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Offers in Compromise
Application Fee
Federal agencies are authorized to implement fees to defray the
administrative costs associated with providing a specialized service
to a limited segment of taxpayers. In November 2002, the Internal
Revenue Service announced the proposal to charge a fee that would help
recover part of the cost of processing offer in compromise (OIC)
requests. An OIC allows taxpayers to settle their tax liabilities for
less than the full amount.
During the comment period on the
proposed fee that ended on February 4,
2003, and a public hearing, the IRS received numerous comments and
suggestions on the proposed application fee. These comments were
considered and the final regulations were announced on August 15,
2003.
The final regulations establish a $150 application
fee that will begin on November 1, 2003. Taxpayers who submit an OIC
postmarked November 1, 2003, and thereafter, must submit the fee using
a check or money order made payable to the United States Treasury.
Cash payments will not be accepted.
Beginning November 1, 2003, all taxpayers
submitting the Form 656 “Offer in
Compromise,” package must use the May 2001 version of the form. They
must also attach the $150 application fee, except in two instances:
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If the OIC is submitted based solely on “doubt as
to liability;” or
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If the taxpayer’s total monthly income falls at
or below income levels based on the Department of Health and Human
Services poverty guidelines. The poverty guideline exception applies
only to individuals.
The IRS developed
Form 656-A (fill-in format)
, “Offer in Compromise Application Fee Instructions and Certification”
to provide information on the fee and to help taxpayers determine if
they meet the poverty guideline exception. Taxpayers must include
Form 433-A, “Collection Information Statement for Individuals,” found
in the Form 656 package, to assist in determining if they qualify for
the exception.
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