CDTFA Offer in Compromise
The other way to release a lien is to have your balance set to zero by the CDTFA. This may be possible by requesting relief. In some circumstances, you may be eligible to make an Offer in Compromise, where you settle with the CDTFA for an amount less than what you owe, but as much as they believe you can reasonably pay.
You may be eligible for an Offer in Compromise if you meet all of the following criteria:
- You have a final tax or fee liability on a closed account.
- You are no longer associated with the business that incurred the liability.
- You do not dispute the amount of tax or fee you owe.
- You cannot pay the full amount you owe in a reasonable amount of time.
The rules around the CDTFA Offer in Compromise program are very strict and only apply to businesses which have been closed.
If you were the spouse or domestic partner of a taxpayer with a lien against them and have ended your relationship, you may be able to apply for Innocent Spouse or domestic partner relief.
Regardless of which repayment plan you end up with, it is very important that you uphold your end of the bargain by making your scheduled payments in the full amount and on time. The consequences of not paying could lead to termination of the agreement.
An installment agreement can be terminated due to:
- late payments,
- delinquent or partial payments,
- failure to disclose assets or income on the financial statement,
- failure to increase payment levels as requested on new assets or income, or
- failure to comply with a review of financial status.
Once a lien is released, the CDTFA will issue a “Release of the Notice of State Tax Lien'' to the county office where the lien was recorded. You can also request that copies of the lien release be sent to yourself, title companies or escrow agents.
All Is Not Lost
My recommendation for payment plans when you're dealing with the state is to bring somebody in to help you negotiate, especially if you start having problems with the representative. This is particularly true for any state liability $20,000 or over.
If you need help setting up a payment plan with the state, they're generally pretty quick and will send us documents within a week. After that, a decision comes very quickly.
There’s usually a lot of pressure that goes along with this, so if you're dealing with the state, know that you might be in for a rough ride.
In fact, one of the reasons why our practice is centered around California tax issues is we know there's more pain at the state level. The lack of a judicial check on the administrative tax agencies in California creates a lot of problems for people and settling up with collections is very difficult.
The CDTFA in particular is very inflexible, especially for active businesses. If you have a sales tax liability with California, it's very difficult to get those negotiated.
First, get your attorney involved in protecting the cash flow of your business. That way, it is far less likely that California can come in and drain everything out of operations.
From an individual perspective, you don't want to commit to a payment plan that's going to be too aggressive and that you're going to struggle to keep up with, either.
We’ll consider your situation, your family situation and how much you need to live on. Then we’ll negotiate collections resolutions that satisfy the interests of the government but still protect you and the cash flow you need to live.