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Fillable Printable Form 656-B

Fillable Printable Form 656-B

Form 656-B

Form 656-B

Form 656 Booklet
Offer in
Compromise
CONTENTS
What you need to know................................................................................. 1
Paying for your offer ..................................................................................... 3
How to apply ................................................................................................ 3
Completing the application package ............................................................ 4
Important information ................................................................................... 5
Removable Forms - Form 433-A (OIC), Collection Information Statement
for Wage Earners and Self-Employed; Form 433-B (OIC), Collection
Information Statement for Businesses; Form 656, Offer in Compromise ..... 7
Application Checklist ....................................................................................27
IRS contact information
If you want to see if you qualify for an offer before filling out the paperwork, you may use the Offer in
Compromise Pre-Qualifier tool. The questionnaire format assists in gathering the information needed and
provides instant feedback as to your eligibility based on the information you provided. The tool will also assist
you in determining a preliminary offer amount for consideration of an acceptable offer. The Pre-Qualifier tool is
located on our website at www.irs.gov.
If you have questions regarding qualifications for an offer in compromise, please call our toll-free number at
1-800-829-1040. You can get forms and publications by calling 1-800-TAX-FORM (1-800-829-3676), by
visiting your local IRS office, or at www.irs.gov.
Taxpayer resources
The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service that
helps taxpayers and protects taxpayer rights. We help taxpayers whose problems with the IRS are causing
financial difficulties, who've tried but haven't been able to resolve their problems with the IRS, or believe an IRS
system or procedure isn't working as it should. And the service is free. Your local advocate's number is in your
local directory and at taxpayeradvocate.irs.gov. You can also call us at 1-877-777-4778. For more information
about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.irs.gov. TAS is your voice
at the IRS.
Low Income Taxpayer Clinics (LITCs) are independent from the IRS. LITCs serve individuals whose income is
below a certain level and who need to resolve a tax problem with the IRS. LITCs provide professional
representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or
for a small fee. For more information and to find an LITC near you, see the LITC page at
www.taxpayeradvocate.irs.gov/litcmap or IRS Publication 4134, Low Income Taxpayer Clinic List. This
Publication is also available by calling the IRS toll-free at 1-800-829-3676 or visiting your local IRS office.
WHAT YOU NEED TO KNOW
What is an Offer? An Offer in Compromise (offer) is an agreement between you (the taxpayer) and
the IRS that settles a tax debt for less than the full amount owed. The offer
program provides eligible taxpayers with a path toward paying off their tax debt
and getting a fresh start. The ultimate goal is a compromise that suits the best
interest of both the taxpayer and the IRS. To be considered, generally you must
make an appropriate offer based on what the IRS considers your true ability to
pay.
Submitting an application does not ensure that the IRS will accept your offer. It
begins a process of evaluation and verification by the IRS, taking into
consideration any special circumstances that might affect your ability to pay.
This booklet will lead you through a series of steps to help you calculate an
appropriate offer based on your assets, income, expenses, and future earning
potential. The application requires you to describe your financial situation in detail,
so before you begin, make sure you have the necessary information and
documentation.
Are You Eligible?Before your offer can be considered, you must (1) file all tax returns you are legally
required to file, (2) have received a bill for at least one tax debt included on your
offer, (3) make all required estimated tax payments for the current year, and (4)
make all required federal tax deposits for the current quarter if you are a business
owner with employees. Your offer will be immediately returned without
consideration if you have not filed all tax returns you are legally required to file.
Note: If it is determined you have not filed all tax returns any initial payment
sent with your offer will be applied to your tax debt and your offer will be
returned along with your application fee.
BankruptcyIf you or your business is currently in an open bankruptcy proceeding, you are not
eligible to apply for an offer. Any resolution of your outstanding tax debts generally
must take place within the context of your bankruptcy proceeding.
If you are not sure of your bankruptcy status, contact the Centralized Insolvency
Operation at 1-800-973-0424. Be prepared to provide your bankruptcy case
number and/or Taxpayer Identification Number.
Can You Pay in Full?Generally, the IRS will not accept an offer if you can pay your tax debt in full or
through an installment agreement and/or equity in assets.
Note: Adjustments or exclusions, such as allowance of $1,000 to a bank
balance or $3,450 against the value of a car, are only applied after it is
determined that you cannot pay your tax debt in full.
Your Future Tax RefundsThe IRS will keep any refund, including interest, for tax periods extending through
the calendar year that the IRS accepts the offer. For example, if your offer is
accepted in 2016 and you file your 2016 Form 1040 on April 15, 2017 showing a
refund, IRS will apply your refund to your tax debt. The refund is not considered
as a payment toward your offer.
Doubt as to LiabilityIf you have a legitimate doubt that you owe part or all of the tax debt, complete and
submit a Form 656-L, Offer in Compromise (Doubt as to Liability). The Form
656-L is not included as part of this package. To request a Form 656-L, visit www.
irs.gov or a local IRS office or call toll-free 1-800-TAX-FORM (1-800-829-3676).
1
Other Important FactsPenalties and interest will continue to accrue during consideration of your offer.
After you file your offer, you must continue to timely file and pay all required tax
returns, estimated tax payments, and federal tax payments. Failure to meet your
filing and payment responsibilities during consideration of your offer will result in
your offer being returned. If your offer is accepted, you must continue to stay
current with all tax filing and payment obligations through the fifth year after your
offer is accepted (including any extensions).
Note: If you have filed your tax returns but you have not received a bill for at
least one tax debt included on your offer, your offer may be returned.
An offer cannot be accepted for processing if the IRS has referred your case, or
cases, involving all of the liabilities identified in the offer to the Department of
Justice (DOJ). In addition, the IRS cannot compromise any restitution amount
ordered by a court or a tax debt that has been reduced to judgment.
The law requires the IRS to make certain information from accepted offers
available for public inspection and review. These public inspection files are
located in designated IRS Area Offices.
The IRS may levy your assets up to the time that the IRS official signs and
acknowledges your offer as pending. In addition, the IRS may keep any proceeds
received from the levy. If your assets are levied after your offer is pending,
immediately contact the IRS person whose name and phone number is listed on
the levy.
If you currently have an approved installment agreement, you will not be required
to make your installment agreement payments while your offer is being
considered. If your offer is not accepted and you have not incurred any additional
tax debt, your installment agreement with the IRS will be reinstated with no
additional fee.
2
Trust Fund TaxesIf your business owes trust fund taxes, responsible individuals may be held liable
for the trust fund portion of the tax. Trust fund taxes are the money withheld from
an employee's wages, such as income tax, Social Security, and Medicare taxes.
You are not eligible to submit an offer unless the trust fund portion of the tax is
paid or the Trust Fund Recovery Penalty determinations have been made on all
potentially responsible individual(s). However, if you are submitting the offer as a
victim of payroll service provider fraud or failure, the trust fund assessment
discussed above is not required.
Your Rights as a TaxpayerEach and every taxpayer has a set of fundamental rights they should be aware of
when dealing with the IRS. Explore your rights and our obligations to protect them.
For more information on your rights as a taxpayer, go to //www.irs.gov/
Taxpayer-Bill-of-Rights.
A lien is a legal claim against all your current and future property. When you don’t
pay your first bill for taxes due, a lien is created by law and attaches to your
property. A Notice of Federal Tax Lien (NFTL) provides public notice to creditors
and is filed to establish priority of the IRS claim versus the claims of other
creditors. The IRS may file an NFTL while your offer is being considered. However,
an NFTL will usually not be filed until a final decision has been made on your offer.
Note: A Notice of Federal Tax Lien (NFTL) will not be filed on any individual
shared responsibility payment under the Affordable Care Act.
Notice of Federal Tax Lien
You must select a payment option and include the payment with your offer. The
amount of the initial payment and subsequent payments will depend on the total
amount of your offer and which of the following payment options you choose:
Lump Sum Cash: This option requires 20% of the total offer amount to be paid
with the offer and the remaining balance paid in 5 or fewer payments within 5 or
fewer months of the date your offer is accepted.
Periodic Payment: This option requires the first payment to be paid with the offer
and the remaining balance paid in monthly payments within 6 to 24 months, in
accordance with your proposed offer terms.
Note: Under this option, you must continue to make monthly payments
while the IRS is evaluating your offer. Failure to make these payments will
cause your offer to be returned. There is no appeal. Total payments must
equal the total offer amount.
Exception: If you are an individual, are operating as a sole proprietor, or are a
disregarded single member LLC taxed as a sole proprietor, and your household
income meets the Low Income Certification guidelines, you will not be required to
send the initial payment or make the required monthly payments while your offer is
being considered.
All payments sent in with your offer and made during consideration of the offer will
be applied to your tax debt. The payments cannot be returned to you unless you
pay more than the required payment and designate it as a deposit.
If you do not have sufficient cash to pay for your offer, you may need to consider
borrowing money from a bank, friends, and/or family. Other options may include
borrowing against or selling other assets.
Note: You may not pay your offer amount with an expected or current tax
refund, money already paid, funds attached by any collection action, or
anticipated benefits from a capital or net operating loss. If you are planning
to use your retirement savings from an IRA or 401k plan, you may have
future tax liabilities owed as a result. Contact the IRS or your tax advisor
before taking this action.
HOW TO APPLY
Application Process
The application must include:
Form 656, Offer in Compromise
CompletedForm 433-A (OIC), Collection Information Statement for Wage
Earners and Self-Employed Individuals, if applicable
CompletedForm 433-B (OIC), Collection Information Statement for
Businesses, if applicable
$186 application fee, unless you meet Low Income Certification
Initial offer payment, unless you meet Low Income Certification
Note: Your offer(s) cannot be considered without the completed and signed
Collection Information Statement(s), Form 433-A (OIC) and/or 433-B (OIC).
3
Payment Options
PAYING FOR YOUR OFFER
Application FeeOffers require a $186 application fee.
Exception: If you are an individual or are operating as a sole proprietor, or are a
disregarded single member Limited Liability Company (LLC) taxed as a sole
proprietor and your household gross income meets the Low Income Certification
guidelines, you will not be required to send the application fee.
Note: You may be eligible to receive a refund of the application fee if the IRS
either (1) accepts the offer to promote effective tax administration, or (2)
accepts the offer based on doubt as to collectability and determines that
collecting an amount greater than the amount offered would create an
economic hardship. After the IRS processes your offer, the IRS will notify
you if you are eligible to request a refund of the application fee.
COMPLETING THE APPLICATION PACKAGE
Step 1 – Gather Your InformationTo calculate an offer amount, you will need to gather information about your
financial situation, including cash, investments, available credit, assets, income,
and debt.
You will also need to gather information about your average household's gross
monthly income and expenses. The entire household includes all those in addition
to yourself who contribute money to pay expenses relating to the household such
as, rent, utilities, insurance, groceries, etc. This is necessary for the IRS to
accurately evaluate your offer.
In general, the IRS will not consider expenses for tuition for private schools,
college expenses, charitable contributions, and other unsecured debt payments as
part of the expense calculation.
Step 2 – Fill out Form 433-A
(OIC), Collection Information
Statement for Wage Earners and
Self-Employed Individuals
Fill out Form 433-A (OIC) if you are an individual wage earner and/or operate as a
sole proprietor, a disregarded single member LLC taxed as a sole proprietor or are
submitting an offer on behalf of a deceased individual. This will be used to
calculate an appropriate offer amount based on your assets, income, expenses,
and future earning potential. You will have the opportunity to provide a written
explanation of any special circumstances that affect your financial situation.
4
If You and Your Spouse Owe
Joint and Separate Tax Debts
If you and your spouse have joint tax debt(s) and you and/or your spouse are also
responsible for separate tax debt(s), you will each need to send in a separate
Form 656. You will complete one Form 656 for yourself listing all your joint and any
separate tax debts and your spouse will complete one Form 656 listing all his or
her joint tax debt(s) plus any separate tax debt(s), for a total of two Forms 656.
If you and your spouse or ex-spouse have a joint tax debt and your spouse or ex-
spouse does not want to be part of the offer, you on your own may submit a Form
656 to compromise your responsibility for the joint tax debt.
Each Form 656 will require the $186 application fee and initial payment unless you
are an individual, are operating as a sole proprietor, or are a disregarded single
member LLC taxed as a sole proprietor, and meet the Low Income Certification
guidelines.
If You Owe Individual and
Business Tax Debt
If you have individual and business tax debt that you wish to compromise, you will
need to send in two Forms 656. Complete one Form 656 for your individual tax
debts and one Form 656 for your business tax debts. Each Form 656 will require
the $186 application fee and initial payment.
Note: A business is defined as a corporation, partnership, or any business
that is operated as other than a sole-proprietorship. An individual's share of
a partnership debt will not be compromised. The partnership must submit an
offer based on the partnership's and partners' ability to pay.
If You Have Tax Debt From a
Limited Liability Company (LLC)
Individuals or individuals operating as a disregarded single member LLC taxed as
a sole proprietor, tax debts (including employment taxes) incurred before January
1, 2009 may be included on one Form 656. However, in those instances where an
LLC incurred employment taxes after January 1, 2009 or excise taxes after
January 1, 2008, two Forms 656 must be sent with a separate application fee and
initial payment for each offer, even if the tax debts were reported under the same
Tax Identification Number. One Form 656 will be for the individual tax debts while
the second Form 656 will be for the LLC employment tax debts incurred after
January 1, 2009 and excise tax debts after January 1, 2008.
Step 3 – Fill out Form 433-B (OIC),
Collection Information Statement
for Businesses
Fill out Form 433-B (OIC) if the business is a Corporation, Partnership, LLC
classified as a corporation, single member LLC taxed as a corporation, or other
multi-owner/multi-member LLC. This will be used to calculate an appropriate offer
amount based on the business assets, income, expenses, and future earning
potential. If the business has assets that are used to produce income (for example,
a tow truck used in the business for towing vehicles), the business may be allowed
to exclude equity in these assets.
Step 4 – Attach Required
Documentation
You will need to attach supporting documentation with Form(s) 433-A (OIC) and
433-B (OIC). A list of the documents required will be found at the end of each
form. Include copies of all required attachments. Do not send original
documents.
Step 5 – Fill out Form 656, Offer
in Compromise
Fill out Form 656. The Form 656 identifies the tax years and type of tax you would
like to compromise. It also identifies your offer amount and the payment terms.
Step 6 – Include Initial Payment
and $186 Application Fee
Include a personal check, cashier's check, or money order for your initial payment
based on the payment option you selected (20% of the offer amount for a lump
sum cash offer or the first month's payment for a periodic payment offer).
Include a separate personal check, cashier's check, or money order for the
application fee ($186).
Make both payments payable to the “United States Treasury.” All payments must
be made in U.S. dollars.
If you meet the Low Income Certification guidelines, the initial payment and
application fee are not required.
IMPORTANT INFORMATION
After You Mail Your Application
Continue to:
Promptly reply to any requests for additional information within the time frame
specified.
If you selected the Periodic Payment option, you must continue to make the
payments during consideration of your offer, unless you meet the Low Income
Certification. Failure to reply timely or make monthly payments may result in the
return of your offer without appeal rights.
If your offer is accepted, you must continue to timely file all required tax returns
and timely pay all estimated tax payments and federal tax payments that become
due in the future. If you fail to timely file and timely pay any tax obligations that
become due within the five years after your offer is accepted (including any
extensions) your offer may be defaulted. If your offer is defaulted, you will be liable
for the original tax debt, less payments made, and all accrued interest and
penalties. An offer does not stop the accrual of interest and penalties. Please note
that if your final payment is more than the agreed amount by $50 or less the
money will not be returned but will be applied to your tax debt. If your final payment
is more than the agreed amount by more than $50, your money will be returned to
you.
In addition, your offer may be defaulted if you fail to promptly pay any tax debts
assessed after acceptance of your offer for any tax years prior to acceptance that
were not included in your original offer.
5
Step 7 – Mail the Application
Package
Make a copy of your application package and keep it for your records.
Mail the application package to the appropriate IRS facility. See page 27,
Application Checklist, for details.
Note: If you are working with an IRS employee, let him or her know you are
sending or have sent an offer to compromise your tax debt(s).
Form 433-A (OIC)
(Rev. March 2017)
Department of the Treasury — Internal Revenue Service
Collection Information Statement for Wage Earners and
Self-Employed Individuals
Use this form if you are
An individual who owes income tax on a Form 1040, U.S.
Individual Income Tax Return
An individual with a personal liability for Excise Tax
An individual responsible for a Trust Fund Recovery Penalty
An individual who is self-employed or has self-employment
income. You are considered to be self-employed if you are in
business for yourself, or carry on a trade or business.
An individual who is personally responsible for a partnership
liability (only if the partnership is submitting an offer)
An individual who operates as a disregarded single member
Limited Liability Company (LLC) taxed as a sole proprietor
An individual who is submitting an offer on behalf of a
deceased person
Note: Include attachments if additional space is needed to respond completely to any question. This form should only be used with the Form
656, Offer in Compromise.
Section 1 Personal and Household Information
Last NameFirst Name
Date of Birth(mm/dd/yyyy)
Social Security Number
--
Marital status
Unmarried
Married
Home Physical Address(Street, City, State, ZIP Code)
Do you:
Own your home Rent
Other (specify e.g., share rent, live with relative, etc.)
County of Residence Primary Phone
( ) -
Secondary Phone
( ) -
Fax Number
( ) -
Home Mailing Address (if different from above or Post Office Box number)
Provide information about your spouse.
Spouse's Last Name Spouse's First Name Date of Birth (mm/dd/yyyy)
Provide information for all other persons in the household or claimed as a dependent.
Name Age Relationship
Claimed as a dependent
on your Form 1040?
Contributes to
household income?
YesNoYesNo
YesNoYesNo
YesNoYesNo
YesNoYesNo
Social Security Number
--
Section 2 Employment Information for Wage Earners
Complete this section if you or your spouse are wage earners and received a Form W-2. If you or your spouse have self-employment income (that is
you file a Schedule C, E, F, etc.) instead of, or in addition to wage income, you must also complete Business Information in Sections 4, 5, and 6.
Your Employer’s NameEmployer’s Address (street, city, state, zip code)
Do you have an ownership interest in this
business?
YesNo
If yes, check the business interest that
applies:
PartnerOfficer
Sole proprietor
Your OccupationHow long with this employer
(years)(months)
Spouse’s Employer's NameEmployer’s Address (street, city, state, zip code)
Does your spouse have an ownership
interest in this business?
YesNo
If yes, check the business interest that
applies:
PartnerOfficer
Sole proprietor
Spouse's OccupationHow long with this employer
(years)(months)
Catalog Number 55896Q www.irs.gov
Form 433-A (OIC) (Rev. 3-2017)
Page 2 of 8
Section 3 Personal Asset Information
Use the most current statement for each type of account, such as checking, savings, money market and online accounts, stored value cards (such as, a
payroll card from an employer), investment and retirement accounts (IRAs, Keogh, 401(k) plans, stocks, bonds, mutual funds, certificates of deposit), life insurance
policies that have a cash value, and safe deposit boxes. Asset value is subject to adjustment by IRS based on individual circumstances. Enter the total
amount available for each of the following (if additional space is needed include attachments).
Round to the nearest dollar. Do not enter a negative number. If any line item is a negative number, enter "0".
Cash and Investments (domestic and foreign)
CashChecking SavingsMoney Market/CDOnline AccountStored Value Card
Bank Name Account Number
(1a) $
Checking SavingsMoney Market/CDOnline AccountStored Value Card
Bank Name Account Number
(1b) $
Total of bank accounts from attachment (1c) $
Add lines (1a) through (1c) minus ($1,000) = (1) $
Investment Account: StocksBondsOther
Name of Financial Institution Account Number
Current Market Value
$ X .8 = $
Minus Loan Balance
– $
=
(2a) $
Investment Account: StocksBondsOther
Name of Financial Institution Account Number
Current Market Value
$ X .8 = $
Minus Loan Balance
– $
=
(2b) $
Total investment accounts from attachment. [current market value X.8 minus loan balance(s)](2c) $
Add lines (2a) through (2c) =
(2) $
Retirement Account: 401KIRAOther
Name of Financial Institution Account Number
Current Market Value
$ X .8 = $
Minus Loan Balance
– $
=
(3a) $
Retirement Account: 401KIRAOther
Name of Financial Institution Account Number
Current Market Value
$ X .8 = $
Minus Loan Balance
– $
=
(3b) $
Total of retirement accounts from attachment. [current market value X .8 minus loan balance(s)] (3c) $
Add lines (3a) through (3c) = (3) $
Cash Value of Life Insurance Policies
Name of Insurance Company Policy Number
Current Cash Value
$
Minus Loan Balance
– $
=
(4a) $
Total cash value of life insurance policies from attachment
$
Minus Loan Balance(s)
– $
=
(4b) $
Add lines (4a) through (4b) = (4) $
Catalog Number 55896Q www.irs.gov
Form 433-A (OIC) (Rev. 3-2017)
Page 3 of 8
Section 3 (Continued) Personal Asset Information
Real Estate (Enter information about any house, condo, co-op, time share, etc. that you own or are buying)
Property Address (Street Address, City, State, ZIP Code) Primary Residence
YesNo
Date Purchased
County and Country Date of Final Payment
How title is held (joint tenancy, etc.)Description of Property
Current Market Value
$ X .8 = $
Minus Loan Balance (Mortgages, etc.)
– $
(Total Value of Real Estate) =(5a) $
Property Address (Street Address, City, State, ZIP Code) Primary Residence
YesNo
Date Purchased
County and Country Date of Final Payment
How title is held (joint tenancy, etc.)Description of Property
Current Market Value
$ X .8 = $
Minus Loan Balance (Mortgages, etc.)
– $
(Total Value of Real Estate) =(5b) $
Total value of property(s) from attachment [current market value X .8 minus any loan balance(s)] (5c) $
Add lines (5a) through (5c) =(5) $
Vehicles (Enter information about any cars, boats, motorcycles, etc. that you own or lease)
Vehicle Make & Model Year Date Purchased Mileage
Lease
Loan
Name of CreditorDate of Final Payment Monthly Lease/Loan Amount
$
Current Market Value
$ X .8 = $
Minus Loan Balance (Mortgages, etc.)
– $
Total value of vehicle (if the vehicle
is leased, enter 0 as the total value)
=
(6a) $
Subtract $3,450 from line (6a)
(If line (6a) minus $3,450 is a negative number, enter "0")
(6b) $
Vehicle Make & Model Year Date Purchased Mileage
Lease
Loan
Name of CreditorDate of Final Payment Monthly Lease/Loan Amount
$
Current Market Value
$ X .8 = $
Minus Loan Balance (Mortgages, etc.)
– $
Total value of vehicle (if the vehicle
is leased, enter 0 as the total value)
=
(6c) $
If you are filing a joint offer, subtract $3,450 from line (6c)
(If line (6c) minus $3,450 is a negative number, enter "0")
If you are not filing a joint offer, enter the amount from line (6c)
(6d) $
Total value of vehicles listed from attachment [current market value X .8 minus any loan balance(s)](6e) $
Total lines (6b), (6d), and (6e) =(6) $
Catalog Number 55896Q www.irs.gov
Form 433-A (OIC) (Rev. 3-2017)
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