Sunday, June 06, 2010

Utah State Tax Commission -- Offers in Compromise

I have been focusing my work on offers-in-compromise and taxpayer representation for the past several months. I receive lead from several different states including Colorado, Kansas, North Dakota, and our great state of Utah. Most of these leads are interested in pursuing offers-in-compromise, settlements of tax debts for less than you owe.

The IRS has a fairly clear and well-defined offer-in-compromise program. It explains in detail the reasons for which you may request an offer, how the amount of the offer may be calculated, and it outlines the terms for the offers acceptance and fulfillment. Colorado also has clearly defined offer-in-compromise program requirements and clearly explained procedures for submitting an offer to the Colorado state Department of Revenue.

Utah, on the other hand, doesn't give really clear criteria on how an offer is evaluated, and what requirements must be met for an offer to be accepted. The only official guidance that the the state of Utah provides is Utah State Tax Commission Publication 22, in Pub. 22 the statement for who qualifies to have an offer-in-compromise accepted is as follows:

When an analysis of taxpayer’s assets, liabilities, income and
expenses shows that a liability cannot realistically be paid in
full in the foreseeable future, an offer in compromise may be
considered.
If you compare that to the IRS' 46 page book complete with instructions, forms, and detailed formulas to assist taxpayers in completing acceptable offers.

I'll admit the IRS isn't the perfect model of fairness in accepting offers-in-compromise, but most offers that are denied by the IRS have (if not, logical) discernible reasons for the settlement request's denial. Offers-in-compromise that are rejected by the state of Utah are often offers that the IRS has already accepted without denial -- in one case that a colleague related the taxpayer being rejected a Utah State Tax Commission OIC was a widow who had her tax debt almost completely forgiven by the IRS without any IRS OIC denials or counter-offers (the taxpayer finally had the offer accepted by the State of Utah after an appeal). In the previous case the only discernible reason for initial offers denial was bad whether or a fight offer investigator must have the night before with their spouse.

The Utah Legislature could improve the offer-in-compromise by 1.) enact rules requiring the state of Utah to accept offers already accepted by the Internal Revenue Service, 2.) enacting a collections statute of limitations, and 3.) establishing an taxpayer appeals process that includes a "Utah State Tax Court" (a place where taxpayers can appeal Tax Commissions to independent third parties). If the State of Utah would simply accept IRS accepted offers than the state could save some money on offer investigation costs and taxpayers could have some assurance as to whether or not their offers-in-compromise would be accepted by the state of Utah. Enacting a collections statute of limitations would incentivize the state of Utah to accept a greater number of offers. Lastly, establishing an independent appeals process and a review court of tax commission determinations would allow taxpayers and taxpayer representatives a fairer playing field with the tax commission in the audit and collection functions of the Utah State Tax Commission.

1 comment:

scott davidson said...


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