All offer amounts - doubt as to liability, doubt as to collectibility, or effective tax administration - must exceed $0.00.  Enter the offer amount on Item 7 of Form 656.

	Doubt as to Liability - Complete Item 9, Explanation of Circumstances, on Form 656, explaining why, in the taxpayer's judgment, he/she doesn't owe the tax liability he/she wants to compromise.  Offer the correct tax, penalty, and interest owed based on his/her judgment. .
	Doubt as to Collectibility - Complete Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, as appropriate, and attach to the Form 656.  If a wage earner or self-employed individual, figure the offer amount by completing the worksheet on pages 10 - 11 of Form 656.

Taxpayers must offer an amount greater than or equal to the reasonable collection potential (RCP). The RCP equals the net equity of the taxpayer's assets, plus the amount the IRS could collect from future income. Please see Form 656, page 8, Terms and Definitions, for more detailed definitions of these and other terms.

If special circumstances cause a taxpayer to offer an amount less than the RCP, the taxpayer must also complete Form 656, Item 9, Explanation of Circumstances, explaining the situation. Special circumstances may include factors such as advanced age, serious illness from which recovery is unlikely, or unusual circumstances that impact the ability to pay the total RCP and continue to provide for the necessary expenses for the taxpayer and his/her family.

Effective Tax Administration - Complete Collection Information Statements, Forms 433-A or 433-B, as appropriate, and attach to Form 656. Complete Item 9, Explanation of Circumstances, on Form 656, explaining the exceptional circumstances and why requiring payment of the tax liability in full would either create an economic hardship or would be unfair and inequitable.

Effective Tax Administration

There is no doubt the tax is correct, and no doubt the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider the taxpayer's OIC. To be eligible for compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

 

Doubt as to Collectibility with Special Circumstances

If special circumstances cause taxpayers to offer an amount less than the reasonable collection potential (RCP), they must also complete Item 9, "Explanation of Circumstances," on OIC Form 656, explaining their situation. Special circumstances may include factors such as advanced age, serious illness from which recovery is unlikely, or unusual circumstances that impact the ability to pay the total RCP and continue to provide for the necessary expenses for the taxpayer and his/her family.