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IRS Form 656 and 656-B Booklet

By the Tax Relief Answers editors · Sources checked November 3, 2026 · How we check

The short answer

Form 656 is the application for an offer in compromise, an agreement with the IRS that settles a tax debt for less than the full amount owed. The About Form 656 page says to download it inside the Form 656-B booklet, which also contains Forms 433-A (OIC) and 433-B (OIC). The current revision of Form 656 and the booklet is April 2026 (checked November 2026). Each application needs a $205 fee and a first payment unless you meet the low-income guidelines, and individuals can apply online through their IRS Individual Online Account.

Form 656 at a glance

Who files it

Individuals and businesses that cannot pay in full. The Form 656-B booklet says that before an offer can be considered you must have filed all required returns, received a bill for at least one debt in the offer, made the current year's estimated payments, and, if you are a business owner with employees, made the required federal tax deposits for the current and two preceding quarters. You cannot apply while in an open bankruptcy. Generally, the IRS will not accept an offer if you can pay in full through a payment plan or equity in assets.

Spouses with joint and separate debts, and people with both individual and business debts, each send separate Forms 656, and each needs its own fee and payment. If you dispute that you owe the tax at all, the form is Form 656-L, not Form 656.

Payments and fees, as listed by the IRS

The IRS offer in compromise page adds that a rejected offer's fee is not returned, payments are applied to the balance, and an application is accepted automatically if the IRS does not accept or reject it within two years (appeal time not counted).

Where and how it is submitted

Individuals can prepare the forms, make the payments and submit the offer in their Individual Online Account. Otherwise, the booklet says to mail the package to the Centralized Offer in Compromise Unit at the Memphis or Brookhaven IRS center, depending on your state, using the address on the booklet's application checklist page. The fee and first payment can be paid through EFTPS or the online account, or by separate checks or money orders payable to "United States Treasury".

Steps

1. Run the IRS Pre-Qualifier tool or check eligibility in your online account.
2. File any missing returns and make current estimated payments.
3. Download the current Form 656-B booklet, in English or Spanish.
4. Complete Form 433-A (OIC) or 433-B (OIC) with supporting documents, then Form 656.
5. Apply online, or mail the package to the address on the checklist page with the fee and first payment.

Common mistakes

• Sending Form 433-A instead of Form 433-A (OIC). The offer requires the OIC version.
• Stopping periodic payments during review. The booklet says the IRS may return the offer.
• Filing a doubt as to liability offer and an ability-to-pay offer at the same time. The booklet says not to.

More on the program: our offer in compromise page, the OIC checklist, and alternatives such as a payment plan or Currently Not Collectible status.

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