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Part 8. Appeals

Chapter 22. Collection Due Process

Section 2. Technical Review (Cont. 2)

8.22.2  Technical Review (Cont. 2)

8.22.2.2 
Collection Due Process (CDP) Hearing under IRC 6330 and/or IRC 6320

8.22.2.2.16 
Letter 3193, Notice of Determination; Contents of attachment

8.22.2.2.16.3  (10-30-2007)
Brief Background

  1. Describe in the Brief Background section:

    • Each written or oral request for documentation,

    • How much time the hearing officer gave the taxpayer or their representative to produce the documents,

    • To what extent the requested documents were produced,

    • That a face-to-face conference was offered (if one was offered) and if the taxpayer agreed to a telephone conference or a correspondence hearing in lieu of a face-to-face meeting,

    • When the taxpayer agreed to the telephone conference or correspondence hearing and how the agreement was communicated to the hearing officer. This description will become important if, during judicial review, a claim is made of not being given an opportunity for a face-to-face conference or insufficient time to submit requested documents to become eligible for a face-to-face conference

    • Any discrepancies regarding issues of timeliness, which is vital for any potential court cases, future retained jurisdiction cases, and case review.

      Example:

      If there is a statement in the case file that the CDP hearing request was postmarked on a certain date, but the envelope is not available, and the Form 12153 is stamped received on the purported postmark date.

      Address these facts and explain the reason for selecting your date for determining timeliness.

8.22.2.2.16.4  (03-11-2009)
The Big 3 CDP statutory review

  1. Hearing officers are required by statute to consider three areas, herein referred to as the Big 3:

    1. Verification that the requirements of any applicable law or administrative procedure have been met

    2. Issues raised by the taxpayer

    3. Whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary

8.22.2.2.16.4.1  (03-11-2009)
Verification that the requirements of any applicable law or administrative procedure were met

  1. The hearing officer must document the verification in both the case activity record and the NOD or Decision Letter attachment.

    1. State that Appeals has obtained verification from the IRS office collecting the tax that the requirements of any applicable law, regulation or administrative procedure with respect to the proposed levy or NFTL filing have been met. Note that computer records indicated that the notice and demand, notice of intent to levy, and notice of a right to a Collection Due Process hearing were issued. Make note of and verify, when applicable, any IRM requirements before the planned levy or lien action.

      Note:

      There is no need to document the specific dates these requirements were accomplished other than the CDP notice date and taxpayer CDP hearing request date, unless some legal or procedural requirement was an issue raised by the taxpayer. IRM 8.22.2.2.4.7.

    2. If any provision of the Internal Revenue Code, regulation, or administrative procedure has not been followed, describe the failure and the effect such failure has on the final determination.

      Note:

      If there has been some violation of procedure leading up to the lien filing or sending the levy notice, such violation of the IRM does not mandate rescission of the notice or lack of support for the action. The hearing officer must determine the harm the violation caused to the taxpayer, and weigh and consider the violation accordingly as part of the taxpayer's legitimate interest in the least intrusive collection method necessary.

    3. Document "no prior involvement" with respect to the specific tax periods either in Appeals or Compliance; also document previous handling of a non-CDP case, whether Form 14041 waiver was secured, or the case was transferred to another employee.

    4. Document that the collection statute has been suspended. Instead of saying "TC 520" , say the collection period allowed by statute to collect these taxes has been suspended by the appropriate computer codes for the tax periods at issue.

    5. Discuss non-frivolous issues raised by the taxpayer regarding legal and administrative procedures in the "Issues" section in necessary detail to address the taxpayer's issue.

    6. If Appeals finds no procedural or legal defects in the actions taken by field Collection or ACS, this section should have a statement to the effect that "The RO (ACS) followed all legal and procedural requirements and the actions taken or proposed were appropriate under the circumstances. "

    1. Note:

      Certain specific levy actions do have other legal requirements, particularly seizure actions, and if a seizure was specifically a planned action after a jeopardy levy, those requirements should also be BRIEFLY mentioned.

8.22.2.2.16.4.2  (03-11-2009)
Issues Raised by the Taxpayer

  1. Issues raised by the taxpayer is the second of the "big three" discussion areas.

  2. The taxpayer may raise any non-frivolous issue relating to the NFTL or the proposed levy including:

    1. Spousal defenses (relief under IRC §6015),

    2. The appropriateness of collection actions,

    3. Collection alternatives,

    4. The existence or amount of the tax, but only if the taxpayer did not receive a notice of deficiency for that liability or did not have an opportunity to dispute the tax liability.

  3. The case activity record and Notice of Determination/Decision Letter attachment must list all issues:

    1. All non-frivolous issues raised by the taxpayer on the Form 12153

    2. Additional issues raised orally or in subsequent correspondence (whether the hearing includes face-to-face, or telephone conferences or is conducted by correspondence) until the conclusion of the hearing.

      Note:

      A taxpayer or their authorized representative may raise additional issues during the CDP hearing, prior to the issuance of the Notice of Determination/Decision Letter.

      Caution:

      DO NOT FORGET to document all issues that were raised on the Form 12153, even if the taxpayer abandons one of the issues and makes no further mention of it during the conference.

    3. As appropriate, raise and discuss with the taxpayer issues the taxpayer fails to raise, including issues that were fully considered in a prior administrative hearing for which the taxpayer may now qualify.

      Example:

      Taxpayer does not request a streamlined installment agreement as a streamlined agreement was raised, discussed, and denied in an earlier CAP hearing. Taxpayer made a payment toward their liability and now qualifies for a streamlined agreement.

  4. Document Issues in the NOD/Decision Letter attachment:

    1. With detail necessary to convince someone who may have no understanding of any of the issue(s) that Appeals' determination was correct.

    2. That reflects independent consideration of the issue. The following statement does not reflect independent consideration:

      Example:

      "Since the Revenue Officer found you did not qualify for withdrawal of the lien, your request is denied."

    3. Include a decision on any spousal defense appropriately raised by the taxpayer, including relevant factual findings.

      Note:

      Only discuss the Innocent Spouse issue if the taxpayer raises it.

    4. If the taxpayer requests a notice of federal tax lien withdrawal and provides an explanation of why the lien should be withdrawn, be sure to address using one of the four criteria stated in IRC 6323(j).

    5. State whether the taxpayer is precluded from raising an issue under IRC §6330(c)(4) and the facts that underlie that conclusion.

    6. Specifically state that no other issues were raised. If frivolous issues were raised, then state that no other non-frivolous issues were raised. This helps preclude the taxpayer from raising new issues in any judicial challenge to the Notice of Determination.

  5. Documenting Collection Alternatives or a Currently Not Collectible Decision:

    1. Clearly outline any agreement, any relief and any actions required and advise the taxpayer of the consequences if the terms are not met for any arrangements or if there is a change in the taxpayer's economic situation.

      Example:

      If you determine that the account is currently not collectible, inform the taxpayer of the effect of an increase in income on his CNC status.

  6. Additional OIC documentation requirements:

    1. For accepted OICs, DO NOT document the details of the RCP. Prepare a separate Appeals Case Memo (ACM) with the details of the RCP.

    2. For rejected OIC's, document all the details of the determination of the Reasonable Collection Potential (RCP) so the taxpayer will be aware of the reasons for the rejection and what must be offered to make an acceptable offer. Also, clearly document that the OIC was rejected and the reason for the rejection.

      Note:

      Do not issue Rejection Letter 238. Discuss the rejection details in the attachment to the NOD/Decision Letter.

      Note:

      IRC §7122 regulations specify that an OIC has not been rejected until the IRS issues a written notice to the taxpayer or his representative, advising of the rejection and the reason(s) for rejection, and the right to review by Appeals. However, when an OIC is submitted in a CDP or equivalent hearing, there is no further right of review in Appeals. The taxpayer has already had Appeals consideration.

  7. Documenting Liability Issues:

    1. Whether the taxpayer raised the liability.

      Note:

      If the liability was based on an original, self-assessed return, document that the taxpayer was given clear instructions in writing to submit an amended return by a certain date. Retain the letter documenting this action in the administrative file. If the taxpayer is precluded from challenging the merits of the tax liability under IRC 6330(c)(2)(B) document the facts that underlie that conclusion. If there is no challenge to the liability, state: "The taxpayer did not dispute the liability."

    2. If you reconsider the liability under Appeals' general authority, because IRC 6330(c)(2)(B) precludes reconsideration within the CDP hearing.

      Caution:

      The discussion should only describe resulting adjustments to the taxpayer's liability. A liability not considered in the CDP hearing is not addressed in the attachment except to note that liability was addressed under separate consideration from the CDP.

  8. Do not address frivolous statements included on a multi-page attachment. Instead, review the information to the extent possible to comfortably ensure there are no non-frivolous issues to address. Document the determination that their dispute is either based solely on a specified frivolous position, or the disagreement reflects a desire to delay or impede the administration of federal tax laws and that Appeals does not consider such issues.

8.22.2.2.16.4.3  (12-14-2010)
Balancing

  1. The third of the "big three" issues, consideration of whether the proposed collection action balances the need for the efficient collection of the taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary , needs to be tied to:

    • the taxpayer's actions

    • compliance history

    • financial circumstances

    This section should state clearly and in detail how the hearing officer's determination balances efficient collection and intrusiveness. This will vary based on the situation.

    1. Balancing the need to collect with intrusive actions must be done even if the only issue raised by the taxpayer is liability.

    2. Balancing in situations where the taxpayer is unresponsive, proposes no collection alternatives, or is unable to dispute the liability supports the requested levy action or retention of the filed Notice of Federal Tax Lien, as applicable.

    3. If the notice of levy or seizure is valid or the tax liability is upheld, the letter should so state, even if the hearing officer decides to provide the taxpayer a collection alternative.

    4. If collection action is to be permitted, include a statement that tracks the language of IRC 6330(c)(3)(C) and state as follows: The [insert the collection action taken or proposed, e.g., lien filed or proposed levy] balances the need for the efficient collection of taxes with the legitimate concern of [name] the taxpayer(s)] that any collection action be no more intrusive than necessary, because [provide explanation].

      Example:

      "You requested an installment agreement instead of levy action. You previously had an installment agreement and did not make any payments. You have continued to accrue more quarters of tax liability, making only sporadic deposits. Your current proposal does not give us any reason to believe your performance on a new installment agreement would be any more reliable. Therefore, levy action now is the appropriate action albeit more intrusive than an installment agreement."

      Example:

      "You qualify for the Service's streamlined installment agreement and will be able to pay the total liability within five years if the agreement is maintained. All tax returns that are due have been filed and you have adjusted your withholding which should now be sufficient to cover your future tax liabilities. Levy action is prohibited so long as you maintain this installment agreement. Since the problems that led to these delinquent periods appear to have been resolved and you should be able to pay this off within the streamlined installment agreement parameters, this installment agreement balances the need for efficient collection of taxes with your legitimate concern that any collection action be no more intrusive than necessary."

      Example:

      "The financial information you have provided indicates that your income does not cover your necessary living expenses. As such our determination is to report your account currently not collectible (CNC). This designation appropriately balances the need for efficient collection of taxes with your legitimate concern that any collection action be no more intrusive than necessary. Levy action is not appropriate when a taxpayer is in CNC status due to economic hardship so the proposed levy action will not be allowed unless, or until, the Collection function determines the payment of the tax liabilities will not impose an economic hardship."

    5. If the CDP Levy or Lien Notice was issued appropriately but the levy action is either not permitted or necessary because, for example, the liability was subsequently full paid or an installment agreement granted or the NFTL is released or withdrawn, include a statement that while the notice of levy or lien filing was appropriate at the time it was issued Appeals does not sustain the levy action or lien filing.

      Note:

      DO NOT USE language in either the 5402 or the NOD/Decision Letter that the action is sustained when the action is no longer warranted. This language is contradictory and confusing to both Collection and the taxpayer or their representative.

  2. Incorporate MY EVALUATION into the balancing discussion. The balancing discussion is the rationale for your determination.

8.22.2.2.17  (12-14-2010)
Abbreviated ACM

  1. The following abbreviated language is to be used ONLY as follows:

    1. Appeals-agreed/resolved cases where the taxpayer would not sign waiver Form 12257

    2. Appeals-resolved equivalent hearing cases

    3. Collection-resolved cases where the taxpayer would not withdraw the CDP or EH hearing request.

  2. Use abbreviated language, shown below, in the attachment to the Notice of Determination or Decision Letter. On EH cases, substitute the word decision for determination. If the outcome of the hearing is a currently not collectible determination/ decision, substitute the words "currently not collectible determination (or decision)" in place of the words "collection alternative" .

  3. Form 5402 should include any other information deemed necessary but not included in the abbreviated language.

    Example:

    Include in the "Remarks" section of the Form 5402 when APS must include non-CDP periods in processing a CNC determination.

  4. The abbreviated language must contain enough detail to determine the specifics of the original resolution if a CDP retained jurisdiction request is filed.

  5. If you considered, but did not accept, an offer in compromise proposal, the abbreviated language should include a comment as to whether the offer was rejected, returned or withdrawn.

    Figure 8.22.2-1

    Abbreviated Determination Letter Language & Instructions

    "Appeals has verified, that applicable laws and administrative procedures have been met, has considered the issues raised, and has balanced the proposed Collection action with the legitimate concerns that such action be no more intrusive than necessary as required by section 6330(c)(3). The taxpayer(s) has(have) represented to Appeals that the taxpayer(s) agrees with the proposed collection alternative described below. The proposed collection alternative balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary."
    "The determination of Appeals is: [Insert terms or incorporate payment agreement by reference.] "

8.22.2.2.18  (12-14-2010)
Form 12257 - Summary Notice of Determination

  1. If the taxpayer reaches an agreement with Appeals, the hearing officer may ask the taxpayer to sign Form 12257. Form 12257:

    1. serves as a summary Notice of Determination

    2. waives the right to go to court and the suspension of levy action

      Reminder:

      Ensure that the taxpayer understands the effect of Form 12257 and the rights that are being waived before the taxpayer signs the Form 12257. Inform taxpayers that they are under no obligation to sign Form 12257, waiving their judicial rights, but that proceeding to court would serve no useful purpose. There is no basis to reject a case resolution if the taxpayer declines to sign Form 12257.

  2. The hearing officer will clearly document the Appeals determination on Form 12257 or on Letter 4382. The determination will include, as appropriate:

    1. terms of an installment agreement, such as payment amount and payment date

    2. terms of an accepted offer in compromise

    3. consequences of reporting an account currently not collectible such as continuous accrual of interest and penalty

  3. If you considered but did not accept an offer from the taxpayer and Form 12257 documents that an agreement was reached for an installment agreement or CNC instead, the Form 12257 must address whether the offer in compromise was rejected, returned or withdrawn.

  4. When the hearing officer secures a Form 12257, the following must still be documented in the case activity record:

    1. Legal and Administrative review. IRM 8.22.2.2.4.7.

    2. Discussion of all issues raised. IRM 8.22.2.2.16.4.2.

      Note:

      ALL issues must be discussed in the Case Activity Record; only discuss the resolving issue on Form 12257.

    3. Impartiality statement. IRM 8.22.2.2.4.5.

  5. Prepare Letter 4382, available on the Appeals Collection Issues CDP web page and APGOLF, for the ATM's signature:

    1. Letter 4382 is the cover letter that acknowledges receipt of the waiver.

    2. A signed copy of the Form 12257 will be sent to the taxpayer with Letter 4382.

      Note:

      IRM 8.22.2.2.18.1. for the two scenarios when the Settlement Officer, rather than the ATM, can sign both the Form 12257 and Letter 4382.

8.22.2.2.18.1  (12-14-2010)
Exceptions to ATM signing Form 12257 and Letter 4382

  1. Delegation Order App-193-1 (Formerly App 8-a (Rev. 1)) was revised to allow Appeals Officers, Settlement Officers, or Account Resolution Specialists, in two situations, to accept from the taxpayer and execute on behalf of the Internal Revenue Service, Form 12257 and Letter 4382:

    Situation 1: Collection Due Process (CDP) or an Equivalent Hearing (EH) case where Innocent Spouse is the sole issue and relief is granted in full by Compliance leaving no remaining claim for consideration by Appeals. The taxpayer also signs Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy Action, for all periods covered in the CDP notice.

    Situation 2: Collection Due Process (CDP) or an Equivalent Hearing (EH) case where the sole issue is collection, which is resolved by a Streamlined or Guaranteed Installment Agreement. The taxpayer also signs Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy Action, for all periods covered in the CDP notice.

  2. The AO/SO/AARS that signs the Form 12257 and Letter 4382 will:

    1. E-mail the ATM of the case resolution so the ATM can enter the ACAP date on ACDS.

    2. In lieu of ATM signature on Form 5402, enter in ATM signature block "N/A- D.O. App-193-1" .

    3. Send the entire case file to APS for back-end CDP processing.

8.22.2.2.19  (10-30-2007)
Standardized Administrative Record

  1. Application of the abuse of discretion standard of review requires the court to determine:

    1. if the Appeals employee followed the proper procedures in conducting the CDP hearing,

    2. made the requisite factual findings, and

    3. considered all the fact and factors necessary to make the determination.

  2. To minimize the possibility of an abuse of discretion finding, hearing officers must document in the activity record:

    • all of the non-frivolous issues raised by the taxpayer

    • all the facts and reasons underlying their conclusions, including verification that all legal and administrative procedural requirements for the subject collection action have been satisfied.

  3. The court renders a decision based on the administrative record rather than by having a full trial with testimony and introduction of new evidence. As such it is vital that the Standardized Administrative Record include:

    1. CDP lien or levy notice (L3172, L1058, LT-11, or other applicable CDP notice),

    2. CDP hearing request (Form 12153, Request for Collection Due Process or Equivalent Hearing),

    3. Transcript of the taxpayer's account (TXMODA, TDS, or Form 4340). Include all transcripts actually reviewed by the hearing officer,

    4. All other documents used to verify that legal and administrative procedural requirements have been satisfied (e.g., ICS history),

    5. All written communications and information, including E-Mail, from the taxpayer or the taxpayer's authorized representative,

    6. All written communications, including E-Mail, from the hearing officer to the taxpayer or taxpayer's authorized representative,

    7. Internal IRS documents and information (including E-Mail) reviewed by a hearing officer that are relevant to an issue considered as part of the CDP hearing,

    8. All notes made by a hearing officer of any oral communications with the taxpayer or the taxpayer’s authorized representative and memoranda created by the hearing officer or employee in connection with the CDP hearing,

    9. Case activity record or other history notes of the hearing officer,

    10. All documents and materials submitted by the taxpayer after the date of the hearing request up until the date of the Notice of Determination whether or not such evidence is believed to be relevant,

    11. Tape recordings or transcriptions,

    12. Notice of Determination with attachment,

    13. Appeals Transmittal Memorandum (Form 5402 and Appeals Case Memo, if applicable),

    14. Form 14041, "Waiver" of prior involvement,

    15. Any other documents relied upon by the hearing officer in making the balancing determination under IRC 6330(c)(3).

  4. When any dispute occurs over the conduct of the hearing, the CDP administrative record will be reviewed to determine the validity of the taxpayer's argument. If the record is inaccurate, unclear or incomplete, Counsel may determine that the Appeals employee must testify in order to fill the gaps in the record or rebut the taxpayers arguments. Therefore it is important that the administrative record contain appropriate details. The list above provides a baseline for what to include in the administrative record, but is not an exclusive list of what may be contained in the administrative record.

8.22.2.2.20  (12-14-2010)
Closing Codes for CDP, EH, and RJ Hearings

  1. CDP cases are closed using one of the following closing codes:

    Closing Code Definition
    04 agreed with waiver (F12257)
    05 defaulted NOD
    10 docketed (agreement secured; Counsel jurisdiction)
    11 dismissed (lack of jurisdiction)
    12 dismissed (lack of prosecution)
    16 withdrawn (F12256 or other)
    17 tried
    20 premature referral/rescinded
    42 (interim closing code) case remanded
    43 (interim closing code) petition filed

  2. EH cases are closed using one of the following closing codes:

    Closing Code Definition
    14

    • fully sustained

    • collection action is supported with no change
    15

    • partially or not sustained

    • full or partial abatement

    • minor changes or collection action is completely overturned
    16 withdrawal, verbal or written

  3. RJ cases are closed using one of the following closing codes:

    Closing Code Definition
    14 Whether the Collection function is following Appeals determination: Collection is following Appeals determination
    14 Change in circumstances: No change in Appeals determination
    15 Collection is not following Appeals' determination
    16 CDP determination is revised in cases involving change in circumstances

8.22.2.2.21  (03-11-2009)
Equivalent Hearings

  1. The guidance and procedures in IRM 8.22.2 with respect to CDP hearings also apply to Equivalent Hearings. The exceptions and differences are listed in this section.

  2. An Equivalent Hearing:

    1. Is one at which the taxpayer may raise, and Appeals will consider, all of the issues that could have been raised in CDP.

    2. Is identified with EH feature code.

    3. Has no statute suspension. Statute verification requirements in IRM 8.22.2.2.4.6 also apply to equivalent hearings.

    4. Has no retained jurisdiction.

    5. Requires documentation of no prior involvement on the attachment to the Decision Letter 3210, 4439, or 4440. IRM 8.22.2.2.14.

      Note:

      If the taxpayer wishes to retain the Appeals employee who has had prior involvement in the matter other than a prior CDP case, use Form 14041 waiver.

  3. Taxpayers do not have the right to seek judicial review of Appeals' decision at the conclusion of an Equivalent Hearing unless the following issues are raised:

    • spousal relief under IRC 6015. IRM 8.22.2.2.11.3.

    • abatement of interest under IRC 6404(h). IRM 8.22.2.2.13.

    • the timeliness of the CDP request. IRM 8.22.2.2.4.9.

  4. If the taxpayer disagrees that their request was late, discuss in detail in the attachment to the decision letter:

    1. how you determined what date the Service received their request and what date the request was due to be timely

    2. the 30 day time period to file a judicial action if the taxpayer disagrees with the timeliness determination

    Note:

    Taxpayers can seek judicial review of an adverse determination on the timeliness of their requests within 30 days of the issuance of the decision letter.

    Note:

    See Sample #21 in the "Determination Letter Guide" for suggested wording to use in the attachment when addressing the issue of timeliness and providing court filing information.

  5. The hearing officer will ultimately determine the timeliness of all requests that Collection believes to be untimely.

    1. Consider cases where the taxpayer is only one or two days late an issue to be verified.

  6. Late-filed CDP hearing requests are not automatically classified as Equivalent Hearing requests. The taxpayer requests an equivalent hearing by:

    1. checking box 6 on the revised (Nov. 2006) Form 12153,

    2. provide wording to that effect if the form is not used

    3. orally request an EH subsequent to submitting the written hearing request

  7. If a taxpayer requested a CDP hearing, but the request was untimely filed or untimely perfected and the taxpayer did not ask for an EH, Collection will:

    1. contact the taxpayer to verify that the taxpayer wants an equivalent hearing

    2. provide the taxpayer a reasonable amount of time for such verification (generally 15 calendar days)

  8. The taxpayer must affirmatively respond in order to be entitled to an equivalent hearing:

    1. the affirmative response may be verbal

    2. need not submit an additional request form

    3. Collection will document taxpayer's verbal request

  9. A taxpayer must submit a written request for an equivalent hearing within the one-year period commencing:

    1. Levy - the day after the date of the CDP Notice

    2. Lien - within the one-year period commencing the day after the end of the 5 business day period following the filing of the NFTL

    Note:

    IRM 8.22.2.2.4.10

    Note:

    If the EH request is not timely, the taxpayer may pursue resolution by working with Collection, requesting a CAP hearing or requesting assistance from TAS.

  10. Taxpayers are informed that they may raise timeliness as an issue in their Equivalent Hearing via the following language in the Substantive Contact Letter: "If you do not agree with our decision that your hearing request was late, please let me know immediately. We will discuss this issue during your hearing."

  11. The hearing officer sends the taxpayer Decision Letter 3210, 4439 (where Innocent Spouse is raised), or 4440 (where Abatement of Interest is raised), explaining the results of the hearing. The letter and the attachment will describe the "Big Three" and how they were resolved.

  12. If there is an agreement with the taxpayer over the resolution, Appeals employees may use the Abbreviated Notice of Determination language and there will be no need for a detailed attachment.

  13. Levy action is not suspended by statute; however, IRS will generally suspend levy action absent circumstances indicating that collection is at risk (e.g., imminent CSED or taxpayer is dissipating assets). Automatic levies like SITLP (State Income Tax Levy Program) are not suspended.

    Note:

    Be mindful of prohibited ex parte communications if Collection advises Appeals of planned levy action.

  14. If the taxpayer raises the issue, which Appeals verifies, that the hearing request was late because the IRC §6320 or §6330 notice was not sent to the taxpayer's last known address, take the following steps:

    1. Do not sustain the CDP Notice.

    2. Instruct Collection to rescind the CDP Notice and to send the taxpayer a proper notice of his or her Collection Due Process rights to the correct address.

      Note:

      The taxpayer will then have the opportunity to request a timely CDP hearing.

  15. Taxpayers may withdraw their request for an Equivalent Hearing at any time before a Decision Letter is issued.

  16. Once an Equivalent Hearing is withdrawn, the taxpayer may not request a second Equivalent Hearing on the same tax and tax periods.

8.22.2.2.21.1  (12-14-2010)
CSED implication in Equivalent Hearing cases

  1. In an Equivalent Hearing, the collection statute is not suspended.

  2. For multiple EH periods, APS will only list the earliest CSED in the Case Summary Card "Summary Return Information" section.

    Example:

    Summary Return Information

    TAXPER STATDATE CODE
    199112 03/28/2012 CSED
    199212 (left blank) CSED
    199312 (left blank) CSED

    Note:

    The STATDATE, 03/28/2012, may or may not be the CSED date for the 199112 period. However, it is the correct date to use for ACDS if it is the OLDEST CSED date of all modules. For statute purposes, Appeals is only concerned with the OLDEST CSED date of the case.

    Note:

    Do NOT ask APS to fill in a STATDATE for all tax periods

    Note:

    The IDRS CSED date does not need to be verified

  3. There may be instances when Appeals receives an EH case with an imminent CSED.

    Note:

    A CSED with less than one year remaining is considered an imminent CSED

    1. Document imminent CSEDs in the Case Activity Record.

  4. Notifying Collection of imminent CSEDs:

    1. Field cases: Notify either the Revenue Officer or the group manager via E-mail. Document your notification to the RO or GM of the imminent CSED.

    2. ACS cases: ACS does not need to be notified about pending CSEDs. There is nothing they can do to protect the CSED nor are they required to remove it from their inventory. If possible return cases where the CSED has expired as quickly as possible.

8.22.2.2.22  (10-30-2007)
Contacts with Taxpayer after Issuance of Notice of Determination

  1. Appeals employees should not hold meetings with taxpayers after the Notice of Determination is issued. As a general rule, any post-NOD contacts the taxpayer has with the IRS to work on payment/ collection alternative issues is with the Collection function.

  2. Appeals should not hold meetings with taxpayers once the NOD is issued unless there is a remand, as described in IRM 8.22.2.3, or there is a retained jurisdiction hearing, as described in IRM 8.22.2.5. The Court will not consider a supplemental NOD (Letter 3978) unless it is issued following further meetings pursuant to a remand order from the Court.

8.22.2.3  (12-14-2010)
Remanded CDP cases - General Information

  1. When Appeals has abused its discretion, the Tax Court will remand the case to the Office of Appeals to hold a new hearing if a new hearing is necessary or will be productive.

  2. If Counsel determines that the hearing officer's exercise of discretion in conducting the hearing or making a determination on a non-liability issue can not be defended, and reconsideration of the case by Appeals is required because the error is not harmless, Counsel may file a Motion for Remand to require Appeals to:

    1. hold a supplemental hearing (if necessary), and

    2. issue a Supplemental Notice of Determination (NOD) - Letter 3978.

  3. Review for abuse of discretion requires an adequate administrative record including clear findings by the hearing officer on relevant issues so the court can determine whether the record supports the hearing officer's findings. IRM 8.22.2.2.19. The court should not be making findings but instead review the hearing officers findings for abuse of discretion and should give deference to those findings.

  4. Specific examples of cases when remand would be appropriate are:

    1. taxpayer requested abatement of interest but the hearing officer failed to address this issue,

    2. the hearing officer rejected the taxpayer’s offer-in-compromise without consideration of relevant financial information that was provided by the taxpayer,

    3. the hearing officer's findings are confusing or contradictory (e.g., a low installment agreement amount is rejected as not adequate, while a higher amount is rejected because the taxpayer cannot afford it),

    4. the hearing officer closed the hearing and issued the notice of determination prior to the expiration of the agreed upon deadline for the taxpayer to submit financial documentation.

  5. A "Remand" would not be appropriate and the court should uphold a determination where the hearing officer erred if the error does not affect the outcome of the case. Counsel will evaluate any error to determine whether it is harmless. The harmless error rule is often applied where the taxpayer is only making frivolous arguments.

    Example:

    If the taxpayer was denied the right to record his conference but relies on frivolous or groundless arguments, the Tax Court will not remand the case.

  6. Chief Counsel Notice 2009-010, the IRS provides guidance on the application of the ex parte rules to communications between Chief Counsel attorneys and the hearing office when a CDP case is remanded by the Tax Court.

  7. The following guidelines apply when a CDP case is remanded. The Counsel attorney working the docketed case should prepare a written memorandum addressed to the Office of Appeals explaining:

    1. the reasons why the court remanded the case to Appeals,

    2. any special requirements in the order (e.g., whether and to what extent to hold a new conference and whether the case must be reassigned to a new hearing officer),

    3. what issues the court has ordered Appeals to address on remand.

    Note:

    The memorandum should not discuss the credibility of the taxpayer or the accuracy of the facts presented by the taxpayer.

  8. A request by a hearing officer for legal advice in connection with the remanded CDP case may be handled by the Counsel attorney who is handling the docketed Tax Court case, so long as that attorney did not give legal advice to an originating function (e.g., Collection) concerning the same issue in the same case. If the Counsel attorney provided such advice, Counsel should assign the request to another Counsel attorney who has not previously provided advice to a Service office concerning the same issue in the same case. Counsel should carefully tailor any legal advice to only answer the legal questions posed by Appeals, and the advice should not opine on how you should ultimately decide the issues in the Supplemental NOD. Consistent with Q&A 11 of Rev. Proc. 2000-43, the advice will be shared with the taxpayer pursuant to IRC 6110. However, neither the taxpayer nor his representative have a right to participate in any discussions between Appeals and Counsel with respect to the advice.

  9. After the Supplemental NOD is issued, the jurisdiction of the case remains with the Tax Court that ordered the remand. The issuance of the Supplemental Notice is not a new determination and, therefore, does not provide the taxpayer with additional judicial appeal rights.

  10. The taxpayer is not required to re-petition the Tax Court if they disagree with the Supplemental NOD.

8.22.2.3.1  (12-14-2010)
Remanded CDP Cases - Issuing a Supplemental Notice of Determination (L3978) and other required actions

  1. Counsel will contact the manager of the Appeals office where the place of trial is designated. Since the manager of the office may not be the manager of the Settlement Officer that worked the case, the office manager will coordinate with the ATM of the Settlement Officer to determine where to return the administrative file.

  2. The SO's ATM will assign (or reassign, if necessary) the case on ACDS to the hearing officer and will direct Counsel to send the case to the assigned officer.

  3. The hearing officer assigned the remand will:

    1. forward to APS via encrypted E-mail, a request to input ACDS closing code 42, Case Remanded. CC 42 changes case from PART 3 to PART 2.

    2. provide a copy of Counsel's memorandum to the taxpayer and the taxpayer's representative.

    3. complete the requirements in Counsel's Remand memo

    4. prepare a Supplemental Notice of Determination (NOD) - Letter 3978 and share with assigned attorney prior to submitting the case to the ATM

      Note:

      The Counsel attorney who is handling the docketed case should review the supplemental NOD before it is issued to the taxpayer. This review is for the limited purpose of ensuring compliance with the Tax Court's order.

      Note:

      For joint filers, prepare separate notices.

    5. document in the case activity record when the Supplemental NOD is submitted for approval

    6. do not change the original ACDS AC/FR and ACAP entries

    7. prepare Form 2828, TRANSMITTAL MEMORANDUM, to return the case to Counsel

  4. The hearing officer will submit the following to the ATM:

    1. APGOLF Letter 3978, Supplemental Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330

    2. copy of Case Summary Card

    3. copy of Case Activity Record

    4. the administrative file including copies of all letters and documentation issued to or received from the taxpayer regarding the remand

    5. Form 2828

  5. APS will mail the supplemental NOD via regular mail. The supplemental NOD is not subject to the same mailing requirements as the original NOD. The purpose of sending the original notice by certified mail is to keep a record verifying that we issued the notice on a certain date for purposes of Tax Court jurisdiction or to verify that the IRS may levy after the appeal period expires. The Supplemental Notice is issued during the pendency of a Tax Court proceeding and counsel provides it to the court with a status report.

8.22.2.3.2  (03-11-2009)
Docketed CDP case - when Appeals reconsideration is inappropriate

  1. Because Appeals has been granted the discretion to determine whether to sustain a collection action, it is generally not appropriate for Appeals to reconsider CDP cases in docketed status. Chief Counsel and Appeals have agreed that generally Counsel will not ask Appeals to reconsider a case after we issue a Notice of Determination.

  2. On the other hand, if Appeals has made a significant non-harmless mistake, Counsel will not oppose a remand because such opposition might lead to bad case law or give the impression that Appeals will not fully or properly consider a case. In addition, if the Court has remanded the case or otherwise returned it for a new hearing, it is our responsibility to follow the Court’s decision. IRM 8.22.2.3.

  3. It is not appropriate for Appeals to consider collection alternatives, such as an offer in compromise or installment agreement, after the case is docketed where during the CDP hearing the taxpayer:

    • Did not respond to Appeals’ attempts to set up a conference

    • Did not present the offer in compromise or installment agreement proposed in the docketed case

    • Did not provide the requested information after being given a reasonable period of time to respond

    • Otherwise did not qualify for the proposed alternative while the case was in Appeals

8.22.2.3.3  (12-14-2010)
Remanded CDP Case - Reconsideration of an OIC

  1. When an OIC is rejected in the CDP Notice of Determination, the taxpayer appeals to the Tax Court, and the court remands the case for reconsideration of the OIC because there was some abuse of discretion, the original rejection qualifies as a rejection under IRC 7122(f) even if the court holds that the rejection was erroneous.

  2. The Settlement Officer will reconsider the original offer. The taxpayer will not be asked to submit a new OIC or pay a new application fee.

8.22.2.4  (12-14-2010)
Collection Alternatives and Currently Not Collectible Status

  1. Part 5 (Collection Process) of the IRM is a guide regarding the appropriate procedures for the following. This list is not all-inclusive:

    • conducting financial analysis

    • investigating Offers in Compromise

    • entering into installment agreements

    • reporting accounts as currently not collectible

    • resolving lien issues

    • making lien determinations

  2. Hearing officers will use Part 5 as a guide to identify the IRS's position when working and resolving CDP/EH cases.

  3. An alternative that requires higher approval authority in Collection than the RO or RO group manager, as some seizure, levy, or lien actions do, will require a similar approval level in Appeals unless, as with offers, where the ATM is delegated the authority to make a final determination on an offer, the ATM is delegated to approve the seizure, levy, or lien action.

  4. If... Collection approval level Then... Appeals approval level Example
    Territory Manager Area Director Request to seize property requires Collection Territory Manager approval; request to release seized property requires Appeals Area Director
    Area Director Field Operations Director Request to levy taxpayer's IRA requires Collection Area Director approval; Appeals determination that requests Collection to levy taxpayer's IRA requires Appeals Area Director approval

    Note:

    When in doubt of approval level for collection action or alternative, consult IRM Part 5.

  5. All open periods (CDP and non-CDP) must be included when the Appeals CDP resolution involves:

    1. Currently Not Collectible

    2. Installment agreement

    3. Offer in Compromise-DATC

      Note:

      Appeals takes jurisdiction over non-CDP periods for the limited purpose of considering collection alternatives.

  6. There may be additional verification requirements when non-CDP periods are part of the resolution. Consult IRM Part 5 for all verification requirements

    1. credit reports

    2. lien filing

      Note:

      Add in "Remarks" section if a NFTL must be filed on non-CDP periods. This is especially important when granting an IA or CNC in a lien hearing and including non-CDP periods that are not covered by current lien.

  7. For CNC determinations, the hearing officer MUST list the non-CDP periods in the "Remarks" section of the customized Form 5402 and identify those periods for APS.

    Note:

    APS inputs status 53. APS is not aware of non-CDP periods if the hearing officer does not identify them on the 5402 and those periods may remain subject to collection notices, etc.

    Note:

    For OIC-DATC and payment agreements, ALL periods are listed on the Forms (656 or 433D) so the non-CDP periods are not required on Form 5402.

  8. The hearing officer must resolve an open Taxpayer Delinquent Investigation (TDI) filing requirement (see (8) below) when granting the taxpayer one of the following and clearly document in the "Remarks" section of Form 5402, how and when the TDI module was resolved:

    1. Installment Agreement

    2. OIC Acceptance

    3. Currently not collectible, except for cases closed with a hardship closing code, as described in 8.22.2.4.2(4).

      Note:

      Appeals Processing (APS) will return cases with unresolved return delinquency periods to the hearing officer through their manager.

  9. See IRM 5.1, General Collection Procedures for resolutions of unfiled returns. Policy Statement P–5–133 allows closing of an unfiled return because the non-filing is not willful, and:

    1. There would be no tax due on the delinquent return;

    2. There would be minimal tax due on the return (minimal is defined in LEM 5.2.4);

    3. The cost to the Service to secure a return would exceed anticipated revenue.

    IRM 5.1.11.7 provides the transaction code and closing code options for resolving an open IDRS filing requirement.

8.22.2.4.1  (12-14-2010)
Installment Agreements

  1. Appeals secures installment agreements (IA's) as alternative resolutions in CDP cases. Installment agreements may also be secured in CAP cases.

  2. Installment agreements secured by Appeals in CAP and CDP cases are not limited by the multi-functional restrictions that apply to other installment agreements secured by Appeals.

  3. A Form 433D or Form 2159 is required when entering into an Installment Agreement; however, the taxpayer's signature is only required on payroll deduction or direct debit agreements.

  4. Beginning Jan. 1, 2007, user fees for installment agreements are:

    1. $105 - non-direct debit installment agreements

    2. $52 - direct debit installment agreements

    3. $45 - reinstatements

    4. $43 - new agreements for taxpayers with income at or below certain U.S. Department of Health and Human Services poverty guidelines

    Note:

    All taxpayers entering into an installment agreement will automatically be considered for the reduced user fee using information the IRS already has on hand from the taxpayer’s current tax return.

  5. In some instances, taxpayers may receive an installment agreement acceptance notice from the IRS but not a reduced user fee even though they believe they qualify for one. In that situation, taxpayers can request a reduced fee by completing Form 13844, Application for Reduced User Fee for Installment Agreements, and submit it to the IRS within 30 days of receipt of the installment agreement acceptance notice. The IRS will evaluate the application and respond to the taxpayer. See IRM 5.14.1.2 for additional information on installment agreement user fees.

  6. Before granting an IBTF agreement (other than an express agreement), the TFRP must be considered, the assessment statute expiration date protected, and an assessment determination made on all in-business trust fund cases by collection. IRM 5.1.9.3.7 requires a revenue officer generally to conduct a TFRP investigation while the CDP case is in Appeals. On a field-sourced CDP case, note the face of the Form 5402 that the revenue officer should associate the TFRP file with the IBTF installment agreement prior to processing under IRM 5.14.7.4.2. On an ACS-sourced CDP case, send an ARI to the field, requesting that Collection conduct a TFRP investigation. On the ARI, advise Collection of the projected length of the installment agreement so that Collection can protect the ASED for the life of the agreement.

    Note:

    If Collection responds to an ARI that they will not pursue an investigation of a TFRP on an in-business installment agreement (I/A) (which may happen if the TFRP ASED date is not imminent), document the case activity record and process the IA.

  7. Request input of Transaction Code (TC) 971, Action Code (AC) 043 within 24 hours of a processable request for an installment agreement. E-Mail, encrypted, the APGOLF ACDS Update form to your local APS processing unit. Request TC 971 AC 043 on all CDP/EH and non-CDP periods. The input of this transaction code:

    1. prevents levy action on non-CDP periods

    2. suspends the running of the collection statute during consideration of the agreement

  8. Appeals employees should not request input of TC 971 AC 063 identifying approved agreements. This code, along with TC 972 AC 043, is systemically generated upon input to status 60.

  9. If a pending installment agreement TC 971, AC 043 was input in Collection or requested by Appeals, and the agreement is rejected as a CDP collection alternative place instructions for APS in the "Remarks" section of Form 5402 to input TC 972, AC 043, which will reverse the TC 971, AC 043.

    Note:

    APS will not input the TC 972 AC 043 until the conclusion of the 30 day suspense period for filing for a judicial review; if a judicial review is filed, the TC 972 AC 043 will not be input until after the court case is concluded.

8.22.2.4.1.1  (12-14-2010)
Direct Debit Installment Agreements (DDIA's)

  1. A Direct Debit Installment Agreement (DDIA) is an agreement that uses an electronic transfer of funds from the taxpayer's account to IRS on the same date, preselected by the taxpayer, every month to make monthly payments. If the taxpayer has a bank account, strongly encourage them to use a DDIA as the method to remit payment.

  2. To establish a DDIA, the following is required:

    1. A Form 433D.

    2. A financial statement, Form 433A, unless agreement meets streamlined criteria.

    3. A voided check or deposit slip with the routing and account number from the taxpayers bank account.

    4. The taxpayer's signature (a legal requirement).

  3. Faxed signatures are accepted by Appeals employees ONLY with annotation regarding date spoken to the taxpayer and that TP requested to send a fax.

    Note:

    You cannot accept a faxed signature unless you have spoken to the taxpayer prior to the fax being received. When accepting a faxed signature, you must document the faxed copy with the date of contact and notate the taxpayer requested to send the signed request via fax.

    Example:

    "04-07-2004 TP REQ FAX"

  4. APS will fax DDIA and Form 433A to the DDIA liaisons at the number provided in SERP "Who/Where Campus DDIA Liaisons" .

  5. The first direct debit date should be at least 8 weeks from the date the agreement is granted. This allows sufficient time to verify the depository information prior to initiating the first direct debit.

  6. Taxpayers not paying the user fee with Form 433-D, Installment Agreement, will receive a CP 521, Installment Agreement Reminder Notice, for the first payment and the user fee. Direct debits will continue monthly thereafter.

  7. Monthly reminder notices are not issued on DDIAs, therefore the taxpayer must keep careful records of direct debit payments.

  8. See IRM 5.14.10, IRM 5.19.1.10, and IRM 5.19.1.5.5 for additional information.

8.22.2.4.1.2  (12-14-2010)
Manually-Monitored Installment Agreements (MMIA)

  1. Certain agreements are not compatible with IDRS monitoring. According to IRM 5.14.8.3 the following agreements must be manually monitored in Centralized Case Processing (CCP) to ensure compliance with the terms of agreements:

    1. NMF assessments in either notice or balance due status

    2. agreements calling for variable or percentage amounts

    3. agreements with irregular payment intervals

    4. agreements secured from two or more parties at different addresses on the same liability (e.g. divorced taxpayers, partnerships, etc.)

    5. L Freeze modules during pending Joint and Several Liability Relief Under IRC §6015 claims

    6. In-Business Trust Fund Installment Agreements (other than IBTF Express Agreements. See 5.14.7.3)

    7. any other agreement not compatible with IDRS monitoring

  2. CCP will only accept MMIAs for processing from RO's or ACS. Therefore, APS will not input MMIAs to status 60 but instead return them to the originating function along with the administrative file.

  3. When generating the 5402, select "MMIA" from the Installment Agreement drop-down box. Selecting MMIA will alert APS to return the "MMIA" Installment Agreement to the originator for processing.

8.22.2.4.1.3  (12-14-2010)
Multi-functional Authority to Grant Full Payment Within 60 or 120 day Agreements

  1. Extensions of time to pay are no longer authorized on field-sourced cases.See IRM 5.14.1.6(4). Extensions of time to pay are limited to 60 days on ACS-sourced cases. See IRM 5.19.1.5.4).

    1. An extension of 60 days (or less) is not considered an installment agreement and a TC 971 AC 043 is not placed on the module.

    2. The modules are not placed in status 60. Instead, APS will return the case to Collection, who will monitor for full payment and take appropriate action if payment is not remitted.

    3. Hearing officers should request APS input STAUP to a non-CDP notice status module in the remarks section of Form 5402, if the agreement with the taxpayer is that the notice status module will be satisfied within the 60 day period as well.

8.22.2.4.2  (12-14-2010)
Currently Not Collectible

  1. Classifying a case as Currently Not Collectible (CNC) is a legitimate method of resolving a CDP case. CNC is a challenge to the appropriateness of collection that the taxpayer may raise at the hearing under IRC 6330(c)(2)(A)(ii), rather than a collection alternative. CNC means the IRS has made an administrative determination that the case should not be in the collection stream at the present time.

    Caution:

    Do not promote CNC as a way to resolve the case without adequately disclosing the benefit of a DATC OIC or a partial IA or you risk an abuse of discretion ruling especially where the taxpayer is requesting an OIC or an IA. If a taxpayer understands the benefit of an OIC or a partial IA and still agrees to CNC, then there is less likelihood that the Tax Court will find an abuse of discretion.

  2. Policy Statement P–5–71 provides the authority for reporting accounts currently not collectible. Accounts can be removed from active inventory after taking the necessary steps in the collection process.

  3. IRM 5.16 provides the guidance for reporting accounts as CNC.

  4. IRC 6343(a)(1) requires release of a levy if the IRS determines the levy is causing economic hardship to the taxpayer due to the taxpayer's financial condition. Based on this provision, if a taxpayer is entitled to CNC status based on economic hardship, the taxpayer should be granted CNC status based on economic hardship, even if the taxpayer has not filed all required returns. The hearing officer will attempt to resolve return delinquency issues during the course of the hearing, however, the lack of resolution will not be a bar to a CNC hardship determination. In that instance, the hearing officer will note in the remarks section of Form 5402 that there are unfiled returns.

  5. Clearly communicate to the taxpayer in the Notice of Determination/Decision Letter attachment or Form 12257 the following:

    1. that penalty and interest continue to accrue while collection action is suspended

    2. that the Service will have the discretion to remove their account from CNC status should the taxpayer's financial situation improve

    3. if the taxpayer's account is removed from CNC status the Service may levy to collect the liabilities

  6. A paper Form 53 does not need to be prepared to report an account CNC. The appropriate closing code must be stated on the Form 5402.

  7. A paper Form 53 will need to be prepared when a Mandatory Follow-up is requested.

  8. IRM 5.16.1.6 gives guidance for when mandatory follow-ups are appropriate. Request mandatory follow-up when there is evidence that the taxpayer's ability to pay will improve and either computer generated reactivation is not available or the improvement will happen significantly sooner than systemic reactivation can occur.

  9. Under no circumstances should a mandatory follow-up:

    1. be less than one year from the date the case is being closed

    2. be in lieu of an allowed extension to pay (IRM 8.22.2.4.1.3.)

    3. be on accounts subject to systemic follow-ups

  10. APS must input to status 53, ALL tax periods, including non-CDP periods.

    Reminder:

    In the "Remarks" section of the Form 5402, list the non-CDP periods.

8.22.2.4.3  (12-14-2010)
Adjustments - Form 3870

  1. Adjustments on accounts may involve, but are not necessarily limited to:

    1. Credit transfers

    2. Tracing payments

    3. Penalty abatement reasonable cause

    4. TFRP civil penalty adjustment

      Note:

      Only the Technical Services Advisory unit is authorized to make adjustments to TFRP assessments. Identify for APS, in red, on the Form 3870 the appropriate Advisory unit.

    5. Tax abatement (FUTA, 6020(b), CAWR, SFR)

    6. Tax assessed under wrong entity or tax period

    7. 941C increase or decrease

    8. statute consideration

  2. To assist APS in processing adjustment requests, use Form 2424 for Credit Transfers and Form 3870 for all other adjustment requests.

  3. Form 3870 and Credit Transfer Handbook (Document 12193) is a "how to" guide for Appeals and Collection personnel. It provides detailed information and examples that will assist employees in the accurate preparation of Form 3870 and the required documentation necessary for processing adjustments, abatements, and credit transfers.

    Note:

    Doc. 12193 is no longer available on the IRS publishing web site. The Form 3870 and Credit Transfer Handbook is available under "Resources" on the Appeals CDP web page.

    Note:

    See IRM 25.6.1.10.2.5.1.1 for procedures to request the Statute Unit clear a payment currently located in the Excess Collection File for credit or refund to the taxpayer's account.

  4. You must include the item and credit adjustment codes when adjusting Form 941, 940, and 1040 tax assessments. See Section 8 in Doc. 6209. Shown below are a few of the commonly used codes for adjusting Forms 941, 940, and 1040. See IRM 21.7.2.4.1 for other Employment Taxes Reference Numbers:

    Caution:

    APS will return incomplete adjustment requests.

    Form 941    
    003 ADWH or AITW Adjusted Total of Income Tax Withheld (Line 5 of form 941)
    004 FICA or FIWG Taxable Social Security Wages (Line 6A of form 941)
    005 FITP Taxable Social Security Tips (Line 6D of form 941)
    007 FITX or AFTW Adjusted Total of Social Security/Medicare Taxes (Line 6B & 7B of form 941)

    Form 940 and 940 EZ  
    WCA – Wage increase/decrease (Line 5 of form 940)
    TCA – Tax increase/decrease (Line 7 of form 940)

    Form 1040   1040EZ 1040 1040A
    806-W-2 Withholding tax and/or excess FICA contribution Credit Line 7 61 39
    807-W-2 Withholding tax and/or excess FICA contribution Debit Line N/A N/A N/A
    886-Taxable income (valid 7712 and subsequent) Line 6 40 27
    888-Adjusted gross income adjustment Line 4 34 or 35 21 or 22
    889-Self-Employment Tax Adjustment Line N/A 55 N/A

8.22.2.4.3.1  (12-14-2010)
Interim Adjustments

  1. On occasion, a tax or penalty adjustment, or credit transfer, must be made before the CDP/EH case can be closed. An action that is requested prior to the closing of the case is called an "interim adjustment " .

  2. Interim adjustment requests, which should be made judiciously, require the approval of the ATM on the form.

    Note:

    The ATM can approve the Form 3870 with a digital signature.

  3. To request an interim adjustment, follow these instructions:

    1. Generate an on-line pdf form from the IRS Intranet publishing catalogue: http://publish.no.irs.gov/catlg.html

    2. Complete the on-line form with all required information (see above for information on reference numbers) and save to a folder.

    3. E-mail the Form 3870 to your ATM for approval.

    4. Generate the "ACDS Update Request form" on APGOLF and open in MS WORD.

    5. Change the caption from "ACDS Update Request form" to "CDP Interim Adjustment Request form" .

    6. After establishing which APS campus site services your office, send an E-Mail to the respective site (*AP-TS-APS-Campus-FSC ACDS Update Request, *AP-TS-APS-Campus-MSC ACDS Update Request, or *AP-TS-APS-Campus-BSC ACDS Update Request) with the retitled update form and Form 3870.

    7. In the subject line, type: CDP Interim Adjustment

  4. APS will process your interim adjustment request and send back an E-Mail when completed.

    Caution:

    APS will return, unprocessed, incomplete requests.

8.22.2.4.4  (12-14-2010)
Lien Withdrawals

  1. IRC 6323(j) gives the Service the authority to withdraw Notices of Federal Tax Liens (NFTL) under certain circumstances and provide notice to credit agencies. Taxpayers requesting NFTL withdrawals must meet one of the following provisions:

    1. The filing of the notice was premature or otherwise not in accordance with the Service's administrative procedures;

    2. The taxpayer entered into an agreement under IRC §6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise;

    3. Withdrawal of such notice will facilitate the collection of the tax liability;

    4. With the consent of the taxpayer or the National Taxpayer Advocate (NTA), the withdrawal of such notice would be in the best interest of the taxpayer (determined by the NTA or the taxpayer) and the United States.

  2. IRM 5.12.3 provides examples on when NFTL withdrawals are and are not appropriate.

  3. The NFTL is a collection tool, but not a levy action. Therefore, there is no prohibition against filing a NFTL while an offer in compromise is under consideration as long as pre-lien filing requirements have been met (see IRM 5.12.2).

  4. Generally, withdrawal requests made under IRC 6323(j)(1)(C) to facilitate collection or IRC 6323(j)(1)(D) best interest will require documentation from the taxpayer. Decisions to withdraw should not be based just on an oral request. Taxpayers should be instructed to complete Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien, if this issue arises.

  5. When a NFTL is withdrawn in response to a CDP lien determination made by the Office of Appeals, the taxpayer will not get additional CDP hearing rights if the notice of federal lien is later filed.

  6. Settlement Officers will use the following procedures for requesting lien withdrawals after first discussing and receiving concurrence from their ATM:

    1. Prepare Form 13794.

    2. Explain in the "Reason" section of Form 13794 or in a separate attachment, the basis for the lien withdrawal. State that your decision results from a CDP hearing. The basis will be a brief description of which of the 4 provisions were met and how the provision was met.

      Example:

      The taxpayer qualifies for a lien withdrawal under IRC 6323(j)(1)(b). The taxpayer entered into a streamlined agreement on August 1, 2008 and did not miss any payments. On April 3, 2009 the Service filed a NFTL. The NFTL filing was erroneous and should be withdrawn.

      Example:

      The taxpayer qualifies for a lien withdrawal under IRC 6323(j)(1)(c). The taxpayers occupation requires that he is bonded. A NFTL will cause him to lose his bonding and his job. The taxpayer and his employer agreed to a payroll deduction agreement to satisfy the taxes. Withdrawing the NFTL will facilitate collection.

    3. The ATM will forward Form 13794 via encrypted email to the Advisory Group servicing the area where the lien was recorded. Publication 4235 is the most current resource for Advisory Group contact information. The email will signal the ATM's approval of the withdrawal request. The ATM should not sign the Form 13794.

    4. Request acknowledgment of the request for a lien withdrawal.

  7. The hearing officer will not close the case until acknowledgment is received back from the Advisory unit for the request for a lien withdrawal.

    Note:

    The lien withdrawal does not need to be recorded before closing the CDP case. Forwarding the request to the Advisory unit and receiving acknowledgement is sufficient for closing the case and issuing the determination.

  8. In limited circumstances it may be appropriate to withdraw a NFTL after it has been released under the criteria in IRC 6323(j). Collection Policy is developing guidance for IRM 5.12.3 that will provide examples for when it may be appropriate under IRC 6323(j) to withdraw the NFTL after release. If you find the facts in your CDP case support a determination to withdraw a NFTL after release under IRC 6323(j), consult the CDP analyst in Tax Policy and Procedure for the status of that guidance.

8.22.2.4.5  (10-30-2007)
Partial and Full Lien Release

  1. Hearing officers will use the following procedures for requesting partial lien releases after first discussing and receiving concurrence from their ATM:

    1. Prepare Form 13794.

    2. Forward the request to ALS Centralized Processing (See SERP).

    3. Request acknowledgment of the request for a partial lien release.

    4. The hearing officer will not close their case until they receive an acknowledgment of the request for a partial lien release.

      Note:

      The partial lien release does not need to be recorded before closing the CDP case. Forwarding the request to the centralized unit and receiving acknowledgement is sufficient for closing the case and issuing the determination.

  2. Hearing officers will use the same procedures for requesting full lien releases. However, if exigent circumstances exist Settlement Officers are delegated the authority (see Del. Order 5-4) to issue a manual release:

    1. The ATM must concur, and document their concurrence in the case activity record, that exigent circumstances exist for a manual release.

    2. Settlement Officer will follow the manual release procedures in IRM 5.12.3.3.2, Satisfied or Unenforceable Taxpayer Accounts.

      Note:

      You must obtain the recording information prior to issuing the release. Some recording offices will not accept releases without recording information.

8.22.2.4.6  (12-01-2006)
Lien Discharges and Subordinations

  1. IRC 6325(b) gives the Service the authority to discharge property from the Notice of Federal Tax Lien.

  2. IRC 6325(d) gives the Service the authority to subordinate a federal tax lien to another lien or interest.

  3. The form and content for applications for a Discharge or Subordination are contained in Publications 783 and 784, respectively. See IRM 5.12.3.

  4. Applications for certificates, together with all necessary evidence, will be submitted on a Courtesy Investigation Form 2209 or Appeals Referral Investigation Form 10467 directly to the Advisory Unit for the State where the property is located. See SERP for a listing of Advisory Unit addresses.

  5. The Advisory Unit will review all requests, prepare and issue the certificate and process payments.

  6. Appeals will communicate the results of the discharge or subordination request in the Notice of Determination or Decision Letter attachment or Form 12257 waiver.

  7. Any disputes between the taxpayer and Advisory Unit with respect to issuing the certificate, such as the amount of payment that may be required, will be resolved by the Settlement Officer before closing the case.

8.22.2.4.7  (12-14-2010)
Offer In Compromise

  1. The taxpayer or their representative may submit a Doubt as to Collectibility offer in compromise (DATC-OIC) as a collection resolution. With respect to a Doubt as to Liability offer in compromise, see IRM 8.22.2.2.11.6.

  2. A taxpayer who is not represented may be uncertain whether a DATC-OIC is a viable option, Explain to the taxpayer:

    1. the components of the reasonable collection potential (RCP). See IRM 5.8.5.

    2. the payment options available and the difference between lump-sum, short-term periodic payment, or deferred periodic payment OIC

    3. special circumstances

    4. effective tax administration

  3. You are permitted to assist an taxpayer who is not represented in estimating his/her RCP by helping him/her fill out "Worksheet to Calculate an Offer Amount" in the Form 656 package, using the financial information he submits on Form 433. See P-5-100 at IRM 1.2.14.1.17.

    Caution:

    You may not assist the taxpayer in estimating his/her RCP unless he/she has first submitted complete financial information on Form 433. The information, however, need not be verified.

    Note:

    You should also assist a taxpayer to complete the Form 433 under appropriate circumstances (e.g., the taxpayer is illiterate or does not speak English).

  4. When assisting a taxpayer in completing the "Worksheet to Calculate an Offer Amount" to estimate RCP, emphasize that the amounts shown on lines 13a and 13b of the Worksheet are based only on the information he/she provided and his/hers RCP could be different if the information is not accurate. Advise the taxpayer that:

    1. the only way for you to determine their actual RCP is for them to formally submit an OIC as part of a hearing.

    2. that no DATC-OIC will be rejected solely on the basis of the amount of the offer without evaluating the offer under the IRS’s policies and procedures.

    Caution:

    While it is acceptable to tell a taxpayer that the worksheet will assist him/her in deciding how much to offer, do not tell the taxpayer to offer his/her estimated RCP or any other amount. Never tell a taxpayer that a suggested offer amount is acceptable or not acceptable.

  5. Do not negotiate an acceptable offer amount before an OIC is submitted.

    Caution:

    Policy Statement P-5-100 (found in IRM 1.2.14.1.17 ) states, in part (emphasis added): The taxpayer will be responsible for initiating the first specific proposal for compromise.

    Note:

    "Pre-negotiation" potentially leads to the government negotiating against itself and the taxpayer offering as little as possible to settle the liability.

    Example:

    The taxpayer owes $60,000. He states he can obtain $10,000 from his mother as an offer amount. Using the Form 433 he prepared, you help him complete the Form 656 Worksheet to Calculate an Offer Amount. The Worksheet shows that the taxpayer’s RCP is $30,000. In the process of filling out the worksheet, you explain how the reasonable collection potential is computed. If the taxpayer indicates his mother can loan him more money and asks how much he should offer, tell him you cannot advise him on how much he should offer, but that you can consider a DATC-OIC if he submits a completed Form 656, the application fee and the initial payment.

  6. Do not "pre-determine" the overall eligibility for acceptance of an offer without actually having a Form 656 on the table. The following is an example of pre-determination:

    Example:

    Six months before the CDP Lien hearing request filing, the taxpayer submitted an economic hardship ETA-OIC to Collection. Collection rejected the ETA-OIC due to the large amount of equity in the taxpayers residence. The taxpayer filed an appeal of the rejected ETA-OIC; Appeals sustained the rejection. During the CDP Lien conference the taxpayer discussed with the SO submitting an economic hardship ETA-OIC. The SO told the taxpayer that Appeals had already looked at and made a decision on an economic hardship ETA offer and based upon the equity in their residence, they were not good candidates for ETA hardship consideration.

  7. If there are special circumstances, explain the requirements for a DATC-OIC with special circumstances. If the taxpayer’s RCP is greater than the tax liabilities, ask the taxpayer if collection of the full liability would cause them economic hardship (if the taxpayer is an individual), or if compromise is otherwise warranted based on effective tax administration because of compelling public policy or equity considerations.

  8. The OIC constitutes a component of the final determination/decision that Appeals is required to reach with regard to the hearing. An OIC being considered by Appeals as an alternative to collection in a CDP or EH case is considerably different than a rejected offer received from Collection. Appeals' jurisdiction over the CDP/EH generally runs from its initial receipt through its conclusion and is continuous. Appeals is generally responsible for:

    1. securing the CDP/EH offer

    2. perfecting and submitting it for initial processing

    3. developing all aspects of the offer

    4. determining the offer's acceptability

    5. preparing the required closing documents

    6. securing the necessary approvals

      Note:

      For COIC's responsibility on offers they accept - IRM 8.22.2.4.7.5.1.

  9. If a CDP or EH taxpayer raises OIC as a collection alternative, and the taxpayer has not yet submitted the Form 656, advise the taxpayer in the Substantive Contact Letter, as applicable, conditions that exist that may need to be corrected for consideration of an OIC. Conditions that may exist and prevent consideration of an OIC are:

    1. Unfiled returns

      Caution:

      The taxpayer may not have a filing requirement in which case the non-filing of return(s) will not compromise the OICs acceptability.

    2. Failure to make required Federal tax deposits

  10. If a corporate taxpayer proposes an OIC on the corporate liability see subsection entitled Corporate Trust Fund Offers, IRM 8.22.2.4.7.10

  11. Mail the taxpayer Form 656, Offer in Compromise, Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment, along with the appropriate financial statement(s), Form 433-A and/or Form 433-B and inform the taxpayer of the following:

    • General OIC policies and procedures including processability requirements, how reasonable collection potential (RCP) is generally determined, and basic compliance and acceptance requirements

    • OIC application fee, and that such fee is refundable if the offer is not processed, but is not refundable once the offer is processed

    • Up-front TIPRA payment required with submission of the offer and that such payment is not refundable regardless of whether the offer is processed or the offer is denied.

    • That the application fee and TIPRA payment(s) are applied to the taxpayer's liability

    • Taxpayer's right to designate application of required TIPRA payments, but that such designation must be in writing at the time the payment is made, and that the right to designate offer payments ends once the offer is accepted

    • That the application fee and TIPRA payment requirements don't apply if the basis of the offer is doubt as to liability or the taxpayer meets the low-income qualifications

    • Approvals needed in the event the hearing officer is able to make an acceptance recommendation

  12. If the taxpayer submits an OIC and it appears the offer was submitted solely to delay collection, see IRM 5.8.4.18.

    Caution:

    A determination that the offer was submitted solely to delay collection is an issue for which the taxpayer could seek judicial review under CDP. Make sure the case fits the criteria in IRM 5.8.4.18 before arriving at this conclusion.

  13. DO NOT SIGN THE FORM 656. The Centralized Offer in Compromise (COIC) will sign the form as part of the processability determination.

  14. The COIC sites, after making a processability determination, will retain and investigate all CDP and EH offers meeting COIC criteria. COIC criteria is:

    • Individuals (Individual Master File-IMF)

    • Sole-proprietors (without employees) and gross receipts of $500,000 or less

    • Previously self-employed but currently unemployed

      Note:

      COIC will work ETA OIC's if the OIC meets COIC criteria.

  15. CDP/EH offers that do not meet COIC criteria will be investigated by Appeals. Appeals will request assistance, as needed, from Revenue Officer field groups on offers that do not meet COIC criteria. IRM 8.22.2.4.7.8. OIC Financial Statement Courtesy Investigation Procedures. The following offers do NOT meet COIC criteria. See IRM 5.8.3.4:

    • Corporations

    • Partnerships

    • Estates and Trusts

    • Currently incarcerated taxpayers

    • Trust Fund Recovery Penalty (TFRP) – Doubt as to Liability (DATL)

    • Any business with employees

    • Closely-held corporations

    • LLP and LLC

    • IMF taxpayer's whose primary source of income is from a partnership

    • Sole-proprietors with gross receipts over $500,000

    • International taxpayer's

  16. Taxpayers or their authorized representatives do not have the option to request that Appeals, rather than COIC, investigate their offer unless they provide extenuating circumstances. The ATM must approve the extenuating circumstances; the hearing officer must document the extenuating circumstances in the case activity record.

  17. If the taxpayer or their representative insist on withdrawing the CDP hearing request after submitting an OIC that does not meet COIC criteria, Appeals will accept the withdrawal and close the CDP WUNO. However, Appeals will keep and work the OIC. Remove the DP feature code from the OIC WUNO. Inform the taxpayer of the ramifications of withdrawing the CDP:

    1. the OIC will stay in Appeals and be worked under Appeals general authority

    2. the Appeals Team Manager conducts the Independent Administrative Review

    3. Appeals will issue an administrative decision letter which does not entitle the taxpayer to a judicial review

      Note:

      Both the OIC and CDP must be withdrawn and the OIC submitted directly to Compliance if the taxpayer or their representative insist on Compliance working the investigation; another application fee is required on the new OIC submitted to Compliance.

8.22.2.4.7.1  (12-14-2010)
TIPRA considerations

  1. The Tax Increase Prevention Act of 2005 (TIPRA) greatly impacted and increased Appeals' responsibilities and procedures for CDP/EH OICs.

  2. An OIC received as an alternative to collection or not precluded as a liability challenge in a CDP/EH case is subject to IRC 7122(f), which states that an offer is deemed accepted if such offer is not rejected, returned or withdrawn before the date which is 24 months after the date the offer is submitted. An offer is considered "submitted" as of the day IRS receives the offer. The date COIC determines processability has no effect on the TIPRA statute.

  3. When you receive a Form 656:

    1. immediately date-stamp the Form 656 in the upper right corner of Page 1 with the date the offer was received by the Service

    2. document the receipt of Form 656 in the CDP/EH case activity record

    Example:

    On November 14, 2007, the IRS mail room receives, date-stamps, and processes the envelope addressed to the Settlement Officer (SO) containing the Form 656. The Settlement Officer receives the envelope containing the Form 656 on December 7, 2007. The SO date-stamps the Form 656 "November 14, 2007" in the upper right-hand corner.

    Note:

    The postmark date is irrelevant in determining when an offer is submitted.

  4. Promptly send a Form 656 for a processability determination regardless of processability or perfection issues to the appropriate Centralized OIC site. This must be done within 24 hours of receipt to allow COIC to meet the 24 hour deposit criteria.

  5. Impact of amended OIC on TIPRA statute : An amended Form 656 is not a new offer. It simply amends the tax periods and/or payment terms of the original offer. Because an amended offer is not a new offer, it does not impact the 24 month period during which the Service must make a determination on the offer. The period during which the offer must be accepted, rejected, or returned by the Service or withdrawn by the taxpayer remains 24 months from the date the original offer was received.

  6. Appeals employees can process all pre-acceptance TIPRA payments using a Form 3244 except for the initial payment due with the Form 656. See IRM 8.23.1.4.1.1 for OIC payment processing procedures.

  7. The Appeals Team Manager is responsible for preparing a memorandum if 24 months have expired since the IRS received date of an OIC with no determination that may qualify the OIC for mandatory acceptance.

  8. The ATM will forward the memo to the Area Director (AD) for review. After review, the AD will forward the memorandum to their Director of Field Operations. Copies of the memorandum and acceptance letter must be sent to the Appeals Tax Policy and Procedure OIC Program Analyst after an OIC acceptance letter is issued.

    Note:

    See SBSE-05-0809-019 Interim Guidance, issued August 4, 2009, for additional information on the memorandum and the acceptance letter.

    Note:

    TPP is available to assist in determining whether a case qualifies for mandatory acceptance.

8.22.2.4.7.2  (03-11-2009)
Non-CDP Periods in the CDP/EH Offer

  1. Many offers received as an alternative to collection in a CDP/EH case include tax periods that are not the subject of the underlying CDP/EH case. These may include:

    • Tax debts owed by the CDP/EH taxpayer but not listed on the CDP notice,

    • Joint tax debts owed by a spouse who did not request a CDP/EH hearing, or

    • Tax debts owed by a related entity such as a closely held corporation, partnership or LLC.

  2. Appeals can use its general authority to render a decision on an OIC listing non-CDP/EH tax debts even though there has been no appealable action taken by a Compliance function with regard to the non-CDP/EH periods.

  3. IRC 6331(k) generally prohibits the IRS from levying to collect the tax debts which are the subject of the offer:

    1. the TC 520 and STAUP 72 protect timely modules

    2. TC 480 and STAUP 71 will protect all non-CDP tax periods, including EH periods

  4. Ensure that TC 480 and STAUP 71 are input on all non-CDP periods, including EH periods.

8.22.2.4.7.3  (01-18-2008)
Requesting a Processability Determination

  1. For consistency purposes and OIC application fee processing, the following COIC sites are responsible for processability determinations:

    1. Brookhaven, NY

    2. Memphis, TN

  2. COIC will make processability determinations on all Doubt as to Collectibility (DATC) offers whether or not COIC retains the OIC to investigate and make a preliminary recommendation.

  3. An offer will be deemed not processable only if one or more of the following criteria are present:

    1. Taxpayer in Bankruptcy: An offer will not be considered during an open bankruptcy proceeding.

    2. Taxpayer did not submit the application fee with the offer: An application fee of $150 or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee (For Individual Taxpayer Only), must accompany the Form 656. The Form 656-A applies to individual taxpayers only.

      Note:

      No application fee or Form 656-A is required if the sole basis of the offer is Doubt as to Liability.

    3. Taxpayer did not submit the required initial payment with the offer: See the above for initial payment requirements. No initial payment or Form 656-A is required if the sole basis of the offer is Doubt as to Liability.

      Note:

      This criteria is reflected on the not processable Letter 3821 available on APGOLF.

      Note:

      Effective February 2, 2009, if a taxpayer failed to include Form 656-A but based on the financial information available would qualify for a waiver of the application fee and TIPRA payments process the offer as if the Form 656-A were included in the offer package. See IRM 5.8.2.8(9).

  4. The IRS will no longer automatically return an offer as not processable if:

    1. IMF and BMF taxpayers are not in filing compliance

    2. BMF taxpayers seeking to compromise employment tax debts are not compliant with FTDs prior to submitting the offer

  5. The IRS will contact the taxpayer or the representative and explain to them if additional information is needed or the taxpayer needs to come into compliance for them to consider the OIC. The IRS will allow 30 calendar days from the date of contact to comply. If the taxpayer does not come into compliance or provide the requested items or provide an acceptable explanation for failing to comply with the request, the OIC will be returned.

  6. Taxpayers are encouraged (but not required) to send separate checks for the application fee and 20% initial payment or initial periodic installment payment. The reason for this is the 20% initial payment and initial periodic installment payment are not refunded if IRS determines that the offer is not processable, but the application fee may be refunded. The Form 656 instruction booklet portrays the various OIC application fee and initial TIPRA payment scenarios.

    Note:

    IRM 5.8.2 contains OIC processability requirements and procedures.

8.22.2.4.7.3.1  (01-18-2008)
Processability determination procedures for COIC-criteria OICs

  1. For offers meeting COIC criteria:

    1. Do not prepare a processability package. COIC will generate the appropriate processability letter.

      Exception:

      An APGOLF processability package is required where the OIC meets COIC criteria but Appeals will conduct the investigation.

    2. Prepare Transmittal Form 13933.

  2. Use Transmittal Form 13933 to promptly send the Form 656 to the appropriate COIC site. Form 13933 provides a two-fold purpose:

    1. Will ensure prompt identification of the case in COIC.

    2. COIC will use Form 13933 to acknowledge receipt of the offer and communicate whether the offer is processable.

  3. COIC will fax a copy of Transmittal Form 13933 to the originator when COIC determines the offer they are retaining to investigate is processable (generally within 3-14 days).

  4. COIC will:

    1. input TC 480 jurisdiction 1 for retained OICs.

    2. STAUP EH and non-CDP periods to status 71 (if not in status 53 or 60).

8.22.2.4.7.3.2  (01-18-2008)
Processability determination procedures for Non-COIC criteria OICs

  1. Prepare Form 3210, Document Transmittal, Letter 3820, Offer is Processable , and Letter 3821, Offer is Not Processable for offers that do not meet COIC criteria or for offers Appeals retains to investigate.

    Note:

    A package Form 3210, which includes Letters 3820 and 3821, is available on APGOLF.

    Note:

    Clearly inform COIC on the transmittal to return the OIC, where the OIC meets COIC criteria but the OIC is to be returned to Appeals for investigation.

    Note:

    ATM approval is required for Appeals to retain and investigate CDP OICs meeting COIC criteria; the Appeals employee will document in the case activity record the reason the offer is being retained and investigated in Appeals.

  2. The Letters 3820 and 3821 must contain all Appeals contact information. Do not sign or date either Letter. The COIC unit will complete these items after its processability review.

  3. Offers either not meeting COIC criteria or offers meeting COIC criteria that Appeals wants to investigate will be returned to Appeals after the processability determination.

  4. Send the following items to the appropriate COIC site:

    • Form 3210 (two copies) which includes the sender's name, phone and fax numbers and is clearly labeled "CDP Offer in Compromise"

    • Form 656

    • Either the required OIC application fee and TIPRA payment or a Form 656-A

    • Any written documentation from the taxpayer as to designation of the TIPRA payment

    • Form 433-A and/or Form 433-B

    • Letters 3820 and 3821 (including POA copies, if applicable)

    • A return envelope to assist COIC in returning the offer to the correct person

    Note:

    Review the Form 433-A/B to see if the taxpayer lists a prior bankruptcy filing which was likely closed out. Advise the taxpayer to include the discharge or dismissal date on the Form 433-A/B. COIC will now check the Integrated Data Retrieval System (IDRS), Automated Insolvency System (AIS) and the Public Access to Court Electronic Records (PACER) system before returning the offer as not processable.

  5. COIC processability procedures for CDP/EH offers returned to Appeals for investigation are:

    1. Sign the Form 656

    2. Mail Letter 3820 to the taxpayer (and POA, if applicable)

    3. Input a TC 480 jurisdiction 3 to all OIC periods

    4. Input a STAUP 71 to the OIC periods that are not part of the underlying CDP case (and not already in ST 53 or 60)

      Reminder:

      The OIC is under Appeals' jurisdiction, so the hearing officer is responsible to make sure the TC 480 is properly input to all periods, both CDP and non-CDP, and a STAUP 71 is input to the appropriate non-CDP periods.

    5. Fax a copy of the Letter 3820 to the hearing officer advising that the offer was processed

    6. Mail the offer package, including the signed Form 656 and Letter 3820, to the hearing officer

  6. COIC will also advise Appeals if an additional Form 656, application fee, or initial payment is needed.

  7. OIC's not added to AOIC:

    1. an offer that does not meet COIC criteria

    2. offers Appeals retains to investigate

  8. CDP/EH OICs not added to AOIC will be entered on a separate Appeals database that does not interface with AOIC. This stand-alone platform was created to enable Collection to reconcile the OIC application fee collected by Appeals in the CDP/EH offer.

8.22.2.4.7.3.2.1  (01-18-2008)
Not processable OICs

  1. If COIC determines the offer is not processable, COIC will:

    1. For COIC-criteria OICs: Generate and mail the non-processable letter,

    2. For OICs COIC will not investigate: Mail the non-processable Letter 3821 and return the original Form 656 back to the taxpayer as an attachment to the Letter 3821,

    3. Fax a copy of the Letter 3821 and Form 2515, Record of Offer in Compromise, to the hearing officer. (The Form 2515 reflects application of the application fee and TIPRA payment and the unprocessable issues),

    4. Refund the application fee (if paid) and/or a deposit. TIPRA payment are not refunded.

    5. Return the case to Appeals with no further action,

    6. Include a copy of the non-processable letter in the case file.

    Note:

    The taxpayer may dispute the determination that the CDP/EH offer was not processable, so Appeals must concur with COIC's not processable determination. Be sure to fully document the case activity record as to the reason(s) why the offer was not processable in case the taxpayer petitions Tax Court over Appeals' CDP determination and lists the not processable determination as an issue.

8.22.2.4.7.3.2.2  (03-11-2009)
Dishonored payments

  1. If Collection is notified that either the OIC application fee or the up-front TIPRA payment are dishonored (returned due to non-sufficient funds), COIC will query ACDS to determine the Appeals employee assigned the case and notify the hearing officer to advise of the dishonored payment(s).

  2. COIC will fax a copy to Appeals. The hearing officer must promptly contact the taxpayer by telephone or letter to advise of the dishonored payment and that the offer will be returned if a replacement payment in certified form (money order, cashier's check, etc.) is not received within 14 days of the date of the letter or telephone contact. If the contact is made by telephone, document the case activity record. If the taxpayer has to overnight the payment to meet the deadline, follow the procedures for such in IRM 5.8.3.12.

    1. If the taxpayer properly replaces the dishonored payment, proceed with considering the offer.

    2. If the taxpayer does not properly replace the dishonored payment, the offer is considered "returned." Submit a Form 4844, Request for Terminal Action, to the Appeals Processing Section (APS) to have a TC 482 input to the OIC periods. Document the case activity record and return the taxpayer's offer with a cover letter containing the following language:

      We are returning your Form 656, Offer in Compromise, because the check you sent for the offer in compromise application fee and/or offer in compromise initial payment was not honored by your bank. We gave you an opportunity to replace the dishonored check with certified payment, but did not receive the required replacement payment. We cannot consider your offer.

8.22.2.4.7.3.2.3  (03-11-2009)
Mandatory Withdrawal Procedures

  1. If a taxpayer fails to make a proposed installment payment (other than the first installment), IRC 7122(c)(1)(B)(ii) allows the IRS to consider the offer withdrawn. IRM 5.8.4.23 refers to this as a "mandatory withdrawal."

    Note:

    Mandatory withdrawal procedures do not apply to a non-CDP offer because such an offer has already been rejected by Collection and the taxpayer is not required to continue making proposed periodic installment payments after the offer is rejected.

  2. It is the hearing officers responsibility to monitor the taxpayer's compliance with proposed periodic installment payment requirements where Appeals investigates the offer. Monitor compliance on IDRS if the taxpayer is not sending such payments to Appeals.

  3. If COIC is doing a preliminary investigation of the CDP/EH offer, Appeals is not responsible to monitor the proposed periodic installment payment requirements during the time the case is being worked by COIC.

  4. The taxpayer will be allowed one opportunity to make up the missed payment. Notify the taxpayer by either telephone or correspondence to make the payment. If contact is made by phone, allow 15 calendar days to do so. If contact is by letter, allow 15 calendar days from the date of the letter. Clearly document the case activity record if the contact was made by telephone or by letter.

    1. If the taxpayer pays the missing payment within 15 days after the date of the telephone contact or within 30 days of the date of the letter continue with the offer investigation.

    2. If the taxpayer fails to pay the missing payment within 15 days after the date of the telephone contact or within 30 days of the date of the letter, the offer may be considered withdrawn.

      Note:

      Afford the taxpayer one opportunity to make up only one missed installment payment, unless special circumstances exist. An amended offer does not create an additional opportunity.

  5. If a decision has already been made to reject the offer, then no contact is needed. Follow the procedures for addressing other issues raised as part of the CDP/EH case and/or closing out the underlying CDP/EH case.

8.22.2.4.7.4  (12-14-2010)
Procedures for establishing CDP/EH DATL or DATC OIC WUNO

  1. OICs received with or initiated during the course of a CDP/EH hearing case will be carded-in on ACDS as separate work units.

  2. Request an OIC WUNO as soon as possible after receipt of the processability determination from COIC to control the TIPRA statute.

  3. Do not request an OIC WUNO for non-processable OICs.

    1. Non-processable OICs are not recognized as an OIC.

    2. COIC does not input TC 480s.

  4. Document the non-processable determination both in the case activity record and the Notice of Determination/Decision Letter.

  5. If an OIC is later made processable, give the Form 656 a new date-stamp and start the processability process anew.

  6. A CDP case could result in more than one OIC. For example, related entities, such as a joint return and a sole proprietorship, will each be carded-in as a separate OIC WUNO.

  7. For creation of a CDP OIC WUNO, fax or hand-carry the following information to your local servicing Appeals Processing Services (APS):

    1. A copy of the related CDP Case Summary Card noted at the top in red "Please create OIC WUNO" with feature code = DP and Notes - XREF (WUNO of the related CDP case),

    2. A copy of page one of Form(s) 656 identifying all periods included on the OIC,

    3. IMFOLI (IMF) or BMFOLI (BMF). Add the TOTAL MOD BALANCE for all periods,

    4. REQAPPL & RECDATE = Date stamped in upper right-hand corner of Form 656; ASGNDATE = current date,

      Note:

      If there are multiple dates stamped on the Form 656, instruct APS to use the earliest date stamped on the Form 656 when entering the TIPRA statute date.

    5. TIPRA statute date = 24 months from the "Received" date stamped in upper right-hand corner of Form 656.

  8. Feature Codes:

    1. Input Feature Code "DP" on both the OIC and CDP WUNO to identify either a DATL or DATC OIC submitted in a CDP case.

    2. On COIC-investigated OICs ONLY input Feature Code "CO" on both the CDP and OIC WUNO .

    3. On DATL-OICs ONLY also input Feature Code "LI" on the OIC WUNO.

  9. The CDP and OIC WUNOs will be cross-referenced in the "Notes" field on the case cards.

  10. Do NOT add periods to the CDP case just because they may be included on the OIC.

  11. Entries in SOURCE, DO, and PBC for the OIC(s) will be the same as those entries in the related CDP case(s).

8.22.2.4.7.4.1  (01-18-2008)
Suspend COIC-investigated CDP and OIC WUNOs

  1. Suspend both WUNOs:

    1. Select carats history Action Code SU, sub action=PI and suspense action=E/OIC.

    Note:

    When COIC returns the case, take the case out of suspended status with carats history Action Code SU, sub action=TO

  2. For the OIC WUNO only, E-mail or hand-carry to your local servicing APS, the APGOLF "ACDS Update" form requesting input of ACDS action code DDJRET. DDJRET puts the case into E/DD status.

    Note:

    When COIC returns the case E-mail/hand-carry a request to APS to remove ACDS action code DDJRET.

8.22.2.4.7.4.2  (01-18-2008)
Taxpayer Notification of COIC Investigation of CDP/EH OIC

  1. Notify the taxpayer by letter, using the following paragraph or similar language that the OIC is being forwarded to COIC for investigation and the taxpayer may receive further communication from COIC. Appeals, however, will retain jurisdiction of the CDP case and will make the final determination regarding the OIC:

    "You have requested consideration of an Offer In Compromise to resolve your tax liabilities. While Appeals will retain jurisdiction of your case, we have requested assistance from the IRS Centralized Offer In Compromise (COIC) unit to research and verify the information you have provided. It may be necessary for COIC Service personnel to contact you for information necessary to expedite this review. The Service employee may also need to contact third parties to verify some of this information. The information we have requested is needed to help us reach a resolution of your appeal. We will share with you COIC’s information and ask you for comment before using COIC’s information in our final determination of your Offer."

8.22.2.4.7.5  (01-18-2008)
COIC-Investigated OICs

  1. COIC will take the following additional actions on all processable OICs that it retains to investigate:

    1. Add CDP OIC cases to their Automated OIC system (AOIC),

    2. Work to completion all "acceptable" OICs,

    3. Provide a preliminary recommendation to Appeals on denied (i.e., rejected, returned, mandatory withdrawal) OICs. Appeals will make the final determination on denied OICs.

  2. If during the investigation COIC discovers complex issues that would normally be a field issue, COIC will:

    1. Document the case file regarding the complex issue,

    2. Return the entire case file with all documentation to Appeals,

    3. Delete the case from AOIC,

    4. Input STAUP or TC 480 jurisdiction code 3 before sending the case to Appeals. This action should stop all collection activity before Appeals has an opportunity to work the case.

  3. COIC will inform taxpayers that they must be compliant before COIC evaluates their OIC (if they have compliance issues such as unfiled tax returns or missing Federal Tax Deposits).

  4. With no less than one year left on the 24 month time frame in which the Service must make a determination on an OIC, COIC will:

    1. Return the Form 656, investigation and administrative files, and all history to Appeals for a final determination using a transmittal entitled "EXPEDITE PROCESSING REQUIRED - CDP/EH OIC COVER SHEET" .

    2. Mail the taxpayer a preliminary recommendation letter, which will include copies of the Asset Equity Table (AET) and Income and Expense Equity Table (IET), if COIC prepared them. The letter will also inform the taxpayer that the OIC is being returned to Appeals for a final determination.

  5. If COIC is unable to return a preliminary recommendation to Appeals that allows Appeals 12 months to make a final determination, COIC will contact the assigned Appeals employee and provide a status report on the completion of their investigation. COIC will not discuss with Appeals the merits of the OIC, which would be a prohibited ex parte communication. If COIC’s status report gives the Appeals employee concern that Appeals may not be able to make a final determination within the required 24 months, Appeals may ask COIC to promptly return the case to Appeals, deleting the case from AOIC and inputting TC 480 and STAUPs as necessary to prevent collection activity.

  6. If the taxpayer sends Appeals a CDP/EH withdrawal, withdrawing the CDP/EH request during COIC’s investigation of the OIC, Appeals will accept and process the CDP withdrawal following established procedures and send an encrypted E-mail to COIC, informing COIC of the CDP/EH withdrawal.

    Note:

    The CDP withdrawal must be voluntary. Do NOT solicit a withdrawal. See IRM 8.22.2.2.1 regarding CDP Withdrawals.

    Note:

    Upon notification from Appeals that the taxpayer withdrew their CDP/EH hearing request, COIC will continue their investigation; COIC will not return any paperwork to Appeals.

  7. Close the OIC WUNO using closing code 20 and the premature referral reason "CDP withdrawn while related OIC pending in COIC" .

8.22.2.4.7.5.1  (01-18-2008)
COIC Recommends Acceptance of OIC

  1. If COIC "accepts" the OIC, Appeals will adopt the recommendation.

  2. The hearing officer will close the CDP/EH case:

    1. Ask the taxpayer to sign Waiver Form 12257, Summary Notice of Determination.

    2. If the taxpayer does not sign the waiver, issue the Notice of Determination or Decision Letter, incorporating COIC’s recommendation to accept the offer.

      Note:

      The Appeals employee will not ask the taxpayer to withdraw the CDP or EH. It is important, where the hearing request was timely, that Appeals preserves the taxpayer’s retained jurisdiction rights.

  3. Close the OIC WUNO:

    1. Generate the OIC 5402 and select closing code 15,

    2. Select "CDP OIC acceptable" as the Resolution Reason,

    3. In "Remarks" section, type "COIC accepted OIC and issued the acceptance letter. No further action required by APS" .

  4. COIC will:

    1. Issue the acceptance letter,

    2. Forward original documents (Form 7249, et al) to the Monitoring OIC (MOIC) unit,

    3. Forward the required documents to the Public Inspection File,

    4. Return to Appeals, copies of the acceptance letter, Form 7249, and amended Form 656, if applicable,

    5. STAUP CDP periods to status 71 (prevents periods from reverting to collection status when TC 520 cc 76/77 is reversed),

    6. Close the case on AOIC as accepted.

      Note:

      COIC’s acceptance letter qualifies as a final determination under IRC 7122(f).

  5. APS will:

    1. Issue the CDP Notice of Determination, EH Decision Letter or Form 12257 Waiver following established procedures,

    2. Close the OIC WUNO on ACDS. Since COIC issues the acceptance letter, APS will issue only the CDP/EH letter.

8.22.2.4.7.5.2  (12-14-2010)
COIC Recommends Rejection, Return, Mandatory Withdrawal

  1. If COIC makes any recommendation other than to accept the OIC (i.e., rejection, return, mandatory withdrawal), Appeals will make the final determination, which can include accepting or amending the offer.

  2. The Appeals employee will need to share the results of COIC’s investigation with the taxpayer or their representative where COIC did not prepare an AET/IET or otherwise did not share their recommendation. Appeals sharing COIC’s recommendation and requesting comment before using COIC’s information in the final determination will prevent a prohibited ex parte communication.

    Caution:

    COIC’s preliminary recommendation is NOT a final determination under IRC 7122(f). A final offer determination must be made within 24 months from the date the offer was date-stamped received or the offer will be deemed accepted.

  3. Offer cases for which COIC conducted the investigation and issued a preliminary recommendation will be treated as priority cases in Appeals. The Settlement Officer will work such cases with the goal of making a CDP/EH determination, addressing the merits of the offer and any other relevant issues raised, within 120 days from the date the COIC offer recommendation is received in Appeals. The hearing officer need not contact COIC when the offer cannot be closed within that time.

  4. When a taxpayer has submitted a periodic payment offer and fails to submit installment payments subsequent to the first installment payment, and Collection has given the taxpayer an opportunity to resolve the problem, the offer meets mandatory withdrawal criteria. COIC will return the OIC to Appeals. Appeals will make one additional attempt to bring the taxpayer into compliance with the missing payments before treating the offer as a mandatory withdrawal.

  5. If COIC erroneously issues a final rejection letter, Appeals will inform the taxpayer that the OIC is under Appeals’ jurisdiction and Appeals will address the OIC in Appeals determination or decision letter. COIC will not "rescind" their rejection letter.

8.22.2.4.7.5.2.1  (03-11-2009)
Appeals Independent Administrative Review requirements under IRC 7122(e)

  1. A taxpayer is not entitled to an administrative appeal if the taxpayer submitted the offer directly to the Office of Appeals and Appeals, not Collection, rejects the offer.

  2. The administrative review procedures of IRC 7122(e) are intended to apply only when a function of the Service other than Appeals rejects the offer.

  3. The review of the proposed rejection by the Appeals Team Manager constitutes the independent administrative review required under IRC §7122(e)(1).

  4. Since the review required by IRC 7122(e)(1) is performed by Appeals, an independent administrative review does not have to done by COIC before COIC advises Appeals of its recommendation.

8.22.2.4.7.6  (01-18-2008)
COIC Receives OIC Directly from Taxpayer on Open CDP/EH

  1. If COIC receives an OIC directly from the taxpayer, and the COIC site CDP coordinator determines there is an open CDP/EH case, the coordinator will send the assigned Appeals employee an E-mail and inform them of the date they received the OIC. The assigned Appeals employee will:

    1. Update the case activity record regarding COIC’s receipt of the OIC,

    2. Add "DP" and "CO" feature code to the CDP/EH WUNO,

    3. Request creation of an OIC WUNO with DP and CO feature code; REQAPPL & RECDATE = received date (provided by COIC); ASGNDATE = current date,

    4. Suspend both WUNOs by selecting carats history Action Code SU, sub action=PI, and suspense action=E/OIC,

    5. E-mail or hand-carry a request to APS on the APGOLF "ACDS Update" form requesting input of Action Code DDJRET on OIC WUNO ONLY. DDJRET will place OIC WUNO in E/DD status. Also, request that APS input on OIC WUNO new STAT code "TIPRA" with the OIC received date + 2 years,

    6. Suspend further actions on the CDP/EH case unless other issues beside the OIC collection alternative need to be addressed.

8.22.2.4.7.7  (01-18-2008)
COIC Receives CDP/EH Directly from Taxpayer while investigating OIC

  1. COIC may receive a CDP or EH request directly from a taxpayer whose OIC they are investigating because COIC determines there is a need to file a Notice of Federal Tax Lien. IRM 5.8.4.13 requires the Offer Examiner make a lien filing determination as part of the initial case review.

    Note:

    There is no prohibition against filing a Notice of Federal Tax Lien (NFTL) while an offer is pending.

  2. If COIC requests an NFTL filing while the offer is still under consideration and the taxpayer requests a CDP hearing, the offer then becomes an alternative to collection in the CDP case. Both the CDP and OIC cases are under the jurisdiction of Appeals.

  3. The COIC site CDP coordinator, following established procedures, will:

    1. Prepare Form 12153-B,

    2. Have the CDP case established on CDPTS,

    3. Forward the CDP case to Appeals Processing Services (APS) with a copy of the Form 656.

  4. APS will:

    1. Card-in the CDP/EH case with "DP" feature code,

    2. Update CDPTS to Stage 4,

    3. Input TC 520 cc 76/77, as needed,

    4. Card-in OIC WUNO; add "DP and CO" feature code, REQAPPL & RECDATE = received date stamped on Form 656, and ASGNDATE = current date,

    5. Add "TIPRA" , OIC periods, and TIPRA statute date (OIC received date + two years) to "Summary Return Information" return fields for every OIC period.

  5. The Appeals employee assigned the CDP/EH case where COIC has already been investigating the OIC will:

    1. Send (or verify the sending of) Appeals Uniform Acknowledgement Letter,

    2. Update the case activity record regarding COIC’s receipt and investigation of the OIC,

    3. Verify the input of the TC 480 and verify and document the CSED suspension (TC 520), as appropriate,

    4. Document in the case activity record "no prior Involvement" and "legal and administrative" review,

    5. Suspend further actions on the CDP/EH case unless other issues beside the OIC collection alternative need to be addressed. Suspend both WUNOs by selecting carats history Action Code SU, sub action=PI, and suspense action=E/OIC.

      Note:

      When COIC returns the case, take the case out of suspended status with carats history Action Code SU, sub action=TO.

    6. Request that APS input action code DDJRET to place OIC WUNO in E/DD status.

      Note:

      Request that APS remove action code DDJRET when COIC completes investigation.

    7. Verify, and if needed, add feature code "CO" to both CDP and OIC WUNOs.

  6. Where COIC first received the CDP/EH hearing request while investigating the OIC and forwarded the CDP/EH request to Appeals, the hearing officer will not need to issue a Substantive Contact Letter (SCL) until they receive COIC’s preliminary OIC recommendation. An SCL must be issued within 30 days of receiving COIC’s preliminary recommendation. IRM 8.22.2.2.6.

8.22.2.4.7.8  (03-11-2009)
OIC Financial Statement Courtesy Investigation (ARI/OI) Procedures

  1. CDP and EH cases generally come to Appeals with little or no development of the factual issues.

    1. Appeals will verify the financial statement and gather other documentation from the taxpayer using electronic research sources.

    2. If complex issues surface and additional documentation or verification is necessary to determine whether the offer is acceptable, send an ARI/OI to a Field Revenue Officer group. IRM 8.22.2.2.8..

  2. The following are examples of offers that may require an asset investigation.

    Example:

    The taxpayer’s financial statement shows she has antiques worth $10,000. Her offer is $15,000 and she owes $55,000. She incurred the liability when she was working for an art gallery but is now employed as a wage earner. Her home is worth $200,000 and she drives a vehicle worth $85,000. You completed internal research but there was no information available on the antiques. The taxpayer states she does not have any papers authenticating the pieces and does not have any documentation of value. She provided an itemized list with the values based on her knowledge. She does not plan to sell the antiques to fund the offer. The offer funds will be a loan from a friend. The offer might be acceptable if the antiques are only worth $10,000 as stated on the financial statement. You request that the field make an on-site visit to visually inspect the antiques and or any other assets and obtain the values.

    Example:

    The taxpayer submitted an offer on a Trust Fund Recovery Penalty (TFRP). The liability arose from a construction company that he formerly owned. The taxpayer submits a financial statement indicating that he is no longer in business and is working for wages. During the conference, he states that he works for his wife and has sufficient withholding. The taxpayer indicates that he has no administrative duties with his wife’s business. He further states that he does not have the financial savvy to run a business. In verifying the financial statement, the Appeals Officer or Settlement Officer discovers that for the past three years the wife had no income. Internal research revealed that the new corporation began almost immediately after the other one closed and the type of business is construction. Based on these facts there may be potential for an alter ego or nominee. Further investigation is required by Collection before a resolution can be determined.

    Note:

    Do not send an ARI/OI to an Offer in Compromise specialist group since OIC specialists, while field personnel, are sparsely placed across the country and not in a position to make a field visit to determine the value of assets .

    Note:

    Per Q-A 6 in Section 3 of Rev. Proc. 2000-43, OIC cases are subject to ex parte provisions. The third party contact waiver provision found in paragraph (n) in Section V of Form 656 pertains to non-IRS contacts only.

  3. In general, only issue the ARI/OI:

    1. if there is a reasonable probability that the offer will be accepted if the results of the ARI/OI favor the taxpayer's position

    2. if the acceptability of the offer simply cannot be determined without the information that will be asked for in the AR/OI

      Note:

      There is no point in issuing an ARI if its results will have little or no impact on the likely decision on the offer

  4. Appeals is responsible for securing the verification required in IRM 5.8. If you give the taxpayer or their representative a reasonable opportunity to provide information necessary to adequately determine reasonable collection potential (RCP) and they fail to, then use the criteria in IRM 5.8.7.2.2 to "return" a processed offer as a basis to not accept the CDP/EH offer.

  5. Appeals retains full jurisdiction of the open OIC while Collection is working the ARI/OI. The offer will be deemed accepted by operation of law if it's not rejected, returned or withdrawn within 24 months after the date the offer was submitted. This means that Appeals is responsible to monitor the ARI/OI's completion as it relates to the 24 month period. Follow up with Collection after 30 days from the ARI/OI's issuance to make sure appropriate priority is given.

    Note:

    Follow-up with Collection is recommended every 30 days.

  6. Because of ex parte issues, limit the extent of the discussion to only the general time frame of the ARI/OI's completion. See Rev. Proc. 2000-43. Carefully document the case activity record:

    1. why you contacted the Revenue Officer

    2. what question(s) was asked

    3. the answer(s) received.

8.22.2.4.7.9  (12-01-2006)
Completed Financial Statement Courtesy Investigation

  1. Once a financial statement or asset investigation is complete, Collection will return their results to the hearing officer/requestor.

  2. Upon receiving the investigation results from Collection, the hearing officer will send a copy of the results to the taxpayer with a letter which simply states that Collection has concluded their investigation of the taxpayer's financial information. The letter will ask the taxpayer to review the investigation results.

  3. Provide the taxpayer at least 10 days to review the results before scheduling a follow-up conference and using the information in the determination.

  4. All original ARI/OI documents must be associated with the CDP case file.

  5. If the OIC is rejected or withdrawn, keep all the investigative information with the CDP file as the OIC is probably just one of several payment or collection alternatives.

    1. Document the request for input of the TC 481 (for rejections) or TC 482 (for withdrawals) on the OIC customized Form 5402.

      Note:

      The TC 482 Action Date will be the date the withdrawal is received if hand-delivered to Appeals or mailed via certified mail. Otherwise, the TC 482 Action Date will be the date of the letter from Appeals acknowledging receipt of the withdrawal. This is important because it is the date that the CSED begins running again on non-CDP or EH periods.

  6. The following procedures apply for accepted offers:

    1. Prepare a separate ACM, as necessary, for details on offer that will not be included in Letter 3193 or Letter 3210 attachment,

    2. Sanitized Transcript Delivery System (TDS) transcripts (for the Public Inspection File),

    3. Prepare Letter 673, Offer Acceptance Letter,

    4. Prepare Form 7249 Offer Acceptance Report.

8.22.2.4.7.10  (03-11-2009)
Corporate Trust Fund Offers

  1. Effective February 4, 2008, the following guidance on offers apply to any type of entity with unpaid trust fund tax where assertion of the Trust Fund Recovery Penalty (TFRP) is applicable:

    1. Only the amount representing the reasonable collection potential (RCP) of the corporation is needed to compromise a corporate trust fund liability.

      Note:

      The RCP of the person(s) responsible for the TFRP is no longer needed as part of the corporate trust fund offer

    2. The trust fund portion of the tax liabilities must be paid, or the TFRP assessed, or forwarded (by Collection) for assessment before the corporate offer may be evaluated.

  2. When evaluating a corporate offer, if the liabilities are not currently in status 26 and/or there is no indication Collection explained the corporate OIC requirements to the taxpayer that an offer will not be investigated unless the TFRP has been assessed or the trust funds paid, the hearing officer will:

    1. advise the taxpayer that the trust fund balance must be paid or TFRP assessed before a corporate offer involving trust fund tax may be evaluated. Clearly document the discussion in the case activity record.

    2. retain the offer

    3. issue a courtesy investigation (OI) to the appropriate field group to conduct the TFRP investigation

    Note:

    Appeals will not solicit Form 2751(s) from the responsible officer(s). A complete investigation is necessary to determine ALL responsible officers. Also, Letter 1153 must be issued with the Form 2751 informing the taxpayer of their appeal rights.

  3. Collection will complete the TFRP investigation within 90 days and return one of the following results to Appeals:

    1. Proposal Letter 1153 sent to all culpable individuals. No protests filed and assessments in process. ("Completion" includes sending Letter 1153).

    2. Trust Fund full paid. No TFRP investigation required.

    3. One of the proposed individuals filed a formal protest of proposed TFRP. Offer was submitted "solely to delay"

  4. Appeals will use the results of Collections TFRP investigation in their decision to proceed with the corporate OIC:

    1. Reject the OIC if a formal protest was received as "solely to delay"

    2. Consider OIC where the trust fund was paid or the assessment is in process

  5. If Appeals determines that the responsible individual(s) had been previously advised that an offer will not be investigated unless the TFRP has been assessed or forwarded for assessment or the trust funds paid, the hearing officer will:

    1. send OIC to COIC for a processability determination

    2. determine that OIC submitted "solely to delay" and not accept (i.e., reject) the offer

  6. The hearing officer will document the "solely to delay" rejection determination in both their case activity record and the Notice of Determination or Decision Letter.

  7. Use the following table to determine necessary actions when addressing various issues and scenarios concerning a corporate trust fund offer received as part of a CDP/EH case:

    If... Then...
    The corporate taxpayer wants to discuss submitting an OIC and has not previously discussed the same with Collection.

    1. Fully explain the OIC process making sure to advise the taxpayer that:

    • acceptance of the corporate offer does not preclude IRS from pursuing collection of the TFRP

    • the corporation must either pay the trust fund portion in full or the TFRP must be assessed, and

    • an offer submitted without the trust fund portion being paid or TFRP assessed or forwarded for assessment cannot be accepted

    Note:

    Try to ascertain if the taxpayer has the ability to fully pay the trust fund amount. If the taxpayer indicates they want to pay the trust fund portion, provide the trust fund computation. If the taxpayer can’t pay the trust fund amount, let them know that a TFRP investigation with assessment(s) will be necessary if an offer is submitted.

    The corporate taxpayer wants to pay the trust fund portion before submitting the offer

    1. Compute the trust fund balance.

    2. Give the taxpayer a reasonable amount of time (14-21 calendar days) to both pay the required trust fund portion and submit a complete OIC package.

    Note:

    The taxpayer may designate the OIC’s up-front TIPRA payment to pay the trust fund portion. The designation must be in writing.

    The corporate taxpayer pays the trust fund portion in full

    1. Send the complete offer package to the appropriate COIC site for processing.

    2. Generate Form 3210 and Letters 3820 and 3821 on APGOLF and forward the OIC package to COIC per standard procedure.

    3. Prepare a Form 4844, Request for Terminal Action, for input of ASEDR Definer Code 4 (see IRM 5.7.3.9.1) to reflect full payment of the trust fund tax.

      Note:

      ATM approval is needed on Form 4844 per IRM 5.7.3.9.1(2).

    4. Attach the approved Form 4844 to an encrypted E-mail and send it to one of the following E-mail addresses based on the relative location of your Appeals office: *SBSE CCS GCP EAST1 – includes the North Atlantic, South Atlantic, Central, and Midwest areas *SBSE CCS GCP WEST1 – includes the California and Western areas *SBSE CCS GCP WEST2 – includes the Gulf States areas

    5. The subject line of the E-mail should look like the following: B 4844 ASEDR; B = BMF; 4844 = Form number
    The corporate taxpayer does not/cannot pay the trust fund portion but submits an offer anyway and all responsible persons agree to assessment of the TFRP(s)

    1. Send the offer to the appropriate COIC site for processing.

    2. Generate Form 3210 and Letters 3820 and 3821 on APGOLF and forward the OIC package to COIC per standard procedure.

      Caution:

      Do not secure a Form 2751. Instead, follow the Appeals Referral or Courtesy Investigation (ARI/OI) procedures listed below for "Trust Fund Investigations "

    The corporate taxpayer submits an offer without first paying the trust fund portion or without all responsible persons agreeing to assessment of the TFRP despite being previously advised of the need to do so by either Collection or Appeals The offer must still be sent to the appropriate COIC site for processing:

    1. Generate Form 3210 and Letters 3820 and 3821 on APGOLF and forward the OIC package to COIC per standard procedure.

    2. If the offer is deemed processable, COIC will simply refer the processed offer back to Appeals per standard procedures.

    3. The offer is considered submitted "solely to delay" collection and Appeals may use Collection’s "return" criteria to deny the offer.

    4. You must still properly address any other issues raised as part of the CDP/EH case.

    5. Make sure the Determination/Decision Letter clearly states that the offer is rejected. This is necessary to properly close out the 24 month TIPRA statute.

    The corporate taxpayer submits an offer without first paying the trust fund portion or agreeing to assessment of the TFRP and the taxpayer was not advised of such requirement by either Collection or Appeals The offer must be sent to the appropriate COIC site for processing:

    1. Generate Form 3210 and Letters 3820 and 3821 on APGOLF and forward the complete OIC package to COIC per standard procedures.

    2. Do not attempt to secure a Form 2751. Instead, follow the ARI/OI procedures for "Trust Fund Investigations"

    Collection completes its investigation, issues Letter 1153 and one or more of the persons against whom the TFRP is proposed files an appeal

    1. The offer is considered submitted "solely to delay" collection and Appeals may use Collection’s "return" criteria to deny the offer.

    2. You must still properly address any other issues raised as part of the CDP/EH case.

    3. Make sure the Determination/Decision Letter clearly states that the offer is rejected. This is necessary to properly close out the 24-month TIPRA statute.

    Collection completes its investigation and either:

    • Secures the Form 2751 with required LEM 5.7 documentation

    • Issues Letter 1153 and none of the persons against whom the TFRP is proposed appeals

    		Proceed with evaluating the offer because the TFRP assessment(s) is considered pending.
    Collection completes its investigation and determines all potentially responsible persons meet the IRM 5.7.5 criteria for non-assertion based upon collectibility

    1. Proceed with evaluating the offer because the TFRP assessment(s) are not applicable.

    2. Document Collection’s non-assertion determination(s) in the case activity record.

  8. Appeals will not be involved in any aspect of:

    • determining who is ultimately responsible for the TFRP

    • determining whether the TFRP taxpayer meets IRM 5.7.5 criteria for non-assertion based upon collectibility, or

    • securing a signed Form 2751, Proposed Assessment of Trust Fund Recovery Penalty

  9. Why Appeals should not ask a willing taxpayer to sign a Form 2751:

    1. A taxpayer who signs the Form 2751 retains the right to challenge the assessment by paying a divisible portion of the tax and filing a Form 843 refund claim and this refund claim comes with appeal rights.

    2. The independence of Appeals (or at least the perception thereof) can be compromised if the signed Form 2751 was originally secured by Appeals, especially if the corporate trust fund CDP offer is rejected.

    3. Appeals is not generally able to sufficiently determine everyone who must sign a Form 2751 or secure the documentary evidence required under LEM 5.7.

    4. Appeals procedures in IRM 8.25.2.6 provide for securing a Form 2751, but only as part of a hazards of litigation settlement after Collection has completed the TFRP investigation.

  10. The hearing officer may also reject a corporate offer involving trust funds without payment of the trust fund balance or assessment of the TFRP as:

    1. public policy

    2. that acceptance is not in the government’s best interest

  11. In "public policy" or "not in the best interest" rejections, RCP is not the issue causing Appeals to deny the offer so Appeals should not request Collection to complete a TFRP investigation when Appeals knows in advance the offer cannot be accepted. Appeals Team Manager (ATM) concurrence is required before the hearing officer proceeds with closing the CDP offer without first asking Collection to complete the TFRP investigation.

    Note:

    Delegation Order 5-1 must also be followed after the ATM agrees the public policy or the "not in the best interest" rejection is the appropriate basis for the offer’s rejection and thus assessment of the TFRP is not needed.

  12. See IRM 5.8.7 for additional information.

8.22.2.4.7.10.1  (03-11-2009)
Trust Fund Investigation Courtesy Investigation Procedures

  1. Prepare a Form 2209, Courtesy Investigation, to refer a case to a Collection Field group to complete the necessary TFRP investigation and assessment(s).

  2. Follow the general ARI/OI procedures. IRM 8.22.2.2.8, except Collection should complete the ARI/OI within 90 days instead of 45. The additional time is needed because IRC 6672(b) requires IRS to give the taxpayer 60 days to respond to the Letter 1153.

  3. In the "Remarks" section of the Form 2209 state:

    "The taxpayer submitted an offer to compromise trust fund tax. Please complete a TFRP investigation in accordance with the procedures outlined in IRM 5.8.4.20.1. The earliest ASED expires ________________."

  4. Field Revenue Officers are responsible for all aspects of the TFRP, including ASEDs, on the CDP cases that originate from field Collection per IRM 5.1.9.3.7.

  5. If there are fewer than six (6) month left on the earliest ASED on an offer received on a corporate CDP case originating in ACS, the Revenue Officer must follow the guidance in IRM 5.7.3.7. Prominently highlight the earliest ASED expiration date on the Form 2209.

  6. Do not attach a copy of the Form 656 or provide details of the offer with the Form 2209. Collection is being asked to conduct a TFRP investigation and has no need for details about the underlying corporate offer.

  7. Follow up with Collection within 30 days after the expiration of 90 days.

    Note:

    Follow-up with Collection is recommended every 30 days.

  8. Because of ex parte concerns, be sure to limit the discussion to the investigation’s completion date. Document such contact in the case activity record.

  9. Once the TFRP investigation is complete, and the results are returned, proceed with evaluating the offer unless one or more of the principals appeals the proposed TFRP assessment. See above "If - Then" chart.

  10. Collection is fully responsible for all aspects of assessing the TFRP against the responsible person(s). Appeals will not question Collections TFRP investigation results which is considered administrative information.

  11. Appeals is not required to share the results of the TFRP investigation with the taxpayer under ex parte rules.

8.22.2.4.7.10.2  (03-11-2009)
Trust Fund Computation

  1. The taxpayer has the option of paying the trust fund portion of the unpaid tax to have the corporate offer evaluated.

  2. The corporate taxpayer also has the right to designate the OIC payments made prior to the offer being accepted, so there may be instances, such as receipt of a periodic payment offer, where Appeals needs to know the trust fund amount to apply designated payments properly.

  3. In most instances, Appeals will be able to compute the trust fund amount simply by following the instructions in IRM 5.7.4.3.

  4. In the cases where computing the trust fund amount is difficult or time-consuming because of multiple periods, numerous payments, TC 290/300 issues, etc., Collection has agreed to provide Appeals with the trust fund computations using the Automated Trust Fund Recovery (ATFR) program.

  5. Forward an encrypted E-mail containing the corporate taxpayer’s name, TIN, and the periods involved to the TPP analyst in charge of the OIC program.

  6. Generally, the trust fund computation will be E-mailed back to the requestor within 5-7 business days.

  7. To avoid ex parte concerns, provide the taxpayer with a copy of Collection’s trust fund computation.

8.22.2.4.7.11  (03-11-2009)
OIC based upon Public Policy or Equity Considerations

  1. Review Delegation Order 5-1, which is available at the Appeals OIC Home Page to determine the appropriate approving official.

    1. If the offer is being accepted or rejected based upon public policy or equity considerations, approval from the Director of Field Operations is required and copies of the CDP ACM and OIC Form 5402 must be E--mailed to the OIC program analyst for Appeals Tax Policy and Procedure. See IRM 8.23.4.

8.22.2.4.8  (12-01-2006)
Requests to Collect from Third Parties

  1. The Settlement Officer is only required to consider taxpayer assets, not third-party assets, when evaluating a collection alternative. However, it may be appropriate in certain situations, based on the credible evidence presented, to consider the extent third party assets are available to pay the liability, and whether withholding levy while third party assets are being liquidated may be a more efficient and less intrusive manner of collection.

    Example:

    Taxpayers H and W are jointly and severally liable for 2000 income taxes. Pursuant to a divorce decree and court order, taxpayer W has assumed liability for the taxes and has property designated to be used to pay the liability. Taxpayer H in his CDP levy proceeding, presents documentation that his former wife has a contract to sell the property for an amount greater than the amount owed by the taxpayer, and that the proceeds will be put into escrow to pay the tax liability.

  2. The hearing officer may grant the taxpayer a reasonable extension of time to pay based on the credible evidence presented that the assets are in the process of being liquidated and the amount is sufficient to full pay the liability; generally the extension should not exceed 120 days.

    Note:

    The 120 day time frame should not be confused with the short-term extension of time Collection no longer allows but rather a

    "reasonable" amount of time for the taxpayer to liquidate assets.

  3. The Notice of Determination should state that the third-party asset or assets are in the process of being liquidated to pay the liability in full, that the taxpayer has a specified period of time to ensure the liability is paid in full, and that if the liability is not paid in full by the end of the time period specified, collection action could resume against them.

    Example:

    Same facts as above example, except that instead of a contract to sell, the Taxpayer H provides a copy of a court order that gives taxpayer W 180 days to liquidate the earmarked property. The Settlement Officer may grant H an extension of time to pay exceeding 120 days, based on the court order to liquidate the earmarked property. The hearing officer should document these special instructions in the "Remarks" section of Form 5402 and clearly mark in red in the top margin of Form 5402 that APS needs to return a copy of the Form 5402 with these special instructions to Collection.

8.22.2.4.9  (12-14-2010)
Credit Bureau Reports

  1. A centralized request procedure for Appeals' campus and field employees has been established when the IRM requires a review of a credit report.

  2. To request a credit report the employee should:

    1. first review Appeals Credit Report User Guide

    2. prepare Appeals Credit Bureau Request Form

    The User Guide and Bureau Request Form are available from the Tax Policy & Procedures - Collection & Processing Programs web page under Resources - Credit Reports . Use the following link to access the page: http://appeals.web.irs.gov/tech_services/collection/default.htm

  3. In order to meet the legal requirements for obtaining a credit report, you must properly and accurately complete the Appeals Credit Bureau Request Form. Complete the highlighted portions of the request form in all instances.

  4. To request a credit report, the Settlement Officer must send an encrypted E-mail to his or her team manager that includes the following:

    1. Appeals Credit Bureau Request Form

    2. IDRS INOLE print (s)

    3. IDRS IMFOLI and/or BMFOLI

      Note:

      The INOLE and IMFOLI/BMFOLI may be sent as attachments to the E-mail or placed within the body of the E-mail (see the Credit Bureau Request form instructions)

      .

  5. The Appeals Team Manager will:

    1. Review the Appeals Credit Bureau Request Form

    2. Verify the request meets the requirements to be authorized for a credit bureau request

    3. Verify the request is completed properly and contains all necessary information

    4. Include this managerial statement in the body of the E-mail: "I approve this request for a credit bureau report. A Balance Due Account is under Appeals jurisdiction."

    5. Forward the E-mail to "*SBSE IDRS Security Appeals Requests" via encrypted E-mail.

  6. The credit bureau report should be returned electronically, via encrypted E-mail, to the requesting employee within two business days (48 hours) of the ATM sending the E-mail.

  7. Appeals Credit Bureau Request forms that are incomplete or incorrect cannot be processed and will be returned to the originator through his or her ATM.

    Reminder:

    The highlighted portions of the request form must be completed.

8.22.2.4.9.1  (12-14-2010)
Retention and Disposal of Credit Reports

  1. The following procedures apply to the disposal of all credit reports whether they were obtained by Appeals or Collection employees.

  2. If... Then...
    The Settlement Officer (SO) determines the Appeals approving official (Appeals Team Manager (ATM), Area Director or Director of Field Operations) and/or Counsel do not need to review the credit report(s) as part of the case disposition approval The SO will remove and destroy all credit reports
    The SO determines the Appeals approving official and/or Counsel may need to review the credit report(s) as part of the case disposition approval The SO will prominently 'flag' all credit reports and submit the case file for the necessary review and approvals
    The case does not require the review or approval of anyone beyond the ATM The ATM will remove and destroy all credit reports immediately prior to submitting the case to APS for closing actions
    The case requires the review or approval of the Area Director, the Director of Field Operations and/or Counsel and the file is returned to the ATM prior to submitting the case to APS for closing Leave the credit reports in the case file pending completion of all reviews. The ATM will remove and destroy all credit reports immediately prior to submitting the case to APS for closing actions

  3. If the case is a timely CDP case that can be appealed to Tax Court the Case Activity Record must contain a summary of the findings of the employee's review of the Credit Report and the impact of this review on Appeals determination.

  4. Obtaining, appropriately using, and timely disposing of credit reports is a sensitive area and is closely monitored because of The Fair Credit Reporting Act of 1971 which regulates access to the use of credit reports by Internal Revenue Service personnel. See IRM 5.1.18.17.2 for additional information.

8.22.2.5  (03-11-2009)
Retained Jurisdiction Hearings

  1. Appeals retains jurisdiction on their determinations on Collection Due Process (CDP) cases.

  2. Retained jurisdiction is available after the expiration of the 30-day period for seeking judicial review if the taxpayer does not file a Tax Court petition, or, if the taxpayer does file a Tax Court petition, retained jurisdiction is available after the Tax Court has entered a decision and all appeals of that decision are completed.

  3. In two circumstances, taxpayers may return to Appeals for a Retained Jurisdiction Hearing (feature code = RJ):

    1. If they perceive that the Collection function did not carry out Appeals' determination as it was stated.

    2. If there is a change in their circumstances which affects Appeals' determination.

  4. The following applies to both types of RJ cases.

    1. Collection action will generally be administratively withheld, unless collection is at risk. (There is no suspension of the statute of limitations on collection). If collection is determined to be at risk, Appeals will be notified immediately.

    2. RJ cases that are active collection cases (i.e., status 22 or 26) will be worked in an expeditious manner; Appeals has set a 5 business day goal for closing RJ cases.

    3. The ONLY issues that will be considered in a retained jurisdiction hearing are those that pertain to the resolution of the CDP Notice of Determination.

    4. Advise taxpayers who wish to raise new issues or tax periods and types of tax that were not in the CDP Notice of Determination to do so in a CAP request. Such a CAP request would not need to be sent to Collection, if the taxpayer was already in Appeals for RJ periods.

  5. Taxpayers requesting RJ hearings may qualify for and wish to initiate other types of hearings on different periods at the same time.

    1. It is also possible that they may be able to make a CDP hearing request on a given period or periods - if it is within 30 days of a CDP notice.

    2. If it is more than 30 days after a CDP notice on a given period but within one year, and a CDP hearing request was not previously made on that period within 30 days, they would be able to request an Equivalent Hearing.

    3. Different tax periods, in the event of multiple modules, might qualify for only one or some combination of the following: RJ, CDP, EH, and CAP.

    4. Appeals employees will explain to taxpayers who qualify for more than one type of hearing for a given tax period, the advantages and disadvantages of each.

  6. For RJ hearings about conflict over the implementation of the determination:

    1. It is preferable that taxpayers first try to resolve their differences with the manager of the Collection employee with whom they have a conflict. However, taxpayers who believe they have an unresolved conflict with the Collection function may come directly to Appeals.

    2. Refer to Appeals those taxpayers who first try to resolve the conflict with Collection over implementation of Appeals' determination but are unable to do so once the parties determine the conflict will not be resolved with the Collection function.

  7. For RJ hearings relating to a change in circumstances:

    1. These taxpayers must first follow initial CAP procedures, as described in Publication 1660, Collection Appeal Rights. A conference with the Collection manager is encouraged but is not mandatory.

    2. Sent to Appeals if the Collection manager and the taxpayer do not agree with the proposed change in resolution.

    3. The transmittal document from Collection should indicate that the case is an RJ case to differentiate it from regular CAP cases.

  8. When received in Appeals, the case will be carded in with the appropriate type code DPLV, DPLN or DPL2 with a feature code of RJ. Indicate the earliest CSED in the STATDATE field on ACDS.

    1. The hearing officer will attempt to close the case within 5 days, unless the issues, e.g. OIC, cannot realistically be completed within 5 days.

    2. The same hearing officer who worked the original CDP case should generally work the RJ hearing case unless case load or other management considerations warrant otherwise.

  9. Closing procedures for RJ hearings:

    1. Prepare Form 5402, case memo and taxpayer closing letter of the general type used for CAP cases.

    2. If you have multiple types of hearings, the Form 5402 and case memo should be of the degree required for the type of case requiring the most extensive write-up.

    3. To avoid confusion in multiple hearing situations, list each period and the type of hearing at the beginning of the case memo and issue the appropriate letter(s) for each period.

      Example:

      Notice of Determination, Letter 3193 for CDP period(s), decision letter for Equivalent Hearing periods, and CAP type letter for retained jurisdiction or CAP hearings.

Exhibit 8.22.2-1 
CDP ACM/Determination Letter Template

CDPTemplate - Determination Letter

Taxpayer TIN:

Type of Tax Tax Period Date of CDP Notice 1. Use TC 971 069 date for levy hearing 2. Use date of L3172 for lien hearing Indicate 6320 or 6330 (Enter "Date" and indicate which of the following was used to determine timeliness) CDP Request Received or CDP Postmark date (if "Received" late but postmarked timely)
1040 12/31/2000 3/14/2004 6330 3/30/2004 (date received)
1040 12/31/2000 3/1/2004 6320 3/25/2004 (postmark)
IRC §6702 (frivolous return penalty) 12/31/1999 3/1/2004 6320 3/25/2004 (postmark)

State whether the hearing is provided under IRC §6320 with respect to a lien filing or IRC §6330 with respect to a levy or proposed levy.

If the request is based on both lien and levy notices, specify tax and periods listed in each notice.

If the assessment in the notice involves a civil penalty module, specify the code section under which the penalty is imposed. In addition, specify the code section under which the penalty is imposed if a specific return penalty is being disputed.

Only list those tax periods referenced in the CDP notice(s).

SUMMARY AND RECOMMENDATION

Short, sharp summary statement – keep to about 25 to 35 words; should entice readers to want to read on for the Big 3 details

BRIEF BACKGROUND Describe:

• Each written or oral request for documentation

• How much time the settlement officer gave the taxpayer or their representative to produce the documents,

• To what extent the requested documents were produced,

• That a face-to-face meeting was offered (if one was offered) and that the taxpayer either agreed to a telephone hearing or a correspondence hearing in lieu of a face-to-face meeting or did not request a face-to-face hearing, when offered,

• When the taxpayer agreed to the alternative and how the agreement was communicated to the settlement officer. This description will become important if during judicial review a claim is made of not being given an opportunity for a face-to-face hearing or insufficient time to submit requested documents,

• Address any discrepancies regarding issues of timeliness. (If timeliness determination is an issue, further discussion will be required in "Issues" section.

DISCUSSION AND ANALYSIS

  1. Verification of legal and procedural requirements. IRM 8.22.2.2.4.7. Document:

    • No prior involvement with respect to the specific tax periods either in Appeals or Compliance, if the Appeals employee previously handled a non-CDP case and secured a waiver, Form 14041, or transferred the case to another employee.

    • That the collection statute has been suspended. Instead of saying TC 520, say the collection period allowed by statute to collect these taxes has been suspended by the appropriate computer codes for the tax periods at issue.

    • Where the assessment of tax and/or penalties is based on a deficiency, whether a statutory notice of deficiency (SNOD) was properly issued to the taxpayer.

    • If a non-frivolous issue is raised by the taxpayer regarding legal and administrative procedures, this must be discussed in the Issues section in necessary detail to address the taxpayer's issue.

    • If a legal or administrative procedural requirement is not met, discuss the affect of the defect on the determination in the balancing section.

    • If, during the hearing, Appeals finds no procedural or legal defects in the actions taken by field Collection/ACS, this section should have a statement to the effect that "The RO (ACS) followed all legal and procedural requirements and the actions taken or proposed were appropriate under the circumstances" .

  2. Issues raised by the taxpayer. IRM 8.22.2.2.16.4.2.

    • List and discuss every non-frivolous issue raised (face-to-face, telephone, correspondence).

    • Discuss in detail, showing independent review.

    • Document whether the taxpayer raised the liability. If there is no challenge to the liability, indicate that with the following statement: "The taxpayer did not dispute the liability"

    • Specifically state that "no other issues were raised" . If frivolous issues were raised, then state that no other non-frivolous issues were raised. This helps preclude the taxpayer from raising new issues in any judicial challenge to the Notice of Determination.

  3. Balancing of need for efficient collection with taxpayer concern that the collection action be no more intrusive than necessary. IRM 8.22.2.2.16.4.3.

This section should state clearly and in detail how the Appeals employees determination balances efficient collection and intrusiveness. This will vary based on the situation. See the Determination Letter Guide for examples. You no longer need a separate "MY EVALUATION" paragraph. Rather, incorporate your evaluation into the balancing discussion, as this is the rationale for your determination.

Exhibit 8.22.2-2 
Instructions for completing Customized CDP Form 5402

CDPCustomized 5402 Instructions
1. Date Leave blank. APS will fill in date.
2. Route to (Mandatory field) ACS-CDP originating case, select address from drop down box unit; Field case, fill in address from F3210
3. From Populated from ACDS
4. Features: Populated from ACDS
5. Taxpayer Populated from ACDS
6. TIN Populated from ACDS
7. WORKUNIT NO. Populated from ACDS
8. Tax Years (MFT/Tax Period) "Key Case" MFT and Tax Periods will populate ACDS;
9. Type of Case Populated from ACDS
10. Category Code Populated from ACDS
11. WUNO-related MFT/Tax Period(s) Complete, if applicable, with MFT/Tax Periods related only to the WUNO of the case
12. Disposal Information Closing code and CDPTS code fields are mandatory fields for completion ACDS populates ARDI Code 7. Employee selects: Closing code, Premature Referral code (when applicable), Closing information for CDPTS (Reason Code and Resolution Reason) from drop down boxes
13. Special Features, Remarks, and/or Appeal Case Memorandum Complete "Short Statute" if applicable; "Other" box is optional
14. For APS use APS will use this section for TC 521 information, et al
15. Taxpayer Representative/telephone # Populated from ACDS
16. Area Counsel/Docket # Completed by APS
17. AO/SO Signature/Date self-explanatory
18. Earliest statute date Populated from ACDS
19. Approval / Date ATM signs and dates, if required.
20. Area Counsel / Date Space for Counsel signature, when required

Exhibit 8.22.2-3 
Recognition and Authorization Requirements for Persons Practicing Before the Service

CDPPracticing Before IRSEHPracticing Before IRS

Type of Representative Scope of Practice before IRS (1) Scope of Eligibility to Practice before IRS Required Evidence of Representation Authority (2) Source of Publication Outlining Requirements for Evidence of Representational Authority
Taxpayer appearing on own behalf Any IRS Office Circular 230 10.7(a) Satisfactory identification Circular 230 10.7(a)
Attorney Any IRS Office Circular 230 10.3(a) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 601.502(a), (b)(1)
Certified Public Accountant Any IRS Office Circular 230 10.3(b) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(2)
Enrolled Agent - unlimited enrollment Any IRS Office Circular 230 10.3(c) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(3)
Enrolled Agent - limited enrollment of former IRS employee May be unlimited or limited to IRS unit or division listed on enrollment card Circular 230 10.4(c) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(3)
Temporary recognition pending decision on enrollment May be unlimited or limited to IRS unit or division listed on enrollment card Circular 230 10.5(d) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(5)(i)
Enrolled Actuary Limited to pension issues Circular 230 10.3(d) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(4)
Unenrolled return preparer Limited to examination matters (3) Circular 230 10.7(c)(1)(viii) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(5)(iii)
Others eligible for limited practice (4) (e.g., member of immediate family, full-time regular employee or general partner) Any IRS office Circular 230 10.7(c)(1)((i)-(vi) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(5)(ii)
Special Appearance Subject to conditions imposed by Director of the Office of Professional Responsibility Circular 230 10.7(d) Form 2848 or other suitable power of attorney plus declaration 26 C.F.R. 602.502(a), (b)(5)(iv)
Student tax clinic personnel Any IRS office Director of the Office of Professional Responsibility special order Director of the Office of Professional Responsibility special order and Form 2848 Director of the Office of Professional Responsibility special order
Low income tax clinic personnel Any IRS office Director of the Office of Professional Responsibility special order Director of the Office of Professional Responsibility special order and Form 2848 Director of the Office of Professional Responsibility special order
Attorney of record in docketed Tax Court case (5) Any IRS office 26 C.F.R. §601.509 Proof that Attorney of Record ---
Fiduciary (6) Any IRS office 26 C.F.R. §601.503(d) Form 56 (7) ---

(1) Receipt of taxpayer information and appearance as a witness are not considered practice before the IRS. The taxpayer may authorize any third party to receive tax information by filing a written tax information authorization, such as Form 8821. The regulations under §6103 outline the requirements for written and oral tax information authorizations. Any individual may appear as a witness for the taxpayer before the IRS. See Circular 230, § 10.7(e). The function of a witness is to assist in the factual development of a case. The mere appearance of an individual as a witness does not confer representational authority. See Rev. Proc. 68-29.

(2) The IRS will accept a power of attorney other than a Form 2848, provided such document satisfies the requirements of 26 C.F.R. 601.503(a). In addition, the required declaration must be provided. See 26 C.F.R. 601.503(b). An individual who has representational authority also has the authority to inspect or receive the return information of the individual who is being represented. See 26 U.S.C. 6103(e)(6).

(3) There are other limitations on the representational authority of an unenrolled return preparer. See Rev. Proc. 81-38.

(4) Individuals having a relationship or special status with the taxpayer may represent the taxpayer without limitation. These individuals include members of the immediate family, regular full-time employees, general partners and bona fide officers.

(5) In a case docketed in the Tax Court, anyone other than the attorney of record must be eligible to practice before the IRS and, in order to be recognized must present a Form 2848 or other power of attorney plus a declaration.

(6) A fiduciary (for example, a trustee, executor, administrator, receiver, or guardian) stands in the position of a taxpayer and acts as the taxpayer, not as a representative.

(7) A fiduciary must furnish evidence of his or her appointment as a fiduciary, such as Form 56. See 26 C.F.R. 601.503(d).

(8) Students working in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) may represent taxpayers under a special order by the Director, Office of Professional Responsibility. The instructions to Form 2848, Power of Attorney and Declaration of Representative, require that such students attach a copy of the letter from the Office of Professional Responsibility authorizing practice before the Internal Revenue Service. Students who have been authorized to practice by special order may, subject to any limitations set forth in the letter from the Office of Professional Responsibility, represent taxpayers before any IRS office and should be viewed the same as any other taxpayer's representative for which a Form 2848 has been submitted..

Exhibit 8.22.2-4 
Delegation Order Appeals-193-1 (Formerly App 8-a (Rev. 1))

1) EFFECTIVE DATE: 03/16/2010

2.) Authority: To conduct hearings and make determinations under sections 6320 and 6330 of the Internal Revenue Code (relating to notice and opportunity for hearing upon filing of notice of lien and before levy).

3) Delegated to: Appeals Officers; Settlement Officers; Appeals Account Resolution Specialists.

4) Redelegation: This authority may not be redelegated.

5) Authority: To review and approve determinations made under sections 6320 and 6330 of the Internal Revenue Code (relating to notice and opportunity for hearing upon filing of notice of lien and before levy), except in the case of any Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy Action that the Director, Policy and Valuation (Appeals) determines in writing does not require review and approval.

6) Delegated to: Appeals Team Managers.

7) Redelegation: This authority may not be redelegated.

8) Authority: To determine which Appeals employees may accept from the taxpayer, and execute on behalf of the Internal Revenue Service, Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, and Waiver of Suspension of Levy Action.

9) Delegated to: Director, Technical Services (Appeals).

10)Redelegation: This authority may not be redelegated.

11)Source of Authority: I.R.C. § 6320 and 6330; Servicewide Delegation Order No. 193 (Rev. 6).

12)To the extent that the authority previously exercised consistent with this order may require ratification, it is hereby affirmed and ratified. This order supersedes Delegation Order App 8-a (Rev. 1).

Diane Ryan, Chief,

Appeals,

Appeals Division


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