Form 656 is the IRS Offer in Compromise form. This particular PDF form is the Form 656-B, the more common Offer-in-Compromise based on “doubt as to collectability”, which requires completion of the Form 433-A (OIC) and/or a Form 433-B (OIC) if you also have a business. The purpose of these forms is to allow the IRS to evaluate your ability to pay and qualification for fresh start relief.
While your Form 656 Offer in Compromise or other Fresh Start relief is under consideration by the IRS, the IRS will cease levies and garnishments. If the tax is successfully negotiated down and the lower tax balance is paid, IRS tax liens can be released. In some circumstances, IRS liens can be avoided or released while taxpayers are in a payment plan. If you have received a Notice of Filing of Federal Tax Lien or a Notice of Intent to Levy or Seize Property, you have limited time to protect your rights by filing a request for a Collection Due Process hearing or to pursue Fresh Start options before the IRS pursues aggressive collection action. However, it should be understood that the IRS’s time to collect is generally extended during the time any of the programs discussed here, including Form 656, are pending.
This is differentiated from the Form 656-L, for “doubt as to liability.” While “doubt as to collectability” compromises are based on your financial status where you are unable to pay (you can’t afford to full-pay through an installment agreement, either), “doubt as to liability” compromises are similar to an audit or re-audit (though audit-reconsideration is an option that should also be considered in these circumstances). For the “doubt as to liability” fresh-start type of Offer-in-Compromise, you must submit the IRS Form 656-L along with an explanation and proof justifying the decrease in your tax liability.
Click on the image above to download the PDF Form 656 (IRS) Booklet.
Posted by Daniel Layton on 2020/04/03.