IRS 656-B Explained

What is IRS 656-B?

The IRS Form 656-B is a document used by taxpayers seeking to make an offer in compromise with the Internal Revenue Service (IRS). This form allows individuals or businesses to propose a settlement of their tax liabilities for less than the total amount owed. The offer in compromise provides a pathway for those who find it difficult to pay their tax debt in full and want to resolve their tax issues more affordably.

Fill out IRS 656-B online

Get the latest version of the form and complete it in minutes.

Get IRS 656-B

Purpose of IRS 656-B

The main purpose of IRS 656-B is to facilitate a settlement between taxpayers and the IRS. It serves as the formal request to the IRS, outlining the offer that a taxpayer is willing to pay as a settlement for their tax liabilities. The form is crucial for those who cannot pay their debts due to financial hardship. By using IRS 656-B, taxpayers can negotiate a reduced tax amount, which can alleviate their financial burden and help them regain fiscal stability.

Where is IRS 656-B used and by whom?

IRS 656-B is utilized by various groups, primarily individuals and businesses that are struggling with outstanding tax debts. Here are typical scenarios for usage:

1.

Individuals: Taxpayers with significant tax liabilities due to circumstances like job loss, medical expenses, or financial hardship often file this form.
2.

Small Businesses: Business owners with tax debts who face cash flow issues or are negotiating debts may employ IRS 656-B to settle with the IRS.
3.

Tax Professionals: Accountants and other tax professionals often help clients navigate the complexities of completing IRS 656-B to ensure the best possible outcomes.

Step-by-step: how to fill out IRS 656-B

Filling out IRS 656-B may seem daunting, but it can be made simpler with a clear step-by-step approach. Here’s how you can do it:

1.

Download Form 656-B from the IRS website or access it through pdfFiller.
2.

Complete the identification section by providing your name, address, and social security number (SSN) or Employer Identification Number (EIN).
3.

Specify the amount you are offering as payment to settle your tax debt. It’s important to clearly outline this figure.
4.

Detail your current financial situation, including income, expenses, and assets. This information is critical as the IRS will evaluate your ability to pay.
5.

Review your offer for accuracy before submitting it. This ensures that all information is correct and will help expedite the process.

Using pdfFiller, you can edit the form easily, sign it electronically, and save a copy for your records.

Who is required to complete IRS 656-B?

Individuals and entities that owe back taxes and seek a compromise with the IRS are generally required to complete IRS 656-B. This includes:

1.

Taxpayers who are unable to pay their tax liabilities and want to propose a settlement.
2.

Businesses facing severe financial difficulties that have resulted in tax debts.
3.

Anyone who believes their tax debt exceeds their ability to pay and wishes to negotiate a lower total with the IRS.

Information you need to complete IRS 656-B

To successfully fill out the IRS 656-B form, you will need the following details:

1.

Your personal identification information (name, address, SSN/EIN).
2.

The total amount of tax debt owed.
3.

The amount you are proposing to pay as a compromise.
4.

Financial statements, including income and monthly expenses.
5.

A list of assets owned, including bank accounts, vehicles, and real estate.

How to submit IRS 656-B

Submitting IRS 656-B can be done through various channels, depending on the preference of the taxpayer:

1.

Online submission: Some taxpayers might opt to submit their forms electronically through the IRS website.
2.

Mail: You can print your completed form and send it via postal mail to the designated IRS address associated with the region of your tax filings.
3.

Direct submission through a tax professional: If you’re working with an accountant or tax advisor, they may handle the submission on your behalf.

Ensure that you adhere to any deadlines specified by the IRS to avoid complications.

When to update or refile IRS 656-B

There are several circumstances that may require you to update or refile the IRS 656-B form:

1.

If your financial situation changes significantly, it is advisable to update your offer.
2.

If you move or your contact information changes, you must notify the IRS and may need to refile the form.
3.

If the IRS rejects your initial offer, you might want to revise your proposal based on feedback received.

What happens if you don’t file IRS 656-B?

Failing to file the IRS 656-B can result in several consequences, including:

1.

Continued accrual of penalties and interest on your existing tax debt.
2.

Potential collection actions by the IRS, including wage garnishments or liens against property.
3.

Loss of the opportunity to negotiate a lower tax settlement, which can prolong financial distress.

It’s in the best interest of taxpayers facing tax liabilities to consider filing IRS 656-B to avoid these serious issues.

Fill out IRS 656-B online

Get the latest version of the form and complete it in minutes.

Get IRS 656-B

Frequently Asked Questions About the IRS 656-B

What is the IRS 656-B form used for?

The IRS 656-B form is primarily used for submitting an offer in compromise to the IRS. This form allows individuals to settle their tax debts for less than the total amount owed. Using the IRS 656-B can be an effective way to resolve tax liabilities while potentially alleviating financial struggles.

Who qualifies to use the IRS 656-B form?

To qualify for using the IRS 656-B form, individuals must meet specific criteria, including having unpaid taxes and being unable to pay the debt in full. The IRS considers various factors when assessing eligibility, including income, expenses, and asset valuation. Understanding these requirements is vital for anyone considering the IRS 656-B form for tax relief.

How do I complete the IRS 656-B form?

Completing the IRS 656-B form involves providing detailed information about your financial situation, including income, expenses, and debts. Ensure you follow the instructions carefully, as incomplete applications can be rejected. Accurate and complete information is crucial for a successful submission of the IRS 656-B form.

What documents do I need to submit with the IRS 656-B form?

When submitting the IRS 656-B form, you need to include several supporting documents to validate your financial situation. This may include proof of income, bank statements, and an asset list. Proper documentation ensures the IRS can assess your offer accurately when evaluating the IRS 656-B.

How long does it take for the IRS to process the IRS 656-B form?

The processing time for the IRS 656-B form varies, but applicants can expect a response within 6 to 9 months. Delays can occur based on the volume of submissions and the complexity of your case. Be patient as you await the IRS's decision regarding your offer submitted with the IRS 656-B form.

Can I appeal if my IRS 656-B form is rejected?

Yes, if the IRS rejects your offer submitted via the IRS 656-B form, you have the option to appeal the decision. The appeal process allows you to present additional information or clarify your financial situation. Engaging a tax professional can be beneficial to navigate the complexities of appealing an IRS 656-B rejection.

What are the common mistakes to avoid when filing the IRS 656-B form?

Common mistakes when filing the IRS 656-B form include providing inaccurate financial information or failing to include all required documentation. It's essential to double-check the information for accuracy and completeness before submission. Avoiding these mistakes can significantly improve your chances of acceptance.

Is there a fee for submitting the IRS 656-B form?

Yes, there is a non-refundable fee associated with submitting the IRS 656-B form, typically around $205. However, there are instances where low-income applicants may qualify for a fee waiver. Understanding the cost implications is important when deciding to apply through the IRS 656-B.

What should I do if I receive a notice after submitting the IRS 656-B form?

If you receive a notice from the IRS after submitting the IRS 656-B form, read it carefully to understand the information being requested. Often, the notice will include instructions on how to respond or provide additional information. Timely and accurate responses can help maintain your progress in resolving your tax issue.

Where can I find assistance for filling out the IRS 656-B form?

You can find assistance for filling out the IRS 656-B form through several resources, including the IRS website, tax professionals, or tax preparation services. Engaging an expert can simplify the process and increase the likelihood of a successful submission. Numerous online platforms also provide guides and templates to aid in accurately completing the IRS 656-B.

Author:

by Iryna Marchuk

Lead Writer/Blogs Manager at airSlate

Disclaimer: This content is for informational purposes only. It is not legal or other professional advice. airSlate provides this material on an "as-is" basis and disclaims all representations, guarantees, or warranties, whether express, implied, or statutory, including but not limited to warranties of merchantability, fitness for a particular purpose, or accuracy.