What Forms Do You Need for an IRS Offer in Compromise?

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You’ve decided that the IRS offer in compromise (OIC) is the best solution to your current tax issues. If your OIC is accepted, you could settle your current tax debt for far less than you actually owe. First, however, you will need to get through a considerable amount of paperwork. The exact forms you need to complete will depend somewhat on your personal situation, as you’ll discover below:

Form 656-B

If you apply for an OIC based on doubt as to collectibility, you will need to complete Form 656-B. This booklet includes Form 656, which should be completed regardless of how you intend to apply. Form 656 includes an explanation of the reason for your offer, as well as payment and offer terms. Use of the IRS pre-qualifier tool is highly recommended prior to submitting the form.

Once you’ve completed the Form 656 portion of your booklet, the remainder of your application will depend on whether you file as a wage earner or a business:

  • Wage earners and self-employed individuals complete a Collection Information Statement known as Form 433-A.
  • Businesses complete a similar Collection Information Statement — Form 433-B.

Form 656-L

If you intend to apply for an OIC because you doubt your liability as a taxpayer, you will need to complete Form 656-L. This form may prove necessary if an examiner makes a critical error in interpreting tax law. It can also be used if new information becomes available to change the initial assessment. The form itself is simple — typically, complications involve not the contents of the form, but rather, whether it, Form 656-B, or another document is appropriate in a given situation.

Still confused about the process of applying for an offer in compromise? You’re certainly not alone. Look to the Highland Tax Group for assistance every step of the way. We can be reached at 720-398-6088!