take up to 120 days to provide a taxpayer with a decision. Once the FTB finishes reviewing a taxpayer’s claim, the FTB will notify the taxpayer and provide him or her with further instructions.
If your OIC is approved, the FTB has the right to require you to enter into a collateral agreement. This agreement is needed if the FTB believes “you have significant potential for increased earnings.” The period of the collateral agreement is generally five years.
What Documents Do You Need to Apply for an FTB OIC?
The documents needed to apply for an OIC in California are listed in online checklists titled FTB-4905PIT, which is meant for individual taxpayers, and FTB 4905BE, which is meant for business entities. To provide a few examples from FTB-4905PIT, an individual who wishes to apply for an FTB OIC will need to gather and submit the following:
Bank statements
Medical information, where applicable
Mortgage statements, where applicable
Proof of income, such as pay stubs
Proof of expenses, such as bills
Rental agreements or lease agreements
Your IRS OIC application
Keep in mind that this is not the full list of application materials. Taxpayers should reference the aforementioned documents and consult with an experienced tax resolution attorney for guidance.
Roseville Tax Attorneys for IRS and FTB Offers in Compromise
The Franchise Tax Board is very clear when it comes to the requirements to complete an OIC request successfully. It is of the utmost importance that you comply in order to make sure that your application is as strong and as thorough as possible. Failure to provide accurate and complete information can lead to unnecessary delays and further financial difficulty.
A skilled and experienced tax attorney from NewPoint Law Group, LLP can guide you through the entire OIC process. If you need assistance applying for an OIC or exploring other approaches to tax debt relief, our firm is here to provide support. For a free consultation with our Roseville tax lawyers, call our law offices at (800) 358-0305 today, or contact us online.
