Preparing the 656 OIC

Preparing Form 656 and Supporting Documentation in Pursuing an Offer for Compromise of Tax Debt

An Offer of Compromise (OIC) is a tax debt settlement offer from the IRS to taxpayers, either an individual or a business unable to repay in full their tax debt. There are certain strict criteria that spell out eligibility to file for the OIC. And if you meet these criteria, you will need to fill out Form 656 and submit a host of documents to be evaluated for an offer.

Preparing the Form 656

You need to fill out a Form 656 to file for an OIC in two circumstances. In the Doubt as to Collectability situation, there exists a reasonable amount of doubt over your ability to pay the full amount of your claims within the specified period. In the Effective Tax Administration case, your contention for a tax settlement is that paying the full amount of the dues will create economic hardship for you.

If you meet the above criteria, here are some considerations for when you begin to complete the Form 656:

• All persons submitting the offer should enter their social security numbers.

• You will have to provide the names of both the parties in the case of a joint offer for joint liabilities. When you jointly owe a liability and both you and the other party are submitting for an OIC, then do so on Form 656, just one form. Now you might owe a liability, such as employment taxes for yourself and hold other liabilities, such as income taxes, with another person. If you are submitting this offer solely this form, then you need to list all liabilities on one of Form 656. In case both of you want to submit this application, then you have to include all tax liabilities on your Form 656 and the other person must show only the joint tax liability on their Form 656.

• You need to supply the relevant information In each field on the Form 656.

• You need to show the employer identification numbers of all businesses, except corporate concerns, that you own, either in whole or in part.

• If your claim to an OIC is based on a Doubt as to Collectability, you need to also furnish a completed Form 433A if you are an individual taxpayer and Form 433B if you are a business taxpayer.

• If your claim to an OIC is based on Effective Tax Administration, then in addition to submitting a Form 433A or 433B, you’ll also complete the details in the “Explanation of Circumstances” field. You may include supplementary bits of relevant information on attached sheets together with your social security and EIN.

• In providing the total amount of your offer, you cannot include a sum that the IRS owes back to you or any of the amounts that you may have already paid in taxes.

• All persons submitting the offer should apply their signature on the 656 Form and supply the date. They must also give the names and titles of authorized corporate officers, trustees, Powers of Attorney, and executors where requested.

• Ensure that you provide the name and if possible, the address of the OIC preparer.

• You might want the IRS to contact a family member, a friend, or any other acquaintance to discuss your case so that they might understand your state of affairs better. In that case, you need to mark the “Yes” box in the “Third Party Designee” field. Additionally, if you would like a CPA, your attorney, or an enrolled agent to represent your case, you need to provide the 2848 Form and submit it along with your offer. to improve the chances of your offer being accepted. And after you’ve compiled all the documents for submission, be sure you make hard copies or electronic copies for your records. Apart from these documents, you may also submit documents that support your claim for the offer.

Focus on Detail

Filing for the Offer in compromise is complicated. Make sure to spend ample time on Form 656 and provide the entire set of supporting documents to strengthen your chances of your offer being accepted.

 

 

visit the guides at:

Seattle Business Valuation
Seattle Tax Debt Relief
Seattle Offer in Compromise