Get Help From a New York Offer in Compromise Attorney
If you’re struggling with a tax debt to the New York State (NYS) Department of Taxation and Finance (DTF) and are going through financial difficulties, it can feel like there’s no way forward. The good news is just like the IRS, the NYS DFT has an Offer in Compromise (OIC) plan that allows you to settle your tax liability for less. However, it’s not as easy as it sounds; countless applications get rejected every year. To increase your odds, talk to a professional with OIC knowledge and experience with NY tax debts.
At the Law Offices of Stephen B. Kass, we’ve helped many of our clients file the OIC successfully, and we can guide you, too. For now, let’s show you the ropes.
Key Takeaways
- Offer in Compromise: An arrangement that allows you to settle your tax dues for less than you owe.
- New York OIC vs IRS OIC: These two programs are different and operate on different sets of rules.
- High OIC rejection: The IRS approves only about 21% of OIC offers, and New York State offers also have low approval rate.
- Working with a New York OIC attorney: Hiring a New York-based attorney to help with your application improves your approval chances.
What Is an Offer in Compromise?
An OIC is a legal settlement that allows you to resolve tax obligations for less than what you owe. It’s a negotiation with your creditor ( in this case, a government agency) with specific rules and calculations.
The caveat is that very few OIC offers get approved. According to the IRS Data Book, in 2024, only 7,199 out of 33,591 requests were approved. That’s a 21.43% acceptance rate. While the New York State DTF doesn’t publish its approval acceptance rate, tax professionals report similar rates.
We are not saying this to scare or discourage you; we’re just advising you to be cautious, check the requirements, fill out the documents correctly, and ask for help if you get stuck.
The NYS DTF approves the OIC only when collecting less now makes more sense than indefinitely investing in collection efforts for an uncollectable debt.
Differences Between the NY State and IRS OIC
The NY State OIC has a few distinctions from the IRS OIC. Here are some differences:
Expense Calculations
The IRS has preset standards that taxpayers must meet to get approved. They set maximum amounts for food, housing, and transportation, applying national standards regardless of local costs. While NY State does use some of the IRS standards, they’re a bit flexible.
Tax Categories
NY state OIC covers Individual and business income taxes, sales and use taxes, and employment taxes. On the other hand, the IRS OIC covers Individual income taxes, employment taxes, corporate taxes, and interest and penalties.
Application Fees and Payment Requirements
- Application fee: NYS DTF has no set fee listed on its official site. The IRS has a non-refundable $205 application fee that’s only waived for taxpayers who meet the low-income certification requirements.
- Payment requirements: The NYC OIC program states that payment terms can be negotiated and are not rigidly set, which allows room for flexibility. The IRS has stricter payment requirements. For example, lump-sum offers must be cleared in five or fewer instalments after the offer is accepted.
Financial Hardship Standards
Both the IRS and the DTF base their OIC on economic hardship. NY considers:
- Age and health
- Exceptional circumstances like natural disasters and medical issues
- Employment prospects
- Local living costs
IRS hardship standards have a more rigid formula. They calculate the Reasonable Collection Potential (RCP) using the following formula:
- Monthly disposable income x12 or 24 months
- Plus equity in assets
- Minus allowable expenses from their tables
The Application Process of the IRS OIC and the NYC OIC
Both the IRS and NYS OIC have similarities and differences when it comes to the application process. Here is a look at some of the differences and similarities.
Required Documents
Both OIC Programs require the following:
- Three years of tax returns
- Bank statements (12 months)
- Asset valuations
- Proof of income and expenses
- Credit reports
Timeline Differences
IRS OIC timeline:
- It takes longer to process (12-24 months)
- More bureaucratic process
- Automatic acceptance if no response within 24 hours
New York State timeline:
- Faster processing (6-12 months)
- A direct communication approach
- Easier to get status updates
Incomplete OIC applications get rejected immediately. We help our clients prepare the applications, which dramatically improves their approval rates.
How to Apply for an IRS Offer in Compromise
You must apply for an IRS offer through the mail. Use Booklet 656-B to complete your application. Then, mail or fax the paperwork to the IRS. Learn more on our IRS offer in compromise page.
How to Apply for the NYC State OIC
Before the NYC DTF even considers your offer, you must comply with the terms that include:
- Complying with all tax laws, including paying taxes when required and filing returns for the next five years
- Allowing the DTF to apply your credits, tax refunds, lottery winnings, and any other eligible funds to offset your tax debt.
- Allowing the DTF to apply payments you make, including OIC payments to any tax liability they choose, in any order.
- Waive your right to contest the amount of tax liability being compromised.
- Be ready to meet your compromise agreement and any collateral agreement; otherwise, the NYC won’t compromise the debt in question.
Failure to comply with these terms can lead to the NYC state revoking your offer and reinstating the original liability. We ensure our clients agree to terms they can handle in their current situation so that they don’t end up dealing with collection.
Apply Online or By Mail
You can apply for the OIC online or by mail.
If you want to apply online, view the full terms in the web application, and create an online services account. Ensure you meet the criteria for an online application. For example, this is only open for individuals and personal income tax.
If you’re unsure whether you qualify for an online application, consider consulting a professional to save time before the collection starts.
To apply through the mail, complete DTF-5 and either Form DTF-4.1 (most common) or Form DTF-4, and provide all the required information.
- Form DTF-4.1, OIC (For Fixed and Final Liabilities)
- Form DTF-4, OIC( For Liabilities Not Fixed and Final and Subject to Administrative Review)
- Form DTF-5, Statement of Financial Condition
Alternatives to an Offer in Compromise
If you don’t qualify for the OIC, we can help you explore other alternatives to settle your tax debt. Here are some options:
- IRS Installment agreements – The IRS has different kinds of agreements depending on the amount owed.
- Installment payment agreement (IPA) for NYS – You can request an IPA through your online service account if your balance is $20,000 or less, and you can pay off the balance in 36 months or less.
- IRS Currently Not Collectible Status (CNC) – The IRS will pause all collection actions if you prove that you can’t pay anything now.
- Hardship status under the New York State relief program – You can request hardship status by filing Form DTF-5. If you qualify, the department will temporarily suspend the enforced collection actions.
- Penalty abatements – Both the IRS and the DTF offer penalty abatement to qualifying taxpayers, but you must apply.
Why Hire a New York Offer in Compromise Attorney?
If you’re on the fence about whether to hire a NYC state attorney to handle your OIC, this may give you confidence to go ahead and do it. See some benefits of working with an attorney:
- Knowledge of local laws: Working with an NYS-based lawyer ensures that your tax pro understands the state’s tax code and the department’s requirements, increasing the odds of your OIC being approved.
- Experience with the NYS DTF: NYS lawyers have worked with the department before, and they know the best way to approach the DTF to get things done. They’ve also formed professional relationships with staff members, which can help get quick replies.
- Ensuring you don’t make errors: As mentioned, any mistakes made during the application can significantly reduce your odds of your OIC getting approved by either the IRS or the state. Working with a lawyer ensures this doesn’t happen.
At Law Offices of Stephen B. Kass, we’ve had great success with our OIC applications. We begin by evaluating your finances and assets to ensure that an offer is the right option for you. We take a very careful and detailed approach to improve your chances of success.
Frequently Asked Questions (FAQs)
The offer process is complicated on both the state and federal levels. Take a look at answers to some of the questions we hear the most often.
How much tax debt do I need to qualify for an OIC?
There’s no minimum amount of tax liability required to qualify for an OIC. Both the NYS tax department and the IRS base their decision to settle taxes on your collection potential. As long as your application proves that your offer is the most you can afford, you’re likely to get approved (provided all other requirements are met).
Can I apply for an Offer in Compromise on my own?
Yes, you can apply an OIC on your own, but it might significantly reduce your chance of getting approved. Many OIC offers get rejected, and working with a tax professional helps improve your odds.
Can I apply for OIC if a taxpayer owes trust taxes?
The NYS normally doesn’t accept offers for less than the amount of trust fund taxes owed. However, you can make an offer with a statement of why the tax wasn’t paid. The department will then consider the offer, depending on whether the business is still operating or if the taxes have been collected. They then determine if the offer is the best option for all parties involved.
Ready to Get Your NYS OIC Approved?
You’re in debt with the NYS DTF, and you’ve decided to settle your scores through an OIC. But you’re not sure whether you qualify for one or where to begin. Or, you’ve applied, and the waiting is getting to you. You’re anxious about whether you’ll get approved or not.
Whatever stage you’re in, we are ready to take over and get you to your end goal. We’ve successfully done this for our clients, and we can do it for you, too. Give us a chance to utilize our strong working relationship with the New York State DTF and make sure your offer doesn’t get shoved to the side with no consideration. Contact us today and let’s get to work.
