5.8.12  Independent Administrative Review

Manual Transmittal

October 28, 2014

Purpose

(1) This transmits revised IRM 5.8.12, Offer in Compromise, Independent Administrative Review.

Material Changes

(1) Relocated sections for better work flow. Revisions include:

IRM Reference Change
5.8.12.2, Role of the Independent Administrative Reviewer Further clarified the role of the IAR is to determine if the decision to reject was appropriate.
5.8.12.3, Documents Required for Review Previously 5.8.12.3.1, Case File. Removed the requirement for the field OS to include a copy of the ICS history with the file. Added item i) requiring the OE/OS to include any letters explaining or discussing special circumstances. Added the ability to transmit information either by fax or electronically via E-mail as stated in IRM 5.8.12.4.
5.8.12.4, Transmission of Documents Using the Electronic Offer in Compromise (EOIC) Process (Field Only) & 5.8.12.4.1, Independent Administrative Review Procedure for EOIC (Field Only) New sections based on a MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN THE INTERNAL REVENUE SERVICE AND THE NATIONAL TREASURY EMPLOYEES UNION (NTEU) CONCERNING THE ELECTRONIC TRANSMITTAL OF OFFER IN COMPROMISE CASES signed June 17, 2011. This MOU authorizes Field OS to transmit files through the EOIC process.
5.8.12.5, Submitting the File for Independent Administrative Review Split out the procedures between the submission of the file and the IAR review. The procedures define in IRM 5.8.12.5 apply to the OE/OS. Added a Note to (1) stating that if the OE/OS fails to secure the signature of the approving official prior to sending the file to the IAR the case will be returned without the IAR completing the review.
5.8.12.6, Initial Process Previously 5.8.12.4, Independent Review Process. Revised the requirement for the Field IAR to complete the review within 30 days of receipt to include the COIC IARs; thus making the 30 day requirement for both the Field and COIC IARs.
5.8.12.6.1, The Review Previously 5.8.12.3, The Review. Included 5.8.12.3.2, Communication, in paragraph (7) of this section. The Exception regarding the Obvious Full Pay Criteria was removed. Included in the note in (5) a reference to Payroll Service Provider Fraud for ETA Special Circumstance consideration.
5.8.12.7, The Decision; 5.8.12.7.1, Rejection Sustained; & 5.8.12.7.2, Rejection Not Sustained. Previously IRM 5.8.12.4, Independent Review Process; 5.8.12.4.1, Rejections Sustained by the Independent Administrative Review; 5.8.12.4.2, Rejections Not Sustained by the Independent Administrative Reviewer.

Effect on Other Documents

This material supersedes IRM 5.8.12, dated 04/15/2011.

Audience

SB/SE Compliance employees

Effective Date

(10-28-2014)


Rocco A. Steco
Acting Director Collection Policy

5.8.12.1  (10-28-2014)
Overview

  1. This IRM provides instruction to conduct an independent administrative review of a proposal to reject an OIC in accordance to IRC § 7122 (d) (1).

  2. The review must be conducted prior to the final determination of rejection being communicated to the taxpayer. See IRM 5.8.12.6.1(7).

  3. The Independent Administrative Reviewer (IAR) is responsible for conducting this review.

5.8.12.2  (10-28-2014)
Role of the Independent Administrative Reviewer

  1. The IAR is responsible for reviewing the facts and circumstances of each case to determine if the proposed rejection is reasonable. The IAR is not responsible for conducting a quality analysis of the accuracy of the documents used to support the case but, instead, is to determine if the decision to reject was appropriate.

5.8.12.3  (10-28-2014)
Documents Required for Review

  1. The below items should be present in the file. In addition, any additional pertinent information that supported or influenced the case decision should also be included, such as correspondence.

    1. Form 656, Offer in Compromise

    2. Form 1271, Rejection or Withdrawal Memorandum

    3. Preliminary rejection letter

    4. Asset/Equity Table (AET)

    5. Income/Expense Table (IET)

    6. Rejection summary, including all issues not in agreement between the taxpayer and the Offer Examiner (OE) or Offer Specialist (OS).

    7. Collection Information Statements (CIS)

    8. Case History

      Note:

      COIC — The COIC OE must include a complete printout of the latest AOIC Remarks.

      Note:

      Field — The IAR has the capability to review the current history on ICS; therefore, it is no longer necessary for Field OS to include a copy of the ICS history with the case submission.

    9. All other supporting documents and/or correspondence, including any letters explaining or discussing special circumstances.

  2. If the IAR determines that any information is missing or incomplete that may hinder the review process, the case file may be returned or a memorandum may be sent to the OE, OS, or the manager requesting the information.

    Note:

    In cases where the IAR is located off-site, the requested information may be faxed or electronically submitted via email to the IAR for inclusion in the analysis. See IRM 5.8.12.4, Transmission of Documents Using the Electronic Offer in Compromise (EOIC) Process (Field Only), below for additional information.

5.8.12.4  (10-28-2014)
Transmission of Documents Using the Electronic Offer in Compromise (EOIC) Process (Field Only)

  1. As an alternative method of submitting documents to the IAR for review, it is recommended that the OS use email attachments instead of physically shipping the case file. This method should result in considerable savings of time and shipping costs while eliminating the possibility of loss of the case file in transit.

    Note:

    All documents transmitted by email must be sent using Secure Messaging.

  2. Supporting documents should be in one email with the Form 1271, Rejection or Withdrawal Memorandum, sent under separate email.

  3. The scanned documents must be reduced to a PDF file for transmittal to the IAR as an email attachment, with "Scanned Documents XXXX" as the subject line.

    Note:

    The "XXXX" in the subject line will be the last 4 digits of the Taxpayer Identification Number (TIN) or Employee Identification Number (EIN). Use the PDF format that yields the smallest file size.

5.8.12.4.1  (10-28-2014)
Independent Administrative Review Procedure for EOIC (Field Only)

  1. When the IAR receives an email from the OIC group with the PDF files attached, they may be printed out for reference during the case review. Since the ICS case history is available in real time, it should be referred to online so that the latest entries are not overlooked.

  2. The IAR should add the case to the reviewers ICS and Automated OIC (AOIC) inventories.

  3. Once the review is complete, the IAR should delete all attachments except the Form 1271. If the rejection is not appropriate, follow procedures defined in IRM 5.8.12.7.2 below. If the rejection is appropriate, the IAR should:

    • Electronically sign and save the Form 1271, then

    • Forward the form back to the originator via secure messaging.

      Note:

      It is recommended that when the email is sent that "Read Receipt" on Outlook is also activated to ensure the email was received.

5.8.12.5  (10-28-2014)
Submitting the File for Independent Administrative Review

  1. Prior to the proposed rejection being forwarded to the IAR, the authorized official must have reviewed the file and signed the Form 1271, Rejection or Withdrawal Memorandum, indicating concurrence with the proposed rejection.

    Note:

    Failure to secure this signature before transmission to the IAR may result in return of the case to the OE or OS without the IAR completing the review.

  2. Once the approving official has signed the Form 1271, the offer must be assigned to the IAR pool on AOIC.

  3. If a physical file is forwarded to the IAR the Form 3210, Document Transmittal, must be used.

  4. If the Field OS follows procedures in IRM 5.8.12.4 and 5.8.12.4.1 above, "Read Receipt" on Outlook must be used.

5.8.12.6  (10-28-2014)
Initial Process

  1. The Field IAR will load the case onto ICS no later than 7 calendar days after receipt.

  2. The IAR will be responsible for updating AOIC to reflect the IAR's assignment number.

  3. The IAR should complete the review and reach a determination no later than 30 calendar days from opening the ICS "OI" or assignment on AOIC.

  4. Upon completion of the review, the IAR must update AOIC documenting information on the results of the review. In addition, the Field IAR must document the results of the review on ICS, and complete the disposition of the assigned Other Investigation.

  5. The results of the review should be communicated in a clear, concise, professional and easy to understand manner.

5.8.12.6.1  (10-28-2014)
The Review

  1. The OE or OS analysis of the taxpayer's OIC should be reviewed to determine if the basis for the rejection determination was appropriate.

  2. The IAR should consider if the taxpayer's rights have been observed during the offer investigation, in communications, and/or discussions with the taxpayer or Power of Attorney (POA). These considerations should be based on issues that would impact the recommended rejection.

  3. The IAR should compare the offered amount with the RCP in order to determine if the decision to reject is reasonable. Review the Asset/Equity Table, the Income/Expense Table (AET/IET), and the taxpayer’s financial information to determine if the reasonable collection potential (RCP) determination is fully supported by the documented facts and circumstances in the case file; including making sure the OE/OS has fully developed the RCP and discussed all issues with the taxpayer before recommending the rejection.

    Note:

    It is not the responsibility of the IAR to re-work the case; however, it is the responsibility of the IAR to make sure all aspects of the offer have been taken into consideration.

  4. If supporting documents indicate any circumstances that could impact either future earning potential or allowable expenses the documentation in the case file must support the decision to exclude or include assets, expenses, and/or income relating to the taxpayer's circumstances.

  5. If information contained in the case file indicates issues were raised that meet either Effective Tax Administration (ETA) or Doubt as to Collectibility Special Circumstance (DCSC) criteria, as defined in IRM 5.8.11, Effective Tax Administration, the case history must address these issues as well as support the rejection decision.

    Note:

    It is not a requirement that the taxpayer specifically ask for consideration of "special circumstances." If the IAR identifies the existence of special circumstances that meet ETA or DCSC criteria, this fact should be addressed. The IAR should be alert to instances of Payroll Service Provider Fraud for ETA Special Circumstance consideration and review the victim's individual unique circumstances.

  6. The IAR should ensure that all of the facts and circumstances of the case were considered during the investigation and that the decision to reject the offer is reasonable, based on the case analysis.

  7. The case file should indicate an attempt to communicate the results of the OIC investigation with the taxpayer or POA, prior to recommending the rejection. The IAR should determine whether the communications were reasonable based on the facts of the case.

    Note:

    Communications may not necessarily be telephone calls. In some cases, they may be conducted entirely in the form of letters to the taxpayer or their authorized representative. The case file should document these communications and any specific issues that are in dispute.

  8. When circumstances dictate, the OE/OS should use problem solving and professional judgment, and in so doing consider the taxpayer’s perspective when working toward case resolution.

5.8.12.7  (10-28-2014)
The Decision

  1. The below sections provide closing actions for the IAR based on whether the decision to reject the offer was appropriate.

5.8.12.7.1  (10-28-2014)
Rejection Sustained

  1. If the proposed rejection of the offer is sustained by the IAR, the reviewer will:

    1. Update the IAR "Main Screen" on AOIC indicating the appropriate disposition.

    2. Sign the Form 1271 as the reviewer, indicating concurrence with the proposed disposition.

    3. Once the review is completed by the IAR, update AOIC to reflect the results of the review. The Field IAR must also document the results of the review on ICS, and complete the disposition of the assigned Other Investigation.

    4. If a physical file is to be returned to the OE or OS, the Form 3210 must be used.

    5. If the case is closed using EOIC, follow procedures in IRM 5.8.12.4.1 above.

  2. Once the signed, approved Form 1271 is received from the IAR, the OE or OS must include a copy in the case file.

5.8.12.7.2  (10-28-2014)
Rejection Not Sustained

  1. If the proposed rejection is not sustained by the IAR, the reviewer will:

    1. Update the IAR "Main Screen" on AOIC indicating the appropriate IAR disposition.

    2. Prepare the Form 5942, Reviewer's Report - Technical Services Advisory, providing an explanation of why the determination was not sustained and providing instruction on additional actions required by the investigating employee. Field IARs will complete an ICS history entry noting that rejection was not sustained and the specifics of the review are noted on Form 5942 and close the Other Investigation assignment on ICS.

    3. The IAR manager is required to sign the Form 5942.

  2. After the IAR Manager approves the Form 5942, the case will be routed as follows:

    1. The original Form 5942 and the offer file will be returned to the OE/OS manager.

    2. A copy of the Form 5942 will be sent to the OE/OS second level manager.

    3. A copy of the 5942 will be retained by the IAR group manager for two years after the year prepared.

  3. The following procedures describe necessary actions once the offer file is received by the OE or OS:

    If… Then…
    Reconsideration of the offer based on recommendations from the IAR results in a determination to accept the offer Process the acceptance recommendation following procedures defined in IRM 5.8.8, Acceptance Processing.
    Reconsideration of the offer based on recommendations from the IAR results in a determination to continue to recommend rejection of the offer Update the case file with the additional case actions and any new information and re-submit to the IAR for a second review.
    The investigating employee determines that the rejection is the correct action without further development, after reviewing the Form 5942 The offer file will be returned to the IAR for reconsideration. If necessary, additional history should be included to further support the offer rejection.
    After a second review by the IAR, the rejection is still not sustained and if the OE/OS and the IAR still disagree The decision will be elevated to the second level manager for resolution.
    • The IAR Manager will forward a memorandum to the Offer Manager with an explanation of why the rejection cannot be sustained.

    • A copy of the memorandum will be forwarded to the second level manager.

    • The IAR manager and the second level manager will discuss the issues to reach a resolution.

    • The final decision will be made by the field second level manager for cases assigned to the field and the second level manager for those cases decided by the COIC sites.

  4. The original Form 5942 and any other documentation regarding second level management involvement and decisions must be retained in the offer file as a record of actions taken during the IAR process.


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