Understanding Form 656 and Mastering its Completion for an OIC Submission
Understanding the Purpose of Form 656
Form 656 serves as the official application for individuals or businesses seeking an OIC from the IRS. It provides detailed information about the taxpayer's financial situation, supporting their request for a reduced settlement amount. The purpose of Form 656 is to demonstrate to the IRS that the taxpayer is unable to pay the full tax debt within a reasonable timeframe, making a compromised settlement the best resolution.
Gathering the Necessary Documentation
Before tackling Form 656, it is crucial to gather all the necessary documentation. This includes:
- Detailed financial statements: Provide a comprehensive overview of your income, expenses, assets, and liabilities.
- Proof of income: Submit recent pay stubs, profit and loss statements, or any other relevant documentation that supports your reported income.
- Bank statements: Include statements from all your bank accounts to substantiate your financial standing.
- Investment statements: If you have investments, include statements that disclose their value and any potential income they generate.
- Real estate documentation: If you own any real estate, provide documentation showing the market value and any associated debts.
- Vehicle information: List all vehicles you own, including their make, model, year, and current market value.
By ensuring you have all the required documentation on hand, you can accurately complete Form 656 and present a compelling case to the IRS.
Accurately Completing Form 656
To optimize your OIC submission, follow these key steps when completing Form 656:
- a) Section 1: Identification
In this section, provide your personal details, including your name, address, Social Security number (SSN), and contact information. Accuracy is vital, as any errors may delay the processing of your application.
- b) Section 2: Tax Liability
Here, you will disclose the type of tax debt you are seeking to settle, such as income tax, employment tax, or other applicable taxes. Include the tax periods involved, the amount owed, and any associated penalties and interest.
- c) Section 3: Reason for the Offer
Clearly explain your financial hardship and why you believe an OIC is the most appropriate solution. Provide a detailed narrative outlining your circumstances, focusing on factors that affect your ability to pay the full tax debt.
- d) Section 4: Payment Terms
In this section, you will specify your proposed terms for settling the compromised amount. You can choose between a lump sum cash offer, a periodic payment offer, or both. Ensure you carefully calculate your offer amount, considering your disposable income and the value of your assets.
- e) Section
Other Information
Include any additional information or supporting documentation that strengthens your case for an OIC. This can include medical bills, divorce decrees, or other circumstances that impact your financial situation.
Seeking Professional Assistance
Form 656 and providing valuable guidance throughout the OIC submission process. They can help you assess your financial situation, accurately complete the form, and compile the necessary documentation. Furthermore, professionals well-versed in tax laws and IRS procedures can offer insights and strategies to maximize your chances of a successful OIC acceptance.
Double-Checking for Accuracy and Completeness
Once you have completed Form 656, it is crucial to review it meticulously for accuracy and completeness. Ensure that all the required fields are filled out correctly, and verify that the information provided aligns with your supporting documentation. Mistakes or omissions may lead to delays or rejection of your OIC application.
Conclusion
Successfully navigating the OIC submission process begins with a thorough understanding of Form 656 and its requirements. By gathering the necessary documentation, accurately completing the form, and seeking professional assistance when needed, you can enhance your chances of a