TOO MUCH US TAX -IR-2004- 129 130 -- Form 656 656A IRS

In Canada, a bankruptcy will cancel an Income tax and a
GST debt.
The US has an offer in Compromise and has just changed
/ amended / improved the forms.
IR-2004-129, October 25, 2004
WASHINGTON - The Internal Revenue Service announced
today that the newly
revised taxpayer application for an offer in
compromise, the Form 656
package, is now available.
An offer in compromise is an agreement between a
taxpayer and the IRS that
resolves the taxpayer's tax liability. Under certain
circumstances, the
IRS has the authority to settle federal tax liabilities
by accepting less
than full payment.
The Form 656 package was redesigned to make it easier
for taxpayers to
follow the instructions for and correctly prepare the
application for an
agreement. The form was last revised in 2001.
The new 62 page package can be found at:
The new form also includes a signature block for the
tax practitioner (if
any) employed by the taxpayer to prepare the
application form. This paid
preparer signature block was added to discourage
unscrupulous promoters
who falsely market offers in compromise to taxpayers as
a "pennies on the
dollar" approach.
"This is part of our continuing effort to improve this
program, which
benefits both taxpayers and tax administration by
allowing people to
settle tax liabilities," said IRS Commissioner Mark W.
Everson. "The new
application will help taxpayers determine if they are
eligible to file for
an offer and ease the application process."
The IRS worked with and received recommendations from
external groups and
the National Taxpayer Advocate in revising the Form 656
The package now includes Form 656-A, Income
Certification for OIC
Application Fee, and a worksheet to help taxpayers
determine whether they
meet the income exception to the $150 fee. The redesign
also features:
.       A checklist to help taxpayers determine if they
are eligible to file an
OIC before they invest time in form preparation;
.       A step-by-step guide through the OIC process;
.       A Third Party Designee section, which allows a
person other than the
taxpayer to discuss any additional information that the
IRS needs to
process the offer; and
.       A summary checklist that reduces the chance
that the application will be
returned by the IRS for omissions.
Tax practitioners and the general public should begin
using the 2004
revised package immediately and destroy any previous
versions of the form
they may have.
Applicants may order the package by calling the IRS
toll-free at
1-800-TAX-FORM (1-800-829-3676).
The Form 656 package is also available on
the IRS Web site at
More specifically at:
Next, the IRS issued a warning about dealing with
unscrupulous people who are taking money to prepare
Offers when the taxpayer does not qualify:
IR-2004-130, October 25, 2004
WASHINGTON — The Internal Revenue Service today issued
a consumer alert
advising taxpayers to beware of promoters’ claims that
tax debts can be
settled for “pennies on the dollar” through the Offer
in Compromise
Such promoters make money by inappropriately advising
indebted taxpayers
to file an application for an offer in compromise with
the IRS, promising
unrealistic results, even when the taxpayers do not
meet the requirements
of the program. This bad advice costs taxpayers money
and time.
Taxpayers may refer promoters who are using the program
inappropriately to
the IRS’s Office of Professional Responsibility for
civil sanctions by
sending their complaint to: Office of Professional
(SE:OPR), Internal Revenue Service, 1111 Constitution
Avenue N.W.,
Washington, DC 20224.
An offer in compromise is an agreement between a
taxpayer and the IRS that
resolves the taxpayer's tax debt. The IRS has the
authority to settle, or
"compromise," federal tax liabilities by accepting less
than full payment
under certain circumstances.
“This program serves an important purpose. But we do
warn taxpayers to
watch out for unscrupulous promoters charging excessive
fees to taxpayers
who have no chance of meeting the program’s
requirements,” said IRS
Commissioner Mark W. Everson. “Taxpayers should not be
duped by
high-priced promises.”
Although there are some tax practitioners who promote
dubious schemes,
most practitioners give quality service to their
clients. Taxpayers who
need a qualified tax professional to prepare and submit
their offer in
compromise application form may contact state or local
tax professional
associations to find enrolled agents, CPAs or attorneys
in their
geographic area with the education and experience to
assist them.
The application package, IRS Form 656, Offer in
Compromise, was recently
redesigned with new instructions, worksheet and
checklist to make it
easier for taxpayers to determine if they are eligible
for the program and
to accurately prepare the necessary forms. The July
2004 revision of the
application form also contains a new paid preparer
signature block.
Taxpayers may wish to reconsider using preparers who
hesitate to identify
themselves on the form.
An offer in compromise may be considered only after
other payment options
have been exhausted. If taxpayers are unable to pay
their taxes in full,
there are other payment options, such as monthly
instalment agreements,
that must be explored before an offer in compromise can
be submitted.
The IRS Web site at contains information on
the collection
process and payment options. Additional information is
available in IRS
Publication 594, The IRS Collection Process, and Form
9465, Instalment
Agreement Request. These documents provide complete
information on all
options available and help taxpayers determine if they
qualify for a
payment program.
Taxpayers who are unable to pay their taxes in full and
who have explored
the various options should use the checklist in the
Form 656 package to
determine if they are eligible for an offer in
Some taxpayers may be exempt from the $150 application
fee depending on
income or whether the offer in compromise is based
solely on doubt as to
tax liability. Taxpayers who claim the income exception
must certify their
eligibility by completing Form 656-A, Income
Certification for Offer in
Compromise Application Fee. This certification should
be attached to Form
656 in lieu of the $150 fee at the time of submission.
The Form 656
package contains a worksheet designed to assist
taxpayers in determining
whether they qualify for the income exception. The
income exception
applies only to individuals.
The publications and forms are available at
or by calling
1-800-829-3676 to order copies. All publications and
forms are free.
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