Definition and Purpose of 2014 IRS Form 656
The 2014 IRS Form 656, also known as the Offer in Compromise form, allows taxpayers to negotiate their tax debts with the Internal Revenue Service (IRS) for an amount less than the full balance owed. This form is a crucial component of the Offer in Compromise (OIC) program, enabling individuals and businesses facing significant financial difficulties to settle their federal tax liabilities in a manageable way. It serves as a formal proposal for compromise, outlining the taxpayer's financial situation, including assets, income, and expenses.
Key elements of this form include detailed financial disclosures, calculation of the offer amount, and a statement supporting the taxpayer’s inability to pay the full tax amount. Proper completion of Form 656 is essential to convey to the IRS that the taxpayer is offering the maximum amount they can afford.
Steps to Complete the 2014 IRS Form 656
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Verify Eligibility: Before filling out Form 656, ensure eligibility by reviewing the IRS guidelines for the OIC program. Taxpayers must demonstrate an inability to pay the total tax liability.
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Gather Required Financial Information: Collect detailed financial data, including current income, assets, living expenses, and past tax returns. This will be crucial in accurately assessing what you can afford to pay.
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Calculate Offer Amount: Use the collected financial information to propose an offer amount. This should reflect the maximum payment you can reasonably make based on your economic circumstances.
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Fill Out the Form: Carefully enter all required information in the appropriate sections of Form 656. This includes personal identification details, the proposed offer amount, payment terms, and a signature.
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Attach Supporting Documents: Include necessary financial documentation, such as income statements, bank statements, and proof of expenses, to substantiate your financial claims.
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Submit the Form and Initial Payment: Mail the completed form and any accompanying documents to the IRS, along with the initial payment of the proposed offer or the application fee, if applicable.
Eligibility Criteria for 2014 IRS Form 656
Taxpayers seeking to submit Form 656 must meet certain criteria. They should be:
- Unable to pay their tax liability in full, either now or in the foreseeable future.
- In compliance with all federal tax filing and payment requirements.
- Not currently in an open bankruptcy proceeding.
The IRS will evaluate the taxpayer’s ability to pay, income, expenses, and asset equity. Special consideration is given to low-income taxpayers, who may be eligible for a reduced application fee or payment plan comfort.
Important Terms Related to Form 656
- Offer in Compromise (OIC): A settlement agreement between the taxpayer and the IRS to pay less than the full tax debt.
- Reasonable Collection Potential (RCP): The IRS’s assessment of a taxpayer's capacity to pay, calculated based on income and asset equity.
- Doubt as to Collectibility: A situation where the taxpayer cannot fully pay the tax due, influencing the evaluation of the compromise.
How to Obtain the 2014 IRS Form 656
To acquire Form 656, taxpayers can:
- Download and print it from the IRS website for free. This is the most direct and convenient method.
- Request a physical copy by contacting the IRS directly using the phone numbers provided on their official site.
- Visit a local IRS office to pick up the form in person.
Using these methods ensures you have the most updated version of the form along with comprehensive instructions for completion.
Filing Deadlines and Submission Methods
Form 656 does not have a fixed filing deadline; however, prompt submission is advised for taxpayers experiencing financial hardship. The form can be submitted to the IRS via:
- Mail: Send the completed form and attachments to the address specified in the instructions.
- In-Person: Visit a local IRS office for submission assistance.
- Online Submission: While currently limited, check IRS updates on possible electronic filing options.
Understanding submission options prevents delays in processing and expedites review by the IRS.
IRS Guidelines and Compliance
The IRS provides detailed guidelines for taxpayers considering the OIC program. The guidelines emphasize:
- Accurate representation of financial information.
- Compliance with all tax filing and payment obligations throughout the process.
- Importance of maintaining communication with IRS representatives during the evaluation period.
Following these guidelines ensures proper consideration of an OIC application and improves the likelihood of acceptance.
Potential Penalties for Non-Compliance
Non-compliance with the requirements of Form 656 can result in:
- Rejection of the offer if inaccuracies or omissions are identified.
- Continuation of enforcement actions by the IRS, such as levies or liens, against the taxpayer.
- Additional penalties and interest on the unpaid tax liability.
Adherence to the OIC process rules is essential to avoid these repercussions and to achieve a favorable resolution of tax debts.
