You are correct that the form and instructions are vague. My advice is to simply fill it out responding to each question as specifically and honestly as you can. As for the offer amount, fill in an amount that you can afford to pay. It is that simple. Sometimes, that will be 50% and at other times 1% of the amount owed. The FTB typically looks at what they can expect to receive over the next 5-7 years when reviewing your offer for reasonableness. So, if you're on an installment payment plan of $100 a month based on your financial situation, they expect $8,400 over 7 years. You then have to a apply a present day value of $8,400 to arrive at an offer that might be accepted. Lastly, you have to evaluate your available funds including any funds that might be borrowed. As for the documents that must be included, follow the instructions and if 3 months worth of bank statements must be provided, provide exactly what is asked for. Don't leave anything out or else you might get the OIC kicked back to you as simply incomplete. Sadly, there is no manual or regulation that provides more information than the instructions. As for the appeals process, it is very informal. The FTB or BOE will just ask for more if the offer is too low and you are expected to counter. I assist taxpayers with OICs all the time and highly recommend the OIC Program. If you're having problems, contact a state and local tax professional.
California OIC's applications are very complex and better left to professionals who have experience in negotiating with the FTB, and BOE.
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Licensed in the United States Tax Court
Main: 323-292-4116 ❘ Cell: 562-505-1004
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is firstname.lastname@example.org.