Get IRS 656-B Form

If you're tackling your debt with the IRS and have come across the Form 656-B, you might have some questions. The Form 656-B, or the Offer in Compromise booklet, is a crucial step for many taxpayers looking to settle their tax liabilities for less than the full amount owed. Here, we'll explore some common questions related to this form and the process it entails.

1. What is the IRS Form 656-B?

   The IRS Form 656-B is a document that taxpayers use to apply for an Offer in Compromise (OIC). This program allows you to settle your tax debt for less than the full amount you owe if you meet certain criteria. It's an option worth considering for those who cannot pay their full tax liability, or doing so would create financial hardship. The form comes as part of a booklet that includes instructions and other necessary forms like the 433-A (OIC) for individuals or 433-B (OIC) for businesses.

2. Who is eligible to apply for an Offer in Compromise?

   Eligibility for an OIC depends on several factors. You may qualify if you cannot pay your full tax liability, or if doing so would cause financial hardship. The IRS considers your income, expenses, asset equity, and ability to pay when determining eligibility. Before applying, all filing and payment requirements must be up to date, and you cannot be in an open bankruptcy proceeding.

3. How do you submit Form 656-B?

   To submit Form 656-B, you'll need to complete it along with the required documentation and submit it to the IRS. This includes a detailed financial statement using Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses. You'll also need to include the application fee and initial payment as outlined in the form's instructions unless you qualify for a low-income certification, which waives these requirements.

4. What is the application fee for an Offer in Compromise?

   As of the last update, the application fee for an OIC is $205. This fee is non-refundable and must be submitted with your Form 656-B. However, if you meet criteria for low-income certification, this fee can be waived.

5. Can the initial offer payment be waived?

   Yes, the initial offer payment can be waived for qualifying individuals. If you fall under the low-income certification guidelines, you will not be required to make the initial offer payment when you submit your Form 656-B. Additionally, there are different payment options available, which are outlined in the form's instructions, allowing you to customize your approach based on your financial situation.

6. How does the IRS decide to accept or reject an Offer in Compromise?

   The IRS considers several factors, including your ability to pay, income, expenses, and asset equity. The key is proving to the IRS that your offered amount is the most they can expect to collect within a reasonable period, usually seen as being less than the full balance owed. The decision also takes into account any special circumstances that might affect your financial situation.

7. What happens if the IRS rejects your Offer in Compromise?

   If the IRS rejects your Offer in Compromise, you will receive a written notice explaining the reasons for the decision. You have the right to appeal the rejection, but you must do so within 30 days of the date the notice was sent. The appeal process is outlined in the notice of rejection, and it gives you an opportunity to provide additional information or clarification that might affect the decision.

8. How long does it take for the IRS to make a decision on an Offer in Compromise?

   The time frame for a decision on an OIC can vary significantly, but it generally takes the IRS about four to six months to review an offer and make a decision. This timeline can be longer if additional information is needed or if there are delays in processing. It's important to ensure that your application is complete and accurate to avoid unnecessary delays.

Navigating the Offer in Compromise process can seem daunting, but understanding the basics of Form 656-B and related procedures can help you take the first step towards resolving your tax debt. Always consider consulting a tax professional for guidance tailored to your specific situation.

1. Not checking eligibility before applying. The IRS has strict qualifications for the Offer in Compromise program. Taxpayers often miss reviewing these criteria closely before submitting their application, which can result in immediate rejection.

2. Incorrect financial information. Many applicants underestimate the importance of accurate financial details. Failing to report income accurately, overestimating expenses, or omitting assets can not only cause delays but also lead to potential legal issues for providing false information to the IRS.

3. Missing documentation. Every piece of information on the 656-B form needs to be backed up with documentation. Taxpayers frequently submit their offers without the necessary documentation to support their financial status, leading to rejections.

4. Not considering all tax debts. It's crucial to include all tax debts in your offer. Some individuals mistakenly believe they can select which debts to compromise, but the IRS requires a comprehensive approach, taking all outstanding taxes into account.

5. Setting unrealistic payment offers. A common error is proposing a payment that's too low, based on wishful thinking rather than realistic financial capability. The IRS expects a reasonable offer that reflects one's ability to pay, considering their assets and income.

6. Attempting to navigate the process without professional help. While it's possible to submit an Offer in Compromise on your own, the complexity of the form and the negotiation process often benefits from professional guidance. Many people undervalue this and try to go it alone, which can lead to mistakes in the application process or in the negotiation itself.

When approached with care and thorough preparation, the Offer in Compromise can be a valuable tool for resolving tax debts. Avoiding these common mistakes can significantly improve the chances of an acceptance.

When navigating the intricacies of debt resolution with the IRS, the Form 656-B, Offer in Compromise booklet, plays a pivotal role. This form is a starting point for taxpayers seeking to negotiate a settlement for less than the full amount owed. However, understanding and completing this form is just one piece of the puzzle. To create a thorough and compelling case, several other forms and documents usually accompany Form 656-B. Here's a concise overview of other essential paperwork often required in this process.

• Form 433-A (OIC): This is the Collection Information Statement for Wage Earners and Self-Employed Individuals. It's crucial for providing detailed information about your financial situation, including income, expenses, assets, and liabilities.
• Form 433-B (OIC): Similar to 433-A, this Collection Information Statement is for Businesses. It's needed if the offer in compromise involves business debts, detailing the business's financial standing.
• Form 2848, Power of Attorney and Declaration of Representative: This form allows you to authorize an individual, such as a tax lawyer or accountant, to represent you in matters before the IRS, including negotiating and submitting your offer in compromise.
• Form 8821, Tax Information Authorization: This form permits a third party to access and receive your tax information, useful for those assisting you with your case but not representing you as a power of attorney.
• Form 4506-T, Request for Transcript of Tax Return: It's often necessary to provide copies of your past tax returns as part of the offer in compromise process. This form requests those transcripts from the IRS.
• Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment: This form is used to certify that your income is below a certain threshold, potentially qualifying you for exemption from the application fee or initial payment.
• Copies of Current Bank Statements: Providing up-to-date bank statements for all checking, savings, and investment accounts is essential to prove your current financial situation.
• Copies of Recent Pay Stubs: These documents verify your income, an important factor in determining what you can reasonably offer to settle your tax debt.
• Proof of Living Expenses: Receipts, bills, and other documents showing monthly expenses help establish what you can afford to pay towards your debt.
• Documentation of Assets and Liabilities: Mortgage statements, car loan documents, retirement account statements, and similar documents provide a full picture of your assets and debts.

Successfully negotiating an Offer in Compromise with the IRS requires a detailed and accurate presentation of your financial life. Each document plays a crucial role in painting this picture, from forms detailing personal and business finances to proof of income and expenses. While the process might seem daunting, collecting and submitting the right information can significantly increase the chances of reaching a favorable resolution. Remember, this information is intended as a guide to help you understand the process and is not a substitute for professional advice.

The IRS Form 433-A (OIC) is similar to the IRS 656-B form, as both are crucial in the process of offering a compromise to the IRS. While the 656-B form is the formal offer document, the Form 433-A provides detailed financial information about the individual's ability to pay. This form collects comprehensive data regarding income, expenses, assets, and liabilities, painting a complete financial picture for the IRS to consider alongside the compromise offer.

Form 433-B (OIC) shares similarities with the IRS 656-B by also being integral to the offer in compromise process, but it focuses on businesses instead of individuals. Similar to how the 433-A offers a detailed financial snapshot for individuals, the 433-B does the same for business entities. This form is necessary for the IRS to evaluate the business's financial situation and determine its capacity for debt repayment, which is vital information when considering a compromise offer.

The IRS Form 9465 is another document akin to the 656-B, as it’s related to setting up payment arrangements with the IRS, albeit not specifically an offer in compromise. This form is used to request an installment agreement for paying off taxes in more manageable monthly payments. The similarity lies in the objective of both forms to alleviate the taxpayer’s debt burden, though they serve different purposes and lead to different payment solutions.

Form 1127 is similar to the IRS 656-B form in that it is used by taxpayers seeking relief from tax liability, but through the avenue of requesting an extension for tax payment. This form appeals to the IRS for more time to pay taxes due, based on demonstrating significant financial hardship. While both forms aim at reducing the immediate financial strain on the taxpayer, Form 1127 does not offer a compromise but rather a delay, giving taxpayers a temporary reprieve.

Last but not least, the IRS Form 2848, Power of Attorney and Declaration of Representative, shares its relevance with the 656-B in the context of tax resolution. Though not directly a financial or debt resolution form, it’s essential for taxpayers who wish to authorize a representative, such as a tax attorney or CPA, to handle their offer in compromise (or other tax matters) on their behalf. This form establishes the authority to communicate and negotiate with the IRS, making it a supplementary document that often accompanies the 656-B when a taxpayer has professional representation.

The process of completing an IRS 656-B form, which pertains to an offer in compromise, should be approached with careful attention to detail and thoroughness. This guide outlines what individuals should and shouldn't do to ensure that the form is filled out accurately and effectively.

Do's:

1. Review the entire form and instructions carefully before starting to fill it out. This ensures that you understand all the requirements and gather all necessary information beforehand.
2. Use blue or black ink if completing the form by hand, as these are the only colors that are reliably legible after the form is processed.
3. Provide complete and accurate financial information. Transparency and accuracy are crucial, as they allow the IRS to assess your situation fairly.
4. Attach all required documentation, such as proof of income, expenses, and debts, to substantiate the information provided in the form.
5. Consider seeking advice from a tax professional or lawyer experienced in tax resolution, to ensure that your offer is structured in the best possible manner.
6. Double-check your form and attached documents for any mistakes or missing information before submission, to avoid delays or rejections of your offer.

Don'ts:

• Don't guess or estimate figures. Use actual numbers from your financial statements to fill out the form. Inaccuracies can lead to rejection of your offer or further legal complications.
• Don't leave any sections blank unless instructed. If a section does not apply, write "N/A" (Not Applicable) to indicate that you have read and considered every part of the form.
• Don't omit information about any assets, income, or debts. Full disclosure is required for a fair assessment by the IRS.
• Don't forget to sign and date the form. An unsigned form is invalid and will be returned to you, which can delay the resolution of your tax issues.
• Don't submit the form without making a copy for your records. Having a copy is important for tracking your submission and future reference.
• Don't ignore deadlines. Submitting the form in a timely manner is critical for the consideration of your offer.

The IRS 656-B form, often associated with the Offer in Compromise program, is surrounded by a number of misconceptions. This list aims to clarify some of the common misunderstandings.

• Anyone can get their tax bill reduced through an Offer in Compromise. Not everyone qualifies for an Offer in Compromise. The IRS considers your ability to pay, income, expenses, and asset equity when making a determination.

• Filing a 656-B form automatically stops collection activities. While it's true that the IRS may hold off on certain collection activities while your offer is being evaluated, it does not automatically stop all actions, such as collection of the existing balance due.

• The process is quick. The process of reviewing an Offer in Compromise can be lengthy, taking several months and in some cases, up to a year.

• There's a high success rate for Offers in Compromise. Actually, a significant number of applications are rejected due to various reasons, including incorrect forms, inability to pay the offer amount, or not meeting the IRS's criteria for doubt as to collectibility, doubt as to liability, or effective tax administration.

• You need a tax professional to submit Form 656-B. While hiring a tax professional can help navigate the complexities of the process and potentially increase the likelihood of acceptance, individuals can submit the form and negotiate with the IRS on their own.

• If the IRS rejects your offer, you can't appeal the decision. You have the right to appeal a rejection within 30 days after the date of the decision letter.

• The fee for Form 656-B is always required. The IRS waives the application fee for low-income individuals or includes it in the offer amount under certain conditions.

• You can't make any tax payments while waiting for a decision. You are generally required to continue making tax payments, especially if you are making estimated tax payments or have a business with employees.

• Submitting an Offer in Compromise is an admission of financial hardship. While financial difficulty is a consideration, submitting this form is more about finding a realistic solution when full payment is not feasible, rather than an outright admission of financial distress.

Understanding the realities behind these misconceptions can help taxpayers navigate the complexities of submitting an IRS 656-B form more accurately and with appropriate expectations.

The IRS 656-B form, more commonly known as the Offer in Compromise booklet, is an essential document for taxpayers seeking to negotiate a settlement with the IRS for less than the full amount owed. Understanding the key aspects of this form can significantly streamline the process. Below are six crucial takeaways regarding filling out and utilizing the 656-B form effectively.

• Eligibility Requirements Are Detailed: Before attempting to complete the form, it is important for individuals to thoroughly assess the eligibility requirements outlined within the document. These criteria must be met to successfully submit an Offer in Compromise.
• Complete Financial Disclosure is Necessary: The form requires comprehensive financial information from the applicant. This includes details about income, expenses, assets, and liabilities. Accurate and thorough disclosure is crucial for the IRS to make an informed decision.
• Payment Options Are Available: Within the 656-B form, applicants are given the choice between lump sum and periodic payment options for their offer. The selection made influences the initial payment amount and the overall processing of the offer.
• Application Fee and Initial Payment Must Be Included: When submitting the form, it is mandatory to include the non-refundable application fee and the initial payment towards the offer amount. These must be provided for the IRS to consider the application.
• Use of Correct Forms and Documentation: The 656-B booklet contains specific forms that vary based on the taxpayer’s individual circumstances, such as the 433-A (OIC) for individuals or the 433-B (OIC) for businesses. It is important to use the correct form tailored to the situation to avoid delays.
• Professional Advice May Be Beneficial: Given the complexities involved in submitting an Offer in Compromise, seeking advice from a tax professional can be advantageous. Professionals can provide guidance on the feasibility of an offer, assist with paperwork, and navigate the negotiation process with the IRS.