5.19.7  Campus Collection Programs (Cont. 2)

5.19.7.3 
Monitoring Offers in Compromise (MOIC)

5.19.7.3.16 
Collateral Agreements

5.19.7.3.16.2  (01-08-2014)
Setting Up Collateral Agreement Files

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

  2. To set up the collateral agreement file:

    1. Remove the collateral agreement form from the accepted offer file

    2. Associate Form 2515, Record of Offer in Compromise, (or set up the collateral file on AOIC) with the collateral agreement.

    3. Indicate type of collateral agreement, e.g., Form 2261, Form 2261B, and years involved on Form 2515 or AOIC.

    4. Update the AOIC collateral screen with information from the collateral agreement, or

    5. For manually monitored offers prepare Form 6313 , Collateral Agreement Payment Record.

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

5.19.7.3.16.3  (01-08-2014)
Processing Future Income Collateral Agreements

  1. 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.

  2. 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:

    1. Letter 0294C or AOIC Letter 279 SC/CG.

    2. Two Forms 3439, Statement of Annual Income for IMF or two Forms 3439A , Statement of Annual Income (Corporate) for BMF accounts.

    3. An addressed return envelope.

    4. A cover sheet is suggested to avoid having copies of returns misdirected through the pipeline.

    5. Copy of Collateral Agreement.

    Note:

    For requests for blank tax forms, provide: (1) the toll-free number for forms to be mailed (1(800)829-3676), or (2) the IRS Internet Web site www.irs.gov).

  3. After compiling the collateral package take the following steps:

    1. Record on Form 6313 the tax year and date the package is mailed to the taxpayer.

    2. Mail the package to the taxpayer.

    3. Update AOIC recording the information in (a).

5.19.7.3.16.4  (09-29-2014)
Processing Future Income Collateral Responses

  1. 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.

    1. Prepare or generate and print Form 3244 from AOIC for remittances received with Form 3439:
      • Input TC 670 with the amount.
      • Input designated payment code (DPC) 09.
      •Apply the payment to the oldest CSED offer tax period.
      • Enter TC 570 with .00 (second TC).
      • If an NMF account, enter in "Remarks" 6530 Account Collateral Agreement.

    2. Prepare Form 8485 to reverse any write-offs on manually processed cases; use:
      • Priority Code 3 or 8 (per campus policy)
      • Hold Code 3
      • Blocking Service 80 (except for MFT 55)

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

    1. Input TC 972 AC 32.

    2. Assess applicable accruals if the TC 605 is less than the payment amount.

      Note:

      When performing a manual calculation of interest follow procedure in IRM 20.2.8.3 (5) (a)

    3. Monitor the account for the payment to post.

    4. Re-input TC 480, 780 with delay code of 1, when the total amount paid has posted to the tax periods.

    5. Also, re-input TC 971 AC 032 delay code 2 and TC 788 delay code 4.

  3. 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:

    1. Verify the income on the tax return using the Information Returns (IRs) found under IDRS command code IPRTR (available by the end of May for the previous calendar year) as indicated in the following table:

      Type of Income IR Item and Box in Which it Should Appear Where to Find Income on Form 1040 / Form 1040A (dollar amount on those lines should be equal to or more than the total dollar amount for the IR Type
      W-2 Wages, tips, other compensation (box 1) Form 1040, line 7
      Form 1040A, line 7
      W-2G Gambling Winnings
      (box 1)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 (if taxpayer is professional gambler)
      1099-G Unemployment compensation (box 1) For 1040, line 19
      Form 1040A, line 13
        State & local income tax refunds (SITR) (box 2) Form 1040, line 10 (taxpayer must report this as income if claimed as an itemized expense on prior tax year Schedule A)
      1099-INT Interest Income (box 1) Form 1040, line 8a or 8b
      Form 1040A, line 8a or 8b
      1099-DIV Dividend Income
      (box 1a)
      Form 1040, line 9a or 9b
      Form 1040A, line 9a or 9b
      1099-MISC Rent
      (box 1)
      Form 1040, line 17 or 21 or
      Schedule C, line 1 or 6 or
      Schedule E, line 3
        Other Income (box 3) Form 1040, line 21 or
      Schedule C, line 1 or 6
        Non-Employee Compensation (NEC),
      (box 7)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 or
      Schedule F, line 10
      1099R IRA Distribution Form 1040, line 15a and / or 15b
      Form 1040A, line 11a and / or 11b
        Distribution from pension, annuities Form 1040, lines 16a and / or 16b
      Form 1040a, lines 12a and / or 12b
        Capital gain (box 3) Form 1040, line 13 or
      Schedule D, line 1
      Form 1040A, line 10
      SSA-1099 Benefits received
      (box 3)
      Form 1040, line 20a and / 20b
      Form 1040A, line 14a and / or 14b

      Note:

      If the accepted offer was for a single taxpayer, and the taxpayer is now filing a joint return, you must include the spouse's IRPTR income in the verification to determine if all of your taxpayer income is included on the return.

    2. If unable to identify and verify all IRPTR income listed in the above table on the tax return, or the IRPTR includes any Forms 1099 other than those listed above, send to Exam for review, along with the submitted Form 3429 , Form 2261 Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested. Only the IRs listed above are to be verified. All other IRs (i.e. 1098 Mortgage Interest Expense) are not income documents.

      Note:

      NEC income of $400 or more is subject to self-employment tax (SET). If the taxpayer did not include SET on his tax return, send the case to Exam for review, along with submitted Form 3439 , Form 2261 Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.

    3. If the IRPTR information lists IRs that can only be reported on a Form 1040, and the taxpayer files a Form 1040A , send the case to Exam for review, along with submitted Form 3439 , Form 2261 Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.

  4. Verify Form 3439, Statement of Annual Income:

    1. Include all applicable non-taxable and taxable income (see back of Form 3439 for a complete list).

      Note:

      Tips for completing the statement of annual income, Form 3439 :

      Example:

      Line 2 - Non-taxable income other than social security and railroad retirement benefits should be included on this line. Please see IRS Publication 525, Taxable and Non-Taxable Income .

      Example:

      Line 3(a) - Enter the total tax as indicated on your Form 1040 on this line.

      Example:

      Line 5 - Enter the information from Item 1 of your Form 2261 , Collateral Agreement.

    2. Include all offer payments received during the calendar year that covers the tax return period.

    3. Math verify all calculations:

    1. If Form 3439 needs correction, prepare Form 3440, Adjustments to Statement of Annual Income.

    2. Forward the Form 3439 and / or Form 3440 , along with the tax return and print of the AOIC journal screen to the Lead Tax Examiner for review. The Lead will initial and date the upper left corner of the Form 3439 / 3440, and return to the Tax Examiner for processing within 24 hours.

    3. If the tax return and Form 3439 submitted by the taxpayer are correct, accept as filed.

    4. If the tax return is correct, but the Form 3440 is prepared, and the taxpayer has a balance due over tolerance or they have overpaid, send Collateral Letter 279 . If there is a balance due, inform the taxpayer of a potential default, and request the additional amount due. If the taxpayer has overpaid, he should agree and request the refund before it can be released.

      Note:

      If the Form 3440 indicates no balance due, annotate AOIC history and accept as file.

    5. Suspend case for 45 days from the date of letter.

    6. If no response to a balance due, default offer.

    7. If no response to a potential overpayment, annotate AOIC history and accept as filed.

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

    1. Verify Form 3439A , Statement of Annual Income:

    • Verify all Math calculations.

    • include all offer payments received during the calendar year that cover the tax return period.

    • If Form 3439 needs correction, prepare Form 3440.

    • Forward the Form 3439 and Form 3440 (if applicable), along with the tax return and print of the AOIC journal screen to the Lead Tax Examiner for review. The Lead will initial and date the upper left corner of the Form 3439 / 3440 , and return to the Tax Examiner for processing within 24 hours.

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


    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.

    1. If the tax return and Form 3439 submitted by the taxpayer are correct, accept as filed.

    2. If the tax return is correct, but the Form 3440 is prepared, send Collateral Letter 279 which should inform the taxpayer of a potential default if there is a balance due over tolerance, and request either the additional amount due or notify the taxpayer that they have overpaid.
      • Suspend case for 45 days from the date of letter.
      • If no response, default the offer.
      • If no response to a balance due, default offer.
      • If no response to a potential overpayment, annotate AOIC history and accept as filed.
      • If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908.

    3. If Exam 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.
      • If no response, default the offer.
      • If you receive the amended return, route to Exam for review along with a copy of the letter that was sent to the taxpayer.
      • Route amended tax return for processing, and retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

  6. 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 ,

    1. Verify the taxable income on the tax return to the Information Returns (IRs) found under IDRS command code IPRTR (available by the end of May for the previous calendar year) as illustrated in the following table:

      Type of Income IR Item and Box in Which it Should Appear Where to Find Income on Form 1040 / Form 1040A (dollar amount on those lines should be equal to or more than the total dollar amount for the IR Type
      W-2 Wages, tips, other compensation (box 1) Form 1040, line 7
      Form 1040A, line 7
      W-2G Gambling Winnings
      (box 1)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 (if taxpayer is professional gambler)
      1099-G Unemployment compensation (box 1) For 1040, line 19
      Form 1040A, line 13
        State & local income tax refunds (SITR) (box 2) Form 1040, line 10 (taxpayer must report this as income if claimed as an itemized expense on prior tax year Schedule A)
      1099-INT Interest Income (box 1) Form 1040, line 8a or 8b
      Form 1040A, line 8a or 8b
      1099-DIV Dividend Income
      (box 1a)
      Form 1040, line 9a or 9b
      Form 1040A, line 9a or 9b
      1099-MISC Rent
      (box 1)
      Form 1040, line 17 or 21 or
      Schedule C, line 1 or 6 or
      Schedule E, line 3
        Other Income (box 3) Form 1040, line 21 or
      Schedule C, line 1 or 6
        Non-Employee Compensation (NEC),
      (box 7)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 or
      Schedule F, line 10
      1099R IRA Distribution Form 1040, line 15a and / or 15b
      Form 1040A, line 11a and / or 11b
        Distribution from pension, annuities Form 1040, lines 16a and / or 16b
      Form 1040a, lines 12a and / or 12b
        Capital gain (box 3) Form 1040, line 13 or
      Schedule D, line 1
      Form 1040A, line 10
      SSA-1099 Benefits received
      (box 3)
      Form 1040, line 20a and / 20b
      Form 1040A, line 14a and / or 14b

      Note:

      If the accepted offer was for a single taxpayer, and the taxpayer is now filing a joint return, you must include the spouse's IRPTR income in the verification to determine if all of your taxpayer income is included on the return.

    2. If unable to identify and verify all IRPTR income on the tax return, send to Exam for review, along with Form 2261 Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.
      • If Exam review advises the request of an amended return, send Letter 279 and a Form 3439 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.
      • If no response, default the offer.
      • If you receive the amended return, but not a Form 3439: prepare the Form 3439 and route the amended return and the Form 3439 to Exam for review, along with a copy of the letter that was sent to the taxpayer.
      • If you receive the amended return and a completed Form 3439 , verify the Form 3439, create a Form 3440 if necessary, and route to Exam for review along with a copy of the letter that was sent to the taxpayer.
      • Route the amended tax return for processing, and retain a copy in the offer file. (Monitor for posting of the adjustment to IDRS.)
      • If there is a balance due over tolerance per the Form 3439 or Form 3440, send another Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3439 , and the amount due.
      • Suspend case for 45 days from the date of the letter. If no response, default the offer.

    3. If the tax return includes all IRPTR income, prepare Form 3439. If there is a balance due over tolerance per the Form 3439, send Collateral Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3439, and the amount due. Suspend case for 45 days from the date of letter. If no response, default the offer.

    4. If there is no balance due per the Form 3439 , notate AOIC history and accept as filed.

    5. If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908.

  7. If the taxpayer submits a tax return other than a Form 1040 / Form 1040A (i.e., Forms 1120, Form 1120S, Form 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.

    Note:

    All Form 2261 A agreements should be forwarded to Exam.

  8. 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... Then
    The taxpayer does not respond or does not file
    1. Send potential default letter.
    2. Suspend case for 45 days from date of letter. If no response, follow procedures in IRM 5.19.7.3.20 , Processing Defaulted OICs.
    It appears that the taxpayer is not liable to file 1. Document Form 6313 or AOIC.
    2. Return Form 6313 to the case file.
    3. Update AOIC to the appropriate status.
    Close TDI. MOIC inputs the FRM49, TC590/76.
  9. 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.

    1. If there is no balance due per the Form 3440, notate AOIC history and accept as filed.

    2. If there is a balance due over tolerance per the Form 3440, send Collateral Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3440, and payment for the amount due.

    3. Suspend case for 45 days from the date of letter.

    4. If no response, default offer.

    5. If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908 .

  10. 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.

    1. If no response, default the offer.

    2. If you receive the amended return, route to Exam for review.

    3. Route amended return for processing, retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

5.19.7.3.16.5  (09-29-2014)
Processing Other Collateral Agreements

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

    1. Examination determines compliance with terms of the collateral agreement and forwards the file back to the offer unit.

    2. Based on Exam's guidance, the tax Examiner will take the next appropriate action (i.e. file case, start potential default actions).

  2. MOIC tax examiners should review the tax returns included on the Form 2261-C Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and 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.

    Reminder:

    Form 3439 or 3439A are not sent to the taxpayer.

    1. If the taxpayer files a Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits a capital loss, review Form 1040, line 13 ( Form 1040A, line 10) for a negative dollar amount. If present, forward to Exam for review, along with Form 2261-C Collateral Agreement, IDRS RTVUE print, and the original case file if requested.

    2. If the taxpayer's Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits a net operating loss (NOL), review Form 1040 for a negative entry on lines 12, 14, 17, 18, and / or 21 ( Form 1040A, line 15), or an NOL identified by a negative entry on Form 1040, line 22 caused by a negative amount on line(s) 12, 14, 17 (other than Schedule E Part I), 18, or the indication of a carryover NOL on line 21. If present, forward to Exam for review, along with Form 2261-C Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, IDRS RTVUE print, and the original case file if requested.

    3. If the taxpayer's Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits an Unused Investment Credit, review Form 1040 for a negative entry on line 55, box "c" , with 3468 written in the blank. If present, forward to Exam for review, along with Form 2261-C Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, IDRS RTVUE print, and the original case file if requested.

  3. 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" .

  4. 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 1040Form 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.

    Note:

    Losses cannot be carried on Forms 94X, 1040EZ or 1065 tax returns. Any Form 1120S loss would pass to the shareholder(s), and are limited to credits which would be included on the taxpayers Form 1040. MOIC can close these cases "accepted as filed" . All other types of tax returns go to Exam for review.

  5. 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.

    1. If no response, default the offer.

    2. If you receive the amended return, route to Exam for review along with a copy of the letter that was sent to the taxpayer.

    3. Route amended return for processing, retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

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

    If Then
    Terms of the basis or other collateral agreement have been satisfied. 1. Input TC 788
    2. File collateral in closed file.
    Terms of the basis or other collateral agreement have not been met, i.e., the asset has not been sold. Continue to review the collateral file annually, forwarding to the Exam function as needed.
    After satisfactory conclusion of the 5-year monitoring period for compliance, the basis or other collateral agreements will be reviewed yearly until all CSED's of all tax periods included in the offer have expired or the Collateral offer terms have been satisfied, whichever comes first. 1. Input TC 788
    2. File collateral in closed file.

5.19.7.3.16.6  (01-08-2014)
Examination Function Review

  1. 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.

  2. 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.

  3. 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 15 days. If no response, elevate to MOIC Manager for action.

5.19.7.3.16.7  (01-08-2014)
Death of a Taxpayer With a Collateral Agreement

  1. When the taxpayer dies during the monitoring of the terms of a collateral agreement, follow the procedures in IRM 5.19.7.3.10.7, Death of the Taxpayer While Monitoring the OIC.

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

  3. Follow Appeals reply instructions provided on Form 2209.

5.19.7.3.16.8  (01-08-2014)
Transfer of Collateral Agreements

  1. 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.

  2. Follow transfer procedures in IRM 5.19.7.3.17.3, Transfer of Accepted OICs.

5.19.7.3.17  (01-08-2014)
Transfers

  1. An offer may be transferred from one campus's jurisdiction to another's if a related offer is being worked at the other campus.:

  2. If the offer is under consideration, the Area Office will be responsible for the transfer of the case, including notifying the taxpayer and updating AOIC and IDRS. The campus is contacted only when there is an offer deposit. The campus will be responsible for the transfer of the deposit.

5.19.7.3.17.1  (01-08-2014)
Transfer of Deposits on Pending OIC

  1. 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.

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

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

    • 4710 Account symbol 20X6879

    • The taxpayers name, new address and TIN

    • RACS number

    • Amount of deposit

    • The address of the receiving campus

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

5.19.7.3.17.2  (01-08-2014)
Transfer of Pending OICs on NMF

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

    1. Secure an ANMF transcript via ICP/DI or ANMF.

    2. Complete Form 3177 to input TC 483, use the TC 480 date.

    3. Advise Accounting to transfer the RACS account via a two-way memo with a photocopy of the Form 656.

    4. Review the AOIC or the 4710 Account File for OIC deposits. If there is a deposit follow procedures in IRM 5.19.7.3.17.1, Transfer of Deposits on Pending OICs, to notify Accounting.

    5. Send the offer file to the appropriate campus on a Form 3210.

    6. Close out manually monitored deposits by zeroing out the deposit amount on Form 2515.

    7. Notify the taxpayer using Correspondex Letter 86C that: (1) the offer has been transferred; (2) one balance due notice may erroneously issue during the transfer; and (3) give the address and telephone number of the receiving campus.

    8. File Form 2515 (if applicable) in the closed Form 2515 file.

5.19.7.3.17.3  (01-08-2014)
Transfer of Accepted OICs

  1. On IDRS take the following actions.

    1. Input the new address and location codes on ENMOD.

    2. Input TC 470 using CC REQ77 without a closing code to prevent notices from issuing.

    3. When the TC 470 posts (within 2 weeks), input TC 483/782 to reverse TC 480/780.

  2. Use Form 3177 to input TC 483 for NMF periods.

    Reminder:

    Form 3177 must be mailed to the appropriate consolidated NMF site.

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

  4. Close the OIC control base on IDRS.

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

5.19.7.3.17.4  (01-08-2014)
AOIC Transfers

  1. A transfer option has been programmed on AOIC in the Headquarters module. Before a case may be transferred it must be accepted into the SC inventory. If a case is in NW the transfer will not be completed. Once the case is in the Service Center (SC) inventory an E-mail may be sent to the Headquarter's analyst requesting the case be transferred to the other MOIC site. Be sure to explain in the E-mail why the transfer is necessary.

    Note:

    Generally, a transfer of an offer case files should be limited to related offers.

5.19.7.3.18  (06-17-2015)
Department of Justice (DOJ) Settlements

  1. The Department of Justice (DOJ) settles certain tax litigation cases by accepting an Offer in Settlement. DOJ sends accepted Settlement cases to the Collection Advisory office responsible for that geographic area. See Pub 4235 for a list of Collection Advisory offices by state.

  2. The Advisory office retains the original accepted case file. If the compromised liability has a deferred payment or collateral agreement, the campus monitors the case to ensure that the taxpayer complies with the terms of the settlement agreement.

5.19.7.3.18.1  (06-17-2015)
Processing Accepted DOJ Settlements

  1. Advisory sends copies of pertinent documents from the DOJ Settlement file on a Form 3210, Document Transmittal, to MOIC.

  2. The file should include copies of:

    1. A copy of Judgment..

    2. DOJs acceptance letter.

    3. DOJs letter concerning any collateral agreement.

  3. The documents will provide:

    1. Amount of the offer.

    2. Amount of the liability.

    3. MFTs.

    4. Tax years or periods compromised.

    5. Terms of the agreement.

  4. Review the DOJ case file to determine if the necessary information is present for monitoring. If any item is missing, send a written request for the missing documentation to the Advisory office. Place the response from Advisory in the case file and follow the guidance provided below to proceed with monitoring actions.

  5. Do not input TC 480 or TC 780 on DOJ cases. (DOJ generally does not use the IRS Form 656.) Request Advisory to input TC 520 (litigation) with a closing code (cc) 74 to freeze account during CSCO monitoring period. When the CSCO monitoring period is complete, request Advisory input the TC 521. No CC is used when the TC 520 uses a CC 74.

  6. To set up the DOJ case for monitoring;

    1. Prepare Form 2515, Record of Offer in Compromise. Annotate "DOJOffer in Settlement. "

    2. Prepare Form 6314, Deferred Payment Offer Payment Record, and maintain in chronological order by payment due anniversary date.

    3. If a collateral is included in the terms of agreement, prepare Form 6313, Collateral Agreement Payment Record, and file in alphabetical order.

  7. Payments required by the terms of the agreement are sent directly to CSCO by the taxpayer.

    1. Payments are deposited as revenue received and applied to tax, penalty and interest of the earliest CSED tax period and to the next earliest CSED tax period of the taxpayers module(s).

      If Then
      Deferred payment is not received within 30 days after the due date. Send Letter 274 to the taxpayer.
      Payment not received within 45 days after Letter 274 was sent. Prepare Form 2209 with copy of Letter 274 and Form 6314 to the Advisory function requesting DOJ be advised of the taxpayers default. DOJ will take necessary actions to get the taxpayer into compliance or otherwise advise CSCO.
    2. Payments made based on terms of the collateral are applied in the same manner.

    If Then
    Taxpayer fails to comply with the terms of the collateral agreement within 30 days after the due date. Send Letter 279.
    Payment not received within 30 days after Letter 279 sent. Prepare Form 2209, Courtesy Investigation, with a copy of Letter 279 and Form 6313 to the appropriate Advisory function requesting that DOJ be advised of the taxpayers default. DOJ will take necessary actions to get the taxpayer into compliance or otherwise advise CSCO.
  8. If the taxpayer requests modifications of the settlement or collateral agreement, immediately notify DOJ through the Advisory function via Form 2209.

    Note:

    Send copies of any correspondence to the Advisory contact.

  9. Send to DOJ via Advisory a copy of all Forms 6314 in October of each year and all Forms 6313 in May of each year.

5.19.7.3.18.2  (01-08-2014)
Closing DOJ Settlements

  1. When the terms of the deferred payment agreement have been fulfilled, input the appropriate adjustments to zero out any remaining open tax periods.

  2. When the terms of a collateral agreement have been fulfilled, the offer tax examiner should close out the collateral agreement account.

  3. When all the amounts under the settlement agreement, including accrued interest and amounts due under a collateral agreement have been received, immediately notify DOJ through the Advisory contact.

    1. Forward copies of Form 6314 and/or Form 6313.

    2. Request release of Federal Tax Lien(s).

5.19.7.3.19  (01-08-2014)
OIC Defaults

  1. When a taxpayer fails to meet any term of an offer, the offer may be defaulted and all liabilities reinstated. Any of the following may result in a default of the offer.

    • Failure to remit any OIC payment due (Cash or deferred).

    • Failure to return overpayments erroneously refunded.

    • Failure to meet terms of a collateral agreement, including payments based on a future income collateral agreement.

    • Failure to timely file subsequent tax returns and pay all taxes due during the compliance period.

  2. Prior to issuance of MOIC correspondence, use IDRS to determine if the AOIC record has the most current address for the taxpayer.

    Example:

    The OIC was accepted in 2003 and IDRS ENMOD shows an address update for 2005. Update the AOIC.

  3. Failure to meet any of the above may be due to the death of the taxpayer. IRM 5.19.7.3.10.7, Death of the Taxpayer While Monitoring the OIC.

  4. If one taxpayer on a joint offer dies and the surviving spouse maintains the offer terms, do not terminate the offer.

  5. Taxpayers who default an accepted offer do not have appeal rights.

5.19.7.3.19.1  (01-08-2014)
Failure to Remit an OIC Payment

  1. Review your inventory weekly for missing or overdue OIC payments.

    1. AOIC Cases: Generate Journal Payment Due Report showing payments due.

    2. Manually Monitored Cases: Review OIC Deferred Offer Payment Record File.

  2. When you determine a payment is more than 30 days past due, research IDRS to look for the missing payment.

    1. If the overdue payment is located, update AOIC or Form 6314 by recording the payment using the TC 670 amount and date.

    2. If not, contact the taxpayer in writing.

      Note:

      Contact must be initiated before the payment is 45 days over due.

      If Then
      The offer is controlled on AOIC, 1. Send AOIC Letter 274 SC/CG.
      2. On AOIC: Enter follow-up date (date letter generated plus 45 days) on the AOIC Follow up screen and update status to "IP" .
      3. Suspense the case for 45 days.

      Note:

      The Journal Screen should not be changed to reflect a new payment due date.

      The offer is being manually monitored, 1. Send Letter 274C.
      2. Update the IDRS control.
      3. Suspense the case for 45 days.
      4. Input a history on AMS.
  3. Process responses as follows:

    If the And Then
    Taxpayer pays in full   1. Process the payment.
    2. AOIC: Update AOIC Journal Screen, follow up and status.
    3. Non-AOIC: Update the IDRS control and update Form 6314.
    Taxpayer responds within the 45-day suspense period Requests any change that would revise the terms or conditions of the offer 1. Advise that the request must be in writing and must be received within 15 days.
    2. Document AOIC history and input follow-up date. If manually monitored, update IDRS control and Form 6314.
    Taxpayer responds within the 45-day suspense period Requests to pay less than the scheduled payment amount Grant the request if the CSED will not expire before the payment is due. Advise that:
    1. The request is granted for the missing payment only.
    2. the balance of that payment must be paid within 120 days.
    3. If the intent is to revise the payment amount permanently, a written request to compromise the original offer is required and must be received within 15 days.
    Taxpayer submits a written request to compromise the offer The offer was accepted by COIC, Appeals, Collection, Examination, or DOJ, 1. Prepare Form 2209 stating the taxpayers request.
    2. Send the Form 2209 and any related correspondence with a complete print of the AOIC history to the office that accepted the offer or the office that currently works offers that originate from the taxpayer's location. ) Ex parte communication rules prohibit attempts to influence Appeals. Do not include in a Form 2209 addressed to Appeals or its attachments any statements directing Appeals to make a particular determination in the potential default case.

    Note:

    Give the receiving office a 45 day deadline and input a follow up for 90 days.


    3. Document AOIC remarks with the taxpayer's requested terms change per the correspondence received.
    4. AOIC : Update the database to reflect OI status.
    5. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    Failure to remit a payment on a lump sum cash offer The taxpayer requests an extension of time to pay (the offer was accepted by Collection or Exam) 1. Grant the request, allowing 120 days to make the payment if the CSED will not expire before the payment is due. If the payment is not received within the extension period, issue the default letter. Follow procedures in IRM 5.19.7.3.20, Processing Defaulted OICs.
    The offer was accepted by Appeals or DOJ, 1. Prepare Form 2209 stating the taxpayer's request.
    2. Send the Form 2209 and any related correspondence with a complete print of the AOIC history to Appeals or Advisory office (for DOJ offers) where the offer was accepted.
    3. AOIC: Update the database to reflect "OI" status.
    4. Non-AOIC: Update the IDRS control to reflect Form 2209 sent.
    Taxpayer has a short-term periodic payment or deferred periodic payment offer and requests an extension of time to pay,   Follow procedures in IRM 5.19.7.3.19.2, Extension of Time to Remit OIC Payment. (A taxpayer may be granted an extension of time to repay a missed installment payment if the CSED will not expire before the payment is received. The extension can be no longer than 120 days.)
    Taxpayer does not respond, The offer was accepted by Appeals or DOJ, 1. Prepare a Form 2209 stating the taxpayer is not in compliance with the offer terms.
    2. Send the investigation to the Appeals Office or Advisory (for DOJ offers).
    3. Attach a copy of :
    • Form 656

    • Form 7249

    • Taxpayer's letter (if one was sent)

    • Complete print of AOIC history


    4. AOIC: Update the database to reflect "investigation" status.
    5. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    The offer was accepted by Examination or Collection, Follow procedures in IRM 5.19.7.3.20, Processing Defaulted OICs.
    Letter 274C (SC/CG) is returned undelivered,   Follow procedures in IRM 5.19.7.3.19.6 , Undelivered Potential Default Letters.
  4. If the taxpayer contacts the Service during any suspense period and states they can not pay, proceed with default actions.

5.19.7.3.19.2  (01-08-2014)
Extension of Time to Remit an OIC Payment

  1. A taxpayer may be granted an extension of time to make an installment payment if the CSED will not expire before the payment is received. The extension can be no longer than 120 days. All regular installment payments must be made timely during this extended period.

  2. Offers with an extension to remit a missed installment payment must be monitored closely. If the terms of the extension are not met or another regular installment payment is not received, follow procedures in IRM 5.19.7.3.20, Processing Defaulted OICs, or if applicable, send Form 2209 for Appeals or DOJ offers.

    If Then
    The account is on AOIC, 1. Update the Journal screen to include the additional payment.
    2. Update the status to ML or MP whichever is applicable.
    3. Advise the taxpayer in writing that an extension has been granted. Also advise the taxpayer if a subsequent installment payment or payment on the extension is late, the offer will be defaulted.
    4. Input a follow -up on AOIC for the date the payment was re-scheduled.

    Note:

    If the status is ML then the follow up must be within 21 days.

    The account is not on AOIC, 1. Update the IDRS control with follow-up of next payment date. Also include the date of the rescheduled payment on control history.
    2. Advise the taxpayer in writing that an extension has been granted. Also advise the taxpayer if a subsequent installment payment or payment on the extension is late, the offer will be defaulted.

    Example:

    The Service accepts a $5,000 offer to compromise $20,000 in tax liability on February 20, 2002. The payment terms are that $1,000 is to be paid every two months on the first of the month beginning April 1. The taxpayer makes the April and June payment but does not remit his payment for August. Following issuance of the potential default letter the tax examiner receives a response from the taxpayer requesting to pay the missed $1,000 installment over the next 4 weeks. On Sept. 4, the tax examiner agrees and advises the taxpayer must make the next $1,000 payment due in October along with a weekly payment of $250 to pay the missed payment.

  3. If the missed payment is not received within 30 days of the extended payment date or a subsequent payment is more than 30 days late, take the following actions.

    If Then
    The offer was accepted by Appeals or DOJ 1. Prepare a Form 2209, attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting office.
    2. AOIC: Update the database to reflect "OI" status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    The offer was accepted by Collection or Examination Follow procedures in IRM 5.19.7.3.20., Processing Defaulted OICs.
  4. Do not grant an extension to pay a missed installment payment more than one time during a 24-month period.

5.19.7.3.19.3  (01-08-2014)
Failure to Return Refunds (Refund Recoupments)

  1. The Service is entitled to any overpayment of tax or other liability for the tax periods extending through the calendar year the offer is accepted. If an overpayment is erroneously refunded, contact the taxpayer.

    Note:

    Contact must be initiated as soon as the erroneous refund is identified.

    If Then
    The refund is under ≡ ≡ ≡ Do not contact the taxpayer for payment.
    The offer is controlled on AOIC 1. Send Letter 274 SC/CG.
    2. On AOIC, enter follow-up date (date letter is generated plus 45 days) on the AOIC follow-up screen and change the AOIC status to "IR" .
    3. Suspense the case for 45 days.
    The offer is being manually monitored 1. Send Letter 276C.
    2. Update the IDRS control.
    3. Input history on AMS.
    4. Suspense the case for 45 days.
  2. Process responses as follows:

    If the And Then
    Taxpayer repays the refund in full   1. Apply the refund to the module it refunded from. Input a a TC 570 to keep the credit from refunding.
    2. Wait for the refund to post.
    3. Apply the refund to the earliest CSED period.
    4. AOIC: Update AOIC.
    5. Non-AOIC: Update the control on IDRS.
    Taxpayer requests an extension of time to repay the refund   You may grant up to 120 days for the taxpayer to repay the refund.
    1. Update the Journal screen to include the additional payment.
    2. Update the status to "MO" .
    3. Advise the taxpayer in writing that an extension has been granted. Also advise the taxpayer if a repayment of the refund is late, the offer will be defaulted.
    4. Input a follow up on AOIC for the date the refund repayment was re-scheduled.
    Taxpayer is unable to repay the refund, refuses to repay the refund, or does not respond The offer was accepted by Appeals or DOJ, 1. Prepare a Form 2209 attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting office.
    2. AOIC: Update the database to reflect "OI" status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    The offer was accepted by Collection or Examination Follow procedures in IRM 5.19.7.3.20, Processing Defaulted Offers.
    Letter 274C (SC/CG) is returned undelivered   Follow procedures in IRM 5.19.7.3.19.6, Undelivered Potential Default Letters.

5.19.7.3.19.4  (06-17-2015)
Failure to Adhere to Compliance Terms

  1. Taxpayers agree, as a term of the offer, to file all tax returns and pay required taxes for five years.. The taxpayer must timely file all tax returns and pay all taxes due during the compliance period.

    Note:

    As a matter of policy, if there is no other basis to default the taxpayer's offer, the non-payment of an individual shared responsibility payment (SRP) will not default an offer. The SRP amount that the taxpayer owes is not subject to failure-to-pay penalties. filing a notice of federal tax lien, or levy on the taxpayer's property.

  2. The taxpayer is considered in compliance if the taxpayer has submitted an extension to file the current year's tax return.

  3. This compliance provision is monitored for five years via AOIC listings and / or EUREKA™(DAE) reports (for IMF) beginning with the year of acceptance.

    Note:

    For accepted offers on joint assessments and one party fails to remain compliant with the future filing of returns and payment of taxes, the offer will be defaulted for the noncompliant taxpayer only. The taxpayer who remains in compliance will be unaffected. Do not contact the compliant taxpayer. IRM 5.19.7.3.19.5, Defaults on Joint Offers Due to Non-Compliance.

  4. When checking 5-year compliance and, upon discovery that a subsequent module has been closed using closing code TC 597 or TC 598 (surveyed/shelved by National Office):

    1. Verify the taxpayer has a filing requirement via command code IRPTR.

    2. If no filing requirement, no action is necessary.

    3. If the taxpayer should file, input TC 592 to reverse and reopen the filing requirement.

  5. Update the case history to reflect your actions and process the TDI as indicated below.

  6. When income information is available and the taxpayer meets requirements for filing status single with one exemption then take the following actions:

    If And Then
    The potential default is due to non filing the TDI is assigned to ASFR (TSIGN 8000)
    1. Do not send the potential default letter.
    2. Update the AOIC history or IDRS control if a manually monitored agreement (MMA).
    3. ASFR will work the delinquency following ASFR procedures.
    4. Leave the offer in 5M status on AOIC, or update the IDRS control for MMA.
    the TDI is assigned to a revenue officer (RO) 1. Send AOIC Letter 2909 SC/CG.
    2. Input a follow-up date (date the letter is generated plus 45 days).
    3. Change the AOIC status to I5 or update the for a manually monitored agreement (MMA).
    4. If the taxpayer files the return, update the history.
    5. If the taxpayer does not file, contact the RO advising that the campus is defaulting the OIC.
    the TDI is unassigned 1. Check TSIGN. If not 8500, input TSIGN 8500.
    2. Send Letter 2909 SC/CG or 2909C.
    3. Input a follow-up date (date the letter is generated plus 45 days).
    4. Change the AOIC status to "I5 or update the IDRS control for a manually monitored agreement (MMA)." .
    5. If the taxpayer files the return, update the history.
    6. If the taxpayer does not file, default the offer.IRM 5.19.7.3.20, Processing Defaulted OICs.
    The taxpayer files the return there is a balance due with no payment
    1. Send the potential default letter.
    2. Input a follow up date (date the letter is generated plus 45 days).
    3. Change the AOIC status to "I5 or update the IDRS control for a manually monitored agreement (MMA)." .
    4. If the taxpayer pays the balance, update the history.
    5. If the taxpayer does not submit payment, default the offer.
  7. Process responses to Letter 2909 CG/SC or Correspondex Letter 2909C as follows:

    If And Then
    The taxpayer files the return there is no tax due 1. Input TC 599 with cc 96.
    2. Process the return per IRM 5.19.2, Return Delinquency.
    3. AOIC: Update AOIC and change the monitoring status to "5M" .
    4. Non-AOIC: Update the IDRS control.
    The taxpayer files a balance due return without a payment -IMF requests an installment agreement 1. Process the return per IRM 5.19.2 Return Delinquency.
    2. Input TC 599 with closing code 94. (Refer to Chapter 11, Doc. 6209)
    3. Send AOIC Letter 2909 , select appropriate paragraph.
    4. Advise the taxpayer in the open paragraph, that an extension for 120 days or less can be granted.
    5. AOIC: Update the AOIC history.
    6. Non-AOIC: Update the IDRS history.

    Note:

    If the request for an installment agreement was made in writing, maintain a copy of the request. If the offer defaults, the request will be sent to the Bal Due unit with a 4442 instructing them that the taxpayer has requested an IA. See IRM 5.19.7.3.20(10).

    The taxpayer agrees to the 120 day extension,   1. Send Letter 2908 with the appropriate paragraph verifying approval of the extension.
    2. Input STAUP 22-09 with a follow up to reinput after 9 cycles. STAUP will only hold notices for 9 cycles.
    3. Set up the manual agreement using the follow up screen.
    4. Update AOIC status to MO for the 120 day extension period.
    The taxpayer cannot pay in 120 days,   Default the offerIRM 5.19.7.3.20,
    The taxpayer files a balance due return without a payment requests an extension of 120 days or less to full pay, 1. Process the return per IRM 5.19.2, Return Delinquency.
    2. Send 2908 letter using the appropriate paragraph verifying approval of the extension.
    3. Input STAUP 22-09 with a follow up to input after 9 cycles. STAUP will only hold notices for 9 cycles.
    4. Set up the manual agreement using the follow up screen
    5. Destroy the transcript.
    6. AOIC: Update AOIC and change status to "MO" .
    7. Non-AOIC: Update the IDRS control.
      requests an extension to pay for more than 120 days 1. Process the return per IRM 5.19.2.
    2. Deny the request in writing, using letter 2908 appropriate paragraph, advising that only 120 days may be granted.
    3. AOIC: Update the database to reflect "I5" status.
    4. Non-AOIC: Update IDRS history to reflect OIC letter sent.
    5. If no response or a negative response to the proposed 120 extension, default the offer.
    The taxpayer states the return was previously filed IDRS research now shows a return was filed
    1. Update the AOIC or Manual case history.
    IDRS research shows no record of the return 1. Request a copy of the return with an original signature.
    The taxpayer submits a signed copy of the missing return   1. Use CC FFINQ or CC TRDBV to see if the return has been received and is in the pipeline.
    2. Process the return as an original if research indicates no record.
    3. Input TC 599 with appropriate closing code. (See Document 6209, IRS Processing Codes and Information.)
    The taxpayer responds stating the return was filed another TIN was the primary 1. Research IDRS under the TIN provided to verify the filing.
    2. Input the OIC Acceptance year under this TIN using CC ENREQ if a TC 780 is posted.
    3. If a TC 780 is not present, compliance for this taxpayer must be manually monitored.
    4. Update the AOIC or Manual case history.
    The taxpayer states that he/she (they) are not required to file   1. Verify by researching SERP and CC IRPOL/SUPOL/IRPTR.
      the income shown indicates a return should be filed 1. Send the taxpayer a copy of the print requesting a return be filed.
    2. Input a follow up on AOIC for 30 days to allow the taxpayer to file the return.
    3. Update the AOIC or Manual case history.
      the income does not require a return 1. Input the correct closing code.
    2. Update the AOIC or manual case history.

    Note:

    When sending a letter to the taxpayer granting an extension, the TE should include the balance owed with interest to the date of the extension.

  8. When the reason for the noncompliance is failure to pay taxes on a subsequent tax period or liabilities assessed after offer acceptance on tax periods not included in the offer, , take the following actions:

    If the new balance due period is in And Then
    Any status except status 26 the amount owed is below ≡ 1. Consider the account full paid.
    the amount owed is above ≡ ≡ ≡ 1. Send Letter 2909 SC/CG .
    2. On AOIC, enter follow-up date (date letter is generated plus 45 days).
    3. Change status to "I5" .
    4. Update the AOIC or Manual case history.
    Status 26 (Indicates the balance due period is in TDA status) TSIGN to 8500 or to an RO 1. Send AOIC Letter 2909C.
    2. Input a follow up date (date the letter is generated plus 45 days).
    3. Change status to "I5" or OI status on Form 6314 for manually monitored cases.
    4. Update the AOIC or Manual case history.
     
           
  9. Process responses to the potential default letter as follows:

    If the And Then
    Taxpayer pays in full,   1. Process the payment.
    2. AOIC: Update AOIC.
    3. Non-AOIC: Update the IDRS control.
    Taxpayer requests an extension to pay of 120 days or less,   1. Send Letter 2908 with appropriate paragraph allowing the taxpayer to pay what is owed in 120 days or less on IMF modules. BMF modules see 5.19.7.3.19.4.1, Failure to Adhere to Compliance Terms - BMF Federal Tax Deposit (FTD).
    2. Input a control on IDRS and input a TC 470 to change module to status 53. (no notice)

    Note:

    Follow-up will be needed after 9 cycles to reinput the TC 470.


    3. Manually monitor the payments on the extension.
    4. Update AOIC status to MO for the 120 day extension period.
    Taxpayer requests an extension of more than 120 days, the OIC was accepted by Collection or Examination 1. Advise the taxpayer that the offer will be defaulted.
    2. Follow procedures in IRM 5.19.7.3.20, Processing Defaulted OICs.
    Taxpayer requests an extension of more than 120 days, the OIC was accepted by Appeals or DOJ 1. Prepare Form 2209 attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting Appeals office or territory Advisory contact for DOJ offers.
    2. AOIC: Update the status to OI.
    3. Non-AOIC: Update the IDRS control to reflect Form 2209 was sent.
    Taxpayer does not respond the offer was accepted by Collection or Examination 1. Follow procedures in IRM 5.19.7.3.20., Processing Defaulted OICs.
    the offer was accepted by Appeals or DOJ, 1. Prepare Form 2209, attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting Appeals office or territory Advisory contact for DOJ offers.
    2. AOIC: Update the status to OI.
    3. Non-AOIC: Update the IDRS control to reflect Form 2209 was sent.
    Letter 2909C (SC/CG)is returned undelivered,   Follow procedures in IRM 5.19.7.3.19.6., Undelivered Potential Default Letters.

5.19.7.3.19.4.1  (01-08-2014)
Failure to Adhere to Compliance Terms - BMF Federal Tax Deposit (FTD)

  1. Generally, every employer who pays wages to an employee must withhold income tax and the employee share of FICA (i.e., social security and Medicare) or RRTA taxes from the employee’s gross wages and report the tax liability on an employer’s federal tax return.

  2. The following steps should be taken to verify that the BMF account is in FTD compliance if the taxpayer/POA requests an extension to pay a previous payroll tax liability.

    1. Use IDRS command code ENMOD to determine if the taxpayer has an open employment tax filing requirement.

    2. Use BMFOLK to determine if a taxpayer is a monthly or semi-weekly depositor for a particular quarter. Paragraph 4 below has additional information on types of depositors.

    3. Fax the computation of Federal Tax Deposits form to the taxpayer. Allow the taxpayer/POA 10 calendar days to respond. If the taxpayer does not have access to a fax machine, send correspondence requesting the information by mail and allow the taxpayer 10 days to respond. Input a follow up.

      Note:

      Document AOIC with the fax number and who's attention it was faxed.

    4. Verify the deposits on the computation form with IDRS.

    5. Using the total wages paid on the form and the FICA tax withheld, complete a Form 941 to verify the correct amount of deposits have been made.

    6. If the deposits are not correct and the taxpayer appears to be underpaid, do not allow the extension and proceed with potential default actions.

      Note:

      If the deposits were correct, consider that only one 120 day extension is allowed in a 24 month period.

  3. There are two deposit schedules: monthly and semi-weekly.

    Exception:

    if an employer’s total tax liability for any quarter is less than $2,500, payment may be made with the Form 941 on the due date of the return in lieu of making deposits.

  4. Semi-weekly depositors must deposit accumulated taxes on payment using the following schedule;

    PAYMENT DAYS DEPOSIT BY
    Wednesday, Thursday, and/or Friday Following Wednesday
    Saturday, Sunday, Monday, and/or Tuesday Following Friday

5.19.7.3.19.5  (01-08-2014)
Defaults on Joint Offers Due to Non-Compliance

  1. When one of the parties to the compromise fails to remain compliant with filing and payment terms, the offer is only defaulted on the noncompliant spouse.

  2. The several liability provision applies while payments are being made on a deferred payment offer or during the remaining compliance period following full payment of the offered amount.

  3. The several liability provision applies to all terms of the OIC including:

    • Filing all returns timely,

    • Paying all current taxes timely, and

    • Complying with collateral agreements.

  4. Do not contact the compliant spouse. Use the potential default Letter 275C or AOIC Letter 2909C /Letter 2909(SC/CG) and address it to the noncompliant spouse.

    Note:

    A DEFAULT FSC transcript should generate if the primary taxpayer changes filing status in a subsequent filing year. The account for each spouse on the joint offer should then be monitored manually for filing and payment during the compliance period.

  5. If only one spouse on a joint liability is not compliant, separate accounts will need to be established using MFT 31.

5.19.7.3.19.6  (01-08-2014)
Undelivered Potential Default Letter

  1. When a potential default letter is returned as "undeliverable" the tax examiner must follow specific procedures.

  2. The tax examiner must research for a new address using appropriate guidelines outlined in IRM 21.3.3.4.13.2, Undelivered Mail Received From Campus Mail Operation, IRM 3.13.62 , Exhibit 3.13.62-54, and IRM 3.13.12.21.2; Undelivered Correspondence, and/or available locator services. Then:

    If And Then
    A new address is located, there is a yellow address change sticker provided by the U.S. Postal Service on the original envelope AOIC:
    1. Reissue the letter attaching Form 8822, Change of Address.
    2. Update AOIC with a follow-up date (date letter reissued plus 30 days).
    NonAOIC:
    1. Reissue the letter.
    2. Suspense for 30 days.
    3. Update IDRS control.
    A new address is not found, the offer was accepted by Appeals or DOJ, 1. Prepare a Form 2209, attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting Appeals office or territory Advisory contact for the DOJ offer.
    2. AOIC: Update the database to reflect "OI" status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    the offer was accepted by Collection or Examination, Follow procedures in IRM 5.19.7.3.20., Processing Defaulted OICs.

5.19.7.3.20  (06-17-2015)
Processing Defaulted OICs

  1. When the Service determines the OIC should be defaulted, a default letter is sent to the taxpayer and liabilities previously written off are reinstated.

    1. Generate and print the default letter from AOIC for signature.

    2. Secure the signature of the designated official on the default letter.

      Note:

      If the default letter is issued on a date other then the generation date, place a history in the remarks section of AOIC stating what date the letter was mailed.

    3. If there is a case file, make a copy of the signed default letter for the file.

    4. Send the signed letter to the taxpayer.

    5. Update AOIC status to OD.

  2. The default letter is generated and sent by the MOIC unit. This action can also be taken in response to Form 2209 from the territory Advisory office (DOJ) or Appeals. The default letter can only be generated and printed at the campus once the case is assigned to MOIC.

  3. If the taxpayer complies before the issuance of the default letter, do not default the offer.

    Note:

    If the potential default letter is returned undeliverable follow procedures IRM 5.19.7.3.19.6., Undelivered Potential Default Letters.

  4. Often taxpayers will comply (take the actions requested of them in the potential default letter) soon after receiving the default letter. So in addition, allow 15- days following the issuance of the default letter before taking default actions. If the taxpayer complies within this time frame, do not default the offer. It is in the Service's best interest to allow the taxpayer a full 60 days before defaulting (30 days for the POTENTIAL default letter with a 15-day grace = 45 days + 15 days after the default letter = 60 days).

  5. The AOIC record should be updated to OD status during the 15-day period.

  6. Research IDRS to determine if the taxpayer complied during the 15-day waiting period. If the taxpayer complied within this time frame, do not default the offer. Write to the taxpayer explaining that the unfiled return or unpaid payment was found and the offer was not terminated.

  7. Research all tax modules on the offer for an unreversed TC 470 prior to input of TC 781. Input TC 472 to reverse any unreversed TC 470.

  8. Change the TSIGN to 0000 or a TSIGN requested by the Field Office.

  9. Federal tax liens will be re-filed by the territory office when the reversed assessments are reissued.

  10. If the default was due to a balance due on a new module and the taxpayer ask for an IA, Input a TC 971 a/c 043 and forward the taxpayer information to TDA on a form 4442.

  11. File the closed paper file in current year closed file.

    Note:

    If the defaulted offer has TFRP modules, the TFRP liaison should be contacted to update the transactions on the account.

5.19.7.3.20.1  (01-08-2014)
Appeals/DOJ Default Letters

  1. The OIC Unit cannot generate a default letter from AOIC for CDP offers that are not entered on AOIC or for DOJ offers.

  2. In this circumstance, Appeals or DOJ will issue the default letter and forward a copy to MOIC along with the Form 2209 response.

    Exception:

    If Appeals accepts an offer that originated with Collection and there is a record on AOIC, MOIC can issue the default letter if the Form 2209 response from Appeals or DOJ states to take such action.

  3. MOIC must manually prepare a default letter for Examination (DATL) offers if the offer is not loaded on AOIC.

5.19.7.3.20.2  (01-29-2014)
Reinstating Previously Written Off Tax Periods

  1. After allowing 15 days from issuance of the default letter tax, penalty and interest previously written-off may be reinstated as appropriate per the chart below. .

  2. Each previously written off tax period should be analyzed to determine if the CSED has expired.

    If Then
    The tax period was previously written off via TC 608 Do not reinstate the tax liability.
    The CSED has expired Do not reinstate the tax liability.
    The CSED has not expired and tax period was written off via TC 971 AC 032 Reinstate the tax liability.
    The tax period was full paid Do not reinstate the tax liability.
  3. If the offer is controlled on AOIC:

    1. Follow default procedures provided in the AOIC User Guide to close cases controlled on AOIC.

    2. The action date is the date of the default letter.

      Note:

      The stamped date on the signed default letter (TC 781/action date) should coincide with the date the offer is placed in OD status. If there is a variance, the history must be updated with the correct TC 781 date for a complete audit trail.

    3. Update the AOIC history indicating the appropriate closed status (CX).

  4. If the offer is a manually monitored OIC:

    1. Pull the separately maintained control cards, Forms 2515 , 6313, 6314, etc.

    2. Associate the forms with the offer case file.

    3. Stamp "Defaulted" and the action date on Forms 656, 2515, 6313, 6314, and on the outside of the case folder.

    4. Determine the amount of the reassessment to be reinstated using a current transcript.

    5. Compute and determine if the CSED has expired on any period. If the CSED has expired, do not reinstate the tax liability.

    6. Input TC 781 and action date using REQ77.

    7. Update the status using CC STAUP.

    8. Change the TSIGN to 0000 or a TSIGN requested by the territory office.

    9. Input TC 972 AC 32 for accounts previously written off with TC 971 AC 32. This will generate a TC 605 to reverse the TC 604 write off.

    10. Input TC 131 (if necessary) with a delay code of one (1) to release TC 130 (credit offset). TC 130 will need to be re-input with the correct DLN indicator if the liability is on NMF.

    11. Use REQ54 to input write-off reversals and manually compute penalty and interest to a current Date of Notice and Demand (23C date).

      Caution:

      When re-establishing joint accounts on MF, notices must be suppressed.

      Caution:

      Do not use TC 340, TC 341, TC 270, or TC 271 unless the account had restrictions before input of TC 780, which need to be restored.

  5. Accounting takes the necessary actions for reinstating non-master file accounts. CSCO actions follow:

    1. Prepare Form 3177 for TC 480/TC 780 input.

    2. Attach a copy of the default letter and a NMF transcript to each Form 3177.

    3. Prepare Form 3465 indicating TC 860 with the full amount to be reinstated, 23C date highlighted, and specific transaction codes that were previously written off. Enter in the remarks section to reinstate abated NMF module, for the defaulted offer.

    4. Prepare a statutory period worksheet and compute the new statute expiration date.

    5. Prepare Form 3177 for input of TC 550 to indicate the new statute expiration date. Attach a current NMF transcript to the Form 3177.

    6. Prepare two Forms 3177 for input of TC 781 and TC 483 (using the date of the default letter for the transaction date). Attach current NMF transcripts to both Forms 3177.

    7. Wait for these transactions to post.

  6. Before closing the defaulted/terminated offer:

    1. Verify all TCs have posted to IDRS or NMF.

    2. Staple Forms 2515, 6313 and/or 6314 together and place in the case file.

    Note:

    If the defaulted offer contained mirrored modules that previously had a TC 972 AC 110 posted to prevent cross referencing of subsequent payments and the CSED has not expired, manually input a TC 766 to the offer MFT 31 module to credit it for any uncredited payments posted to the spouse's MFT 31. Then input a TC 971 AC 110 cross referencing the spouse's MFT 31. Future payment will be credited on both MFT 31 modules.

  7. ) If the offer being defaulted contains mirrored modules that have previously had a TC 972/110 posted to prevent cross-referencing of subsequent payments, complete the following:

    If Then
    The CSED on the offer taxpayer MFT 31 is expired No action needs to be taken
    The CSED on the offer taxpayer MFT 31 is not expired
    1. Manually input TC 766 Ref 337 (seeIRM 5.19.7.3.24.6(2), Mirrorfail Transcripts), to the offer taxpayer MFT 31 module to credit it for each payment not cross-posted from the non-offer taxpayer MFT 31 module.

    2. Input a follow-up for all payments to post and to ensure the module balance is the same for each MFT 31.

    3. Input a TC 971/110 to each MFT 31 module, cross-referencing the spouse’s SSN to ensure cross-posting of future payments.

5.19.7.3.20.3  (01-08-2014)
Revocation of the Certificate of Release of Federal Tax Lien

  1. MOIC requests release of the federal tax lien(s) following full payment of the amount offered and accepted on an offer in compromise. However, if the taxpayer defaults on the offer after the release of a federal tax lien, and the IRS defaults the offer, MOIC must request that Advisory Unit revoke the lien release.

  2. The first step MOIC should take is to view the periods covered on each released lien. The paid offer amount may have full paid the liability for the periods shown on the lien.

    1. Use the ALS system to research all liens filed on the offer taxpayer. Do not include on the request for revocation any period that has been full paid by any funds received as payments on the offer or by offsets from other periods.

    2. Prepare Form 4442, Inquiry Referral, and Form 12474 , Revocation of Certificate of Release of Federal Tax Lien, to request the revocation of the release of lien for tax periods being reinstated due to the default.

    3. Use the original data on ALS to prepare the Form 12474 . Include any request to refile the lien, if appropriate and the aggregate account balance meets the criteria to file, on Form 4442 and in the remarks section on Form 12474 . Advisory will sign Form 12474 before filing.

    4. E-Mail or fax both forms to an Advisory Group in the appropriate Territory Office.

    5. Document the AOIC history.

      Example:

      The IRS accepted a cash offer from Jerry and Margaret Taxpayer on July 8, 2010 for $5,000 that included the following tax periods:
      • 199912, for $1,200
      • 200012, for $1,000
      • 200112, for $3,500
      • 200212, for $4,000
      • 200312, for $1,300
      There were (3) three separate federal tax liens that covered all (5) five tax periods;
      - one lien for 199912,
      - another for 200012,
      - and the last for 200112, 200212 and 200312.
      The offer amount full paid the 199912 and 200012. The offer amount also partially paid the liability for 200112. In August 2012, their offer was defaulted for failure to full pay their liability on their 201112 return of $3,000.
      The assigned tax examiner, researched the ALS system to determine which liens had previously been released and determined that because the offer amount full paid the liability for 199912 and 200012, that a request to revoke the release of the FTL (1st lien and 2nd lien) was not necessary for these tax periods. She prepared Form 4442, Inquiry Referral, and Form 12474 for the liens which covered the 200112, 200212, and 200312 periods (3rd lien). Both forms were mailed to Advisory and the AOIC history documented.

  3. Outstanding revocations on a taxpayer's credit report can be resolved by the filing of a subsequent release of the lien, even if the lien was not refiled after the revocation. The request to release the lien in this instance must be sent to Advisory since this is also a manual process and cannot be accomplished on ALS. Release of refiled liens must also be processed through Advisory as well.

  4. Take the following steps to route requests to the appropriate Advisory unit:

    • Go to the SERP web page on the IRS intranet;

    • Click on the "Who / Where" tab at the top of the page;

    • Click on the "Advisory Units Contact List" ;

    • Click the link at the bottom of the page;

    • Scroll to the appropriate area to route the forms.

5.19.7.3.20.4  (01-08-2014)
Reopening Defaulted Offers

  1. A situation may arise where an offer in compromise is defaulted and we later discover that the termination was an IRS error.

    Example:

    The IRS does not receive a tax return during the 5-year compliance period and the taxpayer does not timely respond to the potential default letter due to circumstances beyond the taxpayer's control. The taxpayer later, via a certified mail receipt, conclusively establishes that the return was in fact filed but somehow was never processed.

  2. In rare situations a defaulted offer may be reopened based upon a taxpayer's exceptional circumstance.

  3. All requests to reinstate a defaulted offer must be reviewed and approved by a manager and reviewed by the local MOIC P&A analyst prior to any action taken by the Tax Examiner. Requests to re-open an offer will be forwarded via E-mail to the SBSE Headquarters MOIC analysts.

  4. If the offer is controlled on AOIC, provide the following information to SBSE Headquarters:

    1. Provide the offer number.

    2. Briefly state why the offer was defaulted.

    3. Include the specific dates of the default actions.

    4. State the reason for the reopening.

    5. Indicate the SC status code for the offer after reopening.

    Note:

    If the offer was defaulted by Appeals, the request to reopen should be routed via Form 2209 to Appeals. IRM 5.19.7.3.19.1 regarding ex parte communication rules involving a Form 2209 addressed to Appeals.

  5. The analysts will decide whether the reinstatement is appropriate and let MOIC know if the request is approved.

  6. If approved:

    1. Re-input TC 480, TC 780, etc. using the original transaction dates.

    2. Re-compute the CSED if necessary.

    3. Send the taxpayer correspondence advising of the reinstatement.

    4. Update the case or AOIC history stating the reason for the reversal.

5.19.7.3.21  (09-29-2014)
Refund Recoupments

  1. One of the terms/conditions of an OIC is that IRS will keep any refund, including interest, due to the taxpayer because of an overpayment of any tax or other liability, for tax periods extending through the calendar year in which the offer is accepted.

    Note:

    The only exceptions are:

    • DATL offers, unless indicated otherwise on the acceptance letter

    • Department of Justice (DOJ) offers

    • Effective Tax Administration (ETA) (if stated in the terms)

  2. When an offer is accepted for an IMF taxpayers the TC 780 freezes all credits from refunding for ALL tax modules on the account for 8 weeks.

    Note:

    If a recoupment pays off a liability prior to Acceptance, the recoupment year may be recorded as zero. Example: The taxpayer files an offer on 12/20/2012 but the offer is not accepted until May 5, 2013. He files his tax return on 3/15/13 with a refund due of $1200. The refund paid off an offer module. Since this action took place prior to the acceptance and the module has been removed from the MFT screen by the accepting official the recoupment will be noted as zero.

  3. Eureka/DAE reports are to be run by each site on 5/30 and 11/30 for refund recoupments. The Tax examiners are responsible for completing all related case actions within 45 days of receipt of the reports. These reports are for IMF only. The TE should generate an AOIC Open Refund Recoupment Listing or an MR (Monitor Recoupment) Listing to monitor BMF returns.

  4. Additional notification will be issued due to input of TC 130. TC 130 causes a V- freeze and keeps the module from offsetting/refunding.

    1. CP Notice 44 (IMF) or CP Notice 188 (BMF) generates to notify CSCO of the available overpayment.

    2. An OIC transcript will issue three weeks later for any module where the credit balance was not resolved.

      Reminder:

      If an account freeze (TC 130) has not been input allowing the Service to cross-reference credits between IMF and BMF, this provision does not apply.

      Reminder:

      We cannot ask for any refunds to be returned that were issued prior to the submission date (TC 480) of the accepted offer from the responsible party (IMF) of a business, or if TC130 was not input on the IMF account allowing the cross reference credits between IMF and BMF accounts.

  5. Outstanding available overpayments should be applied to the tax period with the earliest CSED, followed by the tax period with the next earliest CSED.

    Reminder:

    Unless the OIC falls under one of the earlier exceptions, overpayments do not apply to the offer balance because the recoupment of a refund is in addition to the offer amount.

  6. Procedures for processing refund recoupments through AOIC can be found in the AOIC Compliance Center User Guide.

  7. Process refund offsets for modules previously written off per instructions below:

    If the Then
    refund recoupment will be applied to an account adjusted by TC 971 1. Input TC 972 with A/C 32 to re-establish the liability and apply the refund amount.
    2. Input TC 470 (no closing code) to prevent notices from issuing.
    3. If the TC 788 has posted, re-input: TC 480/780 with delay code 1, TC 971/032 with delay code 2, and TC 788 with delay code 4.
    overpayment/refund is less than the TC 605 amount 1. Input TC 972 with A/C 32 to re-establish the liability and apply the refund amount.
    2. Input TC 470 (no closing code) to prevent notices from issuing.
    3. If the TC 788 has posted, re-input: TC 480/780 with delay code 1, TC 971/032 with delay code 2, and TC 788 with delay code 4.
    overpayment/refund is more than the TC 605 amount 1. Input assessment of accruals using TC 270 and TC 340. Caution:: Do not over assess the module.
    2. Follow procedures above.

    Note:

    When performing a manual calculation of interest follow procedure in IRM 20.2.8.3 (5) (a)

    overpayment/refund should be applied to an NMF account Prepare Form 2424 to transfer the credit from IDRS to NMF.
    overpayment amount applies to penalty and interest only on NMF accounts prepare Form 3809, Miscellaneous Adjustment Voucher.
    liability has been mirrored to MFT 31 or split to an NMF for a co-obligor apply the overpayment to offer taxpayer; the credit will offset systemically to spouses MFT 31 account. For the NMF account manually offset the credit to the co-obligor account.

    Caution:

    See IRM 5.19.7.3.14.6(8). This may result in a non-refundable credit on the spouse.

  8. When a new assessment is made on a recoupment year and the Service has already applied the overpayment, some or all of the recouped monies will be moved back to offset the new assessment.

    If Then
    The overpayment does not full pay the balance due 1. Follow appropriate default procedures.
    2. Adjust the AOIC recoupment screen.
    Part or all of the overpayment will full pay the balance due 1. Adjust the AOIC recoupment screen.
    2. Continue monitoring for compliance.
  9. If the earliest CSED has been written off by using TC 291 (accounts prior to implementation of TC 971/AC 32):

    1. Use a bypass indicator to post credits to the .00 balance module(s).

    2. Use CC REQ54/TC 290 to assess reversals of the written off tax including accrued penalty and interest due to the date of the payment and limited to the amount of overpayment.

    3. Input TC 160 and/or TC 180 with a zero money amount, if necessary.

  10. Note all actions on the case history sheet or AOIC.

    Example:

    "2010 refund recoupment applied to December 31,2000 OIC tax period. Due to acceptance date (February 04, 2012) IRS entitled to refund from 2011."

  11. If the amount of the refund recoupment full pays the tax liability:

    1. Input TC 780, if necessary.

    2. Input TC 788 on all the offer periods.

    3. Input history on AOIC to explain why there is an open offer balance on the AOIC Main Screen.

    4. Turn off the OIC indicator as there is no need to monitor for compliance.

    5. Change the AOIC status to CF.

  12. Manually input TC 131 to reverse the TC 130 freeze if the Service is not entitled to another refund recoupment and additional installment payments are due.

    Note:

    Reverse any TC 130's on related TIN;s.

  13. If the refund recoupment is the last offer condition/term to be met (no collateral agreement, liens released) set up the file for 5-year monitoring. AOIC will systemically upload TC 131 when changing the status to 5M.

    Note:

    To prevent an unpostable, if TC 131 was previously input manually, delete the upload via the XMIT screen on AOIC.

  14. The Service is not entitled to any additional refund recoupment if a compromise on an offer is accepted since the refund would have been recouped for the original offer.

5.19.7.3.21.1  (01-08-2014)
Incorrect Acceptance Letters

  1. OIC Acceptance Letters are generated from AOIC or local systems by Collection and Appeals.

  2. Occasionally, the refund recoupment year(s) may be incorrectly stated. This usually occurs when an offer is accepted at the beginning of the tax year.

  3. Regardless of the year(s) stated on the acceptance letter, monitoring units are required to monitor for the refund recoupment as stated in the terms of the OIC contract and required by law.

  4. If contacted by the taxpayer or representative regarding recoupment of a refund for a year other than what is stated on the acceptance letter, apologize for the error and advise that we are entitled to the refund as a term of the OIC contract. This includes the year of filing (TC 480) through the year of acceptance (TC 780).

5.19.7.3.21.2  (01-08-2014)
Refunds Erroneously Sent to Taxpayers

  1. When overpayments are erroneously refunded to the taxpayer the Service will contact the taxpayer and request the refund be returned or the offer will be defaulted.

  2. Returned refunds are applied to the tax period from which they generated and then applied to the oldest CSED period on the offer. For more information follow procedures in IRM 5.19.7.3.19.3., Failure to Return Refunds (Refund Recoupments).

5.19.7.3.21.3  (01-08-2014)
Applying Refunds for Non Recoupment Tax Years

  1. Taxpayers may request the IRS apply a refund for a non recoupment tax year to the offer amount.

  2. Generally this situation may arise when a taxpayer is unable to meet payment terms of an OIC. In such situations take the following steps:

    1. Request the taxpayer send in written authorization.

      Note:

      The credit can not be applied without the written authorization.

    2. Maintain this correspondence in the OIC case file, if available.

    3. Input TC 130 immediately to hold the pending credit and TC 570 (on TXMOD) to stop the credit from offsetting.

    4. Update the history.

  3. When the credit becomes available apply the amount to the outstanding offer amount and oldest CSED period.

  4. If the credit becomes available and we have not received written authorization from the taxpayer:

    1. Contact the taxpayer making a second request for written authorization.

    2. Give the taxpayer 15 days to respond.

    3. If the written authorization is not received, release the TC 130 freeze.

  5. Enter all actions on the AOIC history or note the manually monitored history file.

    Reminder:

    DO NOT SOLICIT REFUNDS.

5.19.7.3.22  (01-08-2014)
Closing an OIC

  1. For the most part an OIC is complete when the taxpayer fulfills all terms of the offer.

  2. Offers can be transferred to the compliance monitoring status after the following are met:

    • The offer amount is paid in full including interest, if applicable

    • Co-obligor accounts have been mirrored.

    • Refunds have been recouped

    • Terms of collateral agreements have been met

      Note:

      Terms of collateral agreements may extend beyond the 5-year monitoring period.

  3. As long as some payment has been made against the offer amount, remaining offer balances less than ≡ ≡ ≡ ≡ will not be pursued. Consider the offer paid in full and proceed with closing actions. The balance will remain on AOIC with a history item stating that the offer is considered paid in full .

5.19.7.3.22.1  (01-08-2014)
Closures on AOIC

  1. When the above conditions have been met, update the AOIC status to 5M. AOIC will initiate several systemic uploads to IDRS:

    1. Input TC 131 to reverse the V- freeze on the account, if not already done.

      Note:

      Until AOIC programming can be changed, tax examiners should release the V- freeze manually after the recoupment year to avoid future refunds from offsetting. Delete from the transaction screen or the TC 131 uploading via AOIC will unpost. See IRM 5.19.7.3.21.1 Incorrect Acceptance Letters.

    2. Input TC 971 with Action Code (AC) 032 to generate TC 604, TC 604 will abate all remaining liabilities.

    3. The account for each unique TIN in the MFT Screen is TSIGNed 0000.

    4. TC 788 will generate the release of the Y freeze for each tax period in MFT Screen.

      Note:

      The TC 788 input is delayed by 16 days to allow the TC 604 to post and abate remaining liabilities.

  2. Place a 6 week follow up on the offer. Tax Examiners are to leave the offer in their assignment number until they can verify that the systemic transactions took place. If in 6 weeks they can not be found on IDRS, input manually.

    Note:

    After all 5M transaction codes have successfully posted, change the assignment name to 5M and ensure that all IDRS follow up are removed.

  3. Research the Automated Lien System (ALS) to determine where all federal tax liens have been filed on the offer taxpayer. Follow guidelines in IRM 5.19.7.3.22.4, Releasing the Federal Tax Lien.

  4. Write or Stamp "Closed" with the closed date on the case file. This file can be sent to the FRC; note the history with box, ascension number, etc.

  5. Tax examiners will generate and send Letter 2908 SC/CG from AOIC using selective paragraph "H" and paragraph "I" , if applicable, advising taxpayers that they have met the paying provisions of the OIC.

5.19.7.3.22.2  (01-08-2014)
Closing Manually Monitored OICs

  1. Closing actions for offers not controlled on AOIC must be input manually.

  2. Input the following on each open period via IDRS:

    1. Input TC 131 using CC REQ77, if not previously input.

      Note:

      Any related TIN that had a TC 130 input must also have a TC 131.

    2. Input TC 971 with AC 032 using CC REQ77.

      Note:

      TC 971 will generate a TC 604 which will abate all remaining liabilities.

    3. Wait for the TC 604 to post.

    4. TSIGN each TIN to 0000, or as requested by the territory office.

    5. Input TC 788 using CC REQ77 with Delay Code 2 to allow TC 971/032 to post. Set a follow-up for 2 cycles to ensure TC 788 input on Masterfile.

  3. Make a photocopy of Form 6314 (showing the zero offer amount balance due) and write or stamp "Notice to Release Lien" .

  4. Notify the territory Case Processing to release the Federal Tax Lien(s). Follow guidelines in IRM 5.19.7.3.23.4, Releasing the Federal Tax Lien.

  5. If the offer is submitted by one party of a joint assessment, special rules apply. IRM 5.19.7.3.14, Separate OICs on Joint Liabilities.

  6. Note all actions on the case history sheet or AOIC (per campus policy).

  7. Write or Stamp "Closed" and the date on the case folder and file the case in the closed file.

5.19.7.3.22.3  (01-08-2014)
Adjustment of NMF Tax Liabilities

  1. For NMF accounts on IDRS, prepare a separate Form 1331-B , Notice of Adjustment (Doc Code 54), for each tax period, to adjust tax, penalty and interest.

  2. Include in Form 1331-B :

    • The OIC NMF accepted account case

    • Taxpayers name and address

    • Amount compromised

    • Total liability

    • Taxpayers SSN or EIN

    • Type of tax and period(s) ending

    • DLN of the transcript

  3. Request TC 291 and related TCs (271, 341, etc.) to remove the liability from NMF.

  4. If the NMF account is in Status 53, prepare Form 3177 to reactivate the account; request input of TC 531.

  5. Send Form 1331-B to the centralized NMF sites:

    Cincinnati Sub. Proc. Campus
    Post Office Box 12267
    Covington, KY. 41012.

5.19.7.3.22.4  (06-17-2015)
Releasing the Federal Tax Lien

  1. Under IRC 6321 a allows the Service to file a Notice of Federal Tax Lien (NFTL), to protects the interest of the government and provides other creditors, judgment lien holders, and the public with notice of the government's lien on the taxpayer's assets.

  2. When tax, penalty, and interest for all tax periods listed on the NFTL are fully satisfied, the Government issues a Certificate of Release of Federal Tax Lien . The same applies when the full amount of an accepted offer, including interest, (if applicable) has been paid.

  3. Liens must be released no later than 30 days after the date the Secretary determines that the underlying liabilities for which the NFTL was filed have been satisfied or are legally unenforceable. The Service considers the liabilities satisfied when an offer amount is paid in full. If there are delays in posting payments or transferring credits that may impact the timely release of the lien, contact the Centralized Lien Processing Operation. Contact number(s) for the centralized lien unit can be found on SERP under the "Who/Where" tab, Lien - Centralized Lien Processing, Centralized Case Processing.

  4. Self-released liens occur when the statutory period for refiling for each module on the NFTL has expired and no refile was filed. Self-released liens do not have a release document issued systemically nor do they require one unless the taxpayer specifically requests it. MOIC is not required to request a release of these liens. Any request involving a self released lien should be referred to CLO.

  5. How the final payment is provided by the taxpayer determines the waiting period for making the release requests, Exception: see note in (5) below:

    If Then
    Final offer payment is made by personal check 1. Verify the payment cleared after 15 workdays.
    2. Use CC BDINQ to research for a dishonored check.
    3. If not present, research ALS and request the release of all NFTLsfiled.
    4. If the personal check is dishonored, follow procedures below.
    Dishonored check penalty is on IDRS. 1. Contact the taxpayer.
    2. Follow procedures in IRM 5.19.7.3.13.9 Dishonored Checks and IRM 20.1.10.4, IRC Bad Check (Dishonored Checks or Other Forms of Payment).
    3. Abate the penalty.
    Final payment is a cashiers check or money order, Research and request release of the NFTL via ALS immediately upon receipt of full payment of the amount offered.

    Note:

    If the status of the NFTL on ALS is "new" a release cannot be input. A request to release the lien must be sent to CLO using form 13794.

  6. DO NOT issue an immediate release when credit or debit cards are used to full pay the amount offered. See IRM 5.12.3.3.1.1.1. Electronic and Credit Card Payments

    1. If a credit card is accepted to satisfy an offered amount, the lien may not be released until the 120-day charge-back period has expired.

    2. If a debit card is used, the lien may not be released until the 100-day charge-back period has expired.

      Note:

      The charge-back period must expire before the lien is released. Even if the final payment is made with a personal check, cashiers check or money order.

    3. Document case history to indicate the method of payment and schedule a follow-up to release the lien based on payment type.

    4. Monitor for TC 583 posting.

    Note:

    TC 583 will need to be manually input on MFT 31 once NFTL's are released.

5.19.7.3.22.5  (01-08-2014)
Automated Lien System (ALS)

  1. Notice of Federal Tax Liens, Forms 668-(Y)(c), are generated and printed from the Automated Lien System (ALS). ALS systemically uploads TC 582, FTL indicator.

  2. Once the lien is printed the ALS unit mails the printed document to the appropriate office designated by the state for filing. A facsimile of the lien or release of a lien can be printed from ALS as needed.

  3. Access ALS to research the Automated Lien System (ALS) database for all liens filed on a given taxpayer.

  4. A list of liens filed on the taxpayer's TIN will be displayed on ALS. Each lien is assigned a SLID number.

    1. In the upper right corner of the ALS display screen is a field that indicates if more than one lien is on file.

    2. If, for example, the display says" Selected: 5 Current: 1" this means there are multiple liens filed on this taxpayer not just the one showing on the screen.

    3. In this example, press 5 to select the lien and follow the ALS prompts.

      Note:

      If researching using the ALS slid number the "selected" field won't appear.

  5. A request to release the federal tax lien must be made for each lien on file.

    1. In the upper right corner of the ALS display screen is a field that indicates if more than one lien is on file.

    2. If, for example, the display says" Selected: 5 Current: 1" this means there are multiple liens filed on this taxpayer not just the one showing on the screen.

    3. In this example, press 5 to select the lien and follow the ALS prompts.

      Note:

      If researching using the ALS slid number the "selected" field won't appear.

  6. To request the release select Request a Lien Release from the ALS Menu option or type release at the prompt.

  7. You will be prompted by the ALS program to enter data to show that the tax liability has been satisfied.

  8. Requests for releases will go into the OIC Unit manager's queue for approval. The manager's queue must be cleared of all lien release requests on a weekly basis and a five-day follow-up placed on any requests that are returned for corrections.

  9. Once the manager approves the release it is printed in the ALS unit. ALS examiners batch and mail the releases along with the lien fee payment to the appropriate court houses.

  10. Document the AOIC History, or in the manually monitored case file history, the date of the release (AOIC - if the date of the release is not the date of the remarks entry it must be stated) and released liens from ALS. If a partial release, this must be stated.

  11. Monitor for TC 583 posting.

5.19.7.3.22.6  (01-08-2014)
Lost Lien on Full Paid Offers

  1. If a lien was placed on the liability with a TC 582 and ALS shows no lien on record, it is considered a lost lien (the lien report was not processed by the county it was filed in). To correct the error, submit a request via secured E-mail to the Case Processing Lien Unit (CLU) so it can be resubmitted to the county court for recording. Include the following in the E-mail:

    • SLID number (if provided by the taxpayer)

    • Social Security Number (SSN) /Employer Identification Number (EIN)

    • Taxpayer name

  2. Indicate that it is identified as a lost lien and to resubmit to county court for proper filing. Also indicate that the lien is valid and either the taxpayer is still liable due to pending Offer In Compromise (OIC), or OIC is full paid and lien needs to be released. Send the request to the correct lien unit that can be found on SERP per the state in which the taxpayer resides. Copy the manager and lead when sending the E-mail.

    Note:

    There may be instances where a manual input of the TC 583 is necessary on IDRS, if ALS does not upload the release to the system.

5.19.7.3.22.7  (01-08-2014)
5-Year compliance Monitoring

  1. Taxpayers must agree to future compliance provisions when offers are accepted. The taxpayer must timely file all tax returns and pay all taxes due during the compliance period. The compliance period is five years from the acceptance date.

    Example:

    Taxpayer A has a cash offer accepted on March 14, 2008. As policy directs, MOIC will cease monitoring this offer for compliance on 03/14/2013.

  2. Prior to issuance of MOIC correspondence, use IDRS to determine if the AOIC record has the most current address for the taxpayer.

    Example:

    The OIC was accepted in 2006 and IDRS ENMOD shows an address update for 2008. Update the AOIC.

  3. Prior to reaching the above Master File statuses, the taxpayer is reminded of the compliance requirements on each issuance of a return delinquency or balance due notice. The reminder appears as a pop-up paragraph on the notice.

  4. Failure to adhere to the compliance terms could result in the default of the OIC and reinstatement of compromised liabilities. IRM 5.19.7.3.19.4., Failure to Adhere to Compliance Terms.

  5. If the offer is on a defunct business that has met all terms of the offer and we are not monitoring the individual that owned the business, then there is no need to monitor for 5-year compliance.

5.19.7.3.23  (01-08-2014)
OIC Suspense Files

  1. All OIC files are to be maintained until sent to FRC.

  2. The following suspense files must be maintained for accepted offers.

5.19.7.3.23.1  (01-08-2014)
Form 2515 Suspense File

  1. Maintain a file of Forms 2515 prepared on all manually processed offers which have deposits on RACS. Maintain the forms in the suspense file for 6 months following refund of the deposit to ensure there are no undeliverable issues.

    1. Maintain the file in alphabetical order.

    2. Update Form 2515 as necessary.

5.19.7.3.23.2  (01-08-2014)
RACS Report Control File

  1. Maintain a control of all offer deposits based on the Revenue Accounting Control System (RACS) number posted at the top of the Form 2515.

  2. Open offer deposits are to be reconciled monthly when the RACS Inventory Report is received.

  3. For offers on AOIC, the Form 2515 can be destroyed once the 4710 account is clear of the related funds and the AOIC history is documented as to the disposition of the deposit. Forms 2515 for all manually monitored offers can be placed in the case file once the deposit has been cleared from the 4710 account listing and the case file documented.

5.19.7.3.23.3  (01-08-2014)
Collateral Suspense File

  1. Maintain a file of all offers accepted with a collateral agreement.

  2. The file should be maintained by teams and in alphabetical order.

5.19.7.3.23.4  (01-08-2014)
Collateral Agreement Payment Record File

  1. Maintain a file of Forms 6313, Collateral Agreement Payment Records, for all manually processed offers. It is not necessary to maintain a file for any account loaded on AOIC.

  2. Maintain the file in alphabetical order.

  3. Maintain forms in the file until the collateral is closed.

5.19.7.3.23.5  (01-08-2014)
Deferred OIC Payment Record File

  1. Maintain a file of Forms 6314, Deferred Payment Offer Payment Records, for all manually processed offers. Maintain the file in chronological order by anniversary date of payment, until the offer is closed. It is not necessary to maintain a file for any account loaded on AOIC.

5.19.7.3.23.6  (01-08-2014)
Closed Form 2515 File for Rejected or Withdrawn Offers

  1. Maintain a Form 2515 closed file on all manually processed Offer in Compromise cases with deposits that were closed as Rejected or Withdrawn. These files can be purged one year after the deposit account has been reconciled and the deposit either applied or refunded.

  2. Retain all Forms 2515 for deposits that post back into RACS until the funds are either refunded or applied.

  3. Maintain the file in alphabetical order.

5.19.7.3.23.7  (01-08-2014)
Closed OIC File

  1. Maintain a file for all closed Offer in Compromise case files.

  2. Maintain the file in alphabetical order.

5.19.7.3.24  (01-08-2014)
Transcripts

  1. Transcripts are paper documents generated by the Martinsburg Computing Center (MCC) as an alert when an identified transaction or missing action occurs on a tax module. All transcripts are issued on Form FC-4.

  2. Transcripts should be processed within 45 days of "receipt."

    Note:

    Due to the 2001 consolidation, transcripts may generate at another campus and must be sorted and shipped to the correct campus.

5.19.7.3.24.1  (01-08-2014)
OIC Transcripts

  1. Transcripts generated on OIC Accounts are:

    • Unreversed TC 470 Transcript/AMO6 W Transcript

    • Diagnostic-Q Transcript/DIAG-Q Transcript

    • Non-Master File Transcript/NMF Transcript

    • MIRRORFAIL Transcripts

    • OIC Default FSC

5.19.7.3.24.2  (05-06-2014)
Processing DIAG-Q Transcripts

  1. Input of TC 480 generates a Y freeze on the tax module. The freeze generates reason code 33 to Master File. When the reason code remains on the module for over one year, a Diagnostic (DIAG Q) transcript will generate annually to identify potential problem modules on the taxpayer Information File (TIF). The reason code is removed by the reversal of the TC 480.

  2. Although not all DIAG-Q's require action, these transcripts provide a means to identify and remove unnecessary modules/accounts from the TIF.

    Note:

    The following research tools are available to assist in the resolution of the DIAG-Q transcript. Accounts Management Services (AMS), Intergrated Collection System (ICS), Appeals Centralized Database System (ACDS), Automated Offer In Compromise (AOIC), and Intergrated Data Retrieval System (IDRS) using command codes IMFOLI and BMFOLI.

  3. Reverse the Y freeze by the following transactions:

    • TC 481, OIC Rejected or Returned

    • TC 482, OIC Terminated or Withdrawn

    • TC 483, Correction of Erroneous Posting of TC480

    • TC 781, Defaulted Account Compromise

    • TC 782, Correction of 780 Processed in Error

    • TC 788, All Collateral Conditions of the Offer Completed

  4. Upon receipt of the DIAG-Q transcript, review the tax module(s):

    If Then
    TC 480 freeze is valid Destroy the transcript
    Module should have been previously closed Input the appropriate TCX to close the module
    Closing code is posted to the module, indicating a systemic problem Report the problem to Information Systems (IS).
  5. Document receipt and any action taken as a result of the transcript in the case history.

  6. Destroy all transcripts after resolution.

5.19.7.3.24.3  (01-08-2014)
Processing AM 06W Transcripts

  1. AM O6W transcripts issue when TC 470 is not reversed on a defaulted offer tax module (TC 781).

  2. Research and reverse all TC 470 on each module.

    Note:

    Use TC 472 when applicable.

5.19.7.3.24.4  (01-08-2014)
Processing Non-Master File (NMF) Transcripts

  1. NMF transcripts generate when:

    1. A second credit posts to a module after issuance of a CP44 Notice and a V freeze created by the TC 130 remains on the taxpayers account.

    2. A TC 740 posts to the transcript module and creates a credit balance.

  2. If the NMF transcript cannot be resolved within 14 days from the computer notice date:

    1. Control the transcript using Category Code CP44 and

    2. Input in the history section of the control base "NMF."

  3. If the OIC has been paid in full and the credit is not subject to recoupment, refund the credit to the taxpayer.

  4. Release the V freeze, if necessary, by inputting TC 131.

  5. Document receipt and any action taken as a result of the transcript in the case history.

5.19.7.3.24.5  (01-08-2014)
Processing DEFAULTFSC Transcripts

  1. If the Filing Status (FS) of an identified entity is updated from one FS to another based on the posting of a TC 150 within the five-year period a "DEFAULTFSC" transcript will generate.

    Example:

    Joint taxpayers Robert and Rose divorce; Rose files as single in the subsequent year. A DEFAULTFSC transcript will generate showing that Roberts filing status changed from joint to single or to head of household.

  2. Using the example above, if taxpayer Rose had accepted the offer and would be filing future returns under her or a different TIN, the OIC indicator must be placed on her TIN.

    1. Use Command Code (CC) ENMOD overlaid with CC ENREQ to place the OIC Acceptance year on the new entity. (OIC> 1998 for 1998.)

    2. This will generate TC 016 in the module.

    Caution:

    Reports indicate this action may not input the OIC Acceptance year if a TC 780 is not present under the taxpayer TIN. If this is true, manually monitor these cases.

  3. Using the example above, if Taxpayer Robert was not a party to the offer, the OIC Acceptance year must be taken off. Using ENREQ (see above) enter 1966 to remove the OIC indicator. (OIC>1966.)

  4. Document receipt and any action taken as a result of the transcript in the case history.

5.19.7.3.24.6  (01-08-2014)
MIRRORFAIL Transcripts

  1. MIRRORFAIL transcripts generate when a payment does not systemically cross-reference from a mirrored module, TC 971 AC 110, to the other SSN. They may also generate when a TC 766 credit creates a credit balance on a cross-reference MFT 31 module.

  2. Cross-reference and reversal actions on MFT 31 mirrored accounts will have to be done manually.

    1. To cross reference a payment or other credit that has not systemically cross- referenced from a mirrored module, input a TC 766 Ref 337 using command code REQ54.

    2. To abate a cross-referenced payment or credit, use CC REQ54 and input the amount of the TC 766 reference code 337 with a minus sign. See IRM 21.6.8.8.2, REFMFT31 Transcripts.

  3. Mirrorfail transcripts are to be worked within 30 days of the date of the transcript.

5.19.7.3.25  (01-08-2014)
Form 2209 for Offers in Compromise

  1. Form 2209, Courtesy Investigation, is used in MOIC to advise Appeals and DOJ of potential default situations on accepted offers. Campuses should allow a 45 day response deadline and establish a 90 calendar days follow up for a response and take the following actions:

    1. For offers on AOIC, input a 90 day follow up to monitor for response. For manually monitored offers, input the follow-up in the history section of the tax module.

    2. Provide as much detail as possible in the remarks section of the Form 2209, attach a copy of any correspondence from the taxpayer and a complete print of the AOIC history.

    3. Place offers on AOIC in OI status. Place manually monitored offers in a suspense file.

  2. Record all Form 2209 responses in the OIC case history file for manually monitored offers and include a follow up date. For offers on AOIC, document responses in the AOIC history and set a follow up on the system.

  3. Ex parte communication rules prohibit attempts to influence Appeals. Do not include in a Form 2209 addressed to Appeals or its attachments any statements directing Appeals to make a particular determination in the potential default case.

  4. If a response is not received by the investigation due date, send a list of all overdue courtesy investigations to Appeals contact (to Advisory contact for offers accepted by DOJ) requesting they provide a status update. This list should be sent every 30 days following the initial request for a status update.

5.19.7.4  (01-08-2014)
Status 71 Accounts

  1. When an OIC is filed, a TC 480 is input with Status 71. TC 480 indicates an OIC is pending.

  2. For IMF accounts, verify on IDRS using CC TXMOD that the CSED has been suspended on all taxpayers. A letter "P" for primary or "S" for secondary will appear to the right of the CSED, if the CSED has been suspended on only one of the taxpayers.

  3. Contact the OIC Unit regarding any other concerns.


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