Taxpayers may attempt to amend a return for a tax period(s) included on the offer, however, once the tax period has been compromised, changes cannot be made to the amount assessed.

If an amended return is received for an offer period return the original form, and remittances (if submitted with the amended return), to the taxpayer with a letter advising that we can not process an amended return on a tax period included in an accepted offer.

If the offer is being monitored with a physical case file make a copy for the file.

Update the AOIC or case file history.

During the 5-year compliance monitoring period of an accepted offer, a determination to terminate or rescind an existing compromise agreement may need to be made.

An offer is an agreement which is binding and conclusive on both the taxpayer and the government, and prohibits further action on periods related to the offer unless fraud or a mutual mistake is identified.

Requests regarding rescission of accepted offers are routed to the MOIC area from COIC, the Area offices, Appeals or Counsel. MOIC will take the following action to return the original offer file to the originator as required:

Update AOIC with the deposit information from the Form 2515, Form 656, or other documentation. Follow procedures in the Compliance Services AOIC User Guide, Chapter 3.

After the deposit information has been input, generate the appropriate forms from AOIC. (See below)

Route a copy of the Form 2515 and generated AOIC forms to the RACs Unit through Receipt & Control (R&C), R &C will forward Form 2515 to RACS in Accounting. The remittance will be deposited by R &C.

Deposits made on offers not controlled by the AOIC program must be processed manually.

Manually processed deposits must be assigned an 8 or 10-digit RACS control number. This number may be created by RACS or the OIC Unit.

Research the RACS Report Control File and determine if a previous remittance was recorded as a deposit for the OIC taxpayer.

For both initial and subsequent deposits, route the copy of Form 2515 and Form 3244 to the RACS Unit in Cincinnati Accounting. The remittance will be deposited through R & C.

Form 3244 will be returned by Accounting with a journal number and date.

Associate and attach the Form 3244 to the Form 2515 in the 4710 Account File.

Maintain the Form 2515 until the remittance has been either applied or refunded and the 4710 account cleared of the funds.

When the offer investigation is completed and a determination has been made, deposits in the 4710 Account must be refunded to the taxpayer or applied to the tax liability.

Deposits on accepted offers will be applied to the taxpayer's liability.

Deposits on withdrawn, rejected or returned offers will be refunded to the taxpayer by completing Form 3753, Manual Refund Posting Voucher, unless the taxpayer has provided a written statement or signed Form 3040, Authorization to Apply OIC Deposit, authorizing the Service to transfer the deposit to the tax liability. This authorization can be secured at anytime during or following the investigation.

Although IRM 21.4.4.4.2(7) instructs employees requesting manual refunds to contact the Financial Management System (FMS), it is not necessary for refunds from the 4710 RACS Account.

Take the following actions to process deposits through AOIC. (Refer to the AOIC User's Guide, Chapter 3.)

Print the AOIC Offer Deposit Disposition Listing monthly. This listing identifies withdrawn, rejected and returned offers and also indicates the type of disposition. (A=Applied/R=Refund.)

All monitoring units must apply or refund deposits controlled by their sites.

Although OIC deposits submitted with incoming offers may be physically located in the RACS accounts at another campus, each campus is responsible for the deposit disposition for the states serviced by their site.

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When disposing of AOIC offers with deposits residing in the RACS Unit of another campus:

When a request to refund a deposit is made and it is not on the deposit disposition list, secure written evidence that this is what the taxpayer wants from the requestor (Area, COIC, etc.). R &C requires a source document when refunding deposits.

The Area Office, Exam or Appeals will provide disposition instructions for manually monitored offers when the offer is rejected, withdrawn or returned. If the Area Office does not specify what should be done or does not provide the required documentation, refund the deposit.

Deposits are recorded on Form 2515 and Form 6313 for manually monitored cases. When the manual control card, Form 2515 or Form 656 indicates the taxpayer made a deposit(s):

Apply the deposit as follows:

For applying deposits to ANMF tax periods:

After month-end reconciliation with Accounting, Form 2515 will remain with the open file until the deposit is either refunded or applied to the taxpayer's liability.

On the 3rd workday of each month the RACS Accounting function closes the 4710 Account activity for the month and forwards the Offers in Compromise Inventory Detail Report showing all OIC deposits in the 4710 Account to Brookhaven and Memphis. The OIC unit at each site must match its record of OIC deposits with this report to reconcile with the general ledger balance.

Upon receipt of the RACS report from the RACS 4710 Account Coordinator, an MOIC tax examiner generates a Deposits (RACS) Open Balance Report (selection A on the AOIC Reports menu) to reconcile balance amounts.

The "manual" RACS Report Control File must also be pulled to verify that all credits and debits for the month have been recorded for manually monitored offers.

The MOIC tax examiner must compare the two reports and research all deposits that do not match.

Copies of the following documents that will impact the 4710 account should be routed, on a daily basis, to the designated MOIC employee responsible for reconciling the account:

If a payment does not appear on both Accounting's report and AOIC/Manual RACS report, take the following actions:

If the deposit is on AOIC but not listed on the 4710 Account Report:

Research IDRS to see if the payment was applied to the tax liability.

If the deposit is not on AOIC but is on the 4710 Account Report:

As of April 1, 2005, COIC payments may be processed through the Paper Check Conversion System (PCC) at Brookhaven and Memphis. PCC is a process for converting checks into electronic fund transfers. There will not be a paper check if it is processed through PCC.

Refunds issued to the taxpayer may be redeposited into the 4710 Account for two reasons:

If the refund check was undelivered, research for a new address.

Accounting will notify the OIC Unit when a deposit made by check was returned due to insufficient funds.

A correction should be made to the Deposit RACS screen.

If the deposit is located at your campus and the account is controlled by another campus, notify the other site that the deposit on their records must be reversed due to insufficient funds.

) By signing Form 656, taxpayers agree to Section 3.03(2) of Revenue Procedure 2002-26 which calls for payment application to periods in the order of priority that the Service determines will serve its best interest. The payment will be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed.

If the following corporate liabilities are included in the offer, apply OIC payments in the following descending order:

If a taxpayer wishes to make a voluntary payment on a liability with an expired CSED, the payment should be accepted and the taxpayer should be asked to sign a statement indicating that they are aware collection of the tax is barred and the payment will not be credited to a specific liability.

Attach the statement to the payment posting document and process the payment through normal remittance processing. The payment should be applied to Excess Collections.

Do not treat these payments as offer payments.

Check the AOIC Balance (Liability) screen to determine if the payment will full pay the period with the oldest CSED date. If it will, update the balance.

Go to the Journal (payments) screen to generate and print Form 3244CG (AOIC). AOIC applies the payment posting rule systemically.

Refer to Chapter 6 of the AOIC User's Guide.

For offers accepted prior to January 1, 2000, continue to accrue interest per The IRS Restructuring and Reform Act of 1998,( IRM 5.19.7.3.14.8, Interest). The Service has made a policy decision not to compute accruals unless the taxpayer defaults.

If interest computation becomes necessary, the affected modules must reflect correct balances and payment application.

Payments should be applied to these and all other offers based on the balance due amount shown on the INTST prints and updated when the offer was first received into inventory.

Analyze tax periods being monitored to determine to which period the payment should be applied. This may have been done when the case was initially processed.

Prepare Form 3244 to process the payment. Along with taxpayer entity information Form 3244 should include:

Record the payment on Form 6314, Deferred Payment Offer Payment Record.

Payments erroneously applied to IDRS must be moved to NMF with Form 2424.

When the final deferred payment is received and the refund recoupment requirements have been met, use procedures outlined in IRM 5.19.7.3.24., Closing an OIC.

If the tax period(s) is on NMF, the centralized ANMF databases should be accessed.

ANMF was centralized in Cincinnati on September 26, 2006. All NMF processing is now completed in Cincinnati.

On AOIC or Form 6314, record payments and calculate the remaining balance.

When the final deferred payment is applied to an NMF account:

Overpayments of $1.00 or more must be refunded to the taxpayer.

Occasionally the investigating individual overlooks the release of a continuous wage levy.

When this occurs:

The investigating function should guarantee that all TFRP payments made prior to acceptance have been cross-referenced, thus the offer taxpayer's TFRP assessment will show the correct balance due.

Accepting an offer from the employer, or one or more of the responsible officers, does not change the policy that the tax is to be collected only once. All payments should be cross-referenced as they normally would be as if there were no OIC. The TFRP Units will cross-reference OIC payments to the related TFRP accounts. TFRP transcripts will not be forwarded to MOIC.

For one offer filed jointly by husband and wife with identical TFRP assessments, apply OIC payments to the primary taxpayer. A TFRP transcript will issue so the payment will be cross referenced by the TFRP Units to the secondary and related accounts. When all terms are met, both TFRP assessment accounts will be compromised. See IRM 5.19.7.3.14.8 for IRS policy regarding computation of accruals.

When the offer is full paid, see IRM 5.19.7.3.11.2 for detailed closing requirements.

For all OICs accepted after December 31, 1999, future interest will also be compromised. Therefore, no interest will accrue on the unpaid balance of an accepted compromise.

If an OIC has an acceptance date prior to January 1, 2000, interest continues to accrue from the date the Service accepts the offer until the amount offered is completely paid.

Compute interest using CC COMPA or a Tax Interest Program. Use the Accrued Interest Amount from Form 2515 or AOIC.

Process taxpayer responses as follows.

A dishonored check is a check received and processed as a payment by the IRS, but the bank does not accept the check as valid.

A dishonored check penalty should not be assessed.

If a taxpayer's check is dishonored, issue letter 274, Potential Default Letter and follow guidance in IRM 7.19.7.3.20.1, Failure to Make OIC Payments, if payment is not received.

The Chief Financial Officer set policy on October 21, 2002 that changed processing of a joint account when one spouse requests tax relief.

The policy states that the Service will split the joint return into two separate modules, one for the primary taxpayer and one for the secondary taxpayer, both mirroring the original return. The policy statement also called for a linkage for transaction codes between the modules and systemic intervention to accommodate payment and credit cross-referencing. The mirror functionality became operational January 2005.

Each taxpayer has a mirrored MFT 31 account under their SSN that accurately reflects his/her tax liability and correct CSED/ASED.

Mirror assessments must be established on master file when:

In addition, the policy change includes offers submitted separately that are eventually rejected or withdrawn. COIC or the field investigating offices will mirror modules for rejected/withdrawn offers.

When a compromise is accepted from one party to a joint liability, the other party is not released from their several liability. A co-obligor agreement is generally secured from the taxpayer submitting the offer to clarify the effect of the compromise on the obligations of the other party. State law dictates whether a co-obligor agreement is appropriate. Therefore a co-obligor agreement may or may not be secured by the investigating office.

A joint account can be mirrored without a co-obligor agreement.

The majority of accepted offers are controlled on AOIC. If the AOIC MFT screen displays a CSED indicator of P for primary or S for secondary then research IDRS to identify the joint periods that must be mirrored.

For manually monitored offers review the acceptance letter or the Form 656; if only one name appears and IDRS research of each tax period (CC TXMOD) shows a joint filing status (FS2) then the MFT 30 period(s) must be mirrored to MFT 31.

Review the MFT 30 module(s) before beginning the transfer process to ensure all appropriate actions have been completed.

For accepted offers controlled on AOIC:

For accepted offers manually monitored:

The secondary spouse's SSN must be validated. See IRM 5.19.7.3.20.4. below.

Before beginning the mirror/transfer process the secondary spouse's SSN must be validated. Master file will not create an MFT 31 if the secondary SSN is not valid.

To verify the secondary spouse's SSN use CC IMFOLE to review the entity information:

Correct the SSN or Name Line using CC ENMOD/ENREQ and monitor until the SSN moves into a valid segment (in about 3 weeks) then continue with the mirroring process.

If you determine that an invalid name control is due to the secondary spouse not notifying the Social Security Administration of a change in surname due to divorce or marriage, then validate the SSN using CC IRCHG. The validation (correction) must be made for each tax period.

Use CC ENMOD to monitor for TC 017 to post (about 3 weeks) then continue the mirroring process.

If unable to validate the secondary SSN, the MFT 30 modules can not be mirrored. They must be transferred to NMF by completing Form 12810 and routing to the appropriate consolidated NMF site as indicated on SERP.

Establish a control on the account being moved to NMF.

Set appropriate follow up dates for all actions taken and update the case history.

When all preliminary actions and validations have been completed then the joint liability periods are ready to be mirrored.

Follow the steps below using CC REQ77:

As a part of establishing the two MFT 31 modules a TC 370 is systemically generated with one DLN identifying the primary SSN from the copy and both will carry a complete mirror of the MFT 30 module.

If the offer taxpayer is the secondary taxpayer and TC 400 posts, the TSIGN should be reversed back to 0000 and the OIC indicator shut off on primary taxpayer's SSN. (This can be done at the same time of TC 972 - AC145 input.)

MFT 31 mirror modules will generally reflect the collection status immediately prior to Status 29. TC 470 is input on the MFT 31 of the offer taxpayer in order to suppress collection notices that are systemically generated when the mirrored accounts are established on IDRS.

Update the AOIC MFT Screen to reflect the MFT 31 modules.

Update the liability on the MFT screen on AOIC from MFT 30 to MFT 31. AOIC will transmit the correction to the liability screen.

Offer payments received on the offer MFT 31 after mirroring will systemically cross reference to the MFT 31 module of the non offer spouse.

Because the CSED on the mirrored accounts differ, periodically check to see if the offer payment will cross reference to a period of the non offer spouse with an expired CSED.

OIC payments received after the initial mirroring process has begun should be placed in the 4710 account and applied immediately following establishment of the MFT 31 accounts.

Cross referenced payments reduce the unpaid balance of the co-obligor but are nonrefundable.

When an offer with mirrored modules is being placed in monitoring status of 5M, input a TC 972 AC 110 on both MFT 31 modules for the offer to prevent the cross-referencing of any future payments made by the spouse.

Both taxpayers on a joint tax liability must remain compliant with filing and paying subsequent returns following acceptance of an offer in compromise. The taxpayers must be compliant for the 5-year period following acceptance of the offer or during an extended installment offer payment period, whichever is longer.

If one taxpayer is noncompliant during the compliance period and the other compliant, only the noncompliant spouse will be in default. The account is split and the offer will remain in effect for the compliant taxpayer.

Tax examiners should first follow Default Procedures in IRM 5.19.7.3.26. and correspond only with the noncompliant spouse.

When the noncompliance occurs during the 5-year monitoring (5M), all previously written off tax periods must be reversed and established as a separate MFT 31 account.

Before inputting any transactions to MFT 31 research IMFOL to ensure that the MFT 31 module(s) have posted with the correct entity.

When noncompliance occurs while extended offer payments are being made (usually beyond the 5-year compliance period).

A taxpayer who files a joint return with a spouse is generally jointly and separately liable for all tax due in that tax year. If a taxpayer believes he/she should not be required to pay the tax (including penalty and interest) for a tax year in which he/she filed a joint return, the taxpayer may be eligible for relief from joint and several liability.

Taxpayers generally request Innocent Spouse Relief via Form 8857. The taxpayer filing the Form 8857 is referred to as the requesting spouse or requesting taxpayer. The Form 8857 claim is referred to as an Innocent Spouse claim.

When the spouse filing the Innocent Spouse claim is granted relief the Service may still collect the entire liability from the other spouse. Innocent spouse examiners generally set up an assessment on the other spouse separately via MFT 31. Related Examination paper work will be forwarded to the OIC monitoring unit.

Exam will forward Innocent Spouse determination letters to the back end OIC Unit when there is an unreversed TC 780 on the module. This determination letter should be held in the case file pending closure of the OIC case.

For instances where the OIC has been closed on MFT 30 (TC 788) prior to processing the innocent spouse claim, Innocent Spouse will issue the letter to the requesting spouse. A copy of the letter will not be sent to the OIC unit because the OIC taxpayer has complied with all terms of his offer and his/her liabilities have been compromised.

A master file account must be established for the co-obligor using current MFT 31 procedures. There may be special circumstances i.e. invalid TIN, requiring an NMF account be established.

If establishment of the co-obligor's account is pending on master file or NMF, prepare a Form 3244 to apply payments on a deferred NMF account.

TC 788 goes unpostable on MFT 31 accounts established from January 2001 through January 2005. The -Y freeze does not release and subsequent refunds due the taxpayer may be frozen.

Although TC 780 displays on IDRS TXMOD, it did not set on master file when the MFT 31 account was created. Without an established TC 780 on the account input of TC 788 goes unpostable.

To correct this condition re-input the OIC transactions using REQ77.

One or more of the following collateral agreements may be part of the OIC.

A co-obligor collateral agreement preserves the Services right to collect a joint liability from taxpayers who are not a party to an Offer in Compromise. This is necessary when state law provides that if a debt is forgiven or compromised for one liable party, the co-obligors are automatically provided the benefit of the compromise.

The collateral agreement file is a part of the open offer file.

To set up the collateral agreement file:

Collateral files are to be maintained at the campus until the offer is closed.

Future income collateral agreements for an individual or a business run for a specified period, beginning the year following the year the offer is accepted.

For each year of the collateral agreement, forty-five (45) days prior to the due date of the taxpayers annual income tax return, prepare and send a "collateral" package to the taxpayer. Include the following items in the package:

After compiling the collateral package take the following steps:

When a signed Form 3439 or Form 3439A is received from the taxpayer, record the date received on the AOIC history and the Form 6313. If with remittance, also record the amount received.

For the accounts previously written off using TC 971 AC 32:

If the taxpayer submits a copy of a Form 1040 or Form 1040A tax return or a Form 1040 / 1040A return has been filed (CC RTVUE), and a Form 3439:

Verify Form 3439, Statement of Annual Income:

If the taxpayer submits a tax return other than a Form 1040 or Form 1040A (i.e. Forms 1120, 1120S, 1065) and a Form 3439A :

2) Route the tax return to Exam for review, along with Form 3439, Form 3440 (if applicable), Form 2261 Collateral Agreement, IDRS prints RTVUE / BRTVU, IRPTR, the AOIC Journal Screen, and the original case file if requested.

If the taxpayer submits a Form 1040 / 1040A or files a Form 1040 / 1040A tax return (CC RTVUE), but does not submit a Form 3439 :

If the taxpayer submits a tax return other than a Form 1040 / 1040A (i.e. Forms 1120, 1120S, 1065), but does not submit a Form 3439A, send to Exam for review, along with a blank Form 3439A, Form 2261A Collateral Agreement, IDRS prints RTVUE / BRTVU, IRPTR, and the AOIC Journal Screen.

If the taxpayer does not respond to the collateral package within 45 days and a return or extension to file is not posted within 60 days of the due date of the return, or responds that he is not liable, compare the W-2 Income or IRPTR information to determine filing requirements. See IRM 5.19.2, Return Delinquency.

If a tax period included in the Future Income Collateral Agreement is amended / adjusted at a later period in time, MOIC should compute the Form 3440 to determine if there is an additional balance due.

If an Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.

Form 2261-B, Basis Collateral Agreement will be sent to Exam between six and eight weeks after the due date of the return, along with the Form 2261-B Collateral Agreement, IDRS RTVUE / BRTVU print, and the original case file if requested.

MOIC tax examiners should review the tax returns included on the Form 2261-C Waiver of Loss Collateral Agreements for Net Operating Losses, Capital Losses, Unused Investment Credits, Unused AMT credit, and/or any "unexplained" credits to evaluate if the package should be sent to Exam for review. This review should occur no later than 6 - 8 weeks after the due date of the tax return or valid extended due date of the tax return.

If the Form 1040 taxpayer does not claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / or an "unexplained" credit,"accept as filed" .

If the Form 1040 taxpayer does claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / "unexplained" credit, or an income tax return other than a Form 1040/1040A, forward the case to Exam for review, along with Form 2261-C Collateral Agreement, IDRS RTVUE / BRTVU print, and the original case file if requested.

If Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.

MOIC processes basis and other collaterals per the terms and the years included on the collateral as indicated in the chart below:

The Campus Examination Function reviews the Collateral Agreements to determine if the terms of the agreement have been met. If during this review, Exam determines that an audit is warranted, they will request the original return from files, attach an explanation and forward the package to the Area Office.

Campus Exam will provide a response to all IMF referrals within 30 days and to all BMF within 45 days. If no response from Exam within the allotted time frame, send a reminder and wait an additional 5 days. If no response, elevate to MOIC manager for action.

If the terms of the Collateral Agreement are beyond Campus Exam's ability to validate, (e.g. sale of property, proceeds from a business) prepare a Form 2209 and route to appropriate Field Office with copies of the acceptance letter, Form 656, and Form 2261. Suspend case for 60 days. If no response within the allotted time frame, send a reminder and wait an additional 10 days. If no response, elevate to MOIC Manager for action.

When the taxpayer dies during the monitoring of the terms of a collateral agreement, follow the procedures in IRM 5.19.7.3.14.6, Death of the Taxpayer While Monitoring the OIC.

Update AOIC history or Form 6313, as appropriate, showing the date of death.

Follow Appeals reply instructions provided on Form 2209.

A request to transfer an accepted OIC when we are monitoring for the collateral should be rare. The request to transfer must be made by the taxpayer in writing.

Follow transfer procedures in IRM 5.19.7.3.18.3., Transfer of Accepted OICs.

When a pending OIC is transferred from one campus's jurisdiction to another's, the Accounting function at the losing campus must transfer OIC deposits from the 4710 Account to the Accounting function at the receiving campus. The Area Office will notify the campus of the transfer.

If the account is on AOIC, update AOIC with the transfer information following procedures in the AOIC User Guide, Chapter 3.

Prepare Form 2158, Credit Transfer Voucher showing (per local policy):

Route the completed Form 2158 to the RACS unit in Accounting.

When the tax periods on the Form 656 are on the ANMF, follow the steps below:

On IDRS take the following actions.

Use Form 3177 to input TC 483 for NMF periods.

Record your actions and the new address on AOIC or Forms 2515, 6313 and/or 6314, if applicable.

Close the OIC control base on IDRS.

Send Letter 86C notifying the taxpayer of the transfer, providing the address of the receiving campus.