Dear Consumer Ed:
Can you negotiate or lower the amount of taxes that you owe the IRS, or are the companies that claim they can do this not legit?
Consumer Ed says:
Yes, in certain, limited cases you can arrange to pay tax debts through a payment plan (called an installment agreement) or settle outstanding tax debts for less than what you actually owe (called an offer in compromise or OIC). However, in order to apply for these programs with the Internal Revenue Service (IRS) or the Georgia Department of Revenue (GDOR) you must first explore all other payment options. Even if you qualify, strict requirements and restrictions apply. Last week's column delved into this subject as to the IRS and federal taxes. This week, we're taking up the Georgia related aspects of this question.
Georgia Department of Revenue and State Tax Debts
Georgians are taxed according to a graduated tax rate. You will be charged a set amount (based on your taxable income and filing status) plus a percentage of your taxable income above a given number. The percentage varies depending on your taxable income but the maximum tax rate is set at 6%. If you do not pay your state taxes, the State will begin its collection procedures. However, the GDOR also has installment agreement and offer-in-compromise programs if you owe back state taxes and can't pay in full. Although similar to the IRS programs, Georgia's requirements and application processes are separate, so you must apply for them separately.
Georgia Installment Agreements
According to the GDOR website, if you are legitimately unable to pay your taxes in full by the time they are due, you may request a payment agreement within guidelines set by the GDOR. You would do this by filing Form GA-9465 to request a monthly installment plan. However, according to the form's instructions, you don't qualify if you: (1) are currently in bankruptcy; (2) have unfiled state tax returns that are past due; (3) have a pending offer in compromise with the GDOR; or (4) your state tax liability has been assigned to a private collection agency. For more information, visit the GDOR Installment Payment Agreements webpage.
Georgia Offers in Compromise
Some Georgia taxpayers may qualify for a Georgia OIC, which lets you settle an outstanding state tax debt for less than the full amount that you owe. According to the GDOR Offer in Compromise Booklet, you can apply if: you are not able to pay the taxes you owe in full even by selling assets or through an installment agreement; a legitimate doubt exists that you owe part or all of your assessed tax debt; or special circumstances exist that would make full payment of the taxes owed an economic hardship. However, you can only apply if you have filed all required tax returns and reports; you have received a final notice of assessment for all Georgia state taxes that you owe; and you are not the subject of an open or active bankruptcy case. For more information, visit the GDOR Offer in Compromise webpage. If you need assistance in completing the application, you can contact the GDOR at (404) 417-6543.
If you owe taxes to the State of Georgia, below are resources that may be helpful in determining your payment options:
- Payment Options
- Form GA-9465 - Installment Agreement Request & Instructions
- Georgia Offer in Compromise Booklet
- Georgia Form OIC-1 - Offer in Compromise Application