California Offer in Compromise

Do you have a tax debt in the state of California that you can't afford to pay? You might be able to make an Offer in Compromise (OIC) to lower your tax burden. If the relevant state tax agency accepts your OIC, it will reduce your tax debt. The OIC only applies in certain situations, so it's not always clear if it's the right program for you

Offer in Compromise in California

The three tax agencies that offer an OIC program in California are the California Department of Tax and Fee Administration (CDTFA), the Franchise Tax Board (FTB), and the Employment Development Department (EDD). Each agency has similar qualifications to apply for an OIC, and evaluates offers with similar criteria.

California Offer in Compromise Qualifications

To make an OIC, you must meet certain criteria:

  • You exhausted all other payment options, including payment plans
  • You're up-to-date on your tax returns
  • Your final tax or fee liability is on a closed account
  • You are no longer associated with the business that has the liability, nor have you engaged in a new, similar type of business
  • You agree with the tax amount you owe
  • You're unable to pay the full tax burden in a reasonable amount of time, either with current income, future income, or assets

Will Your California Offer in Compromise Be Accepted?

Each tax agency evaluates offers on an independent basis, taking the unique circumstances of the case into account. They generally consider the following factors for most offers, however:

  • Your ability to pay
  • The equity in your assets
  • Your present and future income
  • Your present and future expenses
  • The potential for changed circumstances
  • If the offer is in the best interest of the state of California

The CDTFA, FTB, and EDD will usually accept an OIC if the amount you offer is the most the agency expects to collect from you within a reasonable amount of time. Keep in mind that collection will usually stop once you make the offer, but your tax debt will start accruing interest. You can start making payments on your debt based on the amount you offered while your OIC is still in consideration.

OIC offers for each agency are separate—an accepted offer from the FTB does not guarantee acceptance from the CDTFA, for example. Also, the agencies may collect payments differently. When you make an offer to lower your tax debt to the FTB, it must be a lump sum. The CDTFA will accept payment installments, however.

What to Do if Your Offer in Compromise Is Not Accepted

If your OIC isn't accepted by one of California's state tax agencies, you still have other options. You may be able to work out a payment plan or find another appropriate resolution. A professional tax representative, such as an attorney, can contact the CDTFA, the FTB, or the EDD on your behalf and represent your interests.

If you're considering requesting an Offer in Compromise for your California state tax debt, contact a California Tax Attorney today to set up a consultation.

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