Georgia State Tax Forgiveness: How it Works
The Georgia Department of Revenue (GA DOR) allows taxpayers to settle a tax liability for less than the total amount owed. This is called an offer in compromise and is one of the more popular tax debt relief programs in Georgia. These programs are also known as Georgia state tax forgiveness programs. The IRS offers a similar program for unpaid federal taxes.
We also discuss the Georgia tax payment plan, another form of tax debt relief offered by the GA DOR, at the end of this article.
What is a Georgia Offer in Compromise?
The purpose of the Georgia offer in compromise program is to resolve back taxes so that the Department of Revenue will receive the most tax that it can expect to collect from a delinquent taxpayer within a reasonable period of time.
Why will the state agree to accept less money in satisfaction of a tax bill? An offer with some amount of payment today is often more attractive to the state than an installment agreement paid over many years, where the chances of default are high. And, an offer of some money is certainly better than putting the case in the currently non collectible file, where the state gets nothing.
In short, the Georgia Department of Revenue will accept an offer in compromise if it is in the best interest of the state. And that is almost always in the best interest of the taxpayer as well.
Georgia Offer in Compromise Calculator
The GA Department of Revenue will decide on the merits of an offer based on the taxpayer’s ability to pay the tax. This is called a “doubt as to collectability offer.”
Application for a Georgia offer in compromise requires a calculation of:
- The amount of equity in the taxpayer’s assets
- The taxpayer’s present and future income
- The taxpayer’s present and future expenses
Documentation is required to support these calculations. It must be submitted with a Collection Information Statement (CD-14C for individuals and CD-14B for businesses). Overall, the calculations and the supporting documentation will need to demonstrate that doubt exists that the taxpayer will ever be able to pay the tax to the state in full.
Just the like the IRS, the Georgia Department of Revenue will not accept all expenses as legitimate when deciding if a taxpayer can afford to pay a tax. The state uses predefined standards for expenses. Expenses that are in excess of those standards will not be considered.
An offer will be rejected if the calculations and supporting documentation show that the taxpayer can afford to pay an amount greater than the offer. An offer will also be rejected if the state can prove that the taxpayer is able to afford to pay the tax in full, either immediately or through an installment agreement.
The required from to obtain an offer in compromise in Georgia is Georgia Form OIC-1 (Offer In Compromise).
Requirements for a Georgia Offer in Compromise
The state will only consider an offer in compromise if all tax returns have been filed. Therefore, before applying for an offer, the first step in the process is to identify which returns are missing. Then, have the missing returns prepared and filed with the government as soon as possible.
The state will reject an offer if the taxpayer is not making quarterly state tax payments for the current year, if required to do so. Most commonly, this applies to business owners and independent contractors who do not pay their state taxes through payroll withholding. Georgia quarterly tax payments are due to the state on April 15, June 15, September 15, and the following January 15. Quarter tax payments may be paid electronically with the Georgia Department of Revenue, by mail, or in person.
The state will not consider an offer if the taxpayer is in bankruptcy.
The state may reject an offer in compromise if the taxpayer owes sales taxes or payroll taxes to the state (trust fund taxes).
Finally, the state requires a history of good tax compliance before an offer in compromise will be accepted.
Tax Forgiveness and Tax Settlement Services for GA State Taxes Owed
Tax forgiveness and tax settlement programs are available from both the IRS and the Georgia Department of Revenue. The offer in compromise program remains one of the most powerful techniques to wipe away a tax debt.
However, not all offers in compromise are accepted by the government. In fact, some national “tax resolution companies” are known to churn out offers that have little or no chance of being accepted. At our local, Atlanta-based accounting firm, we only submit offers that we know have a very high probability of being accepted. To do differently is a waist of time and money.
Georgia State Tax Payment Plan
In addition to a an offer in compromise, the Georgia Department of Revenue also offers Georgia state tax payment plans. These are installment agreements for individuals or businesses who are unable to pay their tax to the Georgia Department of Revenue all at once. Installment agreements allow taxpayers to settle their debt to the state over time.
A Georgia state tax payment plan or installment agreement should be considered if a taxpayer does not quality for an offer in compromise.
The Georgia Department of Revenue payment plans offer installments of up to 60 months (5 years).
Collection activates will stop as long as you are in an installment agreement with the GA DOR. However, interest and penalties will continue to accrue on taxes owed to the Georgia Department of Revenue until the tax debt is paid in full. So it is best to pay off the tax as quickly as possible.
Installment plans will not be approved if:
- The taxpayer is in bankruptcy
- The taxpayer has a pending over in compromise with the Georgia Department of Revenue
- The taxpayer has unfiled returns for the prior five years
The Georgia state tax payment plan is not technically the same as Georgia state tax forgiveness. The tax, plus interest and penalties, will be paid to the state in full in the end. Nevertheless, a state tax payment plan is often just what a taxpayer needs to resolve a state tax debt that they cannot afford to fully pay all at one time.
How Long Can Georgia Collect Back Taxes?
After the Georgia Department of Revenue records a tax lien, also known as a state tax execution, the state has 10 years from the recording date to collect the tax liability. The state tax debt is no longer enforceable after the 10 year period expires.
This 10-year period may be extended for specific reasons, such as the taxpayer filing bankruptcy, entering into an installment payment agreement, submitting an Offer in Compromise, or filing protests and appeals.
State tax liens may not be renewed.
Unfiled Tax Returns
If you want to take advantage of a Georgia offer in compromise or a Georgia state tax payment plan and you have unfiled tax returns, call your CPA, tax preparer or accountant to get the required tax returns prepared and submitted to the Georgia Department of Revenue as soon as possible. The state will not negotiate with you or your representative until all tax returns have been filed.
Nevertheless, it is not too late to solve the problem of GA taxes owed that you cannot afford to pay!
Meet us face to face in Atlanta to discuss Georgia state tax forgiveness, the Georgia offer in compromise program, or a Georgia state tax payment plan. We want to be your local Atlanta CPA firm.
Due to the sensitivity and complexity of the issues, it is usually better to work with a local GA firm when dealing with GA tax problems, rather than a national firm. We can work with you face to face in Atlanta.
To learn more about our CPA services for clients under audit, check out our article on IRS Audit Basics.
You may also like our post on the Statute of Limitations and IRS Tax Relief Programs.
Lastly, our Guide to IRS Payment Plans or Installment Agreements discusses an important alternative to the offer in compromise program. This is available from both the IRS and the Georgia Department of Revenue.
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Massey and Company CPA is a boutique tax and accounting firm serving individuals and small businesses in Atlanta, Chicago and throughout the country. Our services include tax return preparation, tax planning for businesses and individuals, IRS tax problem resolution, IRS audits, sales tax, and small business accounting and bookkeeping.
Gary Massey, CPA, our Managing Director, is a Certified Tax Representation Consultant.