The Internal Revenue Service announced that its revised taxpayer application for an offer in compromise, Form 656, is now available.

An offer in compromise is an agreement between a taxpayer and the agency that resolves the taxpayer's tax liability. Under certain circumstances, the IRS has the authority to settle tax liabilities by accepting less-than-full payment. The Form 656 package was last revised in 2004 to help taxpayers prepare an offer correctly and completely.

The new form retains the 2004 changes and adds significant changes as a result of the Tax Increase Prevention and Reconciliation Act of 2005. The changes include:

  • New payment terms and submission rules;
  • A new matrix to assist in determining the number of forms, $150 application fees, 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 revised section defining the contractual terms of the offer; and,
  • An application fee and payment worksheet to determine eligibility for claiming exception to the payment of the application fee and the mandatory offer payments imposed by the legislation.

The 44-page Form 656 package is located online at www.irs.gov/pub/irs-pdf/f656.pdf and will be available at IRS walk-in offices shortly.

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