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Offer In Compromise Forms and Documentation Requirements

Offer In Compromise

Offer In Compromise Forms and Documentation Requirements:

  • Form 656: Start by completing Form 656, the Offer in Compromise application. This form includes your personal information, details about your tax debt, and the proposed settlement amount.
  • Form 433-A (OIC) or Form 433-B (OIC): Depending on your individual or business situation, you’ll need to fill out one of these Collection Information Statements. These forms provide a detailed overview of your financial situation, including income, expenses, assets, and liabilities.
  • Form 656-A: This form, also known as the “Income Certification for Offer in Compromise Application Fee,” is necessary if you’re requesting a waiver of the application fee based on low income.
  • Form 656-L: Include this form if you plan to make a lump sum payment with your offer. It outlines the payment terms and conditions.
  • Supporting Documentation for Income: You’ll need to provide documentation for all sources of income, including pay stubs, W-2s, 1099s, and income tax returns for the last few years.
  • Supporting Documentation for Expenses: Include documentation that substantiates your monthly living expenses, such as rent or mortgage statements, utility bills, and receipts for other essential expenses.
  • Asset Documentation: Gather information about your assets, such as bank statements, investment account statements, and appraisals of valuable property, including real estate and vehicles.
  • Liabilities Documentation: Document any outstanding loans, debts, or other financial obligations, such as credit card statements and loan agreements.
  • Business Financials (Form 433-B OIC): If you are a business owner, provide detailed financial statements for your business, including profit and loss statements, balance sheets, and business tax returns.
  • Bankruptcy Documentation: If you’ve filed for bankruptcy, include documentation related to your bankruptcy case.
  • Other Supporting Evidence: Any additional documentation that strengthens your case for financial hardship or inability to pay the full tax debt.
  • Non-Refundable Payment: Include the required non-refundable application fee and initial payment, if applicable.

It’s crucial to carefully review the IRS guidelines and requirements for Offer In Compromise submissions, as incomplete or inaccurate documentation could lead to delays or denials. Seek professional guidance if you have questions or concerns about the process to increase your chances of a successful OIC application.

Frequently Asked Questions

What is Offer in Compromise (OIC) and why is documentation important in the process?
Offer in Compromise is a program offered by the IRS that allows eligible taxpayers to settle their tax debt for less than the full amount owed. Documentation is crucial as it provides evidence of your financial situation and is used to support your OIC application.
What forms do I need to complete for an Offer in Compromise?

The primary form for an OIC is Form 656, Offer in Compromise. Depending on your individual or business situation, you may also need to complete other forms, such as Form 433-A (OIC), Form 433-B (OIC), or Form 656-L, Offer in Compromise (Doubt as to Liability). The specific forms you need will depend on your circumstances.

How do I determine which forms to use for my OIC application?

It’s recommended to seek professional tax advice or use the IRS’s Pre-Qualifier tool on their website. This tool can help you determine the correct forms to use based on your financial situation and the type of taxes you owe.

What financial documentation is typically required for an OIC application?
Common financial documentation includes:

  • Pay stubs, W-2s, or 1099s to verify your income.
  • Bank statements to show your assets and cash flow.
  • Mortgage or rent agreements.
  • Details of your monthly expenses, including bills and loan payments.
  • Information about any outstanding loans or debts.
  • Statements for any investments or retirement accounts
How recent must the financial documentation be for an OIC application?
Generally, the IRS requires financial documents to be up-to-date, typically within the last three months at the time of submission. However, it’s essential to check the specific requirements, as they may vary.
What if I can't locate certain financial documents for my OIC application?
If you’re missing specific financial documents, it’s essential to explain the reason for their absence in your application. The IRS may accept alternative forms of documentation or request additional information.
Are there any documentation requirements for self-employed individuals or businesses applying for an OIC?
Yes, self-employed individuals and businesses will typically need to provide additional documentation, such as profit and loss statements, business tax returns, and business bank statements.
Can I submit my OIC application electronically, or do I need to mail it to the IRS?
As of my last update in September 2021, you could generally submit OIC applications both electronically and by mail. However, the preferred method may vary, and it’s advisable to check the IRS website or consult with a tax professional for the most current guidance.
How long does it take for the IRS to review an OIC application with all the required documentation?
The processing time for OIC applications can vary, but it often takes several months for the IRS to review and make a decision. It’s essential to be patient during this process.
Can I amend my OIC application if I discover errors or omissions in my documentation?
Yes, you can typically amend your OIC application to correct errors or provide additional information. It’s crucial to communicate promptly with the IRS if you discover any discrepancies or need to update your documentation.

Remember that the OIC process can be complex, and providing accurate and complete documentation is crucial to the success of your application. Consulting with a tax professional can help ensure that you meet all requirements and navigate the process effectively.

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