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What is IRS Form 656

The IRS Form 656 Offer in Compromise is a tax document used by individuals and businesses to settle a tax debt for less than the full amount owed.

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Who needs IRS Form 656?

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IRS Form 656 is needed by:

Individuals seeking to settle tax debts with the IRS
Businesses facing tax liabilities
Taxpayers interested in applying for tax relief
Financial advisors assisting clients with tax issues
Accountants preparing tax documents for clients

Comprehensive Guide to IRS Form 656

What is the IRS Form 656 Offer in Compromise?

The IRS Form 656 is a crucial document that taxpayers use to settle tax debts for less than the total amount owed. This form serves as a request for an Offer in Compromise, allowing both individuals and businesses to negotiate with the IRS regarding their tax liabilities. For many taxpayers, this form represents a significant opportunity for relief from financial strain, making it an essential tool in tax debt settlement.

Purpose and Benefits of the IRS Form 656 Offer in Compromise

The primary purpose of the IRS Form 656 is to facilitate tax compromise, enabling taxpayers to clear their debts for less than they owe. This process not only helps in settling tax obligations but also offers a much-needed fresh start, alleviating the burden of overwhelming financial stress. Among its numerous benefits, a successful application can result in reduced payments, allowing taxpayers to regain control over their financial futures.

Who Needs to File the IRS Form 656 Offer in Compromise?

This form is designed for a wide range of taxpayers, including both individuals and businesses that are struggling with tax debt. Those who may want to consider filing the IRS Form 656 include anyone who finds themselves unable to pay their tax obligations. Common scenarios leading to the need for this application encompass significant life changes, such as a loss of income, unexpected medical expenses, or other financial hardships that hinder repayment capabilities.

Eligibility Criteria for the IRS Form 656 Offer in Compromise

To qualify for the IRS Form 656, taxpayers must meet specific eligibility criteria. Key factors influencing eligibility include financial situation, income levels, and tax filing compliance. Taxpayers should be proactive in determining their eligibility status, as unpaid taxes, sufficient income to pay, and prior attempts to resolve debts may affect their ability to successfully secure an Offer in Compromise.

How to Fill Out the IRS Form 656 Offer in Compromise Online (Step-by-Step)

Filling out the IRS Form 656 online requires careful attention to detail. Below is a step-by-step guide to assist taxpayers in completing the form:

Visit the official IRS website to access the form.
Gather all necessary financial documents, including income statements and expenses.
Begin filling out the personal information section, ensuring accuracy.
Provide detailed information on your financial condition in the financial disclosure section.
Review all entries for accuracy before submission.

Each section's details are important, as inaccuracies can lead to delays or denial of the offer.

Required Documents and Supporting Materials for IRS Form 656

When submitting the IRS Form 656, taxpayers need to include certain supporting documents to strengthen their case. Essential documentation includes:

Recent tax returns.
Proof of income, such as pay stubs or bank statements.
Detailed monthly expenses.
Any relevant financial statements.

Providing comprehensive financial information is vital for demonstrating the inability to pay the full tax liability.

Submission Methods and Delivery for IRS Form 656 Offer in Compromise

Taxpayers have several acceptable methods for submitting the IRS Form 656. These options include:

Mailing the completed form to the appropriate IRS address.
Faxing the form if eligible for expedited processing.
Utilizing any available electronic submission options provided by the IRS.

Each method has specific guidelines and it is essential to follow these closely for successful acceptance.

What Happens After You Submit the IRS Form 656?

Once the IRS Form 656 is submitted, taxpayers can expect a review process to begin. The typical processing timeline can vary, but the IRS aims to respond within a specified period. Taxpayers can track their application status through various IRS resources, allowing them to stay informed about their Offer in Compromise status.

Common Reasons for Rejection and Solutions

Applications for the IRS Form 656 may face rejection for various reasons, including incomplete information or insufficient financial documentation. To improve the chances of approval, taxpayers should:

Double-check all form entries for accuracy.
Ensure all supporting documents are included and correctly formatted.
Be clear and thorough in the financial disclosure section.

Awareness of these common pitfalls can help applicants navigate the process more successfully.

Why Choose pdfFiller for Your IRS Form 656 Offer in Compromise Needs?

pdfFiller offers an effective solution for completing the IRS Form 656. With its user-friendly interface, taxpayers can easily fill out, edit, and securely eSign their forms. The platform ensures compliance and security, utilizing 256-bit encryption to safeguard sensitive tax documents throughout the process, making it a trusted choice for managing tax relief documentation.

Last updated on Feb 11, 2015

How to fill out the IRS Form 656

1.

Access pdfFiller and enter the IRS Form 656 Offer in Compromise into the search bar to locate the document.
2.

Click on the form to open it in the pdfFiller editor. Utilize the intuitive interface to navigate through the form fields easily.
3.

Before filling out the form, gather necessary financial documents including income statements, bank statements, and proof of assets.
4.

Carefully enter your personal and financial information into the required fields, ensuring accuracy to prevent processing delays.
5.

Review all the information entered on the form for completeness and accuracy, correcting any errors as necessary.
6.

Once satisfied with the filled form, use the save option to store it in your pdfFiller account or download it for your records.
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Follow the prompts to submit the form online through pdfFiller if you're ready, or print it out for mailing.

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Who is eligible to apply for the IRS Form 656 Offer in Compromise?

Eligibility for the IRS Form 656 includes having a tax liability with the IRS and demonstrating an inability to pay the full amount owed. It’s important to consult the IRS guidelines for specific criteria such as income thresholds and types of eligible tax debts.

What are the common mistakes to avoid when filling out Form 656?

Common mistakes include failing to provide complete and accurate financial information, neglecting to sign the form, or not including the required application fee. Always double-check entries before submission to avoid these issues.

How long does it take to process the Offer in Compromise application?

Processing times for the IRS Form 656 can vary, but it typically takes the IRS around six to ten months to review applications. Ensuring your application is complete can help prevent delays.

What supporting documents are required with Form 656?

Along with Form 656, taxpayers must provide supporting documentation that outlines their financial situation, including income statements, asset details, and any outstanding debts. Always refer to IRS guidance for the complete list of requirements.

Are there any fees involved in submitting Form 656?

Yes, submitting IRS Form 656 requires payment of an application fee, which is non-refundable even if your offer is rejected. Review the IRS instructions for the current fee amount.

What are the available submission methods for Form 656?

IRS Form 656 can be submitted via mail or online through designated IRS e-file options. If using pdfFiller, you can also choose to download and mail the form.

Can I appeal a rejected Offer in Compromise application?

Yes, if your Offer in Compromise is rejected, you can appeal the decision. Instructions for the appeal process will be provided with your rejection notice, so it’s crucial to read it carefully.