There are generally, two mechanisms for reducing income tax debt in New Jersey, one is an Offer in Compromise and the other is bankruptcy.
An Offer in Compromise is a very burdensome and extensive process that may allow someone to reduce their tax debt. The process requires the completion of an application, and the submission of documents and information relating to the person’s payment ability, income, expenses, and assets. The debtor must present an offer to resolve the debt and select a specific payment option. Although there are general guidelines that are applied, it appears that the ultimate result is based on the subjective decision of the assigned tax agent.
The bankruptcy process is a specific determination as to the taxes that must be paid and the amounts that may be eliminated, based on the bankruptcy laws. The laws are designed to dispose of the debtor’s taxes by year. For example, the debtor may eliminate his year 2007 tax liability, but not his year 2012 tax liability. In general, the bankruptcy debtor should know, prior to the bankruptcy filing, the total amount that will be eliminated in his bankruptcy. Typically, there is no negotiating, which may be association with the Offer in Compromise.
Please note that the above is a simplified explanation of an extemely complex issue.
Robert Manchel is a New Jersey lawyer, who may be contacted at 866 503 5655, to discuss your tax issues.