Form 656-B - Offer In Compromise Booklet Page 5
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32PAYING FOR YOUR OFFER
Application Fee
Offers require a $186 application fee.
Exception: If you are an individual or are operating as a sole proprietor, or are a
disregarded single member Limited Liability Company (LLC) taxed as a sole
proprietor and your household gross income meets the Low Income Certification
guidelines, you will not be required to send the application fee.
Note: You may be eligible to receive a refund of the application fee if the IRS
either (1) accepts the offer to promote effective tax administration, or (2)
accepts the offer based on doubt as to collectability and determines that
collecting an amount greater than the amount offered would create an
economic hardship. After the IRS processes your offer, the IRS will notify
you if you are eligible to request a refund of the application fee.
Payment Options
You must select a payment option and include the payment with your offer. The
amount of the initial payment and subsequent payments will depend on the total
amount of your offer and which of the following payment options you choose:
Lump Sum Cash: This option requires 20% of the total offer amount to be paid
with the offer and the remaining balance paid in 5 or fewer payments within 5 or
fewer months of the date your offer is accepted.
Periodic Payment: This option requires the first payment to be paid with the offer
and the remaining balance paid in monthly payments within 6 to 24 months, in
accordance with your proposed offer terms.
Note: Under this option, you must continue to make monthly payments
while the IRS is evaluating your offer. Failure to make these payments will
cause your offer to be returned. There is no appeal. Total payments must
equal the total offer amount.
Exception: If you are an individual, are operating as a sole proprietor, or are a
disregarded single member LLC taxed as a sole proprietor, and your household
income meets the Low Income Certification guidelines, you will not be required to
send the initial payment or make the required monthly payments while your offer is
being considered.
All payments sent in with your offer and made during consideration of the offer will
be applied to your tax debt. The payments cannot be returned to you unless you
pay more than the required payment and designate it as a deposit.
If you do not have sufficient cash to pay for your offer, you may need to consider
borrowing money from a bank, friends, and/or family. Other options may include
borrowing against or selling other assets.
Note: You may not pay your offer amount with an expected or current tax
refund, money already paid, funds attached by any collection action, or
anticipated benefits from a capital or net operating loss. If you are planning
to use your retirement savings from an IRA or 401k plan, you may have
future tax liabilities owed as a result. Contact the IRS or your tax advisor
before taking this action.
HOW TO APPLY
Application Process
The application must include:
• Form 656, Offer in Compromise
• Completed Form 433-A (OIC), Collection Information Statement for Wage
Earners and Self-Employed Individuals, if applicable
• Completed Form 433-B (OIC), Collection Information Statement for
Businesses, if applicable
• $186 application fee, unless you meet Low Income Certification
• Initial offer payment, unless you meet Low Income Certification
Note: Your offer(s) cannot be considered without the completed and signed
Collection Information Statement(s), Form 433-A (OIC) and/or 433-B (OIC).
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