Form 656-A

Offer in Compromise

Application Fee

Instructions and

Certification

Use these instructions together with Form 656, Offer in Compromise.

This Offer in Compromise Application Fee package includes:

• Information you need to know about the application fee before

submitting an offer in compromise,

• A worksheet that can be used to determine if you qualify for an

exception to the application fee, and

• One copy of Form 656-A, Income Certification for Offer in Compromise Application Fee.

__________________________________________________________

Note: You can get forms and publications by calling 1-800-829-1040 or 1-800-829-

FORM, or by visiting your local Internal Revenue Service (IRS) office or our

website at www.irs.gov.

IRS

Department of the Treasury

Internal Revenue Service

www.irs.gov

Form 656-A (Rev. 8-2003)

Catalog Number 28300X
What You Need to Know

About the Application Fee

Before Submitting an

Offer In Compromise

What is an Offer In Compromise

Application Fee?

How much is the fee?

When is the fee due?

Do all OICs require this fee?

When you submit an Offer In Compromise (OIC), the Internal Revenue

Service expends resources evaluating your individual financial

condition. The OIC application fee allows the Internal Revenue Service

to recover a portion of the cost of processing your OIC.

The application fee is $150, payable by check or money order.

The application fee of $150 is due at the time you submit your OIC for

consideration.

You must remit the application fee along with your Form 656, Offer in

Compromise, unless:

(1) Your OIC is based solely on doubt as to liability (see Form 656,

Offer in Compromise, page 1) or

(2) You certify that your total monthly income is at or below levels

based on the poverty guidelines established by the U.S. Department

of Health and Human Services (See Offer In Compromise Application

Fee Worksheet).

The exception for taxpayers with incomes below these levels only

applies to individuals; it does not apply to other entities such as

corporations or partnerships.

To determine if you qualify for the exception, please complete the

attached Offer In Compromise Application Fee Worksheet.

How do I determine if I qualify for the

exception?

Is the application fee ever refunded?

If the Internal Revenue Service accepts your OIC based on effective

tax administration or special circumstances (see Form 656, Offer in

Compromise, pages 1 and 3, respectively), the fee will be applied

against the amount of the offer, or refunded to you if you request.

What happens if I do not submit the

application fee with my OIC Form 656?

Except for the two situations described above under “Do all OICs

require this fee?” any OIC submitted without the fee will be returned to

you without further consideration.

Where do I call if I have additional questions

about OICs and the application fee?

If you have additional questions about an OIC or about the application

fee, please call 1-800-829-1040.
Offer In Compromise Application Fee Worksheet

If your OIC is based solely on doubt as to liability, do not submit the fee. Otherwise, please complete the

following checklist to determine if you qualify to have your OIC considered at this time.

YES NO

1. Are you currently in bankruptcy?

2. Do you have any unfiled federal tax returns for which you are liable?

(You must file all federal tax returns for which you met the filing requirement prior to submitting your OIC.)

3. If you are a business with employees, have you failed to make any required federal tax

deposit for the current quarter and the two immediately preceding quarters?

4. Did you use an outdated Form 656, Offer In Compromise, or outdated

Form 433-A/-B, Collection Information Statement, to complete your OIC?

(You must use Forms 656 and 433-A or 433-B, revision May 2001.)

If you answered YES to any of the questions above, STOP HERE. You are not eligible to have your OIC considered at

this time.

The application fee does not apply to individuals whose income falls at or below levels based on poverty guidelines established

by the U.S. Department of Health and Human Services (HHS) under authority of section 673(2) of the Omnibus Reconciliation

Act of 1981 (95 Stat. 357, 511). The exception for taxpayers with incomes below these levels only applies to individuals; it does

not apply to other entities such as corporations or partnerships.

 If you are an individual, follow the steps below to determine if you must remit the application fee along with your

Form 656, Offer in Compromise.

1. Family Unit Size______. Enter the total number of dependents (including yourself and your spouse) listed in

Section 1 of Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.

2. Total Income_____________. Enter the amount of your total monthly income from Section 9, Line 34 of the

Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.

3. Compare the information you entered in items 1 and 2, above, to the monthly Application Fee Income Exception Levels

table below. Find the “Family Unit Size” equal to the number you entered in item 1. Next, find the column which

represents where you reside (48 Contiguous States, DC ..., Hawaii or Alaska). Compare the “Total Income” you

entered in item 2 to the number in the row and column that corresponds to your family unit size and residence. For

example, if you reside in one of the 48 contiguous states, and your family unit size from item 1 above is 4, and your

total monthly income from item 2 above is $1500, then you are exempt from the fee because your income is less than

the $1,667 guideline amount.

2003-2005 Application Fee Income Exception Levels

Family Unit Size 48 Contiguous States, DC, US Possessions, Residents of Foreign Countries Hawaii Alaska

 1 $833 $917 $1,000

 2 $1,083 $1,250 $1,333

 3 $1,333 $1,583 $1,667

 4 $1,667 $1,833 $2,000

 5 $1,917 $2,167 $2,333

 6 $2,167 $2,500 $2,667

 7 $2,417 $2,833 $3,000

 8 $2,667 $3,083 $3,333

 For each additional person, add $333 $333 $417

SOURCE: Based on 2002 HHS Poverty Guidelines, Federal Register, Vol. 67, No. 31, February 14, 2002, pp. 6931-6933, increased to

account for 5% inflation through 2005, rounded up to the nearest $1,000.

 4. If the total income you entered in item 2 is more than the amount shown for your family unit size and residence in the

monthly Application Fee Income Exception Levels table above, you must send the $150 application fee with each

OIC you submit.

Your check or money order should be made payable to the “United States Treasury” and attached to the front of your

Form 656, Offer In Compromise. Do Not Send Cash. Send a separate application fee with each OIC; do not combine

it with any other tax payments as this may delay processing of your OIC. Your OIC will be returned to you without

further consideration if the application fee is not properly remitted, or if your check is returned for insufficient funds.

 5. If the total income you entered in item 2 is equal to or less than the amount shown for your family unit size and

residence in the table above, do not send the application fee. Sign and date Form 656-A, Income Certification for

Offer in Compromise Application Fee, on the next page. Attach the certification and this worksheet to the front of your

Form 656.
Form 656-A

Income Certification for

Offer in Compromise Application Fee

If you are not required to submit the fee based on your income level, you must complete

this form and attach both it and the worksheet to the front of your Form 656.

(You should make a copy of this certification and worksheet for your records.)

_________________________________________________________________________________________________________

Your name SSN or EIN

_________________________________________________________________________________________________________

Spouse’s name SSN or EIN

Signature Certification

I certify under penalty of perjury that I am not required to submit an offer in compromise application fee

based on my family unit size and income.

_________________________________________________________________________________________________________

Your signature Date

_________________________________________________________________________________________________________

Spouse’s signature (if submitting a joint offer) Date

NOTE: If the Internal Revenue Service determines that you were required to pay a fee, your offer in

 compromise will be returned without further consideration.

Form 656-A (Rev. 8-2003) IRS Catalog Number 28300X www.irs.gov Department of the Treasury

Internal Revenue Service