What is an Offer in Compromise?
An Offer in Compromise is a taxpayer’s proposal to pay the Office of Finance an amount that is less than the full amount due on an account.
What tax liabilities can participate in the Offer in Compromise program?
The Offer in Compromise program is limited to business tax liabilities only.
How does the Office of Finance determine that an Offer in Compromise should be accepted?
A taxpayer’s Offer in Compromise is usually accepted if the amount offered is the amount the Office of Finance can reasonably expect to collect after exhausting all collection efforts within a reasonable amount of time.
What factors does the Office of Finance consider in determining if an Offer in Compromise is the amount it can reasonably expect to collect?
Offers in Compromise are considered on a case by case basis and considers each taxpayer’s specific situation. Some of the factors considered are:
- The taxpayer’s ability to pay;
- The equity a taxpayer has in their assets;
- The taxpayer’s present and future income;
- The taxpayer’s present and future expenses;
- The likelihood of change circumstances;
- Whether the offer is in the best interest of the City
How long does the Office of Finance usually take to approve or deny an offer?
Once an offer is submitted, the Office of Finance will typically make a decision within 90 days. However, for complex accounts it may be in excess of 90 days.
After an offer is submitted, are collection efforts placed on hold?
No. Offers in Compromise are handled on a case by case basis. In cases where delaying collection efforts would jeopardize the City’s position, normal collection efforts, such as seeking court judgments, will continue.
If an offer is accepted, can the agreed upon amount be divided into a payment plan?
Yes. In certain circumstances, the Office of Finance will consider placing the Taxpayer on a payment plan after an offer is accepted.
Can prior payments be applied to the offered amount?
We cannot apply prior payments toward the offered amount. However, we will consider prior payments and the offered amount compared to the total liability when evaluating your offer.
Other agencies, such as the IRS or the Franchise Tax Board, have accepted an Offer in Compromise, will the Office of Finance automatically accept an offer as well?
The Office of Finance will individually review the offer and make its determination based on the best interests of the City.
Is there a fee associated with making an Offer in Compromise?
There is a $150.00 application deposit. Regardless of whether or not the offer is accepted, the $150.00 deposit will be applied towards the outstanding tax liability and is thus non-refundable.
I have submitted an Offer in Compromise but no longer wish to do so, may I withdraw the offer?
Yes. An Offer in Compromise can be revoked any time prior to its acceptance or rejection. However, the $150.00 application deposit will be retained and applied towards the outstanding tax liability.
What documentation is needed for an Offer in Compromise application?
All applicants must submit an application. For applicant’s with annual gross receipts over $1,000,000.00, a financial statement and other additional documents are required. Please review the application checklist for more information.
Will City tax liens be released if the Office of Finance accepts an offer?
If there is a City tax lien on record prior to the acceptance of an offer, the lien will not be released until either, depending on the terms of the agreement, (1) an installment agreement is executed and the first installment paid or (2) a lump sum payment is received. A City tax lien may be re-filed at any time when the taxpayer is found to be in default of the agreement. Please note, City tax liens may be filed during the course of any Offer in Compromise investigation.
If the City determines that my offer is not acceptable, will I be contacted?
Yes. We will contact you to discuss your account and to determine the most appropriate resolution. For example, if we determine that a taxpayer has the ability to make monthly payments which will exceed the amount offered, we will work with you to establish an installment agreement.
Do I need to have someone represent me?
Representation is not required. The Offer in Compromise program is available to all taxpayers, whether or not they are represented.
Can I apply for an Offer in Compromise if I have no funds to offer?
No. We will not accept a zero dollar offer. Your offer must represent the most the City of Los Angeles can expect to collect over a reasonable period of time.