Form 656 Booklet - Offer In Compromise Page 5
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28If 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: If retirement
savings from an IRA or 401k plan are cashed out, there will be future tax
liabilities owed as a result. Contact the IRS or your tax advisor before
taking this action.
Future tax obligations
If your offer is accepted, you must continue to timely file and pay your tax
obligations. If you fail to file and pay your required tax returns, before your
offer is paid in full, or for five years after your offer is accepted, which ever
is longer, your offer may be defaulted. If your offer is defaulted, all compro-
mised tax debts will be reinstated.
HOW TO APPLY
Application process
The application involves filling out Form 433-A (OIC), Collection Informa-
tion Statement for Wage Earners and Self-Employed Individuals and/or
Form 433-B (OIC), Collection Information Statement for Businesses, filling
out a Form 656, (Offer in Compromise), attaching an initial payment, and
attaching a $150 application fee for each offer you send in.
If you and your spouse owe
If you have joint tax debt(s) with your spouse and also have an individual tax
joint and separate tax debts
debt(s), you and your spouse will send in one Form 656 with all of the joint
tax debt(s) and a second Form 656 with your individual tax debt(s), for a
total of two Forms 656.
If you and your spouse have joint tax debt(s) and you are also each respon-
sible for an individual tax debt(s), you will each need to send in a separate
Form 656. You will complete one Form 656 for yourself listing all your joint
and separate tax debts and your spouse will complete one Form 656 listing
all his or her joint and individual tax debts, for a total of two Forms 656.
If you and your spouse/ex-spouse has a joint tax debt and your spouse/
ex-spouse does not want to submit a Form 656, you on your own may
submit a Form 656 to compromise the joint debt.
Each Form 656 will require the $150 application fee and initial down
payment unless your household meets the Low Income Certification guide-
lines (See page 2 of Form 656, Offer in Compromise).
COMPLETING THE APPLICATION PACKAGE
To calculate an offer amount, you will need to gather information about your
Step 1 – Gather your information
financial situation, including cash, investments, available credit, assets,
income, and debt.
You will also need to gather information about your average gross monthly
household income and expenses. The entire household includes spouse,
significant other, children, and others that reside in the household. This is
necessary for the IRS to accurately evaluate your offer. In general, the
IRS will not accept expenses for tuition for private schools, college
expenses, charitable contributions, credit card payments, and other
unsecured debt payments as part of the expenses calculation.
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