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How To File an Offer In Compromise

When submitting an offer in compromise (OIC), taxpayers must use the most current version of Form 656, Offer in Compromise (PDF), or Form 656 – L, Offer in Compromise (Doubt as to Liability) (PDF), depending on the basis of the offer in compromise. Taxpayers should file Form 656 when there is doubt that the liability could be collected in full through a lump sum or an installment agreement and file Form 656-L when it is believed that the tax liability is incorrect.  Taxpayers may not file offers concurrently claiming both that the tax liability is incorrect along with an inability to pay the liability.

In most cases, taxpayers must submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B, Collection Information Statement for Businesses. Neither the Form 433-A nor Form 433-B is required when a taxpayer submits an OIC based solely as to doubt as to liability.

How Many Forms 656 and
Application Fees are Required?

The general rule when determining how many offers and application fees are necessary is "one fee and form per entity". The Form 656 contains an Offer in Compromise Application Fee and Payments matrix to assist you in determining the number of Forms 656 and application fees required.

Examples:

A married couple owing the same joint income tax liability may file only one Form 656 listing the joint liability. One fee of $150 should be attached to the Form 656. A married couple opting to file separate offers to compromise the same joint liability may do so, but two $150 application fees will be required.

When a married couple owes a joint liability and one spouse also owes an individual (non-joint) liability, two OICs and two application fees are needed.

A divorced, separated or married couple living apart may still file one From 656 listing their joint liability and pay only one $150 fee as long as all the taxes owed are joint liabilities. Taxpayers in these situations that opt to file separate offers must pay a $150 application fee for each offer that is submitted for consideration.

Note: These examples assume that the taxpayers do not meet one of the exceptions for paying the application fee: the OIC is filed under doubt as to liability or the taxpayer has completed and attached Form 656-A and the OIC Application Fee and Payment Worksheet to Form 656.

Keys To Success In
The Offer In Compromise Program:

  1. Explore all collection options before submitting an offer in compromise
  2. Complete the Form 656 “Is Your Offer in Compromise “Processable?’’ checklist
  3. Submit all required documentation
  4. Complete all items on Form 656, Offer in Compromise
  5. Include all required fees and payments
  6. Be current with all filing and paying requirements
    (estimated taxes and federal tax deposits) and remain current
  7. Respond promptly to all requests for additional information
  8. Complete all items on Form 433-A or Form 433-B

Where to File Form 656

Residents of:   Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Mississippi, Montana, Nevada, New Mexico, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin or Wyoming:

If you are a wage earner, retiree, or a self-employed individual without employees; then mail Form 656 and all attachments to:

Memphis Internal Revenue Service
Center COIC Unit
PO Box 30803 AMC
Memphis, TN 38130-0804

If you are other than a wage earner, retiree, or self-employed individual without employees; then mail Form 656 and all attachments to:

Memphis Internal Revenue Service
Center COIC Unit
PO Box 30804, AMC
Memphis, TN 38130-0804

Residents of: Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, West Virginia, or have a foreign address:

If you are a wage earner, retiree, or a self-employed individual without employees; then mail Form 656 and all attachments to:

Brookhaven Internal Revenue Service
Center COIC Unit
PO Box 9007
Holtsville, NY 11742-9007

If you are other than a wage earner, retiree, or a self-employed individual without employees; then mail form 656 and all attachments to:

Brookhaven Internal Revenue Service
Center COIC Unit
PO Box 9008
Holtsville, NY 11742-9008

Where to File Form 656-L
(Doubt as to Liability)

Brookhaven Internal Revenue Service
COIC Unit
PO Box 9008
Holtsville, NY 11742-9008

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