Understanding the National and Colorado Offer in Compromise

If you’ve settled an IRS offer in compromise, can you file a Colorado Offer in Compromise? Penalties on unpaid taxes are extremely high in Colorado, making mitigation strategies such as local offers in compromise all the more desirable. Comparing and contrasting state and federal OIC programs can be tricky, however, so we break it down to help you understand your options:

Eligibility at the State Level

To qualify for an offer in compromise for state taxes, you need to already have been accepted for a similar OIC by the IRS. The Colorado Department of Revenue mandates that this federal OIC cover the “same years and liabilities.”

Prior to being accepted for an OIC in Colorado, you’ll need to provide thorough documentation. This includes IRS Form 656, which should be stamped with an IRS received date. Additionally, verification of IRS OIC acceptance is required, along with proof of payment and even a record of the account transcript.

Should You Try for a Colorado OIC?

With such extensive eligibility standards, the Colorado OIC may not seem worthwhile. If you’re already planning on seeking an offer at the federal level, however, a state-based OIC could be well worth the effort, given the steep cost of local penalties for late payment.

Another consideration: in Colorado, payment plans are not available for less than the full amount of the taxes, interest, and penalties. If you don’t have funds available to cover an accepted offer in the near future, a local payment plan may be the better option.

If you’re still struggling to keep the standards for multiple OIC programs straight, feel free to seek clarification from the Highland Tax Group. Our team can provide the guidance you need. We can also help you determine other mitigation strategies for dealing with state and federal tax debts. Contact us today to get started.