Ncdor Offer In Compromise Form – Fill Out and Use This PDF

OIC-101 (09/2021)

Offer In Compromise Instruction Booklet

State of North Carolina

Department of Revenue

Help Preparing an Offer In

What is an Offer in Compromise?

Compromise

This Booklet provides instructions for taxpay- ers preparing an Offer In Compromise.

Additional instructions and web-fill versions of forms are available on the Department’s web- site at www.ncdor.gov.

Contact a Customer Service agent at 1-877- 252-3052 for assis- tance with specific ques- tions.

The North Carolina Offer In Compromise program allows qualifying, financially dis- tressed taxpayers the opportunity to put overwhelming tax liabilities behind them by paying a lump sum amount in exchange for the liability being settled in full. The law pro- vides specific requirements for accepting an offer. The goal of the Offer In Compromise program is to resolve a liability in a manner that is in the best interest of both the State and the taxpayer.

You are required to provide reasonable doc- umentation, as outlined below, with your request for an Offer In Compromise.

An offer will not be considered if it is determined that the offer was filed for the

purpose of delaying collection or otherwise jeopardizing the Department’s ability to

collect the tax debt.

Forced collection actions, such as garnish- ments, in effect at the time you submit your offer, will not automatically be suspended during the review period. Interest and penal- ty will continue to accrue on any unpaid tax debt while the offer is being considered.

This booklet provides the basic instructions, forms and other materials you will need to submit a request for an Offer In Compromise.

If you have questions, or need additional assistance, please contact the Department at 1-877-252-3052 or visit our website at: www.ncdor.gov .

Basic Qualifications

1.The period is collectible under NC G.S. 105-241.22.

2.You have filed all tax returns and reports as required by statute.

3.You are not the subject of an open or active bankruptcy case.

4.You are not the subject of an open or active North Caro- lina Department of Revenue criminal investigation.

Keep

Copies!

You should

make copies

of all

documents

submitted to the Department for your records.

Do not send original copies with

your offer in

compromise

to the

Department

since they

will not be

returned.

1.If your statutory basis for compromise is anything other than reasonable doubt as to the amount of liability, a complete financial analysis will be completed on your account. Financial documentation must be submit- ted that reflects your financial situation for the three months immediately preceding the date you submit your Offer In Compromise.

Documentation Required (additional documentation may be requested after an initial review of the offer):

a.A completed and signed OIC-100.

b.A 20%, non-refundable, down payment made by credit card or by certified funds.

Exceptions to this requirement are allowed if you submit a Form OIC-102 Third Party Affir- mation, or if your gross income is below the federal poverty guidelines.

c.A completed and signed NCDOR Financial Statement based upon your entity type:

RO-1062 (Collection Information Statement for Individuals or Sole Proprietorships).

RO-1063 (Collection Information Statement for Businesses) . All business offers are re- quired to attach an RO-1062 for each officer, partner, or member.

d.Supporting Documentation:

If wage earner, last 3 months paystubs

Complete copies of last 3 bank statements for all accounts

Complete copies of last 2 federal income tax returns (if required to file)

If you claim to also owe the IRS, you must include a current federal account transcript for each outstanding period and tax schedule.

Substantiation for any claims of special circumstances made in section 8 of OIC-100 Expla- nation of Circumstances (copies of actual monthly expenses, court ordered payments, out- of-pocket medical expenses, physician’s statements detailing illness, etc.)

A completed worksheet calculating your Reasonable Collection Potential based upon your entity type:

○OIC 101-A (Individuals)

○OIC 101-B (Businesses)

○OIC 101-C (Sole Proprietorships and Self-Employed Individuals)

e.Substantiation of claimed mortgages, vehicle liens and any other claimed judgments or liens.

2.If your basis for compromise is reasonable doubt as to the amount of liability, a financial analysis will not be conducted, however, you need to provide documents to support your claim.

Documentation Required:

a.A completed and signed OIC-100..

b.A 20%, non-refundable, down payment made by credit card or by certified funds.

Exceptions to this requirement are allowed if you submit a Form OIC-102 Third Party Affir- mation, or if your gross income is below the federal poverty guidelines.

c.An explanation of the basis of reasonable doubt along with verifying documentation.

d.A computation of the claimed corrected tax due along with an explanation of how you arrived at that amount.

Offers should be submitted to: NC Department of Revenue, Attn: Offer In Compromise Unit, 1500 Pinecroft Rd., Suite 300, Greensboro, NC 27407-3724

The Department will provide you an electronic template for completing the Collection Statement and RCP/down- payment calculations upon request.

All offer amounts must exceed zero.

Your offer amount must equal or exceed your Reasonable Collection Potential (RCP) amount. Your RCP should be calculated us- ing the OIC 101-A, OIC 101-B, or OIC 101-C worksheet that is included in your OIC pack- et. These worksheets will help you estimate your RCP, and determine your minimum offer amount and required down payment. Elec- tronic versions of these worksheets are avail- able upon request and on our website at www.ncdor.gov. Exceptions can exist to offer- ing the RCP (see pg. 5.)

The RCP equals the net equity of your assets plus the amount the Department projects it could collect from your future income.

If the Department’s financial analysis indicates that you have the ability to pay the tax liability in full, either immediately or through an installment payment agreement, or you can pay a greater amount than that offered in compromise, your offer will be denied.

The Department requires a 20% down payment of the offer amount. This will be applied towards your tax liability and will not be refunded. Pay- ment must be submitted in certified funds or by credit card. Offers received without the down payment will not be processed. If your gross in- come falls below the Federal Poverty Guidelines, or if you attach a Form OIC-102 Third Party Affir- mation with your offer, then you may be exempt from this requirement.

The OIC 101-A, OIC 101-B, and OIC 101-C worksheets are used to calcu- late the RCP.

Each form begins with the total of your liquid assets which includes cash on hand, average bank balance, invest- ment account balances and cash value of all insurance policies. You must in- clude your last 3 months statements for all accounts (checking and savings) and insurance policy statements with your offer.

The worksheets also assist in calculat- ing equity in all property owned by us- ing the Quick Sale Asset Value (QSV)

method. The QSV is calculated by mul- tiplying the asset’s value by a discount

factor. The Department allows you to discount property values to 80%. Real property asset value is calculated us- ing the county tax value multiplied by 80% QSV discount minus any out- standing mortgage balances. The most current mortgage statements must be submitted with the offer for the loan to be allowed.

Purchased vehicle and other licensed asset value is calculated using the NA- DA value multiplied by the 80% QSV discount minus any outstanding loan balance. The most current loan state- ments for each vehicle/ licensed asset owned must be submitted with the offer for the loan to be allowed.

Asset values minus any liens superior to the Department’s, such as those

arising from lRS or county tax debts, will equal your total equity in assets held.

Next, the worksheets assist in calculat- ing monthly disposable income by sub- tracting monthly allowable expenses from total monthly income. Calculate total monthly income using the aver- age of 3 months of paystubs, monthly pensions, social security, dividends, profit from business, alimony, child support, commissions or any other income sources.

Total allowable monthly expenses are calculated using Collection Financial

Standards provided by the IRS for housing and utilities, food, clothing & other items, vehicle operating costs, public transportation costs, vehicle loans, and medical costs as well as actual alimony, child support, day care expense, health and life Insurance expense, IRS and estimated tax pay- ments, and any court-ordered pay- ments.

The calculated monthly disposable income is multiplied by 60 months and added to total equity in assets held to determine your RCP.

Each taxpayer is also allowed up to $2,000 in accounting/legal fees when documentation is provided. This allow- ance is solely for the preparation of the Offer In Compromise, and not for ac- counting fees accrued as a part of nor- mal personal and business filings. The accounting/legal fees are subtracted from the reasonable collection poten- tial in order to determine the net RCP.

No. The Department performs an analysis of your financial condition during the review process. Failure to provide documentation to support

income, expenses, and loan balances can impact the Department’s calcula-

tion of the RCP and may result in the Department’s inability to process your

offer.

The following are factors used during the Department’s financial analysis

process when making a determination for an offer:

Omitted Items – If you omit income, assets, or other items of significance from your financial statement, your offer may be denied.

History of Non-Compliance – A history of regular or willful non-compliance with revenue statutes may constitute grounds for the rejection of your offer.

Insufficient Documentation - If docu- mentation for outstanding mortgage and loan balances for real and per- sonal property is not provided, the loan balances will not be allowed. In addition, claimed expenses for alimo- ny, child support, day care, health and life insurance, IRS and estimated tax payments, and any court-ordered pay- ments should be provided or the claimed expenses will be disallowed.

Property Valuation – The Department will assess the value of all property that you own. If the Department deter- mines value of the property is greater than shown on your RCP work-sheet and financial statement, your offer may be denied.

Collected Taxes – If your debt is based on taxes that were collected from others, but not remitted, such as

sales or employee withholding taxes, the offer may not be accepted.

Earned Income – If an attachment of earned income will collect more over the statutory period of collection than the amount offered, your offer may be denied.

Installment Payment Agreement– If the current installment payment agreement will pay more over the stat- utory period of collection than the amount proposed in settlement, your offer may be denied.

Other – The law gives the Secretary the option to accept an offer but in no way requires it. In any instance where the Secretary determines that ac- ceptance is not in the best interest of the State, the offer will be denied.

In order to settle one

person’s interest in a joint

income tax liability, you must qualify for Innocent Spouse Relief.

You cannot be relieved of the liability through an Offer In Compromise.

No. If you have filed a joint income tax return for the year(s) in which you are requesting relief, you must submit an offer in compromise from both parties that includes financial information from and has been signed by both parties.

Pursuant to G.S. § 105-153.8(e), a wife and husband filing jointly are treated as one taxpayer for the pur- pose of determining the tax imposed by this Part. A husband and wife filing jointly are jointly and severally liable for the tax imposed by this Part reduced by the sum of all cred- its allowable including tax payments made by or on behalf of the hus- band and wife.

In order to receive relief for your

interest in a jointly filed income tax liability, you must qualify for Inno- cent Spouse Relief under N.C.G.S. § 105-153.8(e).

If you request and qualify for Inno- cent Spouse Relief, you will be noti- fied by the Department of your per- centage of relief once your request has been processed.

If you do not qualify for Innocent Spouse Relief, you will remain jointly and severally liable for the balance of tax, penalty and interest due. You cannot request an offer in compro- mise to settle your interest in the outstanding liability.

OIC-101 (09/2021)

Offer In CompromisePage6

Instruction Booklet

What Happens After My Offer Is Submitted?

A Certificate of Tax Liability may be filed at any time while your offer is

The Offer In Compromise (OIC) Unit conducts an initial review of the offer to determine if it meets the basic qualifications to be processed.

If the qualifications are met and the offer can be processed, then the completed OIC packet is reviewed and analyzed by the OIC Unit using the information provided. The OIC Unit also performs independent re-

search.

During the review of the OIC packet, the OIC Unit may deter- mine that more documentation is needed from you. If this is the case, then the OIC Unit will contact you.

If the additional documentation is not submitted as requested, then your offer will not be processed.

The OIC Unit makes a recom- mendation to the Secretary of Revenue and/or their designee, who has the final approval for all offer in compromise deci- sions.

The process can take up to 90 days. This timeframe can vary depending on the current vol- ume of submissions and the time of year.

being considered.

Will Collection Actions Stop?

Offer amounts must be paid in full with certified funds or by credit card when an offer

Not necessarily.

There are certain circumstanc- es when the Department will suspend collection activities while we consider your offer, but it is not a requirement.

After an offer is determined to be complete and submitted for

processing, we will not act to collect the tax liability while we consider and evaluate your offer.

We will also allow 14 days for you to respond after we send a

letter notifying you of the De- partment’s decision to deny

your offer.

It is important to note that the Department will not suspend collection if we determine that you submitted your offer to delay collection or cause a delay which will jeopardize our ability to collect the tax.

is accepted.

If Your Offer Is Accepted

Payment plans are not accepted for offer funds.

All Offer In Compromise forms and payments should be remitted to:

The Department will notify you and your designated repre- sentative if the offer is accept- ed, and direct you to remit pay- ment to: NC Department of Revenue, Attn.: Offer in Compro- mise Unit, at: 1500 Pinecroft Rd., Suite 300, Greensboro, NC 27407-3724.

Payment of the accepted offer must be made in certified funds

or by credit card by the payment due date as indicated on the acceptance letter (usually 30 days from date of the ac- ceptance letter).

The total amount due will be the accepted offer amount less the 20% down payment.

Payments made toward the account while the offer is being considered will not decrease

the total offer amount due.

The Department does not accept payment plans on an offer in compromise.

A recorded Certificate of Tax Liability will be released when the Department receives pay- ment of the accepted offer amount in certified funds or by credit card.

NC Department of Revenue, Attn: OIC Unit, 1500 Pinecroft Rd., Suite 300, Greensboro, NC 27407-3724

The Department will notify you and your designated repre- sentative if the offer is denied.

As part of the review process, the Department calculates the RCP. If your RCP is less than the total liability due but more than the amount offered, in most cases, the Department will include the calculated RCP in the denial letter and give you the option to offer this amount.

Offering the calculated RCP does not necessarily guarantee the Department will accept the offer.

If you are unable to counter offer, you should immediately contact the Department to ar- range payment of the entire liability.

Appealing the Decision: North

Carolina statutes make no pro-

vision for appeal of a denied offer.

The Department may reconsid- er a denied offer if there is a

material change in the taxpay- er’s circumstances and docu-

mentation is provided prior to the due date on the denial let- ter. If it is after the due date on the denial letter, you will be required to submit a new offer.

OIC-101

Calculating the RCP and Down Payment - Individuals

Worksheet for Offer in Compromise - Individual

Form OIC 101-A

Must complete RO-1062 prior to completion of worksheet

Step 1: Assessing Liquid Assets - Section 3

Cash on Hand - Line 12

Average Bank Balance- line 13e

Investment account balance (stocks, bonds, retirement, virtual currency) - Line 14e + Line 15d

Cash value of insurance policy - Line 16c

TOTAL LIQUID ASSETS										A
Step 2: Real Property - Section 4
										B
Fair Market Value		x	80%	-	Loan Balance		=	Asset Value
	Section 4 Line 17c		QSV			Section 4 Line 17d
Step 3: Purchased Vehicle/ Other Licensed Asset -Section 5
										C
Fair Market Value		x	80%	-	Loan Balance		=	Asset Value
	Section 5 Line 18c		QSV			Section 5 Line 18d
Step 4: Subtracting Judgments/Liens -Section 7
								Balance due		D
									Section 7 Line 20d

Step 5: Total Equity in Assets Held

E

(A+B+C)-D= E

Step 6: Disposable Income Analysis -Section 10

Page 10

Refer to RO-1062 Collection Statement for Individuals when completing this form

The Department allows you to discount property values to 80%. This is referred to as Quick Sale (QSV) value

Total Monthly Income (line 36)

Wages, pensions, Social Security, dividends, profit from business, alimony, child support, commissions, other

Less

Total Monthly Expenses (line 48)

Housing and Utilities, Vehicle ownership & operating costs, food & clothing, health & life insurance, out-of-pocket medical, alimony, child support, and other court-ordered payments, child care, tax payments

Disposable Monthly Income:

F Section 10 Line 36

G Section 10 Line 48

H

F-G= H

**Do not enter amounts below $0.00. If equity in assets or disposable income calculations are less than $0.00, enter $0.00.

Equity in Assets Held (E)

Disposable Monthly Income (H)

x

60 (months)

=

Reasonable Collection Potential

Allowance for Accounting/Legal Fees (not to exceed $2,000-must provide receipt)

Proposed Amount Offered In Compromise (must be greater than 0)

20% Deposit (see instructions for exceptions)

I

J

H X 60

K

I + J = K

L

M

K-L=M

N

M x 20% = O

OIC-101

Calculating the RCP and Down Payment - Business Entities

Worksheet for Offer in Compromise - Business

Form OIC 101-B

Must complete RO-1063 prior to completion of worksheet

Step 1: Assessing Business Assets- Section 4

Cash on Hand - Line 15

Total Cash in Banks - Line 16d

Accounts/Notes Receivable - Line 18f

Total Investments (stocks, bonds, mutual funds, stock options, CDs, virtual currency) - Line 17c + Line 19c

Total Credit Available - Line 20c

Page 11

Refer to RO-1063 Collection Statement for Businesses when

Total Business Assets

Step 2: Real Property -Section 4

Fair Market Value		x	80%	- Loan Balance		= Asset Value
	Section 4 Line 21e		QSV		Section 4 Line 21f

Step 3: Vehicles, Leased and Purchased -Section 4

A

B

completing this form

Fair Market Value

x

80%

- Loan Balance

= Asset Value

C

The Department

Section 4 Line 22e

QSV

Section 4 Line 22f

Step 4: Business Equipment - Section 4

Fair Market Value		x	80%	- Loan Balance		= Asset Value
	Section 4 Line 23e		QSV		Section 4 Line 23f

Step 5: Business Liens, Judgments and Other Liabilities - Section 4

Balance due

Line 24d

Step 6: Total Equity in Assets Held

(A+B+C+D)-E= F

Step 7: Disposable Income Analysis -Section 5

Total Monthly Income (Line 35)

Less

Total Monthly Expenses (Line 48)

Disposable Monthly Income:

G-H= I

Step 8: Proposed Amount Offered In Compromise (must be greater than 0).

**Do not enter amounts below 0. If equity in assets or disposable income calculations are less than 0, enter 0.

Equity in Assets Held (F)

Disposable Monthly Income (I)

x

60 (months)

=

I X 60

Reasonable Collection Potential (RCP)

J+K=L

Allowance for Accounting/Legal Fees (not to exceed $2,000-must provide receipt)

Proposed Amount Offered In Compromise (must be greater than $0.00)

L-M =N

20% Deposit (see instructions for exceptions)

N x 20% = O

allows you to discount property values to 80%.

DThis is referred to as Quick Sale (QSV) value

E

F

G

H

I

J

K

L

M

N

O

Calculating the RCP and Down Payment - Self Employed Individuals

Worksheet for Offer in Compromise - Self Employed Individuals

Form OIC 101-C

Must complete RO-1062 prior to completion of worksheet

Step 1: Assessing Liquid Assets - Section 3

Cash on Hand - Line 12 + Line 59

Average Bank Balance - Section 3 Line 13e + Section 11 Line 60c

Investment account balance (stocks, bonds, retirement, virtual currency) - Line 14e + Line 15d

Cash value of insurance policy - Line 16c

TOTAL LIQUID ASSETS

A

Step 2: Real Property - Section 4

B

Fair Market Value

x

80%

-

Loan Balance

=

Asset Value

Section 4 Line 17c

QSV

Section 4 Line 17d

Step 3: Purchased Vehicle/ Other Licensed Asset -Section 5

C

Fair Market Value

x

80%

-

Loan Balance

=

Asset Value

Section 5 Line 18c

QSV

Section 5 Line 18d

Step 4: Subtracting Judgments/Liens -Section 7

Balance due

D

Section 7 Line 20d

Step 5: Total Equity in Assets Held

E

(A+B+C)-D= E

Step 6: Disposable Income Analysis -Section 10 / 12

Refer to RO-1062 Collection Statement for Individuals when completing this form

The Department allows you to discount property values to 80%. This is referred to as Quick Sale (QSV) value

Total Monthly Income (Line 36 + Line 72)

Wages, pensions, Social Security, dividends, profit from business, alimony, child support, commissions, other

Less

Total Monthly Expenses (Line 48 + Line 84)

Housing and Utilities, Vehicle ownership & operating costs, food & clothing, health & life insurance, out-of-pocket medical, alimony, child support, and other court-ordered payments, child care, tax payments

F

Section 10 Line 36 +

Section 12 Line 72

G

Section 10 Line 48 +

Section 12 Line 84

**Do not enter amounts below $0.00. If equity in assets or disposable income calculations are less than $0.00, enter $0.00.

Equity in Assets Held (E)

Disposable Monthly Income (H)

x

60 (months)

=

Reasonable Collection Potential

Allowance for Accounting/Legal Fees (not to exceed $2,000-must provide receipt)

Proposed Amount Offered In Compromise (must be greater than 0)

20% Deposit (see instructions for exceptions)

I

J

H X 60

K

I + J = K

L

M

K-L=M

N

M x 20% = O