Form 656, Offer in Compromise
Form 656 is the application for an offer in compromise, an agreement that settles your tax debt with the IRS for less than the full balance. Fill in the official IRS PDF below and download it.
This is the genuine IRS PDF, unmodified. Source: IRS official page.
What is 656?
An offer in compromise is for taxpayers who cannot pay their full tax liability, or for whom full payment would create financial hardship. Form 656 states which tax debts you want to settle, how much you are offering, and how you will pay it, either as a lump sum or in periodic payments. The IRS weighs your income, expenses, and asset equity to decide whether your offer represents the most it can reasonably expect to collect.
Form 656 travels as part of the Form 656-B booklet along with a financial statement: Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses. An application fee and an initial payment are generally required, though both can be waived if you qualify under the low-income certification. Offers based on doubt as to liability use a different form, Form 656-L.
Who files 656?
- Individuals who cannot pay their tax debt in full and want to settle for a reduced amount
- Self-employed people and business owners with tax liabilities they cannot fully pay
- Taxpayers for whom collecting the full balance would create economic hardship or be unfair under the circumstances
- People who have checked eligibility, for example with the IRS pre-qualifier tool, and are not in an open bankruptcy
How to fill out 656
- Complete the financial statement first, Form 433-A (OIC) or 433-B (OIC), since it determines a reasonable offer amount.
- On Form 656, identify yourself and list the tax periods and types of tax you want the offer to cover.
- Choose lump sum or periodic payment terms and enter your offer amount and payment schedule.
- Check the low-income certification if you qualify, which waives the application fee and initial payment.
- Download the completed PDF, sign it, and mail the full package with the fee and initial payment to the address in the Form 656-B booklet, or apply online if eligible.
Quick fill 656 on this page
Prefer to see the form itself while you type? Open 656 in the editor to fill it on the actual pages, add a signature, and download.
Frequently asked questions
How does the IRS decide whether to accept my offer?
The IRS looks at your ability to pay, income, expenses, and asset equity, and generally accepts an offer when it represents the most it can expect to collect within a reasonable time. Lowballing rarely works because the financial statement drives the math.
What happens to collection while my offer is pending?
Collection activity is generally suspended while the IRS evaluates the offer, though interest continues to accrue and the IRS may keep certain refunds. If the offer is rejected, you can appeal within the window stated in the rejection letter.
What are my obligations after an offer is accepted?
You must pay the offer amount on schedule and stay compliant with filing and payment requirements for the period stated in the offer terms. Falling behind can default the offer and reinstate the original debt.