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:: California Offer In Compromise
What you should
know before preparing an Offer in Compromise
Are you an Offer in Compromise
candidate?
If you are an individual who does
not have the income, assets, or means to pay your
tax liability now or in the foreseeable future, you
may be a candidate. The Offer in Compromise program
allows you to offer a lesser amount for payment of a
non-disputed final tax liability.
Generally, we approve an Offer in
Compromise when the amount offered represents the
most we can expect to collect within a reasonable
period of time.
Although we evaluate each case
based on its own unique set of facts and
circumstances, we give the following factors strong
consideration:
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The taxpayer's ability to pay.
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The amount of equity in the
taxpayer's assets.
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The taxpayer's present and
future income.
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The taxpayer's present and
future expenses.
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The potential for changed
circumstances.
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The offer is in the best
interest of the state.
Can we process your application?
We will only process your Offer in
Compromise application if you have done all of the
following:
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You have filed all of the
required tax returns. If you have no filing
requirement, note it on the application.
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You have fully completed the
Offer in Compromise application, and provided
all supporting documentation.
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You agree with the Franchise
Tax Board on the amount of tax that you owe.
Will a collateral agreement be
required?
Upon approval, we may require you
to enter into a collateral agreement for a term of
five years. Generally, a collateral agreement will
be required if you have significant potential for
increased earnings. A collateral agreement requires
you to:
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Pay us a percentage of your
future earnings that exceed an agreed upon
threshold.
Are collections suspended?
Collection activity is not
automatically suspended. If delaying collection
activity jeopardizes our ability to collect the tax,
we may continue with collection efforts. Interest
will continue to accrue.
When should offered funds be
submitted?
You should not submit the offered
funds until we request them. When we do ask for the
funds, submit them by cashiers check or money order.
What documentation is required with
the application?
For a check list of required items
to include with the application, see page 3 of the
4905PIT (linked below from
Application Request).
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Generally, an offer will be
accepted when the amount offered is more than
the Franchise Tax Board can expect to collect
within a reasonable period of time.
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Generally, if we accept your
offer for processing, we will have a decision to
you within 90 days after receiving your offer.
If your account is more complex, it may take
longer than 90 days.
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No, we require a lump sum
payment of the offered amount.
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We cannot apply prior payments
toward the offered amount. However, we will
consider prior payments and the offered amount
compared to the total liability when evaluating
your offer.
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No, we will evaluate your
Franchise Tax Board offer separately from your
Internal Revenue Service offer.
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Yes, we will contact you to
discuss your account and to determine the most
appropriate resolution. For example, if it is
determined that you will have the ability to
make monthly payments that will exceed the
amount offered, we will work with you to
establish an installment agreement.
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Generally, we release state tax
liens upon final approval of your Offer in
Compromise.
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Representation is not required.
The Offer in Compromise program is available to
all taxpayers, whether or not they are
represented.
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Part or all of your taxes may
be dischargeable under the bankruptcy code. If
this is a consideration, you may want to seek
legal advice.
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No, we will not accept a zero
dollar offer. Your offer must represent the most
the Franchise Tax Board can expect to collect
over a reasonable period of time.
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A collateral agreement is a
contractual agreement between you and the
Franchise Tax Board. By signing the agreement,
you agree to pledge to the Franchise Tax Board a
percentage of income that exceeds an agreed upon
threshold. Generally, the collateral agreement
period is five years.
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If you are on a fixed income or
have limited potential for increased earnings, a
collateral agreement will generally not be
required.
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If you marry while the
collateral agreement is in effect, we will
review any joint tax returns you are required to
file. Generally, we consider your joint annual
income in the collateral agreement. If you are
married and filing separate income tax returns,
the evaluation will be based on your separate
income.
California - Offer
in Compromise Forms:
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