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Settlement Options

Form 656: Offer in Compromise

Form 656 is part of the IRS offer in compromise process. It is usually paired with detailed financial disclosures and supporting documents.

When this form may come up

Applying to settle federal tax debt for less than the full balance when eligibility requirements are met.

  • You believe you cannot pay the full tax balance through income, assets, or an installment agreement.
  • You are current with required filing and payment compliance.
  • You can document income, expenses, assets, and liabilities.

Documents to gather before using it

IRS forms are easier to complete when the facts and supporting documents are organized first.

  • Filed tax return history
  • Proof of income
  • Bank statements
  • Asset and debt records
  • Household expense documentation

Important caution

An offer in compromise is not guaranteed. Eligibility depends on IRS financial standards, compliance, and the facts of the case.

Related tax problems

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