What is IRS Form 656?

IRS Form 656 is the official Offer in Compromise (OIC) application. Filing this form formally proposes to settle your tax debt for less than the full amount you owe. The form requires you to: (1) state your proposed offer amount, (2) choose your payment method (Lump Sum Cash — paid within 5 months, or Periodic Payment — paid within 24 months), (3) certify under penalty of perjury that all information is accurate, and (4) submit the $205 application fee (waived for low-income taxpayers) and the required initial payment (20% of the offer for Lump Sum, first monthly payment for Periodic Payment). Filing Form 656 also suspends the Collection Statute Expiration Date (CSED) while the OIC is pending.

What is the OIC acceptance rate?

The IRS accepts approximately 33-40% of all Offers in Compromise filed. This means roughly 2 out of 3 OICs are rejected — typically because the taxpayer's Reasonable Collection Potential (assets plus future income) exceeds the offer amount, or because the application was incomplete or contained errors. Working with a qualified tax professional significantly increases acceptance rates. The most common OIC ground is Doubt as to Collectibility (DATC) — the taxpayer does not have enough assets or income to pay the full tax debt before the Collection Statute Expiration Date (CSED). Doubt as to Liability cases are rarer but have higher acceptance rates when the taxpayer genuinely disputes the underlying tax.

Offer in Compromise Application

Form 656: Offer in Compromise

The official application to settle your tax debt for less than you owe. Filing Form 656 halts IRS collection, suspends the CSED clock, and puts your case in front of an OIC specialist. But 2 out of 3 OICs are rejected — here's how to be in the 33% that succeeds.

Get Free OIC Evaluation 310-597-2254

Get Your Free Tax Relief Review

A specialist will review your case and outline your options — completely free.

Get Free OIC Evaluation

Get Your Free Tax Relief Review

A specialist will review your case and outline your options — completely free.

Form 656: Critical Deadlines & Requirements

$205 Application Fee

Non-refundable. Waived if your income is at or below the HHS Poverty Guidelines (check Form 656 instructions for current thresholds).

20% Down Payment (Lump Sum)

If you choose Lump Sum Cash offer (paid within 5 months), you must include 20% of the total offer amount with Form 656. This is non-refundable.

First Monthly Payment (Periodic)

If you choose Periodic Payment offer (paid over 6-24 months), include the first monthly installment with Form 656. Continue monthly payments while the OIC is pending.

Tax Compliance Requirement

You must have filed ALL required tax returns for the past 6 years. An OIC will be returned (not rejected) if you have unfiled returns for any tax period within the last 6 years.

Form 433-A (OIC) Required

Form 656 must be filed with a complete Form 433-A (OIC version) including all required financial documentation. The OIC version of 433-A is more detailed than the standard version.

Statute Suspension

Filing Form 656 suspends the Collection Statute Expiration Date (CSED) while the OIC is pending plus 30 days after rejection or withdrawal.

File Your OIC with Confidence

We calculate your optimal offer amount, prepare Form 656 and all supporting forms, and represent you before the IRS OIC unit. Free OIC eligibility evaluation.

Get Free OIC Help Call 310-597-2254