Form 656 - Offer In Compromise (Including Form 433-A (Oic), Form 433-B (Oic)) Page 3
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28WHAT YOU NEED TO KNOW
What is an offer?
An offer in compromise (offer) is an agreement between you (the taxpayer)
and the IRS that settles a tax debt for less than the full amount owed. The offer
program provides eligible taxpayers with a path toward paying off their debt
and getting a “fresh start.” The ultimate goal is a compromise that suits the best
interest of both the taxpayer and the IRS. To be considered, generally you must
make an appropriate offer based on what the IRS considers your true ability to
pay.
Submitting an offer application does not ensure that the IRS will accept your
offer. It begins a process of evaluation and verification by the IRS, taking into
consideration any special circumstances that might affect your ability to pay.
Generally, the IRS will not accept an offer if you can pay your tax debt in full via
an installment agreement or a lump sum.
This booklet will lead you through a series of steps to help you calculate an
appropriate offer based on your assets, income, expenses, and future earning
potential. The application requires you to describe your financial situation in
detail, so before you begin, make sure you have the necessary information and
documentation.
Are you eligible?
Before you submit your offer, you must (1) file all tax returns you are legally
required to file, (2) make all required estimated tax payments for the current
year, and (3) make all required federal tax deposits for the current quarter if you
are a business owner with employees.
Bankruptcy
If you or your business is currently in an open bankruptcy proceeding, you are
not eligible to apply for an offer. Any resolution of your outstanding tax debts
generally must take place within the context of your bankruptcy proceeding.
If you are not sure of your bankruptcy status, contact the Centralized Insolvency
Operation at 1-800-973-0424. Be prepared to provide your bankruptcy case
number and/or Taxpayer Identification Number.
Doubt as to Liability
If you have a legitimate doubt that you owe part or all of the tax debt, you will
need to complete a Form 656-L Offer in Compromise (Doubt as to Liability).
The Form 656-L is not included as part of this package. To submit a Doubt as to
Liability offer, you may request a form by calling the toll free number 1-800-829-
1040, by visiting a local IRS office, or at
Other important facts
Penalties and interest will continue to accrue during the offer evaluation
process.
You cannot submit an offer that is only for a tax year or tax period that has not
been assessed.
The law requires the IRS to make certain information from accepted offers avail-
able for public inspection and review. These public inspection files are located in
designated IRS Area Offices.
A Notice of Federal Tax Lien (lien) gives the IRS a legal claim to your property
as security for payment of your tax debt. The IRS may file a Notice of Federal
Tax Lien during the offer investigation. However, unless a jeopardy situation
exists, a request for a Notice of Federal Tax Lien will usually not be made until a
final determination has been made on the offer.
If your business owes trust fund taxes, and responsible individuals may be
held liable for the trust fund portion of the tax, you are not eligible to submit
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