Colorado 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
The State of Colorado OIC program is like some other states in that you must have an accepted Offer from the IRS. As stated on the website, here is what you need to qualify:
- All required tax returns have been filed through the current period.
- The IRS has already accepted an Offer in Compromise covering the same years and liabilities.
- The State of Colorado has not previously accepted an Offer in Compromise from the taxpayer to cover prior liabilities
- The taxpayer has not previously received tax relief such as a tax liability discharged through bankruptcy, written off past statute, an innocent spouse relief or any prior settlement.
- The taxpayer cannot be reasonably expected to satisfy all outstanding delinquencies within the period for collection as prescribed by Colorado Revised Statute 39-10-101 (2)(b).
Submitting Your Offer in Compromise
The documentation the State of Colorado requires is extensive, but if you have already submitted an Offer to the IRS as they require, there isn’t too much more that needs to be done before submission. Here is what you need to ensure your Offer will be reviewed and not returned:
- A copy of the IRS Form 656 stamped with the IRS Received Date.
- IRS Form 433 Collection Information Statement for Wage Earners and Self-employed Individuals
- Verification of IRS acceptance of a submitted Offer in Compromise
- Proof of payment for IRS Offer in Compromise
- An IRS “Record of Account”
- Any other relevant information pertaining to the Offer in Compromise agreement with the IRS
- The department’s financial form Statement of Income and Expenses (DR 6596).
- Completed Offer in Compromise Terms and Conditions.
- A written statement detailing the circumstances that warrant special consideration for an Offer in Compromise as well as the amount being offered.
- Written disclosure of any transfer of real or personal property such as vehicles, cash or title transfer of property.
- Written disclosure of marital and filing status.
Offer in Compromise Pros and Cons
The Pros of submitting an Offer to the State of Colorado 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. In addition, you must pay your Offered amount in full within 15 day of acceptance. So, it’s imperative to be sure you have the funds available to pay in full.