Form 656, Offer in Compromise (OIC)

Form 656, Offer in Compromise (OIC), is an IRS document used by taxpayers to propose settling their tax debt for less than the full amount owed. Key points include:

1. Used when a taxpayer can’t pay their full tax liability

2. Allows negotiation with the IRS for a reduced settlement

3. Requires detailed financial information

4. Includes a non-refundable application fee

5. Must be accompanied by Form 433-A or 433-B (financial statements)

6. Offers can be lump sum or periodic payment plans

7. IRS considers ability to pay, income, expenses, and asset equity

8. Acceptance isn’t guaranteed; IRS evaluates each case individually

This form provides a potential solution for taxpayers facing significant tax debt. It’s important to note that filing an OIC doesn’t guarantee acceptance, and the process can be complex. The IRS will thoroughly review the taxpayer’s financial situation to determine if the offer is appropriate. Professional assistance may be beneficial when preparing and submitting this form to increase the chances of a favorable outcome.