Form 656 2022 Printable, Fillable PDF

Form 656 2022 Printable, Fillable PDF – An offer in compromise, also known as an offer in settlement, is a proposed contract with the Internal Revenue Service (IRS) in which you offer to settle a tax liability for less than you owe. If you can convince the IRS that your offer represents the greatest opportunity for the government to collect the most money, you may be able to persuade them to accept your offer.

The Internal Revenue Service will only accept this offer in certain situations. There are no assurances, and your offer may be refused, or it may be returned to you as “unprocessable,” depending on the circumstances. The following are some instances in which it is more probable that your offer will be accepted:

What Is The Purpose Of Form 656?

In the event that you get behind on your taxes, the financial burden may rapidly mount. Late tax payments accrue penalties and interest, making it that much more difficult to pay back the debt. Form 656 allows you to negotiate an arrangement with the Internal Revenue Service in which you agree to pay less than what is owing.

FForm 656, also known as an “offer in compromise” (OIC), provides the Internal Revenue Service with an overview of your financial status so that it may assess your debt and capacity to pay and decide if the offer is in the best interests of both parties.

Offer in Compromise (Form 656 of the Internal Revenue Service)

Form 656 2022 Printable, Fillable PDF

Who Is The Intended Recipient Of Form 656?

If you want to seek an OIC, you may do so for one of three different reasons:

  • The following are examples of three possible grounds for obtaining an OIC: scenarios in which
  • There is some dispute about whether or not your tax debt will be collected.
  • There is some skepticism about your responsibility for the loan.

It is referred to as “efficient tax administration” due to a unique set of circumstances.

Following the discovery of the reason for your OIC request, you will be required to support your claim.

Concerns about the collectibility of the assets

Taxpayers who are concerned about their ability to pay their tax debts to the Internal Revenue Service (IRS) should consult with a tax professional. It does not imply that you have any doubts about whether you owe the outstanding balance of tax bills; rather, it indicates that you acknowledge that you owe a debt. You’re telling the Internal Revenue Service that it may pursue you for the debt as much as it wants, but it won’t be able to collect the whole amount because you simply do not have the funds. It is doubtful that an unsecured loan would be accepted since you do not have any assets that can be liquidated or refinanced in order to obtain the funds.

Alternatives to an OIC based on this reason include the negotiation of a long-term payment agreement or a partial-pay installment agreement with the Internal Revenue Service.

The overwhelming majority of taxpayers who obtain an OIC do so because they are concerned about the collectibility of their tax debt.

Concerning Liability

If you say so, it signifies that you do not believe you are legally accountable for any outstanding amount of the tax burden. You must provide a statement stating your reasons for believing this to be the case.

Rather than seeking an OIC on the basis of a reasonable question about responsibility, it may be simpler, quicker, and less expensive to find a means to address the underlying tax problem. Filing an updated tax return to address any apparent mistakes, requesting innocent spouse or wounded spouse relief, requesting penalty abatement, or requesting an audit reconsideration are all possible alternatives.

Tax administration that works

Specifically, you are alleging that paying the tax would result in substantial economic hardship for you due to the extraordinary circumstances that you are experiencing. It would be unreasonable and inequitable of us to demand the full amount of the outstanding debt from you. You have no question that you are accountable for the outstanding tax liability, and you are certain that the IRS would be able to collect the whole amount owed if it attempted to do so.

Cases of significant economic hardship would include those with substantial health concerns. David Bauman, an enrolled agent and offer-in-compromise expert with JK Harris, provides the following advice:

“Providing a detailed narrative of the unusual and extraordinary circumstances is required when presenting an offer in compromise based on efficient tax administration, in addition to the rest of the offer in compromise documents. At this time, “unusual circumstances” would be defined as a scenario in which one’s life is in danger, such as a major medical condition.

Options include requesting a long-term payment arrangement, asking for a partial-pay installment agreement, or requesting a penalty abatement based on fair cause, among other things.

The Internal Revenue Service (IRS) seldom accepts an offer based on efficient tax administration.

Where Can I Obtain Form 656?

Although you may download the whole Form 656 booklet from the IRS website and complete it on your own, it’s always best to consult with a tax expert to ensure that this and any other associated forms are completed correctly. It’s not simple to get your OIC just so, so getting some assistance can increase your chances of success.

How To Complete And Understand Form 656

The Form 656 booklet offers thorough instructions as well as any other forms that may be required in conjunction with your OIC submission. Preparing extensive information on your personal and company finances, such as employment and earnings, as well as assets and liabilities, will be required on your part. Take the time to ensure that you have all of this data, as well as an explanation for why you’re making the offer, prepared.

Modalities Of Payment

You must also specify the conditions under which your offer will be paid. These begin on the day the IRS accepts and approves your OIC and run until the end of the year. You have a choice between two alternatives:

  • Payment in one lump sum: This includes 20% of your total offer up front, as well as a recommended payment plan over the next one to five months, depending on your circumstances.
  • Periodic payment: You propose to pay off your provided amount over a period of six to 24 months, depending on your financial circumstances.

Unless you fulfill the IRS’s low-income certification requirements, you should count on continuing to pay your recommended monthly amounts until you get notification from the IRS whether your offer has been accepted or refused.

The IRS will reject your OIC if you have not filed all of your necessary tax returns or have not kept up with your estimated tax payment responsibilities throughout the year. You are also not permitted to get involved in bankruptcy procedures. Make sure to include the $205 filing fee with Form 656 and to make all of your recommended OIC payments until you get a response from the IRS on their decision. 4, However, there is no cost for some low-income people or for those who are seeking an OIC because they are unsure of their legal obligations.

Is It Possible To File Form 656 Electronically?

Form 656 cannot be submitted electronically. You must send your offer of compromise to the proper IRS office in order to complete all of the necessary documentation. Payments may, however, be made electronically if you like.

Form 656 should be sent to:

Please submit your completed Form 656 to the following address if you reside in Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Mississippi, New Mexico, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah, or Washington.

The COIC Unit at the IRS Center in Memphis

PO Box 30803, AMC (American Motors Corporation)

United States, Memphis, TN 38130-0803

Residents of all other states, as well as residents of other countries, should submit their forms to the following address:

Brookhaven IRS Center COIC Unit, Brookhaven, New York

P.O. Box 9007 is the address.

11742-9007 (phone) Holtsville, New York

How To Complete And Submit Form 656

The Form 656 brochure contains step-by-step directions on how to submit your agreement in compromise. Make certain that all essential parts have been completed, that all fees and first payments have been included, and that you have sent your paperwork to the right location for your state.

Pre-qualifying is a tool provided by the Internal Revenue Service that allows you to discover whether or not you qualify before going to the time and cost of drafting your offer.

What Are The Chances Of Being Accepted?

The vast majority of OIC applications are either returned as unprocessable or refused outright. The Internal Revenue Service accepted and approved slightly under 33% of all OICs submitted in 2019. This amounted to around 17,890 approvals out of a total of 54,225 applications received.

It is normally accepted by the IRS if all of the documentation is in place and if the IRS considers that the amount offered is the maximum amount it is likely to be able to collect. It will almost certainly reject your application if it feels it can collect more money from you than you have supplied in your application.

If the IRS rejects your offer, you have 30 days to file an appeal. Use Form 13711 to explain your reasons for disagreeing with the judgment.

If your offer is accepted, we will contact you.

Because the offer in compromise is a legally binding agreement between you and the IRS, you should thoroughly review IRS Form 656 before signing and submitting it. You will be held accountable under the terms of the OIC contract, and any refunds due for a certain tax year will be used against your debt until it is completely paid off. 4, If you fail to comply with any of the contractual requirements, the IRS has the right (and is likely to do so) to rescind acceptance of your offer and re-impose the entire amount of your original tax liability.

The Most Important Takeaways

  • Form 656 is used by a taxpayer to submit a contract for an “offer in compromise” (OIC) with the Internal Revenue Service in order to settle a tax liability for less than what they owe.
  • The IRS is only likely to accept your offer if it is evident that it will not be able to collect any more money from you in the future.
  • To maximize your chances of having your offer approved, you must be current on all tax filings and other tax payments, you must not be in the process of filing for bankruptcy, and you must pay the requisite fee as well as the recommended installments.
  • It’s a good idea to engage with a tax expert since the IRS rejects the vast majority of proposals in compromise. This will ensure that you have the greatest opportunity of having yours approved.

Form 656 2022 Printable, Fillable PDF

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