Can You Settle FL Dor Taxes for Less? How Tax Compromise Works in Florida

Florida does not have a formal offer in compromise application form or standarized process, more a discretionary authority to settle taxes in certain situations. You may be able to reduce your tax liability through an offer in compromise in Florida. An offer in compromise is when the state agrees to let you pay off your tax bill for less than you owe. Basically, you offer money, and the Florida Department of Revenue (DOR) decides if it wants to compromise (or reduce) your tax owed. 

Florida Offer in Compromise Rules

Florida state law says that the FL DOR has the right to compromise on tax debts. The state can compromise tax liabilities for both doubt as to liability and doubt as to collectability. Florida DOR has the authority under Florida Statute § 213.21 and related administrative rules. However, unlike the IRS Offer in Compromise program, Florida doesn’t have a standardized application process or official forms for these settlements.

Doubt as to Liability 

This refers to a doubt that you owe the tax. If you can prove to the state that you don't really owe the tax, you may be able to have your bill reduced based on that fact. 

To obtain doubt as to liability, you typically have to go through the tax appeals process, and ideally, you should work with a tax professional. 

Doubt as to Collectability 

This refers to a doubt that the state will be able to collect the tax. For example, if the state looks at someone's financial situation and determines their whole tax bill will never be collected, the FL DOR has the legal right to reduce the bill.

How to Apply for an Offer in Compromise in Florida

Although the state may be willing to compromise tax bills, the FL DOR does not publish any guidance on its website. The state also does not have a formal offer-in-compromise application. If you want to settle your Florida tax bill for less than you owe, you should work with someone who has experience negotiating with the FL DOR. 

You or your tax professional, must prepare a tailored request to the FL DOR, along with supporting financial information. Be prepared to disclose details similar to what the IRS might require, but know that there is no “official” Florida OIC form to fill out.

Typically, to obtain a tax settlement, you must prove to the taxing authority that you cannot afford to pay the tax in full now or in the near future. In this situation, most states require you to pay as much as you can possibly afford, and to determine this amount, the state may request a full disclosure of your financial situation.

Assessing the Taxpayers' Financial Condition

When you apply for an offer in compromise on federal taxes, you must submit a Form 433-A or 433-F detailing all of your income, expenses, assets, and debts. Then, the Internal Revenue Service (IRS) reviews this form to assess your financial condition and to determine how much to reduce your tax bill. Businesses use Form 433-B.

Although Florida does not have a similar form, you should be prepared to share this level of financial information if you want the state to reduce your tax bill. A tax professional can help you present your case to the FL DOR. 

Identifying the Best Interest of the State

Negotiating a Florida offer in compromise on your own can be very tricky because the state doesn't publish any clear guidance. However, the department is not allowed to make arbitrary decisions, and tax pros who have successfully negotiated tax settlements in the past have insights into the DOR's decision-making process. 

When allowing a taxpayer to compromise a tax liability, the FL DOR must act in the best interest of the state. Typically, the department considers the following three elements:

1. The taxpayer's ability to make payments.

If the DOR believes that you can afford to pay off the tax liability in monthly payments, you will not be able to get a settlement. Be prepared to show the state your last three years of federal business tax returns as well as proof of income for the company's shareholders or owners. 

1. The taxpayer's pattern of delinquencies.

The state is willing to compromise tax bills to help taxpayers. It does not want to provide an unfair competitive advantage to people or business owners who are trying to avoid paying taxes. To assess this issue, the state will look at your pattern of tax compliance. 

If you are compliant with current and past filing and payment obligations, you are more likely to be able to obtain a settlement. Past compliance shows the state that you're likely to stay compliant on future reporting and payment obligations. 

1. If the taxpayer collected but failed to remit the tax.

You cannot obtain a settlement if you have collected but not remitted taxes. For example, you cannot qualify for a settlement if you charged sales tax to your customers and collected their money but never sent the funds to the state. However, recent legal updates allow remote sellers to compromise penalties for unpaid sales tax.

Compromise Through Voluntary Disclosure

The FL DOR may compromise tax liabilities for taxpayers who come forward through the state's voluntary disclosure program. If the state has not contacted you about old taxes that you owe or selected you for an audit, this program allows you to voluntarily come forward and pay your bill. 

When you go through the voluntary disclosure program, the state waives your penalties and only looks back for three years. To explain, imagine your business was supposed to be paying a tax for the last four years, but you didn't realize you owed the tax. Once you became aware of the situation, you voluntarily approached the state before the DOR reached out to you. 

In this case, the DOR will typically waive your penalties, and the agency will only hold you responsible for three years of that tax. The agency won't look further back than that time frame. 

The FL DOR may also settle and compromise the tax and interest due for those three years. When deciding how to reduce the tax liability, the state will take the following factors into account:

• The amount of tax and interest collected or compromised. 
• The financial status of the taxpayer and their business. 
• The taxpayer's compliance with other state taxes. 
• Any other factors deemed relevant. 

You cannot have taxes compromised through the voluntary disclosure program if you collected them but failed to remit them to the state. For example, if you collected sales tax from your customers but didn't send the money to the DOR, you cannot reduce your tax owed through this program. 

Penalty Waivers

Penalty waivers can work as an offer in compromise because they allow you to pay off your tax bill for less than you owe. Depending on how late your tax payment is, the state can assess penalties of up to 50% of the account balance. To save money, you should request to have penalties removed from your account. 

Typically, the FL DOR will remove penalties if you have been compliant for the last 12 months and you don't have any unresolved tax liability. If you have just one noncompliant filing event in the last 12 months, you may be able to get your penalties waived as long as you have resolved the issue. You must have filed a return within 30 days of being notified of the event and paid the tax and interest. 

Get Help With Florida Back Taxes

If you owe back taxes to Florida, you should make arrangements with the FL DOR as quickly as possible. Being proactive is always better than waiting for the state to contact you. If you have unpaid taxes, the state can place liens and levies on your assets, and the DOR can also revoke your business permits and licenses. 

To get help settling your Florida tax debt or to find the best resolution option for your situation, reach out to a Florida tax pro today. At TaxCure, we have a curated directory of tax professionals from around the country, and we can help you find the best fit for your situation.