Form 656 (Rev. 4-2021). Offer in Compromise-2025

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The document provides instructions and details for submitting Form 656, an Offer in Compromise to the IRS. It emphasizes that Form 656 is not a stand-alone form and should be used by tax professionals. Individuals must use Form 656-B for offers, include financial statements, application fees, and initial payments. The document outlines eligibility criteria, required documentation, payment options, and terms of the offer, including consequences of non-compliance.

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Is an IRS offer in compromise a good idea?

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.

What percentage will the IRS accept for an offer in compromise?

With a lump-sum payment, you will fill out IRS Form 656 (located in Form 656-B, the Offer in Compromise booklet) and a non-refundable payment equal to 20 percent of the offer amount, along with the application fee. Even if your offer is denied, the nonrefundable 20 percent payment will be put toward your tax liability.

What is the downside to offer in compromise for the IRS?

For example, the requirements for accepting an OIC are stringent. Taxpayers are required to have low monthly income and practically no assets. You may end up wasting time and money on trying to settle when that effort could have been applied toward a better resolution.

How do I qualify for an offer in compromise with the IRS?

Youre eligible to apply for an offer in compromise if you: Filed all required tax returns and made all required estimated payments. Arent in an open bankruptcy proceeding. Have a valid extension for a current year return (if applying for the current year).

What are the consequences of offer in compromise?

If your offer in compromise is accepted: You must pay the offer amount in ance with the terms of your acceptance agreement. The IRS will keep any tax refund, including interest due, as the result of an overpayment of any tax or other liability due through the date the IRS accepts your offer in compromise.

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How much will the IRS accept in an offer in compromise?

The resulting amount is your monthly disposable income. Take that number and multiply by 12 (which is equal to one year worth of disposable income). This is the bare minimum you can offer to the IRS. They will almost never accept less than this amount.

What exceptional circumstances does the IRS offer in compromise?

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.

How much does the IRS usually settle for?

How much will the IRS settle for? 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.

Form 656 (Rev. 4-2021). Offer in Compromise-2025

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Is an IRS offer in compromise a good idea?

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What are the consequences of offer in compromise?

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How much will the IRS accept in an offer in compromise?

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