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Part 5. Collecting Process

Chapter 8. Offer in Compromise

Section 3. Processability

5.8.3  Processability

5.8.3.1  (09-01-2005)
Overview

  1. All offer receipts other than those based solely upon Doubt as to Liability (DATL) are reviewed to determine if they are processable. No fee is due on Doubt as to Liability (DATL) offers, including Trust Fund Recovery Penalty (TFRP). Processable offers are then "built" (i.e. internal and external information is secured to verify financial information), and perfected, if necessary, before being assigned for investigation. Not processable offers are returned to taxpayers. This chapter defines the procedures to be followed for determining jurisdictional responsibility, processability, and case building.

5.8.3.2  (09-01-2005)
Routing Cases Based on Jurisdictional Responsibility

  1. The following table provides guidance when it has been determined that Collection does not have jurisdictional responsibility:

    If responsibility lies with… Then…
    Department of Justice (DOJ) Contact Area Counsel to determine the status of the pending bankruptcy or litigation and whether Collection has jurisdiction to process the offer. If the DOJ requests the offer be sent directly to them, delete the offer from the Automated Offer in Compromise (AOIC) system and forward the case to the DOJ.
    Examination Send the offer directly to the OIC Coordinator in Technical Support. No fee is required for these offers. Do not open a record on the AOIC system. If the record was inadvertently loaded to AOIC, delete the record.
    Appeals Determine processability, complete the AOIC " Appeals Fee Screen" and follow the established Appeals application fee procedures.

5.8.3.3  (09-01-2005)
Combined Application Fee Payment Processing

  1. Multiple offers submitted with one remittance intended as the application fees for all will not be processed. Do not load the cases to the Automated Offers in Compromise (AOIC) system. Return the offers to the submitter (i.e.- Power of Attorney not the individuals) with the Letter 3796.

5.8.3.4  (09-01-2005)
Processability

  1. Centralized Offers in Compromise (COIC) Process Examiners (PE) are responsible for determining processability of all offers received and worked by the Service, except those based solely on Doubt as to Liability (DATL) issues. This determination must be made within 14 calendar days of receipt of an offer in compromise in the appropriate COIC site.
    Each new receipt will fall into one of the following categories:

    • Not processable – the taxpayer does not meet one or more of the minimum established criteria for offer consideration.

    • Processable – The taxpayer meets the minimum criteria for offer consideration.

5.8.3.4.1  (09-01-2005)
Determining Processability

  1. An offer in compromise will be deemed not processable if one or more of the following criteria are present:

    1. Taxpayer Not in Compliance — All tax returns for which the taxpayer has a filing requirement must be filed. This rule applies even if a Service employee previously decided not to pursue the filing of the return under the provisions of Policy Statement P-5-133, because it was believed to have "little or no tax due" . In-business taxpayers must have timely deposited, filed, and paid all required employment tax returns for the two (2) preceding quarters prior to filing the offer and must be current with federal tax deposits for the quarter in which the offer was submitted. An individual taxpayer should not be considered an in-business taxpayer because he owns or controls a corporation that is not in compliance. IRM 5.8.7.6(5), Rejection, discusses the criteria for possible rejection of an offer from such an individual if a related entity is not in compliance.

      Note:

      Generally speaking, IRM 5.1.11.1.3(2), Delinquent Return Program, only requires employees to conduct a compliance check to confirm and document all IMF tax returns were filed for the preceding 6-year period. The only exception would be if fraud were discovered during the course of the investigation. Even then it should be extremely rare to go beyond 6 years.


      IRM 5.1.11.4, Cases Requiring Special Handling, discusses enforcement criteria, which states that if the taxpayer refuses to file, neglects to file, or indicates an inability to file, then the employees should determine to what extent enforcement should be used (e.g. summons, 6020(b), referral to Exam, or field, etc.). Filing requirements will normally be enforced for a 6-year period, which is calculated by starting with the tax year that is currently due and going back 6 years.

    2. Taxpayer in Bankruptcy — An offer will not be considered during a bankruptcy proceeding. See IRM 5.8.10.2, Bankruptcy.

      Note:

      IRM 25.17.4.7, Offers-in-Compromise and Bankruptcy (09–01–2004) , states that "administrative and legal problems would be created if a tax liability was simultaneously the subject of a court-supervised bankruptcy case and the administrative offer-in-compromise process." Therefore, it is the policy of IRS that an offer will not be considered if a taxpayer is in bankruptcy. Offer materials including financial information should be forwarded to the Insolvency unit assigned to the bankruptcy.

    3. Taxpayer did not submit the application fee with the offer — The application fee of $150 or the signed Form 656-A, Income Certification for Offer in Compromise Application Fee, must be submitted with each Form 656. No application fee is required for offers filed solely on the basis of Doubt as to Liability (DATL).

      Note:

      The Form 656-A applies only to individual taxpayers.

  2. No deviations from or additions to processability criteria may be made without written authorization from the Headquarters Office.

  3. An offer cannot be returned for the sole reason that the cost of an investigation may exceed the amount offered.

5.8.3.4.2  (09-01-2005)
Determining Processability for Appeals Collection Due Process Offers

  1. Apply the same processability criteria as outlined in IRM 5.8.3.4.1, Determining Processablity, but do not load these offers on the Automated Offer in Compromise (AOIC).

    Note:

    If Collection files a lien while an offer is being investigated, and the taxpayer files a Collection Due Process (CDP) request because of that lien and the CDP remains open, the offer will become the jurisdiction of Appeals. Collection cannot work any offer that has an open CDP case. Appeals may require the assistance to complete the investigation on complex cases. In those cases, an Appeal Referral Investigation (ARI) may be issued to the field.

  2. Appeals will provide Centralized Offer in Compromise (COIC) with both processable and not processable determination letters containing all necessary information, including the Appeals contact information. It is the responsibility of COIC to sign, date, and mail the applicable letter based on the processability determination.

    If… Then…
    The offer is not processable and a remittance was attached Prepare the not processable letter and the Form 656 to mail to the taxpayer in accordance with the procedures in IRM 5.8.3.5.1(5), Processing Application Fees. Fax a copy of the non-processable letter to the Appeals employee.
    The offer is not processable and no remittance was attached Prepare the not processable letter and the Form 656 to mail to the taxpayer in accordance with procedures in IRM 5.8.3.5.1(5), Processing Application Fees.
    If the offer is processable and a remittance is attached

    • Access the "Appeals Fee Screen" application of AOIC and input the fee data.

    • Write the application fee serial number on the upper left corner of the remittance.

    • Prepare the Form 13479, COIC Application Fee Tracking Report, in accordance with IRM 5.8.3.5.1(3).

    • Mail the processability letter to the taxpayer.

    • Send a copy of the letter and the offer package to the designated Appeals employee on a Form 3210, Document Transmittal.

    If the offer is processable and no remittance is attached

    • Mail the processability letter to the taxpayer.

    • Send a copy of the letter and the offer package to the designated Appeals employee on Form 3210, Document Transmittal.

  3. Offers submitted directly to the Compliance employee, are occasionally identified as having an open Collection Due Process (CDP) control. When this occurs, the Centralized Offer in Compromise (COIC) site CDP coordinator will research the Appeals Centralized database System (ACDS) to determine:

    • If the CDP is still open, and

    • If a determination letter has been issued.

    If ACDS research indicates that there is an open CDP, contact the assigned Appeals/Settlement Officer (AO/SO) to determine the status of the CDP hearing.

    Note:

    If the CDP determination letter has not been issued or a withdrawal has not been signed and dated, the offer is considered to still be open and under the jurisdiction of Appeals.

    If… Then…
    It is determined that the case is under appeals jurisdiction and the CDP condition is identified while the offer is still in "U" (undetermined) status on AOIC

    • The COIC site CDP coordinator will advise the AO/SO of the processability determination.

    • The AO/SO will generate and transmit via encrypted E-mail to the COIC site CDP coordinator the appropriate appeals processable and not processable letters.

    • The COIC site will delete the offer record from AOIC and load the fee information to the Appeals application fee screen of AOIC.

    • The COIC site will follow the procedures in IRM 5.8.3.4.2(2) to process the letter and application fee.

    • COIC will:
      (1) Change the offer number on the Form 13479, COIC Application Fee Tracking Report, to the Appeals application fee serial number.
      (2) Contact Receipt & Control or the mail team to change the number on the corresponding remittance.

    It is determined that the case is under Appeals jurisdiction but the CDP condition is identified after the offer has already been deemed processable by COIC

    • COIC will:
      (1) Delete the offer record from AOIC.
      (2) Load the fee information to the Appeals application fee screen on AOIC.

  4. When an offer is received in conjunction with a CDP and is deemed to be processable, the COIC site will input the Transaction Code (TC) 480 on all tax periods relating to the offer submission. This includes the input of a TC 480 on all balance due periods not specifically listed on the Form 656. It will be the responsibility of Appeals to perfect the offer document.
    COIC will advise the Appeals/Settlement Officer (AO/SO) when it is necessary for the Appeals employee to secure additional Form(s) 656 and/or application fee(s) prior to investigation by generating the letter identifying " Option Y" criteria. See IRM 5.8.3.7, Forms 656 Application Fee Requirements and Perfection, for examples of these situations. The COIC site will prepare the Form 3210, Document Transmittal, for transmittal of the processable offer back to Appeals. The Form 3210 will include the following information:

    • List the specific periods with the TC 480.

    • Identify an "Option Y" condition.

    Note:

    It will be the responsibility of Appeals to resolve each TC 480 (e.g., input of TC 481, 482, 483) after Appeals concludes the offer investigation.

5.8.3.4.3  (09-01-2005)
Exception Processing for Offers in Compromise Investigations Involving Taxpayers in Combat Zones

  1. The following procedures are instructions on handling those taxpayers identified as being located in a "Combat Zone" (CZ) area. This determination should be based on correspondence, case history entries, or telephone contact. Relief provisions for extensions of deadlines are provided to taxpayers located in the designated CZ areas; such as, a contingency operation designated by the Department of Defense (DOD), a qualified hazardous duty area as defined by Congress, or direct support of military operations in a combat zone certified by the DOD. The relief provisions are also applicable to any support personnel on official duty in the CZ; such as, Merchant Marines serving aboard vessels under the operational control of the DOD, Red Cross personnel, accredited corespondents, and civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces.

  2. Offers that are received and deemed not processable should be worked following standard procedures. If any of the following situations exist, exception processing should be followed:

    • Offers that are received and deemed processable;

    • Offers in which a Combo Letter was issued and Combat Zone notification is received after the letter was issued;

    • Offers in which a determination was made to accept, return, or reject the offer; or

    • Offers in which a Return or Rejection Letter was issued prior to the CZ notification.

  3. In all of the situations identified in IRM 5.8.3.4.3(2) above, the following actions should be taken:

    • Prepare the Form 3244, Payment Posting Voucher , or Form 4844, Request for Terminal Action , requesting input of Transaction Code (TC) 500 Closing Code (CC) 56 on the taxpayers account. Use the current date for the incoming call or the IRS received date for the correspondence. The case should be suspended for 120 calendar days without taking any further action and should be reassigned on the Automated Offers in Compromise (AOIC) system to a designated or locally designated assignment number. Management should utilize the AOIC Follow-up Screen to monitor the progress on the case until the TC 500 is reversed.

    • The offer investigation may continue if there is a Power of Attorney or in the case of a joint offer, the spouse is able and willing to provide all substantiation.

  4. The Service established an E-mail site at combatzone@irs.gov , which can be used by military personnel, support personnel, and their families to contact the IRS.

5.8.3.5  (09-01-2005)
Processing Application Fees

  1. The following situations assume that the taxpayer has met the processability criteria for compliance and the Form 656, Offer in Compromise, and Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B, Collection Information Statement for Business , as appropriate, were submitted:

    If you receive a… Then…
    Processable Form 656 and the $150 application fee Complete the AOIC Application Fee screen and Form 13479, COIC Application Fee Tracking Report, as described in IRM 5.8.3.5.1 below.
    Processable Form 656 with a signed Form 656-A certification (instead of the $150 fee) Complete the AOIC Application Fee screen and input "LI" in the "Waiver Criteria" field.
    Processable Form 656 from an individual taxpayer with both a $150 application fee and a signed Form 656-A certification Complete the AOIC "Application Fee" screen and the Form 13479, COIC Application Fee Tracking Report, to treat the $150 as the application fee.
    DATL offer for a TFRP only liability with a separate application fee Return the $150 fee using combo letter "A" and optional combo letter paragraph "AM" .
    DATL offer for a TFRP only liability with a single remittance that represents both an application fee and a deposit Apply the entire amount as a deposit to the offer. Complete the Form 13479, COIC Application Fee Tracking Report, as described in IRM 5.8.3.5.1 below.
    Processable offer and one undesignated remittance greater than the $150 and there was no indication how to apply the funds. (i.e., TP did not specify where the money was to be applied). Treat $150 of the remittance as the application fee and apply the balance as a deposit to the offer. Complete the Form 13479, COIC Application Fee Tracking Report, as described in IRM 5.8.3.5.1 below.

5.8.3.5.1  (09-01-2005)
Completing the Form 13479, COIC Application Fee Tracking Report

  1. Offers with remittances will be batched with the Form 13479, COIC Application Fee Tracking Report, for processability determinations. Each separate remittance will appear on its own line of the Form 13479. Offers submitted with separate remittances for the application fee and a deposit will have entries on two lines, while an offer submitted with a single remittance that combines the application fee and deposit will have only one entry. Batch integrity must be maintained throughout the processability determination.

    • Cases with deposits and/or tax payments must have a processability determination made and the remittance deposited within 48 hours of the IRS receipt date (unless "misdirected" ).

    • Those offers received with application fees only must have a processability determination made within 14 calendar days of the IRS receipt date.

    Upon assignment to the Process Examiner (PE), the manager will ensure that the "PE Received Date" and " PE COIC #" fields on the Form 13479 are accurately completed.

  2. The last four (4) columns of the Form 13479 are used to document the decision to process or return the remittance. They are:

    • "Deposit 4710/3244 Amt."

    • "Application Fee Amt."

    • "Return Non-Negotiable"

    • "Return Negotiable"

  3. Form 13479 should be completed as follows:

    If Processable, and… Then…
    An Application Fee was submitted Enter $150 in the "Application Fee Amt." column.
    An offer deposit was submitted Enter the amount of the deposit in the "Deposit 4710/3244 Amt" column and prepare the Form 2515, Record of Offer in Compromise.
    A tax payment (e.g., installment agreement (IA) payment, estimated tax (ES) payment) was submitted Prepare the Form 3244, Payment Posting Voucher, for the amount and application of the payment and enter the amount in the "Deposit 4710/3244 Amt. " column.

  4. If the offer has one remittance for any combination of the above three payments enter the appropriate amounts in the respective columns and ensure the amounts entered equal the "Check Amount" column.

  5. If the offer is not processable take one of the following actions based on the type of remittance received:

    If Not Processable, and… Prepare the offer package to be returned and…
    There is an application fee or deposit to be returned to the taxpayer with the Not Processable Return letter

    1. Date and sign the Return letter,

    2. Put the offer package and the letter in an addressed envelope to be returned to the taxpayer. Do not seal the envelope.

    3. Close the offer with a disposition code "10" on AOIC.

      Note:

      This procedure does not apply to Appeals Collection Due Process (CDP) offers.

    4. Annotate the amount of the remittance under the"Return Negotiable " or "Return Non-Negotiable" column, as appropriate, to indicate that the remittance is to be sent back to the taxpayer.

    A separate tax payment (e.g., IA or ES payment) was submitted

    1. Prepare the Form 3244, Payment Posting Voucher , for the amount and application of the payment,

    2. Enter the amount of the payment in the "Deposit 4710/3244 Amt." column.

    One remittance was submitted that combined any tax payment (e.g., IA or ES payment) with an application fee or deposit amount

    1. Apply the entire remittance as the tax payment by preparing a Form 3244 and enter that amount in the "Deposit 4710/3244 Amt." column.

  6. Processability determinations must be made for all offers listed on the Form 13479 before returning it to Receipt and Control for processing of the remittances. When all of the determinations have been made and the Form 13479 is complete, send the original with all Forms 2515, 3244, letters, and envelopes to Receipt & Control for processing of the checks. Acknowledgement of the receipt of the Form 13479 must be secured from the Receipt and Control/mail team employee by having them place their initials in the upper right hand corner of the Form 13479.

    • Personal checks will be stamped non-negotiable and enclosed in the return offer package to the taxpayer.

    • It is the responsibility of Receipt and Control to return all " negotiable" remittances back to the taxpayer in accordance with Receipt and Control procedures.

5.8.3.6  (09-01-2005)
Dishonored Application Fee Payments

  1. Accounting Branch will hand carry or fax copies of dishonored application fee checks to the Centralized Offer in Compromise (COIC) site that originated the Form 13479, COIC Application Fee Tracking Report . Upon notification of a dishonored application fee payment, the site will determine the current Automated Offer in Compromise (AOIC) offer assignment by querying the offer number annotated on the upper left hand corner of the check. For Appeals Collection Due Process offers, see IRM 5.8.3.6.1(3), below.

    Note:

    Due to AOIC programming, only the assigned office can gain access to the "Action Cd" field of the "Application Fee" screen to input the dishonored check status.

5.8.3.6.1  (09-01-2005)
Centralized Offer in Compromise Procedures

  1. If the offer is still assigned to a Centralized Offer in Compromise (COIC) site, COIC will immediately cease processing the associated offer, update the Automated Offer in Compromise (AOIC) "Application Fee" screen by entering "I" in the " Action Cd" field and return it to the taxpayer, utilizing letter option "RET-AA" .

  2. If the offer is assigned to an Area office, COIC will telephone the employee assigned the offer (or the manager of the assigned function, if no individual is specified on AOIC) to advise of the dishonored payment. Once contact is made with the assigned area office employee or manager, COIC will fax a copy of the dishonored check to include in the case file and document AOIC to indicate the information was communicated and to whom.

  3. If the case was processed as an Appeals Collection Due Process (CDP) offer, COIC should query the Appeals Centralized Database System (ACDS) to determine which Appeals employee is assigned the case. COIC will telephone the Appeals employee to advise of the dishonored check and fax a copy to include in the Appeals case file. COIC will update the "Appeals Fee Screen" application of AOIC by entering "I" in the "Action Cd" field.

    Note:

    Appeals Collection due Process (CDP) cases can be identified by the application fee number annotated on the upper left corner of the check.

  4. If notification of the dishonored check occurs after the offer was closed on Automated Offer in Compromise (AOIC), the designated AOIC liaison within the COIC site, will contact the Headquarters AOIC analyst to correct the application fee record of the closed offer.

5.8.3.6.2  (09-01-2005)
Area Office Procedures

  1. Upon notification by the Centralized Offer in Compromise (COIC) site of a dishonored fee payment, the Offer Specialist (OS) (or manager of the assignment function, if the offer is not assigned to an individual) will immediately:

    • Cease processing of the associated offer.

    • Update the AOIC Application Fee screen by entering "I" in the "Action Cd" field

    • Return the offer to the taxpayer utilizing letter option " RET-AA" .

5.8.3.6.3  (09-01-2005)
Notification of Dishonored Application Fee Check After Issuance of the Rejection Letter

  1. If notification of the dishonored OIC application fee check occurred after issuance of a rejection letter, in addition to procedures in IRM 5.8.3.6.1 and 5.8.3.6.2 above, the employee should:

    • Date the return letter 31 days from the date of the rejection letter.

    • Include the open paragraph "RET-M" with the following language: "As a result, your request for appeal has been dismissed. "

      Note:

      This should only be used in those cases where a request for an Appeal was received within the 30-day appeal period.

    • Close the case on AOIC as a return using the mail date of the return letter and AOIC final disposition code "10."

5.8.3.7  (09-01-2005)
Forms 656 Application Fee Requirements and Perfection

  1. Treasury Regulations §300.3 requires taxpayers to submit one fee for each Form 656, Offer in Compromise, received, if no Form 656–A, Income Certification for Offer in Compromise Application Fee, was submitted.
    The table below is intended to assist in identifying a processable offer for application fee purposes and provide guidance to advise the taxpayer when more than one Form 656, application fee, and/or Form 656-A should be submitted. In the following scenarios the status of the taxpayer is not relevant (e.g. married, separated or divorced). The general rule is that there should only be as many Forms 656 as there are entities seeking to compromise. The following scenarios assume all processability criteria (other than for the application fee) are met.

    Scenario Procedures
    1) Two TPs have joint liabilities only. The TPs jointly submit one Form 656 and one $150 application fee. One offer was submitted therefore one fee is required.
    2) Two TPs have joint liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Two offers were submitted; therefore, two fees are required.
    The Process Examiner (PE) must secure a copy of the remittance to make the appropriate determination as indicated below.

    • If it can be determined which TP paid the application fee (i.e., a personal check drawn on the account of one of the taxpayers), the offer from the TP that paid the fee is processable. The second offer should be returned as not processable because the TP did not submit the required processing fee.

    • If each TP contributed a portion of the $150 fee (e.g., each submitted a personal check for $75), then neither TP has paid the appropriate fee and both offers should be returned as not processable.

    • If it cannot be determined which TP paid the application fee treat it as though half were submitted by each individual. Return both offers as not processable, enclose the fee payment with the not processable return letter addressing it to the party with the primary SSN on the liability.

    3) Two TPs have separate liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Same as Scenario 2
    4) Two TPs have joint liabilities and one or both of the TPs also have separate liabilities. The TPs submit one Form 656 listing both the joint and separate liabilities and only one $150 application fee without a signed Form 656-A. Although it is the policy of the Service to require separate offers when TPs have both joint and separate liabilities, the offer submitted in this scenario is processable. However, the Service can require the TP to perfect the original offer by submitting a new offer to separate the liabilities. In this instance, the new offer will require a second fee.
    When requesting the perfection of an offer that requires the submission of a second offer, send the TPs two Forms 656:

    • Prepare an "amended/revised" Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual with the primary SSN on the joint liability. Include both joint and separate liabilities in item 5. Note the original offer number on the top of the "Amended/Revised" Form 656.

    • Prepare a second Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual with the secondary SSN on the joint liability. Include both joint and separate liabilities in item 5. Annotate the top of the Form 656 in red "Related to Offer Number ________" , inserting the number of the original offer. This will help identify that the offer submitted is in response to a perfection request.

      Note:

      Clerical units should be aware that new offers received in the PO Box designated for response correspondence must keep all correspondence and attachments associated with the offer to assist in the identification of the related offer.

    • Include Option "Y" in the combo letter:

    • Include Form 656-A and the a copy of the original Form 656 with the combo letter

    If the TPs refuse to perfect the offer, the Service will return the offer without any further consideration.
    5) One Form 656 is submitted that includes both corporation or partnership and individual liabilities, but only one $150 application fee without a signed Form 656-A for the individual. Follow the procedures outlined in Scenario 4 above.
    6) Two taxpayers have joint liabilities and either or both of the taxpayers also have separate liabilities. The taxpayers submit two Forms 656, listing the joint liability on one and the separate liability on the other, but only one $150 application fee. Since the taxpayers submitted two offers, they require two fees. Only load the joint Form 656, treating it as processable and including the separate liabilities on the MFT screen. Follow procedures in Scenario 4 above.

5.8.3.8  (09-01-2005)
Centralized Offers in Compromise Processability Determinations

  1. Centralized Offer in Compromise (COIC) sites determine offer processability. To accomplish this Process Examiners (PE) must take the following actions:

    1. Check IDRS to determine if the taxpayer is currently in compliance or is in bankruptcy.
      • This includes checking all Social Security Numbers (SSN), Employer Identification Numbers (EIN), and Individual Taxpayer Identification Numbers (ITINs) known or found for the taxpayer. At a minimum check the following IDRS command codes: ENMOD, INOLES, CFINK, BMFOLI, SUMRY, IMFOLI. If any data is found, print and include it in the file. Also, research IDRS command codes TXMOD and FFINQ for additional data, but it is not necessary to include printed copies in the file.
      • Research the Master File to determine if the taxpayer has any unfiled tax returns. Review the offer package to determine if documentation submitted by the taxpayer or another Service employee indicates that the taxpayer has recently filed or was not required to file any delinquent returns. A delinquency check notification or taxpayer delinquency investigation (TDI) does not have to exist to determine if a taxpayer has unfiled delinquent returns.

      Note:

      If a delinquent return was recently filed and has not yet posted to IDRS, a copy of the return is sufficient verification of compliance.

    2. Check for any freeze codes such as: -Y, -W, -Z, -A, -V, -L that may require special action. Refer to local guidelines.

    3. Verify that the taxpayer has submitted the appropriate Form 656, Offer in Compromise, Form 433–A, Collection Information Statement for Wage Earners and Self-Employed Individuals , and/or Form 433-B, Collection Information for Businesses.

    4. Verify that the taxpayer has submitted the application fee (or signed Form 656-A, Income Certification for Offer in Compromise Application Fee) for each offer submitted.

    5. During the internal analysis, AOIC should be documented of any findings.

  2. Review Automated Offer in Compromise (AOIC) and the history for any previous offers to determine if the offer was submitted "solely to delay collection." See IRM 5.8.3.19, Offers Submitted Solely to Delay Collection.

5.8.3.9  (09-01-2005)
Not Processable

  1. When returning the offer as not processable, the return letter will specify all reasons for the determination.

  2. If the offer is not processable:

    1. Stamp the Form 656 "RETURN" in red (or circle the date in red if a red ink stamp is not available) and write the date that the offer was determined to be not processable.

    2. Cross out all IRS received dates with a red"X."

    3. Prepare the return letter with all applicable reason code paragraphs.

    4. In addition to identifying all of the reasons for the determination, also address the issue of the combined joint and separate liabilities, if appropriate. For example, individual and corporate or partnership liabilities on one Form 656. In those cases, include Option "Y" in the return letter.

    5. Complete the Form 13479, COIC Application Fee Tracking Report, if applicable.

    6. Update the history specifying the reason(s) for the not processable determination.

    7. Do not sign the Form 656 as pending.

    8. Update AOIC "Proc Cd" field to "N" (not processable).

    9. Managers and journey level Process Examiners (PE) may sign and date the letter and close the case on AOIC.

    10. Send the Form 656, the Return letter, Publication 1 and Publication 594 to the taxpayer along with all other documents originally sent. If a Power of Attorney (POA) is present, send the representative a copy of the letter. If disclosure issues exist, use the appropriate paragraph to indicate this in the return letter, and do not send a copy to the representative.

    11. If a Form 656 was forwarded by a Revenue Officer (RO) and is not processable, the COIC site should also forward the Form 657 and a copy of the " not processable" letter to the approving official of the Form 657.

  3. Caution should be exercised to ensure that no IDRS prints or other internally generated documents are sent to either the taxpayer or the Power of Attorney (POA). All internal documents should be destroyed. Nothing is required to be maintained in local closed files on these cases.

  4. If the offer was originally determined processable and the application fee was deposited, but it was later concluded that this determination was made in error, processing should stop. The case should be closed using not processable procedures defined above. In these cases, it is important to ensure the "N" (not processable) is input on AOIC to reverse the Transaction Code (TC) 480(s). This will result in the generation of a TC 483 posting to the appropriate modules, and a refund of the $150 application fee.

5.8.3.10  (09-01-2005)
Processable

  1. An offer is considered pending when a delegated IRS official signs and dates the Form 656, Offer in Compromise, in the appropriate section. This date is the official offer pending date.

    Note:

    The pending date entered on AOIC must match the date the delegated official signed the Form 656. This date must also match the Transaction Code (TC) 480 date when it posts to IDRS.

  2. If the offer is processable:

    1. Sign and date the waiver on Form 656 (item 11).

    2. Change the "Proc Cd" to a "Y" (processable).

    3. Complete the AOIC Application Fee Screen.

    4. Complete the MFT and "Terms" screen on AOIC.

      Note:

      If tax periods are in status 60, 61, or 53 (except for those status 53 modules with Closing Code "03" [unable to locate] or Closing Code "12" [unable to contact]) remove the "Y" on each tax period on the MFT screen. DO NOT change the status of those accounts, unless the taxpayer has defaulted the installment agreement.

    5. On all IMF cases enter "P" if the offer is for the primary taxpayer or the controlling taxpayer identification number (TIN) on the entity, enter"S" if the offer is for the secondary taxpayer , or enter "B" if both husband and wife are making a joint offer.

      Note:

      If only one party of a joint liability is submitting the offer, remove the "Y" from the MFT screen. This will