Form 656: Offers of Compromise

Preparing Form 656 and Supporting Documentation in Seeking an Offer in Compromise

An Offer in Compromise (OIC) is a tax debt settlement offer provided by the Internal revenue service to taxpayers, either an individual or a business unable to manage their tax debt. There are certain strict criteria that determine who will be eligible to request the OIC. If you do satisfy these requirements, you’ll need to fill out Form 656 and submit a number of supporting documents to be considered for the offer.

Preparing Form 656

You need to fill out a Form 656 to file for an OIC in two circumstances. In the Doubt as to Collectability situation, there exists a reasonable amount of doubt over your ability to pay the full amount of your claims within the specified period. In the Effective Tax Administration case, your contention for a tax settlement is that paying the full amount of the dues will create economic hardship for you.

Now that you know the circumstances in which you will need to prepare Form 656, here’s what you should remember when completing the form

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

• You will need to give the names of both the persons if you are applying for a joint offer for joint liabilities. If you owe a joint liability and both you and the other party are submitting an offer, then do so on Form 656, just one single form. 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 have 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 will have to include the relevant information In each field in the form.

• You will need to show the employer identification numbers 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 Offer for compromise is based on Effective Tax Administration, then on top of submitting a Form 433B or 433A, you’ll also need to fill out the information in the “Explanation of Circumstances.” You may include additional bits of relevant information in separate sheets along with your social security and employer identification numbers.

• When filling out the total amount of your offer, you don’t include a sum that the Internal revenue service owes you or any of the amounts that you’ve already paid in taxes.

• All persons submitting the offer should sign the Form 656 and supply the date. They need also give the titles and names of authorized corporate officers, trustees, Powers of Attorney, and executors where requested.

• Be sure that you provide the name and if possible, the address of the Offer in Compromise preparer.

• You might want the IRS to get in touch with a a friend, a family member, or some other acquaintance to discuss your case so that they might understand your situation more fully. In that case, you need to tick the “Yes” box in the “Third Party Designee” field. Additionally, if you’d like a Certified public accountant, your attorney, or an enrolled agent to represent your case, you will have to furnish the 2848 Form and submit it along with your offer. to better the chances of your offer being accepted by the IRS. After you’ve compiled all the above-mentioned documents for submission, ensure that you make duplicates for personal records. Additionally, you might also submit documents that support your claim for this genuine offer.

Pay Attention to the Details

The application process for an Offer for compromise is a complicated process. Be sure to spend enough time on Form 656 and submit the entire set of supporting documents to improve your chances of getting approval on the offer.

Visit the offer in compromise guide at:
Seattle Business Valuation
Seattle Tax Debt Relief
Seattle Offer in Compromise