Tax Relief Blog
The Offer in Compromise (OIC) is a powerful tool for taxpayers who are unable to pay their full tax liability. It allows taxpayers to settle their tax debt for less than the full amount owed, potentially saving them significant amounts of money. However, getting an OIC accepted by the California Franchise Tax Board (FTB) can be a complex and challenging process. This article will guide you through the steps to increase your chances of getting your OIC accepted by the FTB.
Get professional help today 1-877-78-TAXES [1-877-788-297].
Understanding the OIC
Before we delve into the process, it’s important to understand what an OIC is and how it works. An OIC is an agreement between a taxpayer and the tax authority (in this case, the FTB) that settles the taxpayer’s tax liabilities for less than the full amount owed. The FTB will consider an OIC if it believes that the amount offered by the taxpayer is the most they can expect to collect within a reasonable period.
Eligibility for an OIC
The FTB has specific criteria to determine who is eligible for an OIC. According to the California Revenue and Taxation Code Section 19443, the FTB may approve an OIC when it is in the best interest of the state. This typically means that the taxpayer is unable to pay the full tax liability due to financial hardship or other extenuating circumstances.
To be eligible for an OIC, you must have filed all required California tax returns and be in current compliance with all FTB filing requirements. You must also not be in an open bankruptcy proceeding.
Preparing Your OIC Application
The first step in applying for an OIC is to complete Form 4905, Offer in Compromise. This form requires detailed information about your financial situation, including your income, expenses, assets, and liabilities. It’s crucial to be thorough and accurate when completing this form, as the FTB will use this information to determine whether to accept your OIC.
In addition to Form 4905, you’ll also need to provide supporting documentation, such as bank statements, pay stubs, and property appraisals. The more evidence you can provide to support your claim of financial hardship, the better your chances of getting your OIC accepted.
Making Your Offer
The amount you offer to settle your tax debt should be based on your reasonable collection potential (RCP). The RCP is the FTB’s estimate of your ability to pay, based on your income, expenses, and assets. Your offer should be equal to or greater than your RCP.
It’s important to note that the FTB will not accept an OIC if it believes that you can pay the full amount owed through an installment agreement or other means. Therefore, your offer should reflect your true financial situation and not simply be a lowball offer.
Submitting Your OIC Application
Once you’ve completed Form 4905 and gathered all necessary supporting documentation, you can submit your OIC application to the FTB. Be sure to include the required application fee, which is currently $50.
After you submit your application, the FTB will review it and make a decision. This process can take several months, so it’s important to be patient. If the FTB requests additional information or clarification, be sure to respond promptly.
If Your OIC is Accepted
If the FTB accepts your OIC, you’ll need to fulfill the terms of the agreement, which typically involves making a lump sum payment or a series of payments over time. Once you’ve fulfilled the terms of the OIC, your tax debt will be considered settled.
If Your OIC is Rejected
If the FTB rejects your OIC, you have the right to appeal the decision. The FTB will provide instructions on how to file an appeal in the rejection letter. It’s important to note that appealing an OIC rejection can be a complex process, and you may want to seek the assistance of a tax professional.
To sum, getting an OIC accepted by the California Franchise Tax Board can be a challenging process, but it’s not impossible. By understanding the process, meeting the eligibility requirements, preparing a thorough application, and making a reasonable offer, you can increase your chances of success. Remember, an OIC is a serious financial decision, and it’s always a good idea to seek professional advice before proceeding.
Get professional help today 1-877-78-TAXES [1-877-788-297].
