IRS Form 656-B

Understanding IRS Tax Form 656 B

The Internal Revenue Service, often abbreviated as IRS, provides various forms to taxpayers for different purposes. One such form is form 656-B, also known as the Offer in Compromise Booklet. If you've accrued a hefty IRS debt and can't pay it back, you might want to take advantage of this form.

Purpose and use of form 656 B

The IRS Form 656-B simplifies the Offer in Compromise (OIC) program for taxpayers with outstanding tax liabilities, allowing them to settle their debt for less than the total amount owed. Determined on a case-by-case basis, applicants must prove either financial hardship or doubtful collectibility for the settlement to be approved.

Eligibility criteria for IRS form 656 B offer in compromise

Before filling out the IRS tax form 656 B, it's crucial to understand whether or not you qualify. The IRS uses specific criteria to determine eligibility for an OIC. These criteria include:

• The inability to pay the tax debt in full
• A detailed financial statement
• Approval of a lump-sum or periodic payment offer
• All required tax returns filed for the past 6 years
• All estimated tax payments and federal tax deposits for the current year made

How To Fill Out IRS Form 656-B

When approaching how to fill out the form, certain key aspects must be considered. Here are some key steps to help you:

1. Start with filling out Section 1 under Individual Information if you are an individual taxpayer. Provide precise details for all the required fields, such as your first name, last name, social security number, street address, city, state, and ZIP code.
2. For marital status, tick the appropriate box: Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow(er). If you’re married, provide your spouse's information.
3. Should you choose 'Married Filing Jointly,' ensure you fill in your spouse’s details. 
4. The next subsection, Individual Tax Periods, requires you to offer the specific tax period and the exact amount of money you owe. 
5. If you qualify as Low-Income, complete the Low-Income Certification section. You qualify if you fall at or below the amounts on the 'Low Income Guidelines' table in Form 656-A; the line numbers to reference in Form 1040 are provided.
6. Move forward to Section 2 and fill it out if your offer is for business tax debt. Give your business's name, Employer Identification Number (EIN), nature of business, years in operation, number of employees, as well as the business address.
7. For Business Tax Periods, provide the tax type, tax period, and unpaid balance similar to the individual tax periods.
8. Choose only one reason for your offer under Section 3. 
9. In Section 4, decide and fill out your Payment Terms, including your initial payment, the remaining balance, how much you can pay per month, and the number of months you'll need to pay off the remaining balance.
10. In Section 5, specify your Designation of Payment. It provides the people in the IRS to whom you can assign your payment. Note that you can choose to assign your payment to a different type of tax for the same tax period.
11. The next part requires you to provide information about your EFTPS application. If you don’t have an EFTPS account, you must create one.
12. Section 6 has checkboxes to acknowledge your understanding of the Source of Funds, Making Your Payment, and Filing Requirements. 
13. In Section 7, Offer Terms, it’s recommended to read carefully.
14. Finally, Section 8 requires your signature, your spouse's signature (if necessary), and your representative's signature (if any), along with the respective dates. 

Remember, always review your details for accuracy before submitting your form. 

Tips for completing 656-B form

If you want to get a good outcome with your IRS Form 656-B, here are some essential tips to keep in mind:

• Review Documentation: Ensure you thoroughly review all instructions and the necessary paperwork before you begin.
• Collect Information: Gather all necessary financial details, such as income, expenses, and asset values.
• Complete Accurately: Fill out the form accurately. Mistakes can lead to delays or even rejection of your offer.
• Explanation: Your reasons for financial hardship must be compelling and truthful. Provide detailed explanations and evidence if possible. 
• Initial Offer: Make a realistic initial offer based on your calculated income and expenses.
• Consult Professionals: If you're unsure about anything or if the situation is complex, consult with a tax professional to ensure you're submitting a well-prepared form.
• Follow Up: Keep track of your application's status. If there is any follow-up required by the IRS, respond promptly to avoid delays.