5.8.9 Actions on Post-Accepted Offers

Manual Transmittal

September 07, 2022

Purpose

(1) This transmits a revision for IRM 5.8.9, Offer in Compromise, Actions on Post-Accepted Offers.

Material Changes

(1) Changes included in this revision:

IRM Reference Change
5.8.9.1.2 Added IRM 1.2.1 to this reference section.
5.8.9.1.3 Added that offer examiners/offer specialists are responsible for procedures in this IRM.
5.8.9.1.4 Added: As a result of these reviews, procedural changes may be required to improve the quality and effectiveness of the program.
5.8.9.1.6 Added definitions for FOIC and MOIC. Edited OE definition.
5.8.9.1.7 Added updated TBOR language.
5.8.9.1.7 Added AOIC User Guide may be found on AOIC.
5.8.9.2.3 Updated rescission example for clarification.
5.8.9.2.4 Added: The Office of Chief Counsel must review for legal requirements and concur with all rescission determinations.
5.8.9.2.4 Added cross reference for IRM 5.8.7 for cases needing assignment to a field revenue officer.
5.8.9.4 New section created to address when offer accepted and the taxpayer is in open bankruptcy.
5.8.9.5 Changed erroneously to mistakenly issued refund.
5.8.9.6 Updated language from settle to write off the tax debt.
5.8.9.6.1 Updated language to advise modification example letters on OIC SharePoint.
5.8.9.6.3 Replaced Counsel approval with Counsel review for legal requirements.
5.8.9.6.3 Updated language to advise modification example letters on OIC SharePoint. and added an example for section clarification.
5.8.9.6.3 Incorporated actions necessary for the Public Inspection File when modification of accepted offer accepted.
5.8.9.7 New section to address when overlooked period present on accepted offer.
Exhibits 5.8.9.1, 5.8.9.2, and 5.8.9.3 Updated taxpayer refund language in the exhibits. These letters were moved from Exhibits to OIC Share Point.

(2) Incorporated SBSE-05-0522-0026, Interim Guidance Memorandum on Public Inspection File for Accepted Offers in Compromise dated May 31, 2022.

(3) Reviewed and updated website addresses, IRM references, and legal references as necessary.

(4) Editorial changes were made throughout the document.

Effect on Other Documents

This IRM supersedes IRM 5.8.9 dated July 7, 2020 and incorporates SBSE-05-0522-0026, Interim Guidance Memorandum on Public Inspection File for Accepted Offers in Compromise dated May 31, 2022.

Audience

SB/SE Collection and Campus Compliance employees

Effective Date

(09-07-2022)

Kareem Williams
Director, Collection Policy

Program Scope and Objectives

  1. Purpose: This section provides:

    • Instructions for guidance on accepted offers in compromise such as when to rescind, terminate, or revise an existing offer in compromise (offer).

  2. Audience: These procedures apply to Internal Revenue Service (IRS) employees who are responsible for investigating offers:

    • Offer Examiners (OE) in Centralized Offer in Compromise (COIC)

    • Offer Specialists (OS) in the Field Offer Territories (FOIC)

    • Additional IRS employees assigned to the offer program and employees who conduct offer in compromise investigations.

  3. Policy Owner: Director, Collection Policy, SBSE

  4. Program Owner: SBSE Collection Policy, SBSE, [Offer in Compromise (OIC) Program] is the program owner of this IRM.

  5. Primary Stakeholders: The primary stakeholders are COIC and FOIC employees.

  6. Program Goals: Policy Statement P-5-100 explains the objective of the OIC as a collection tool. This Internal Revenue Manual (IRM) provides the fundamental knowledge and procedural guidance for offer examiners and offer specialists who address actions on completed offers such as rescission, termination, and revision of an existing offer when appropriate.

Background

  1. Section 509 of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) significantly impacted the offer in compromise program. This section provides direction on completing offer investigations which are fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service. Additionally, procedures for coordinating with other functions are provided. This section provides direction on accepted offers in compromise such as when to rescind, terminate, or revise an existing offer.

Authority

  1. Authorities relating to this section include:

    • IRC 7122, Compromises

    • Title 26 CFR 301.7122-1, Compromises

    • Title 26 CFR 300.3, Offer to Compromise Fee

    • IRC 6702(b),Civil Penalty for Specified Frivolous Submissions

    • Policy Statement P-5-89

    • Policy Statement P-5-100

    • Policy Statement P-1-236

    • Revenue Procedure 2003-71

    • Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

    • IRM 1.2.1, Servicewide Policy Statements

    • IRM 1.2.2.6.1, Delegation Order 5-1 (Rev. 5), To Accept, Reject, Return, Terminate or Acknowledge Withdrawals of Offers in Compromise

    • Internal Revenue Service Restructuring and Reform Act of 1998, Section 1203

Responsibilities

  1. The Director, Collection Policy, is responsible for all policies and procedures within the OIC program.

  2. The National Program manager, OIC is responsible for development and delivery of policies and procedures within the program.

  3. The Director, Specialty Collection Offer in Compromise (SCOIC) is responsible for the performance of the OIC program and ensuring IRM policies and procedures are followed.

  4. Operation managers, department managers, territory managers, team and group OIC managers are responsible for ensuring the procedures are followed and employee actions are timely and accurate.

  5. Offer examiners, offer specialists, and other employees investigating offers are responsible for following the procedures in this IRM.

Program Management and Review

  1. Data and reports from the Automated Offer in Compromise (AOIC) system, Business Objects, ENTITY Case Management System, and Integrated Collection System (ICS) assist in inventory tracking, case age, and timeliness of case actions. Additional ad hoc reports which provide information on the inventory levels, hours per case, and age of offers in open or closed inventory are also provided when requested by SCOIC.

  2. Operational and program reviews are conducted on a yearly basis by the Director SCOIC and Collection Policy respectively. Managerial case reviews are also completed as defined in this IRM and IRM 1.4.52, Offer in Compromise Manager's Resource Guide. These reviews are a method to determine if the offer amount accurately reflects the reasonable collection potential (RCP) as defined in Policy Statement P-5-100.

  3. National quality reviews and consistency reviews are routinely conducted to ensure program consistency and effectiveness in case processing. As a result of these reviews, procedural changes may be required to improve the quality and effectiveness of the program.

Program Controls

  1. AOIC is used to track offers submitted by taxpayers, for inventory control, and to record case actions and history. Ability to take action on AOIC is limited to specific offer employees. Additional permissions are provided based on an employee’s duties and responsibilities.

  2. ICS is used by FOIC employees as a method for inventory control and history documentation.

  3. Managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Offer in Compromise Manager’s Resource Guide.

  4. Managerial requirements for case approval are defined in Del. Order 5-1.

  5. ENTITY is utilized by FOIC managers as a method for inventory control and appropriate time utilization.

  6. Case reviews are conducted by the Office of Chief Counsel on offers when the total liability(ies) for all related offers on the same taxpayer is $50,000 or more in accordance with IRC 7122(b)I and Title 26 CFR 301.7122-1, Compromises.

Terms/Definitions/Acronyms

  1. A list of common abbreviations, definitions and acronyms used throughout this IRM may be found in the table below.

    Acronym or Abbreviation Definition Description
    AOIC Automated Offer in Compromise Computer application where offers in compromise are recorded and monitored from receipt to closure. History of the offer investigations conducted by COIC employees and of actions taken by Monitoring OIC (MOIC) units are also maintained on this system.
    COIC Centralized Offer in Compromise Units located in Brookhaven and Memphis campuses that complete initial processing and work offers to completion. Do not confuse this with MOIC. COIC units do not monitor or default accepted offers.
    DATC Doubt as to Collectibility Basis for acceptance of an offer where there is doubt that the tax can be paid in full.
    DATL Doubt as to Liability Basis for acceptance of an offer where there is doubt that the liability is correct.
    ETA Effective Tax Administration Basis for acceptance of an offer where there is no doubt that the liability is correct or can be paid in full. However, requiring the taxpayer to fully pay the tax would either create an economic hardship or there are compelling public policy or equity considerations.
    FOIC Field Offer in Compromise Area offices where offer specialists investigate offers.
    MOIC Monitoring Offer in Compromise Teams located in Brookhaven and Memphis that monitor accepted offers for compliance with all terms, complete the default of accepted offers when applicable and are responsible for the 4710 account. Accepted offers are sent to one of the two sites (Brookhaven and Memphis) based on whether they were accepted in COIC or FOIC.
    OE Offer Examiner Offer investigator located in COIC.
    OS Offer Specialist A revenue officer appointed as an offer investigator, generally located in an area office.
    PIF Public Inspection File Public Inspection Files contain limited information regarding accepted offers in compromise such as the taxpayer name, city/state, liability amount, and offer/terms.
    RBA Restitution-Based Assessment All related accounts that are associated with specific MFT(s) and tax period(s) that have been ordered by the court to pay unpaid taxes and/or restitution resulting from criminal conduct.
    TC Transaction Code A code used on Integrated Data Retrieval System (IDRS) to signify actions performed.

Related Resources

  1. Additional resources can be found in IRM 5.8, Offer in Compromise.

  2. Employees can find helpful information on these websites:

    • SERP

    • IMD site for Interim Guidance Memorandum (IGM)

    • Delegation Orders IRM 1.2.2.6.1, Delegation Order 5-1 (Rev. 5), To Accept, Reject, Return, Terminate or Acknowledge Withdrawals of Offers in Compromise

  3. The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Taxpayer Bill of Rights.

  4. The AOIC User Guide (Training 28206-002) may be found on the AOIC system.

Rescission of Accepted Offers

  1. In some instances it may be necessary to rescind an accepted offer. An offer is an agreement binding on both the government and the taxpayer, and precludes further inquiry into the matters to which it relates unless false information or documents were supplied in conjunction with the offer, the ability to pay or the assets of the taxpayer were concealed, or a mutual mistake of material fact is discovered.

  2. The function that accepted the offer is responsible for making the determination to rescind the offer and will also be responsible for completion of all required actions identified in IRM 5.8.9.2.1 through 5.8.9.2.4.

  3. After acceptance of the offer, CFR 301.7122-1(e)(5) provides that neither the taxpayer nor the IRS is permitted to reopen the case, except in limited situations:

    • False information or documents are supplied in conjunction with the offer;

    • The assets of the taxpayer or the ability to pay are concealed; or

    • A mutual mistake of material fact sufficient to cause the offer agreement to be reformed or set aside is discovered.

    Note:

    Under section 164, comment (a) of the Restatement 2d of Contracts, false information or concealment may allow the IRS to rescind an accepted offer. To do so, the IRS must be able to show that (1) the misrepresentation was material; (2) the misrepresentation induced the IRS to accept the offer; and (3) the IRS was justified in relying on the misrepresentation.

  4. If the taxpayer has failed to remain in compliance with the 5-year period under the requirements of Form 656 the offer should be defaulted in lieu of rescission under CFR 301.7122-1(e)(5). See default provisions in IRM 5.19.7.14.4, Failure to Adhere to Compliance Terms.

False Information

  1. Under section 159 of the Restatement 2d of Contracts, false information is a misrepresentation, which is defined as an assertion that is not in accord with the facts. False information does not have to be fraudulent. Misrepresentation should not be automatically defined as fraudulent. Misrepresentation may be due to ignorance or carelessness. A half-truth may be a misrepresentation: a statement may be true with respect to the facts stated, but may fail to include qualifying matter necessary to prevent the implication of an assertion that is false with respect to other facts. A half-truth could also be used to conceal relevant information that would have made a material difference in the determination to accept the offer. A misrepresentation must relate to something that is a fact at the time that it is made; a fact does not include a future event.

  2. False information or concealment may allow the IRS to rescind an accepted offer. To do so, the IRS must be able to show the following below.

    1. The misrepresentation was material.

    2. The misrepresentation must have induced the IRS to accept the offer.

    3. The IRS was justified in relying on the misrepresentation.

    Example:

    The taxpayer during the offer investigation states he has nothing to do with XYZ Corporation. The offer is accepted and no value for XYZ Corporation is calculated in the RCP. The taxpayer received $400,000 from the sale of the corporation. Later it was determined that the taxpayer was 100% owner and had full control of XYZ Corporation (alter ego of the taxpayer). This meets the criteria for a rescission.

Concealment of Assets or Ability to Pay

  1. Under section 160 of the Restatement 2d of Contracts, concealment is an affirmative act intended or known to be likely to keep the IRS from learning of a fact that it would otherwise have learned. Concealment is the equivalent of a misrepresentation. Concealment, however, is not the equivalent of non-disclosure. The significance is that CFR 301.7122 -1(e)(5)(ii) provides that an accepted offer may be reopened where there has been concealment of the ability to pay or the assets of the taxpayer. If you have a case that requires a distinction between concealment and non-disclosure, contact Area Counsel.

    Example:

    The taxpayer whites-out the portion of his bank statement listing a money market account with $100,000 in it. The taxpayer then copies the altered bank statement and attaches the copy to his Form 433-A (OIC), list of assets. Here, the taxpayer has taken affirmative acts to conceal the money market account.

    Note:

    Since the value of the properties was considerable refer to IRM 5.8.4.18 for a possible fraud referral.

Mutual Mistake of a Material Fact

  1. Under sections 151 and 152 of the Restatement 2d of Contracts, a mutual mistake of fact is defined as an erroneous belief held by both parties about an existing fact at the time the contract was entered. The law in existence at the time of the making of the contract is part of the total state of facts at the time. The parties’ mutual mistake with respect to the law, as found in statute, regulations, judicial decisions, or elsewhere, may render the compromise subject to rescission. The mere fact that both parties are mistaken with respect to the same basic belief about an existing fact does not, of itself, provide a reason for the affected party to void the agreed offer. Rescission is only appropriate in situations where a mistake of both parties has such a material effect on the agreed exchange of performances that it upsets the very basis of the agreed offer.

    Example:

    The taxpayer submitted an offer which was accepted based on the taxpayer having stock valued at $0. The taxpayer and SCOIC believe the stock to be worthless, but in fact it is worth approximately $55,000. The offer may be rescinded.

    Note:

    Counsel makes the determination if the rescission criteria is met.

Rescission Procedures

  1. When rescinding the offer, the office responsible for completing the letter will also be responsible for inputting the appropriate transaction code (TC). Prior to rescinding an offer, send a preliminary letter to the taxpayer advising of the proposed rescission of their offer. The letter will contain the grounds for the proposed rescission and will give the taxpayer 15 days to respond and provide any additional information related to the proposal.

    Note:

    AOIC Remarks must be noted with the date the preliminary proposal letter was mailed, the taxpayer's response, and the analysis of any additional information provided.

  2. If the rescission is within one year of acceptance, send an e-mail request to the OIC Collection Policy mailbox with the offer number to remove the Public Inspection File (PIF) from public access. If the date of the acceptance letter is more than a year old, a request to remove the PIF will not be required.

  3. Rescind the offer in the following manner:

    • Prepare a letter to the taxpayer identifying the offer by the day it was accepted, advising that the acceptance is rescinded, and the acceptance letter is revoked. Contact OIC Collection Policy for assistance in preparing the rescission letter.

    • Include in the letter the grounds for rescission in general terms with a demand for payment of the original unpaid tax liability, less any payments made on the offer.

    • The Office of Chief Counsel must review for legal requirements and concur with all rescission determinations before sending the rescission notification to the taxpayer.

      Note:

      The letter must be signed by the same level of approval that signed the acceptance.

    • Document the case history with the basis for the decision to rescind and any taxpayer contact.

    • After receiving approval/concurrence, including Counsel, notify the appropriate MOIC liaison of the rescission.

    • Input the appropriate TC 78X or the 48X and reassign to the field for collection action, if appropriate. See IRM 5.8.7.10.4, Alternative Collection Assignment - Field Collection. In cases of false information or concealment of assets or ability to pay, use TC 781, TC 482 to indicate death of a taxpayer, and TC 483 to indicate mutual mistake.

      Note:

      If an offer was erroneously accepted after the death of a taxpayer, the office responsible for completing the letter will also be responsible for inputting the TC 482. Use the date of death as the date for the TC 482. See IRM 5.8.7.5, Termination of Consideration.

Department of Justice Controlled or Restitution Cases

  1. Occasionally an offer is purportedly accepted while a period is under the settlement jurisdiction of the Department of Justice (DOJ) or a restitution-based assessment period is on the Form 656 or Form 7249. In these situations the IRS lacks the legal authority to accept these offers and certain actions must be taken so that the offer may be deemed not processable.

Department of Justice Controlled Cases

  1. Occasionally an offer is inappropriately accepted due to all tax periods on the offer being under the settlement jurisdiction of the Department of Justice (DOJ). In these cases, although the offer was processed as an acceptance, the IRS never actually accepted the offer because it lacked the legal authority to do so. See IRM 5.8.1.6.1, Tax Cases Controlled by Department of Justice, for additional information.

  2. The offer cannot be rescinded but must be returned as not processable because the IRS had no authority to accept an offer on any period controlled by DOJ.

  3. The office which recommended the offer for acceptance is responsible for requesting the following actions:

    1. Send an e-mail to OIC Collection Policy (*SBSE Coll Policy OIC) to request the offer be reopened by an AOIC programmer. Provide the offer number, date of acceptance, and reason for the request.

    2. Contact the taxpayer/POA to advise that DOJ retained jurisdiction therefore the offer was not accepted. Address any payment(s) made and advise the taxpayer the payment(s) will be applied to the liability. The designated payment code (DPC) must be modified to 99.

    3. Notify MOIC that the offer was inappropriately closed as an acceptance while under DOJ jurisdiction, and that no further monitoring actions are required.

    4. Reverse the transaction code (TC) 780 on each applicable period by requesting input of TC 782.

    5. Prepare a revocation of lien release and file the NFTL, if necessary. See IRM 5.12.3.14.1, Requesting Revocation of Lien Release.

    6. Secure the offer case file to be sent to COIC when all required actions have been taken.

    7. Transfer the offer to the originating COIC on AOIC and include in the remarks COIC should take action in accordance with IRM 5.8.9.3.1.

  4. The COIC site will:

    1. Change the processability code on AOIC to "N" .

    2. Stamp the Form 656 ‘RETURN’, and cross out the IRS received date and the IRS signature that established the waiver date.

    3. Issue the not processable letter. See IRM 5.8.2.7, Erroneous Processability Determinations.

    4. Copy the not processable letter for the offer file and return the file to the Federal Records Center.

  5. If the not processable determination is made within one year of acceptance, send an e-mail request to the OIC Collection Policy mailbox with the offer number to remove the PIF from public access. If the date of the acceptance letter is more than a year old, a request to remove the PIF will not be required.

Restitution Erroneously Included on Accepted Offer

  1. An offer may be accepted from a taxpayer who also has been ordered to pay restitution. Although the IRS is authorized to pursue collection of a restitution-based assessment (RBA), an OIC may only include a taxpayer’s civil tax liabilities, not any criminal restitution. Never include restitution and any associated RBAs in an OIC. If a RBA is erroneously included on the Form 656 or approved Form 7249, action needs to be taken to correct the offer. Follow the same procedures in IRM 5.8.9.3.1 to correct AOIC and related transaction codes.

  2. The acceptance of an offer to compromise with a civil tax assessment does not impact the validity of the RBA and the taxpayer is still responsible for any outstanding balance of the RBA. Payments received based on the terms of the offer will be applied to the civil tax assessments, yet in some circumstances the RBA may stem from the same type of tax and tax periods, so offer payments may partly satisfy the RBA when duplicate civil and/or codefendant assessments exist.

  3. See IRM 5.1.5, Field Collecting Procedures, Balancing Civil and Criminal Cases, and IRM 5.8.4.24.1, Offers in Compromise Submitted that Include Restitution, for more information on restitution.

Offers Accepted in Error With Open Bankruptcy

  1. The IRS will not consider an OIC under its administrative OIC procedures while a taxpayer is in bankruptcy. See IRM 5.8.10.2.

  2. If a taxpayer is in bankruptcy when an administrative OIC is submitted, the offer is returned as non-processable. The return of the offer does not constitute a rejection of the offer and it does not entitle the taxpayer to file an appeal. See CFR 301.7122-1(f)(5)(ii). For a joint liability, even if only one spouse is in bankruptcy, the IRS will return the offer as non-processable (if there are joint assessments that have not been split to MFT 31).

  3. If an offer is inappropriately accepted while the taxpayer is in bankruptcy (open TC 520) the office which recommended the offer for acceptance is responsible for requesting the following actions below.

    Note:

    Even if the bankruptcy has already been discharged, the IRS did not have the authority to accept the offer if the accepted date was prior to the discharge date.

    1. Send an e-mail to OIC Collection Policy to request the offer be reopened by an AOIC programmer. Provide the offer number, date of acceptance, and reason for the request.

    2. OIC Collection Policy will notify the originator when the offer is reopened.

    3. Contact the taxpayer/POA to advise the IRS did not have the authority to accept the offer due to the open TC 520. Instruct them not to send any additional offer payments.

    4. If any payments posted after the TC 520, contact Insolvency to determine if action is needed to manually refund or change the DPC.

      Note:

      Ensure Insolvency is aware if the payments resulted in the NFTL release.

    5. Request input of TC 782 to reverse the transaction code, TC 780, on each applicable period. The TC 480 and TC 481 must be manually input as well, but cycle delays are required so the TCs post correctly.

    6. Contact MOIC and notify the offer was reopened because it was closed inappropriately as an acceptance. MOIC does not need to take further monitoring actions.

Potential Default Cases

  1. An offer can reach a potential default status in one of four ways:

    1. The taxpayer failed to fulfill the payment terms.

    2. The taxpayer failed to fulfill the terms of a related collateral agreement.

    3. The taxpayer failed to adhere to the compliance provisions.

    4. The taxpayer failed to return a mistakenly issued refund.

    Note:

    MFT 35 and/or MFT 65 — The taxpayer's failure to report or pay an individual shared responsibility payment (SRP) liability made under IRC § 5000A and/or any individual SRP liability assessment made after acceptance will not default the OIC.

  2. Campus MOIC units have responsibility and authority to make determinations on potentially defaulted offers where the taxpayer has not proposed an alternative to the default.

  3. In its discretion, the MOIC unit may make an attempt to secure compliance; some cases do not merit an attempt to secure compliance. For example, MOIC has previously advised the taxpayer failure to remain in compliance will result in the termination of the offer agreement. If the taxpayer fails to comply with all provisions of the internal revenue laws, including timely filing and payment, MOIC may elect appropriate remedy, including keeping the offer in force while obtaining a missed payment/unfiled tax return to defaulting the offer contract. If MOIC defaults the offer they will input reversal codes to put the liability(ies) back to the collection stream and close the case as a default.

Modification of an Accepted Compromise

  1. The modification of an accepted offer in compromise should be rare in light of the investigation completed in connection with the original offer. In some cases where the taxpayer is unable to pay the balance of an accepted offer, the balance of a non-rebate erroneously issued refund, or the balance of the contingent liability under the terms of a collateral agreement and the investigation reveals that extreme hardship or special circumstances exist, it may be in the best interest of the government to:

    1. Adjust the payment terms,

    2. Obtain managerial approval to write off the tax debt for the amount already paid and not default the offer or

    3. Formally modify the existing compromise.

    Note:

    Modification of an accepted compromise was formerly known as compromise of a compromise. Other IRM sections that include the term compromise of a compromise will be updated as revisions take place.

  2. Adjusting the payment terms allows the taxpayer additional time to pay the offer amount and can be made without a formal modification of an accepted compromise. This does not change what is owed on the offer and if the payments are not made then the option to default still exists.

  3. Obtaining managerial approval to settle for the amount already paid and not default the offer doesn’t require the taxpayer to submit a formal proposal. In some instances, it is determined to close the offer with the amount already paid. The option to default still exists if appropriate, in the future.

    Note:

    The approving official should be commensurate with the delegated official who signed the acceptance. For example, if the second-level manager approved the acceptance of the original offer, this same management level must approve the modification.

  4. When a taxpayer is unable to pay the balance of an accepted offer and/or the balance due under the terms of a collateral agreement, the Service has the option to accept a modification of an accepted compromise. The taxpayer must be current with their filing and payment compliance requirements or a modification of the existing compromise will not be considered. See IRM 5.19.7.9, Modifying the Accepted OIC. The taxpayer must submit a signed letter to request a modification of an accepted compromise.

  5. A proposal to modify an accepted offer must rest on Doubt as to Collectibility (DATC), DATC with special circumstances (DATCSC), or Effective Tax Administration (ETA).

  6. When a request to modify a previously accepted offer is received by MOIC they will issue Form 2209, Courtesy Investigation, electronically with a read receipt, to the office that accepted the offer. A request for a courtesy investigation should be rare, but when issued, the courtesy investigation should be worked in an expeditious manner and if ICS is used, treated as a priority assignment. The receiving office must document both receipt and assignment of the Form 2209 in AOIC Remarks.

    Note:

    A Form 2209 should only be issued by the MOIC function if a modification of an accepted compromise is received or the terms of an agreed collateral agreement cannot be properly monitored.

Receipt and Processing

  1. The proposal must be in writing and in the form of a letter. The proposal letter submitted by the taxpayer should be addressed to the Internal Revenue Service and include language shown in Modification of an Offer Proposal Pattern Letter 1603(P) found on OIC SharePoint. MOIC will share a copy of the required language, an example, or a copy of Modification of an Offer Proposal Pattern Letter 1603(P) with the taxpayer. If the taxpayer does not address the letter to the Internal Revenue Service Commissioner or the Internal Revenue Service there is no need to contact the taxpayer to perfect this issue.

    Note:

    Do not secure a new Form 656. No TIPRA payments are required if the terms (lump sum cash or periodic payment) of the new proposal are the same as the original, accepted offer.

  2. MOIC will send the electronic Form 2209 for a modification of an accepted compromise via e-mail with read receipt. Upon receipt of the proposal, verify acknowledgment by checking the read receipt box in the e-mail. If the Form 2209 is not acknowledged within 7 days, MOIC will follow up with the intended recipient.

  3. Upon receipt of the proposal:

    • COIC will add a history entry to AOIC Remarks indicating receipt and assignment of a modification of an accepted compromise.

    • FOIC will add a history entry in AOIC Remarks as to the assignment and receipt and create an Other Investigation (OI) or Collection Initiative Program (CIP) on ICS to open a control until the taxpayer's proposal has been considered.

  4. If you are rerouting the electronic 2209, document AOIC Remarks and send an e-mail to the MOIC employee who sent the original e-mail.

  5. The taxpayer must submit a current financial statement(s) and all required supporting documentation.

  6. The courtesy investigation will be given priority by COIC and FOIC. If the investigation is not completed by the original response date (90 calendar days for Appeals and 45 calendar days for COIC/FOIC) on the Form 2209 then send an extension request, Form 2209-A, Status Report, to MOIC. An extension request should be rare or based on extenuating circumstances.

  7. When closing the Form 2209, notate AOIC with the results of the investigation.

Consideration of Proposal

  1. Acceptance will depend on:

    1. The best interest of the Government; and

    2. The same considerations and merits being applied as if it were submitted on a Form 656.

  2. The information required to support the proposal should fit the case, such as:

    • Command Code (CC) RTVUE/BRTVU print, or if no data is available, a copy of the taxpayer's most recently filed income tax return.

      Note:

      A request for a copy of the taxpayer’s tax return should be rare. Generally, this information is secured through internal sources such as Account Management Services (AMS) and Employee User Portal (EUP). Do not request a tax return if it is not legally due, including any extension of time to file.

    • Review of CSEDs to make sure no CSEDs have expired or are about to expire.

    • Estimate of the remaining liability under the terms of the future income collateral agreement, if applicable.

    • Reasons why the request is being made to modify the existing agreement.

    • Full compliance check.

      Note:

      If the taxpayer is not in five year filing and paying compliance, a modification of an accepted compromise cannot be considered. This does not include the current year estimated tax payments.

    • Statement of current financial condition.

    • Description of future prospects and any other information that might have a bearing on the acceptability of the offer.

    • Estimated and projected amount of future income over the period covered by the remaining terms of the original agreement.

Processing Completed Investigations

  1. When the investigation is complete, the taxpayer's proposal, investigative report, and memorandum containing a complete statement of the facts in the case, including the recommendation, must be forwarded to the next level of authority for approval/concurrence.

  2. Prepare an acceptance or denial letter for the delegated official. See Acceptance of a Modification of an Offer Pattern Letter 1604(P) and Denial of a Modification of an Offer Pattern Letter 1607(P) available on OIC Share Point in Word format.

  3. If the taxpayer's proposal is acceptable, the procedures for acceptance of the original offer will be followed including an opinion of Counsel as set forth in IRM 5.8.8.13, Legal Opinion of Counsel. You do not need to secure an addendum.

    Note:

    The approving official should be commensurate with the delegated official who signed the acceptance. For example, if the second-level manager approved the acceptance of the original offer, this same management level must approve the modification.

  4. An attempt must be made by phone to contact the taxpayer prior to the issuance of the proposed acceptance or denial letter of the modification of an accepted compromise. If contact is made with the taxpayer on a denial then inform the taxpayer of the findings and that they must bring the payment terms of the original offer current or a default letter will be issued.

    Example:

    The original accepted offer was for $50,000 and the taxpayer requests the modification for $20,000. Your RCP calculation on the modification shows the RCP is $35,000 and there are no special circumstances present. You would reject this modification request.

    Note:

    Advise the taxpayer there are no appeal rights with the denial decision for the modification of an accepted compromise investigation.

  5. Follow the below "If/Then" chart for preparation of the file.

    If Then
    The proposal is acceptable Forward the case file to the delegated official for approval and signature. If the original compromise required Counsel review, and the taxpayer's proposal is acceptable, Counsel legal requirement review is required. Include with any acceptance:
    • Copy of the Acceptance Letter

    • Taxpayer's proposal

    • Memorandum supporting the modification of the compromise

    • Work papers and financial information

    • A new Form 7249

    Note:

    The new Form 7249 must be generated through the Publishing website.

    The proposal was acceptable and the terms change from cash to periodic payment A NFTL determination is needed based upon the new terms.
    Follow IRM 5.1.9.2, Informing Taxpayers of Their Appeal Rights, and IRM 5.12.6, Appeals Process Involving Liens, relative to discussion of appeal rights in the lien filing process.

    Note:

    If a CDP request is received in response to the NFTL, process it timely in accordance with IRM 5.1.9, Collection Appeal Rights.

    The proposal is not acceptable Forward the case file to the delegated official for approval and signature. Include:
    • Copy of the Denial Letter

    • Taxpayer's proposal

    • Memorandum supporting the recommendation

    Note:

    No appeal rights are granted to the taxpayer.

  6. For accepted proposals you may need to add a new PIF.

    If the Form 7249 for the modification of the offer terms will be approved by the delegated official Then
    within one-year from the initial acceptance the PIF must be updated and the Form 7249 prepared within AOIC. Contact OIC Collection Policy to reopen the offer in AOIC. The PIF record will be updated when the offer is closed in AOIC.
    after the one-year PIF retention period the PIF does not need to be updated. Prepare the Form 7249 from the Publishing website.

  7. Update the AOIC Remarks and, if it is an FOIC offer, update the ICS history with the results of the investigation. If the proposal is accepted, include the amount of the accepted proposal and the terms for payment in the AOIC Remarks and ICS history, if appropriate.

  8. Once the decision letter has been signed and mailed, close the OI or CIP notating the final resolution.

    Note:

    There will be no ability to complete this action on AOIC as there is no open AOIC record. The new Form 7249 and letter must be manually generated.

  9. E-fax or e-mail the closing documents to the appropriate MOIC unit with instruction to either monitor if it is to be accepted, or default if it is not accepted.

  10. The closing documents are as follows:

    • Form 2209

    • Taxpayer’s proposal

    • Acceptance or denial letter with memorandum, as appropriate

    • Form 7249, with signatures, if an acceptance

  11. If the offer file is no longer in MOIC and has already been forwarded to FRC, the OE/OS group should forward the work papers and financial information for the modification of an accepted compromise file to FRC following procedures in IRM 5.8.7.12.1, Shipment of Closed Cases to Federal Records Center (FRC). When the case is boxed, AOIC Remarks should be documented "Modification of an Accepted OIC case file information shipped to FRC as the last case in box # xxx shipped to FRC MM/DD/YYYY."

Overlooked Periods on Accepted Offers

  1. Occasionally additional periods are discovered after the acceptance of an offer. Missing liabilities assessed before the acceptance are considered only a defect of the offer. When such liabilities are discovered, the offer agreement should be modified to include the additional period(s).

    Note:

    Such modification of the offer agreement would not require a determination of "mutual mistake of material fact". If the modification results in the unpaid amount of tax equaling or exceeding $50,000 and an opinion from Counsel had not previously been obtained, the file must be sent to Counsel for the required opinion.

  2. To address overlooked periods on accepted offers see IRM 5.19.7.3.4, Overlooked Periods, for necessary actions.