Offer in Compromise

• 1). Download Form 656 from the IRS website. Fill out the form with your name, address and Social Security number. Under "Section II" check the appropriate box for the back taxes type, such as "1040/1120 Income Tax." Next to the box, indicate the years of the back taxes.
  
  
• 2). Complete Section III by checking either the box for "Doubt as to Collectibility" or "Effective Tax Administration." The first box indicates an inability on your part to satisfy the back taxes due to your lack of income and assets. The second choice refers to exceptional circumstances that would make payment of all of the back taxes an economic hardship, unfair and inequitable. If you choose the second box you must also complete IRS Form 433-A and/or Form 433-B, which are available from the IRS website.
  
  
• 3). Complete Section IV of the form. Fill in the blanks indicating how much you wish to pay on the back taxes. Choose either a lump sum payment and/or installment payments. You may also make a deferred periodic payment, through which the first installment payment is not due for a set period of time. You may also indicate to the tax year to which you want a payment applied. Otherwise the payment will be credited at the discretion of the IRS.
  
  
• 4). Complete Section VI. Use the blank space to explain the circumstances that you believe merit reduction of the amount owed, such as your lack of income and assets. Attach supporting documents. Complete Section VII, indicating the source of the funds to pay the IRS. Sign and transmit the form to the IRS for processing.
  
  

Payment Plan

• 1). Contact the IRS at 1-800-829-1040 for assistance from an agent to discuss a payment plan for your back taxes. Alternatively, visit your local IRS office to speak to an agent in person. You may find the nearest office on the IRS website.
  
  
• 2). Ask the IRS agent whether you need to complete Form 433-F, which may be required if you owe more than $25,000. If you owe less than $25,000, you may use the Online Payment Agreement Application instead of a paper Form 9465.
  
  
• 3). Complete Form 9465 to request a payment plan. Provide your name, address, Social Security number and the amount of tax you owe. Indicate the amount you wish to pay each month. Sign and date the form. Mail the completed form to the IRS. The appropriate mailing address may be found on the Form 9465. Note that the mailing address varies based upon your state of residence.