Fillable Form 656-L - Offer In Compromise (Doubt As To Liability) (Page 3 of 8) in pdf

A doubt as to collectibility offer is when you agree that you owe the taxes

but you cannot pay your tax debt in full. To be considered for a doubt as to

collectibility offer you must make an appropriate offer based on what the

IRS considers your true ability to pay. To request consideration under doubt

as to collectibility, you must complete a Form 656, Offer in Compromise,

found in Form 656-B, Offer in Compromise Booklet. Form 656 or 656-B is

not included as part of this package. You may get a Form 656-B by calling

the toll free number 1-800-829-1040, by visiting a local IRS ofﬁce, or at

IMPORTANT NOTE

You cannot submit an offer based on doubt as to liability (Form 656-L) and

an offer based on doubt as to collectibility (Form 656 or 656-B) at the same

time, claiming both that you do not believe the tax debt is correct (doubt as

to liability) and that you are unable to pay it (doubt as to collectibility). It is

in your best interest to resolve any disagreements about the validity of the

tax debt before ﬁling an offer based on doubt as to collectibility. If you send

both kinds of offers at the same time, the doubt to collectibility offer will be

returned without further consideration.

Examples of when you should

Generally, you will send in a doubt as to liability offer when you were unable

submit a Doubt as to Liability

to dispute the amount of tax the IRS claims you owe during the time allowed

Offer

by the Internal Revenue Code or IRS guidelines. Possible reasons for

submitting a doubt as to liability offer in compromise include the following:

the examiner made a mistake interpreting the tax law, the examiner failed

to consider the evidence presented; new evidence is available to support

a change to the assessment. Below are some examples of when it may be

appropriate to make an offer based on doubt as to liability.

Example 1: You ﬁled your tax return reporting stock options as valued

by your employer, which created a large tax liability including Alternative

Minimum Tax (AMT). You paid part of the tax debt, but could not pay the full

amount owed. You later discovered that the stocks were not worth as much

as you originally reported. This was due to fraudulent acts by the broker

and/or your employer. You ﬁled a claim for a refund based on the reduced

value of stock options. IRS told you that the full amount of the tax debt had

to be paid before they could consider your claim and denied your claim for

refund.

Example 2: You were audited by the IRS. When this happened, you moved

and did not get the notiﬁcation or you suffered a disaster (such as books

and records were destroyed in a ﬁre or other natural disaster) causing you

to miss the meeting with the auditor. The IRS disallowed all expenses and

now you have a tax debt. You discover the problem when you try to borrow

some money and ﬁnd that there is a federal tax lien ﬁled. You are able to

reconstruct your books and records with the correct expenses that would

signiﬁcantly lower your tax debt.

Example 3: You are an ofﬁcer of a corporation that has employees. You are

not in a decision-making position nor do you have the authority to pay bills

or sign checks. The business is struggling to make ends meet. In order to

pay suppliers, the money that should have been paid to the IRS as a federal

tax deposit was used to continue business operation. In an effort to collect

the trust fund part of the employee’s wages, the IRS assessed the trust fund

portion of the tax against you and all the other ofﬁcers of the corporation.

You were not a person responsible for collecting and paying the withheld

income and employment taxes. You have supporting statements and docu-

mentation to support that fact.

Form 656-L - Offer In Compromise (Doubt As To Liability) Page 3

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