As part of the process of applying for an Offer in Compromise, all taxpayers must complete Form 656. You Should be prepared in advance to provide the necessary information and supporting documents when seeking a compromise from the IRS. An Offer in Compromise is an opportunity for an alternative solution to an outstanding tax debt that you are unable to pay in full. As such, it is crucial that Form 656 be completed as thoroughly as possible.
8 Pieces of Information to Include on an Application for an Offer in Compromise
When completing Form 656, what information is required? The following is an overview:
- Your contact information. This includes such information as your name, address, and Social Security number.
- Tax information. You will need to include the specific tax liabilities for which you are seeking the compromise. It is important to include the relevant tax years and tax type.
- A reason. Your reason for requesting the compromise, along with a more detailed explanation, will be required. For example, you may select “Doubt as to Collectability” or “Exceptional Circumstances.”
- Low income qualification. If you are unable to pay the application fee or the initial offer payment, indicate that you qualify for Low Income Certification.
- Payment terms. You must specify the terms under which you will complete the payment called for by the Offer in Compromise.
- An initial deposit. You must make an initial deposit along with the offer. Further, if you want your payment to be applied to a specific tax year or a specific tax debt, provide this information.
- Source of funds. How will you pay the offer amount? For example, indicate whether you will be borrowing money from friends or family, taking out a loan, or selling assets.
- Third party. Include the contact information for your third party designee, if you wish to name another individual to discuss the Offer in Compromise with the IRS.
To learn more about how to handle a tax problem, we encourage you to check out our free guide, The Ultimate Guide for IRS Problems.