Form 656 Instructions (Offer in Compromise) – Paul Gaulkin CPA

past_dueOnce the amount of the offer has been determined, Form 656 (Offer in Compromise) should be completed. It is important to remember that the IRS will only process applications that have been filed out on the most current Form 656.

It is extremely crucial that the form be filled out as carefully as possible. The IRS will not process any application for an Offer in Compromise that has errors within it. It is important for any taxpayer to read the form carefully for any errors that may have accidentally been added to the form.

Form 656 Offer Payment

When submitting the completed Form 656, it is required that the taxpayer send payment of 20% of the amount of the offer. The exception to this rule is if the taxpayer’s gross monthly household income is less than or equal to the appropriate amount listed in section 4 of Form 656.

Form 656 vs Form 656-L

Form 656 should only be used for offers that are based on the doubt of collectability or effective tax administration, not on the doubt as to the liability. If there is a doubt as to the liability, Form 656-L should be used instead.

Form 656-L should show to the IRS what the taxpayer believes the correct tax liability to be after credits and payments. This amount must be more than zero and cannot be a refund that is owed to the taxpayer. A statement should be attached to the form explaining why the taxpayer believes the tax liability to be incorrect.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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