Offer in Compromise program
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What is an offer in compromise and who qualifies?
The Offer in Compromise program allows qualifying, financially distressed taxpayers the opportunity to put overwhelming tax liabilities behind them by paying a reasonable portion of their tax debt. We can consider offers in compromise from:
- individuals and businesses that are insolvent or discharged in bankruptcy, and
- individuals who are not insolvent or bankrupt, if payment in full would create undue economic hardship. (Only individuals may apply for relief based on undue economic hardship, which may include relief from business debts they're personally responsible for.)
If you apply for an offer in compromise, we will give your application full consideration, however, we will only consider your offer if you meet the qualifying criteria. We will analyze your offer to determine if acceptance is in the best interest of New York State and other taxpayers. This may, for example, require you to pay in full any trust taxes you owe (unpaid sales or withholding taxes, excluding penalty and interest) to reach a compromise. As a result, we will not accept all offers from qualifying applicants.
What is undue economic hardship?
Generally, undue economic hardship occurs when you are unable to pay reasonable basic living expenses. Basic living expenses are those that provide for the health, welfare, and production of income for you or your family. We look to the IRS Collection Financial Standards to help determine allowable basic living expenses.
In addition to basic living expenses, we will consider other factors that can impact your financial condition when assessing a claim of undue economic hardship, including:
- age, employment status, and employment history
- inability to earn an income because of a long-term illness, medical condition, or disability
- obligations to dependents
- extraordinary circumstances such as special educational expenses, medical catastrophe, or natural disaster
- inability to borrow against or liquidate assets due to hardship
Undue economic hardship does not include the inability to maintain an affluent or luxurious lifestyle. When we review your expenses to determine undue economic hardship, we generally do not allow the following as necessary living expenses:
- private school tuition
- college expenses
- charitable contributions
- voluntary retirement contributions
- payments on credit cards
If you believe you do not qualify for the Offer in Compromise program, New York State does offer payment plans that might help you resolve your outstanding debt with an affordable monthly payment. See Installment payment agreement for additional information.
How to apply
You must agree to comply with certain terms and conditions before we will accept your offer. See Offer in compromise terms and conditions for a summary list. If applying online, you can view the full terms in the Web application. If applying by mail, refer to Form DTF-4 or Form DTF-4.1, listed below. If your offer is accepted, we will also mail you a copy of the full terms that apply to your offer.
You may be able to apply using your Online Services account if:
- you are an individual,
- your debt is for personal income tax only,
- you do not have an open protest for any of your liabilities,
- you do not have an open bankruptcy, and
- the total amount you owe the department is $15,000 or less.
- Have your asset, liability, monthly income, and monthly expense information available.
- Log into your Online Services account (or create one).
- Select Payments, bills and notices from the ≡Services menu.
- Select Offer in Compromise.
You must complete your application within 90 days, otherwise we will delete it.
Apply by mail
- Complete Form DTF-5 and either Form DTF-4.1 (most common) or Form DTF-4, and provide all requested documentation.
- Form DTF‑4.1, Offer in Compromise (For Fixed and Final Liabilities)
- Form DTF‑4, Offer in Compromise (For Liabilities Not Fixed and Final and Subject to Administrative Review)
- Form DTF‑5, Statement of Financial Condition
- federal returns for the preceding three years, with all schedules and statements attached (you must include an explanation if you were not required to file); and
- all bank account statements, brokerage account statements, and retirement account statements for the preceding 12 months; and
- a credit report fewer than 30 days old; and
- any other supporting documentation that will substantiate a financial disclosure made on your Form DTF-5.
NYS TAX DEPARTMENT
CED OFFER IN COMPROMISE UNIT
W A HARRIMAN CAMPUS
ALBANY NY 12227-5100
What happens after applying?
If applying online, you will receive an electronic confirmation.
If applying by mail, you will receive an acknowledgement letter stating:
- your application is complete, or
- you are missing specific required information and must submit it before we can review your application.
Once your application is complete, it will await assignment to a reviewer who will contact you or your representative when the review process begins. We will request additional documentation, as necessary, during our review.
See Publication 220, Offer in Compromise Program, for additional information and instructions.
Still have questions? Call us at 518-591-5000 to have a question or concern addressed.