Offer in Compromise - Frequently Asked Questions

  1. What does the Board of Equalization (Board) consider a fair Offer in Compromise (OIC) in relation to the amount due?
  2. Can I be involved as an owner in the same or a similar type of business?
  3. I have an open business that is a partnership. Do all partners have to submit an OIC application with personal financial information?
  4. My IRS/FTB OIC has been accepted. Will the Board automatically approve my OIC?
  5. Can I make payments on the offered amount?
  6. Do I need to have someone represent me?
  7. Can prior payments be credited to the offered amount?
  8. Does interest stop accruing on my liability while my OIC is being evaluated?
  9. Will collection action be suspended while my OIC is being evaluated?
  10. Will state tax liens be released if my OIC is accepted?
  11. What is the current OIC acceptance process?
  12. What is the process after my OIC is approved?
  13. What does a public record statement include?
  14. How long will it take to get a decision on my OIC?
  15. If the Board determines that my OIC is not acceptable, will I be contacted?
  16. If my OIC is rejected, can I choose to apply the deposit to my liability?
  17. My business was assessed a liability after my business was audited, am I eligible for an OIC?
  18. When does a tax or fee liability become final?
  19. I purchased a business and was assessed a liability for taxes incurred by the previous business owner. Do I qualify for an OIC?
  20. I don't own a business, but I purchased tangible personal property outside California and was later assessed use tax on my purchases. Can I resolve my liability with an OIC?
  21. I previously received an OIC and would like to get another compromise for liabilities recently assessed by the Board. Will my second request be considered for an OIC?
  22. I don't qualify for the OIC program. Are there other options that I can pursue to resolve my liability?
  23. Can I get relief from the tax liability by filing bankruptcy?

  1. What does the Board of Equalization (Board) consider a fair Offer in Compromise (OIC) in relation to the amount due?

    Generally, an OIC will be accepted when the amount offered is more than the Board can expect to collect within a reasonable period of time, typically from five to seven years.

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  2. Can I be involved as an owner in the same or a similar type of business?

    For closed out accounts, you cannot have an interest or association with the same business or a similar type of business as the transferred or discontinued business for which you seek a compromise. Effective January 1, 2009 through January 1, 2013, the Board will also consider an OIC for open and active businesses that have not received reimbursement from the taxes, fees or surcharges owed; successors of businesses that may have inherited tax liabilities from their predecessors; and consumers, who are not required to hold a seller's permit, but incurred a use tax liability.

  3. I have an open business that is a partnership. Do all partners have to submit an OIC application with personal financial information?

    Yes. For open businesses, all partners must submit an OIC application and make full disclosure of their business and personal financial information in order to be considered for an OIC.

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  4. My IRS/FTB OIC has been accepted. Will the Board automatically approve my OIC?

    No. Your Board offer will be evaluated separately from your IRS or FTB offer.

  5. Can I make payments on the offered amount?

    Yes. Effective January 1, 2009 through January 1, 2013, if you are unable to fund your offer with a lump-sum payment, you may enter into a written agreement to pay the offered amount with payments over a period not to exceed one year. However, the terms of the payment agreement are at the discretion of the OIC Section and are determined by your current and future financial situation.

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  6. Do I need to have someone represent me?

    Representation is not required. OIC is available to all taxpayers, whether or not they are represented. If you think you need representation, there are many tax professionals who have experience with the OIC process.

  7. Can prior payments be credited to the offered amount?

    No. Prior payments are not credited to the offered amount unless you have entered into a written agreement with the OIC Section to fund the offer with installment payments. However, prior payments and the offered amount compared to the total liability are taken into consideration when evaluating your OIC.

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  8. Does interest stop accruing on my liability while my OIC is being evaluated?

    No. Interest continues to accrue on your liability while your OIC is being evaluated.

  9. Will collection action be suspended while my OIC is being evaluated?

    Most collection actions will be suspended while your OIC is being considered. However, if delaying collection activity jeopardizes the Board's ability to collect the tax, the Board may continue with collection efforts. You may also be required to continue payments if you are currently in an Installment Payment Agreement while applying for an OIC. You may want to refer to Publication 54, Tax Collection Procedures, for additional information concerning the Board's collection process.

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  10. Will state tax liens be released if my OIC is accepted?

    Generally the Board will release state tax liens upon final approval of your OIC. However, if another partner existed on the permit, that person's liability will not be canceled nor will the lien be released. A single-party release will be issued to release you from the effects of the lien.

  11. What is the current OIC acceptance process?

    Your application information and financial documentation will be evaluated. If your OIC is acceptable, the OIC Section will submit a recommendation to management for approval. If the compromise of the tax or fee portion of the liability is more than $7,500, your OIC must also be approved by the Board Members at a public hearing. Offers for tax and fee programs with no statutory provision for an OIC are submitted to the Attorney General's office.

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  12. What is the process after my OIC is approved?

    The Board will apply the offered funds to the amount owed and release any tax liens associated with the taxpayer involved in the compromise. If the liability compromised was for an active business, you must file and pay all returns by the required due dates for a five-year period from the date the liability was compromised or your OIC may be rescinded. The Board is required by law to post a public record statement when a compromise of tax and/or penalties in excess of $500 is approved.

  13. What does a public record statement include?

    A public record statement includes the name of the taxpayer involved in the compromise, the amount of unpaid tax and related penalties, interest, or other amounts involved, the amount offered, and a summary of the reasons why the compromise is in the best interest of the state. A public record statement is placed in the office of the Board's Executive Director for at least one year.

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  14. How long will it take to get a decision on my OIC?

    Generally, if the Board accepts your OIC for processing, the Board will have a decision to you within 180 days after receiving your offer. If your account is more complex, it may take longer than 180 days.

  15. If the Board determines that my OIC is not acceptable, will I be contacted?

    The Board may contact you to discuss your account and to determine the most appropriate resolution. For example, if the Board determines that you have the ability to make monthly payments that will exceed the amount offered, the Board will work with you to establish an installment payment agreement.

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  16. If my OIC is rejected, can I choose to apply the deposit to my liability?

    Yes. If you funded the offer with a lump sum payment you may choose to have the deposit applied to your liability or you may have it returned to you. If you choose to do so, the effective date of the payment is the date the deposit was made. If the deposit was posted by a third party, the Board must obtain their approval before applying the payment. If the offer was funded through a written payment agreement, the payments are retained and applied towards the liability.

  17. My business was assessed a liability after my business was audited, am I eligible for an OIC?

    For active businesses, effective January 1, 2009 through January 1, 2013, only "qualified" liabilities are eligible for the OIC program. A "qualified" liability is a final board assessed liability that resulted from a transaction in which no tax or fee reimbursement was collected from the customer. If tax was collected but not remitted in full to the Board, the liability is not a "qualified" liability and will not be considered for an OIC.

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  18. When does a tax or fee liability become final?

    Generally, a tax or fee liability becomes final after you have exhausted all your appeal rights. The tax or fee liability is not final if you have a petition for redetermination, administrative protest, claim for refund, or settlement pending.

  19. I purchased a business and was assessed a liability for taxes incurred by the previous business owner. Do I qualify for an OIC?

    Yes. Effective January 1, 2009 through January 1, 2013, if you inherited a liability as a "successor" of a business for your predecessor's tax or fee liability, the liability is eligible for an OIC, as long as you were not part of the predecessor's business. However, if you were notified by the Board through a Sales Tax Clearance Request or through an open escrow, that the predecessor had a liability prior to purchasing the business, your OIC will not be considered. For example, you initiated an escrow to purchase the business and were notified that a liability existed. If the escrow is cancelled and you later purchase the business without obtaining a tax clearance from the Board, you were aware of the liability prior to your purchase and circumvented payment to the Board. Therefore, the Board will not compromise your successor liability.

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  20. I don't own a business, but I purchased tangible personal property outside California and was later assessed use tax on my purchases. Can I resolve my liability with an OIC?

    Yes. Effective January 1, 2009 through January 1, 2013, consumers (not required to hold a permit with the Board) who incur a use tax liability may resolve their liability through the OIC program provided they do not have the ability to pay the outstanding liability in full.

  21. I previously received an OIC and would like to get another compromise for liabilities recently assessed by the Board. Will my second request be considered for an OIC?

    No. The Board will not consider an OIC for a business in which a taxpayer has previously received an OIC, nor will the Board consider an OIC for any liabilities similar in assessment that were previously compromised. For example, if you received an OIC for a liability that was assessed for excise taxes due on cigarettes purchased out-of-state, an excise tax liability for subsequent purchases of cigarettes will not be compromised.

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  22. I don't qualify for the OIC program. Are there other options that I can pursue to resolve my liability?

    Yes. If you dispute the amount of tax or fee you owe, you can usually contest that decision by filing an appeal (filing deadlines apply). You may want to refer to Publication 17, Appeals Procedures, for additional information concerning the Board's appeal process. If you have a petition for redetermination, administrative protest, or claim for refund pending, you may qualify for the Settlement Program. If you want to make payments instead of paying the liability in full, you should contact the collector assigned to your case. You may want to refer to Publication 54, Tax Collection Procedures, for additional information concerning the Board's collection process. In addition, you may pay the liability and then file a Claim for Refund, BOE-101 (filing deadlines apply).

  23. Can I get relief from the tax liability by filing bankruptcy?

    Part or all of your taxes may be dischargeable under the bankruptcy code. If this is a consideration, you may want to seek legal advice.

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Updated 12/02/08