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Offer in Compromise Booklet

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					Offer in Compromise Booklet
Georgia Department of Revenue




IMPORTANT! THIS BOOKLET CONTAINS INFORMATION AND FORMS THAT YOU
NEED IN ORDER TO PREPARE A COMPLETE AND ACCURATE OFFER IN
COMPROMISE. PLEASE READ THESE INSTRUCTIONS CAREFULLY BEFORE
ATTEMPTING TO COMPLETE THE ENCLOSED FORMS.


What is an Offer in Compromise?

An Offer in Compromise (OIC) is an                  both the taxpayer and the Department.
agreement between the taxpayer and the              Acceptance of an adequate offer will also
government that settles a tax liability for         result in creating a fresh start for the
payment of less than the full amount owed.          taxpayer and an expectation of compliance
                                                    with all future filing and payment
The Georgia Department of Revenue will
                                                    requirements. A tax debtor can make an
generally accept an Offer in Compromise
                                                    offer due to doubt as to collectibility, doubt
when it is unlikely that the tax liability can be
                                                    as to liability, or economic hardship.
collected in full and the amount offered
reasonably reflects collection potential. An        Doubt as to Collectibility. This means that
OIC is a legitimate alternative to declaring a      doubt exists that the taxpayer could ever pay
case currently not collectible or to a              the full amount of tax liability owed. The
protracted installment agreement. The goal          Department will consider a doubt as to
is to achieve collection of what is potentially     collectibility offer when the taxpayer is
collectible at the earliest possible time and       unable to pay the taxes in full either by
at the least cost to the government.                liquidating assets or through current
                                                    installment agreement guidelines. The
The success of the Offer in Compromise
                                                    taxpayer must submit the appropriate
program will be assured only if taxpayers
                                                    collection information statement along with
make adequate compromise proposals
                                                    all required supporting documents.
consistent with their ability to pay and the
Department makes prompt and reasonable              Doubt as to Liability. This means that a
decisions. Taxpayers are expected to provide        legitimate doubt exists that the taxpayer
reasonable documentation to verify their            owes part or all of the assessed tax liability.
ability to pay. The ultimate goal is a
                                                    Economic Hardship. This means that the
compromise which is in the best interest of
                                                    taxpayer does not have any doubt that the

Offer in Compromise Booklet                                                                Page 1
tax is correct and there is potential to collect     The taxpayer must also attach appropriate
the full amount of the tax owed, but an              documentation that will prove that there
exceptional circumstance exists that would           would be an economic hardship if the taxes
allow the Department to consider an offer.           were collected in full.
To be eligible for compromise on this basis, a
                                                     Note: An important factor in determining
taxpayer must demonstrate that collection
                                                     the type of offer to submit is the potential
of the tax would create an economic
                                                     ability to pay the liability in full. If a taxpayer
hardship. For an economic hardship offer, a
                                                     cannot pay his or her liability in full, then the
taxpayer must submit:
                                                     taxpayer should submit a Doubt as to
1. A statement of financial condition with all       Collectibility offer. However, if potential
appropriate attachments, and                         exists to pay their liability in full, but the
                                                     collection of the tax would create an
2. A written narrative explaining the
                                                     economic hardship, then they should submit
taxpayer’s special circumstances and why
                                                     an Economic Hardship offer.
paying the tax liability in full would create an
economic hardship.


Statutory Basis for Offer In Compromise
Section 48-2-18.1 of the Georgia Public Revenue Code provides the authority for the
Commissioner of Revenue to entertain an offer in compromise:

§ 48-2-18.1. Settlement or compromise of tax assessments; application fee

  (a) The commissioner or his or her designee shall be authorized to settle and compromise any
proposed tax assessment, any final tax assessment, or any tax fi. fa., where there is doubt as to
liability or there is doubt as to collectability, and the settlement or compromise is in the best
interests of the state. The commissioner shall develop procedures for the acceptance and
rejection of offers in compromise. The commissioner shall keep a record of all settlements and
compromises made and the reasons for each settlement and compromise.

  (b) Each offer in compromise shall be accompanied by a $100.00 nonrefundable application
fee. If the offer is accepted by the commissioner, such application fee shall be treated as part of
the offer. Such application fee shall not apply if the applicant's total monthly income is at or
below levels based on the poverty guidelines established by the United States Department of
Health and Human Services. If this is the case, the applicant shall certify as such with their offer.




Offer in Compromise Booklet                                                                     Page 2
Step 1: Basic Requirements
Please review the following statements. Each statement must be “True” in order for the
Department to process your offer request. If your response to any of these statements is “False,”
your offer cannot be processed at this time.

1. You have filed all required tax returns and reports.

2. You have received a final notice of assessment for all Georgia state taxes that you owe.

3. You are not the subject of an open or active bankruptcy case.

If you answer “False” to any of these 3 statements, STOP. Your offer cannot be processed at this
time.

Step 2: Preparing to Submit an Offer
1. You must file all tax returns that you were legally required to file prior to submitting the offer. If
you did not file a return for a prior period because you were not legally required to file, you must
include a detailed explanation of circumstances with the offer. Timely filing and payment of all tax
returns is required while the offer is pending.
2. All estimated payments (if required) must be paid to date for the current year. You will be given
an opportunity to make the required payments before returning or denying your offer.

3. The Department provides two different methods to submit an offer:

         If the offer concerns an individual income tax liability less than $25,000 exclusive of
interest and penalties, Forms OIC-1S (Offer in Compromise – Short Form) and CD-14A (Collection
Information Statement) must be completed.

        For all other offers, Forms OIC-1 and CD-14B (Statement of Financial Condition For
Businesses) and/or CD-14C (Statement of Financial Condition For Wage Earners of Self-Employed)
must be completed and signed with appropriate identification numbers and all sections
completed. Items that do not apply to you should be notated with “N/A.”

4. If your basis for compromise is Doubt as to Liability, please include a computation of the
claimed corrected tax due, an explanation of how you arrived at the amount, and any verifying
documentation.




Offer in Compromise Booklet                                                                   Page 3
Step 3: Determining the Amount of Your Offer
Complete financial information must be provided for any basis for compromise other than doubt
as to liability. You must also send information that reflects your financial situation for the three
months immediately preceding the date you submitted your offer in compromise (two months if
you are eligible to use Form OIC-S (Offer in Compromise – Short Form)). Your offer amount must
equal or exceed your reasonable collection potential (RCP) amount.
Individual taxpayers seeking to compromise an income tax liability less than $25,000 (exclusive of
interest and penalty) must submit Form CD-14A (Collection Information Statement). For other tax
types and income tax liabilities in excess of $25,000, individual taxpayers must submit Form CD-
14C (Statement of Financial Condition For Wage Earners and Self-Employed). Business entities
(corporations, partnerships, LLCs, etc.) should submit Form CD-14B (Statement of Financial
Condition For Businesses). Such forms assist us in determining the Reasonable Collection
Potential. The RCP equals the net equity of your assets plus the amount we project we could
collect from your future income.

Information from the financial condition statements should be transferred to the worksheets on
page 6 (for individuals filing Form OIC-1S), page 7 (for wage earners and sole proprietorships filing
Form OIC-1) and page 9 (for businesses filing Form OIC-1). These worksheets will help you
estimate your RCP and determine your minimum required down payment.

Your offer will be rejected if the Department’s financial analysis indicates that you can pay a
greater amount than that offered in compromise or you have the ability to fully pay the tax
liability, either immediately or through an installment agreement. You must offer an amount
greater than or equal to the RCP amount. All offer amounts must exceed zero.

Does Offering the RCP Guarantee Acceptance of My Offer?
No. The Department performs an audit of your financial condition as a part of the review process.
Here are examples of reasons why your offer for an amount equal to or greater than the RCP you
calculate might be rejected:

Excess Expenses- The Department uses national collection financial standards produced by the IRS
to determine maximum allowable amounts for claimed expenses. Expenses that exceed these
standards will be adjusted to the maximum allowed.

Insufficient Documentation – Most items on the financial statement must be substantiated. Your
offer will be declined if you do not provide sufficient documentation to support income, expenses,
and other items claimed.


Offer in Compromise Booklet                                                                   Page 4
Property Valuation – The Department will assess the value of all property that you own. Your offer
may be rejected if the Department determines the value of the property is greater than shown on
your financial statement.

Omitted Items – Your offer may be rejected if you omit income, assets, or other items of
significance from your financial statement.

Trust Fund Taxes – Your offer may be rejected if your debt is based on taxes collected from others,
such as sales or employee withholding taxes, but not remitted.

History of Non-Compliance—A history of regular or willful noncompliance with revenue statutes
may constitute grounds for rejection of your offer.

Other – The law gives the State Revenue Commissioner the option to accept an offer but in no way
requires it. The offer will be declined in any instance where the Commissioner determines that
acceptance is not in the best interest of the State.

Will offers for less than RCP be considered?
Yes. Explain your situation if economic hardship causes you to offer an amount less than the RCP
by filling out Section 7 (Explanation of Circumstances) on either Forms OIC-1 or OIC1S, as
applicable.

You must also attach to either Form OIC-1 of Form OIC-1S any pertinent documents to help
support your claims of economic hardship.

Economic hardship circumstances may include factors such as advanced age, serious illness from
which recovery is unlikely, or any other factors that have an impact upon your ability to pay the
total RCP and continue to provide for the necessary living expenses for you and your family.

$100 Application Fee
The law requires each offer in compromise to include a $100.00 nonrefundable application fee.
Payment must be submitted in the form of a certified check or money order. If the offer is
accepted by the commissioner, the application fee will be treated as part of the offer. The
application fee is not needed if the applicant's gross income falls below the poverty guidelines
established by the United States Department of Health and Human Services. The poverty
guideline exception applies only to individuals. Offers received without the application fee will not
be processed unless the applicant is exempt from this requirement and completes Form OIC-1A
(Income Certification for Offer in Compromise Application Fee).




Offer in Compromise Booklet                                                                  Page 5
Calculating the RCP for individuals owing $25,000 or less in income tax
(Form CD-14A)
1. Enter total Accounts balance from Section A

2. Enter total Real Estate Equity from Section B

3. Enter total Other Assets Equity from Section C
                                                                                                             A
4. Add lines 1 through 3 to obtain your total equity and assets                                  Total:
                                                                                                                 $
                                                                         $                                   If Box B is 0 or less,
5. Enter total Monthly Income from amount from Section D
                                                                                                             STOP. Use the
6. Enter total Monthly Necessary Living Expenses from Section E and                                          amount from Box A
                                                                         ($                          )
subtract from line 5                                                                                         to base your offer
                                                                                                             amount in Section 5
                                                                         B
                                                                                                             of Form OIC-1S.
Net Difference – This is the amount that would be available to pay                                           Your offer amount
monthly on your tax liability                                                                                must equal or
                                                                                                             exceed the amount
                                                                         $
                                                                                                             shown in Box A.

Select the payment term below that you have chosen for your offer.
7. Lump Sum Cash paid within 60 days                                  Amount from Box B
                                                                              X                  =
                                                                             48
8. Short Term Periodic Payment paid within 60 months                  Amount from Box B
                                                                              X                  =
                                                                             60
                                                                                                 C
                           Insert in Box C the amount from the payment terms you choose above.           $

                                                                                                 D
                                           Add Box A $ ____________ + Box C $ _____________ =
                                                                                                         $

Enter the amount in Box D as your minimum offer amount in Section 5 on Form OIC-1S




Offer in Compromise Booklet                                                                                              Page 6
Calculating the RCP for Wage Earners and Self-Employed Individuals
(Form CD-14C)
1. Enter total Cash balances from lines 11 and 56                                                             A

2. Enter total Personal and Business account balances from lines 12c and 57c                                  B

3. Enter total investments from line 13d                                                                      C

4. Enter total life insurance cash value from line 15g                                                        D

5. Enter total accounts/notes receivable from line 58e                                                        E

                                                                                                              F
                                                                         Subtotal: Add Boxes A through E

6. Real Property Owned
                                                                                                              Individual asset
                                                                         Enter and subtract loan balance
                         Enter Fair Market Value (FMV) for each asset                                         value (if less than
                                                                                 for each asset
                                                                                                              zero, enter zero)
From Line 17a            $                 x 80%    =$                  -$                                =   $

From Line 17b            $                 x 80%    =$                  -$                                =   $
Amount from
                         $                 x 80%    =$                  -$                                =   $
attachments
                                                                                                              G
                                                                                                  Subtotal

7. Purchased Personal Vehicles and Other Licensed Assets
                                                                                                              Individual asset
                                                                         Enter and subtract loan balance
                         Enter Fair Market Value (FMV) for each asset                                         value (if less than
                                                                                 for each asset
                                                                                                              zero, enter zero)
From Line 18a            $                 x 80%    =$                  -$                            =       $

From Line 18b            $                 x 80%    =$                  -$                            =       $
Amount from
                         $                 x 80%    =$                  -$                            =       $
attachments
                                                                                                              H
                                                                                                  Subtotal

8. Personal Assets Except Furniture and Personal Effects
                                                                                                              Individual asset
                         Enter Fair Market Value (FMV) for each asset   Enter loan balance for each asset     value (if less than
                                                                                                              zero, enter zero)
From Line 17a
                         $                 x 80%    =$                  -$                    =               $
From Line 17b
                         $                 x 80%    =$                  -$                    =               $
Amount from
                         $                 x 80%    =$                  -$                    =               $
attachments
                                                                                                              I
                                                                                                  Subtotal

9. Furniture and Personal Effects
$                x 80%              =$                            -$                   =                      $

                                                                          Allowable exemption (subtract)      ($7,900)
                                                                                                              J


Offer in Compromise Booklet                                                                                               Page 7
                                                                        Subtotal (cannot be less than zero)
10. Business Assets Except Books and Tools
                                                                                                                Individual asset
                                                                          Enter and subtract loan balance
                         Enter Fair Market Value (FMV) for each asset                                           value (if less than
                                                                                  for each asset
                                                                                                                zero, enter zero)
From Line 59a            $                x 80%    =$                    -$                                 =   $

From Line 59b            $                x 80%    =$                    -$                                 =   $
Amount from
                         $                x 80%    =$                    -$                                 =   $
attachments
                                                                                                                K
                                                                                                   Subtotal
                                                                                                                    $
11. Books and Tools
$                x 80%             =$                              -$                  =                        $

                                                                           Allowable exemption (subtract)       ($3,950)
                                                                                                                L
                                                                        Subtotal (cannot be less than zero)
                                                                                                                    $
                                                                                                                M
12. Add amounts in Boxes F through L to obtain your total equity and assets
                                                                                                                    $
13. Enter amount from Line 32                                                                                   If Box N is 0 or less,
                                                                              $
                                                                                                                STOP. Use the
    Enter amount from Line 45 and subtract -                                                                    amount from Box M
                                                                              ($                        )
                                                                                                                to base your offer
                                                                              N                                 amount in Section 5
                                                                                                                of Form OIC-1. Your
Net Difference – This is the amount that would be available to pay            $                                 offer amount must
monthly on your tax liability                                                                                   equal or exceed the
                                                                                                                amount shown in
                                                                                                                Box M.

Select the payment term below that you have chosen for your offer.
14. Lump Sum Cash paid within 60 days                                   Amount from Box N
                                                                                X                   =
                                                                               48
15. Short Term Periodic Payment paid within 60 months                   Amount from Box N
                                                                                X                   =
                                                                               60
                                                                                                    O
                             Insert in Box O the amount from the payment terms you choose above.            $

                                                                                                    P
                                          Add Box M $ ____________ + Box O $ _____________ =
                                                                                                            $

Enter the amount in Box P as your minimum offer amount in Section 5 on Form OIC-1




Offer in Compromise Booklet                                                                                                 Page 8
Calculating the RCP for Businesses (Form CD-14B)
1. Calculating Business Assets

  Cash on Hand – Line 15                                                                                             $
  Total Cash in Banks – Line 16d                                                                                     $
  Accounts/Notes Receivable – Line 18f                                                                               $
  Total Investments (stocks, bonds, mutual funds, stock options, CDs) – Line 19c                                     $
  Total Credit Available – Line 20c                                                                                  $
                                                                                                                     A
                                                                                       Total Business Assets
                                                                                                                       $
                                                                                                                     Asset value (if less
                                      Enter Fair Market Value (FMV) for each       Enter and subtract loan
                                                                                                                     than zero, enter
                                                      asset                         balance for each asset
                                                                                                                     zero)
                                                                                                                     B
2. Real Property – Line 21e           $            x 80%    =$                 -$                            =
                                                                                                                         $
                                                                                                                     C
3. Vehicles – Line 22e                $            x 80%    =$                 -$                            =
                                                                                                                         $
                                                                                                                     D
4. Business equipment – Line 23e $                 x 80%    =$                 -$                            =
                                                                                                                         $
                                                                                                                     E
5. Business Liabilities – Line 24d                                                           Balance Due =
                                                                                                                         ($                )
                                                                                                                     F
6. Total Equity in Assets Held                                                            (A+B+C+D) – E = F
                                                                                                                     $
7. Disposable Income Analysis
                                                                                                                     G
             Total Monthly Income (Line 35)
                                                                                                                              $
                                                                                                                     H
       Less Total Monthly Expenses (Line 48)
                                                                                                                              ($       )
                                                                                                                     I
                                                                      Disposable Monthly Income (G-H=I)
                                                                                                                              $

Select the payment term below that you have chosen for your offer.
                                                                        Amount from Box I            J
8. Lump Sum Cash paid within 60 days                                           X
                                                                              48                         =       $
                                                                        Amount from Box I            K
9. Short Term Periodic Payment paid within 60 months                           X
                                                                              60                         =       $
                                                                                                     L
                            Insert in Box L the amount from the payment terms you choose above.
                                                                                                                 $
                                                                                                     M
                                           Add Box F $ ____________ + Box L $ _____________ =
                                                                                                                 $

Enter the amount in Box M as your minimum offer amount in Section 5 on Form OIC-1




Offer in Compromise Booklet                                                                                                        Page 9
What Do I Send With My Offer?
       1.     Either Form OIC-1 or Form OIC-1S (as appropriate), completed and signed.

       2.     Form CD-14A, CD-14B, or CD-14C (as appropriate), completed and signed.

       3.     Supporting Documentation


                      • You must include supporting documentation for any claims of special
                        circumstances made in Section 7 of either Form OIC-1 or Form OIC-1S (e.g.,
                        copies of actual monthly expenses, out-of-pocket medical expenses,
                       physician’s statements detailing illness, etc.)

                     • You must respond within the requested time frame for additional
                       information.

                     • Liabilities must be assessed by the Department in order to be considered
                       for settlement. We cannot process an offer for a period that has not been
                       assessed.

                     • Any money sent with the offer will not be returned and will be applied to
                       your liability.


       4.     Copy of worksheet from page 6 (for individuals filing Form OIC-1S), page 7 and 8 (for
              wage earners and sole proprietorships filing Form OIC-1) and page 9 (for
              businesses filing Form OIC-1).

       5.     Certified check or money order for $100 application fee or a completed Form OIC-
              1A if you qualify for a fee waiver.

       6.     If your basis for compromise is doubt as to liability, please include a computation of
              the claimed corrected tax due, an explanation of how you arrived at the amount,
              and any verifying documentation.

       7.     Information should be submitted to the Department’s Offer in Compromise Unit at
              the address listed on page 11 of this booklet.


What Happens After My Offer is Submitted?
How we evaluate your offer in compromise: First, the assigned revenue officer makes an initial
review of the file to determine whether the offer may be processed and may request additional
documentation to verify the information you provide. The complete offer packet is forwarded to

Offer in Compromise Booklet                                                                Page 10
the Offer in Compromise (OIC) Unit for evaluation of the offer. The OIC Unit performs an audit of
the information provided. You may be contacted if additional information is needed or
documentation is needed. The OIC Unit then makes a recommendation to the State Revenue
Commissioner.

Will Collections Stop?
Not necessarily. There are certain circumstances when the Department will suspend collection
activities while we consider your offer. After an offer is determined to be complete and submitted
for processing, we will not act to collect the tax liability while we consider and evaluate your offer.
We will also allow 14 days for you to respond after we send a letter notifying you of the
Department’s intention to deny your offer.
It is important to note that the Department will not suspend collection if we determine that you
submitted your offer to delay collection or cause a delay which will jeopardize our ability to collect
the tax.

If Your Offer is Accepted
The Department will notify you and your designated representative by mail if the offer is
accepted. Payment of the accepted offer must be made by the payment due date as indicated on
the acceptance letter (usually 60 days from date of the acceptance letter).

If Your Offer is Declined
Notification: You will be notified by mail if the offer is declined. You should immediately contact
the Department to arrange payment of the entire liability.

Installment Payments: If immediate payment of the entire liability is not possible, you may request
payment through a Department-approved installment payment agreement.

Counter Offers: We will contact you if we believe you may qualify for an offer in compromise at an
increased amount. At that time, you may offer an increased amount based on the Department’s
recommendation, normally without submitting additional paperwork.

Where to Submit an Offer or for Assistance Completing an Offer
Mail the application and all attachments to:

                                 Georgia Department of Revenue
                                  Offer in Compromise Program
                                1800 Century Blvd., NE, Suite 17205
                                   Atlanta, Georgia 30345-3209




Offer in Compromise Booklet                                                                   Page 11

				
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