5.8.8  Acceptance Processing

Manual Transmittal

November 04, 2014


(1) This transmits a topic based revision for IRM 5.8.8, Offer in Compromise, Acceptance Processing to incorporate procedural changes based on Affordable Care Act (ACA) Provision 1501: Requirement to Maintain Minimum Essential Coverage (Individual Shared Responsibility) (IRC § 5000A).

Material Changes

(1) This IRM has only been updated for the Affordable Care Act (ACA) Provision 1501. Any content unrelated to the ACA provision was not reviewed for currency or accuracy.

IRM reference Changes Included language concerning MFT 35 under IRC § 5000A individual shred responsibility payment. Included language that if the OIC contains MFT 35 periods, the related liabilities will not be included in the Notice of Federal Tax Lien (NFTL). Corrected IRM reference in Note. Added a reference to IRM, which provides instruction to load FRC information on AOIC.

Effect on Other Documents

IRM 5.8.8 published 08–08–2014 is superseded.


SB/SE Collection and Campus Compliance employees

Effective Date


Rocco A. Steco
Acting Director Collection Policy  (09-23-2008)

  1. The determination to accept an OIC is based on sound decisions relating to an analysis of the taxpayer's facts, circumstances, and financial situation. Documentation supporting this decision and approval at the proper levels are required to complete the acceptance. This section describes the process for accepting an OIC.  (08-08-2014)
Amendment or Addendum to Form 656

  1. When an OIC is being recommended for acceptance, there may be a need to make changes to the OIC. Depending on the type of change, the taxpayer may be required to submit either an amended Form 656 or an addendum.

    1. Secure an amended Form 656 when there are changes to:

      (1) The entity,

      (2) The TIN, and/or

      (3) The signature


      No amended Form 656 is required if the changes meet the criteria defined in IRM, Pen and Ink Changes to the Form 656, below.

    2. Secure an addendum when the only changes are to:

      (1) The payment amount, and/or

      (2) The payment terms

  2. The submission of an amended Form 656 or addendum may also require an additional payment of either 20% of the revised offer amount (less the amount previously submitted) or the revised periodic payment. The taxpayer will be given credit for payments made with the original OIC.  (08-08-2014)
Amending Form 656

  1. An amended Form 656 will be required if the changes are for other than those defined in:

    • IRM, Addendum to Form 656 or

    • IRM, Pen and Ink Changes to Form 656.

  2. An amended Form 656 will also be required when an original Form 656 was made processable without a signature or with an electronic signature and the OIC is now ready to be accepted. In these cases, an original signature must be secured.

  3. When accepting the OIC requires an amended Form 656, the following actions will need to be taken on AOIC:

    1. Update the Summary screen by inputting "A" (Amended) to reflect receipt of an amended Form 656.

    2. Update the Offer Amount , if applicable.


      Include the total offer amount, not the amount remaining after any applied TIPRA payments.

    3. Update the OIC type (cash or deferred), if applicable.

    4. Do not change the OIC pending date.

  4. Write "AMENDED" on the top margin of Page 1 of the Form 656.

  5. Document the case history.  (08-08-2014)
Addendum to Form 656

  1. The addendum is secured in lieu of an amended Form 656 and should be obtained when the payment terms and/or the offer amount are the onlychanges required.


    See IRM below for instructions on the completion of the addendum.

  2. Prior to sending the addendum to the taxpayer, contact by telephone should be attempted to inform him or her of the purpose and importance of promptly reviewing, signing, dating, and returning the addendum. Also, inform the taxpayer that the OIC may be returned without appeal if they should fail to sign and return it within the agreed time.

  3. Prepare the letter to the addendum. See Exhibit 5.8.8–3 below.


    The letter may also be found on AOIC. Open AOIC, then (Select) "OIC Transmittal" then (Select) "Click here for Addendum to Form 656" (Select) "Addendum Letter Format" .

  4. Complete the addendum before sending it to the taxpayer.


    The addendum may also be found on AOIC. Open AOIC, then (Select) "OIC Transmittal" then (Select) "Click here for Addendum to Form 656" (Select) "ADDENDUM TO FORM 656" .

  5. When the signed, dated addendum is received, do not cross out or update the original Form 656.


    The signed and dated addendum may be mailed or faxed by the taxpayer. In addition, the "IRS Only" box in Section 5 (Payment Terms) of the Form 656 must be completed.

  6. The addendum must be date stamped. There is no requirement for the receiving IRS employee to sign the addendum upon receipt.

  7. The acceptance letter should reflect the date of the original Form 656.

  8. The addendum must be attached to the original Form 656.

  9. The addendum does not reset the 24-month mandatory acceptance period.

  10. Only one addendum is required for joint OICs.  (08-08-2014)
Instructions for Completion of the Addendum

  1. It is the responsibility of the OE or OS to complete the addendum before sending to the taxpayer or POA following the below instructions.

    1. Part 1 — Enter the taxpayer name; original offer number; taxpayer(s) Social Security Number (SSN) or Employee Identification Number (EIN); original IRS received date; original offer amount; and original tax periods to be compromised.

    2. Part 2, Revised Offer in Compromise Amount — Enter the revised, agreed offer amount. Line A – Enter the amount paid with the original OIC; Line B – Enter the amount and date of TIPRA payment(s) submitted with an amended/revised Form 656; Line C – Enter the amount of any additional payment to be included with the addendum; Line D – Enter the total of all periodic payments received since the original OIC was submitted.

    3. Part 3, Revised Offer in Compromise Payment Terms — Cash Offer payable in 5 or fewer payments in 5 or fewer months — Enter the revised terms for a lump sum cash OIC. Lines E through I — define the amount and number of payments.


      Generally, a cash OIC cannot exceed 5 payments made within 5 months from the acceptance date. In rare situations, an exception may be allowed to the five month payment requirement when instances such as the ones shown in the examples below exist (not all inclusive). In these cases, more flexible payment terms may be warranted, but may not exceed 24 months. Also, in these cases, while they may be submitted and considered as cash offers, the RCP should be calculated as a periodic offer (24 months).


      A non-profit organization submits a Doubt as to Collectibility with Special Circumstances offer. This organization’s services are critical to the community and it receives funding through grants from federal and state sources. Based on when the grant funds are received, monies to pay out the OIC will be available in months six, nine and twelve. The financial statement appears to support the offer and the taxpayer’s overall compliance history does not weigh against acceptance. Therefore, the offer is accepted as a lump sum cash payment offer payable in months six, nine and twelve.


      The taxpayer submits an offer under Effective Tax Administration based on non-economic hardship. The taxpayer was using a payroll service provider (PSP) who deducted all tax payments from the taxpayer’s bank account, yet did not remit them to the Service. The taxpayer is a food service company who has been in business since 1987. Their main customer is the Department of Defense. Their overall compliance history has been positive. The majority of funding from DOD is received in October and January. The financial statement appears to support the offer. The offer is accepted as a lump sum cash payment offer payable in months eight and eleven.


      The balloon payment must be in the government's best interest. See IRM

    4. Part 4, Revised Offer in Compromise Payment Terms — Periodic Payment Offer payable in 6 — 24 months — Enter the revised terms for a periodic payment OIC.


      A periodic payment OIC cannot exceed 24 months. Part 4 must equal the amended offer amount minus any payments entered in Part 2, lines A through D. The terms for periodic payments allow the taxpayer to make a final balloon payment or unequal monthly payments. The below example provides language that may be used when the taxpayer is proposing a balloon payment at the end of the OIC agreement.


      $250 will be sent beginning on the 15th of January 2014, and then $250 will be sent in on the 15th of each month for a total of 23 months with a final payment of $7,500 due on the 15th (day) of the 24th month of the agreement.

    5. Signature(s) — The taxpayer(s) or authorized Corporate officer must sign and date the addendum.


      A joint OIC must be signed by both taxpayer's.  (08-08-2014)
Pen and Ink Changes to Form 656

  1. Pen and ink changes may be made to correct the below issues. No amended Form 656 or addendum will be required in these instances. However, if the situation is other than those defined in the below examples, an amended Form 656 or addendum must be secured.

    • Middle initial is incorrect or missing. It may be added or removed to match IDRS.

    • SSN or EIN does not match IDRS and it is apparent that the reason for the mismatch is a transposition of numbers.

    • A business name and EIN was included on the Form 656 but conversation with the taxpayer confirmed they do not want to compromise the liabilities of the company (LLC, LLP, etc.). Remove the name by lining through the entity information. Reverse the related TC 480(s) and remove the related periods on AOIC, if applicable.

    • When the terms are completed but the total amount offered is blank, has a simple addition error, or not completed. Total the payments as stated in the terms and fill in or correct the total amount of the offer.

    • Changing the day of the month of the payment(s) when requested by the taxpayer or POA.

    • Filling in the physical address, after verification with the taxpayer or POA.

    • Check the low income certification box when the taxpayer or POA includes a Form 656-A, Income Certification for Offer in Compromise Application Fee (For Individual Taxpayer Only), with the new Form 656 but fails to check the Low Income Certification box.

    • Round payments up or down to the nearest dollar, as appropriate. Below is an example of rounding the payments to eliminate odd cents.


      There is no requirement to make the payments in equal monthly installments.


      The taxpayer offers to pay $7,810 over 24 months for an average of $325.42 per month. Rounding the offer payments to $326 would equal an offer amount of $7,824. You may consider taking one of two options. Option 1 - Discuss increasing the offer to $7,824 paid at $326 a month for 24 months. Option 2 - The first payment could be set at $335 with the rest of the payments at $325 for the remaining 23 months to equal a total offer amount of $7,810. Any adjustments require telephone contact to discuss the options.

    • Add or delete periods. If an additional period is assessed after the original Form 656 pending date on AOIC, the Transaction Code (TC) 480 date will reflect the TC 150, TC 290, or TC 300 date, if there is a dollar amount associated. Do not use any TC date with zero amounts. If a period has been full paid through other than TIPRA payments, remove the period.


      Update the AOIC MFT screen by adding any new tax periods not included on the original Form 656 and/or deleting any tax periods that are no longer owed, unless the liabilities were paid as a result of TIPRA. In addition, the Form 656 allows the IRS to add or delete any liabilities that were not listed on the Form 656 or not found on IDRS. Therefore, an amended Form 656 is not required for the sole purpose of adding or deleting periods.

  2. In all instances when a pen and ink change is appropriate, the OE, OS, or PE must contact the taxpayer and/or POA by telephone to secure verbal approval before making the change(s). Conversations and approvals must be well documented in the case history.


    If no telephone contact for approval can be secured, an amended Form 656 or addendum must be secured correcting all deficiencies before acceptance, as defined in above.

  3. When pen and ink changes are made to the Form 656 the OE, OS, or PE must initial and date each change.  (08-08-2014)
Use of Electronic Signature on OIC Forms and Letters

  1. When employees are not co-located with approving officials, to expedite case closing actions certain documents have been approved to be signed with electronic signature. In order to secure the approval signature electronically it must meet the current security and verification standards of the IRS.


    The ability to use electronic methods of signature does not forego the delegation of authority defined in IRM, Delegation Order 5-1 (Rev. 3).

  2. The below documents have been approved for electronic signature on accepted OICs.

    • Form 7249, Offer Acceptance Report

    • OIC Acceptance Letter

    • All Collateral Agreements — Form 2261, Collateral Agreement - Future Income (Individual); Form 2261-A, Collateral Agreement - Future Income Corporation; Form 2261-B, Collateral Agreement - Adjusted Basis for Specific Assets; and Form 2261-C, Collateral Agreement - Waiver of Net Operating Losses, Capital Losses, and Unused Investment Credits.

  3. Necessary documents for the approving official to determine the appropriateness of the closing action must be provided with the request.


    Approving officials may use their discretion to determine required documentation based on the specific case and type of closing action. They may also determine when an original signature on any OIC form or letter is the appropriate method of approval.

  4. A printed copy of the electronically executed document, form and/or letter, must be included in the case file.

  5. Follow the below procedures to prepare documents for electronic signature:

    • E-mail, E-Fax, or scan and save the documents in PDF format.

    • Internal use forms, including Form 7249, Offer Acceptance Report, may be signed (certified with visible signature) using the approved signature method.

  6. The letter being provided to the taxpayer should include a graphic signature in the Signature block.


    Specific instructions on how to include an image of your handwritten signature in the digital signature selections are available through (Select) "Adobe Acrobat Help" (Select) "How to Sign" (Select) "Create a Signature Appearance" .

  7. The ICS and/or AOIC history must clearly indicate the documents that are being submitted to the approving official.  (08-08-2014)
Faxed Amended Forms 656

  1. The amended Form 656 may be accepted by fax if:

    • there is an open OIC;

    • contact has been made with the taxpayer by phone or in-person;

    • the taxpayer history file is documented with the date of contact and notation is made that the taxpayer requests to send the form by fax; and

    • the original Form 656 has an original signature(s).  (01-01-2015)
Required Actions Prior to Closing an OIC as an Acceptance

  1. Re-check IDRS Command Codes AMDIS and TXMODA — Tax must not be compromised unless it is assessed and legally due. On those cases where an audit, AUR, SFR, or ASFR was discovered during the investigation IDRS must be re-checked to ensure that all taxes included on the accepted OIC have been properly assessed and are still due and owing. If an open audit or AUR is found on a period included as part of the OIC, contact should be made to resolve the issue per IRM, Pending Assessments. If an amended return has been processed, the adjustment must post before acceptance. Document the case history.

  2. Check IDRS for Department of Justice or Docketed Court Controls — Status code 71 or 72 identifies more than a DOJ case. The OE or OS should check IDRS before acceptance for any Transaction Code (TC) identifying an open DOJ, tax court case, or judgment. If a Status Code 71 or 72, TC 520 or TC 550 with an indicator of 04 is present, the offer cannot be accepted without the approval of Counsel or DOJ. A list of status indicators may be found in Document 6209, Section 11 – Collection or on SERP under Document 6209. Area Counsel must be contacted to share your recommendation for acceptance with DOJ. See IRM, Tax Cases Controlled by Department of Justice and, Docketed Tax Court Cases, for additional information.


    A copy of the IDRS transcript must be included in the file if the offer is to be reviewed and approved by Counsel.

  3. Credit Report request— Verify that a full credit report has been requested when the current balance meets the amount defined in IRM, Required Credit Reports, and IRM, Securing Credit Reports to Verify Taxpayer Information. All requests for credit reports require managerial approval.


    A full credit report may be secured on any case to assist in locating taxpayer assets and verifying financial information, when appropriate. After reviewing the credit report, the case history must be documented with an analysis of the findings as well as the reason(s) for the request .

  4. Update AOIC — Update the AOIC record as follows:

    1. Main Screen — Update to reflect the correct basis for compromise, if changed, and document the existence of special circumstances, if applicable. Update the disposition code to 1 (proposed acceptance).

    2. MFT Screen — Verify the correct assessment date for each module, including MFT 35 — individual shared responsibility payment (SPR) assessed pursuant to IRC § 5000A. Update module(s) that may have changed. Go to the MFT screen; Select the "Update Accrued Date" tab; Input the date the interest is to be computed to; Go to the "Request Interest" tab and re-input the date for the accrual of interest; Review the data to make sure it is correct; Press "Submit" to populate the information into AOIC

      If... Then...
      Any modules have restricted penalty or interest Use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.
      Any modules are Non-Masterfile, and not on IDRS Secure an Automated Non-Masterfile (ANMF) transcript. Update as necessary using IDRS command code COMPAD and/or COMPAF.
      The module was full paid as a result of a payment action other than TIPRA (such as, refund offset, prior levy payment, etc.) Remove the period from the MFT screen on AOIC, and update the Form 656 to reflect the periods to be compromised.


      No amended Form 656 is required. See IRM, Pen and Ink Changes to the Form 656, above for instructions to add or remove periods on the Form 656.

      The payment(s) that satisfied the tax period included both a TIPRA payment, and other payment (such as, refund offset, prior levy payment) The MFT screen will reflect a zero balance due. Do not remove the period from the MFT screen on AOIC. Do not update the Form 656 to remove the periods that were full paid.


      No amended Form 656 is required. See IRM above for additional information.

    3. Terms Screen — Update the Accepted Terms screen to those reflected on the accepted OIC. Do not update the Proposed Terms.


      If a collateral agreement is secured, you must also update the Collateral section of the Terms screen with the information of the agreement. In addition, if a Form 2261-C, Collateral Agreement – Waiver of Net Operating Losses, Capital Losses, and Unused Investment Credits, is secured document the terms and include the following language — "...and all other conditions as set forth in the Form 2261-C attached to the form 656 which was signed by the taxpayer on (MM/DD/YYYY)." This action will ensure the language is also included on the Form 7249, Offer Acceptance Report.

  5. Refresh Masterfile Data — Go to the MFT screen and select "Refresh Masterfile Data" . This action should be completed prior to generating the Form 7249. This action ensures the Form 7249, the AOIC Masterfile Screen, TDS (Transcript Deliver System), or MFTRA-X are in close agreement since the Form 7249 requires various levels of approval, and both become public documents.


    If you have access to TDS you should use that system. MFTRAX will continue to be available; however; TDS should be the first option for ordering transcripts. Both AOIC and TDS provide redacted transcripts.

  6. Redacting the Transcript — Request a transcript using AOIC Masterfile Screen, TDS, or order a MFTRA-X as close to the acceptance date as possible without delaying acceptance. A complete copy should be retained with the case file. If the data has not been systemically redacted (as in most AOIC transcripts) for the public inspection file, the OE/OS must redact critical information by blacking out the taxpayer’s social security number (both primary and secondary, if a joint OIC) and/or Employee Identification Number (EIN) and all tax information that is not to be disclosed to the public; such as:

    1. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise

    2. Address (house number and street name only)

    3. Number of exemptions

    4. Filing status

    5. Adjusted gross income

    6. Taxable income

    7. Principal Industry Activity Code

    8. Transaction Codes with no dollar amounts. Redact the entire line including the date should be redacted.

    9. Transaction Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.

    10. Power of Attorney/Tax Information Authorization (POA/TIA) on file.

  7. Document the Case History — Before closing a case as an acceptance, document the case history on AOIC regarding the decision. For field employees using ICS, include a summary paragraph on AOIC which includes a sentence that the complete history is on ICS. Include any special instructions for the MOIC Unit regarding application of funds, the total offer payments received during the pendency of the OIC, whether a Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, was secured, and/or requesting a NFTL re-filing if one will be required during the terms of any periodic payment OIC. See IRM 5.12, Federal Tax Liens, for more information about when to re-file a NFTL.


    If MFT 35 liabilities were included in the OIC, the related periods will not be included in the NFTL.

  8. Generate and print letters and reports — Generate and print letters and report as follows:

    1. The Acceptance Recommendation Report should only be prepared on those cases meeting Counsel criteria (see IRM, Counsel). Make sure the Acceptance Recommendation Report and case history clearly and accurately reflect the reason for the acceptance. This is particularly important in Effective Tax Administration (ETA) and Doubt as to Collectibility with Special Circumstances (DATC-SC) cases (see Exhibit 5.8.8-1 below). The report should include the following information: (1) The cause of the delinquency and status of current compliance; (2) The amount of the RCP and an explanation of how the RCP was calculated; (3) Whether or not special circumstances exist and how they affected the agreed offer amount; such as age or existing health issues, etc.; (4) Negotiations resulting in the acceptable OIC amount; (5) A conclusion that summarizes the basis for acceptance.

    2. The Confidential Information Report may be required in those rare situations where relevant facts of a confidential nature exist that should not be included in the acceptance recommendation report complete a supplemental memorandum and include it in the case file. Do not include information already discussed in the OIC acceptance recommendation report.

    3. Generate and print the appropriate acceptance letter and POA letter, if applicable, for the signature of the delegated official(s). Attach copies of the accepted Form 656 and addendum, if appropriate, and any applicable collateral agreement(s).

    4. Generate Form 7249 verify that it reflects the current liability(s).

    5. Print Form 7249 for the required signatures. The accepting official has delegated authority for acceptance based on the type and dollar amount of the case. IRM, Delegation Order 5-1 (Rev. 3), provides the level of authority for approving all OIC dispositions.


      The approving official as defined in IRM must be the final signature.

  9. Assemble file using Document 9600 B — The file must be assembled using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document. The current revision of the labeled dividers is required.


    The Document 9600 B must remain in the packaged order. IMFOLI and SUMRY should be the top pages under the "Account Transcript" tab, followed by the balance of current transcripts. Credit Report, Power of Attorney, and Form 3040 should be the first 3 pages under the "Miscellaneous" tab, followed by current additional miscellaneous information.

  10. Submit the file for approval — Submit the file for all required signatures including routing to Counsel for review, if required. See IRM, Legal Opinion of Counsel, below.  (08-08-2014)
Closing Actions on Accepted Offers

  1. Upon securing all required approval(s) and signature(s), date and mail the acceptance letter(s). Acceptance letters generated at the end of the year should be dated and mailed the same calendar year that the letters are signed. Signed and dated copies must retained in the OIC file.

  2. Make a copy of the Form 7249 for the public inspection file. The copy must be redacted in accordance to IRM, above, and include all required signatures. Mail it together with the required sanitized transcripts to the appropriate office for filing in the public inspection file.

  3. Close the case on AOIC and process in accordance with procedures defined in IRM, Processing the Closed Offer File, below.  (08-08-2014)
Public Inspection File

  1. Public inspection of certain information regarding all OIC's accepted under IRC § 7122 is authorized by IRC § 6103(k)(1).

  2. For each accepted OIC, the file will only contain the following items:

    • A copy of the redacted Form 7249


      See IRM above for a list of redacted information.

    • The sanitized AOIC Masterfile Screen, TDS, MFTRA-X or ANMF transcript.

  3. The office that has accepted the OIC will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the public inspection file.

  4. Treas. Reg. § 601.702 (d) (8) provides that, for one year after the date of execution, a copy of Form 7249, Offer Acceptance Report, for each accepted OIC with respect to any liability for a tax imposed by Title 26 shall be made available for inspection and copying. A separate file of accepted OIC records will be maintained for this purpose and made available to the public for a period of one year.

  5. The public inspection file will be maintained in a location designated by the Area office. The file will be maintained in the Area where the taxpayer resides.

  6. The Area office may destroy the Public Inspection file after the one year period has expired.

  7. If a visitor has requested to view the Public Inspection File and attempts to take a picture either with a camera or camera phone, they should be informed that photos are prohibited in IRS facilities. If they continue to attempt to take unauthorized photos, local Physical Security and Emergency Preparedness (PSEP) security staff should be immediately contacted, as well as TIGTA, and/or Federal Protection Service (FPS) and the local police, as appropriate, to file a complaint in violation of CFR, Title 41, Subpart 101-20.310, (Conformity with Signs and Directions).  (08-08-2014)
Processing the Closed Offer File

  1. Once an OIC has been closed on AOIC, it should be held in-house until Embedded Quality (EQ) has had sufficient time to pull for review. Field Area Office EQ randomly selected cases are identified on the AOIC Quality Review Listing the following Monday after closure. If the case is not selected for review, the OIC should be released on AOIC on the following Monday after closure or as soon as practical thereafter, and the entire file mailed to the applicable MOIC unit. Care must be used to ensure that the OIC is mailed to the same unit it is released to on AOIC.

  2. If the case is chosen for EQ review, copies of the following documents should be made and placed in the file in lieu of the originals before the OIC is forwarded for review. The OIC should be validated and released on AOIC on the following Monday after closure or as soon as practical before sending the original documents to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to EQ.

    1. Original and amended Form 656, Offer in Compromise, or addendum

    2. Form 7249, Offer Acceptance Report

    3. Copy of the Acceptance letter(s)

    4. Any collateral agreements

  3. Before forwarding the case to the MOIC unit take the following steps:

    1. Verify that the original, any amended Form(s) 656, and addendum, if required, are in the case file.

    2. Check to be sure the Form(s) 656, Form 7249, IDRS, and AOIC all reflect the same tax liability(ies).

    3. Verify that the waiver dates on the Form(s) 656, IDRS, and AOIC are correct and consistent.

    4. Update Data Download before releasing jurisdiction to MOIC. This action will ensure the Primary Location Code and Collection Location Code are updated.

  4. Accepted OIC files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact must be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing or lost files.  (08-08-2014)
Acceptance Processing for Related, TFRP, Federal Employee, and Federal Contractor Offers

  1. When two or more related OICs are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. A separate file should be created for each entity containing the separate items that pertain to each OIC. It is not necessary to duplicate information that pertains to both or all files. The files must remain together and clearly marked indicating that there are related OICs (for example "1 of 2" and "2 of 2" ).

  2. When the accepted OIC includes Trust Fund Recovery Penalty (TFRP) assessments, a careful review must be made to ensure all TFRP assessments are included. Generally, TFRP assessments made before August 2000, combine all unpaid corporate tax quarters and were assessed under the tax period of the latest quarterly period owed by the corporation. TFRP assessments after August 2000, are made for each quarterly period that is owed by the corporation. The Forms 656 and 7249 must match and must reflect each individually assessed TFRP tax period.

  3. OICs from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee’s position or area of responsibility. The result of this consideration should be documented in the case file. OIC acceptances for employees of the IRS also require the approval of the SBSE Collection Area Directors or SB/SE Compliance Services Operations Manager (COIC).


    OICs from Federal civil service retirees are to be considered under normal procedures.

  4. OICs from a Federal Contractor require a determination of whether public policy implications exist. The result of this consideration should be documented in the case file. OIC acceptances for Federal Contractors also require the approval of the SBSE Collection Area Directors or SB/SE Compliance Services Operations Manager (COIC). See IRM, Identifying Federal Contractors, for additional information.  (08-08-2014)
24-Month Mandatory Acceptance under IRC § 7122(f)

  1. An OIC will be deemed accepted if the IRS does not make a decision on the OIC and notify the taxpayer of its determination within two years of the IRS received date, which is stamped on the Form 656 upon receipt. The postmark date is not relevant in determining when an OIC is received.


    Any period during which any tax liability that is included on the OIC is in dispute in any judicial proceeding will not be taken into account in determining the expiration of the 24-month period.

  2. An OIC will not be deemed to be accepted pursuant to I.R.C § 7122(f), if within the 24-month period, the OIC is:

    1. Rejected by the IRS,

    2. Returned by the IRS to the taxpayer as not-processable or no longer processable,

    3. Voluntarily withdrawn by the taxpayer,

    4. Withdrawn under IRC § 7122(c)(1)(B)(ii) because the taxpayer failed to make the second or later installment(s) due on a periodic payment OIC, or

    5. Terminated by the IRS.

  3. Expedited processing should take place if 18 months or more have expired from the IRS received date. There may be cases where a field Revenue Officer secured the OIC several months (or years), before forwarding to COIC for processing. When identified, these cases must be brought to the immediate attention of Headquarters Policy Analyst and worked expeditiously.

  4. To determine if 24 months have expired since the IRS received date, the OE/OS should conduct a thorough review of the OIC file to determine if the provisions of IRC § 7122(f) apply. This should include (at a minimum):

    • A review of the Form 656 to determine the IRS received date. If the IRS received date is prior to July 16, 2006, the OIC is pre-TIPRA and the 24-month mandatory acceptance period does not apply.

    • A review to determine if the OIC was received after July 16, 2006 and 24 months have elapsed since the IRS received date. If 24 months have not elapsed, then the OIC is not a mandatory acceptance.

    • A review to determine if a decision letter has been issued to the taxpayer within 24 months of the IRS received date. Decision letters include issuance of rejection, return, withdrawal (voluntary and mandatory), termination, and/or acceptance letters. If a decision letter was issued within 24 months of the IRS received date, then the OIC is not a mandatory acceptance.

    • Determine if any tax liability listed in the OIC was disputed in a judicial proceeding during the 24-month period following the IRS received date. The length of time that any tax liability included on the OIC was disputed in a judicial proceeding should be excluded in the calculation of the 24-month TIPRA determination. If, after the revised calculation, 24 months have not elapsed, then the OIC is not a mandatory acceptance. If a total of 24 months have expired (after subtracting the length of time any tax liability was disputed in a judicial proceeding), the OIC will be deemed a mandatory acceptance.


      If there is any question about whether the 24-month period has expired, refer the case through your local IRS Counsel for review. Do not assume that the tax liability was in dispute merely because the Department of Justice litigated issues in a bankruptcy case. A bankruptcy litigation may not raise a dispute as to the taxpayer-debtor’s tax liability, e.g., the trustee sues the United States to recover a preference payment.  (08-08-2014)
Employee Responsibilities for 24-Month Mandatory Acceptance under IRC § 7122(f)

  1. If the 24-month period has expired, the following actions are required:

    1. As soon as the 24-month period expiration is identified, the OE/OS currently assigned the OIC or the group manager if the case is not assigned, will document the AOIC history and ICS history, if applicable, addressing the reason(s) the 24-month period expired. The assigned employee must also immediately inform their group manager or department manager of the 24-month period expiration.


      If the OIC is not on AOIC, a history statement will be entered in the system of record, i.e., ICS, AMS, etc. The statement should include any unusual or mitigating circumstances.

    2. The group or department manager will review the AOIC history, summary statement, and the ICS history as well as any other relevant information to determine if further administrative action is warranted and if disciplinary action is appropriate.

    3. The group or department manager will prepare a memorandum within 30 calendar days of notification of the expired TIPRA statute to the Territory or Operations Manager detailing the reason(s) the 24-month period expired without the IRS making a decision on the OIC, why further administrative action is or is not warranted, and include any proposed disciplinary actions, if appropriate. The memorandum will also include the following information: (1) IRS received date; (2) COIC site of original receipt; (3) Date assigned to and received by the field area (if applicable); (4) Date received by the OE/OS who is currently assigned the case; (5) Date and type of any proposed recommendations made by an OE/OS; (6) Dates of discussion between manager and employee beginning 18 months after the IRS received date concerning the impending expiration of the 24-month TIPRA statute; (7) Any mitigating circumstances.

    4. The Territory or Operations Manager will review the memorandum and within two calendar days of receipt will forward a copy by overnight mail to the Area or Campus Director, if not co-located, along with a cover memorandum outlining recommended disciplinary action, if any.  (08-08-2014)
Acceptance Letter Issued under IRC § 7122(f)

  1. After confirming that the IRS did not make a determination with regard to the OIC within 24 months of the IRS received date, the taxpayer must be issued an acceptance letter (see IRM Exhibit 5.8.8-4 below).

  2. See IRM, Delegation Order 5-1 (Rev. 3) for the level of authority delegated permission to sign the OIC and acceptance letter.

  3. Mail the signed letter to the taxpayer.

  4. Mail a copy of the memorandum described in IRM, above, and a copy of the acceptance letter to the National OIC Program Manager within 45 calendar days of discovery.


    The National OIC Program Manager is not the delegated official required to sign the acceptance letter or memorandum.

  5. Update AOIC to reclassify the basis of compromise as "A" (Alternative Basis for compromise). Use the date the 24-month period expired as the AOIC acceptance date. Use the same date on the acceptance letter.


    Updating the basis to "A" on AOIC is for tracking purposes only and has no impact on the levels of approval defined in IRM

  6. The OIC file will be processed in accordance with procedures defined in this IRM.  (08-08-2014)
Legal Opinion of Counsel

  1. Counsel is required to review OICs when the total liability(ies) for all related OICs on the same taxpayer is $50,000 or more. The purpose of Counsel's review is to determine whether the OIC legally meets the standards of DATL, DATC or the promotion of Effective Tax Administration (ETA). Counsel also reviews the OIC to ensure it conforms to the Service's policies and procedures.

  2. The requirement for Counsel review is based on the liability(ies) at the time of submission, not at the time of acceptance. For example, if the application of TIPRA payments reduced the liability(ies) below the required $50,000, the OIC will still require Counsel review before acceptance.

  3. A follow-up should be scheduled for 45 days from date of submission for Counsel review. If Counsel has not responded within 45 days, contact Counsel to determine the status of the review.  (08-08-2014)
Counsel Review and Concurrence (Legal Issues)

  1. Counsel’s signature on Form 7249 constitutes the legal opinion required by IRC § 7122(b). By signing the form and checking the "agree" box for legal sufficiency, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign or check the "disagree" box for legal sufficiency on the Form 7249, then the IRS has the legal right to accept the offer. However, rejecting Counsel advice is not a preferred course of action. In these instances, the OE/OS should try to resolve the matter with Counsel before accepting the offer.

  2. It is recommended that if no agreement can be reached, the next appropriate action must be taken (for example, rejection) to resolve the OIC.

  3. If it is determined that acceptance without Counsel concurrence is appropriate it must be approved by the Area Director. The Area Director must sign the acceptance letter, Form 7249, and any collateral agreements.

  4. Thoroughly document the case history with the issues and supporting reasons for moving forward with acceptance. Include Counsel’s memorandum or other communication with the case file.  (08-08-2014)
Counsel Review and Concurrence (Non-Legal Issues)

  1. In some cases, Counsel may determine that the compromise is legally permissible, but may raise policy concerns or other issues of a non-legal nature. In these cases, Counsel must sign the Form 7249 and communicate the remaining issues by separate memorandum.


    Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. It may be necessary to contact Counsel to discuss the outstanding issues.

  2. There is no requirement for Counsel to concur with the decision to accept the OIC in order to go forward for approval. In those cases where Counsel does not concur and the issue is not of a legal nature, the accepting official must review and consider any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised but not agreed, thoroughly document the case history with the issues and the supporting reasons for moving forward with the acceptance.

  3. If, after discussion, agreement with Counsel cannot be reached, and only Policy issues exist, and Counsel has not signed the Form 7249 or otherwise agreed with the acceptance recommendation, the OIC may be accepted without Counsel signature.


    Rejecting Counsel opinion is not a preferred course of action. An attempt to resolve issues with Counsel should take place prior to accepting the offer.

  4. Cases that do not have concurrence of Counsel must be approved by the Area Director. The Area Director must sign the acceptance letter, Form 7249, and any collateral agreements.

  5. Thoroughly document the case history with the issues and supporting reasons for moving forward with acceptance. Include Counsel’s memorandum or other communication with the case file.  (08-08-2014)
Continuous Wage Levy

  1. When the taxpayer has a continuous wage levy it must be addressed or released prior to forwarding the case to MOIC.

  2. See IRM, Withholding Collection, for additional information on levy.

  3. Take the following actions:

    1. Research for the levy source.

    2. Prepare a levy release, Form 668-D, Release of Levy / Release of Property from Levy.

    3. Obtain authorizing signature.


      COIC should use the Campus Revenue Officer.

    4. Mail the release to the employer.

    5. Notify the taxpayer informing him or her of the levy release. If a letter is used as the method of communication, the following text is recommended: "Our records show that there is a levy on your account. This levy will be released. A copy of the Form 668-D, Release of Levy / Release of Property from Levy, is enclosed for your records. We are processing your levy release and it should be effective within 30 days."

    6. If a levy is issued in error (during investigation or after processability), the levy proceeds must be returned to the taxpayer unless the taxpayer provides a request in writing for the IRS to keep the payments and be considered part of the OIC funds. If the taxpayer requested the levy funds be applied as a payment toward the OIC, the DPC must be changed to the appropriate DPC for OIC.

  4. If a Transaction Code (TC) 971 Action Code (AC) 060 is present and it is identified as an open Federal Payment Levy Program (FPLP) levy, coordinate with Advisory to facilitate the release. See IRM for additional information concerning the identification of an FPLP levy.  (08-08-2014)
Destruction of Credit Reports

  1. All credit reports must be destroyed on accepted OICs after all approving signatures have been obtained.

  2. If a credit report was requested, verify that the case history includes a summary of all relevant information.  (08-08-2014)
Forwarding Case Files to the Federal Record Center (FRC)

  1. After the case has been closed on AOIC, the case should be retired to FRC when it is no longer needed for current business. It should be destroyed 11 years after acceptance of the OIC.


    Because the closed case will be retained longer than two years, field offer specialists should include a hard copy of the ICS history.

  2. See IRM, Loading FRC Information on AOIC, for instructions on loading the information on AOIC.  (08-08-2014)
Notification of Dishonored Application Fee and/or TIPRA Payment after Notification of Acceptance

  1. If the case has been closed on AOIC but not yet forwarded to MOIC, upon notification of the dishonored check immediately notify the taxpayer or their power of attorney and request a replacement check.

  2. The replacement payment should be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time.

    • Inform the taxpayer or the authorized representative that the accepted OIC will be rescinded if the payment is not received within a reasonable time .

    • Provide a due date for receipt of the replacement payment to the taxpayer or the authorized representative.

    • Advise the taxpayer or their representative to submit the payment by overnight mail.

    • Document the case history.

  3. If the case has been closed on AOIC and forwarded to MOIC, the case will be returned to the OE/OS for taxpayer contact.

  4. Upon receipt of the case from MOIC, the OE/OS should immediately contact the taxpayer and request replacement payment in certified funds, if possible. Follow the procedures paragraphs (1) and (2) above.

  5. If the taxpayer fails to replace the dishonored check, the accepted OIC will be rescinded based on a mutual mistake of fact in accordance with IRM, Rescission of Accepted Offers.

  6. Document the AOIC case history.

Exhibit 5.8.8-1 
Offer in Compromise Recommendation Report

The below document is an example of the Acceptance Recommendation Report.

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Exhibit 5.8.8-2 
Addendum to Form 656

The below document is the addendum to the Form 656 to be used in lieu of an amended Form 656. A fillable form may be accessed by signing on to AOIC then click on "AOIC Transmittals" and then click on "Click here for Addendum to Form 656" .

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Exhibit 5.8.8-3 
Letter for Addendum to Form 656

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Exhibit 5.8.8-4 
24-Month Acceptance Letter

The letter is to be used if the OIC is accepted under IRC § 7122(f). The letter may be accessed by signing on to AOIC then click on "AOIC Transmittals" click on "Click here for Sample TIPRA Letter" .

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