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Form 656 Department of the Treasury Internal Revenue Service Offer in Compromise (Rev. February 2016) To: Commissioner of Internal Revenue Service In the following agreement, the pronoun “we may
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How to fill out offer in compromise
How to fill out an offer in compromise:
01
Gather the necessary information: Collect all relevant financial documents, such as bank statements, income tax returns, and pay stubs. This will help you accurately assess your financial situation.
02
Complete Form 433-A or 433-B: These are the financial disclosure forms required for an offer in compromise. Provide accurate and detailed information about your income, expenses, assets, and liabilities.
03
Calculate your reasonable collection potential (RCP): The RCP is an essential part of the offer in compromise process. It determines the amount the IRS believes you can pay towards your tax debt. Use the IRS guidelines and worksheets to calculate your RCP accurately.
04
Determine your offer amount: Once you have calculated your RCP, you can determine the amount you are willing and able to offer to the IRS as a compromise. This should be based on what you can reasonably afford to pay.
05
Submit your offer: Complete Form 656, Offer in Compromise, and attach all necessary supporting documentation. Along with your offer amount, include a non-refundable payment of 20% of the offer or the first installment if you choose the periodic payment option.
Who needs an offer in compromise:
01
Individuals with significant tax debt: An offer in compromise is typically sought by individuals who owe a substantial amount of money in back taxes and are unable to pay the full amount.
02
Individuals experiencing financial hardship: If you can demonstrate that paying the full tax debt would cause undue financial hardship, you may be eligible for an offer in compromise.
03
Self-employed or small business owners: Individuals who are self-employed or own small businesses may face unique financial challenges, making an offer in compromise a viable option for tax debt resolution.
In conclusion, filling out an offer in compromise requires gathering financial information, completing necessary forms, calculating the reasonable collection potential and offer amount, and submitting the offer with supporting documentation. This option is typically pursued by individuals with significant tax debt or facing financial hardship, including self-employed or small business owners.
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What is offer in compromise?
Offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the full amount owed.
Who is required to file offer in compromise?
Taxpayers who are unable to pay their full tax liability or who have a legitimate dispute about the amount owed may be eligible to file an offer in compromise.
How to fill out offer in compromise?
Taxpayers can fill out Form 656, Offer in Compromise, and submit it to the IRS along with the required documentation and payment.
What is the purpose of offer in compromise?
The purpose of offer in compromise is to provide taxpayers with a way to resolve their tax debt and avoid more severe collection actions by the IRS.
What information must be reported on offer in compromise?
Taxpayers must report their financial information, including income, expenses, assets, and liabilities, on the offer in compromise form.
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