Offer-in Compromise & Voluntary Disclosures

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Offer in Compromise (OIC)

Unfortunately some businesses and individuals may incur a sales and use tax liability that they can never pay off. It may appear that there is no escape or hope for businesses and individuals in this situation. However, the states are not generally looking to put businesses out of business or foreclose on a person’s home simply because of one or two tax mistakes.

When a sales and use tax assessment is so large that there is little chance that it can ever be paid, it might actually encourage someone to stop paying all of their taxes. This results from the thought process of, “Well if I already owe the state 1 million dollars, what is the big deal if I owe the state 1.1 million dollars? I’ll never be able to pay either amount…” In order to give individuals and businesses a second chance and to give these people an incentive to pay their future taxes, the states have created a tax, interest and penalty forgiveness program called an Offer-In-Compromise (OIC).

The way an Offer-In-Compromise (OIC) works is that the individual or business in question must make a complete financial disclosure to the state. A detailed analysis of future cash flows, wages and other potential assets must be done in order to determine how much someone can reasonably pay and still have a chance at a fresh start. There is a substantial amount of work, analysis and negotiating that goes into a successful Offer-In-Compromise (OIC). However, an OIC is a last chance where the government will literally forgive tens of thousands of dollars in tax, interest and penalties in order to give a business or individual a fresh start. We will review all documents prior to filing for an OIC to ensure that they are complete, and then work to expedite a resolution. In addition, we will negotiate with the state to obtain the most favorable terms and maximum debt forgiveness possible.

Voluntary Disclosure Agreement

Most sales and use tax errors do not occur intentionally. Some occur from misunderstanding the law and other errors result from not even knowing that sales and use taxes apply to a transaction. There are also instances where a sales tax error is DELIBERATE or where a sales tax return is intentionally understated. The states have a system in place where an individual or a business can correct an error, REGARDLESS OF THE CAUSE, and avoid all monetary and criminal penalties. In addition, many states will waive or reduce the amount of interest that is due. All that must be done is to file corrected sales and use tax returns and pay the amounts due.

However, you can NOT simply mail corrected returns to the state and hope to get this tax, interest and penalty forgiveness. You must apply through a complicated process and obtain prior approval from the state; this approval is called a voluntary disclosure agreement (VDA).

The terms and conditions of a voluntary disclosure agreement can vary from state to state and from business to business. We will negotiate the best possible VDA on your behalf. We will look to minimize the “look-back” period. (The period which needs to be corrected.) And will try to get you the longest payment period possible for any monies due. Best of all, in most states we can negotiate your VDA for you, while you remain ANONYMOUS. When done anonymously, you can walk away from the state’s offer if you do not like it.

Podcast Episodes on Offer-in Compromise & Voluntary Disclosures

Mark Stone from Sales Tax Defense, LLC is making the rounds to share his expertise with podcast creators and their listeners. Here are the latest features on Offer-in Compromise & Voluntary Disclosures!