Form 656: Offer in Compromise

Preparing Form 656 and Supporting Documentation in Pursuing an Offer of Compromise of Owed Taxes

An Offer in Compromise (OIC) is a tax debt settlement offer from the Internal revenue service to taxpayers, both individuals and businesses, who are unable to manage their tax debt. There are certain strict criteria that determine eligibility to file for the OIC and if you meet these requirements, you are required to complete Form 656 and submit a whole host of supporting documents to be considered for the 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:

• Each person submitting the offer should provide social security numbers.

• You will need to provide the names of both the persons if you are applying for a joint offer for joint liabilities. When you jointly owe a liability and both your partner and you are submitting for an offer, then do so on Form 656, just one 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 want 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.

• You have to supply the appropriate information In each field of the form.

• You’ll need to give the employer identification numbers of all businesses, except corporate concerns, that you own, either wholly or partly.

• If your claim to an Offer in 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 apart from submitting a Form 433A or 433B, you also need to fill out the information in the “Explanation of Circumstances” field. You might include supplementary relevant information on attached sheets together with your social security and employer identification numbers.

• While providing the total amount of your offer, you don’t include a sum that the Internal revenue service owes to you or any of the amounts that you have already paid in taxes.

• All persons submitting the offer should sign the form and give the date. They will also include the titles and names of authorized corporate officers, trustees, Powers of Attorney, and executors where requested.

• Ensure that you mention the name and if it is 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 discuss your case so as to understand your situation better. In that case, you will need to tick the “Yes” box for the “Third Party Designee” field. Additionally, if you want your attorney, CPA, or an enrolled agent to represent your case, you have to complete the 2848 Form and submit it along with your offer. to increase the chances of your offer being accepted. And after you have compiled all the documents for submission, be sure you make hard copies or electronic copies for your personal records. In addition to these documents, you may also submit documents that you think will corroborate your claim for this offer.

Pay Attention to the Details

The application process for an Offer of compromise is complicated. Make sure to spend enough time on Form 656 and provide all supporting documents to increase your chances of gaining approval on the offer.