Form 656-B (Rev. 2-2016). Form 656 Booklet Offer in Compromise-2025

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If you have a legitimate doubt that you owe part or all of the tax debt, you will need to complete a Form 656-L, Offer in Compromise (Doubt as to Liability) PDF. Doubt as to collectability is when you agree with the amount due, however you are unable to pay the entire amount owed.
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. Your offer amount must be equal to or greater than the amount calculated in Form 433-A(OIC) or 433-B(OIC).
Figuring out the optimal amount to offer the IRS is not easy. It takes a lot of experience to know where the sweet spot lies for any given case. In general though, you can start off with an estimate of 1 year worth of your disposable income and add to that any valuable assets you can sell for additional cash.
An offer in compromise is a sound solution if you are in debt to the IRS and have no way to pay it in full. However, in order to apply, there are specific conditions that you must meet, as outlined in this chapter. The main argument that taxpayers make is that paying their tax debt will create a financial hardship.
The IRS will often settle for what it deems you can feasibly pay. To determine this, the agency will take into account your assets (home, car, etc.), your income, your monthly expenses (rent, utilities, child care, etc.), your savings, and more.
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An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you cant pay your full tax liability or doing so creates a financial hardship. We consider your unique set of facts and circumstances: Ability to pay.
Select a payment option Your initial payment varies based on your offer and the payment option you choose: Lump sum: Submit an initial payment of 20% of the total offer amount with your application. If we accept your offer, youll receive written confirmation.
A taxpayers Offer in Compromise is usually accepted if the amount offered is the amount the Office of Finance can reasonably expect to collect after exhausting all collection efforts within a reasonable amount of time.

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