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Legislation, effective August 17, 2011, expands the Tax Department's ability to settle cases through its Offer in Compromise Program.

The Offer in Compromise program allows qualifying, financially distressed taxpayers the opportunity to put overwhelming tax liabilities behind them by paying a reasonable portion of their tax debt.  Previously, we could only consider offers in compromise from individuals and businesses that were insolvent or bankrupt.  These taxpayers may continue to apply for relief under the program.

The program's new provisions will help struggling taxpayers, who are not insolvent or bankrupt, gain a fresh start when payment in full would create undue economic hardship.  Only individuals may apply for relief based on undue economic hardship. This may include relief from business debts for which an individual is personally responsible.

We'll analyze each application to ensure that every taxpayer seeking relief receives full consideration.  However, only applicants meeting the qualifying criteria will receive hardship relief, and we will use our discretion to deny any application that isn't in the best interests of other taxpayers or the State.  This may, for example, require the applicant to fully pay any trust taxes owed (excluding penalty and interest) in order to reach a compromise.

How to apply

We're updating our publications and forms to include the new provision for undue economic hardship. Until that time, you can use the existing applications for cases of hardship, as well as for the previously eligible bankruptcy and insolvency cases: 

• Form DTF‑4, Offer in Compromise (For Liabilities Not Fixed and Final and Subject to Administrative Review)
• Form DTF‑4.1, Offer in Compromise (For Fixed and Final Liability)
• Form DTF‑5, Statement of Financial Condition and Other Information

Taxpayers seeking hardship relief should include a statement describing the undue economic hardship they would experience, along with any supporting documents, when they file their Offer in Compromise application.

For more information

Call our Offer in Compromise office

TSB-M-(11)(9)C,(9)I,(10)M,(2)MCTMT,(2)R,(14)S, Changes to the Offer-In-Compromise Program

Legislation: An act to amend the tax law in relation to reforming the offer in compromise program (Chapter 469 of the Laws of 2011)