5.8.2  Centralized Offer in Compromise Initial Processing and Processability

Manual Transmittal

May 14, 2013

Purpose

(1) This transmits a revision for IRM 5.8, Offer in Compromise, Section 2 — Centralized Offer in Compromise Initial Processing and Processability.

Material Changes

(1) This is a complete reorganization of IRM 5.8.2, Offer in Compromise - Centralized Offer in Compromise Initial Processing and Processability.

(2) References to Form 433-A and Form 433-B have been updated to Form 433-A (OIC) and Form 433-B (OIC).

(3) References to Form 656-A have been updated to the low income certification check box.

(4) 5.8.2.1.1 Added section regarding Integrated Automation Technologies (IAT) tool use.

(5) 5.8.2.2(1) - Added note to document AOIC remarks when an offer is received in a location other than a COIC site.

(6) 5.8.2.2.(3)a - Added language to instruct appropriate use of "D" Deferred on the Terms screen when offer is Lump Sum Cash.

(7) 5.8.2.2(11) Added language that up to two POAs are to be loaded onto AOIC and any additional POAs not loaded are to be added to the AOIC Remarks.

(8) 5.8.2.2.(12) Added language regarding processing offers when research indicates taxpayer has a prior accepted offer in Service Center status other than C*.

(9) 5.8.2.3 Processability previously 5.8.2.4.

(10) 5.8.2.3(2) Incorporated Interim Guidance Memorandum for Centralized Offer in Compromise (COIC) Defining Case Building Procedures, Control: SBSE-05-1012-077, dated October 5, 2012.

(11) 5.8.2.3.1 Determining Processability previously 5.8.2.4.1.

(12) 5.8.2.3.1 Removed reference to Short Term and Deferred Periodic Payment offers, now known as Periodic Payment offers that must be paid within 24 months. Added language regarding shortfall of the TIPRA payment on either cash or periodic payment offers. Added language regarding Department of Justice cases, offer submitted solely on unassessed liabilities and offers submitted solely on liabilities with expired CSEDs as not processable criteria. Specified the low income certification applies only to individual taxpayers including sole proprietorship with Schedule C filing requirements.

(13) 5.8.2.3.2 Additional Research on Bankruptcy Cases previously 5.8.2.4.3.

(14) 5.8.2.3.2 Reference to TC 520 during offer investigation moved to IRM 5.8.4.

(15) 5.8.2.4 Not Processable previously 5.8.2.6.

(16) 5.8.2.4(1) Added language to return correspondence and payments using Letter 278C when initial submission is received without a Form 656.

(17) 5.8.2.4(3)b - Added language that the signature on the Return Letter meets Delegation Order 5-1.

(18) 5.8.2.5 Not Processable Offers Received with Payments previously 5.8.2.8(13).

(19) 5.8.2.6 Erroneous Processability Determinations previously 5.8.2.8.2.

(20) 5.8.2.7 Processable Offers previously 5.8.2.5.

(21) 5.8.2.7(6) Added language referencing -E and F- freeze codes and TC 520.

(22) 5.8.2.7.1 Processable Offers - Payment Processing previously 5.8.2.8.

(23) 5.8.2.7.1(4) - Included language to specify taxpayer designation of a payment applies only to that specific payment. Added note regarding designation of future payments.

(24) 5.8.2.7.1(6) - Added a note to clarify the earliest unexpired CSED is not always the earliest tax period.

(25) 5.8.2.8(1) Added language to request input of a secondary TC 570 with “$.00” on BMF liabilities only when the payment exceeds the liability(ies) to avoid systemic issues that may not allow offset as defined in IRM 5.1.12.

(26) 5.8.2.9 Offer Submitted Solely for Unassessed Liability(s) previously 5.8.2.13.

(27) 5.8.2.9(2) Updated unassessed liabilities chart.

(28) 5.8.2.9.1(3) DPC 02 updated to include example of Trust Fund Liabilities.

(29) 5.8.2.9.1(3) Added note stating payments received on closed offers should be applied to the taxpayer's liability using DPC 99.

(30) 5.8.2.9.2(2)l - Added language to include in AOIC remarks when a payment is applied per the taxpayer's designation.

(31) 5.8.2.10 Processing Forms 3210 After Processability Determinations previously 5.8.2.8.1.

(32) 5.8.2.10(4) - Revised note to include offers solely for an unassessed liability(ies) or expired CSED(s) when leaving the envelope unsealed so that clerical can associate the checks with the return package.

(33) 5.8.2.11 Identifying CDP Cases Under the Jurisdiction of Appeals previously 5.8.2.10.

(34) 5.8.2.11.1 Determining Processability for Appeals Collection Due Process previously 5.8.2.10.1.

(35) 5.8.2.12 Changing Status Codes previously 5.8.2.5.2.

(36) 5.8.2.12(2) Added status codes 63 & 72 tax modules to the list of status codes that should not be changed to status 71.

(37) Exhibit 5.8.2-1 Added exhibit IAT Tools That Work For You in COIC.

(38) Exhibit 5.8.2-1 COIC Procedures for Status 60 / Status 71 Changes, updated 433-D routing contact in Memphis.

Effect on Other Documents

This material supersedes IRM 5.8.2, dated 03-26-2010. Incorporated Interim Guidance Memorandum for Centralized Offer in Compromise (COIC) Defining Case Building Procedures, Control: SBSE-05-1012-077, dated October 5, 2012

Audience

SB/SE Collection and Campus Compliance employees.

Effective Date

(05-14-2013)


Scott Reisher
Director, Collection Policy

5.8.2.1  (05-14-2013)
Overview

  1. Jurisdictional responsibility must be determined upon receipt of a taxpayer's proposal to compromise. This section provides instructions for initial case processing on new offers.

5.8.2.1.1  (05-14-2013)
Integrated Automation Technologies (IAT)

  1. Integrated Automation Technologies (IAT) tools must be used whenever possible. Some IAT tools are mandatory while others are suggested for use.

  2. A current list of mandated and suggested use tools can be found in Exhibit 5.8.2-1, IAT Tools That Work For You in COIC. Each tool on the list is linked to the IAT website at http://iat.web.irs.gov/. The website contains descriptions and job aids for each tool and should be checked periodically for new tools that may assist in case processing.

  3. When a mandated IAT tool is not used because it was not available, or determined not to be appropriate due to a specific situation, document AOIC Remarks with the corresponding reason. In these situations, complete case processing through IDRS following established procedures.

5.8.2.2  (05-14-2013)
Initial Processing of Offers in Centralized Offers in Compromise Sites

  1. When an offer is received in the Centralized Offer in Compromise (COIC) site, date stamp the Form 656, Offer in Compromise, in the IRS Received Date Stamp block.

    Note:

    If an offer was received in a location other than the site that is loading the offer onto the Automated Offer in Compromise (AOIC) system, document AOIC Remarks with the initial IRS Date Stamp location.

  2. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law on May 17, 2006.

  3. The law stipulates that, in addition to the application fee, an Offer in Compromise (OIC) received on or after July 16, 2006, must include one of the following based on the offer terms:

    1. Lump Sum Cash – The submission of any lump sum OIC should be accompanied by 20% of the amount of the offer or the low income certification box checked on Form 656. The term "lump sum" means any offer of payments made in 5 or fewer installments. Enter a "C" (Cash) on the Automated Offer in Compromise (AOIC) Terms screen if the payments will be made in 5 or fewer months or a D (Deferred) if the payments will be completed in more than 5 months.

    2. Periodic Payment – The submission of any periodic payment OIC should be accompanied by the amount of the first proposed installment or the low income certification box checked on Form 656. The term "periodic payment" means any offer of payments in 6 to 24 months. Enter a "D" (Deferred) on the AOIC Terms screen.

  4. The required initial payment and subsequent payments will be applied to the taxpayer’s account, whether the offer is deemed processable or not processable. These funds are non-refundable, except for some situations, and should be immediately posted to the taxpayer’s account (either as designated by the taxpayer or to the Government’s best interest if not designated). This does not include deposits or application fees. Deposits are refundable. Application fees may not be designated but may be refundable, in certain situations.

  5. Because a taxpayer may not specify how the application fee for processing an offer in compromise will be applied, the Service will apply the application fee in the best interests of the government.

  6. Sort in the following categories:

    • Offers submitted with remittance

    • Offers submitted without remittance

    • Out of jurisdiction transfers

  7. Verify the jurisdiction of the offer.

    If the office of jurisdiction is… Then…
    Collection
    • Add the offer to AOIC.

    • Process in accordance with current guidelines.

    Doubt as to Liability (DATL)
    • Process the payment(s) through PCC to the 4710 account.

    • Do not load the offer onto AOIC.

    • Forward to the Brookhaven Centralized DATL Site.

    DATL (Trust Fund Recovery Penalty (TFRP)/ Personal Liability Excise Tax (PLET))
    • Add the offer to AOIC.

    • Process payments in accordance with current guidelines.

    • Immediately forward the case to the appropriate OIC field office drop point.

    Appeals - Non Collection Due Process (CDP)
    • List payments on the AOIC Appeals Fee screen.

    • Do not load the offer onto AOIC.

    • Forward the case to Appeals using the Form 3210, Document Transmittal.

    Appeals - CDP offers meeting COIC criteria
    • Load offer onto AOIC.

    • Select Offer Category Code (OCC) 10

    • Update offer type Collection Due Process which will generate an offer type "P" .

    • Assign offers to next appropriate inventory; 51xx, 60xx.

    Appeals - CDP offers that do not meet COIC criteria
    • Load offer onto AOIC.

    • Select OCC 10.

    • Update offer type Collection Due Process which will generate an offer type "P" .

    • Transfer offer to Area Office (AO) 21.

    • Forward complete offer file to Appeals.

  8. COIC interoffice transfers based upon State mapping are no longer necessary.

  9. Research Integrated Data Retrieval System (IDRS) for entity verification, bankruptcy, cross reference Taxpayer Identification Numbers (TINs) and freeze codes.

  10. Print the first page of Individual Master File Online Tax definer 'T' (IMFOLT) and Business Master File Online Tax definer T (BMFOLT) (as applicable) and include in every case file.

  11. Complete the following actions on AOIC:

    • Query AOIC to ensure the receipt is a new offer

      Note:

      If there is an existing offer for the same taxpayer TIN, additional research will be required.

    • Add only new offers to AOIC

    • Load entity information with the social security number (SSN) and name control only

    • Initiate Data Download

    • If valid power of attorney (POA) information is found on Centralized Authorization File Inquiry (CFINK) or provided with the offer, load the information on the AOIC POA screen. If multiple POAs are provided, load up to two on the AOIC POA screen. Update AOIC Remarks with the representative information for any valid Powers of Attorney not loaded on the AOIC POA screen.

    • Complete the "Update Processability" function of AOIC.

      Note:

      Multiple offers submitted with one remittance intended as the application fee(s) and/or payment(s) for all will be processed. Load the offers to the AOIC system.

  12. If research indicates the taxpayer has an accepted offer in monitoring and the Service Center status code is other than 'C*' do not load the offer. Return the offer and any money received with the submission to the taxpayer. If the prior accepted offer is in status C* load the offer and process following established guidelines.

  13. Follow procedures in IRM 5.8.2.3.1, Determining Processablity, below to make a processability determination and IRM 5.8.2.7.1, Processable Offers - Payment Processing and IRM 5.8.2.8, Sorts and Payment Processing, for processing application fees, payments, and deposits.

5.8.2.3  (05-14-2013)
Processability

  1. COIC Process Examiners (PEs) are responsible for determining processability on offers received and worked by the Service; including TFRP/PLET DATL offers . All other DATL offers are processed by the Centralized DATL Unit (see IRM 5.8.2.2 (7) above).

  2. If the offer is received with payment, processability must be made within 24 hours of IRS received date. Case building must then be completed within 16 calendar days of AO received date.

  3. If no payment is submitted, processability and case building must be completed within 16 calendar days of AO received date.

  4. Each new receipt will fall into one of the following categories:

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

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

5.8.2.3.1  (05-14-2013)
Determining Processability

  1. The COIC sites are responsible for determining offer processability. An OIC will be returned as not processable if one or more of the criteria below are present:

    • Taxpayer in Bankruptcy – An offer will not be considered while a taxpayer is in bankruptcy. See IRM 5.8.2.3.2, Additional Research on Bankruptcy Cases, below for procedures on conducting additional research on bankruptcy OICs prior to returning the offer as not processable.

    • Taxpayer did not submit the application fee with the offer – The application fee must be submitted with each Form 656, Offer in Compromise, or the low income certification box checked in the applicable section of Form 656.

    • Taxpayer did not submit the required initial payment with the offer. – (1) Lump Sum Cash offers must include 20% of the offered amount or the low income certification box checked in the applicable section of Form 656; (2) Periodic Payment offers must include initial proposed installment payment or the low income certification box checked in the applicable section of Form 656.

      Exception:

      If the taxpayer submits the application fee and a portion (but not all) of the required TIPRA payment (either cash or periodic payment) the offer will be considered a processable offer.

    • Department of Justice - The IRS may not process any offer to compromise a liability previously referred to the Department of Justice (DOJ) for prosecution or defense. If all liabilities have been referred to DOJ then the offer is not processable. If IRS retains jurisdiction on any tax liabilities then the offer is processable and should be referred to the appropriate field offer group.

    • Unassessed Liabilities -Offers submitted solely to compromise a tax period or tax year that has not been assessed, and IDRS does not indicate a return has been received, will be deemed not processable. Any TIPRA payment and application fee paid with the offer should be returned to the taxpayer. If IDRS indicates a return has been received, process based on IRM 5.8.2.9, Offer Submitted Solely for Unassessed Liability(ies)

    • Offer submitted solely for tax period(s) with expired CSED(s) - An offer will not be considered when the CSED(s) has expired for all liabilities sought to be compromised; as evidenced by a TC 608 on the taxpayer's account. Any TIPRA payment and application fee paid with the offer should be returned to the taxpayer.

  2. An OIC is considered pending when a delegated IRS official signs and dates the Form 656. This date is the official offer pending date. If the offer is determined to be processable, the PE must immediately sign and date the waiver on the Form 656.

    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.

  3. No application fee, TIPRA payment or financial statement is required for offers based solely on DATL.

  4. The low income certification applies only to individual taxpayers, including sole proprietorship with Schedule C filing requirements.

5.8.2.3.2  (05-14-2013)
Additional Research on Bankruptcy Cases

  1. If the taxpayer failed to indicate the date of dismissal or discharge on the Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B(OIC), Collection Information Statement for Businesses, it may be necessary to conduct additional research to determine whether a taxpayer is still in bankruptcy or has been discharged or dismissed. Bankruptcy should be verified using IDRS, Automated Insolvency System (AIS), and Public Access to Court Electronic Records (PACER) before returning as not processable. The following table directs the next action to take when an open TC 520 is discovered.

    Circumstance… And… Then…
    Upon receipt of an initial offer with a application fee and TIPRA payment IDRS research shows an open TC 520 with a bankruptcy closing code present on any liability Follow current procedures to refund or return the application fee and TIPRA payment, as appropriate.
    Upon receipt of a subsequent periodic payment, and there was previously no open TC 520 with a bankruptcy closing code present on any liability at the time the offer was deemed processable IDRS research now shows an open TC 520 with a bankruptcy closing code present on any liability (posted date is prior to waiver date) Follow current procedures for not processable return to refund or return the application fee and TIPRA payment, as appropriate.

    Note:

    Field OS must contact the appropriate COIC site.

  2. The following TC 520 closing codes can be used to identify when a taxpayer has filed bankruptcy: 60-67, 81, 83-89. See Document 6209, IRS Processing Codes and Information, for additional information.

    Note:

    Because closing codes 81 and 84 are litigation codes not exclusive to bankruptcy, it will be necessary to research PACER to determine if the taxpayer filed bankruptcy.

  3. Document AOIC Remarks with any findings.

5.8.2.4  (05-14-2013)
Not Processable

  1. When returning the offer as not processable do not sign the offer.

    Note:

    If correspondence is received with no Form 656, Offer in Compromise, respond to the taxpayer using correspondex Letter 278C. If the correspondence is received with money, do not send Letter 278C; return both the correspondence and money to the taxpayer along with a letter advising the taxpayer why the correspondence and money are being returned.

  2. Take the following actions:

    1. Complete the AOIC Payment screen as applicable.

    2. Stamp Form 656, Offer in Compromise, with "RETURN" and write the date that the offer was determined to be not processable.

    3. Cross out all IRS received dates with an “X.”

    4. Document the AOIC Remarks with the payment information, specifying the reason(s) for the not processable determination.

    5. If the payment(s) was processed through Remittance Strategy for Paper Check Conversion (RS-PCC), prepare the Form 5792, Request for IDRS Generated Refund (IGR), for a manual refund. In most cases only the application fee will be refunded.

      Note:

      The Form 5792, Request for IDRS Generated Refund (IGR), on not processable offers will be processed according to normal manual refund procedures outlined in IRM 21.4.4, Manual Refunds.

  3. Prepare the Return Letter.

    1. In addition to identifying the reason(s) for the determination, also address any issues concerning combined joint and separate liabilities, if appropriate; for example, individual and corporate or partnership liabilities on one Form 656, Offer in Compromise. In those cases, include option "AF" in the return letter.

    2. Ensure signature on the return letter as defined in Delegation Order 5-1.

    3. Close AOIC with a final disposition code of 10.

    4. Send Form 656, Offer in Compromise, the return letter, Pub 1, Your Rights as a Taxpayer, and Pub 594, The IRS Collection Process, to the taxpayer with all original documents submitted with the offer. If a 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.

  4. If the Form 656, Offer in Compromise, was forwarded by a Revenue Officer (RO) with a Form 657, Revenue Officer Report, and it is determined to be not processable, the COIC site should forward Form 657 and a copy of the not processable letter to the approving official of Form 657. If Form 656 was forwarded by an RO without Form 657, forward a copy of the return letter to the RO assigned the collection case for information.

  5. Caution should be exercised to ensure that no IDRS prints or other internally generated research documents are sent to either the taxpayer or the POA. All internal documents should be destroyed.

    Note:

    There is no requirement to retain any information or copies of documents on not processable cases.

5.8.2.5  (05-14-2013)
Not Processable Offers Received with Payments

  1. The following procedures apply if the application fee and payment(s) were made with certified funds (money order, bank check, cashiers check, government check), and the processability determination and return package can be completed on an expedited basis, and the offer package with the certified funds payment instrument can be returned to the taxpayer within 24 hours of receipt.

    • Hand-carry the certified funds payment instrument and return offer package to the Campus Support Mail Team within 24 hours of receipt. The Campus Support Mail Team is responsible for preparation and mailing of the certified package.

    • The Form 3210, Document Transmittal, must be completed by annotating "$xxx amount Certified" to indicate the payment was returned via certified funds to the taxpayer.

  2. The following procedures will only apply if processability cannot be completed within 24 hours of receipt of the application fee and the payment(s) was made with certified funds (money order, bank check, cashiers check, government check).

    • Certified funds will be deposited upon receipt and processed through the normal work stream for both the clerical and PE procedures.

    • Request a manual refund by preparing the Form 3753, Manual Refund Posting Voucher.

      Note:

      Form 3753 manual refunds on not processable offers will be processed according to normal manual refund procedures outlined in IRM 21.4.4, Manual Refunds.

    • Prepare the offer package to be returned to the taxpayer.

  3. The following procedures will only apply if processability cannot be completed within 24 hours of receipt of the application fee and the payment(s) was made with a personal check.

    1. Complete a separate Form 3210, Document Transmittal, for those offers to be returned based on the receipt of only the application fee.

    2. Enter no more than 5 offers on the Form 3210, Document Transmittal.

    3. Load onto AOIC.

    4. Hand-carry the Form 3210, Document Transmittal, to the Campus Support Mail Team to get personal checks stamped as non-negotiable.

      Note:

      COIC will use a non-negotiable stamp on personal checks when the taxpayer's offer is deemed not processable. The Form 3210 will be issued for control purposes only and should be maintained as a record of the payment(s) received. The Form 3210 must also indicate the check(s) was stamped as non-negotiable and the date it was stamped. The check must be stamped non-negotiable within 24 hours of receipt.

    5. Personal checks stamped non-negotiable will be returned to the designated COIC function employee housed in the Campus Support mail area and maintained in a locked file until the completion of the return package.

    6. Personal checks stamped non-negotiable and the offer package should be returned to the taxpayer through normal mail-out procedures.

    7. The AOIC history must be documented indicating the check was stamped non-negotiable and include the date it was stamped.

      Note:

      Once the checks have been stamped non-negotiable and handled according to the procedures above, the offer package should be assigned to a PE for completion of the return letter and offer package.

  4. Management must establish controls to ensure returned offer packages are associated with the non-negotiable payment instruments and processed in accordance with established procedures.

  5. If the taxpayer also submitted a deposit and the offer is not processable, the deposit should be refunded to the taxpayer. Prepare the Form 3753, Manual Refund Posting Voucher, to refund the deposit from the 4710 Account, and forward it to Monitoring Offer in Compromise (MOIC) for processing. Annotate the AOIC Remarks screen.

5.8.2.6  (05-14-2013)
Erroneous Processability Determinations

  1. The Service retains the application fee for processable offers; therefore, application fees associated with offers that are initially deemed processable but subsequently determined to be not processable must be returned to the taxpayer.

  2. 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 AOIC is updated to "not processable" to reverse the TC 480(s). This will result in the generation of a TC 483 posting to the appropriate modules. The application fee must be manually refunded to the taxpayer. When an erroneous processability determination is corrected, prepare the return letter and correct the AOIC Payment screen record. Follow IRM 5.8.2.5, Not Processable Offers Received with Payments, above, for refund procedures.

    Note:

    If it is later determined that the taxpayer was in bankruptcy at the time the offer was filed, TIPRA payments must also be manually refunded.

5.8.2.7  (05-14-2013)
Processable Offers

  1. Complete the AOIC Payment screen and generate Form 3244, Payment Posting Voucher, or Form 2515, Record of Offer in Compromise, as appropriate.

  2. Complete the Terms screen on AOIC.

  3. Verify Master File Tax (MFT) screens are populated through Data Download or manually input all required information.

  4. On all Individual Master File (IMF) cases enter "P" if the offer is for the primary taxpayer of the controlling TIN on the entity, enter "S" if the offer is for the secondary taxpayer, or "B" if both husband and wife are making a joint offer. If only one party of a joint liability is submitting the offer, remove the "Y" from the MFT screen. This will take the case out of Status 71.

    Note:

    See IRM 5.8.2.12, Changing Status Codes, below for guidance on when it is appropriate to change the status code.

  5. Include a Master File print or a current IDRS print showing the liabilities and CSED(s) at the time the offer was submitted with each case file.

  6. Check for any freeze codes such as: -Y (offer in compromise), -W (litigation), -Z (Criminal Investigation), -A (duplicate return), -V (bankruptcy), -L (Administrative Information Management Strategy, (AIMS)), F- (frivolous return), -E (tax shelter/rollback) and TC 520 that may require special action. Freeze codes indicating Criminal Investigation Division (CID), bankruptcy, Exam issues (i.e. AIMS), duplicate return filed, or other litigations should be worked in accordance with guidelines in this IRM.

  7. Check for cross-reference SSN, Employee Identification Number (EIN), and Individual Taxpayer Identification Numbers (ITINs) known or found for the taxpayer for input to MFT Data Download.

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

  9. Verify the taxpayer has submitted the application fee, required TIPRA payment, or checked the box on Form 656 for the low income certification for each offer submitted.

  10. Document the AOIC Remarks.

5.8.2.7.1  (05-14-2013)
Processable Offers - Payment Processing

  1. If the taxpayer submits both the application fee and the required initial TIPRA payment (20 % or first installment) in one check, the application fee will be entered first and the remainder will be applied as the required TIPRA payment.

  2. Insufficient remittance of the initial TIPRA payment will be considered a perfection issue. See IRM 5.8.3, Centralized Offer in Compromise Transfers, Perfection, and Case Building, for more information regarding the perfection of incomplete offers.

  3. The required initial TIPRA payment (20% or first installment) will be applied to the taxpayer’s liability in all instances. With the exception of specific offer submissions noted in IRM 5.8.2.3.1 (1) above, these monies are not refundable to the taxpayer.

  4. Taxpayers may designate how the required TIPRA payments are to be applied and payments will be applied in accordance with the taxpayer’s designation. The designation applies only to the payment being processed.

    Note:

    If the taxpayer wishes to have future payments applied to particular liabilities, each payment will need to be designated. Payments without designation will be applied to the taxpayer's tax liability in the best interest of the Government.

  5. If no written payment designation was submitted with the offer, apply the payment(s) to the taxpayer's tax liability in the best interest of the Government.

  6. For offers submitted from entities other than corporations, apply the payment(s) to the tax liability(ies) with the earliest unexpired CSED(s).

    Note:

    There may be instances when the earliest unexpired CSED is not the earliest tax period.

  7. For offers submitted from corporations or other entities subject to the trust fund recovery penalty, involving trust fund taxes, apply payment(s) in the following descending order:

    1. To all Forms 1120, 940, and any other non-trust fund liabilities (in earliest unexpired CSED order), if any; and

    2. To the following unpaid portions of all Form 941 periods (in earliest unexpired CSED order):

    • Non-trust fund portion of tax (employer's share of FICA)

    • Assessed lien fees and collection costs

    • Assessed penalty

    • Assessed interest

    • Accrued penalty to the date of payment

    • Accrued interest to date of payment

    • Trust fund portion of the Form 941 (employee's and withholding share of FICA)

  8. It is possible the taxpayer may submit the application fee, the required initial TIPRA payment, and a deposit with the Form 656, Offer in Compromise.

    • The application fee, required initial TIPRA payment, and deposit will be entered on separate lines on the Form 3210, Document Transmittal, Document Transmittal, and processed through RS-PCC.

  9. All checks must be deposited within 24 hours of receipt.

  10. If the amount submitted with the Form 656, Offer in Compromise, exceeds the amount required, the entire amount will be treated as a non-refundable payment of tax, unless the taxpayer indicates the excess amount is to be treated as a deposit in the applicable section on Form 656.

  11. If the taxpayer sends one check, the amount submitted exceeds the required amounts, and the taxpayer indicated how the payment should be applied (for example, as a deposit or an estimated tax payment), process the amount according to the taxpayer’s designation. The application fee portion of the payment may not be designated, and will be applied in the best interest of the Government. Any payments other than the application fee, required TIPRA payment, or deposit must be processed on Form 3244, Payment Posting Voucher, with the appropriate transaction code and Designated Payment Code (DPC). For example, an estimated payment will be a TC 430 (for IMF) or TC 660 (for BMF), instead of TC 670. This determination will be made by the PE when making a processability determination and applying payments on the Form 3244, Payment Posting Voucher, using the IRS received date as the payment date.

  12. Subsequent payments must also be deposited within the 24 hour requirement as defined above.

    Note:

    Subsequent installment payments of a periodic payment offer are non-refundable and should be applied to the earliest tax liability with the earliest CSED or as designated by the taxpayer. If the offer is submitted by an entity subject to the trust fund recovery penalty refer to (7) of this section for application of payments.

  13. If the payment is submitted on Form 656-PPV, Offer In Compromise Partial Payment Voucher:

    • Process the payment as described above through RS-PCC or Paper Check Conversion (PCC) when applicable.

    • Document the payment on AOIC Payment screen.

5.8.2.8  (05-14-2013)
Sorts and Payment Processing

  1. The “If and Then” table below provides the criteria for processing payments:

    Note:

    Request input of a secondary TC 570 with “$.00” on BMF liabilities only when the payment exceeds the liability(ies) to avoid systemic issues that may not allow offset as defined in IRM 5.1.12, Cases Requiring Special Handling.

    If you receive a… Then…
    Form 656, Offer in Compromise, the application fee, and required initial TIPRA payment
    1. Load the offer on AOIC.

    2. List payments on the AOIC Payment screen.

    3. Process payments through RS-PCC or PCC as applicable.

    Form 656, Offer in Compromise, with the application fee and no required initial TIPRA payment (20% or first installment payment) Offers received with a check for the application fee only are deemed not processable upon receipt and will be sorted by the clerical function during the fine sort.
    1. Load the offer in AOIC.

    2. Update the AOIC Remarks documenting that the offer is not processable.

    3. Complete the Form 3210, Document Transmittal, for a not processable return.

    4. If the taxpayer submitted a personal check, COIC will stamp the check non-negotiable, generate the return letter, and send to the taxpayer.

    5. If the taxpayer submitted certified funds (money order, certified check, etc.), COIC will generate the return letter, and the funds will be returned by certified mail via Campus Support.

    Form 656, Offer in Compromise, from an individual taxpayer with both an application fee, the low income certification box checked, and the required initial TIPRA payment
    1. Load the offer on AOIC.

    2. Prepare the Form 2515, Record of Offer in Compromise, designating the payment(s) as a deposit and process through PCC.

    3. Complete the AOIC Payment screen indicating "valid waiver" .

    Form 656, Offer in Compromise, from an individual taxpayer with both an application fee, low income certification, and no required initial TIPRA payment
    1. Load offer on AOIC.

    2. Complete the AOIC Payment screen indicating "valid waiver" .

    3. Prepare the Form 2515, Record of Offer in Compromise, designating the application fee as a deposit and process through PCC.

    Form 656, Offer in Compromise, from an individual taxpayer with a low income waiver (in lieu of the application fee and required initial payment) Complete the AOIC Payment screen indicating "valid waiver" .
    Non CDP Form 656, Offer in Compromise - Appeals Jurisdiction
    • Load payments to the Appeals Fee screen.

    • Complete the Form 3210, Document Transmittal, by entering the following: (1) Revenue Accounting Control System (RACS) number (2) SSN/EIN (3) Name Control (4) Check Amount (5) Check Number (6) Check Type (7) The application fee (8) Amount of the required initial TIPRA payment and deposit, if any.

    • Prepare the Form 2515, Record of Offer in Compromise.

    CDP Form 656, Offer in Compromise – Appeals Jurisdiction
    1. Load payments to AOIC Payment screen.

    2. Complete the Form 3210, Document Transmittal, by entering the following: (1) Offer Number (2) SSN/EIN (3) Name Control (4) Check Amount (5) Check Number (6) Check Type (7) The application fee (8) Amount of the required initial TIPRA payment and deposit, if any.

    3. Prepare the Form 3244, Payment Posting Voucher.

    4. Update Case Category Code to 10

    5. Transfer case to AO 21.

    CDP Form 656 Form 656, Offer in Compromise - COIC criteria
    • Load payments to AOIC Payment screen.

    • Complete the Form 3210, Document Transmittal, by entering the following: (1) Offer Number (2) SSN/EIN (3) Name Control (4) Check Amount (5) Check Number (6) Check Type (7) The application fee (8) Amount of the required initial TIPRA payment and deposit, if any.

    • Prepare the Form 3244, Payment Posting Voucher.

    DATL offer (Form 656-L, Offer in Compromise (Doubt as to Liability)) DATL offers, Form 656-L, are exempted from application fees and all TIPRA payments. Any fee or payment will be treated as a deposit and processed on the Form 3210, Document Transmittal, and Form 2515, Record of Offer in Compromise, through PCC.

  2. DATL offers (and any other manually monitored offer such as DOJ) require the same RACS numbering scheme in place of the offer number on the Form 3210, Document Transmittal, COIC Remittance Tracking Report and Form 2515, Record of Offer in Compromise, as outlined above. Utilize the RACS deposit numbering system provided by MOIC to generate and enter a 10 digit control number on both the Form 3210 and Form 2515.

5.8.2.9  (05-14-2013)
Offer Submitted Solely for Unassessed Liability(ies)

  1. An unassessed liability is a liability where no assessment has been made.

  2. If an offer is received that is solely for an unassessed liability(ies), COIC will determine processability using the following procedures.

    If… Then…
    Research of IDRS indicates the return has been received, but has not posted
    1. Continue working the offer.

    2. Post the payments to the taxpayer account. Request input of a secondary TC 570 with “$.00”, to allow the payment to post to the taxpayers account, before the assessment.

    Research of IDRS shows no indication a return has been received and no return was submitted with the offer. Return the offer per IRM 5.8.2.3.1 (1) above
    Research indicates the unassessed liability is being worked in Exam or AUR
    1. Continue with offer processing

    2. Refer the offer to the Exam/AUR Coordinator. The Exam/AUR Coordinator should follow procedures outlined in IRM 5.8.4, Investigation.

5.8.2.9.1  (05-14-2013)
Payments Processed Using Remittance Strategy – Paper Check Conversion (RS-PCC)

  1. Most payments received for the OIC application fee and TIPRA payments will be processed by Campus Support utilizing Remittance Strategy Paper Check Conversion (RS-PCC).

  2. All payments regardless of whether scanned through PCC or RS-PCC must be delivered to Campus Support for processing within 24 hours of receipt. The 24 hour deposit standard must be met.

  3. COIC is responsible for completing the Form 3244, Payment Posting Voucher, with the following information:

    • SSN/EIN

    • MFT

    • Tax Period

    • Transaction received date

    • Taxpayer name, address, and zip code

    • Transaction code

    • Transaction amount

    • Remarks

    • Prepared by (name and unit symbol)

    • DPC code

    DPC Definition
    33 Offer in Compromise application fee
    34 Offer in Compromise 20% lump sum / initial periodic payment
    35 Offer in Compromise subsequent payments made during the offer investigation
    02 Trust Fund Liability Payments (i.e. 941, 943, 945 liabilities, NOT MFT 55)

    Caution:

    Only use DPC 02 when posting offer payments designated to the trust fund portion when the offer was submitted by a corporate taxpayer or LLC.

    09 Accepted Offer Payments
    99 Miscellaneous

    Note:

    Any payment received after the offer has been closed should be applied to the taxpayer's liability using DPC 99.

  4. Write "RS-PCC" on the Form 3210, Document Transmittal.

  5. List Trust Fund liability designated payments (DPC 02 ) at the beginning of the Form 3210, Document Transmittal, and highlight for special handling.

  6. Write the offer number on the Form 3210, Document Transmittal, for each payment processed through RS-PCC.

  7. Payments should be listed on the AOIC Payment screen.

5.8.2.9.2  (05-14-2013)
Payment Processing through Paper Check Conversion (PCC)

  1. The following payments cannot be processed through RS-PCC and must be processed through Paper Check Conversion (PCC):

    1. Government checks not endorsed.

    2. Third party checks not endorsed.

    3. Foreign checks.

    4. Any check that cannot be read by RS-PCC scanner.

    5. Any funds that are received with the original offer that cannot be identified as the application fee or the initial TIPRA payment. These funds are considered a deposit and must be deposited in the 4710 Account.

    6. Payments posting to MFT 51 (Form 709, United States Gift (and Generation - Skipping Transfer) Tax Return, Form 709-A, United States Short Form Gift Tax Return) and MFT 52 (Form 706, U.S. Estate Tax Return ).

  2. PCC payment processing:

    1. Complete the Payment screen on AOIC.

    2. Generate Form 2515, Record of Offer in Compromise, from AOIC.

    3. Prepare Form 3210, Document Transmittal, annotating "PCC" in the upper right hand corner.

    4. Complete Form 2515 and make one copy. Attach the payment(s) to the original.

    5. Form 2515, Annotations - COIC will use the following abbreviations to annotate the Form 2515, beside the appropriate entry in the Amount column. The blank space at the bottom of the form may be used for any additional remarks.

      Definition Abbreviation
      Application Fee AppFee
      Payment Pymt
      Deposit Dep
      Estimated Payment ES
      Refund to Taxpayer

      Note:

      To be used when COIC prepared the Form 3753, Manual Refund Posting Voucher, to refund the application fee and forwarded to Cincinnati for processing

      RefTP
      Designated Payment

      Note:

      Indicate MFT and Period

      DesgP

    6. Forward the Form 3210, Form 2515, and remittance(s) to PCC for processing.

    7. Forward the copy of Form 2515 to MOIC. Attach the transmittal Form 3210.

    8. Attach Form 3210, and include (1) offer number; (2) taxpayer identification number; (3) taxpayer name; and (4) amount of the payment.

    9. Transmit the payment by traceable methods to the appropriate MOIC unit for processing.

    10. Annotate the Remarks section of Form 2515 with the payment application (e.g., 20% lump sum, first periodic installment, application fee, and any deposit, if applicable).

      Note:

      Because a taxpayer cannot designate how the application fee for processing an offer in compromise will be applied, the Service will apply the application fee in the best interests of the government.

      Note:

      If the taxpayer designated application of the TIPRA payment(s) on Form 656, Offer in Compromise, enter the appropriate information in the Remarks section of the Form 2515. If the taxpayer also submitted a deposit separate from the required TIPRA payment, split the payment as requested. Enter the information according to the offer terms and annotate the difference as the deposit. The deposit will remain in the 4710 Account until a determination is made; that is, the offer is accepted, rejected, or returned.

    11. Retain a copy of the Form 2515 in the case file.

      Note:

      The entries on the Form 2515 must equal the check(s) amount(s) recorded on the Form 3210. The Form 3210 and associated documents should be returned to COIC clerical for processing.

    12. Document the AOIC Remarks with the payment type, application of the funds, and if the payment was applied per taxpayer's designation.

      Example:

      One check received in the amount of $650. Payments applied: $xxx application fee; $xxx payment; $xxx deposit.

  3. Deposits are not treated as payments of tax upon receipt. They are held in a special deposit fund commonly referred to as the 4710 Account. The deposit is not reflected on IDRS nor applied to any specific tax period until the offer is accepted. For those offers previously loaded on AOIC, the amount will be annotated on the Deposits screen of the taxpayers AOIC record by the MOIC employee processing the remittance.

  4. COIC sites will treat any remittance (including those for an application fee) received with DATL offers (non-TFRP/PLET) as a deposit. Since such offers do not require an application fee or initial payment, and will be manually monitored by MOIC, employees should list any such remittances on the Form 3210, Document Transmittal, and prepare the Form 2515, Record of Offer in Compromise, for processing. Utilize the RACS deposit numbering system provided by MOIC to generate and enter a 10 digit control number on both the Form 3210 and Form 2515.

    Note:

    A PDF fillable version of the Form 2515 is accessible on the IRS Intranet.

  5. All payments regardless of whether scanned through PCC or RS-PCC must be delivered to Campus Support for processing within 24 hours of receipt. The 24 hour deposit standard must be met.

5.8.2.10  (05-14-2013)
Processing Forms 3210 after Processability Determinations

  1. Form 2515, Record of Offer in Compromise, and Form 3753, Manual Refund Posting Voucher, will be forwarded to COIC after processability determinations have been made.

  2. Form 3210, Document Transmittal, will be returned to COIC for processing of all attached Form 3244, Payment Posting Voucher. All completed Form 3210 will be filed and retained in COIC.

  3. If the offer was determined to be not processable and payments were processed through PCC, forward the related Form 2515 and Form 3753 to MOIC for processing with a copy of the Form 3210. The Form 3210 serves as the transfer transmittal.

    Note:

    All forms should be forwarded to MOIC on an expedited basis.

  4. Not processable offers (with the exception of offers returned because only the application fee was submitted with a personal check, not processable offers submitted solely for unassessed liabilities and offers submitted solely for a liability(ies) with an expired CSED(s)) will be returned to the clerical function with the associated Form 3210, Form 2515 and Form 3753. The PE will prepare the return letter and envelope for mail out. The following actions must be taken:

    • Date and sign the return letter

    • Include with the letter any other associated documents

    • Seal the envelope for mail out

    • Close with final disposition 10 on AOIC

    • Include the Form 656, Offer in Compromise

    • Return to the clerical function to be mailed

    Note:

    If the offer is being returned because the taxpayer submitted only one $150 personal check, or is a not processable offer submitted solely for an unassessed liability(ies) or an offer submitted solely for a liability(ies) with expired CSED(s) do not seal the envelope. The clerical function must associate the check(s) with the offer package before it is returned.

  5. If the offer was determined to be processable and the payments processed through PCC, forward the related Form 2515 to MOIC for processing with a copy of the Form 3210. The Form 3210 serves as the transfer transmittal.

  6. The COIC sites will retain processable offers for further OIC processing and assignment.

5.8.2.11  (05-14-2013)
Identifying CDP Cases under the Jurisdiction of Appeals

  1. The procedures below apply to cases falling under the jurisdiction of Appeals. They do not apply to CDP procedures established for cases investigated by COIC. See IRM 5.8.3.3, Routing Cases Based on Jurisdictional Responsibility, for guidance.

  2. OICs submitted directly to the Compliance employee, are occasionally identified as having an open CDP control. When this occurs, the COIC site CDP coordinator will research Appeals Centralized Database System (ACDS) to determine if the CDP is still open, and if a determination letter has been issued.

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

  4. If the offer is under the jurisdiction of Appeals:

    • Change the case category code to 10, select Offer Type Collection Due Process , which will change the Offer Type Code to "P" and transfer the case to AO 21.

    • Forward the case file to Appeals

5.8.2.11.1  (05-14-2013)
Determining Processability for Appeals Collection Due Process

  1. If Collection files a lien while an offer is being investigated, the investigation will continue. If the taxpayer files a Collection Due Process (CDP) request because of that lien and the CDP remains open, the offer falls under the jurisdiction of Appeals.

  2. If the case falls under the jurisdiction of Appeals but is being worked in COIC, change the case category code to 10 and select Offer Type Collection Due Process which will change the Offer Type Code to "P" .

  3. Appeals may require Collection's assistance to complete the investigation on complex cases. In those cases, an Appeal Referral Investigation (ARI) may be issued to a field RO Collection group.

  4. The same processability criteria will be applied to these cases.

  5. Payment processing should be through RS-PCC or PCC as appropriate.

  6. Appeals will provide COIC with both processable and not processable determination letters containing all necessary information, including the Appeals contact information on Appeals Transmittal Form 3210, Document Transmittal. Appeals will provide two copies of the Appeals Transmittal Form 3210. One copy is for COIC clerical filing and the other copy will remain with Form 656, Offer in Compromise, and related documents. 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
    1. Prepare the not processable letter and the Form 656, Offer in Compromise, to mail to the taxpayer in accordance to current IRM procedures.

    2. Access the AOIC Payment screen and input the payment data.

    3. Send an email to the SO/AO with the information as to why the offer was deemed not processable. The Appeals employee name and fax number should be noted on the Appeals Transmittal Form 3210, Document Transmittal.

    4. Fax a copy of the not processable letter to the Appeals employee.

    Note:

    The Appeals Transmittal Form 3210 should remain with the case until a processability determination has been made. A copy should be retained by the Clerical staff in Appeals.

    The offer is not processable and no remittance was attached
    1. Prepare the not processable letter and the Form 656 to mail to the taxpayer in accordance with current procedures.

    2. Send an email to the SO/AO with the information as to why the offer was deemed not processable. The Appeals employee name and fax number should be noted on the Appeals Transmittal Form 3210.

    3. Fax a copy of the not processable letter to the Appeals employee.

    If the offer is processable and a remittance is attached
    1. Access the AOIC Payment screen and input the fee and payment data and process the payment through RS-PCC or PCC, as appropriate.

    2. Mail the processability letter to the taxpayer.

    3. Send a copy of the letter and the original offer package to the Appeals employee designated on the Appeals Transmittal Form 3210. The Appeals employee name and fax number should be noted on the Appeals Transmittal Form 3210.

    Note:

    The Appeals Transmittal Form 3210 should remain with the case until the processability determination has been made. A copy should be retained by the Clerical staff in Appeals.

    If the offer is processable and the taxpayer submitted and qualified for the low income certification
    1. Mail the processability letter to the taxpayer.

    2. Send a copy of the letter and the offer package to the designated Appeals employee on Appeals Transmittal Form 3210. The Appeals employee name and fax number should be noted on the Appeals Transmittal Form 3210.

  7. If the offer was deemed not processable send an email notification to the AO/SO advising the reason.

  8. COIC will advise the AO/SO when it is necessary for the Appeals employee to secure additional Form 656, application fee(s), and/or required initial payments prior to the investigation by generating the letter identifying Option "Y" criteria. The COIC site will prepare Appeals Transmittal Form 3210 for transmittal of the processable offer back to Appeals. The Appeals Transmittal Form 3210 will include the following information:

    • List the specific periods with the TC 480

    • Identify an Option "Y " condition

    • Copy of Form 3244, Payment Posting Voucher, (showing the designation of money; i.e., fee, periodic payment received, or partial payment of 20%)

    • Non-compliance issues

    • Additional forms, fees, and/or payments

  9. 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. The Form 3244, Payment Posting Voucher, should show the IRS received date for the date of the payment.

    If… Then...
    It is determined that the case is under Appeals jurisdiction and the CDP condition is identified while the offer is being processed through COIC
    • The COIC site CDP coordinator will advise the AO/SO of the processability determination.

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

    • The COIC site will follow the current procedures to process the letter and application fee.

    It is determined the case is under Appeals jurisdiction but the CDP condition is identified after the offer has been deemed processable and moved to a workable inventory COIC will:
    • Input CCC 10, Offer Type Code "P" and transfer to AO 21, and ship the offer to Appeals.

5.8.2.12  (05-14-2013)
Changing Status Codes

  1. If the offer is determined to be processable, it may be necessary to change the status code to 71.

  2. If tax periods are in status 53, 61, 63, 72 or if the Form 657, Offer In Compromise/Revenue Officer Report, indicates that Tax Delinquent Accounts (TDAs) are to remain in the field, remove the "Y" on each tax period on the MFT screen. Do not change the status of those accounts unless the module is a Status 53 with Closing Code 03 (unable to locate) or Closing Code 12 (unable to contact).

  3. Offers in status 60 (installment agreement) – for offers with a status of 60 the indicator should be changed to Status 71. If the offer cannot be accepted, the installment agreement should be reinstated. In those cases, the reinstatement fee for the IA will be waived. See Exhibit 5.8.2-2, COIC Procedures for Status 60 / 71 Changes, below for instructions.

Exhibit 5.8.2-1 
IAT Tools That Work For You in COIC

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Exhibit 5.8.2-2 
COIC Procedures for Status 60 / Status 71 Changes

The below procedures have been established to assist the COIC sites taking a taxpayer account from Status (STAT) 60 to STAT 71 and placing the account back into STAT 60 if the offer is rejected, returned, or withdrawn.

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