Georgia Tax Debt Relief
The Georgia Department of Revenue 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. A similar program is offer by the IRS.
What is an 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.
Offer in Compromise Calculator
The 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.
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.
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
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 “tax resolution companies” are known to churn out offers that have little or no chance of being accepted. In 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.
Meet us face to face in Atlanta or Chicago to discuss the offer in compromise program. We want to be your local CPA firm.
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.