A few months ago, in March, the IRS announced the release of Form 656, Offer in Compromise. The Form 656 package was last revised in 2004 to help us correctly and completely prepare an offer and reduce the chances of an offer being returned for omissions. The IRS declares that the new form retains the taxpayer burden reduction features while adding significant changes as a result of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA).
These changes include:
New payment terms and submission rules;
Processability checklist, redefined as a result of TIPRA, which assists taxpayers in determining up front if they are eligible for an offer before investing any preparation time;
A new matrix to assist in determining the number of Forms 656, $150 application fee(s), and TIPRA payments to submit to the IRS depending on the number of individuals submitting the offer and the types of liabilities being compromised;
A checklist which reduces the chance that the application will be returned by the IRS for omissions, as well as a reminder of the necessary documents to include with the application prior to its submission to IRS;
Revised Section V which defines the terms of the offer;
OIC Application Fee and Payment Worksheet to determine eligibility for claiming exception to the payment of the $150 application fee and TIPRA payments;
Form 656-A, renamed Income Certification for OIC Application Fee and Payment; and
Form 656-PPV Offer in Compromise Periodic Payment Voucher.
Outlined below is a summary of the major procedural changes implemented as a result of TIPRA and now reflected on the Form 656 revision. In addition, some of the form’s key features are also summarized.
1. Form 656–L: Doubt as to Liability: The February 2007 revision no longer contains a category block for Doubt as to Liability offers.
2. Doubt as to Liability Offers cannot be filed concurrently to request consideration under a different basis.
3. New rules for offer submissions and processability criteria
Form 656 – Key Features
1. New guidelines for defining a low-income taxpayer for purposes of determining exception to application fee and TIPRA initial payment
2. New worksheet to determine eligibility for claiming exception to the payment of the $150 application fee and TIPRA initial payments
3. Certification of eligibility for waiver of application fee and first TIPRA payment
4. Payment Voucher
5. Revised Section V defines the terms of the offer
Form 656, Offer in Compromise
Form 656-A, Income Certification for OIC Application Fee and Payment
Form 656-L (Doubt as to Liability)
Form 656-PPV, Offer in Compromise Periodic Payment Voucher