Kentucky Offer in Compromise: What You Need to Know
An Offer in Compromise is an agreement between you and the State Government to settle your back taxes for less than you owe.
An Offer in Compromise is strictly based on numbers; basically, your income versus your expenses and the equity in your assets.
If you can prove to the State you do not have the ability to pay back your taxes in full before the Statute of Limitations expires, then you may be eligible to file an Offer in Compromise. However, it will depend on your Reasonable Collection Potential and how much time is left before Statute of Limitations on the debt expires.
Qualifying for an Offer in Compromise
To qualify for an OIC with the State of Kentucky, they list the following on the Application:
- Application Deposit—All applications must be accompanied by a non-refundable $500 deposit. The deposit will be applied to your tax liability and count towards an offer amount should one be accepted.
- b. Minimum Case Balance—Offers will only be reviewed and considered on cases with a balance exceeding $3,000. If your case balance does not exceed $3,000 you will need to contact the Division of Collections @ 502-564-4921, ext. 5354.
- c. Operating Business—No offer will be reviewed or accepted on an operating business. The Department will only review and consider offers on businesses which are closed.
- d. Tax Compliance—You must file all tax returns that you were legally required to file prior to submitting an offer. This includes Individual Income Tax returns and all returns for closed businesses and operating businesses. If you had no Individual Income Tax filing requirement for a specific year or period because you were not legally required to file the return, you must note the period(s) below.
Tax Period(s):______________________ Reason(s)________________________________________
- e. Bankruptcy Proceedings—If you currently have an open bankruptcy proceeding, we cannot consider an offer. Once the bankruptcy is closed or discharged, you may submit an offer.
- f. Estimated Tax Payments—You must be current on all required estimated tax payments.
Submitting Your Offer in Compromise
Much like the IRS and other states, you must submit all required supporting documents and failure to do so will result in your Offer being rejected. Their list of documents includes:
- Statement of Financial Condition For Individuals, Form 12A638(I) (signed & dated)
- Copies of all bank account(s) statements (on all household accounts for the most recent 3 months)
- Proof of income (copies of the last 3 months of pay stubs for all household earners)
- Copy of most recent state & federal income tax returns (include W-2’s, 1099’s, and all schedules)
- If you are self-employed, you must also submit a Statement of Financial Condition for Businesses, Form 12A639 (Plus the most recent corporation tax return, most recent profit/loss statement and all business bank account(s) statements for the most recent 3 months)
- Recent copy of power of attorney if represented by someone other than yourself
- Recent copy of a credit report
- All documentation regarding inheritances and lawsuits either pending or resolved within the last 12 months
Offer in Compromise Pros and Cons
The Pros of submitting an Offer to the State of Kentucky is they may allow your debt to be compromised and thereby removed.
The Cons are if the State rejects your Offer, it is not subject to administrative or judicial review.