California catches up with Federal government on Offers in Compromise acceptance rates, says Tax Tiger.
In this recent interview with Tax Tiger, Presentation Solutions uncovers information on how the firm can help individuals and business owners in California negotiate with their state income tax collector.
Presentation Solutions: We understand that many states are now offering to negotiate tax debt. For time’s sake, let’s focus on your primary state of California. Can you tell us who is responsible for collecting taxes in the Golden State?
Tax Tiger: The State of CA Franchise Tax Board.
Presentation Solutions: Is it more difficult to qualify for an Offer in Compromise from state to state than it is with the federal government?
Tax Tiger: That appeared to be the case until recently. Over the last few years, the State of California appears to have leveled out with the federal acceptance rate.
Presentation Solutions: Is the submission and approval process faster with the state or the IRS?
Tax Tiger: Turnaround time is considerably faster with the state, which works more intuitively than the IRS.
Presentation Solutions: Does the state pursue collection activities in the middle of an OIC Proceeding?
Tax Tiger: Not usually, but there are no laws prohibiting the state from doing so. This differs from the IRS who does offer a protected stay period during the negotiating process.
Presentation Solutions: How does the state determine compromise numbers when a taxpayer also owes the federal government?
Tax Tiger: Very simply stated, the state of California expects an offer to be proportionate to the amount the taxpayer owes the federal government. Tax Tiger can help by reviewing the taxpayer’s current information and helping them determine a reasonable amount. This will expedite the process.
Presentation Solutions: So if a taxpayer owes the state approximately one-half of what they owe the IRS, should they offer a proportionate settlement?
Tax Tiger: Yes, that is exactly right. The state is much more likely to accept an offer of less than the actual money owed when a taxpayer is also facing a federal liability.
Presentation Solutions: Are there any tips that you would offer taxpayers who are trying to negotiate with the state and the IRS at the same time?
Tax Tiger: If the taxpayer can pay the state a proportionate amount in cash, they can exclude this amount from the available assets they present to the federal government, possibly increasing the chances of a lower settlement with the IRS.
Presentation Solutions: How far back does the Franchise Tax Board review taxpayer income history?
Tax Tiger: Three years so that the state may compare the reported income to previous tax years.
Presentation Solutions: Are there any differences between the federal and state forms required to apply for an OIC?
Tax Tiger: The state forms are longer and require a more detailed breakdown of expenses. This is actually a benefit to taxpayers since it allows for items such as tithing and college education expenses to be considered. Tax Tiger can help the taxpayer here as well, since we are familiar with what expenses are allowable and which are not.