2017-2025 Form

What is the IRS Form 656

The IRS Form 656 is a crucial document used to apply for an Offer in Compromise (OIC), which allows taxpayers to settle their tax liabilities for less than the full amount owed. This form is designed for individuals and businesses facing financial difficulties, enabling them to negotiate a reduced tax obligation with the Internal Revenue Service (IRS). The form requires detailed financial information to assess the taxpayer's ability to pay and is an essential step in the OIC process.

How to use the IRS Form 656

To effectively use the IRS Form 656, taxpayers must complete the form accurately and submit it along with the required fee and supporting documentation. The form includes sections for personal information, financial disclosures, and the proposed offer amount. It is important to provide truthful and comprehensive information, as the IRS will evaluate the offer based on the taxpayer's financial situation. Once submitted, the IRS will review the application and determine whether to accept or reject the offer.

Steps to complete the IRS Form 656

Completing the IRS Form 656 involves several key steps:

• Gather necessary financial documents, including income statements, expenses, and asset information.
• Fill out the personal information section, including your name, address, and Social Security number.
• Provide detailed financial disclosures in the designated sections, ensuring accuracy and completeness.
• Calculate and propose an offer amount that reflects your financial situation.
• Include the required application fee, unless you qualify for a fee waiver.
• Review the entire form for accuracy before submission.

Required Documents

When submitting the IRS Form 656, taxpayers must include several supporting documents to substantiate their financial claims. Required documents typically include:

• Proof of income, such as pay stubs or tax returns.
• Documentation of monthly expenses, including bills and receipts.
• Statements for bank accounts and other assets.
• Any additional forms that provide context for your financial situation.

Filing Deadlines / Important Dates

It is essential to be aware of filing deadlines when submitting the IRS Form 656. The IRS does not have a specific deadline for submitting an Offer in Compromise, but it is advisable to submit the form as soon as possible if you are facing tax liabilities. Additionally, taxpayers should be mindful of any deadlines related to their tax returns and payments to avoid penalties and interest.

Eligibility Criteria

To qualify for an Offer in Compromise using the IRS Form 656, taxpayers must meet specific eligibility criteria. These criteria include:

• Demonstrating an inability to pay the full tax liability.
• Filing all required tax returns.
• Not being in an open bankruptcy proceeding.
• Meeting the IRS's guidelines regarding reasonable collection potential.