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Form 656

Offer in Compromise

The application to ask the IRS to settle a tax debt for less than the full amount owed.

What it does

Form 656 is the offer itself. It is submitted with a financial statement (Form 433-A (OIC) for individuals), an application fee and an initial payment, unless you qualify for the IRS low-income certification.

When people use it

  • You believe you cannot pay the full balance and want the IRS to consider a settlement.
  • You have checked the offer rules and want to submit a complete package.

Before you file

  • File all required returns and make required estimated tax payments for the current year.
  • Use the IRS Offer in Compromise Pre-Qualifier as a first check, and keep in mind it is a screening tool and not a decision.
  • Read the current instructions on fees, payment options and the type of offer you are making.

What to watch for

  • Most offers are not accepted, and an incomplete package can be returned.
  • The IRS generally cannot collect while an offer is being considered, but interest and penalties continue to accrue.
  • Be careful with anyone who promises a guaranteed settlement.
Get the current Form 656 and instructions from the IRS

Related on ReliefGeek

This guide is general education, not tax or legal advice. Form requirements and fees change, so confirm details on the IRS page above before you file.