Definition & Meaning
The Form 656 Booklet is a comprehensive guide published by the Internal Revenue Service (IRS) to assist individuals and businesses in understanding and applying for an Offer in Compromise (OIC). An OIC is a program that allows taxpayers to settle their tax liabilities for less than the full amount owed, providing relief to those who are unable to pay their full tax debt. The booklet outlines the eligibility requirements, application procedures, and necessary forms involved in the OIC process.
Eligibility Criteria
To qualify for an Offer in Compromise, applicants must meet specific eligibility requirements as outlined in the Form 656 Booklet. Key criteria include:
- Inability to pay the full tax debt within the collection period.
- Evidence of financial hardship impacting the ability to pay the full amount.
- Compliance with all filing and payment requirements.
Eligibility assessments are based on an individual's unique financial situation, and the IRS evaluates applications on a case-by-case basis.
How to use the Form 656 Booklet
To effectively use the Form 656 Booklet, follow these steps:
- Review Eligibility Requirements: Start by understanding the eligibility criteria and determining if you qualify.
- Gather Required Information: Collect pertinent financial documents and income statements.
- Follow Step-by-Step Instructions: Use the detailed instructions in the booklet to complete the necessary forms accurately.
- Submit Supporting Documentation: Ensure all required documents accompany your submission.
- Review and Sign Forms: Thoroughly review for accuracy before signing and submitting the application.
Steps to complete the Form 656 Booklet
Completing the Form 656 Booklet involves several precise steps:
- Form 656: Complete the Offer in Compromise form by detailing your proposed offer amount and payment terms.
- Form 433-A (OIC): Fill out the Collection Information Statement for individuals, providing comprehensive financial details.
- Form 433-B (OIC): If applicable, compile and complete the financial statement for businesses.
- Gather Documents: Collect supporting documentation, including bank statements, income verification, and asset lists.
- Submit Application: Follow submission guidelines, ensuring proper delivery via mail or authorized online services.
Key Elements of the Form 656 Booklet
Several crucial elements are outlined in the Form 656 Booklet:
- Offer Terms: Details on acceptable offer amounts and payment schedules.
- Financial Disclosure Requirements: Guidelines for providing transparent financial statements.
- Supporting Documentation: Explanation of required documents to substantiate financial claims.
- Application Fee: Information on applicable fees and potential fee waiver options.
IRS Guidelines
The IRS has established guidelines to govern the Offer in Compromise program, extensively covered in the booklet. Essential guidelines include:
- Evaluating Offers: The IRS considers income, expenses, asset equity, and future earning potential.
- Verification Process: In-depth review of submitted financial information.
- Approval or Rejection: Offers may be accepted, counter-offered, or rejected based on the IRS's evaluation.
Filing Deadlines / Important Dates
Understanding the critical deadlines ensures timely submission of an Offer in Compromise:
- Tax Filing Obligation: Ensure compliance with all past tax filing requirements before submission.
- Applicable Payments and Fees: Submit initial payments and fees alongside the application.
- Response Time: Anticipate processing times and potential requests for additional information from the IRS.
Required Documents
Submitting a complete application involves including the following documents:
- Completed Forms: Form 656, Form 433-A (OIC), and Form 433-B (OIC), if applicable.
- Proof of Income: Recent pay stubs, bank statements, and IRS transcripts.
- Asset Documentation: Documentation of asset values, including real estate and investment accounts.
- Expense Verification: Bills and statements substantiating claimed living expenses.
Form Submission Methods (Online / Mail / In-Person)
The Form 656 Booklet provides multiple methods for application submission:
- Online: Use the IRS's online portal for electronic submission, ensuring fast processing and confirmation.
- Mail: Send completed forms and documentation via mail to the IRS address specified in the booklet.
- In-Person: Many IRS offices accept in-person submissions by appointment, enabling direct assistance with the application.
Legal Use of the Form 656 Booklet
The Form 656 Booklet is a legally recognized document that outlines the official process for applying for an Offer in Compromise. It serves as a vital resource for:
- Providing Legal Guidance: Ensuring applications meet IRS standards and comply with legal requirements.
- Supporting Taxpayer Rights: Assuring that taxpayers understand their rights in pursuing debt resolution through an OIC.
