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Offer in Compromise program

What is an offer in compromise and who qualifies?

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. We can consider offers in compromise from:

  • individuals and businesses that are insolvent or discharged in bankruptcy, and
  • individuals who are not insolvent or bankrupt, if payment in full would create undue economic hardship.  (Only individuals may apply for relief based on undue economic hardship, which may include relief from business debts they're personally responsible for.)

If you apply for an offer in compromise, we will give your application full consideration, however, we will only consider your offer if you meet the qualifying criteria. We will analyze your offer to determine if acceptance is in the best interest of New York State and other taxpayers. This may, for example, require you to pay in full any trust taxes you owe (unpaid sales or withholding taxes, excluding penalty and interest) to reach a compromise. As a result, we will not accept all offers from qualifying applicants.

What is undue economic hardship?

Generally, undue economic hardship occurs when you are unable to pay reasonable basic living expenses. Basic living expenses are those that provide for the health, welfare, and production of income for you or your family. We look to the IRS Collection Financial Standards to help determine allowable basic living expenses. 

In addition to basic living expenses, we will consider other factors that can impact your financial condition when assessing a claim of undue economic hardship, including: 

  • age, employment status, and employment history
  • inability to earn an income because of a long-term illness, medical condition, or disability
  • obligations to dependents
  • extraordinary circumstances such as special educational expenses, medical catastrophe, or natural disaster
  • inability to borrow against or liquidate assets due to hardship

Undue economic hardship does not include the inability to maintain an affluent or luxurious lifestyle. When we review your expenses to determine undue economic hardship, we generally do not allow the following as necessary living expenses:

  • private school tuition
  • college expenses
  • charitable contributions
  • voluntary retirement contributions
  • payments on credit cards

If you believe you do not qualify for the Offer in Compromise program, New York State does offer payment plans that might help you resolve your outstanding debt with an affordable monthly payment. See Installment payment agreement for additional information.

How to apply

You must agree to comply with certain terms and conditions before we will accept your offer. See Offer in compromise terms and conditions for a summary list. If applying online, you can view the full terms in the Web application. If applying by mail, refer to Form DTF-4 or Form DTF-4.1, listed below.  If your offer is accepted, we will also mail you a copy of the full terms that apply to your offer.

What happens after applying?

If applying online, you will receive an electronic confirmation.

If applying by mail, you will receive an acknowledgement letter stating:

  • your application is complete, or
  • you are missing specific required information and must submit it before we can review your application.

Once your application is complete, it will await assignment to a reviewer who will contact you or your representative when the review process begins. We will request additional documentation, as necessary, during our review.

See Publication 220, Offer in Compromise Program, for additional information and instructions.

Still have questions? Call us at 518-591-5000 to have a question or concern addressed.