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What is Form 656

The IRS Form 656 is a tax document used by taxpayers to apply for an Offer in Compromise, allowing them to settle tax debt for less than the full amount owed.

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Who needs Form 656?

Explore how professionals across industries use pdfFiller.

Form 656 is needed by:

Taxpayers struggling with tax debt
Individuals seeking tax debt relief options
Financial advisors assisting clients with tax settlements
Tax professionals preparing client forms
Anyone interested in understanding IRS payment options
Individuals who want to reduce their tax liabilities

Comprehensive Guide to Form 656

What is the IRS Form 656 Offer in Compromise?

The IRS Form 656, also known as the Offer in Compromise (OIC), is a significant tool for taxpayers seeking to settle their tax debt for less than the total amount owed. This form allows individuals to propose a lower payment that the IRS may agree to accept based on their financial situation. The Offer in Compromise process involves analyzing the taxpayer's income, expenses, and asset details to determine a reasonable offer amount that reflects their ability to pay.

Understanding how the OIC process works is essential, as taxpayers must be prepared to provide detailed financial information along with their application. This form is particularly beneficial for those struggling with overwhelming tax debts and seeking a fresh start.

Purpose and Benefits of the IRS Form 656 Offer in Compromise

The primary purpose of submitting the IRS Form 656 is to enable taxpayers to reach a tax compromise, allowing them to settle their liabilities for an amount that is less than what they owe. This option can significantly alleviate the financial burden on individuals facing tax debts that they cannot afford to pay in full.

Some of the distinct benefits include:

Reducing overall tax liabilities and financial stress.
Providing an opportunity to avoid bankruptcy proceedings.
Offering structured IRS payment options suitable for various financial circumstances.

Eligibility Criteria for the IRS Form 656 Offer in Compromise

To qualify for submitting the IRS Form 656, certain eligibility criteria must be met. Taxpayers should conduct a careful assessment of their financial situation to determine whether they can qualify for an offer. Key factors to consider include:

Financial criteria based on income, expenses, and assets.
Specific personal circumstances that could affect the taxpayer's ability to pay.
Documentation required to prove eligibility, such as the IRS Form 433, which includes the taxpayer financial statement.

How to Complete the IRS Form 656 Offer in Compromise (Step-by-Step)

Completing the IRS Form 656 accurately is crucial for a successful submission. Follow these steps to fill out the form correctly:

Begin with basic taxpayer information, including name and contact details.
Provide financial information, such as income, expenses, and asset details.
Select a payment option that aligns with your financial capabilities.
Double-check all information to avoid common errors.
Submit your completed form with the required documentation.

Required Documents and Supporting Materials for IRS Form 656

Gathering necessary documentation is a vital part of the Offer in Compromise process. Before submission, ensure you have the following items ready:

Proof of income, such as pay stubs or bank statements.
Details of assets, including real estate and vehicles.
Taxpayer financial statement, often completed on IRS Form 433.
Payment for the IRS application fee, if applicable.

Accurate presentation of your financial information will strengthen your application.

Submission Methods for the IRS Form 656 Offer in Compromise

Once the form is completed, taxpayers need to know how and where to submit it. There are several submission methods available:

Mail the form directly to the address specified by the IRS.
Online submission through the IRS portal, if applicable.

Be mindful of important deadlines and any associated fees that may affect your submission process.

What Happens After You Submit the IRS Form 656 Offer in Compromise?

After submitting Form 656, it is essential to understand what follows in the process. The IRS will review your application, which typically takes several months. During this period:

Track the status of your application to stay updated on its progress.
Be prepared to respond to any requests for additional information from the IRS.
Know common rejection reasons, which may include incomplete documentation or insufficient offers.

Security and Compliance with IRS Form 656 Process

Utilizing a secure platform for the submission of sensitive tax information is crucial. pdfFiller employs advanced technologies to ensure that your documents are protected during the process:

All documents are secured using 256-bit encryption.
Compliance with SOC 2 Type II, HIPAA, and GDPR standards is maintained.

This commitment to security highlights the importance of data privacy when submitting tax information.

Maximize Your Experience with pdfFiller for IRS Form 656

Using pdfFiller can enhance your experience while preparing the IRS Form 656. The platform offers numerous features to simplify the process:

Edit and fill out the form online with ease.
eSign documents for quick and secure submissions.

Many users share successful experiences, emphasizing the convenience of using pdfFiller for tax-related forms.

Sample Completed IRS Form 656 Offer in Compromise

For reference, reviewing a filled-out sample of the IRS Form 656 can be invaluable. This example can provide insights into how to complete each section accurately. Key tips to remember when looking at the example include:

Verify that all sections are filled out completely and accurately.
Use the sample to guide your own financial disclosures.

Referencing a completed form can help ensure your submission is as strong as possible.

Last updated on Mar 16, 2015

How to fill out the Form 656

1.

Access pdfFiller and search for 'IRS Form 656 Offer in Compromise' in the template options.
2.

Open the form to begin filling it out within the pdfFiller interface.
3.

Before starting, gather your financial information, including income statements, expenses, and payment history to ensure you have all the necessary data.
4.

Review each field on the form carefully and input the required financial details accurately.
5.

Make sure to select a payment option suitable for your financial situation, as this is a crucial part of the Offer in Compromise.
6.

Once all fields are completed, review the information you have entered to ensure accuracy and completeness.
7.

Check for any areas where additional documentation may be required or where fields are missing information.
8.

Finalize the form and choose the option to save your completed document to your device or within your pdfFiller account.
9.

If you need to submit the form electronically, follow the on-screen prompts in pdfFiller to submit directly to the IRS or download the form for mailing.

FAQs

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Who is eligible to apply for an Offer in Compromise?

Eligibility for the IRS Form 656 Offer in Compromise depends on your financial situation. Generally, you must demonstrate an inability to pay your tax debt in full and show that settling for less is in the best interest of both you and the IRS.

What documents do I need to provide with Form 656?

Along with the IRS Form 656, you need to submit a completed Form 433-A or 433-B, depending on whether you are an individual or a business. Additionally, include any necessary financial statements that support your claim for an Offer in Compromise.

How do I submit IRS Form 656?

You can submit the IRS Form 656 by mailing it to the address specified in the form instructions or submitting it electronically through authorized e-filing services like pdfFiller. Ensure that all supporting documentation is included with your submission.

How long does it take for the IRS to process Form 656?

Processing times for Form 656 can vary, but typically, it takes around 6 to 9 months for the IRS to evaluate your offer. This timeframe can be affected by the complexity of your situation and how promptly you respond to any IRS inquiries.

What common mistakes should I avoid when filling out Form 656?

Common mistakes include failing to provide complete financial information, not signing the form, or not including the required application fee. Double-check all entries and ensure that your calculations are accurate before submission.

How much is the application fee for filing Form 656?

The application fee for IRS Form 656 is generally $205. However, if you qualify for a low-income waiver, you may be exempt from paying this fee. Check the latest IRS guidelines for specific eligibility criteria.

Can I appeal if my Offer in Compromise is rejected?

Yes, if your Offer in Compromise is rejected, you can appeal the decision by following the IRS's guidance outlined in the rejection letter. Make sure to provide any additional information that may support your case in the appeal process.