IRS Offers in Compromise – Application Fee (Part IV)

In general, a taxpayer must submit an application fee for the amount stated on Form 656. Don’t combine this fee with any other tax payments. However, there are two exceptions to this requirement:

  • First, no application fee is required if the OIC is based on doubt as to liability.
  • Second, the fee isn’t required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception. There are two alternative options for qualifying. The first is that the individual’s adjusted gross income, as determined for the most recent taxable year for which such information is available, falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. The second is that the household’s gross monthly income x 12 months falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. For both options, section 1 of Form 656 contains the Low-Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception. A taxpayer who claims the low-income exception should complete section 1 of Form 656 and check the certification box.

IRS Topic 204 (TTT 12/07/21 and 12/14/21)