You’re ready to apply for the IRS offer in compromise, and hopefully, get some relief from your tax burden. First, however, you’ll need to complete Form 656. Keep reading to learn how this form works — and how filling it out correctly will pave the path to an accepted offer.
Individual and Business Information
Form 656 begins with requests for basic details about your individual circumstances or your business. These include contact information, tax periods to be covered by the OIC, and, when relevant, low-income certification.
Once you’ve provided basic information, you’ll need to select your reason for making an offer. You can indicate doubt as to collectability or the presence of special circumstances. This may be accompanied by a narrative to provide additional insight into your situation.
Handling Payment
Should your offer be accepted, you’ll need to designate how you want to handle payment. The IRS allows you to pay in full or set up periodic payments lasting up to 24 months. These payments can be designated towards specific tax years or debts upon request. Be sure to include details on how, exactly, you’ll obtain the funds to pay the offer, as requested in section 6.
Offer Terms
Before you submit an OIC application, it is critical that you understand all the terms. These are explained in detail in section 7 of Form 656, but it can be tempting to skip over the fine print. A closer look, however, will reveal important information regarding:
- The ability of the IRS to keep payments and fees upon application submission.
- Potential consequences of defaulting on an accepted offer.
- The possibility of tax liens while offers are considered.
- The authorization of the IRS to contact third parties as part of the application process.
- Requirements for making liability amounts, offer terms, and other details available for public inspection.
With so much to consider when applying for an offer in compromise, it’s important to seek help from a trusted tax expert. Contact Highland Tax Group to get started.