When you receive a big tax bill from IRS, or have a large tax debt, you may be dismayed with paying off the amount all at once. As a matter of fact, IRS has an option for people who cannot afford to pay off their total tax debts. The IRS call this program the Offer in Compromise Program. The form 656 serves this purpose.
The nature of this form is an agreement between IRS and taxpayer to settle a tax debt amount that is less than what the taxpayer owed through an offer by the taxpayer, and then a negotiated settlement. The ultimate goal of this form is to settle an agreement that fits both parties’ interests. However, the IRS does not guarantee the approval of this application. However, there are little downsides of trying this process.
There are some pre-qualifications issues related to using this debt reduction tecnique. To be eligible for this process, you must have filed all your income tax returns that are legally required, and make all required estimated tax payments for the current year. Along with these three requirements, you cannot apply for offer in compromise if you or your business is currently in an active bankruptcy proceeding. You should go to IRS pre-qualifier test before you start the process. The link to the test is https://irs.treasury.gov/oic_pre_qualifier/.