Part 8. Appeals

Chapter 22. Collection Due Process

Section 7. Alternatives to Collection Action

8.22.7  Alternatives to Collection Action

Manual Transmittal

September 21, 2012

Purpose

(1) This transmits revised IRM 8.22.7, Collection Due Process, Alternatives to Collection Action.

Material Changes

(1) Added a clarifying statement that was left out of the prior revision of IRM 8.22.7.5.2. Manually-Monitored Installment Agreements

(2) Updated the title Appeals Processing Support to Account and Processing Support.

(3) Updated the title Director, Tax Policy and Valuation to Director, Policy, Quality and Case Support.

Effect on Other Documents

IRM 8.22.7 dated March 29, 2012 is superseded.

Audience

Settlement officers, appeals officers, appeals account resolution specialists and appeals team managers.

Effective Date

(10-01-2012)

Susan L. Latham,
Director, Policy, Quality and Case Support.

8.22.7.1  (03-29-2012)
Overview

  1. This section provides guidance to Appeals technical employees for considering alternatives to collection action in resolving CDP, EH and retained jurisdiction cases.

  2. Appeals takes jurisdiction over non-CDP periods when considering collection alternatives. All open tax periods must be included when resolving a case through:

    • Installment Agreement (IA)

    • Offer in Compromise (OIC)

    • Currently not Collectible (CNC)

8.22.7.2  (03-29-2012)
Requesting a Credit Report

  1. Credit reports are no longer required and instead, will be requested only in rare instances when deemed necessary for considering a collection alternative. Credit reports require managerial approval. If you determine a credit report is necessary, review the Appeals Credit Report User Guide to confirm it is authorized. Requests are made with the Credit Bureau Request Form. Both documents are found at http://appeals.web.irs.gov/tech_services/collection/default.htm under Resources - Credit Reports.

  2. To request a credit report, send the Credit Bureau Request Form by secure email to your ATM with:

    1. INOLE

    2. IMFOLI and/or BMFOLI attached to or within the secure email

  3. Your ATM will:

    1. Verify the request is complete and that it meets the authorization requirements

    2. Add this statement to the email: "I approve this request for a credit bureau report. A Balance Due Account is under Appeals jurisdiction."

    3. Forward the secure email to the appropriate location http://appeals.web.irs.gov/tech_services/collection/documents/CreditBureauRequest.xls based on the source and type of case

  4. The credit report is returned to the requesting employee by secure email within two business days of the ATM email.

8.22.7.3  (03-29-2012)
Third-Party Contacts

  1. IRC 7602(c), Notice of Contact of Third Parties, requires the IRS to:

    • Provide advance notice to the taxpayer that third-party contacts may be made

    • Periodically provide a list of all third-party contacts to the taxpayer

    • Provide a list of third-party contacts to the taxpayer upon request

  2. If consideration of a collection alternative requires a third-party contact, confirm the issuance of the stuffer Notice of Third Party Contacts by the input of TC 971 AC 611 in IDRS on the balance due modules. IDRS generates TC 971 AC 611 when either Notice 518, Final Notice - return Delinquency, or Notice 504, Final Notice - Balance Due, is issued. If a TC 971 AC 611 is not present on all modules, send the taxpayer Letter 3164, Third Party Contact Letter.

  3. For a CDP with an OIC, there is no need to verify the issuance of Notice of Third Party Contact as Form 656, Offer in Compromise, operates as a waiver of the requirement.

8.22.7.4  (03-29-2012)
Appeals Referral Investigation

  1. CDP and EH cases often come to Appeals with little to no case development. Generally, Appeals can verify the facts of the case with documentation secured from the taxpayer and/or internal electronic resources. If issues arise that can't be addressed or investigated by Appeals, consider an Appeals Referral Investigation (ARI) to a revenue officer group. An ARI may be appropriate if:

    • The Collection Information Statement (CIS) has specific and complex issues that can't be addressed through the taxpayer (i.e., potential alter ego, nominee or transferee issues)

    • The collection alternative requested requires a Trust Fund Recovery Penalty (TFRP) investigation

  2. Only issue an ARI if it is likely that the collection alternative under consideration will be accepted if the results of the investigation favor the taxpayer's position.

8.22.7.4.1  (03-29-2012)
ARI for Verification of Collection Information

  1. Prepare Form 2209, Other Investigation, or Form 10467, Appeals Feedback Report and Transmittal Memorandum, and state in the remarks section:

    Example:

    "We are conducting a CDP/EH hearing and the taxpayer has raised [collection alternative] which require [specify what is Collection should do]. Please see the attached forms and verify necessary items."

  2. Prepare a letter to the taxpayer notifying them that a referral is being made to Collection for verification:

    Example:

    "You requested Appeals consideration of [specify issue]. Appeals has requested assistance to verify the information provided. It may be necessary for Service personnel to contact you and/or third parties for information to expedite this review. The information is needed to help us reach a resolution of your appeal. Appeals retains jurisdiction of your case."

  3. Route the ARI to the revenue officer group covering the taxpayer's zip code. This is located in ICS by clicking on Administrative Action, Parameter Table and then Assignment table. Send the revenue officer group the ARI and a copy of:

    1. The CIS

    2. The taxpayer referral letter to assure Collection that the taxpayer is aware that contact may be necessary

  4. Per IRM 5.1.8.2, Originating Office Procedure, the completion period for the ARI is:

    • 45 days after issuance if the action address is within the United States, Puerto Rico or the Virgin Islands

    • Six months after issuance if the action address is any other US possession or territory or located within a foreign country

  5. Follow up with Collection within 30 days after the deadline to complete the ARI. Due to ex parte considerations, send follow ups by secure email through your ATM to the revenue officer's manager and limit the inquiry to the status of the ARI. Print Compliance's response and associate with your case file. See IRM 8.1, Appeals Function, for more information on ex parte communication.

  6. The results of the ARI must be shared with the taxpayer. Send a copy of the results to the taxpayer with a letter stating Collection concluded their investigation and ask the taxpayer to review the results. Give the taxpayer at least 10 business days to review the results before scheduling a follow-up conference or using the information in your determination.

8.22.7.4.2  (03-29-2012)
ARI for Trust Fund Recovery Penalty Investigation

  1. Prepare Form 2209 or Form 10467 and state in the remarks section:

    Example:

    "The taxpayer submitted an offer to compromise trust fund tax. Please complete a TFRP investigation in accordance with IRM 5.8.4.20.1, Trust Fund Liabilities. The earliest ASED expires ________________."

  2. Prepare a letter to the taxpayer notifying them that a referral is being made to Collection for the TFRP investigation:

    Example:

    "You requested Appeals consider an offer in compromise with Trust Fund taxes. Appeals has requested assistance in the Trust Fund Recovery Penalty investigation. It may be necessary for Service personnel to contact you and/or third parties for information to complete this process. This investigation is necessary before we can consider your offer. Appeals retains jurisdiction of your case."

  3. Route the ARI to the revenue officer group covering the taxpayer's zip code. This is located in ICS by clicking on Administrative Action, Parameter Table and then Assignment table. Include a copy of the taxpayer referral letter to assure Collection that the taxpayer is aware that contact may be necessary. Do not attach a copy of Form 656 or provide details of the offer as Collection is investigating the TFRP, not the OIC.

  4. Give Collection at least 90 days to complete the ARI because IRC 6672(b), Failure to Collect and Pay over Tax, provides the taxpayer 60 days to respond to Letter 1153, 10-Day Notification Letter, 100% Penalty Proposed Against Filer for Corporation.

  5. Follow up with Collection within 30 days of the expiration of the ARI. Due to ex parte considerations, limit follow ups to a secure email inquiry through your ATM to the revenue officer's manager. Print Compliance's response and associate it with your case file. See IRM 8.1, Appeals Function, for more information on ex parte communication.

  6. The results of the ARI must be shared with the taxpayer. Send a copy of the results to the taxpayer with a letter stating Collection concluded their investigation and ask the taxpayer to review the results. Give the taxpayer at least 10 business days to review the results before scheduling a follow-up conference or using the information in your determination.

8.22.7.5  (10-01-2012)
Installment Agreements

  1. Appeals can secure IAs as a collection alternative in CDP. CDP IAs are not limited by the multifunctional restrictions that apply to other IAs secured by Appeals.

    Caution:

    An IA should not be granted if any of the taxpayer's liabilities (CDP or non-CDP) have been referred to the Department of Justice until DOJ agrees that the installment agreement is appropriate. See IRM 8.22.6.9, Tax Cases Controlled by the Department of Justice.

  2. An IA must be in writing. A written IA may take the form of a document signed by the taxpayer and the Commissioner or a written confirmation of an agreement entered into by the taxpayer and the Commissioner that is mailed or personally delivered to the taxpayer (Letters 2849 or 2850). Form 433-DInstallment Agreement or Form 2159Payroll Deduction Agreement, are generally used to establish an IA. The taxpayer's signature on the form is not required unless it is a payroll deduction or direct debit IA.

  3. User fees for IAs are:

    • $105 - non-direct debit IA

    • $52 - direct debit IA

    • $45 - reinstatements

    • $43 - new agreements for taxpayers with low income

  4. The IRS automatically considers taxpayers for the reduced user fee using information from the taxpayer’s current tax return. Taxpayers may receive an IA acceptance notice but not a reduced user fee even though they believe they qualify for one. Taxpayers can request a reduced fee by completing Form 13844, Application for Reduced User Fee for Installment Agreements, and submitting it to the IRS within 30 days of receipt of the IA acceptance notice. The IRS will evaluate the application and respond to the taxpayer. See IRM 5.14.1.2, Installment Agreements and Taxpayer Rights for additional information.

  5. The Trust Fund Recovery Penalty (TFRP) must be considered when granting an In-Business Trust Fund (IBTF) IA. For field-sourced CDP cases, revenue officers are required to address and conduct the TFRP investigation while a CDP case is in Appeals per IRM 5.1.9.3.7, Conducting the TFRP Investigation while Case in Appeals.If you are granting an IBTF IA with trust fund taxes, consult the table below:

    If the CDP is... Then...
    Field-sourced No ARI is necessary. Instruct the Field on Form 5402 to immediately process the IA to CCP with their TFRP file as per IRM 5.14.7.2, Summary of Agreement Criteria for Business Accounts
    ACS-sourced No ARI is necessary. Instruct ACS on Form 5402 to immediately process the IA to CCP following IRM 5.14.7.4.2 (11) and (12) and arrange with the Field to conduct a TFRP investigation following IRM 5.14.7.4.1 (11)

  6. The TFRP determination and assessment statute are solely the responsibility of Compliance. Appeals will not be involved in any aspect of:

    • Soliciting or securing Form 2750, Waiver, or Form 2751Proposed Assessment of Trust Fund Recovery Penalty

    • Determining who is responsible for the TFRP

    • Determining non-assertion based upon collectibility

    Securing these forms or making such determinations compromises the independence of Appeals.

  7. Within 24 hours of a processable request for an IA, request input of TC 971 AC 043 (pending IA) by secure email to Account and Processing Support (APS) for all CDP/EH and non-CDP periods. The transaction code:

    • Prevents levy action on non-CDP periods

    • Suspends the running of the collection statute (CSED) during consideration of the agreement

  8. When determining the acceptance of an IA, consider all relevant facts and circumstances including the taxpayer’s compliance history, ability to pay and equity in assets.

  9. If it appears a taxpayer will have a balance due at the end of the current year, the accrued liability may be included in an IA as per IRM 5.14.1.4.1(18), Compliance and Installment Agreements. From the date of the IA, the taxpayer must be in compliance with filing, paying estimated tax payments and federal tax deposits.

  10. Make a NFTL determination when the aggregate unpaid balance of assessments equals or exceeds $10,000.00, except where the IA is a streamlined or an in-business express agreement. This determination should be based on the facts and circumstances of the case.

  11. Do not request input of TC 971 AC 063 (approved IA) as this is systemically generated on input to status 60.

  12. If you reject a pending IA, instruct APS in the "Remarks" section of Form 5402 to input TC 972 AC 043 to 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 the review is final.

8.22.7.5.1  (03-29-2012)
Direct Debit Installment Agreements

  1. A Direct Debit Installment Agreement (DDIA) automatically transfers funds from the taxpayer's bank account to the IRS. If the taxpayer has a bank account, encourage the use of the DDIA.

  2. The following is required to establish a DDIA:

    1. Form 433-D

    2. Form 433-A, Collection Information Statement, unless the agreement meets streamlined or guaranteed IA criteria

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

    4. The taxpayer's signature, which is a legal requirement

  3. A faxed signature on Form 433-D can be accepted after speaking with the taxpayer. The faxed copy must be documented with the date of the contact.

    Example:

    "04/07/2011 TP REQ FAX"

  4. Monthly reminder notices are not issued on DDIAs.

  5. The taxpayer may request a lien withdrawal from Compliance once certain conditions of the DDIA are met. See IRM 8.22.7.9.1, Lien Withdrawals for additional information.

  6. See IRM 5.14.10.4 Direct Debit Installment Agreements, for additional information on DDIAs.

8.22.7.5.2  (10-01-2012)
Manually-Monitored Installment Agreements

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

    • NMF assessments

    • Agreements with variable or percentage amounts

    • Agreements with irregular payment intervals

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

    • L Freeze modules during pending Joint and Several Liability Relief Under IRC 6015 claims

    • IBTF IAs (except Express Agreements)

    • Any other agreement not compatible with IDRS monitoring

  2. For the IAs listed above, select "MMIA" from the Form 5402 Installment Agreement drop down box when closing the CDP. This alerts APS to return the "MMIA" to the originator for processing as CCP accepts MMIAs from ACS or ROs only.

8.22.7.6  (03-29-2012)
Extension of Time to Pay

  1. A short term extension of time to pay is only authorized on ACS-sourced cases for up to 60 days per IRM 5.19.1.5.4, Full Pay Within 60 or 120 Day Agreement.

  2. If a taxpayer requests an extension of time to pay (60 days or less) the TC 971 AC 043 pending IA indicator is not placed on the module.

  3. Request in the remarks section of Form 5402 that APS input STAUP to a non-CDP notice status module if the agreement is that the module will be satisfied within the 60 day period as well. Advise APS as to the next status and the number of cycles of delay until the next status. See IRM 2.4.28.2 for the sequence of master file status codes.

8.22.7.6.1  (03-29-2012)
Extension of Time to Pay-Third Party Assets

  1. You are not required to consider third-party assets when evaluating a collection alternative. However, it may be appropriate to consider the extent to which third party assets are available to pay the liability, and whether withholding levy while the assets are liquidated may be a more efficient and less intrusive manner of collection.

    Example:

    In a CDP hearing, the taxpayer documents that her ex-husband, who is jointly responsible for the CDP tax periods, has a contract to sell real estate for an amount greater than the balance due and that the proceeds will pay the taxes.

  2. You may grant the taxpayer a short term extension of time to pay based on evidence that the assets are in the process of being sold and the amount is sufficient to full pay the liability. The extension must not exceed 60 days.

  3. The determination/decision letter attachment will state that third-party asset(s) are being liquidated to pay the liability in full, that the taxpayer has a deadline to pay, and that if the liability is not paid by the deadline, collection action can resume.

8.22.7.7  (03-29-2012)
Currently Not Collectible

  1. A taxpayer may challenge the appropriateness of collection activity by claiming they are in a hardship situation. A taxpayer may also request CNC status.

  2. CNC is not a collection alternative. It is a determination that a case should not be in collection at this time.

  3. Generally, a current CIS is secured prior to reporting an account CNC. A CIS is considered current if it is less than twelve months old.

  4. If the taxpayer's Form 433-A confirms a hardship as per IRM 5.16.1.2.9 Hardship:

    • It is not appropriate to sustain the proposed levy action. IRC 6343(a)(1), Release of levy and notice of release, 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.

    • CNC may be granted even if the taxpayer hasn't filed all required returns. Note in the remarks section of Form 5402 that there are unfiled returns.

  5. Form 53,Report of Currently Not Collectible Taxes, is not needed to report a CDP account CNC, unless you are requesting a mandatory follow-up as per IRM 5.16.1.6, Mandatory Follow Up. APS inputs CNC using Form 5402 and the closing code you selected in the drop down menu. List all non-CDP periods in the "remarks" section of Form 5402 so APS can input ALL tax periods to CNC.

  6. For field-sourced CDP cases, revenue officers are responsible for addressing the TFRP investigation while a CDP case is in Appeals per IRM 5.1.9.3.7,Conducting the TFRP Investigation while Case in Appeals. For ACS-sourced cases, ACS is responsible for addressing the TFRP investigation through Field Compliance. If you have trust fund liabilities to report as CNC, no ARI is necessary. Note on Form 5402 that Compliance is responsible for the TFRP determination and close the case.

  7. When closing a CDP case with a CNC recommendation, make a NFTL determination when the aggregate unpaid balance of assessments equals or exceeds $10,000.00.

8.22.7.8  (03-29-2012)
Adjustments-Form 3870

  1. Adjustments on accounts may involve:

    • Credit transfers

    • Tracing payments

    • Penalty abatements

    • TFRP adjustment

    • Tax abatement (FUTA, 6020(b), CAWR, SFR/ASFR, AUR Reconsiderations, Audit Reconsiderations)

    • Tax assessed under wrong entity or tax period

    • 941-X increase or decrease

    • Statute consideration

  2. See the table below for a description of the forms used for making adjustments and transferring credits:

    Form Used for...
    2424, Account Adjustment Voucher transferring credits
    8765, IDRS Control File Credit Application transferring credits from excess collection.
    3870, Request for Adjustment for all other adjustments.

    Note:

    To request the Statute Unit clear a payment located in the Excess Collection File for credit or refund to the taxpayer's account, see IRM 25.6.1.10.2.5.1.1, Appeals Determinations.

  3. When adjusting Form 941, 940, and 1040 tax assessments, you must include the item and credit adjustment codes. See Document 6209 Section 8. Below are some of the commonly used codes for adjusting Forms 941, 940, and 1040. See IRM 21.7.2.4.1, Item Reference Numbers and Credit Reference Numbers, for additional Employment Tax Return Reference Numbers:

    Form 941
    Item Reference Number Explanation Line on Form 941
    003 Adjusted total of income tax withheld 5
    004 Taxable social security wages 6A
    005 Taxable social security tips 6D
    007 Adjusted total of social security/medicare taxes 6B & 7B

    Form 940
    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

8.22.7.8.1  (03-29-2012)
Interim Adjustments

  1. Sometimes a tax adjustment must be made before a case can be closed. Adjustments requested prior to closing a case are called interim adjustments.

  2. Interim adjustment requests will be made judiciously. Generally, adjustments are requested of APS as part of back-end processing.

  3. To request an interim adjustment:

    Step Action
    1 Generate an on-line Form 3870 from the IRS Intranet publishing catalogue.
    2 Complete the form and email it to your ATM for a digital signature.
    3 Generate the ACDS Update Request form in APGolf and open in MS WORD
    4 Change the caption from ACDS Update Request to CDP Interim Adjustment Request form.
    5 After establishing which APS campus services your office, send an email 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
    6 In the subject line of your secure email, type: CDP Interim Adjustment

  4. APS will send an email when the interim adjustment is complete.

8.22.7.9  (03-29-2012)
Notice of Federal Tax Lien

  1. This subsection describes alternatives to a NFTL including lien withdrawals, releases, discharges and subordinations.

8.22.7.9.1  (03-29-2012)
Lien Withdrawals

  1. IRC 6323(j),Withdrawal of notice in certain circumstances, gives the Service the authority to withdraw a NFTL under certain circumstances. Taxpayers requesting NFTL withdrawal must meet one of the following conditions:

    • The filing was premature or not in accordance with the Service's administrative procedures

    • The taxpayer entered into an agreement under IRC 6159, Agreements for payment of tax liability in installments, to satisfy the tax liability for which the lien was imposed by means of installment payments unless such agreement provides otherwise

    • Withdrawal facilitates the collection of the tax liability

    • With the consent of the taxpayer or the National Taxpayer Advocate, withdrawal would be in the best interest of the taxpayer and the United States

  2. Review the resources in the table below for examples of when a withdrawal is or is not appropriate.

    Lien Withdrawal Resources
    IRM 5.12.3, Certificates Relating to Liens
    http://www.irs.gov/pub/foia/ig/sbse/sbse-05-0611-037.pdfWithdrawal of Notice of Federal Tax Lien after Release. This guidance will be incorporated into IRM 5.12.3
    http://www.irs.gov/pub/foia/ig/sbse/sbse-05-0411-036.pdfWithdrawal of Notice of Federal Tax Lien in Direct Debit Installment Agreement Situations. This guidance will be incorporated into IRM 5.12.3

  3. Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien is used by a taxpayer to indicate the basis for a withdrawal request under IRC 6323(j). This form is not needed in a CDP hearing if the taxpayer's request for withdrawal falls under one of the IRC 6323(j) criteria.

  4. Use the table below after considering a taxpayer's request for lien withdrawal:

    Did the hearing officer determine withdrawal is appropriate under IRC 6323(j)? Then... Does appeals retained jurisdiction on the lien?
    Yes

    • Issue a determination or decision that the NFTL will be withdrawn

    • See table IRM 8.22.7.9.1.3, Lien Withdrawal Procedures

    		Yes
    No Issue a determination or decision explaining the NFTL is not withdrawn and explain the basis of your decision. No

8.22.7.9.1.1  (03-29-2012)
DDIA Lien Withdrawals

  1. A taxpayer may request a DDIA lien withdrawal in a CDP hearing. Under the provisions of Interim Guidance SBSE-05-0411-036, IMF taxpayers, out of business BMF taxpayers, and in-business taxpayers who owe only income tax will be granted a withdrawal of the NFTL under IRC 6323(j)(1) if the following conditions are met:

    1. The unpaid balance of assessments is $25,000 or less and the taxpayer's liability will be full paid, including penalty and interest, in 60 months or prior to the CSED, whichever comes first

    2. The taxpayer is in compliance with other filing and payment requirements

    3. The taxpayer makes three consecutive payments under a DDIA with no default in payment

    4. The taxpayer did not previously have a withdrawal of lien for any of the liabilities included in the DDIA

      Exception:

      A lien was previously withdrawn under IRC 6323(j)(1)(A) because notice was not in accordance with administrative procedures. If the IRS files another NFTL listing the same tax liability after the procedural defect is cured, the taxpayer would be eligible for withdraw under these procedures.

  2. If a taxpayer enters into an installment agreement other than a DDIA, the taxpayer may still qualify for lien withdrawal under IRC 6323(j)(1)(B).

8.22.7.9.1.2  (03-29-2012)
Withdrawal of NFTL after Lien Released

  1. A taxpayer may request that an NFTL that's been released should be withdrawn.

  2. Withdrawals under IRC 6323(j)(1)(A) NFTL filing was improper or the IRS did not follow procedures will generally be granted if:

    1. The taxpayer requests a withdrawal in writing. Form 12277 is the preferred format. However, any written request that provides sufficient information may be used for processing. See IRM 5.12.3.32; and

    2. The taxpayer demonstrates the NFTL filing was improper or otherwise not in accordance with the IRS procedures.

      Note:

      Withdrawal under this provision may be issued whether a certificate of release was issued or the lien self-released.

  3. Withdrawals under IRC 6323(j)(1)(D)Best interest test will generally be granted if:

    1. The taxpayer requests a withdrawal in writing;

    2. A certificate of release was issued. Generally, withdrawals will not be granted for self-released liens unless extenuating circumstances are present. See SBSE-050611-037 for examples of extenuating circumstances.

    3. The taxpayer fully satisfied the liabilities on the NFTL. Fully satisfied is defined here as: (1) tax liability was fully resolved by payment or credit offset; (2) most circumstances where the tax assessment was abated because the taxpayer is no longer liable for the tax; (3) abatement of penalty and/or interest due to reasonable cause resulted in zero balance;
      (4) the taxpayer completed the terms of an OIC including any related collateral agreements.

      Note:

      Fully satisfied does not include liabilities that are no longer owed because of bankruptcy discharge or expiration of the CSED.

    4. The taxpayer is in compliance with filing requirements.

      Note:

      If the taxpayer has an unfiled return for any of the past 3 years, or appears to be delinquent with FTDs or Estimated Tax Payments, further investigation may be necessary. The taxpayer is considered to be in compliance if the return was or can be closed for one of the following reasons: (1) not liable (2) income below the filing requirements (3) little or no tax due. The taxpayer may be requested to supply additional information to complete this determination.

  4. Liens that self-released in error and are subject to revocation do not qualify for a withdrawal under these procedures.

8.22.7.9.1.3  (03-29-2012)
Lien Withdrawal Procedures

  1. Use the table below to request a lien withdrawal:

    Step Who Action
    1 hearing officer Prepare Form 13794-W, Request for Withdrawal or Partial Withdrawal of Notice of Federal Tax Lien, explaining which of the 4 IRC provisions is the basis for the withdrawal.
    2 hearing officer Forward Form 13794-W by encrypted email to the ATM
    3 ATM Transmit the Form 13794-W by encrypted email or fax to the Collection Advisory manager for the office that covers the taxpayer's residence. See the SBSE’s Advisory, Insolvency and Quality (AIQ) Lien Certificates web page or Pub 4235, Collection Advisory Group Addresses, to locate the necessary contact information for the appropriate Advisory area office.

    Note:

    Advisory will process requests for withdrawal received from Appeals in accordance with IRM 5.12.6.5 Processing Lien Related Certificates. Advisory will only confirm the accuracy of the Form 13794-W before concurring with the withdrawal request and forwarding the Form to Centralized Lien Unit (CLU).

  2. When an NFTL is withdrawn in response to a CDP determination, the taxpayer will not get another CDP lien hearing if the NFTL is later filed.

8.22.7.9.2  (03-29-2012)
Partial Release and Manual Release

  1. Circumstances may dictate that it is necessary to partially release a tax lien. A partial release is necessary when:

    • An OIC is accepted from only one party on a joint liability

    • Innocent spouse relief is granted

    • The taxpayer requests a release for a specific tax period that has been satisfied on an NFTL with multiple tax periods

  2. Use the following procedures for requesting a partial release after receiving concurrence from your ATM:

    1. Prepare Form 13794

    2. Forward the request to Centralized Case Processing Lien Unit (See SERP)

    3. Request acknowledgment of the request for a partial release

    4. Once acknowledgment is received, you may close the case. The partial release does not need to be recorded before closing the CDP case

  3. Use the procedures above for requesting a manual release for satisfied or unenforceable accounts as per IRM 5.12.3.3.2, Satisfied or Unenforceable Taxpayer Accounts.

8.22.7.9.3  (03-29-2012)
Discharges and Subordinations

  1. If a taxpayer has an NFTL and is seeking:

    Alternative Definition
    Discharge- IRC 6325(b) Permits the Service to discharge property from the NFTL. Taxpayers typically seek a discharge in connection with the sale of real property when there is insufficient equity to full pay the NFTL. See:

    • Pub 783, How to Apply for a Certificate of Discharge from Federal Tax Lien

    • IRM 5.12.3.12Discharge of Property for additional information

    Subordination- IRC 6325(d) Permits the Service to subordinate an NFTL to another lien or interest. Taxpayers typically seek subordination in connection with refinancing a loan where there is insufficient equity to full pay the NFTL. See:

    • Pub 784, How to Prepare an Application for a Certificate of Subordination of Federal Tax Lien

    • IRM 5.12.3.13Subordination of Lien for additional information

  2. If the taxpayer completes Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien or Form 14134,Application for Certificate of Subordination of Federal Tax Lien, submit the application on an ARI to the Advisory Unit for the State where the property is located. See Pub 4235 for Advisory Unit addresses. Advisory will consider the request to discharge/subordinate the Federal Tax Lien, processes payments and issue the certificate.

  3. If Advisory rejects the request for discharge/subordination and the taxpayer disputes this decision, you must review the decision and make an independent determination prior to closing the CDP.

  4. The results of the discharge/subordination request must be communicated to the taxpayer in the Determination/Decision letter attachment or Form 12257 waiver.

8.22.7.10  (03-29-2012)
Offers in Compromise

  1. This subsection is intended to be consistent with the procedures in IRM 5.8, Offers in Compromise, and supplement the Appeals guidance in IRM 8.23, Offers in Compromise. This subsection describes the unique requirements and procedures of a CDP OIC.

  2. A taxpayer may inquire whether an OIC is a viable collection alternative in a CDP hearing. Alternately, the hearing officer may believe an OIC is a viable collection alternative. Key components of the OIC discussion include:

    • The different types of offers and payment options

    • How reasonable collection potential (RCP) is determined

    • Compliance and acceptance requirements

    • The application fee is refundable if the offer is not processable but is not refundable once a processable offer is processed

    • TIPRA payments are not refundable and are applied to the liability along with the application fee

    • The taxpayer's right to designate application of TIPRA payments, but that the 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

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

  3. Advise the taxpayer that a search of the phrase"offer in compromise" at www.irs.gov provides additional resources and information that can be reviewed at their leisure.

  4. The taxpayer is responsible for initiating the offer amount. Do not pre-negotiate the offer amount as this leads to the government negotiating against itself and the taxpayer offering as little as possible. IRM 1.2.14.1.17,Policy Statement 5-100, states "the taxpayer will be responsible for initiating the first specific proposal for compromise."

  5. Advise the taxpayer of any conditions that might prevent an offer from being considered including:

    • Unfiled returns when the taxpayer has a filing requirement

    • Lack of ES payments for a self employed taxpayer when ES payments are required

    • Lack of FTDs for an in business taxpayer when FTDs are required

  6. If the taxpayer says they want an offer considered, mail them Form 656, Offer in Compromise, and provide a deadline for the offer to be returned.

  7. You may assist the taxpayer in preparing the offer forms if necessary. For example, the taxpayer may need assistance if they are illiterate or do not speak English.

8.22.7.10.1  (03-29-2012)
TIPRA Statute and Responsibilities

  1. The Tax Increase Prevention Act of 2005 (TIPRA) increased Appeals' statute responsibilities for CDP/EH OICs. When an OIC is submitted in CDP, Appeals has 24 months to make a determination. If the offer is not rejected, returned or withdrawn within 24 months of submission, it is deemed accepted.

  2. An OIC is "submitted" as of the day IRS receives the offer. The postmark is irrelevant in determining when an offer was submitted.

  3. An amended Form 656 is not a new offer and it does not impact the 24 month TIPRA statute that started on the date the original offer was received.

  4. TIPRA statute cases are subject to the same back-end processing requirements listed in IRM 8.21.3.1.7, Closings, and IRM 8.21.4.2, Appeals Team Manager, which means:

    • Written ATM concurrence is required to keep the OIC open beyond 120 days remaining on the TIPRA statute

    • You are responsible for ensuring the OIC is shipped to APS for closing with at least 90 days remaining on the TIPRA statute

    • If less than 90 days remain when the case is being closed, notify the PTM by encrypted email when the case is being closed to APS

    • Responsibility for the TIPRA statute is shared jointly by the PTM and the ATM

8.22.7.10.2  (03-29-2012)
Non-CDP Periods in the Offer

  1. CDP OICs often include tax periods that are not the subject of the 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 will consider the non-CDP/EH tax periods in the OIC under its authority per Delegation Order 8-8.

  3. IRC 6331(k), No levy while certain offers pending or installment agreement pending or in effect, 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. Confirm that TC 480 and STAUP 71 are input on all non-CDP periods, including EH periods.

8.22.7.10.3  (03-29-2012)
Requesting an OIC WUNO

  1. OICs received with or initiated during a CDP/EH hearing must be added to ACDS as a separate work unit. This includes OICs submitted before the CDP/EH was requested and later associated with the CDP/EH case.

  2. Upon receipt of Form 656, request an OIC WUNO by providing APS with:

    1. The related CDP Case Summary Card noted "Please create OIC WUNO." Include feature code DP and enter into the NOTES field the following: XREF- WUNO of the related CDP/EH case.

    2. A copy of page one of Form 656 listing all periods on the OIC

    3. Add the TOTAL ASSESSED BALANCE for all periods on IMFOLI or BMFOLI. This amount will be entered in the PROPDTAX field on the earliest period only.

    4. TIPRA statute date = oldest date stamp on form 656 of OIC plus two years

  3. Feature Codes:

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

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

    3. DATL-OICs: input Feature Code "LI" on the OIC WUNO

  4. Entries in SOURCE, DO, and PBC for the OIC will be the same as the entries in the related CDP.

  5. A CDP/EH case can result in more than one OIC. For example, related entities such as a joint return and a sole proprietorship will each be carded as a separate OIC work unit. Related case files are associated and worked together unless there is a Doubt as to Liability OIC where the liability is precluded from CDP.

8.22.7.10.4  (03-29-2012)
Receipt of Form 656

  1. Upon receipt, date stamp the upper right corner of Form 656 with the date the offer was received.

    Example:

    The IRS mail room receives, date stamps, and processes the envelope containing Form 656 on 11/14/2010. You retrieve the envelope containing Form 656 from your mail slot on 11/18/2010. The IRS receipt date is 11/14/2010.

  2. DO NOT SIGN FORM 656 as COIC is responsible for signing it as part of the processability determination.

  3. Document receipt of the OIC in your CDP/EH case activity record.

  4. COIC is responsible for making a processability determination on all offers. Review IRM 8.22.7.10.5 and IRM 8.22.7.10.6 below to determine whether the offer meets COIC investigation criteria and then use the appropriate processing procedures.

8.22.7.10.5  (03-29-2012)
Processing Offers that do not Meet COIC Investigation Criteria

  1. The following CDP/EH offers do not meet COIC investigation criteria and are investigated by Appeals:

    • Corporations

    • Partnerships

    • Estates and Trusts

    • Incarcerated taxpayers

    • Doubt as to Liability TFRP

    • Any business with employees

    • LLP and LLC

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

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

    • International taxpayers

  2. For these OICs, prepare Form 3210-Application Fee, Letter 3820, Offer is Processable, and Letter 3821, Offer is Not Processable in APGolf. Promptly mail them with the following items to the appropriate COIC site for a processability determination:

    • Form 656

    • the OIC application fee and TIPRA payment, if applicable

    • Any written designation of the TIPRA payment from the taxpayer

    • Form 433-A/B

    • A self-addressed return envelope

  3. Letters 3820 and 3821 must contain your contact information. Do not sign or date the letters as COIC will do so after the processability review.

8.22.7.10.5.1  (03-29-2012)
OIC is Not Processable

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

    1. Mail Letter 3821, Appeals Received Your Offer in Compromise And We Cannot Consider Your Offer, explaining why the OIC is not processable along with Form 656 back to the taxpayer

    2. Fax the hearing officer a copy of the Letter 3821 and Form 2515, Record of Offer in Compromise, which reflects the designation of monies received with the offer

    3. Refund the $150 application fee

  2. The issuance of Letter 3821 advises the taxpayer to contact the Appeals hearing officer if they disagree with the decision to return the offer.

  3. If the taxpayer disputes the return of their offer to the Appeals hearing officer, the taxpayer will need to show how the IRM 5.8.2.4.1, Determining Processability, criteria was incorrectly applied. If the hearing officer agrees that the return was in error, resubmit Form 656 to COIC for a redetermination with the new information. The taxpayer will not have to make another TIPRA payment but will need to resubmit the $150 application fee since this was refunded to them.

  4. If the return was not in error, close the OIC WUNO when closing the CDP case:

    1. Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason

    2. Document the not-processable determination in the attachment to the determination/decision Letter

      Example:

      The offer in compromise submitted during your Collection Due Process hearing was returned on 01/31/2011 because it was not processable.

8.22.7.10.5.2  (03-29-2012)
OIC is Processable

  1. If COIC determines the offer is processable, COIC will:

    1. Sign Form 656

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

    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 hearing officer is responsible for confirming 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

    6. Mail the offer package back to the hearing officer to investigate since the offer does not meet COIC investigation criteria

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

8.22.7.10.6  (03-29-2012)
Processing Offers that Meet COIC Investigation Criteria

  1. COIC retains and investigates CDP/EH offers that meet the criteria below:

    • Individuals (IMF)

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

    • Previously self-employed but currently unemployed

      Note:

      COIC will work ETA OICs if the OIC meets COIC criteria.

  2. For offers that meet COIC investigation criteria, prepare Form 13933COIC Investigated OIC Cover Sheet and Form 3210 Application Fee in the OIC section of APGolf. Promptly send them with the following items to the appropriate COIC site for a processability determination:

    • Form 656

    • the OIC application fee and TIPRA payment, if applicable

    • Any written designation of the TIPRA payment from the taxpayer

    • Form 433-A/B

    • A self-addressed return envelope

  3. Notify the taxpayer that the offer has been forwarded to COIC for investigation:

    "You 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 provided. It may be necessary for COIC to contact you and/or third parties to complete this review. Appeals will share the results with you and ask for your comment before using COIC’s information in our final determination of your Offer."

  4. Taxpayers cannot request that Appeals investigate the offer instead of COIC unless they provide extenuating circumstances and the Appeals ATM approves.

  5. On occasion, Appeals may decide to investigate a CDP OIC that meets COIC investigation criteria. Document why you are retaining the offer and inform COIC in the Form 3210 package that you want the offer returned to Appeals for investigation. Secure ATM approval and prepare the APGolf processability package above for the Offer Does not Meet COIC Investigation Criterion.

8.22.7.10.6.1  (03-29-2012)
OIC is Not Processable

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

    1. Mail Letter 3821 explaining why the OIC is not processable along with Form 656 back to the taxpayer

    2. Fax the hearing officer a copy of the Letter 3821 and Form 2515, which reflects the designation of monies received with the offer

    3. Refund the $150 application fee

  2. The issuance of Letter 3821 advises the taxpayer to contact the Appeals hearing officer if they disagree with the decision to return the offer.

  3. If the taxpayer disputes the return of their offer to the Appeals hearing officer, the taxpayer will need to show how the IRM 5.8.2.4.1 processability criteria was incorrectly applied. If the hearing officer agrees that the return was in error, resubmit Form 656 to COIC for processability with the new information. The taxpayer will not have to make another TIPRA payment but will need to resubmit the $150 application fee since this was refunded to them.

  4. If the return was not in error, close the OIC WUNO when closing the CDP case:

    1. Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason

    2. Document the not-processable determination in the attachment to the determination/decision Letter

      Example:

      "The offer in compromise submitted during your Collection Due Process hearing was returned on 01/31/2011 because it was not processable."

8.22.7.10.6.2  (03-29-2012)
OIC is Processable

  1. If COIC determines the offer is processable, COIC will:

    1. Sign Form 656

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

    3. Input the TC 480 jurisdiction 1 for retained OIC periods and STAUP EH and non-CDP periods to status 71 (if not in status 53 or 60)

    4. Fax a copy of Form 13933 to Hearing Officer within 14 days

  2. When COIC notifies you that they are retaining and investigating a CDP OIC, suspend the CDP and OIC WUNOs in ACDS by selecting Action Code SU, sub action PI and suspense action E/OIC.

  3. When COIC returns the case, take the CDP WUNO out of suspense with Action Code SU, sub action TO.

8.22.7.10.6.3  (03-29-2012)
COIC-Investigated OICs

  1. COIC takes the following actions on processable OICs that it retains to investigate:

    1. Add the CDP OIC to AOIC

    2. Work to completion OICs that can be accepted

    3. Provides Appeals a preliminary recommendation (rejected, returned, mandatory withdrawal) on offers they cannot accept

  2. If COIC discovers complex issues, COIC will document the issue, delete the case from AOIC and return the case file to Appeals for consideration.

  3. With not less than one year left on the TIPRA statute, COIC will:

    1. Return Form 656, investigation and administrative files, and all history to Appeals for a final determination

    2. Mail the taxpayer a preliminary recommendation letter including copies of the Asset/Equity Table and Income and Expense Table if COIC prepared them. The letter will also inform the taxpayer that the OIC is being returned to Appeals for a final determination.

  4. If COIC is unable to make a preliminary recommendation in this time, COIC will provide a status report to the hearing officer on the investigation.

  5. If the status report gives the hearing officer concern that Appeals may not be able to make a final determination within 24 months, Appeals may ask COIC to return the case, deleting it from AOIC and inputting TC 480 and STAUPs as necessary to prevent collection activity.

8.22.7.10.6.4  (03-29-2012)
COIC Recommends Acceptance

  1. If COIC accepts the OIC, COIC will:

    1. Issue the acceptance letter, which is a final determination under IRC 7122(f), Deemed acceptance of offer not rejected within certain period

    2. Forward original documents to MOIC and the required documents to the Public Inspection File

    3. Return to Appeals copies of the acceptance letter, Form 7249, and Form 656

    4. STAUP CDP periods to status 71 to prevent them from reverting to collection status when TC 520 cc 76/77 is reversed

  2. Once you are notified of the accepted offer, ask the taxpayer to sign Form 12257 to resolve the CDP. If the taxpayer declines to sign, adopt the decision to accept the offer in the attachment to the Determination/Decision and close the CDP/EH.

  3. To 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"

8.22.7.10.6.5  (03-29-2012)
COIC Recommends Rejection, Return, Mandatory Withdrawal

  1. If COIC makes any recommendation other than acceptance of the offer, Appeals will make the final determination. COIC’s recommendation to reject, return, or withdraw is not a final determination under IRC 7122(f). A final determination must be made by Appeals within 24 months from the date the offer was received.

  2. Share the results of COIC’s investigation with the taxpayer and request comments before using the information in a final determination. This is necessary to prevent a prohibited ex parte communication. See IRM 8.1, Appeals Function, for more information on ex parte communication.

  3. Offers with a preliminary recommendation by COIC will be treated as priority. Work these with a goal of making a final determination within 120 days of the date the preliminary recommendation is received. You need not contact COIC when the offer cannot be closed within that time frame.

  4. If COIC erroneously issues a final rejection letter, COIC will not rescind the rejection letter. Appeals will instead inform the taxpayer that the OIC is under Appeals’ jurisdiction and Appeals will address the OIC in the determination/decision letter. Locate the COIC CDP coordinator http://appeals.web.irs.gov/tech_services/collection/cdp.htm and request that:

    1. The offer be reopened on AOIC

    2. COIC input TC 480 (Jurisdiction Code 3)

    3. COIC send the offer to you

8.22.7.10.7  (03-29-2012)
Mandatory Withdrawal Procedures for Missed Periodic Payment

  1. If a taxpayer fails to make a periodic payment other than the first installment, the offer may be treated as a withdrawn.

  2. When COIC is conducting the preliminary OIC investigation, they also monitor periodic payments. If a taxpayer fails to make a payment, COIC notifies the taxpayer by telephone or letter to make up the missed payment. If the taxpayer fails to do so, the OIC is returned to Appeals.

  3. When Appeals is conducting the OIC investigation, the hearing officer is responsible for monitoring the periodic payments. If you discover a missed payment, notify the taxpayer by telephone or letter to make the payment and allow 15 calendar days to do so. If the taxpayer pays the missed payment within 15 days, continue with the offer investigation.

  4. If the taxpayer fails to pay the missed payment, close the OIC WUNO as a mandatory withdrawal with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 16 withdrawal
    3 Request that APS:

    • input TC 482 using the deadline date the taxpayer failed to pay over the missed payment.

    • close the offer off AOIC as withdrawn with the same date
    4 When you close the CDP, use this language in the attachment to the determination/decision Letter:

    Example:

    You submitted a deferred payment offer which required you to make periodic payments according to a schedule you proposed. When you did not make those payments, we reminded you of the requirement but you did not make the payments. Under the law, your offer is withdrawn.

  5. To close out the OIC WUNO, send APS the:

    • Form 5402 for the OIC WUNO

    • OIC CAR

      Note:

      The hearing officer will retain the closed OIC case filed with the CDP file in case the taxpayer raises the OIC issue in Tax Court.

8.22.7.10.8  (03-29-2012)
Return Procedures for Dishonored Payments

  1. If COIC discovers a dishonored application fee and/or TIPRA payment after the offer is deemed processable, COIC returns the offer to the taxpayer with a letter giving 30 days to make the payment good and to request reconsideration.

  2. If the taxpayer does not provide replacement payment, COIC notifies the hearing officer of the dishonored payment. Appeals will close the OIC WUNO as a return with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Generate Letter 3821, Appeals Received Your Offer in Compromise And We Cannot Consider Your Offer, in APGolf and check the required forms boxes explaining why the OIC is being returned.
    4 request that APS:

    • Input TC 482 using the date APS issues the Letter 3821

    • Close the control on AOIC with the same date

    • Return Form 656 with Letter 3821
    5 When you close the CDP, use this language in the attachment to the determination/decision Letter:

    Example:

    You submitted an Offer in Compromise but did not provide the required 20% down payment and/or the first initial payment of a proposed Periodic Payment Offer. Your offer was returned.

  3. To close out the OIC WUNO, send APS the:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Letter 3821 to be issued to the taxpayer with Form 656

      Note:

      The hearing officer will retain the closed OIC case filed with the CDP file in case the taxpayer raises the OIC issue in Tax Court.

8.22.7.10.9  (03-29-2012)
Return Procedures for Bankruptcy

  1. The Service does not consider an offer while a taxpayer is in bankruptcy. When a taxpayer files bankruptcy, the Bankruptcy Code provides legal remedies and procedures to resolve the government’s claim.

  2. If the taxpayer files bankruptcy while a CDP OIC is being considered, close the OIC WUNO as a return with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Generate Letter 3821, Appeals Received Your Offer in Compromise And We Cannot Consider Your Offer, in APGolf and check the bankruptcy box explaining why the OIC is being returned.
    4 request that APS:

    • input TC 482 using the date APS issues the Letter 3821

    • close the control on AOIC with the same date

    • return Form 656 with Letter 3821
    5 When you close the CDP, use this language in the attachment to the determination/decision Letter:

    Example:

    You submitted an offer in compromise and subsequently filed bankruptcy while your offer was under consideration. We cannot consider an offer while you are in bankruptcy. As a result, your offer was returned.

  3. To close out the OIC WUNO, send APS the:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Return Letter 3821 to be issued to the taxpayer

      Note:

      The hearing officer will retain the closed OIC case filed with the CDP file in case the taxpayer raises the OIC issue in Tax Court.

8.22.7.10.10  (03-29-2012)
Return Procedures for Death of Taxpayer

  1. Consideration of an OIC must be terminated upon the death of a single offer proponent. The date of termination and the date for the TC 482 shall be the date of the taxpayer's death. A sample OIC Termination Letter is available on the Appeals OIC Web Page

  2. If the offer under consideration was submitted jointly by a husband and wife and only one spouse died, follow the procedures in IRM 5.8.10.4, Offer in Compromise, Special Case Processing, Death of Taxpayer, to determine whether to continue with consideration of the jointly submitted offer.

  3. If the offer must be terminated due to the death of the taxpayer while the CDP OIC is being considered, close the OIC WUNO as a termination with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason description.
    3 Generate the Termination Letter using the template found on the Appeals OIC Web Page
    4 request that APS:

    • input TC 482 using the date APS issues the Termination Letter

    • close the control on AOIC with the same date
    5 When you close the CDP, use this language in the attachment to the determination/decision Letter:

    Example:

    The offer in compromise was terminated due to the death of the taxpayer while the offer was under consideration.

  4. To close out the OIC WUNO, send APS the:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Termination Letter to be issued to the taxpayer

      Note:

      The hearing officer will retain the closed OIC case filed with the CDP file.

8.22.7.10.11  (03-29-2012)
Withdrawing a CDP When an OIC is Pending

  1. Taxpayers may ask to withdraw a CDP hearing to have their offer considered by COIC rather than Appeals. Explain the consequences of such a withdrawal based on whether the OIC meets COIC investigation criteria or not.

  2. If the OIC meets COIC investigation criteria, inform the taxpayer that withdrawal of the CDP results in:

    1. No verification by Appeals that all applicable laws and procedures have been followed

    2. The OIC being retained and investigated by COIC

    3. COIC issuing a decision on the OIC with a right to appeal

    4. No right to petition Tax Court for an abuse of discretion review for the CDP

  3. If the taxpayer withdraws the CDP/EH hearing, inform COIC by encrypted email. COIC will continue their investigation of the OIC and will not return any paperwork to Appeals.

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

  5. If the OIC does not meet COIC investigation criteria, inform the taxpayer that withdrawal of the CDP results in:

    1. No verification by Appeals that all applicable laws and procedures have been followed

    2. The OIC being retained and investigated by Appeals under its authority as per Delegation Order 8-8

    3. Appeals issuing a decision on the OIC with no further right to an appeal

    4. No right to petition Tax Court for an abuse of discretion review for the withdrawn CDP

8.22.7.10.12  (03-29-2012)
COIC Receives CDP Request While Investigating OIC

  1. Offer Examiners are required to make a lien determination as part of the initial case review. COIC may request an NFTL and subsequently receive a CDP request from the taxpayer while their offer is under consideration.

    Reminder:

    There is no prohibition against filing an NFTL while an offer is pending.

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

  3. The Appeals employee assigned the CDP/EH case where COIC is investigating the OIC will:

    1. Send the Appeals Uniform Acknowledgement Letter

    2. Update the case activity record to note COIC’s investigation of the OIC

    3. Verify the input of the TC 480 and the CSED suspension

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

    5. Issue the Substantive Contact Letter within 30 days of receiving COIC’s recommendation

8.22.7.10.13  (03-29-2012)
COIC Receives OIC Directly from Taxpayer

  1. If COIC receives an OIC directly from the taxpayer and there is an open CDP/EH case, COIC will determine if the OIC meets their criteria. If it does, they will investigate the OIC and send the hearing officer an email to inform them of the date they received the OIC.

  2. The Appeals employee will:

    1. Update the case activity record to note COIC’s investigation of the OIC

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

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

    4. Request APS input on OIC WUNO new STAT code "TIPRA" with the OIC received date + 2 years

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

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

  3. If the OIC does not meet COIC criteria, COIC will forward the offer to Appeals after completing a processability determination.

8.22.7.10.14  (03-29-2012)
Corporate Trust Fund Offers

  1. Before an OIC for trust fund liability can be considered, either:

    • The TFRP must be assessed or forwarded for assessment against all responsible persons

    • The trust fund portion of the taxes must be paid

    • The RO must have determined to not assert the TFRP

  2. If a taxpayer proposes submitting a trust fund OIC in CDP, explain that Appeals cannot consider a corporate offer until the trust fund portion of the taxes is paid or assessed. Advise the taxpayer that Appeals will ask Collection to complete a TFRP investigation and the responsible person(s) must either:

    • Agree to assessment of the TFRP or

    • Pay the trust fund balance

  3. Advise the taxpayer that acceptance of a corporate offer does not preclude IRS from pursuing collection of the TFRP.

  4. On receipt of a corporate offer:

    1. Generate Form 3210 and Letters 3820 and 3821 in APGolf and forward to COIC for a processability determination

    2. Request that APS establish a WUNO for the OIC

  5. Refer to the table below for additional processing actions required:

    If... Then... Actions Required
    Responsible person(s) were advised an offer would not be considered unless the TFRP was assessed or full paid and they submit an offer anyway The offer is deemed Solely to Delay

    • OIC to COIC for processability determination

    • once the OIC is returned, it is rejected by Appeals in the CDP determination to close the 24 month TIPRA statute
    Responsible person(s) were not advised an offer would not be considered unless the TFRP was assessed or full paid The offer is held pending the TFRP determination

    • OIC to COIC for processability determination

    • ARI to Compliance for TFRP determination per IRM 8.22.7.4.2

    • hold the OIC pending assessment or collection of TFRP

    TFRP amount is assessed or full paid The offer is ready for consideration

    • OIC to COIC for processability determination

    • Appeals proceeds with consideration of the OIC

8.22.7.10.14.1  (03-29-2012)
Trust Fund Computation

  1. To have a corporate offer considered, the taxpayer can choose to full pay the trust fund portion of the liability to avoid a TFRP investigation.

  2. The corporate taxpayer has the right to designate OIC payments made prior to the offer being accepted. Appeals may need to know the trust fund amount to apply designated payments properly or provide a trust fund payoff to the taxpayer. In most instances, Appeals will be able to compute the trust fund amount by following IRM 5.7.4.3 Calculating the TFRP.

  3. Where computing the trust fund amount is difficult or time consuming, Collection will provide trust fund computations using the Automated Trust Fund Recovery program. Forward an encrypted email containing the corporate taxpayer’s name, TIN, and the periods involved to the Appeals Program Analyst responsible for the OIC program.

  4. Trust fund computations will generally be emailed back to the requestor within 5-7 business days.

  5. Provide the taxpayer with a copy of Collection’s trust fund computation to avoid ex parte. Give the taxpayer a reasonable amount of time (14 business days) to pay the trust fund portion and submit an OIC. See IRM 8.1, Appeals Function, for more information on ex parte communication.

  6. If the corporate taxpayer pays the trust fund portion in full:

    1. Send the Form 656 to the appropriate COIC campus for a processibility determination

    2. Prepare Form 4844 for input of ASEDR Definer Code 4 (see IRM 5.7.3.9.1 Input of ASEDR Definer Codes) to reflect full payment of the trust fund tax and send to ATM for approval

    3. Attach the approved Form 4844 to an encrypted email and send it to one of the following email addresses based on the 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

    4. The subject line of the email will look like this: "B 4844 ASEDR" ; B = BMF; 4844 = Form number

8.22.7.10.14.2  (03-29-2012)
TFRP Investigation

  1. A corporate officer may offer to sign Form 2751 in Appeals to avoid the TFRP investigation by Collection. Appeals will not be involved in any aspect of:

    • Soliciting or securing Form 2750 or Form 2751

    • Determining who is responsible for the TFRP

    • Determining non-assertion based upon collectibility

    Securing these forms or making liability determinations compromises the independence of Appeals.

  2. Revenue officers are responsible for all aspects of the TFRP on CDP cases that originate from the field per IRM 5.1.9.3.7. If the taxpayer proposes to submit an OIC with Trust Fund taxes and doesn't full pay the trust amount, issue an ARI to Collection to complete a TFRP investigation. See IRM 8.22.7.4.2 for instructions on how to issue an ARI to Collection to complete a TFRP investigation.

    Exception:

    If you identify public policy or not in the governments best interest grounds to reject the offer, an ARI to investigate the TFRP is not necessary.

  3. Once the TFRP investigation is complete, Collection returns one of the following results to Appeals:

    • Letter(s) 1153 was issued and all responsible persons signed Form 2751, agreeing to the assessment of the TFRP

      Note:

      If extenuating circumstances are present that prevent the assessment against all responsible officers, the revenue officer may recommend that an offer should still be considered if the governments interests are sufficiently protected and if the other responsible persons have agreed to assessment of the TFRP. See IRM 5.8.4.20.1

    • Trust fund balance has been full paid

    • The decision not to assert the TFRP has been made

    • One of the responsible individuals filed a protest of proposed TFRP and thus, the offer can be deemed to be submitted "solely to delay"

  4. Appeals will not question Collection's TFRP determination since that is solely their responsibility.

  5. Once the TFRP investigation is complete, proceed with evaluating the offer unless one of the principals appeals the proposed TFRP assessment.

8.22.7.10.15  (03-29-2012)
Terminated OICs

  1. The taxpayer must strictly comply with the agreement to timely file returns and pay taxes during the 5 year period after a doubt as to collectibility or effective tax administration offer is accepted. The Service is legally authorized to terminate the OIC and reinstate the original tax liability if there is a default by the taxpayer.

  2. When the Service determines that an OIC is in default, it sends the taxpayer a default letter to cure the noncompliance items. If the taxpayer does not cure the default, the OIC is terminated. A taxpayer does not have a right to appeal the termination of an OIC.

  3. Appeals retains jurisdiction of offers accepted through CDP or offers rejected by Collection and subsequently accepted in Appeals. If an offer accepted in Appeals later defaults, Appeals will attempt to cure the noncompliance items.

  4. Appeals cannot "reinstate" an OIC where there was a default and termination was legally authorized. You may consider a new OIC proposed by the taxpayer as a collection alternative pursuant to IRC 6330(c)(2)(a)(iii), Issues at hearing.

  5. The taxpayer may contend that the termination of the OIC was not authorized because there was no default or because there was no "material breach." The only relevant question is whether there was a default of an expressed condition. Whether the taxpayer "materially breached" the OIC or has "substantially complied" with the OIC is irrelevant.

  6. If you determine that there was no default and the termination of the OIC was not authorized, the purported termination by the Service had no legal effect. The OIC does not need to be "reinstated" because legally, the OIC never ceased to be in effect. Issue a decision incorporating the determination that the OIC is in effect and ensure that the Service's records reflect this.

8.22.7.11  (03-29-2012)
Agreed Resolution and Form 12257

  1. Form 12257 serves as a summary Notice of Determination and waives the taxpayer's right to go to court and the suspension of levy action. When you reach an agreed resolution, ask the taxpayer to sign Form 12257 Summary Notice of Determination after advising that:

    1. the taxpayer is not obligated to sign and the agreed resolution will be input with or without the Form

    2. the right to petition Tax Court is waived

    3. the agreed case resolution is input more quickly as Appeals will not need to delay input by 60 days to see if the taxpayer petitions Tax Court

8.22.7.12  (03-29-2012)
Agreed Resolution and Open TDI

  1. Resolve open Taxpayer Delinquent Investigation (TDI) filing requirements when resolving a case through:

    • IA

    • OIC acceptance

    • CNC, except for cases closed with a hardship closing code, as described in IRM 8.22.7.7 , Currently Not Collectible.

      Note:

      Note how the TDI module was resolved in the "Remarks" section of Form 5402.

  2. Policy Statement P-5-133, Little or No Tax Due, allows closing of a TDI because the non-filing is not willful and:

    • There would be no tax due on the delinquent return

    • There would be minimal tax due on the return as defined in IRM 5.19.2-2, Policy Statement P-5-133 Little or No Tax Due

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

  3. Document 6209, Section 11.8(3) lists TDI closing codes. See IRM 5.1.11.7, Del Ret Closures, for more information on closing TDIs.


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