Many taxpayers assume that New York’s Offer in Compromise program works the same way as the federal program. This is a costly misconception. Understanding the differences can save you time, money, and frustration.
Acceptance Rates
The IRS accepts approximately 40% of OIC applications. New York’s acceptance rate is estimated to be well below 20%. The DTF is significantly more skeptical of offers and more aggressive in evaluating your ability to pay.
Payment Terms
IRS:
- Lump sum cash (paid within 5 months)
- Periodic payment (paid over 6-24 months)
- Deferred periodic payment (in rare cases)
NY State:
- Typically requires lump sum payment only
- Rarely accepts periodic payment offers
- Expects payment within 90 days of acceptance
Asset Valuation
IRS: Uses “quick sale value” (80% of fair market value) for assets, recognizing that forced liquidation results in lower prices.
NY State: Often uses full fair market value or close to it, assuming you can borrow against assets or sell them at market prices.
Retirement Accounts
IRS: Generally doesn’t require you to liquidate retirement accounts to pay tax debt, especially if you’re under age 59½.
NY State: More likely to expect you to borrow against or liquidate retirement accounts, particularly if you have substantial balances.
Living Expenses
IRS: Uses national and local standards for allowable living expenses, which are relatively generous.
NY State: Scrutinizes living expenses more aggressively and may challenge expenses they consider excessive or unnecessary.
Processing Time
IRS: 6-12 months (sometimes longer)
NY State: 4-8 months (generally faster than IRS)
Application Requirements
Both programs require:
- Detailed financial disclosure
- Supporting documentation
- All returns filed
- Current year compliance
However, NY’s Form DTF-4 (Application for Offer in Compromise) requires more granular financial detail than the IRS Form 433-A.
When to Choose Which Program
If you owe both IRS and NY State:
File IRS OIC first if:
- Your federal debt is larger
- You have a stronger case for federal relief
- IRS acceptance would improve your NY negotiating position
File NY OIC first if:
- Your state debt is larger
- You have NY-specific reasonable cause
- Faster resolution is critical
Can You File Both?
Yes, but be aware that:
- Information you provide to one agency may be shared with the other
- Acceptance by one doesn’t guarantee acceptance by the other
- You’ll need to coordinate financial disclosures to avoid inconsistencies
The Bottom Line
NY offers in compromise are harder to get than federal offers. Before investing time and money in a NY OIC application, get a realistic evaluation of your chances. In many cases, an installment agreement is a more practical solution.
Our Evaluation Process
We conduct a thorough financial analysis to determine if you’re likely to qualify for a NY OIC. If the numbers don’t support an offer, we’ll tell you upfront and recommend alternative strategies that have a higher probability of success.
