California’s Franchise Tax Board, Employment Development Department and the State Board of Equalization now allow taxpayers behind in their tax payments to use one form when applying to more than one tax agency for an Offer in Compromise.
Are you an OIC candidate for taxes owed to California’s tax agencies?
The Offer in Compromise (OIC) program is for taxpayers that do not have, and will not have in the foreseeable future, the income, assets, or means to pay the tax liability. It allows you to offer a lesser amount for payment of a nondisputed final tax liability. Although each case is evaluated based on its own unique set of facts and circumstances, California gives the following factors strong consideration in the evaluation:
The offer is in the best interest of California.
Your present and future expenses.
The amount of equity in your assets.
Your present and future income.
Your ability to pay.
The potential for changed circumstances.
California’s tax agencies will not recommend approval of offers if there are assets or income available to pay more than the amount offered.
Can California’s tax agencies process your application?
Your offers will be evaluated independently by each agency. The BOE, FTB, and EDD have different criteria for participation in their OIC programs.
For all agencies, you must agree that you owe the amount of the liability. If you dispute the liability, you should appeal through the appropriate agency’s appeal process.
For FTB, your application will be processed if all of the required FTB income tax returns have been filed. If you have no filing requirement, note it on your application.
For both BOE and EDD, you must be out of business and must not have a controlling interest or an association with the business or a successor to the business that incurred the liability. This includes operating a business of the same nature.
For EDD, you cannot have access to income to pay more than the accumulating interest and 6.7 percent of the outstanding liability on an annual basis.
For EDD, an offer will not be considered for liabilities assessed for fraud or where the employer has been convicted of a violation under the California Unemployment Insurance Code.
For BOE, an offer for a liability with a fraud assessment will not be considered if there is a criminal conviction of fraud. For other fraud assessments, an offer will be considered if a minimum of the tax plus the fraud penalty is offered.
Are collections suspended?
Submitting an offer does not automatically suspend collection activity. Wage garnishments already in place at the time of the offer will continue and will not be considered as partial payment of the offered amount. However, in many cases, collection action will be suspended until the OIC evaluation is completed. If delaying collection activity jeopardizes California’s ability to collect, collection efforts may continue. Interest will continue to accrue as prescribed by law.
Will California’s tax agencies require you to continue payments on an Installment Agreement?
All the agencies require that you continue making periodic payments as called for in any existing installment agreement while your offer is being considered.
Call Mitchell A. Port, a California tax attorney, for help with your tax problems. Call (310) 559-5259.