Understanding IRS Form 656
The IRS Form 656 is used to submit an Offer in Compromise, which is a proposal to the IRS to settle a tax debt for less than the full amount owed. To complete the form, you will need to provide detailed financial information, including your income, expenses, assets, and liabilities.
The IRS will review your offer and determine whether it is acceptable based on your financial situation and the amount of tax debt you owe. If your offer is accepted, you will be required to pay the agreed-upon amount and comply with all tax laws and regulations for a period of five years.
Eligibility Requirements for an Offer in Compromise
To be eligible for an Offer in Compromise, you must have filed all required tax returns and made all required estimated tax payments. You must also have a legitimate reason for submitting an offer, such as financial hardship or doubt as to the amount of tax debt owed.
The IRS will consider your income, expenses, assets, and liabilities when determining whether you are eligible for an Offer in Compromise. You may need to provide additional documentation, such as bank statements and pay stubs, to support your offer.
Completing IRS Form 656
To complete IRS Form 656, you will need to provide detailed financial information, including your income, expenses, assets, and liabilities. You will also need to explain why you are submitting an Offer in Compromise and how you arrived at the offered amount.
It is recommended that you seek the assistance of a tax professional or attorney to help you complete the form and ensure that you are providing all required information. You can also contact the IRS directly for guidance and support.
Submission and Review Process
Once you have completed IRS Form 656, you will need to submit it to the IRS along with the required fee and any supporting documentation. The IRS will review your offer and determine whether it is acceptable based on your financial situation and the amount of tax debt you owe.
The review process can take several months, and you may be required to provide additional information or documentation to support your offer. If your offer is accepted, you will be required to pay the agreed-upon amount and comply with all tax laws and regulations for a period of five years.
Appealing a Rejected Offer
If your Offer in Compromise is rejected, you have the right to appeal the decision. You can appeal to the IRS Office of Appeals, which will review your case and determine whether the rejection was reasonable.
To appeal, you will need to submit a written request to the IRS within 30 days of the rejection. You will also need to provide any additional information or documentation to support your appeal. It is recommended that you seek the assistance of a tax professional or attorney to help you with the appeal process.
Frequently Asked Questions
What is the purpose of IRS Form 656?
The purpose of IRS Form 656 is to submit an Offer in Compromise to the IRS to settle a tax debt for less than the full amount owed.
How do I know if I am eligible for an Offer in Compromise?
To be eligible, you must have filed all required tax returns and made all required estimated tax payments, and have a legitimate reason for submitting an offer, such as financial hardship.
What information do I need to provide on IRS Form 656?
You will need to provide detailed financial information, including your income, expenses, assets, and liabilities, as well as an explanation of why you are submitting an Offer in Compromise.
How long does it take for the IRS to review my Offer in Compromise?
The review process can take several months, and you may be required to provide additional information or documentation to support your offer.
Can I appeal a rejected Offer in Compromise?
Yes, you can appeal to the IRS Office of Appeals, which will review your case and determine whether the rejection was reasonable.
Do I need to hire a tax professional to help me with the Offer in Compromise process?
While it is not required, it is highly recommended that you seek the assistance of a tax professional or attorney to help you complete the form and ensure that you are providing all required information.