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Part 5. Collecting Process

Chapter 13. Collection Quality Measurement

Section 5. Offer In Compromise/Collection Quality Measurement System Reviewer's Requirements

5.13.5  Offer In Compromise/Collection Quality Measurement System Reviewer's Requirements

5.13.5.1  (05-31-2005)
CQMS Reviewer Guidelines

  1. This chapter contains guidelines and procedures for Reviewers to follow when reviewing CQMS cases. The guidelines are based on established procedures and must be followed when reviewing closed Offer in Compromise cases for use in the Collection Quality Measurement System.

  2. Under this system Reviewers are given some latitude in using their professional judgement. When a unique situation exists in a case that is not specifically addressed in this handbook, Reviewers must use their judgement to assess the action in the context of the standard that they are measuring. This judgement is expected to be consistent with guidance provided in this handbook as well as current IRS regulations, procedures and policies. In reviewing the exercise of judgement in taking action in the case, the Reviewer will consider only the facts and circumstances of the case. The Reviewer must make a notation, in the comment field of the review, for all standards that are rated "Not Met" .

  3. This chapter is intended to aid the Reviewers in conducting CQMS reviews. The contents of this chapter must not be cited as authority for taking actions in an offer investigation. The case actions can only be based on official procedural guidelines.

5.13.5.2  (05-31-2005)
CQMS Data Input Requirements

  1. CQMS Reviewers document their reviews of closed offer cases on an automated check sheet. This chapter is for their use in the review of CQMS cases and input of the data to the check sheet.

    1. Reviewer ID: Enter CQMS Revenue Officer Reviewer identification number.

    2. CQMS Receipt Date: Enter the date the case was received by CQMS.

      Note:

      This will be the date stamped on the AOIC pullsheet or the received date listed on the Performance Measurement Compliance (PMC) identification and closure sheet.

    3. Reviewer Received Date: Enter the date the case was received by the Reviewer.

    4. Review Date: The date the case was reviewed by the Reviewer is automatically generated by the program. If this date needs to be changed, (i.e., actual review date is not the same as what the computer generated), then the Reviewer has one opportunity to change this date at the end of the case review.

    5. Area Office Number: Enter the zip code found on the AOIC sample sheet, which will default to the correct Area and Territory office number. If the defaulted Area and Territory on the computer differ from that on the AOIC sample sheet attached to the case file, change the Area and/or Territory on the electronic checksheet to match the AOIC sample sheet.

    6. Taxpayer Identification Number: Enter the nine digit taxpayer identification number. (The ID number listed on the sampling pullsheet).

    7. Disposition Type: A code from the following table will be used to record the case disposition type. Also, a reason code will be selected if the case is non-reviewable.

      Disposition Codes Disposition Type
      01 Acceptance
      05 Rejection
      06 Withdrawal
      10 Return
      11 Non-Reviewable

      Non-Reviewable Reason Codes Non-Reviewable Type Description
      01 Appeals Cases Any case resolved by Appeals Division
      02 90 Days Cases closed in excess of 90 days.
      03 Open Cases still in progress
      04 Returns Offers returned to taxpayers prior to assignment.
      05 Terminations Any offer terminated due to the death of the taxpayer.
      06 Offer on Offer Compromise on an existing compromise
      07 Other Other reasons for Non-review

    8. OIC Received Date: Enter the "IRS Received Date" from the AOIC sample sheet. This date should be the earliest date stamped on the Form 656.

    9. Date of First Contact: Enter the first contact with the taxpayer or POA. First contact may be by correspondence from COIC (e.g. perfection letter/additional information letter), in person, or by telephone.

    10. Date Offer Assigned for Investigation: Enter the date that the case was assigned to the Offer Specialist for investigation as noted in the ICS or case history.

    11. Date Case Closed: Enter the "AO Closed DT" from the AOIC System.

    12. Date Forwarded to District/Area Counsel: Enter the date offer was assigned to District/Area Counsel (assignment code 8000) from assignment history on AOIC.

      Note:

      This date is normally obtained from the AOIC sample sheet " Sent Cnsl" field. If the case was reviewed by Counsel and there is no date in this field, use the date the Form 7249 was signed by the manager as the date sent to Counsel.

    13. Date Returned from District/Area Counsel: Enter the date the offer was reassigned to the District/Area Office from the assignment history on AOIC.

      Note:

      If no Return Cnsl: date is in the field on the AOIC sample sheet, use the date Counsel signed the Form 7249.

    14. ETA Offer: This entry will determine if the offer review will include Category 10, Effective Tax Administration (ETA) and Doubt and to Collectibility Special Circumstances (DCSC) Offers. The Reviewer will enter a "Y" if the offer was closed under the basis of ETA. All others cases will receive an "N " . Review Form 656 for an explanation of the ETA circumstances. Ensure the type of information submitted substantiates the basis of the ETA/DCSC. If the case was closed as a rejection or withdrawn, based on the information submitted, then measure the standard as "Yes" .

5.13.5.3  (05-31-2005)
Category One: Observation of Taxpayer Rights

  1. Four standards in the CQMS review fall within this category. Item 15 and 18 are scored as critical.

5.13.5.3.1  (05-31-2005)
Item 15: Was the Taxpayer's Right to Fair and Courteous Treatment Observed?

  1. Definition: All taxpayers must be treated fairly and in a courteous manner. Since behavior is not normally evident from a case file, the Reviewer will assume that fair and courteous treatment was provided unless there are indicators in the file to the contrary. Such indicators might include use of profanity, disparaging comments or inappropriate descriptions of taxpayers.

  2. This item will be applicable in all cases.

  3. Reviewers should report flagrant disregard of this taxpayer right to their supervisor for referral back to the originating Area office. Form 5942, Reviewer's Report, is required to be completed when this standard is measured "Not Met" .

5.13.5.3.2  (05-31-2005)
Item 16: Was the Taxpayer ever provided Publication 1?

  1. The case history should document that the taxpayer/power of attorney was provided Publication 1. This case action can be documented using the ICS Taxpayer Contact Pick List.

  2. This standard will be considered " Met" if the Publication 1 was provided prior to the offer investigation.

5.13.5.3.3  (05-31-2005)
Item 17: Was Receipt of Publication 1 verified?

  1. Definition: When personal contact is made with the taxpayer/POA, the investigating employee must verify whether the taxpayer/POA received the Publication 1 and address any questions.

    1. At first personal contact (via phone or face-to-face contact), with the taxpayer/ POA, the investigating employee must determine whether the taxpayer received Publication 1. If not, the investigating employee must provide a copy to the taxpayer (mailed after phone interview). The case history must be documented that the taxpayer's questions were addressed. The use of the ICS Taxpayer Contact Pick List is acceptable to meet this standard. If it can be determined that the pick list has been selected but, no personal contact was made, then the standard would be measured "Not Applicable " .

  2. This standard will be measured when the investigating employee has made initial contact in person or by telephone with the taxpayer/POA. If the only contact with the taxpayer/POA was by correspondence this standard will be answered "Not Applicable" .

  3. To determine if the overall standard is "Met" or "Not Met" , the following questions concerning Publication 1 should be answered. If any of the questions are answered "No" , including those in the "Then" part of the "If/Then" table (below) the overall standard will be answered "Not Met" .

    1. Whether first contact was made by COIC or Field OIC, did the investigating employee verify whether or not Publication 1 was received by the taxpayer/POA, even if the first contact was made by phone?

      If Then
      Publication 1 was received Did the investigating employee ask if there were any questions about the publication? If there were questions, did the investigating employee answer them? If there were no questions, did the investigating employee document that there were no questions?
      Publication 1 was not received Did the investigating employee provide (or mail a copy) and briefly explain the contents?

5.13.5.3.4  (05-31-2005)
Item 18: Were Other Taxpayer Rights Observed?

  1. Definition: Collection employees must observe other taxpayer statutory and regulatory rights as delineated in the aspects for this standard. For purposes of the CQMS review, the standard is considered "Met" unless there are indications in the file that any of the delineated taxpayer rights were not observed.

  2. To meet this standard, if the file shows that one of the delineated rights was not observed, the file must also clearly show the following:

    1. That there was a legitimate reason, based on procedures, to by-pass that taxpayer right.

    2. An explanation which specifically states why such action was taken. (For example, bypassing a POA because he or she was unresponsive, a jeopardy levy situation, or the purported power of attorney was in fact an unenrolled tax preparer or had been disbarred, etc.)

    3. The history must cite the authority.

  3. This standard will be measured in all cases. The standard will be considered "Met" unless there is evidence in the file to the contrary.

  4. If the standard is answered "Not Met" , the Reviewer will select one of the following reason codes:

    Code Reason
    01 Right to privacy
    02 Right to representation
    03 During an interview, right to consult with an authorized representative
    04 Right to make an audio recording of an in-person interview
    05 Right to file ATAO (Form 911)
    06 Right to expedited review by management of the Offer Specialist's actions
    07 Right to request for transfer of case
    08 Right to request acknowledgement of receipt of returns, payments, or other documents

5.13.5.4  (05-31-2005)
Category Two: Clear Taxpayer Actions

  1. Two standards in the CQMS review fall within this category. There are no standards in this category that are scored as critical measures.

5.13.5.4.1  (05-31-2005)
Item 19: Clear Taxpayer Actions

  1. Definition: When information is needed from the taxpayer, in order to move the case toward resolution, the case history must include documentation that the following information was communicated to the taxpayer: a deadline for receipt of the requested information, the specific action required to be performed by the taxpayer, and possible, specific consequence(s) if the taxpayer failed to comply.

  2. This standard will be "Met" if the employee set clear deadline/action date(s) for the taxpayer during the investigation. The Reviewer will review only the first five occurrences of deadline/action dates. For the overall standard to be "Met" , all of the following questions must be answered "Yes" .

    1. Did the Offer Specialist provide the taxpayer with a deadline to complete the required action?

      Note:

      Deadlines given for responses can include a specific date or number of days such as 14 days or 30 days from date of letter/notice. Entries such as: next week or in a few days will not suffice. A taxpayer requested extension granted by the Specialist, on or before the date of the original deadline/action date, would replace the original deadline date.

    2. Did the Offer Specialist provide a clear explanation of what the taxpayer was required to do?

    3. Was a clear explanation provided of possible consequences if the taxpayer did not complete the required action(s) by the deadline given?

      Note:

      If the taxpayer requested and received an extension of time to supply information PRIOR to the original deadline/action date, the consequences do not need to be reiterated. However, if the original date had expired, or new/additional information was requested by the Offer Specialist, then potential consequences should have been communicated again.

  3. Copies of correspondence in the case file such as additional information request letter or Form 9297 is considered documentation to support a "Met" in this category.

5.13.5.4.2  (05-31-2005)
Item 20: Were there Activity Lapses of 75 Calendar Days or more?

  1. Definition: If there were activity lapses in the case file greater than 75 days, then item 20 will be answered "Yes" , and a reason code will apply as indicated below.

  2. This standard will be applicable in all cases. The time frame for this standard is from the date the offer was signed to the "Date Case Closed." The absence of case-related actions for 75 days or more will result in this standard being "Not Met" . Reasons for lapses in activity should be explained but will be tracked for data analysis only. Lapses of 75 days or longer in case related activity will result in a rating of "Not Met" even when a valid reason for the lapse is documented. Examples of non-case-related history entries are "Offer Specialist on detail for 90 days" or "Offer Specialist on sick leave for 85 days" . When the Reviewer measures this standard with "No" the Reviewer will not select one of the following reason codes:

    Note:

    When multiple reasons are documented for the lapse, the Reviewer should use the Reason Code that caused the widest and/or most recent lapse for the purpose of selecting a reason code.

    Reason Code Definition
    1. No reason entered in case history.
    2. Offer Specialist detailed out per National Office Directive (e.g., Customer Service during filing season).
    3. A FEMA Disaster Declaration (e.g., earthquake, flood, icestorms, fires, hurricanes, etc.).
    4. Offer Specialist on leave (e.g., sick, annual, LWOP, etc.)
    5. Lapse occurred prior to assignment to revenue officer.
    6. Offer Specialist detailed for local reasons (e.g., acting group manager, teaching assignment, etc.).
    7. Other. (Reviewer will note the reason in the comments field)

    Note:

    For the purpose of the CQMS review, any case action or correspondence must be moving the case toward resolution. Correspondence sent to the taxpayer simply to inform them of delays due to high inventory, do not count as moving the case toward resolution and will be rated "Not Met" . Transfer letters that move the case from one POD to another will count as an action (or moving the case along). Transfers within the same POD (or reassignments) will not count as moving the case along.

5.13.5.5  (05-31-2005)
Category Three: Timeliness of Case Actions

  1. Two standards in the CQMS review fall within this category. There are no standards in this category that are measured as critical.

5.13.5.5.1  (05-31-2005)
Item 21: Was Initial Contact made within 45 days from the Date the Case was Assigned to an Investigating Employee?

  1. Definition:

    1. Offers in Compromise are subject to the 45-day initial contact requirement.

    2. Time measure for this standard begins with the date the Offer Specialist was assigned the case as stated on ICS.

    3. Initial contact may be accomplished by correspondence (i.e. perfection letter/additional information request letter), or verbal contact (i.e. telephone or personal). If made via correspondence, the date the letter was sent represents the date of contact.

      Note:

      Leaving a message for the Taxpayer/POA will not suffice for timely contact.

    4. This standard is "Not Applicable" if contact is not necessary during the investigation.

    5. When the Reviewer marks this standard with a "No" , the Reviewer will select one of the following reason codes:

      Reason Code Definition
      1. No reason was entered in case history.
      2. Offer Specialist detailed-out per National Office Directive (e.g., Customer Service during filing season).
      3. A FEMA Disaster Declaration (e.g., earthquake, flood, icestorms, fires, hurricanes, etc.).
      4. Offer Specialist on leave (e.g., sick, annual, LWOP, etc.)
      5. Lapses Occurred Prior to Assignment (Reserved)
      6. Offer Specialist detailed for local reasons (e.g., acting group manager, teaching assignment, etc).
      7. Other. (The Reviewer will note the reason in the comments field).

5.13.5.5.2  (05-31-2005)
Item 22: Were Follow-up Actions taken Timely?

  1. Follow-up actions must be taken within 15 days of a taxpayer's failure to respond to a deadline/action date unless unique circumstances, such as geographic considerations, which warrant a delay, are documented.

    Note:

    If the taxpayer met all deadline/action dates then the standard is "Met."

  2. This standard will be measured if the Offer Specialist gave the taxpayer a deadline/action date. All deadline/action dates will be measured. If the Revenue Officer failed to take appropriate follow-up action(s) within 15 calendar days from the taxpayer's failure to respond to a deadline/action date then this standard is "Not Met" .

  3. The key measure in this standard is the timeliness of the follow-up action. An "appropriate" follow-up action is determined by the circumstances of the case being reviewed. For example, an appropriate follow-up action may be any of the following:

    • Follow-up call to the taxpayer

    • Additional research actions if that activity will move the case toward resolution

  4. Following are two scenarios of " appropriate" follow- up action:

    1. The Offer Specialist sent the taxpayer an additional information letter requesting bank statements and cancelled checks to support expenses claimed on the CIS. The Offer Specialist also contacted the taxpayer by phone to confirm receipt of the letter and to explain the requested items. Both contacts included a firm deadline and discussion of consequences. The taxpayer missed the deadline. An appropriate follow-up action might be to return the offer for failure to provide necessary financial information.

    2. The Offer Specialist set an deadline for the taxpayer to provide substantial information to support CIS information. The taxpayer provided a portion of the information requested by the due date. An appropriate follow-up action may be to make an additional telephone request and/or to secure information through available internal or external information sources.

      Note:

      If the taxpayer provided the requested information and it has a date stamp, but there is no corresponding ICS history entry indicating that the information was received, then measure this standard as "Met " .

5.13.5.6  (05-31-2005)
Category Four: Case Documentation

  1. This category contains two standards. Neither standard is measured as critical.

5.13.5.6.1  (05-31-2005)
Item 23: Was the Case History Clear, Accurate and Sufficiently detailed to Support the Outcome of the Case?

  1. The case history must be documented in a clear, concise and complete manner. Case progression must be clearly evident or a clear plan of action documented. Sufficient information must be in the case file to determine if the right issues were isolated. Case file documents must have all required approvals and signatures that are consistent with the case history. Method of disposition should be consistent with history and case file documents. To rate this standard "Met" , the ICS history and the AOIC history must have a closing summary statement indicating the basis for the closure.

5.13.5.6.2  (05-31-2005)
Item 24: Were the Case File Documents Sufficient to Support the Outcome of the Case?

  1. This standard will be applicable in all cases.

  2. To determine if this standard is " Met" or "Not Met" , the following will be answered. A response of "No" for either question will make the standard "Not Met" .

    1. Were all case file documents consistent with the case history?

      Note:

      Examples of documents that should be in the case file include, but are not limited to:

      • Divorce decree

      • Child support documents

      • Verification of retirement fund

      • Accessibility to retirement fund

      • Cash values of life insurance

      • Foreclosure documents

      • Real estate sales documents

      • Trust documents including accessibility to funds in trust accounts

      • Credit Reports for acceptances over $100,000.

    2. Were there documents in the case file to verify special circumstances (includes ETA/DCSC)?

      Note:

      If special circumstances (ETA/DCSC) do not exist, question " b" will be "Not Applicable" .

5.13.5.7  (05-31-2005)
Category Five: Financial Analysis

  1. Two standards in the CQMS review fall within this category. There are no standards in this category that are measured as critical.

  2. Definition: The taxpayer's payment ability, amount and terms of the offer should be computed accurately. All assets should be considered in determining net realizable equity. Appropriate means should be used to determine asset values. An explanation must be provided in the file for any exceptions or variations.

5.13.5.7.1  (05-31-2005)
Item 25: Was Financial Analysis Complete?

  1. Definition: The Offer Specialist is responsible for establishing the extent of the taxpayer's ownership interest in assets. The fair market value (FMV) and encumbrances must be addressed and verified by the appropriate means.

  2. To determine if this standard is " Met" or "Not Met" , the following questions should be answered. Both questions must be answered "Yes" for the standard to be "Met" .

    1. Were all the assets addressed? The final case analysis should address all assets disclosed on the financial statements and discovered during the investigation. This analysis should include asset verification relating to taxpayer's interest in assets. This question may be "not applicable" for withdrawn or returned offers, if the facts of the case did not require all assets to be addressed to reach the appropriate disposition.

      Note:

      The case file must contain the IRP documents indicating additional income and expenses. If the investigation clearly reveals that assets were dissipated with disregard towards the tax liability, determine if the value was included on the RCP.

      Examples:

      • Liquidated IRA to pay unsecured creditors.

      • Sale of real estate and "gifting" funds from the sale to family members.

      • Refinancing equity in property and using funds to pay unsecured debt.

      Note:

      When the taxpayer can show assets dissipated to provide necessary living expenses, amounts should not be included in the RCP.

      Examples:

      • Liquidated IRA to pay for expenses during unemployment.

      • Using bank account to pay for medical expenses.

      • Transfer of property due to divorce decree court order.

      • Asset used to purchase another asset included in the offer evaluation.

    2. Were determinations of Fair Market Value (FMV) and encumbrances accurate? The file must contain documentation to support values placed on assets and equity determinations based on encumbrance amounts, lien priority, and allocation of assets. Methods used to determine value may be formal appraisals, market valuations, trade publications or other appropriate resources. This standard does not cover the reduction of asset value from FMV (fair market value) to the appropriate value for offer determinations. If a rejection is proposed, all the asset values on the CIS must be verified in the event the taxpayer appeals.

      Note:

      If it was determined the taxpayer could fully pay the entire liability, based on the equity in assets from the information provided by the taxpayer, standard 25 will be rated "Not Applicable" Review the case to ensure no special circumstances exist (ETA). If the taxpayer provided additional information and further analysis/consideration was required by the Offer Specialist to make a determination, then standard 25 should be answered"Yes" or "No" as appropriate.

  3. This standard is "Not Applicable " for TFRP Doubt as to Liability offers and may not be applicable for withdrawn and returned offers.

5.13.5.7.2  (05-31-2005)
Item 26: Was Future Ability to Pay Considered and Accurate?

  1. To meet this standard, the case file should address the taxpayer's income and expenses as verified by the CIS and source documents. National and local standards should be used in the analysis. Conditional expenses are not considered in offer calculations. The file must contain an explanation of any deviations from the standards or this measure will be " Not Met" . Consider the circumstances of the case being reviewed. It is possible to rate this standard as "Not Applicable" due to the financial information submitted with the original offer.

  2. If this standard is "Not Met" , the Reviewer will select each of the following reason codes that apply:

    1. Math computational error.

      Note:

      To calculate payment terms, see table below:

      Payment Type Required Payment Terms Number of Months of future Income Required:
      Cash Within 90 days 48
      Short-term deferred Within 24 months 60
      Deferred payment Within time remaining on statute Within time remaining on statute

    2. Future payment ability not considered.

    3. No documentation of deviation from allowable expense guidelines.

    4. Failure to document verification of income and expenses.

    5. Other (e.g. Duplicate expenses allowed from Schedule C).

  3. This standard does not address factors such as bankruptcy, age, and health, in determining the future income value for offer purposes. It does reflect any math computation errors in determining future income value based on the factor used to determine future income value.

  4. This standard may be "Not Applicable " for withdrawn and returned offers.

5.13.5.8  (05-31-2005)
Category Six: Determination of Acceptable Offer Amount.

  1. One standard in the CQMS review falls within this category. This standard is scored as a critical.

5.13.5.8.1  (05-31-2005)
Item 27: Was a Determination made of an Acceptable Offer Amount?

  1. In order for this standard to be " Met" , the following three questions must be answered " Yes" or "Not Applicable" .

    1. Were the values placed on assets and future income documented to support an acceptable offer amount? The Offer Specialist must document the value of assets and future income to support the determination of an acceptable offer amount. Asset values are usually based on 80% of fair market value unless a reason is documented for using a lower or higher percentage. Future income is based on a calculation of available monthly income for the appropriate period of time. Market conditions, the type of asset and other factors may affect asset valuations. Age, health and education are some of the factors that may affect future income valuations.

      Note:

      If the case was closed as a rejection or withdrawn and the determination was made that the equity in assets along with the future income, could fully pay the liability, the standard will be measured as "Not Applicable" For acceptance closures, the standard will be measured either "Yes" or " No" .

    2. Were assets placed beyond the reach of the government addressed and value considered? Assets available to the taxpayer but out of the reach of government should be valued, as appropriate. This is a negotiable area and the file should contain clear reasons for values placed. Some examples of these assets would be trusts, alter egos and limited partner's interests. Transferee issues must also be considered