Arizona 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
Arizona uses Form 11005 for Offer submissions. To qualify, you must review the Arizona Revised Statutes (ARS) §42-1004.B, which has a ton of information. In short, the Attorney General makes the final decision on whether to accept your Offer or to reject your Offer. The liability owed must be determined uncollectible or the administrative costs of collection must exceed the amount of the liability.
Lastly, if your balances are currently with the Attorney General’s office, you will want to submit your Offer directly to the Assistance Attorney General with whom you are currently working.
Submitting Your Offer in Compromise
Much like the IRS Offer in Compromise program, you must be in compliance before submitting an Offer. In addition, you are agreeing to allow the Statute of Limitations to be extended the amount of time your Offer is under review. However, the State does make a determination much more quickly than the IRS.
Offer in Compromise Pros and Cons
The Pros of submitting an Offer to the State of Arizona is they may allow your debt to be compromised and thereby removed.
The Cons are if your Offer is rejected you have no right to Appeal. In addition, if you submit a second Offer it will 99% of the time also be rejected. Also, your Offer is being reviewed by the Attorney General’s office and that could open you up to a judgment being filed.