FTB OFFER IN COMPROMISE
The FTB Offer in Compromise (OIC) program allows you to offer a lesser amount for payment of a nondisputed final tax liability. Moreover, if you are an individual or business taxpayer who does not have the income, assets, or means to pay your tax liability now or in the foreseeable future, you may be an OIC candidate.
Generally, the Franchise Tax Board (FTB) approves an OIC 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 in our evaluation:
- Ability to pay.
- Equity in assets.
- Present and future income.
- Present and future expenses.
- The taxpayer’s age and health.
- The potential for changed circumstances.
- Whether the offer is in the best interest of the state.
FTB Offer in Compromise: Application process
To apply for an OIC, complete the application and provide the necessary documentation. For a checklist of required items, go to ftb.ca.gov/forms and search for 4905.
- For Personal Income Tax, use FTB 4905 PIT, Offer in Compromise for Individuals.
- For Business Entities, use FTB 4905 BE, Offer in Compromise for Business Entities — Booklet.
We only process OIC applications if you have:
- Filed all of the required tax returns and you agree on the amount you owe. If you do not have a filing requirement, note it on your application.
- Fully completed the Offer in Compromise application and provided all supporting documentation.
- Authorized FTB to obtain your consumer credit report and investigate and verify the information you provided on your application.
Upon approval, we may require a taxpayer to enter into a collateral agreement for a term of five years. Generally, a collateral agreement will be required in cases when an entity or taxpayer has significant potential for increased earnings. A collateral agreement requires you to pay to FTB a percentage of future earnings that exceed an agreed upon threshold.
When you apply for an OIC, collection actions will not automatically stop.
In most cases, no new collection actions will be taken while your offer is reviewed. But if delaying collection actions risks our being able to collect what you owe, we may continue with collection actions.
Penalties and interest continue to accrue as prescribed by law. Further, if your offer is approved, all collection actions stop and state tax liens are released.
If you have questions about an FTB offer in compromise, contact a tax attorney at Disparte Tax Law today.