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Publication 220(12/16)
Offer in Compromise Program
The New York State Offer in Compromise Program is designed • Individuals seeking relief based on undue economic hardship
to help financially distressed taxpayers who face overwhelming must include a statement explaining why paying the full
tax liabilities. This includes any liability administered by the Tax amount would cause undue economic hardship. Include any
Department. Taxpayers accepted into the program may pay supporting documents.
a reasonable amount as a compromise, satisfying the debt Send the forms, and any required statements and documents,
in full. While we carefully review and consider every offer in to:
compromise, we do not accept all offers. While reviewing an
offer, we may continue efforts to collect the debt. NYS TAX DEPARTMENT
CED OFFER IN COMPROMISE UNIT
If the fixed and final amount owed is more than $100,000 (not W A HARRIMAN CAMPUS
including interest and penalties), a New York State Supreme ALBANY NY 12227-5100
Court justice must approve the offer in compromise.
We will send confirmation when we receive the documentation.
If all required statements and documents are not included, we
Who is eligible? will notify the taxpayer that the application is not complete. If the
Generally, we may consider offers in compromise from the missing material does not arrive within a specified time, we will
following taxpayers: not process the application.
• individuals and businesses discharged from bankruptcy
• individuals and businesses that are insolvent (liabilities, May a taxpayer withdraw an offer in
including tax liabilities, exceed the fair market value of assets) compromise?
• individuals (not businesses) for whom paying the debt in full A taxpayer or representative may withdraw an offer any time
would cause undue economic hardship before our final decision. If we request information and it does
not arrive within a reasonable amount of time, we will consider
To participate, taxpayers must have filed all required New York the offer as withdrawn.
State tax returns.
The amount taxpayers propose as a compromise must be If we accept the offer in compromise:
an amount we realistically expect we could collect within If we accept the offer, we will provide a written notification
a reasonable period of time. It is based on the total value detailing the terms and conditions, including:
of assets and the amount we could expect to collect from • Taxpayers agree to remain fully compliant with all Tax Law
anticipated future income. Otherwise, the amount proposed requirements, including filing returns and paying tax when
must be justified by information the taxpayer submits. required, for the next five years.
• If there are any tax refunds, offsets, credits, or funds payable
What is undue economic hardship? to taxpayers that are available to New York State (for
Generally, undue economic hardship means that an individual example, lottery offsets and unclaimed funds), for periods
taxpayer is unable to pay reasonable basic living expenses, before and including the calendar year in which we accepted
which are those providing for the health, welfare, and production the offer, we will apply them to the original outstanding liability.
of income for their family. We use Internal Revenue Service If there is any excess, we will refund it to the taxpayer.
(IRS) standards to help determine your allowable basic living
expenses. • Taxpayers waive any statute of limitations defenses
against the assessment and collection of the liability being
We consider other factors, including: compromised. Taxpayers also waive any statute of limitations
• age, employment status, and employment history defenses against the issuance of new assessments for the
compromised liability in the event a taxpayer fails to comply
• inability to earn income because of long-term illness, medical with the terms of the offer.
condition, or disability
• Taxpayers agree to forfeit any current capital loss or net
• obligations to dependents operating loss credits taken on any future New York State tax
• extraordinary circumstances, such as special educational returns.
expenses, medical catastrophe, or natural disaster
• inability to borrow against or liquidate assets due to hardship If we do not accept the offer in compromise:
Undue economic hardship does not include an inability to If we do not accept the offer, we will notify the taxpayer or
maintain an affluent or luxurious lifestyle. authorized representative in writing. Examples of reasons for us
not to accept an offer include, but are not limited to:
What forms do taxpayers need? • The taxpayer does not meet the requirements of New York
• Form DTF-4.1, Offer in Compromise (For Fixed and Final State Tax Law.
Liability), or Form DTF-4, Offer in Compromise (For Liabilities • The taxpayer submitted false or misleading information.
Not Fixed and Final and Subject to Administrative Review) • The taxpayer failed to make a full financial disclosure.
• Form DTF-5, Statement of Financial Condition and Other • There is evidence that after the taxpayer learned of the
Information, including copies of: liability, some of the taxpayer’s assets were transferred.
• the last three federal income tax returns • The taxpayer shows lack of a good faith effort to repay the
• a credit report less than 30 days old liability.
• the last 12 months of statements from a bank or financial • The liability directly relates to a crime for which the taxpayer
institution pleaded or was found guilty.
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