Can I submit an Offer in Compromise for state tax debt?

Many states offer their own compromise programs, though they are separate from the IRS OIC program. Each state has different rules, names for the program, and requirements. States with formal OIC programs include California (FTB Offer in Compromise), New York (Offer in Compromise for state taxes), Virginia (Offer in Compromise), and many others. Some states call their programs 'settlement agreements' or 'compromise offers.' Key differences from the federal OIC: state programs may use different financial analysis formulas, some states are more willing to accept lower settlements than the IRS, processing times vary widely (some states are faster than IRS), and you can submit state and federal OICs simultaneously. If you owe both state and federal taxes, a tax professional should coordinate both compromise applications to ensure consistency in the financial information presented. Be aware that some states share information with the IRS, so your state OIC financial disclosure should be consistent with your federal filing. Not all states have formal compromise programs; some handle settlements informally on a case-by-case basis.