Offer in compromise package checklist
Client: [Client name] TIN: [SSN or EIN] Prepared by: [Name] Date: [Date]
A. Eligibility (confirm before preparing)
- All legally required tax returns filed. [Note any return filed within the last 10 weeks; include a complete copy]
- A bill received for at least one tax debt included on the offer.
- Current year estimated tax payments made.
- For employers: federal tax deposits made for the current quarter and the two preceding quarters.
- No open bankruptcy proceeding.
- Open audit and innocent spouse claims resolved.
- No expired or deactivated ITIN.
- Business with trust fund taxes: trust fund portion paid or TFRP determinations made on all responsible parties [or payroll service provider fraud exception applies].
- No other open offer covering the same liability. Not submitting a doubt as to liability offer at the same time.
B. Forms
- Form 656, all fields complete, payment option selected, signed. [Separate Form 656 for business and individual debts; separate forms for spouses with separate debts]
- Form 433-A (OIC), complete and signed, if applicable.
- Form 433-B (OIC), complete and signed, if applicable.
- Offer amount equals or exceeds the amount calculated on Form 433-A (OIC) or 433-B (OIC), or special circumstances are explained in Form 656, Section 3, with documentation.
- Low-income certification box checked, if the client qualifies.
C. Supporting documentation
- Photocopies of all required supporting documents listed on Forms 433-A (OIC) / 433-B (OIC). [List: pay stubs, bank statements, investment and retirement statements, loan statements, vehicle and real estate values, expense support]
- Form 2848 (representation) or Form 8821 (information only), covering the current tax year.
- Letters testamentary or other proof of authority, for an estate or deceased taxpayer.
D. Payments [Skip if low-income certification applies]
- $205 application fee: paid through EFTPS / Individual Online Account on [date], or separate check payable to "United States Treasury."
- Initial payment: [20% of offer (lump sum) / first monthly payment (periodic)] paid on [date], or separate check payable to "United States Treasury."
- Periodic offers: monthly payments calendared for the entire investigation period.
E. Submission
- Application Checklist from Form 656-B included.
- Mailed to [Memphis IRS Center COIC Unit / Brookhaven IRS Center COIC Unit] on [date] by [method and tracking number], or submitted through the Individual Online Account (do not also mail).
- Revenue officer notified, if assigned: [name, date].
- Complete copy of package retained.
F. After submission
- Response dates for IRS information requests calendared.
- Client reminded to file and pay all returns and estimated taxes while the offer is pending and for five years after acceptance.
When to use it
Use this checklist for doubt as to collectibility and effective tax administration offers on Form 656. A doubt as to liability offer uses Form 656-L, and the booklet says: “Do not submit both an offer under Doubt as to Liability and an offer under Doubt as to Collectibility or Effective Tax Administration at the same time.” Before building the package, estimate the minimum offer with the reasonable collection potential calculator; the booklet says the offer amount “must be equal to or greater than the amount calculated” on Form 433-A (OIC) or 433-B (OIC) unless special circumstances are explained.
Eligibility and processability
The booklet lists four conditions before an offer can be considered: all required returns filed, a bill received for at least one debt on the offer, current year estimated payments made, and, for employers, deposits for the current quarter and the two preceding quarters. It also bars offers during an open bankruptcy, asks that open audits and innocent spouse claims be resolved first, and will not consider an offer with a deactivated ITIN.
The Centralized Offer in Compromise (COIC) sites then decide processability under IRM 5.8.2.4.1. What happens to the money depends on the reason:
| Not processable because | Application fee | Initial payment |
|---|---|---|
| Bankruptcy; liabilities referred to DOJ; no liabilities due; all CSEDs expired; only unassessed liabilities | Returned | Returned |
| Unfiled returns; FTD noncompliance; missing fee or missing payment without low-income certification; same liability in an open offer | Returned | Applied to the liability |
Two details from the IRM are worth knowing. Estimated tax: “The offer will not be returned during processability due to lack of ES payments”; they are requested later, during case building. Deposits: “Effective with the Form 656 revision on 4/2022, deposits will no longer be accepted and will be returned to the taxpayer.” Do not label any payment a deposit.
Fees and payment options
For offers submitted on the Rev. 4-2026 booklet, the application fee is $205 per Form 656. Each Form 656 needs its own fee and initial payment, so a client with individual and business debts, or spouses with separate debts, pays more than once. Qualifying individuals under the low-income certification pay neither the fee nor the initial or monthly payments while the offer is pending.
| Option | With the offer | Balance |
|---|---|---|
| Lump sum | 20% of the total offer amount | 5 or fewer payments within 5 or fewer months of acceptance |
| Periodic payment | First proposed payment | Monthly within 6 to 24 months; keep paying during the investigation |
Pay electronically through EFTPS or the Individual Online Account, or by check. The booklet says to “Provide a separate personal check, cashier’s check, or money order for each fee and offer payment you submit.” On periodic offers, missed monthly payments during the review can cause the IRS to return the offer, and that decision cannot be appealed.
Where to send it
| Client resides in | Mail to |
|---|---|
| AL, AZ, CA, CO, GA, HI, ID, KY, LA, MD, MS, ND, NM, NV, OK, OR, SD, TN, TX, UT, VA, WA | Memphis IRS Center COIC Unit, P.O. Box 30803, AMC, Memphis, TN 38130-0803 |
| AK, AR, CT, DC, DE, FL, IA, IL, IN, KS, MA, ME, MI, MN, MO, MT, NC, NE, NH, NJ, NY, OH, PA, PR, RI, SC, VT, WI, WV, WY, or a foreign address | Brookhaven IRS Center COIC Unit, P.O. Box 9007, Holtsville, NY 11742-9007 |
Individuals can submit through the Individual Online Account instead. The booklet: “If you already submitted your application online, do not mail a duplicate application to the IRS.” If a revenue officer is assigned, the booklet asks you to let them know an offer is being sent. See working with revenue officers.
After submission
The booklet warns: “Failure to reply timely will result in the return of your offer without appeal rights.” It also says “You do not have the right to appeal if the IRS returns your offer,” while a rejection can be appealed. Penalties and interest keep accruing, refunds for periods before acceptance can be offset, and the client must stay current on filing and payment through the fifth year after acceptance or the offer can be defaulted. For how a pending offer interacts with collection timing, see collection statute expiration.
Mistakes
- Submitting while a required return is unfiled, which costs the initial payment.
- One check for the fee and the payment combined.
- Combining business and individual debts on one Form 656.
- Omitting a copy of a return filed in the last 10 weeks, which the booklet’s checklist asks for: “Did you include a complete copy of any tax return filed within 10 weeks of this offer submission”.
- A Form 2848 that does not include the current tax year.
Questions practitioners ask
Is the $205 fee refundable?
It is returned in the not-processable situations in IRM 5.8.2.4.1. Otherwise it is part of the application.
Does a CDP hearing offer follow the same rules?
IRM 5.8.2.12 covers processability for offers raised in Appeals CDP cases. The package contents are the same Form 656 and financial statements.
Can the offer be paid from a tax refund?
No. The booklet says the offer cannot be paid with an expected or current refund, money already paid, funds attached by collection action, or anticipated benefits from a capital or net operating loss.
Can an LLC owner file one offer for the LLC and personal debts?
No. The booklet requires separate Forms 656 for individual and business debt, and says a partner may not compromise an individual share of partnership debt.
Will the IRS levy while the offer is pending?
The booklet notes the IRS may keep levy proceeds received before the offer is acknowledged as pending. See levies for the general rules.