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Department of Taxation and Finance

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 
  • 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—this may include relief from business debts for which an individual is personally responsible.)

We review each application to ensure that every taxpayer seeking relief receives full consideration. However, we will only consider applicants who meet the qualifying criteria. We analyze offers to determine if acceptance is in the best interest of New York State and other taxpayers. This may, for example, require the applicant to pay in full any trust taxes they 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.

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

  1. Complete Form DTF-5 and either Form DTF-4.1 (most common) or Form DTF-4 and provide all requested documentation.
  2. Submit:
    • federal returns for the preceding three years, with all schedules and statements attached (you must include an explanation if you were not required to file); and
    • all bank account statements, brokerage account statements, and retirement account statements for the preceding 12 months; and
    • a credit report less than 30 days old; and
    • any other supporting documentation that will substantiate a financial disclosure made on your Form DTF-5. 
       
  3. If you are an individual seeking hardship relief, include a statement describing the undue economic hardship you are experiencing, along with any supporting documents, when you file your Offer in Compromise application.
     
  4. Mail your application directly to our office at:

NYS TAX DEPARTMENT
CED OFFER IN COMPROMISE UNIT
W A HARRIMAN CAMPUS
ALBANY NY 12227-5100

We will request additional documentation, as necessary, during our review.

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

What happens after applying?

After submitting your application, you will receive an acknowledgement letter stating that:

  • 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.

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

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
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