All offer receipts other than those based solely upon DATL are reviewed to determine if they are processable. No application fee or TIPRA payment is due with the submission of DATL offers, including DATL offers to compromise a TFRP or PLET. 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 explains the procedures to be followed for determining jurisdictional responsibility, processability, and case building.

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

Multiple offers submitted with one remittance intended as the application fee(s) and/or payment(s) for all will be processed. Load the cases to the Automated Offers in Compromise (AOIC) system. Prepare the AOIC Combo Letter with the "Y" paragraph. If the taxpayer fails to respond to the request, return the offer.

COIC PE's are responsible for determining processability of all offers received and worked by the Service, including DATL offers to compromise a TFRP or PLET. All other DATL offers are processed by the Centralized DATL Unit. See IRM 5.8.2.2. This determination must be made within 14 calendar days of receipt of an OIC at the appropriate COIC site.

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

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law on May 17, 2006. The new law changed the rules for the submission of OIC.

The law stipulates that OIC's received on or after July 16, 2006 must include the application fee, and based on the offer terms, one of the following:

Document the terms of the offer on the AOIC Terms Screen.

If the taxpayer submits both the application fee and the required initial TIPRA payment (20 % or first installment) in one check, the $150 Application Fee will be entered first and the remainder will be applied as the payment amount. A decision concerning whether the submitted payment complies with the offer terms will not be made until a processability determination has been completed.

Insufficient remittance of the required initial lump sum cash payment (20% of the offer amount) will be considered a perfection issue.

Insufficient periodic payments will render the offer not processable and the offer will be returned to the taxpayer. Processing procedures are addressed in IRM 5.8.3.11, Types of Perfection.

The required initial TIPRA payment (20% or periodic payment) will be applied to the taxpayer’s liability in all instances. These monies are not refundable to the taxpayer.

Taxpayers may designate how these payments are to be applied to the tax liabilities. If the taxpayer does not designate how these payments are to be applied, the IRS will apply them to the tax liability with the earliest unexpired CSED.

Application fees will continue to be refunded to the taxpayer on not processable offers.

Qualified taxpayers may continue to submit Form 656-A for a waiver of the application fee. Taxpayers who qualify for a waiver of the application fee will also be exempted from all TIPRA payments. If, during the investigation, the OI determines the taxpayer does not qualify for the waiver, make one attempt to request the taxpayer submit the required initial TIPRA payment and application fee. If the taxpayer fails to respond, the offer will be returned as a processable return.

Incoming offers will be sorted in the following categories:

If the taxpayer submits only the $150 application fee and does not submit the required initial TIPRA payment (any portion of 20% of a lump sum cash offer or the required initial payment of a periodic payment offer), the offer will be deemed not processable upon receipt, and will be returned. These offers must receive expedited processing to generate the return letter and update the AOIC history to meet the 24-hour deposit requirement.

The following are procedures for immediate processing of the not processable returns due to receipt of the $150 application fee submitted with a personal check.

The following are procedures for immediate processing of the not processable returns due to receipt of the $150 application fee submitted with certified funds (money order, bank check, cashiers check, government check).

The following procedures will only apply if 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.

If the processability determination and return package cannot be completed within 24 hours of receipt, the certified funds payment instrument must be deposited upon receipt and processed in accordance with the instructions below.

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

It is possible the taxpayer may submit the $150 Application Fee, the required initial TIPRA payment, and a deposit with the Form 656. See IRM 5.8.2.7 for further discussion on what constitutes a deposit.

All checks must be deposited within 24 hours, with the exception of those personal checks submitted with offers deemed not processable.

Once the offer is deemed processable, the process examiner will update AOIC changing the "N" to a "Y" and process the offer in accordance with established procedures.

If the offer is deemed not processable after the check(s) is deposited, prepare the Form 3753, Manual Refund Posting Voucher, to manually refund the $150 application fee to the taxpayer. Once the offer is deemed not processable take the following steps:

The required initial TIPRA payment and the deposit (if applicable) will be deposited to the 4710 Account. Once a processability determination has been made, annotate the Form 2515 with the following abbreviations to move the payment from the 4710 Account to the taxpayer’s liability(s) as applicable.

Form 2515 Annotations (Abbreviations) – COIC will use the following 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.

In all cases, 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 and should be moved 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 and application fees may be refundable.

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 MOIC for processing. Annotate the AOIC history screen.

If the amount submitted with the Form 656 exceeds the amount required, the entire amount will be treated as a non-refundable payment of tax, unless the taxpayer indicates on the Form 656 to treat the excess amount (less the $150 application fee if one check was submitted) as a deposit.

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. Any payments other than the application fee, required TIPRA payment, or deposit must be processed on Forms 2424 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 2515 using the IRS received date as the payment date.

If the taxpayer submits multiple checks:

The "If and Then" table below provides the criteria for processing on the above sorts:

Subsequent payments (periodic payment offers) made during the offer investigation must be deposited within 24 hours of receipt using Form 3244 and in accordance with the Discovered Remittance procedures outlined in IRM 3.8.46.1, Discovered Remittances.

Process the check through the Manual Deposit function at the Cincinnati Submission Processing Center.

Forward to the Campus Support Mail Team with instructions to process the check through manual deposit.

If the payment is submitted on Form 656-PPV, Partial Payment Voucher:

For payments processed through PCC, Cincinnati Accounting receives the initial notification of a dishonored OIC payment from the Federal Reserve Bank though the Electronic Verification and Image Services (ELVIS) automated system. The Cincinnati Dishonored Check Unit will notify the taxpayer by mailing them a copy of the dishonored check and the Form 12993-A, Check for Offer in Compromise Payment Not Accepted by Bank.

Cincinnati Accounting will fax copies of the dishonored payments to the COIC site that originated the Form 13479.

Upon notification of a dishonored application fee and/or TIPRA payment, the site will determine the current AOIC offer assignment by querying the offer number annotated on the upper left hand corner of the check. For Appeals CDP offers, see IRM 5.8.3.6.1(3).

If the payment has been moved from the 4710 Account to the Master File, the Dishonored Check Unit will reverse the payment with a TC 671. If COIC or MOIC fail to receive notification of the dishonored payment, the dishonored check can also be identified by the posting of a TC 671 on IDRS.

Upon notification of a dishonored application fee and/or TIPRA payment, the offer will be immediately returned to the taxpayer with the appropriate AOIC letter for a dishonored check. Document the AOIC history with the following information:

If the payment was dishonored while still in the 4710 account, Accounting will annotate their copy of the Form 2515 as appropriate.

If the taxpayer or their representative offers to replace the dishonored check and requests reconsideration of their offer, contact by the taxpayer or their representative must be made within 10 days of the date of the initial AOIC return letter. The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time. See IRM 5.8.7.3 for reconsideration procedures.

The taxpayer must be informed that the offer will not be reconsidered if the payment is not made with certified funds. A due date for receipt of the payment must be provided to the taxpayer or their representative. Document the case history. It may be necessary to advise the taxpayer or their representative to submit the payment by overnight mail. In those cases, it should be mailed to either of the following addresses:

To ensure proper handling, advise the taxpayer to include a letter requesting reconsideration of the offer.

If the payment was dishonored while still residing in the 4710 Account, the payment should be processed through established deposit procedures. A copy of the Form 2515 must be forwarded to the appropriate MOIC function. Clearly indicate on the copy of the Form 2515 that the payment is a replacement for a dishonored check. MOIC will load the payment on the AOIC deposit screen once the AOIC record is reloaded. MOIC is responsible for ensuring the payment is applied to the Master File as originally intended.

If the payment was dishonored with a TC 671 on the Master File, prepare a Form 3244 to post the payment as a replacement for the dishonored payment.

Upon receipt of the replacement payment, the employee that processed the payment must reload the offer on AOIC, if appropriate. The employee will also be verify if the payment was received within the established deadline as annotated in the AOIC history. If the payment was received within the established timeframe, continue working the offer. If the payment is not received by the specified due date, the payment will be processed in accordance with TIPRA payment requirements, and the case will not be opened as a reconsideration. See IRM 5.8.7.3 for reconsideration procedures.

Taxpayers are required to include one application fee and TIPRA payment or a Form 656-A for each Form 656 submitted. The table below is intended to assist in identifying a processable offer for application fee purposes and provide guidance on advising the taxpayer when more than one Form 656 application fee, initial TIPRA payment, 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.

COIC sites are solely responsible for determining offer processability. See IRM 5.8.3.4.1, Determining Processability, for processability criteria. To accomplish this, PE's must take the following actions:

Review AOIC and prior case histories for any previous offers. Document the current case history with the findings. This will allow the OI to determine upon initial analysis if the offer was submitted "Solely to Delay Collection." See IRM 5.8.3.19, Offers Submitted Solely to Delay Collection.

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

If the offer is not processable:

Caution should be exercised to ensure that no IDRS prints or other internally generated documents are sent to either the taxpayer or the POA. All internal documents should be destroyed. Nothing is required to be maintained in local closed files on these cases because this information is available from IRS systems.

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" is input on AOIC to reverse the 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.

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

If the offer is processable:

Generate the Full Pay Worksheet from AOIC and retain a copy in the case file.

Communication with the taxpayer and/or authorized representative may be necessary to perfect the offer while it is pending. This communication may be completed by letter, fax, phone, or personal contact.

If an offer was submitted by an RO and it is processable, but the RO has determined that the offer was submitted "solely to delay collection" , the COIC site will contact the originating RO to advise when the return letter has been issued. Unless a jeopardy situation exists, the RO must wait for COIC notification that the return letter has been issued before taking any collection enforcement action. See IRM 5.8.3.19 for delegated approval authority.

COIC will generate the TC 480 and Status 71 through the AOIC system. However, there may be situations when the Status 71 will not generate (e.g., MFT 31 modules created prior to January 2005, imminent statute, etc.). In those cases, the field OS may request input of the TC 470 with CC 90 to suspend collection activity.

Taxpayers that submit a periodic payment offer are required to continue making regular payments during the investigation process. It may be necessary for the OI working the case to monitor the payments. Until AOIC programming can be completed, the OI may use a calendar, tickler file, notating the follow-up date on the front of the file folder, or something similar to ensure the taxpayer remains compliant with the payment requirements.

Send the taxpayer the Forms 656-PPV with instructions for completion. The fill-in paragraph may be used to inform the taxpayer that payments must be made during the investigation process and Form 656-PPV must be used when submitting the payment. It is recommended that this form be included with the Combo letter.

It is the responsibility of the OI to monitor the payments, and to ensure they are correctly applied to the taxpayer’s account(s). If an error is discovered, the OI must take the corrective actions. The OI may need to research IDRS to determine that the payments have been appropriately applied. A Form 4442 should be prepared to correct the payment posting.

During the offer investigation, if the taxpayer fails to make the periodic payments the OI must attempt one phone call to notify the taxpayer of the need to make the payment(s).

If no contact by telephone can be made, a letter must be issued to notify the taxpayer of the deficiency.

Ensure that the TC 480 has posted to each tax period shown on the Form 656:

Certain errors in an offer must be corrected in order to perfect the offer and enable the Service to begin the offer investigation. The combo letter on the AOIC system is designed to communicate with the taxpayer and their representative to request the necessary corrective action. If there is no response to the request letter, return the offer to the taxpayer as not perfected. A return for failure to perfect an offer does not require a Form 1271, Rejection or Withdrawal Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. The following errors must be corrected before beginning the investigation:

When sending a combo letter to perfect the errors listed in (1) above or to request financial substantiation, also include a request to correct the following errors. If acceptance of the offer is considered and a combo letter was not sent but the errors listed below exist, they must be corrected prior to the recommendation to accept the offer.

If a period with an amount due is missing from the Form 656, but all periods due can be determined from IDRS or other documents submitted with the offer, add the missing periods to the AOIC MFT screen and to the Form 656.

When a taxpayer has included a period(s) for which there is no apparent amount due, do not add the period(s) to AOIC. Contact the taxpayer to determine if any issues are pending that may result in additional tax. If there is no tax due after contact with the taxpayer, document the history and do not add the period(s).

If the basis for compromise is not indicated, but it can be determined by reviewing the package, begin the investigation.

Taxpayers may submit an OIC based on DATC, yet indicate on their application an ability to pay the account in full. These cases, once determined to be processable, will be screened out. Absent any special circumstances they will be rejected with no further investigation or verification. The taxpayer will be directed toward the appropriate resolution for the delinquency.

The rejection letter will be the first communication with the taxpayer. A decision to reject with appeals rights is adequately justified by the taxpayer's self-disclosed ability to pay in full.

For processable offers one of the first considerations is to determine if the taxpayer can pay in full. The following initial review should be conducted by the COIC site on all processable offers to make that determination.

For all processable offers to be transferred to an Area Office the COIC site will:

For all processable offers not transferred to an Area office or for those not qualifying under the "Screen for Obvious Full Pay" procedures, the CIS should be reviewed to verify the taxpayer has submitted all supporting documents.

TIPRA requires inclusion of a partial payment upon submission of an offer. For lump sum cash offers, the taxpayer must include a $150 application fee and 20% of the offered amount. If the taxpayer sends less than 20%, it will be considered a processable offer and investigated accordingly. It will be necessary to request the remainder of the required 20% when the combo letter is issued.

An OIC submitted by a taxpayer who has unfiled tax returns will be a processable offer and investigated accordingly. It will be necessary to either secure the unfiled returns or a statement addressing the filing requirements.

If the taxpayer submits delinquent tax returns with a balance due, the OI will treat the liabilities as missing periods and process the return(s), add the missing periods on the AOIC MFT screen, include the periods on the original Form 656, and continue working the offer.

If the taxpayer indicates that they are no longer required to file a tax return, it will be the responsibility of the OI to close the filing requirements or indicate no liability to file; that is, input of Transaction Code 590 or 591, as appropriate. Refer to Document 6209, Sections 8 and 11 for the appropriate transaction and closing codes and request input of the TC 590/591.

The following information is considered necessary to allow for the OI to make a determination. If the following expenses were claimed on the CIS but substantiation was not included, supporting documentation should be requested.

Substantiation should also be requested for the following information; however, if the taxpayer fails to provide the supporting documentation the expense should be disallowed unless the value can be determined using other sources as indicated below. If no value can be found, make a determination based on all other information. The following list is not all-inclusive.

Prior to assigning the offer for investigation, internal sources must be searched.

Conduct research using IDRS, the electronic locator source, state motor vehicle records, and in-house real property valuation sources, to verify claimed amounts and to identify undisclosed assets or sources of income.

Update the AOIC history to annotate the information and documents received and sign any amended or revised Forms 656 with the current date. Retain the original Form 656 and any amended Forms 656 in the file.

If the determination is made to return the offer for failure to provide the requested information, use the appropriate paragraph(s) in the AOIC return letter.

PE's are required to initiate the next appropriate action on cases where taxpayers have responded to the combo letter within 10 calendar days from the date the offer is assigned to the PE.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or their representative fails to meet the additional deadline, initiate the procedures as defined in IRM 5.8.3.17, "No Reply" Procedures.

The failure to provide proof of payment of any monthly expenses claimed on the CIS, for health care, court orders/court-ordered payments, child/dependent care, life insurance, secured debt, or other expenses, or the failure to submit current loan balance statements for real estate mortgages, or current loan balance statements for motor vehicles will by itself not be a sufficient reason to return an offer.

If a court-ordered payment is to be acknowledged as an expense, a copy of the court-order must be secured to determine the number of months to allow for the remainder of the payments. If the court-ordered payment is not to be allowed, a copy of the court order will not be required.

Determine if the taxpayer's response or original submission statements and documents addressed all requested items. The failure to provide the desired information/documents will by itself not be sufficient reason to return an offer, as long as the taxpayer addressed the particular information or documentation requested.

Below are some examples of when a taxpayer may address, while not actually providing, the requested documentation. In these cases, the taxpayer would be considered to have substantially responded and the case should be forwarded to an OI for further investigation and consideration. This list may include but is not limited to the following:

For offers where it is determined the taxpayer has substantially replied or adequately addressed the requested information or documents (even if they did not specifically include them in the response), or where they failed to substantiate certain claimed monthly expenses or loan balances, the case will be assigned to an OI for further consideration.

If the OI determines that the RCP calculation cannot be completed because of the missing information or documents, the OI will attempt to telephone the taxpayer (or representative, if applicable) to secure any needed substantiation, explaining the information is needed in order to continue the offer investigation. If unable to contact the taxpayer by telephone after one attempt or if the taxpayer or representative is unable to provide the information to the OI within a reasonable amount of time (fax transmission is preferable), document the AOIC history and return the offer for failure to provide necessary information.

If any of the errors identified in IRM 5.8.3.11 above were not corrected to perfect the offer, the offer will be returned. The following conditions assume that the taxpayer's response corrected any perfection errors.

If the taxpayer fails to submit the balance of the required initial TIPRA payment(s) (20% for a cash lump sum offer) within a reasonable amount of time, the offer will be considered to be a processable return. The OI should issue the appropriate AOIC withdrawal letter and mail it to the taxpayer.

After the offer is determined processable and the combo letter has been sent, the offer should be held for the required number of days to allow the taxpayer to provide the requested information. If after the designated time period has passed and the COIC site has not received a response, an automated return process will be completed. The AOIC system will generate all the necessary letters and documents to close the case. Before closing the offer the employee must check AOIC to verify that no response was received.

Offers for which the PE determined the taxpayer has substantially replied or adequately addressed the requested information or documents (even if they did not specifically include them in the response), or where they failed to substantiate certain claimed monthly expenses or loan balances, will be assigned to an OE for further consideration. The PE will not implement the "No Reply" procedures.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or their representative fails to meet the additional deadline, initiate the "No Reply" procedures as defined above.

See IRM 5.8.7.2.2.3 for additional procedures.

A taxpayer's installment agreements remains in effect, if the taxpayer submits a lump sum cash offer only while the offer is pending. If the OIC was submitted as a periodic payment offer, the taxpayer will only be required to make the TIPRA payments. The cases submitted under periodic payment criteria will be changed to Status 71.

For offers submitted after December 31, 1999, collection by levy on property owned by the offer taxpayer is prohibited while the offer is pending unless collection is in jeopardy.

The term "jeopardy" has the same definition described Policy Statement P-4-88. Collection is not considered to be in jeopardy because an undisclosed asset was discovered during the investigation.

Upon receiving information that a jeopardy levy has been approved, contact the employee issuing the levy. If it is agreed that the offer was filed to hinder or delay collection, follow procedures in IRM 5.8.3.19, Offers Submitted Solely to Delay Collection, below to return the offer.

The prohibition on levy does not require release of a levy that was served prior to the offer submission. The taxpayer's circumstances should be considered when making a determination to release a levy or keep it in place while the offer is pending.

While an offer is pending there is no prohibition on filing notices of federal tax lien. See IRM 5.8.4.9, Notice of Federal Tax Lien Filing, for a discussion of filing a notice of federal tax lien while an offer is pending.

When it is determined that an offer is submitted solely to delay collection,, the offer can be returned to the taxpayer without further consideration.

The Field OIC group manager and the COIC Unit Manager, have delegated authority to approve returns based on solely to delay collection.

An offer is not considered submitted solely to delay collection just because there is an imminent CSED issue or if an offer has been investigated and rejected and the taxpayer exercises appeal rights.