Form 656 Booklet - Offer in Compromise 2025

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The document provides instructions and details regarding Form 656, which is used for submitting an Offer in Compromise to the IRS. It emphasizes that Form 656 is not a stand-alone form and should be accompanied by Form 656-B for individuals seeking consideration of an offer. The document outlines the necessary financial statements, application fees, and payment options required for submission. It also includes sections for individual and business information, reasons for the offer, payment terms, and legal agreements related to tax liabilities. Additionally, it discusses Low-Income Certification eligibility and the implications of accepting or failing to meet the terms of the offer.

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How much should I offer on my offer in compromise?

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.

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 to get IRS to accept offer in compromise?

For the IRS to accept an offer, you must file all tax returns due and be current with estimated tax payments or withholding. If you own a business and have employees, you must file all returns and be current on all your federal tax deposits. NOTE: If you or your business is currently in an open bankruptcy.

What documents are required for offer in compromise?

Include three months of all billing statements for amounts claimed. Include a current rental agreement or mortgage statement. Include copies of all bank statements and pay stubs. If self-employed, provide profit and loss worksheets.

How do I make a successful Offer in Compromise to the IRS?

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).

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Does the IRS usually accept an Offer in Compromise?

We generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before you submit an offer in compromise.

What is the acceptance rate for an IRS Offer in Compromise?

People often complain that they should not file an Offer in Compromise for a client because the acceptance rate is only 36%.

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 Booklet - Offer in Compromise 2025

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