OIC Doubt as to Liability

Doubt as to Liability in an Offer in Compromise and Form 656-L

The Offer in Compromise is a tax settlement arrangement rolled out by the IRS. It is an attempt to allow both individual and business taxpayers who owe taxes but are unable to pay these fully, to come to an agreement with the IRS whereby they are allowed to pay only a part of their tax dues. However, it must be made clear in this context that the Offer is not a tax reprieve but rather is an effort to reach at a compromise that suits the interests of both the taxpayer and the IRS.

No Application Fee Required

In some instances, taxpayers may have doubts over the existence or the amount of tax debt that has been decreed under the law. They may then choose to file Form 656-L Offer in Compromise (Doubt as to Liability). Along with the form, the taxpayer also needs to submit relevant documents that support or evidence that corroborates their claims. He will also need to provide a written statement to explain why he doubts the accuracy of the debt and also quote the amount of tax debt that he believes is correct. He does not need to deposit any application fee along with the form.

Information not Taken into Account

A taxpayer may submit an offer stating doubt as to liability of the tax claims under several circumstances. For instance, he has reason to believe that the tax examiner may have erred while interpreting the lax when calculating the claims or failed to take into account the documents and evidence he had presented. He may also submit an offer for doubt as to liability when he has fresh evidence that he thinks will necessitate a modification of the assessment.

One Form at a Time

Noteworthy in this context is the fact that doubt as to liability cannot exist if the tax amount has been estimated or ruled to be final after a court decision. Also, a taxpayer cannot file both Form 656-L and Form 656 or 656-B, which is an offer based on doubt as to collectability. This is tantamount to claiming that he has doubts about the accuracy of the tax amount and also declaring that he is unable to pay the tax amount within the stipulated collection time. He should instead file Form 656-L first, that is, settle any dispute regarding the amount or the existence of the tax debt.

Increasing Your Odds

To increase the chances of the offer for doubt as to liability being accepted, it is imperative that a taxpayer hires the services of a competent and experienced tax professional to help him fill out Form 656-L and prepare the supporting documents.

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