Offer In Compromise Booklet 656

Filing an Offer for Compromise: Preparing Form 656 and Supporting Documentation

An Offer in Compromise (OIC) is a tax settlement offer provided by the Internal revenue service to taxpayers, both individuals and businesses, who are unable to manage tax debt. There are certain strict criteria that determine who may be eligible to file for the OIC and if you do satisfy these requirements, you will need to complete Form 656 and submit a number of documents to be evaluated for an offer.

Preparing Form 656 OIC

There are two circumstances in which you’ll meet the requirements to file Form 656. In the first, you’re making a case that paying the full amount of owed taxes will create economic hardship. In the second, you are make the case that there is doubt as to collectiblity.

If you meet the above criteria, here are some considerations for when you begin to complete the Form 656:

• You’ll have to include the relevant information in every field of the form.

• You’ll need to supply the names of both the parties if you are seeking a joint offer for joint liabilities. When you owe a liability jointly and both you and the other party are submitting an offer, then do so on Form 656, just one single form. Now you might owe a liability, such as employment taxes for yourself and hold other liabilities, such as income taxes, with another person. If you are the sole submitter of this form, then you will need to list all liabilities on one of Form 656. In case both of you want to submit this application, then you have to include all tax liabilities on your Form 656 and the other person must show only the joint tax liability on their Form 656.

• all persons submitting the offer should enter their social security numbers.
• You will need to provide the employer identification number (EIN) of all businesses, except corporate concerns, that you own, either wholly or partly.
• If your claim to an Offer for Compromise is based on a Doubt as to Collectability, you need to also furnish a completed Form 433A if you are an individual taxpayer and Form 433B if you are a business taxpayer.
• If your claim to an OIC is based on Effective Tax Administration, then in addition to submitting a Form 433A or 433B, you will also fill out the info in the “Explanation of Circumstances” field. You may include additional relevant information on separate sheets along with your EIN and social security numbers.
• While providing the total amount of your offer, you don’t include a sum that the IRS owes back to you or any amount that you’ve already paid in taxes.
• All persons submitting the offer should apply their signature on the 656 Form and give a date. They will also include the titles and names of authorized corporate officers, trustees, Powers of Attorney, and executors when requested.
• Ensure that you give the name and if possible, the address of the Offer in Compromise preparer.
• You may want the IRS to get in touch with a family member, a friend, or some other acquaintance to talk about your case in order to understand your circumstance better. In that case, you need to tick the “Yes” box in the “Third Party Designee” field. And, if you’d like an enrolled agent, your cpa, or attorney to represent your case, you have to provide the 2848 Form and submit it together with your offer. to better the chances of your offer being accepted by the IRS. Once you’ve gathered all the documents for submission, be sure that you make photocopies or electronic copies for your personal records. In addition to these documents, you might also submit documents that corroborate your claim for this genuine offer.

Applying for an Offer for Compromise is complicated. Ensure that you spend ample time with Form 656 and submit the entire set of supporting documents to increase your chances of acceptance.

You can view more of our OIC guide in the tax libraries at:

Accountants and Tax Preparers in Bellevue
Accountants and Tax Preparers in Bellevue