Filing an Offer in Compromise
An OIC is submitted on Form 656, Offer in
Compromise. The Form 656 is a complete information package, also
containing Forms 433-A and 433-B, Collection Information Statements,
as well as instructions and a worksheet. Taxpayers should use the May
2001 version of Form 656.
If the required documentation is not submitted with
Forms 656 and 433-A or 433-B, the IRS will issue one written request
to the taxpayer asking for the missing information. If the
information is not provided within 30 days, the OIC case is closed and
returned to the taxpayer without the opportunity to appeal the
decision. It is the taxpayer's responsibility to ensure the IRS has
the required information to make its determination on an OIC, as well
as provide additional information when the IRS requests it.
Form 656, Offer in Compromise
Taxpayers are cautioned to complete all items on
Form 656. Here are some common errors that delay OIC processing
because the IRS must contact the taxpayer to correct information on
Form 656:
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Missing name, incorrect address (don't use P.O.
Box) or missing taxpayer identification numbers on Form 656, Items
1- 4. |
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Tax liability periods/years missing on Form 656,
Item 5. |
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Tax periods included where no tax is due on Form
656, Item 5. |
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No "offer to pay" amount shown on Form 656, Item
6. |
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Appropriate offer amount not submitted on Form
656, Item 7. |
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Form 656 has been altered (pen/ink changes made
on the OIC). |
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Form 2848, "Power of Attorney," not attached.
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The Form 656 contains the
Form 433-A worksheet on page 44
that can assist in determining the correct OIC amount:
Form 656-A, Offer in Compromise Application
Fee Instructions and Certification
The IRS developed Form 656-A, "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 to the $150 application fee.
Taxpayers must submit Form 433-A , "Collection Information Statement
for Wage Earners and Self Employed Individuals," found in the Form 656
package, to help determine if they qualify for the exception.
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Form 656-A, Offer in Compromise Application Fee
Instructions and Certification (fill-in
format)
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Forms 433, Collection
Information Statements
The Forms 433-A and 433-B are included with the
Form 656 package. Taxpayers use these forms to submit financial
information that is used to determine their ability to pay their tax
debt. Individual taxpayers and self-employed individuals must use
Form 433-A, while partnerships and corporations must use Form 433-B.
Note: There will be instances where the IRS may request the 433-A from
corporate officers or individual partners.
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Form 433-A, Collection Information Statement for
Wage Earners and Self Employed Individuals
(PDF format) |
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Form 433-B, Collection Information Statement for
Businesses (PDF format)
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Taxpayers are cautioned to complete all items on
the appropriate Form 433. Here are some common errors that delay OIC
processing because the IRS must contact the taxpayer to correct
information on Forms 433:
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Personal and real estate assets, or income and
expenses not accurately valued. |
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Sections of the form are complete, but the
required financial verification documents aren't provided.
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Collection Financial Standards and
Necessary Expenses
Collection Financial Standards are used to help
determine a taxpayer's ability to pay a tax debt. The allowed amounts
are used in the Form 433-A:
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National Standards - Allowances for
food, clothing and other items, known as the
National Standards, apply nationwide except for Alaska
and Hawaii, which have their own tables. Taxpayers are allowed the
total National Standards amount for their family size and income
level, without questioning amounts actually spent.
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Local Standards - Maximum allowances for
housing and utilities known as
Local Standards, vary by location. Unlike the National
Standards, taxpayers are allowed the amount actually spent, or the
standard, whichever is less. There are separate allowance amounts
for
transportation expenses.
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Necessary Expenses -
Necessary Expenses are the allowable payments taxpayers
make to support their own and their family's health and welfare
and/or the production of income. However, this expense allowance
does not apply to business entities.
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OIC Payment Plans
There are three payment plans taxpayers
and the IRS may agree to:
Note: The
Form 433-A
worksheet on page 44 of the Form 656 packet instructs wage earners
and self-employed individuals on how to figure the appropriate amount
for a Cash, Short-Term Deferred or Deferred Payment Plan.
Frequently Asked Questions
Want more information on what happens after you
submit an OIC? Check the Frequently Asked Questions .
Where to Mail an Offer in Compromise
Form 656 should be mailed to one of two centralized
locations where offers are processed Holtsville, NY or Memphis, TN.
Because the original Form 656 is required, facsimile copies of this
form cannot be accepted. Where the OIC is submitted is based on where
the taxpayer resides and the taxpayer type (wage earner,
self-employed, etc.). Check to see where to mail an Offer in Compromise.
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