How it works
Form 656 states the offer amount, the payment option (lump sum within five months or periodic over up to 24 months), and the ground: doubt as to collectibility, doubt as to liability (on Form 656-L), or effective tax administration. It is filed with Form 433-A (OIC) or 433-B (OIC), the application fee, and an initial payment unless the low-income certification applies. The IRS has two years to decide or the offer is deemed accepted.
Why it matters
The number on Form 656 should come from the IRS’s own collection potential formula, and the taxpayer must stay current on filing and payment throughout the review and for five years after acceptance.
Related: Offer in Compromise, reasonable collection potential.
