Settling New York State Taxes: NYS Offer In Compromise
In this guide, we will go through filing an NYS Offer In Compromise (“NYS OIC”) from start to finish. We provide this guide as part of our tax help guide. The guide helps people resolve their own tax debts and helps our existing clients understand the process better. Our firm may be in Las Vegas, but we have handled more NY tax debt cases than most tax attorneys in NY. The NYS OIC department does everything through the mail, phone and fax. There is no need to physically be in NY to complete your case.
Does NYS have a tax forgiveness program?
Both businesses and individuals may qualify for a NYS Offer in Compromise. If successful, it can lead to tax debt getting cleared for a significantly smaller sum. However, not all who apply may succeed.
You can watch our video on this information below, then keep reading on for the written guide.
What is the difference between an NYS Offer In Compromise and an IRS Offer In Compromise? Mostly how the numbers are calculated. New York State accepts actual expenses that are reasonable. The IRS has pre-set standards for many of the expenses and the others are based on actual expenses. The other difference is that an NYS Offer In Compromise can be for income, payroll, or sales tax. IRS Offer In Compromises are never for sales tax since the IRS does not collect sales tax. This guide covers individual NYS offers in compromise. An individual can be assessed an NYS sales tax debt. Please note that in most NYS sales tax debt cases, the Offer In Compromise usually just ends up being the base tax amount and they take off penalties and interest.
NYS OIC Forms
Update: Recently, New York state has now introduced a way to file an Offer in Compromise form online. This makes it easier than ever to file OIC, at least as far as waiting on snail mail times can get.
NYS Form DTF 4 or DTF 4.1
Your NYS OIC will consist of two forms: a financial statement and an Offer In Compromise form. The financial statement is Form DTF 5. The NYS OIC form is different depending on the liability. If the liability is fixed and final, Form DTF 4.1 is used. If the liability is still pending or subject to administrative review, Form DTF 4 is used. If you still have appeal rights, Form DTF 4 should be used. The majority of cases will use Form DTF 4.1.
Due to the slight differences in the form, we will go over both.
See our How To Fill Out Form DTF 4 page if filling out Form DTF 4.
See our How to FIll Out Form DTF 4.1 page if filling out Form DTF 4.1.
NYS Form DTF 5
You will also need to prepare Form DTF 5 for your NYS OIC. The only exception is for Doubt as to Liability offers. Form DTF 5 is a financial statement. It helps the NYS Offer Examiner determine if New York should settle your debt. Here we will go through the form section by section.
Section I: Basic Identifying Information
Fill out your name, address, and SSN. Fill in your Spouse’s information as well if a joint liability.
Section II: Representative
If you have a tax attorney they would be input here. They should be filling this form out for you if so. Contact a tax attorney if you do not want to do this yourself.
Section III: Banking Information
List all banks and financial institutions that you had an account at in the last three years.
Section IV: Spouse and Dependents
List your spouse’s name if not a joint debt. List all of your dependents and their information.
Section V: Life Insurance Policies
List your life insurance information. Note that term life insurance has no cash value. For term life insurance put 0 in Box D. Term life insurance also will not have loans against it. Whole life insurance has a cash value.
Section VI: Statement of Assets and Liabilities
Use a recent date for your statement of assets and liabilities.
Make sure to use the used value of items. Furniture is almost worthless once it is used. Vehicles are worth substantially less once used.
List all of your liabilities. Add personal loans as well.
Section VII: Life Insurance Policies Pledged or Assigned
If any of your whole life insurance policies are assigned or have debt, list the details here. No term life insurance should be listed here.
Section VIII: Accounts and Notes Receivable
If you are owed money list here. This usually applies to businesses.
Section IX: Real Estate
List what real estate you own here. NYS wants to know the cost and mortgage details. For fair market value, make sure to put the quick sale value. This is the amount you would get for it if you had to sell it quickly.
Section X: Furniture, Fixtures, Machinery and Equipment
Machinery and equipment is for businesses. For furniture, make sure to put the quick sale value. This is very little for used furniture. Do not include trucks or automobiles for equipment.
Section XI: Trucks and Automobiles
List your vehicles and their details. Make sure to put quick sale value for the vehicle values.
Section XII: Securities (Bonds, Stocks, Etc.)
Fill in all the details for what securities you have. If none put N/A.
Section XIII: Judgments
If you have been sued and lost, list those judgments and their details here.
Section XIV: Statement of Income – Individual
A. Gross Receipts or Income
Include all income for the last 12 months. List the source of the income. NYS is going to look at your average monthly income based on this data.
These are your living expenses. For putting either a number or a 0 for every category they list. Then itemize a lift of your living expenses. They even have a section for Servant’s wages. Odds are if you have a servant, you probably are not going to get an NYS Offer In Compromise.
Section XV: Statement of Income – Corporation
We are skipping this section for Individual NYS Offer In Compromises. It only applies to corporations.
Section XVI: Salaries Paid to Principal Officers and Dividends – Corporation
We are skipping this section for Individual NYS Offer In Compromises. It only applies to corporations.
Section XVII: Disposable Assets
They want to know out of all assets you have had since you had the liability, did you sell/give away anything that was worth more than $500 for less than its full market value. They want the details if you have. They are trying to determine with this section whether or not you transferred assets to avoid tax liability.
Section XVIII: Interest In or Beneficiary of Estate or Trust
If you have interests in or are the beneficiary of a trust, fill in the details here. If they determine you are getting too much from the trust this could disqualify you from receiving an NYS Offer In Compromise.
Section XIX: Ganor, Donor, Trustee, or Fiduciary
Answer yes or no as to whether you have any life interest, remainder interest, either vested or contingent, in any trust. Also, mark yes if you are the beneficiary of any trust. If you select yes, furnish a copy of the instrument creating the trust. Also, give the present value of the corpus of trust any other pertinent information.
Section XX: Any Other Assets or Interests In Assets
Mark yes or no. If yes, describe what you have. Most people will select no here.
Section XXI: Foreclosure
Select yes if you are in foreclosure for any property you own or have an interest in. Select no if none. If yes, give the address of the real estate in subsection B. If no
Section XXII: Bankruptcy or Receivership
If you are in Bankruptcy, mark yes. Receivership is for corporations. Contact your bankruptcy attorney before proceeding. Usually, there is no point to do an Offer In Compromise if the debts can be included in your bankruptcy. Part B is for corporations.
Section XXIII: Is Your Offer a Loan?
If your settlement funds are a loan, select yes. Select no if not. If yes, make an additional page listing their contact information. As the title put, “Lender for offer funds.” If there is any collateral for the loan, on the same page make a subsection called “Collateral.” List the collateral and its value.
Section XXIV: Criminal History
They ask if you have committed any crimes regarding unlawful possession or acquisition in the last 5 years. Answer yes or no. If yes, provide a copy of the paperwork from your court proceedings. Your criminal attorney or probation officer may be able to assist you in obtaining the correct documents.
They ask if you are the subject of, or defendant in, any pending criminal or grand jury action or proceeding which may involve or affect in any way, your right, title, or interest to any real or personal property. Answer yes or no. If yes, provide documentation showing what is pending against you. If you have a criminal attorney they may be able to provide you with the needed information.
Section XXV: Increase in Assets or Income
Explain why you will not have an increase in assets or income. NYS is trying to see if they can collect more from you later by not accepting the NYS Offer In Compromise.
Section XXVI: Supporting Documentation
Include copies of the following documentation with your NYS Offer In Compromise submission:
A. Federal returns – preceding three years, all schedules attached.
B. All bank statements (including checking accounts) for the preceding year.
C. Recent credit report from local bureau within last 30 days.
D. Real estate appraisal if you have real estate.
E. Chapter 7 discharge papers if you had a Chapter 7 bankruptcy.
F. All mortgage indentures and conveyances, as grantor or grantee for the preceding 10 years.
G. Legal instruments related to pending claims (insurance or otherwise), rights to sue, subrogations, assignments, and other assets. If there are any. Most people will not have any.
H. Contracts of sale of any sizable assets, either pending or within the last 5 years. For most people, this is just home and vehicle sales.
I. Federal Application to Compromise, with results. If you had an IRS Offer In Compromise accepted include a copy of it with the acceptance letter. If not yet accepted, submit a copy of your submission. Explain in a cover letter that your IRS OIC is pending.
J. Leases, both as landlord and a tenant. If you live with a relative or are in an informal situation, get a written agreement for what you pay monthly.
K. Loan agreements and instruments in evidence of assets pledged as collateral for any undertaking. For most people, this is proof of loans for any vehicle.
Read the declaration and sign and date. Have your spouse sign and date as well if a joint liability.
Add A Cover Letter
Add a cover letter explaining the circumstances regarding your NYS Offer In Compromise request. If there are any circumstances not shown in the offer paperwork, now is the time to explain.
The below video explains some of the details of New York State Offers. You may want to watch it before submitting it.
Mail It Out
NYS OICs are mailed to:
OFFER IN COMPROMISE PROGRAM
PO BOX 5100
ALBANY NY 12205-0100
Send them by USPS certified mail with return receipt. I recommend making a full copy of everything you are sending including your cover letter. If your case is in collections, you should call NYS Civil Enforcement. Let them know you mailed out an NYS Offer In Compromise and to place a collection hold on your account while it is pending.
I Don’t Want to Do it Myself
If you rather not do this yourself, feel free to contact us. Our tax attorneys are experts in NYS and IRS Offers In Compromise. We only work on tax debt issues to guarantee you the best results. Fill out our contact form or call us at (888) 515-4829 to talk directly to a tax attorney.