How to Get Forgiveness on Georgia State Taxes
Can’t afford to pay your state taxes? Then, you may qualify to settle for less than you owe through an offer in compromise. This can be one of the most effective ways to reduce your state tax bill, but there is a very involved application process. Here’s what you need to know.
What is a Georgia Offer in Compromise?
An offer in compromise is when a tax agency agrees to let you pay off your taxes for less than you owe. To participate in the program, you must submit a reasonable offer based on the amount the Department of Revenue expects to collect over a feasible period and your current financial situation. The Georgia Department of Revenue then evaluates the offer to determine if it is in the state’s best interest to accept the compromise.
The Georgia offer in compromise program is very similar to the IRS’s program, and if you owe back taxes to both the state and the IRS, you may end up applying to both programs.
To gain deeper insights into how Offers in Compromise work on both the federal and state level and how to know if you’re eligible for one, the other, or both, download our free whitepaper, “Demystifying the Offer in Compromise: Understanding the Frequently Misunderstood Tax Liability Solution.”
Types of Offers in Compromise
In Georgia, you can qualify for an offer in three different ways:
- Doubt as to collectibility — This is when you cannot afford to pay the full bill. Usually, the state will only accept your offer if it’s the most you can afford to pay. When you make your offer, you must convince the state that they wouldn’t be able to collect more if they enforced collections against you.
- Economic Hardship — This applies when the state takes a smaller offer than you can technically afford to pay because requiring you to pay more would be unfair or cause economic distress. For instance, this rule might apply if the only way you could afford to pay more is by selling your home, but if you sell, you won’t be able to afford rent or a new home.
- Doubt as to liability — If there is a legitimate doubt that you should owe the tax, you may be able to get an offer in compromise based on doubt as to liability. For best results, work with a tax professional, like the experienced attorneys at Wiggam Law, who can make a strong legal argument to the Department of Revenue on your behalf.
How Much Can You Save?
The exact savings vary depending on your situation. Some taxpayers may get their bills reduced by 10 to 20%, while others may save well over 90%. We’ve helped many taxpayers eliminate over 99% of their state tax bills.
One of our clients was assessed $99,851.00 in unpaid sales taxes related to her ex-husband’s business. She was not involved with the business but was listed as an officer by her ex-husband, which caused the Georgia Department of Revenue to assess her personally for the unpaid sales tax.
We filed a Georgia Offer in Compromise based on “doubt as to liability” for $720.00, and it was accepted, saving our client $99,131.00. You can check out more of our Offer in Compromise case results here to see how we’ve helped our clients lower their tax debt.
How to Apply for an Offer in Compromise in Georgia
You can apply for an offer in compromise through the mail or online. To apply online, set up an account with the Georgia e-services Tax Center. Then, select offer in compromise and follow the prompts to complete your application.
To apply through the mail, submit Form OIC-1 (Georgia Department of Revenue Offer in Compromise Application) along with Form CD-14C (Collection Information Statement for Wages Earners and Self-Employed Individuals) or Form CD-14B (Collection Information Statement for Businesses).
The OIC-1 form requires information about the tax period and the type of tax (state income tax, sales tax, withholding tax, etc). It also asks why you’re applying for an offer in compromise, and then it requires you to explain why the department should forgive some of your bill. This is arguably the most important part of the application, so you must complete it carefully.
The other two forms are all about your financial situation. They request very detailed information about your assets, income, and expenses. Then, the forms guide you through the process of creating an offer.
How Much Should You Offer?
If you’re applying for an offer based on doubt as to collectibility or effective tax administration, the right offer varies based on your situation. If you’re applying based on doubt as to collectibility, you need to base your offer on your disposable income and the equity in your assets.
The GA DOR expects your offer to include the following:
- All of your cash and cash equivalents, such as the cash value in your life insurance accounts.
- 80% of the value of your investment accounts.
- 70% of the value of your retirement accounts.
- 80% of the equity in your home, vehicles, and other assets, such as jewelry and collectibles.
- 48 or 60 months of disposable income.
Your offer should be the result of adding all of those numbers together. However, there can be some subjectivity. For instance, you may not need to include the value of assets that you use for your business. This is where an experienced tax attorney can be critical — they know how to convince the department to not take certain assets into account.
There can also be some subjectivity involved in the process of calculating your disposable income. In particular, the department usually only lets you include a certain amount of expenses. A tax attorney may be able to help you craft arguments to get the department to allow more expenses than usual.
When Do You Pay the Offer?
You can pay your offer in a lump sum, or you can request to make monthly payments. If you opt for a lump sum, you must pay the offer within 60 days of acceptance. If you want payments, you can take up to five years to pay.
With a lump sum offer, you must include four years of disposable income, and with a payment plan, you must include five years of disposable income. You must decide which option you want before you apply.
Cost of an Offer in Compromise
The Georgia Department of Revenue charges $100 for an offer in compromise, but if you qualify as low-income, the department will waive the fee. If you work with a tax attorney or CPA, you will also need to pay their fees. The cost varies depending on the situation, but keep in mind that you get a lot of value in exchange for the fees.
What to Expect When You Apply
When you apply for an offer in compromise, the state will stop enforced collection actions against you while it reviews your offer. For instance, the state won’t seize your assets. However, if the department determines that you have only applied to slow down the collection process, the department can initiate collections. The state also has the right to issue a tax lien (aka a state tax execution) while reviewing your offer.
Rules for an Offer in Compromise
If the department accepts your offer, you must pay in the allotted time frame. If you don’t pay the lump sum within 60 days or if you miss a monthly payment, you will go into default, and the state will have the right to demand full payment and seize your assets.
Additionally, once the state accepts an offer in compromise, you no longer have the right to contest the amount of tax you owe. If you disagree with your state tax liability, contact a tax attorney to help you figure out if you should appeal, pay under protest, apply for an offer based on doubt as to liability, or take other actions.
Finally, you cannot receive any refunds for the tax years through the calendar year in which the offer is accepted. For instance, if the department accepts an offer in compromise in 2023, your state tax refund for 2023 will be applied to your bill.
Why Contact Wiggam Law?
Approval rates on offers in compromise are very low. The IRS accepts less than half of all offers, and the state doesn’t publish its acceptance rate. Unfortunately, a lot of unscrupulous tax debt relief companies just churn out offers in compromise, and they often end up charging clients a lot of money for failed, ill-advised attempts.
At Wiggam Law, we don’t submit offers unless we are sure that there’s a very high chance of acceptance. We leverage years of experience working with the IRS and the GA DOR to help our clients, and if we don’t think you’ll qualify, we will help you explore other options, such as a state payment plan, to help you reduce your tax debt.
Ready to take the first step towards getting help with your state or federal tax problems? Call us at (404) 233-9800 or schedule a consultation today. Our experienced team at Wiggam Law is always here to help you find stress free relief and give you back your peace of mind.