8.22.7  Alternatives to Collection Action

Manual Transmittal

November 05, 2013

Purpose

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

Material Changes

(1) See the table below for material changes in this IRM:

Current IRM Description of Change Prior IRM
8.22.7.1, Overview Clarified that if the CDP liability is full paid, Appeals does not have jurisdiction to consider a collection alternative for non-CDP period(s) alone. Clarified that Appeals follows Part V by including CDP and non-CDP periods in IAs, OICs and CNCs.  
IRM 8.22.7.1.1, Collection Information Statement (CIS) Incorporated Appeals Interim Guidance AP-08-0613-02, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project New
IRM 8.22.7.1.2, Form 12257 Summary Notice of Determination Clarified that Form 12257 is for when you reach an agreed resolution in a timely CDP. 8.22.7.11
IRM 8.22.7.4, Appeals Referral Investigation (ARI) Added:
  • An ARI may be issued if the appropriateness of a collection alternative can't be determined without additional information.

  • An ARI is not necessary if the taxpayer does not qualify for the collection alternative requested due to noncompliance.

 
IRM 8.22.7.4.1, ARI to Verify Collection Information Removed the requirement that ARI follow-ups are made through the Appeals ATM.  
IRM 8.22.7.4.2, ARI for Corporate and LLC Trust Fund Offers Expanded to include suggested language for the following trust fund ARI situations:
  • Doesn't full pay the trust amount

  • Proposes to full pay the trust fund portion, or

  • Asks to designate its OIC payments

Removed the requirement that an ARI follow-ups are made through the Appeals ATM.
 
IRM 8.22.7.5, Installment Agreements (IA) Removed content on user fees as this information is on Form 433-D.  
IRM 8.22.7.5.1, Direct Debit Installment Agreements (DDIA)
  • Clarified that Appeals needs either a voided check or the taxpayer's routing and account number

  • Removed the reference to Form 433-A and replaced with CIS.

 
IRM 8.22.7.5.2, Manually-Monitored Installment Agreements (MMIA) Added Restitution Based Assessments and related civil assessments to the list of IAs needing to be processed as an MMIA.  
IRM 8.22.7.6 Extension of Time to Pay
  • IRM 8.22.7.7.1 Extension of Time to Pay-Third Party Assets was incorporated into IRM 8.22.7.6, Extension of Time to Pay.

  • Removed the requirement that an extension must be based on evidence that assets are in the process of being liquidated.

IRM 8.22.7.7.1
IRM 8.22.7.7, Currently Not Collectible (CNC)
  • Removed the reference defining a current CIS as that is in the new CIS subsection.

  • Removed the reference to mandatory follow-ups.

  • Added instruction for completing a Form 53 if the closing code is CC 13, In-business corporation. APS will send the paper Form 53 to Collection for input.

 
IRM 8.22.7.8, Adjustments-Form 3870 Removed the "line" information from the table as it is evident on the return and also changes as returns are updated.  
IRM 8.22.7.8.1, Interim Adjustments Corrected APS E-mail address for interim adjustments.  
IRM 8.22.7.9.1, NFTL Withdrawals Removed the table with hyperlinks to SBSE Withdrawal Interim Guidance and replaced with a reference to the new IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien .This IRM incorporates the old SBSE IG on withdrawals.  
IRM 8.22.7.9.1.1, DDIA NFTL Withdrawals Replaced content with a citation to the SBSE IG.  
IRM 8.22.7.9.1.2, Withdrawal of NFTL after Release Replaced content with a citation to the SBSE IG.  
IRM 8.22.7.9.1.3, NFTL Withdrawal Procedures Added:
  • Clarification that ATM signs Form 13794-W.

  • Advisory will process the request within 5 business days.

  • A copy of the withdrawal is available through ALS and will be returned by CLO if requested by Appeals.

 
IRM 8.22.7.10, Offers in Compromise (OIC) Replaced the word "investigate" with "consider" throughout this subsection.  
IRM 8.22.7.10.2, Associating Separated CDP and OIC Cases This subsection contains guidance that used to be covered in both IRM 8.22.7.10.12 COIC Receives CDP Request While Investigating OIC and IRM 8.22.7.10.13 COIC Receives OIC Directly from Taxpayer: The new subsection includes a discussion of:
  • If a pending OIC is not addressed in your Notice of Determination, the CDP may be remanded by the Tax Court. You must associate pending OICs with your CDP/ EH case to avoid this.

  • A discussion of Appeals jurisdiction over OICs that arise while a CDP is open.

  • A discussion of ecase and how to confirm an OIC has been submitted.

  • What to do if an OIC is discovered pending in Collection.

  • What to do if an OIC appeal is discovered pending in Appeals.

  • Removed requirement to tell APS the RECDATE & ASGNDATE. These are determined within APS when the OIC WUNO request is received and assigned.

8.22.7.10.12 COIC Receives CDP Request While Investigating OIC and IRM 8.22.7.10.13 COIC Receives OIC Directly from Taxpayer
IRM 8.22.7.10.3, Requesting an OIC WUNO Removed requirement to add up the assessed total and enter in the PROPDTAX field for the earliest period.  
IRM 8.22.7.10.4, Receipt of Form 656
  • Removed instruction to total the assessed balance and enter in the PROPDTAX field in ACDS.

  • Removed the instruction to verify the TC 480/ STAUP since input is Collection's responsibility.

  • Added instruction to address discrepancies between a taxpayer's address shown on Form 656 and IDRS.

  • Incorporated IRM subsection 8.22.7.10.2 Non-CDP Periods in the Offer into this subsection for better flow.

  • In parenthesis (4), 3rd bullet, removed reference to closely held corporation, partnership and LLC, and replaced with "sole proprietorship or an LLC where the single member owner is solely responsible"

 
IRM 8.22.7.10.5, Processing Offers that do not Meet COIC Investigation Criteria Updated list of OICs that COIC does not investigate.  
IRM 8.22.7.10.6, Processing Offers that Meet COIC Investigation Criteria Removed the statement "Appeals will share the results with you" and replaced with "COIC will share the results of their investigation with you."  
IRM 8.22.7.10.6.3, COIC-Investigated OICs Added voluntary withdrawal as a resolution option.  
IRM 8.22.7.10.6.5, COIC Recommends Rejection, Return, Mandatory Withdrawal Removed requirement to share COIC's investigation with the taxpayer since COIC does that before the OIC is returned to Appeals.  
IRM 8.22.7.10.6.5, COIC Recommends Rejection, Return, Mandatory Withdrawal Incorporated Appeals Interim Guidance AP-08-0613-02, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project  
IRM 8.22.7.10.7, Mandatory Withdrawal for Missed Periodic Payment
  • Added guidance that generally, the OIC and CDP should be close together in this circumstance.

  • In step 3 of the Step Table, removed the instructions to request APS to input a TC 482 and close AOIC. The TC 482 will be generated when APS closes the OIC on AOIC.

 
IRM 8.22.7.10.8, Return Procedures for Dishonored Payments In step 4 of the Step Table, removed the instructions to request APS to input a TC 482 and close AOIC. The TC 482 will be generated when APS closes the OIC on AOIC.  
IRM 8.22.7.10.9, Return Procedures for Bankruptcy
  • When the taxpayer files bankruptcy, the OIC WUNO will be closed at once. The CDP case will remain open.

  • In step 4 of the Step Table, removed the instructions to request APS to input a TC 482 and close AOIC. The TC 482 will be generated when APS closes the OIC on AOIC.

 
IRM 8.22.7.10.10, Return Procedures for Death of Taxpayer The OIC WUNO will be closed at once when the taxpayer dies. The CDP case will remain open.  
IRM 8.22.7.10.11, Withdrawals New subsection to cover both CDP and OIC withdrawals as they relate to combination CDP OIC cases. New
IRM 8.22.7.10.11.2, Withdrawal of the OIC New subsection discusses:
  • TP may withdraw an OIC while its under consideration.

  • if a withdrawal is not hand-delivered or received by certified mail, it is considered withdrawn when it is acknowledged in writing. For a CDP OIC, Form 12257 or the closing letter must acknowledge the taxpayer's withdrawal of the offer to close the TIPRA statute.

New
IRM 8.22.7.10.12, Corporate and LLC Trust Fund Offers Added:
  • Offer from an LLC where the LLC is the liable taxpayer .

8.22.14
IRM 8.22.7.10.12.1, Trust Fund Computation
  • Removed the instruction that Appeals manually computes the trust fund amount.

  • Added instruction to request an ARI to Collection per IRM 8.22.7.4.2 ARI for Corporate and LLC Trust Fund Offers. Collection will calculate the trust fund balance and process any payment as per IRM 5.7.4.4, Payments by Responsible Party on Behalf of the Employer.

  • Removed the instruction for Appeals to update the ASEDR indicator. If the RO secures full payment of the trust fund, they'll address the indicator per IRM 5.7.3.9.1 Input of ASEDR Definer Codes.

8.22.7.10.14.1
IRM 8.22.7.10.12.2, TFRP Investigation Removed the instruction that an ARI to investigate the TFRP is not necessary if you identify public policy or not in the governments best interest grounds to reject the offer. 8.22.7.10.14.2
IRM 8.22.7.10.13, Doubt as to Liability (DATL) Offers Discusses DATL OICs in CDP and what to do when:
  • DATL is precluded.

  • DATL is not precluded.

  • DATL is precluded but liability was determined in Appeals.

8.22.8.
IRM 8.22.7.10.14, Terminated OICs Changes include:
  • When an Appeals accepted OIC is proposed for default, the MOIC unit will send an OI to Appeals to consider issuing a formal letter of default.

8.22.7.10.15
Throughout
  • Editorial changes including grammar, spelling, and minor clarification.

  • Plain language changes.

  • References to the $150 application fee for OICs were removed.

  • Replaced "a NFTL" with "an NFTL." Abbreviations that start with the consonants F, H, L, M, N, R, S and X attract an, because they start with vowel sounds.

 

Effect on Other Documents

IRM 8.22.7 dated September 21, 2012 is superseded.

Audience

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

Effective Date

(11-05-2013)

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

8.22.7.1  (11-05-2013)
Overview

  1. This section provides guidance to hearing officers considering alternatives to collection action in CDP, EH and retained jurisdiction cases.

  2. All open tax periods must be included when resolving a case through

    • Installment Agreement (IA)

    • Offer in Compromise (OIC)

    • Currently not Collectible (CNC)

  3. If a CDP liability is full paid, Appeals does not have jurisdiction to consider a collection alternative or CNC for non-CDP period(s) alone.

8.22.7.1.1  (11-05-2013)
Collection Information Statement (CIS)

  1. A current Collection Information Statement (CIS) is generally required if a taxpayer requests an alternative to collection action and does not qualify for a:

    • Guaranteed, Streamlined, In-Business Trust Fund Express IAs, or

    • Currently not Collectible (CNC) hardship status in limited situations. See IRM 5.16.1.2.9.

    A CIS is current if it is dated 12 months or less from the date received in Appeals.

  2. Treat a current CIS that comes with a CDP referral as verified since Collection reviewed it or had an opportunity to review it. If a new CIS is received in Appeals from the taxpayer, the CIS may be referred to Collection for review if the CDP is a field sourced case. See IRM 8.22.7.4.1

  3. A taxpayer's financial information may be reported on:

    • Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.

    • Form 433-B, Collection Information Statement for Businesses

    • Form 433-F, Collection Information Statement

    • Form 433-A (OIC) and Form 433-B (OIC)

  4. Form 433-F is routinely used by ACS and campuses. If Collection requested a Form 433-F and the taxpayer provided it, Appeals will rely on it.

    Exception:

    If the taxpayer proposes an OIC as a collection alternative, the taxpayer must complete the CIS that is included in Form 656-B, the offer in compromise booklet.

  5. Ensure current Allowable Living Expenses are used prior to making a determination or decision that requires a CIS.

8.22.7.1.2  (11-05-2013)
Form 12257 Summary Notice of Determination

  1. Form 12257 serves as a summary Notice of Determination that waives the taxpayer's right to go to court and the suspension of levy action.

  2. When you reach an agreed resolution in a timely CDP, 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 right to a 30 day suspension of levy action is waived

    4. Without it, Appeals delays the input of the agreed resolution by 60 or more days to see if the taxpayer petitions Tax Court

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

  1. Credit reports are 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.

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

    1. INOLE

    2. IMFOLI and/or BMFOLI attached to or within the secure E-mail

  3. Your ATM:

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

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

    3. Forwards a secure mail 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 mail within two business days of the ATM mail.

8.22.7.3  (11-05-2013)
Third-Party Contacts

  1. It is the Service’s practice to obtain information relating to a liability or collectibility determination from the taxpayer whenever possible. In the event that you must contact a third party to resolve a case, do not contact the third party without first:

    • Confirming the taxpayer received advance third party notification by checking IDRS for Transaction Code 971 Action Code 611, or

    • Providing the taxpayer with Letter 3164

  2. For a CDP with an OIC, there is no need to verify advance third party notification as Form 656, Offer in Compromise, operates as a waiver of the requirement.

8.22.7.4  (11-05-2013)
Appeals Referral Investigation (ARI)

  1. Generally, Appeals needs information from both Collection and the taxpayer to consider disputed issues and alternatives to collection action. An Appeals Referral Investigation (ARI) to Collection may be appropriate if:

    • The appropriateness of a collection alternative or CNC hardship can't be determined without additional information that Appeals can't secure from internal sources or the taxpayer

    • The taxpayer proposes a corporate or LLC Trust Fund offer requiring a TFRP calculation or investigation

  2. If the taxpayer proposes a collection alternative but does not qualify for the alternative based on other facts (e.g. non-compliance), an ARI is not necessary.

8.22.7.4.1  (11-05-2013)
ARI to Verify Collection Information

  1. Prepare Form 2209, Courtesy Investigation, or Form 10467, Appeals Division 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 consider [specify issue]. Appeals has asked Collection to review the information provided while we retain jurisdiction of your case. It may be necessary for Collection to contact you and/or third parties for information to complete the review. You'll have an opportunity to respond once the results of the review are shared with you."

  3. Route the ARI to the revenue officer group covering the taxpayer's zip code. This is found 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 contact may be necessary

  4. The deadline for completing an 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 via secure mail within 30 days of the deadline for completing the ARI (generally 45 days after issuance). Limit your inquiry to the status of the ARI. Print Collection's response and associate it with your case file.

  6. The results of the ARI must be shared with the taxpayer. If Collection didn't share a copy, send the results to the taxpayer with a letter asking for their review. 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  (11-05-2013)
ARI for Corporate and LLC Trust Fund Offers

  1. An ARI is appropriate when a corporate/LLC taxpayer proposes an OIC with Trust Fund taxes.

  2. Prepare Form 2209 or Form 10467 and add in the remarks section the appropriate language from the table below:

    If the taxpayer... Tell Collection in the ARI... And tell the taxpayer in a letter...
    doesn't propose to fully pay the trust fund balance The taxpayer submitted an OIC for trust fund tax. Please complete a TFRP investigation in accordance with IRM 5.8.4.22.1, Trust Fund Liabilities. The earliest ASED expires [fill in date]. You requested Appeals consider an offer to settle a trust fund tax liability. IRS policy requires an investigation of who is liable under IRC 6672 for the unpaid trust fund taxes before your offer can be considered. Appeals has asked Collection to conduct this investigation while we retain jurisdiction of your case. It may be necessary for Collection to contact you and/or third parties for information. Appeals will share the results of the investigation and give you an opportunity to respond.
    proposes to fully pay the trust fund balance The taxpayer is interested in an OIC and asked to pay the Trust Fund (TF) balance. Please provide [person proposing to pay] a payoff for the TF balance and allow at least 14 days for receipt of the payment. Process any payment per IRM 5.7.4.4 and advise Appeals whether the TF balance was fully paid. You offered to full pay the trust fund liability to have your corporate/LLC trust fund OIC considered. Collection will calculate the trust fund balance, provide you with a payoff and process your payment. Appeals will retain jurisdiction of your case.
    asks to designate OIC payments to pay trust fund prior to acceptance The taxpayer has chosen to designate its pre-acceptance OIC payments. Please provide Appeals with the Trust Fund balance for the periods below so that the designated payments can be properly applied. No letter necessary. Trust fund calculations are a clarification of the administrative file.

  3. Route the ARI to the revenue officer group covering the taxpayer's zip code. This is found in the ICS Parameter Tables under the Employee Tables option. 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.

  5. Follow up with Collection via secure mail within 30 days of the deadline to complete the ARI. Print Collection's response and associate it with your case file.

  6. The results of the ARI must be shared with the taxpayer. If Collection didn't share a copy, send the results to the taxpayer with a letter asking for their review. 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  (11-05-2013)
Installment Agreements (IA)

  1. Appeals may 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 may 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 IA is appropriate. See IRM 8.22.6.9, Tax Cases Controlled by the Department of Justice.

  2. IAs must be a document signed by taxpayer and IRS, or a written confirmation of an agreement mailed or delivered to the taxpayer. 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. An ARI to Collection to address TFRP is not necessary when the IA includes trust fund taxes owed by a corporation or an LLC (when the single member owner is not the liable taxpayer). When considering an In-Business Trust Fund (IBTF) IA, Appeals is not involved in any aspect of:

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

    • Determining who is responsible for the TFRP

    • Determining non-assertion based upon collectibility

    Collection is solely responsible for TFRP determinations and assessment statutes. Securing Forms 2750 or 2751 or making responsibility and collectibility determinations compromises Appeals' independence.

  4. Within 24 hours of a processable request for an IA, request input of TC 971 AC 043 (pending IA) by secure mail 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

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

  6. 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 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.

  7. Make an 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 is based on the facts of the case.

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

  9. 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. APS does 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 is not input until the review is final.

8.22.7.5.1  (11-05-2013)
Direct Debit Installment Agreements (DDIA)

  1. A 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. A CIS, unless the agreement meets streamlined or guaranteed IA criteria

    3. a voided check or the taxpayer's legibly written routing and account number

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

    Caution:

    Avoid delays in DDIA processing by verifying the legibility of a hand written routing and account number.

  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 notice of federal tax lien withdrawal from Collection once certain conditions of the DDIA are met. See IRM 8.22.7.9.1, Notice of Lien Withdrawals for additional information.

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

  7. At closing, select "DDIA" from the Form 5402 Installment Agreement drop down box. This alerts APS to return the "DDIA" to the originator for processing.

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

  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)

    • Restitution Based Assessments and related civil assessments

    • Any other agreement not compatible with IDRS monitoring

  2. At closing, select "MMIA" from the Form 5402 Installment Agreement drop down box. This alerts APS to return the "MMIA" to the originator for processing.

8.22.7.6  (11-05-2013)
Full Pay Within 60 Day Agreement

  1. If a taxpayer proposes an agreement to full pay an ACS-sourced account within 60 days, an agreement is authorized per IRM 5.19.1.5.4, Full Pay Within 60 or 120 Day Agreement. A request may be granted based on:

    • Personal funds available to full pay the balance due

    • Third party assets available to full pay the balance due

    • Refund return or amended return that full pays the balance due

  2. Request in the remarks section of Form 5402 that APS input STAUP to any non-CDP tax periods if the agreement is that the liability will be satisfied within 60 days as well. Advise APS as to the next status and the number of cycles of delay until the next status. See IRM 2.4.28.2CC STAUP Notice Requests, for the sequence of master file status codes.

8.22.7.7  (11-05-2013)
Currently Not Collectible (CNC)

  1. A taxpayer may challenge the appropriateness of collection activity by claiming they are in a hardship situation or by requesting 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. If the taxpayer's CIS confirms hardship 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.

  4. Form 53,Report of Currently Not Collectible Taxes, is generally not needed to report a CDP account CNC. APS inputs CNC using Form 5402 and the closing code 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.

    Note:

    Prepare Form 53 if the closing code is CC 13, In-business corporation. APS sends the paper Form 53 to Collection for input.

  5. When resolving trust fund liabilities as CNC, no ARI is necessary. Note on Form 5402 that Compliance is responsible for any TFRP determination and close the case.

  6. Make an NFTL determination when the aggregate unpaid balance of assessments on the CNC equal or exceed $10,000.

  7. Avoid making a CDP determination that a CDP liability is uncollectible on the basis of TC 530 CC 39 in the module. A TC 530 CC 39 only indicates the module has been assigned in Collection to a hold file.

8.22.7.8  (11-05-2013)
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 item or credit adjustment codes. See Document 6209, Section 8. Below are some of the commonly used codes for adjusting Forms 941, 940, and 1040:

    Form 941
    Item Reference Number Explanation
    003 Adjusted total of income tax withheld
    004 Taxable social security wages
    005 Taxable social security tips
    007 Adjusted total of social security/medicare taxes

    Form 940
    WCA – Wage increase/decrease
    TCA – Tax increase/decrease

    Form 1040
    806-W-2 Withholding tax and/or excess FICA contribution Credit
    807-W-2 Withholding tax and/or excess FICA contribution Debit
    886-Taxable income (valid 7712 and subsequent)
    888-Adjusted gross income adjustment
    889-Self-Employment Tax Adjustment

8.22.7.8.1  (11-05-2013)
Interim Adjustments

  1. A tax adjustment may be required before a case can be closed. Adjustments requested prior to closing a case are called interim adjustments. Interim adjustment requests should be made judiciously.

  2. 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 mail 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 mail to the respective site
    • *AP-PQCS-APS-Campus-FSC ACDS Update Request, or

    • *AP-PQCS-APS-Campus-MSC ACDS Update Request, or

    • *AP-PQCS-APS-Campus-BSC ACDS Update Request

    with the retitled update form and Form 3870
    6 In the subject line of your secure mail, type: CDP Interim Adjustment

  3. APS alerts the originator via mail when the interim adjustment is complete.

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

  1. This subsection describes actions with respect to an NFTL including NFTL withdrawals, and lien releases, discharges and subordinations.

8.22.7.9.1  (11-05-2013)
NFTL Withdrawals

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

    • IRC 6323(j)(1)(A): The filing was premature or not in accordance with the Service's administrative procedures

    • IRC 6323(j)(1)(B):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

    • IRC 6323(j)(1)(C): Withdrawal facilitates the collection of the tax liability

    • IRC 6323(j)(1)(D): 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. See IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien , for examples of when a withdrawal is or is not appropriate.

  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 an NFTL withdrawal:

    Did you determine withdrawal is appropriate under IRC 6323(j)? Then... Does Appeals retain jurisdiction on the NFTL withdrawal?
    Yes
    • Issue a determination or decision that the NFTL will be withdrawn

    • See table IRM 8.22.7.9.1.3, Notice of 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  (11-05-2013)
DDIA NFTL Withdrawals

  1. A taxpayer may request withdrawal of an NFTL under IRC 6323(j)(1)(B) when in an established DDIA. See IRM 5.12.9.3.2.1Special Provisions for Direct Debit Installment Agreements, for conditions which must be met prior to a determination to withdraw under this provision. Appeals ATMs have the delegated authority to approve or deny such requests. For Appeals NFTL withdrawal procedures, see IRM 8.22.7.9.1.3 below.

  2. If a taxpayer enters into an IA other than a DDIA, the taxpayer may still qualify for an NFTL withdrawal under IRC 6323(j)(1)(B) if the IA did not provide for the NFTL.

8.22.7.9.1.2  (11-05-2013)
Withdrawal of NFTL after Release

  1. A taxpayer may request withdrawal of an NFTL under paragraphs (A) and (D) of IRC 6323(j)(1) after the notice has been released. See IRM 5.12.9.9.1, Processing Withdrawals After Release, for conditions which must be met prior to a determination to withdraw under this provision. Appeals ATMs have the delegated authority to approve or deny such requests. For Appeals NFTL withdrawal procedures, see IRM 8.22.7.9.1.3 below.

8.22.7.9.1.3  (11-05-2013)
NFLT Withdrawal Procedures

  1. Use the table below to request an NFTL 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. Use the .pdf Form 13794-W in the Publishing catalog pending deployment in APGOLF.
    2 hearing officer Insert your name in the "requested by" field on the form and forward the Form 13794-W .pdf file by encrypted mail to the ATM.
    3 ATM The ATM signs Form 13794-W and transmits it by encrypted mail or fax to the Collection Advisory manager for the office that covers the taxpayer's residence. See Pub 4235, Collection Advisory Group Addresses, for the appropriate Advisory area office contact information.
    4 Advisory Advisory processes the withdrawal request in accordance with IRM 5.12.6.5 Processing Lien Related Certificates:
    • Confirms the accuracy of Form 13794-W, and

    • Forwards it to Centralized Lien Processing Operation (CLO) within 5 days of receipt

  2. A copy of the withdrawal is available through ALS. If requested by the hearing office, a copy of the withdrawal form is returned by CLO.

  3. When an NFTL is withdrawn in response to a CDP determination, the taxpayer may not request another CDP lien hearing if the NFTL is later filed.

    Exception:

    If Collection timely rescinded the original CDP notice, the taxpayer would be entitled to another CDP lien hearing request.

8.22.7.9.2  (11-05-2013)
Partial Release and Manual Release

  1. Circumstances may dictate a partial release of an NFTL is necessary. 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 Lien Processing Operation (See SERP)

    3. Request acknowledgment of the request for a partial release

    4. Once acknowledgment is received, you may close your CDP without waiting for the partial release to be recorded

  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  (11-05-2013)
Discharges and Subordinations

  1. If a taxpayer requests a subordination or discharge of a tax lien, see the table below:

    Alternative Definition
    Discharge- IRC 6325(b) Permits the Service to discharge property from a tax lien. 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, Instructions on How to Apply for 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 a tax lien 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, Instructions on How to Apply 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 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.

  3. Advisory considers the request, processes any payments and issues the certificate. Advisory shares the results of the request with the taxpayer.

  4. If Advisory rejects the discharge/subordination request and the taxpayer disputes it, review the decision and make a final determination prior to closing the CDP.

  5. The results of the discharge/subordination request are communicated to the taxpayer in the determination/decision letter attachment or Form 12257 waiver.

8.22.7.10  (11-05-2013)
Offers in Compromise (OIC)

  1. This subsection discusses the unique procedures in CDP OICs. General guidance for working OICs in Appeals is in Appeals IRM 8.23, Offer in Compromise.

  2. An OIC may be a viable collection alternative in a CDP hearing. Key components of an OIC discussion include:

    • 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. The application fee is not refundable once an offer is determined processable

    • 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.

  4. The taxpayer is responsible for initiating the offer and determining the amount of the offer as per IRM 1.2.14.1.17, Policy Statement 5-100. Do not prenegotiate the offer amount as this leads to the government negotiating against itself and the taxpayer offering as little as possible.

  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 wants an offer considered, provide Form 656-B, Offer in Compromise, and 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. 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 mail 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  (11-05-2013)
Associating Separated CDP and OIC cases

  1. If a pending OIC is not addressed in your Notice of Determination, the CDP may be remanded by the Tax Court. You must associate any pending OIC with your CDP/ EH case to avoid this. Examples of OICs that must be associated and addressed in a CDP include:

    • A taxpayer requests a CDP hearing while an OIC is pending with Collection

    • A taxpayer timely requests an appeal of a rejected OIC, and the OIC hearing is pending in Appeals when the taxpayer requested a CDP hearing

    • A taxpayer submits an OIC directly to Collection while a CDP hearing is pending i.e. before the date the CDP closing letter is mailed

  2. An ecase notification in the CAR ecase found new AOIC information for this case indicates COIC received an offer which must be carded in and considered by Appeals as a collection alternative in CDP unless, prior to the date of the TC 480:

    • The determination/decision letter was mailed in a CDP case, or

    • The ATM signed Form 12257 in an agreed CDP case

  3. When you see the CAR entry, "ecase found new AOIC information for this case," and don't have an OIC, check IDRS for a TC 480 and confirm receipt with the COIC CDP coordinator. Do not make a final determination without confirming whether an OIC is pending. If an OIC is pending, the CDP determination/decision must comment on it as a collection alternative.

  4. If you discover an OIC is pending in Collection, notate it in the CAR and:

    1. Alert the COIC CDP Coordinator, identified in SERP, by secure mail that a CDP/ EH is pending in Appeals

    2. Obtain a copy of Form 656 and request APS card in a OIC WUNO per instructions below.

    3. Suspend action on the CDP unless other issues need to be addressed besides the OIC

    4. Issue the Substantive Contact Letter within 30 days of receiving COIC’s recommendation, if the letter has not already been sent

  5. If you discover an OIC appeal is pending before another Appeals employee, request the OIC WUNO to be transferred to you to associate with your CDP. If, by agreement, the CDP WUNO is transferred to the employee with OIC, the receiving employee's previous assignment does not constitute prior involvement. The employee to whom the CDP is transferred, however, must not otherwise have prior involvement. A DP feature code is applied to both WUNOs.

  6. If Collection is considering an OIC and discovers a CDP pending in Appeals, Collection sends Appeals a secure mail to notify of the OIC and faxes a copy of Form 656.

  7. Upon receipt of Form 656:

    1. Update the CAR to note Collection’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 codes; REQAPPL = the date the taxpayer requested an Appeal. APS will determine the RECDATE and ASGNDATE in generating the OIC WUNO.

    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 besides the OIC need to be addressed

8.22.7.10.3  (11-05-2013)
Requesting an OIC WUNO

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

  2. 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

  3. Entries in SOURCE, DO, and PBC for the OIC are the same as the entries in the related CDP.

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

8.22.7.10.4  (11-05-2013)
Receipt of Form 656

  1. Upon receipt of a new OIC submitted as a collection alternative under CDP, date stamp the upper right corner of Form 656 with the date the offer was received.

    Example:

    The IRS mail room receives and date stamps an envelope containing Form 656 on 11/14/13. You get the Form 656 in your office mail on 11/18/13. The IRS receipt date of the form 656 is 11/14/13.

  2. DO NOT SIGN FORM 656 as COIC is responsible for signing it as part of the processability determination. Forward the offer to COIC for processing, even if it was received without a user fee or TIPRA payment..

  3. Review IRM 8.22.7.10.5 and IRM 8.22.7.10.6 below to determine whether the OIC meets COIC investigation criteria and then use the appropriate processing procedures.

  4. If the address on Form 656 doesn't match IDRS, confirm with the taxpayer the correct current address. Update ACDS to the correct address as necessary.

  5. Appeals may take jurisdiction over non-CDP periods for the purpose of resolving a case through an OIC. Examples of tax periods included in a CDP OIC but not the subject of the CDP/EH 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

    • sole proprietorship or an LLC where the single member owner is solely responsible

8.22.7.10.5  (11-05-2013)
Processing Offers That Do Not Meet COIC Investigation Criteria

  1. The following offers do not meet COIC investigation criteria and are considered by Appeals:

    • Corporations

    • Employment Tax from Partnerships

    • Estates and Trusts

    • Currently incarcerated taxpayers

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

    • Personal Liability Excise Tax (PLET) - Doubt as to Liability (DATL)

    • Any business with employees

    • IMF taxpayers involved in a closely held corporation

    • Limited Liability Partnership (LLP) & Limited Liability Company (LLC)

    • IMF taxpayers whose primary source of income is from a partnership

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

    • Offers worked by a field OS within the past 24 months

    • International taxpayers

    • Docketed court cases

    • Offers involving court ordered restitution

    • Department of Justice, see IRM 5.8.2

  2. Upon receipt of a non-COIC criteria OIC, promptly mail the following items to the appropriate COIC site for a processability determination:

    • Form 13933 CDP/ EH OIC Cover Sheet

    • Form 3210 (2 copies)

    • Unsigned Letter 3820, Appeals Received Your Offer in Compromise and We Can Consider It, completed with your contact information

    • Unsigned Letter 3821, Appeals Received Your Offer in Compromise and We Can't Consider Your Offer, completed with your contact information

    • Form 656

    • The OIC application fee and TIPRA payment, if applicable

    • Any written designation of the TIPRA payment from the taxpayer

    • Form 433-A (OIC)/433-B (OIC), if applicable

    • A self-addressed return envelope

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

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

    1. Mails Form 656 and Letter 3821, explaining why the OIC isn't processable to the taxpayer

    2. Faxes Appeals a copy of the Letter 3821.

    3. Refunds the application fee, if applicable

  2. Letter 3821 advises the taxpayer to contact Appeals if they disagree with the decision to return the offer. In such an instance, the taxpayer must show how the processability criteria at IRM 5.8.2.3 was incorrectly applied. If you agree the return was in error, resubmit Form 656 to COIC for processability with the new information.

  3. 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 01/31/2013 because it was not processable."

8.22.7.10.5.2  (11-05-2013)
OIC is Processable

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

    1. Signs Form 656

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

    3. Inputs TC 480 for OIC periods

    4. Inputs STAUP to EH and non-CDP periods to move those periods to status 71 (if not in status 53 or 60)

    5. Mails a copy of Form 13933 ,Letter 3820 and the original offer package to the Appeals employee designated on the Appeals Transmittal Form 3210. within 14 days

8.22.7.10.6  (11-05-2013)
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

    • ETA (hardship) offers

  2. Upon receipt of a COIC-criteria OIC, promptly mail the following items to the appropriate COIC site for a processability determination:

    • Form 13933, Collection Due Process/Equivalent Hearing Offer in Compromise Cover Sheet

    • Form 3210 (2 copies)

    • Unsigned Letter 3820, Appeals Received Your Offer in Compromise and We Can Consider It, completed with your contact information

    • Unsigned Letter 3821, Appeals Received Your Offer in Compromise and We Can't Consider Your Offer, completed with your contact information

    • Form 656

    • The OIC application fee and TIPRA payment, if applicable

    • Any written designation of the TIPRA payment from the taxpayer

    • Form 433-A (OIC)/433-B (OIC), if applicable

    • A self-addressed return envelope

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

    "You requested an Offer In Compromise to resolve your tax liabilities. While Appeals retains jurisdiction of your case, we requested assistance from the IRS Centralized Offer In Compromise (COIC) unit to consider your offer. COIC may contact you and/or third parties to complete their review. COIC will share the results of their review with you and Appeals will ask for your comment before using the information in our final determination of your Offer."

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

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

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

    2. Faxes Appeals a copy of the Letter 3821.

    3. Refunds the application fee, if applicable

  2. Letter 3821 advises the taxpayer to contact Appeals if they disagree with the decision to return the offer. In such an instance, the taxpayer must show how the processability criteria in IRM 5.8.2.3 was incorrectly applied. If you agree the return was in error, resubmit Form 656 to COIC for processability with the new information.

  3. 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 01/31/2013 because it was not processable."

8.22.7.10.6.2  (11-05-2013)
OIC is Processable

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

    1. Signs Form 656

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

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

    4. Inputs STAUP to EH and non-CDP periods to move those periods to status 71 (if not in status 53 or 60)

    5. Faxes a copy of Form 13933 with a copy of Letter 3820 to Appeals within 14 days

  2. When you are notified that Collection is 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  (11-05-2013)
COIC-Investigated OICs

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

    1. Adds the CDP OIC to AOIC

    2. Works to completion OICs that can be accepted

    3. Provides Appeals with a recommendation (reject, return, or mandatory withdrawal) on offers they can't accept, or secures a voluntary withdrawal

  2. If COIC discovers complex issues, COIC documents the issue, assigns the offer on AOIC to AO21 (Appeals) and returns the case to Appeals.

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

    1. Returns Form 656, administrative files, and documentation to Appeals for a final determination

    2. Mails the taxpayer a preliminary recommendation letter including copies of the Asset/Equity Table and Income and Expense Table if completed. The letter informs the taxpayer the OIC is being returned to Appeals for a final determination.

  4. COIC provides a status report to Appeals in the event they're unable to make a preliminary recommendation with at least one year left on the TIPRA statute.

  5. If the status report gives Appeals concern about making a final determination within the TIPRA statute, Appeals may ask COIC to return the OIC and input a TC 480 and STAUP to prevent collection activity.

8.22.7.10.6.4  (03-29-2012)
COIC Recommends Acceptance

  1. If COIC accepts the OIC, COIC:

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

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

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

    4. Inputs a STAUP to CDP periods 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, 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 "Collection accepted OIC and issued the acceptance letter."

8.22.7.10.6.5  (11-05-2013)
COIC Recommends Rejection, Return, Mandatory Withdrawal

  1. COIC shares the results of their investigation with the taxpayer in a pre-determination letter. If COIC makes any recommendation other than acceptance, 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. Offers with a preliminary recommendation by COIC are treated as a priority. Work these with a goal of making a final determination within 120 days of the date the preliminary recommendation is received. You don't need to contact COIC when the offer can't be closed within this time frame.

  3. In making a final determination on Collection-investigated OICs:

    • Consider only the assets documented by Collection, unless the taxpayer voluntarily provides new information to Appeals. Do not investigate to identify and value additional assets.

    • Use the values agreed to by the taxpayer and Collection. Do not revise the value of an asset to an amount higher than determined by Collection, unless the taxpayer voluntarily provides new information to Appeals.

    • Correct any RCP errors that are strictly computational.

  4. If COIC erroneously issued 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 that 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 the offer be reopened on AOIC under reconsideration procedures in IRM 5.8.7.3.

8.22.7.10.7  (11-05-2013)
Mandatory Withdrawal for Missed Periodic Payment

  1. If a taxpayer fails to make a payment other than the first installment, Collection asks the taxpayer to make up the missed payment. If the taxpayer fails to do so, the OIC is returned to Appeals.

  2. After Collection has conducted its investigation and has provided a recommendation, Appeals is responsible for monitoring the periodic payments. If you discover a missed payment, ask the taxpayer to make up the payment in 15 calendar days.

  3. If the taxpayer fails to make up the missed payment, close the OIC 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 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.

  4. The CDP and the WUNO for a processable offer should generally be closed together. If the offer must be closed before the CDP due to a pending TIPRA statute, the death of the taxpayer or the taxpayer's bankruptcy filing, send APS:

    • Form 5402 for the OIC WUNO

    • OIC CAR

      Note:

      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 fails to provide replacement payment, COIC notifies Appeals of the dishonored payment. 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 Can't Consider Your Offer, in APGolf and check the required forms boxes explaining why the OIC is being returned.
    4 Request that APS 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. If the OIC WUNO will be closed before the CDP WUNO, send APS:

    • Form 5402 for the OIC WUNO

    • OIC CAR

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

      Note:

      Retain the closed OIC case filed with the CDP file in case the taxpayer raises the OIC issue in Tax Court.

    • Copy of Form 656

8.22.7.10.9  (11-05-2013)
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 Can't Consider Your Offer, in APGolf and check the bankruptcy box explaining why the OIC is being returned.
    4 Request that APS 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 can't consider an offer while you are in bankruptcy. As a result, your offer was returned.

  3. When the taxpayer files bankruptcy, the OIC WUNO is closed at once. The CDP case may remain open but suspended. To close out the OIC WUNO, send APS:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Return Letter 3821 to be issued to the taxpayer

      Note:

      Retain the closed OIC case filed with the CDP file in case the taxpayer raises the OIC issue in Tax Court.

    • Copy of Form 656

8.22.7.10.10  (11-05-2013)
Return Procedures for Death of Taxpayer

  1. Appeals must terminate a pending offer when notified of the death of the taxpayer. A sample OIC Termination Letter is available on the Appeals OIC Web Page

  2. If an offer was submitted jointly and only one spouse died, follow IRM 5.8.10.4, Death of Taxpayer, to determine whether to continue considering a jointly submitted offer.

  3. If an offer is terminated due to the death of the taxpayer, close the OIC WUNO 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 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. When a taxpayer dies, the OIC WUNO is closed at once. The CDP case may remain open. 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:

      Retain the closed OIC case filed with the CDP file.

8.22.7.10.11  (11-05-2013)
Withdrawals

  1. The subsections below discuss CDP and OIC withdrawals as they relate to combination CDP OIC cases.

8.22.7.10.11.1  (11-05-2013)
Withdrawal of the CDP

  1. Taxpayers may request to withdraw a CDP hearing while an OIC is under consideration. 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, withdrawal of the CDP results in:

    1. No Appeals verification that all applicable laws and procedures were followed

    2. COIC investigates the OIC and issues a decision

    3. No right to petition Tax Court for an abuse of discretion review

  3. If the taxpayer withdraws the CDP/EH hearing before Collection has provided Appeals with its recommendation, inform Collection immediately by encrypted mail. Collection will complete 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, withdrawal of the CDP results in:

    1. No Appeals verification that all applicable laws and procedures were followed

    2. Appeals considers the OIC and issues a decision

    3. No right to petition Tax Court for an abuse of discretion review

8.22.7.10.11.2  (11-05-2013)
Withdrawal of the OIC

  1. A taxpayer may request to withdraw an OIC while it is under consideration.

  2. If the withdrawal is not hand-delivered or received by certified mail, it is considered withdrawn when the withdrawal is acknowledged in writing. For a CDP OIC, Form 12257 or the closing letter must acknowledge the taxpayer's withdrawal of the offer to close the TIPRA statute.

8.22.7.10.12  (11-05-2013)
Corporate and LLC Trust Fund Offers

  1. A corporate offer or an offer from an LLC where the LLC is the liable taxpayer can't be considered until the trust fund portion of the taxes is addressed. Addressed means:

    • The TFRP is assessed or forwarded for assessment against all responsible persons, or

    • The trust fund portion of the taxes is paid, or

    • The RO determined to not assert the TFRP, or

    • The ASED expired for the trust fund periods.

  2. If a taxpayer proposes submitting a trust fund OIC in CDP, explain that Collection must determine whether any individuals are responsible under IRC 6672 for the unpaid trust fund. 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 the 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

    3. Refer to the table below:

    If... Then... Actions Required
    Responsible person(s) were advised an offer would not be considered unless the TFRP was addressed and they submit an offer anyway After the processability determination, return the offer as solely to delay.
    • Note in the CAR and in the remarks section of form 3210 how you determined the responsible person was advised

    • Prepare a brief letter for the ATMs signature returning the offer to the taxpayer. The return of the offer addresses the TIPRA statute.

    • Note the fact that the offer was submitted, and was returned, and the reason for the return, in the CDP determination letter.

    • Close the OIC WUNO when the CDP is closed, using CC 14.

    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

8.22.7.10.12.1  (11-05-2013)
Trust Fund Computation

  1. A corporate taxpayer or an LLC (where the LLC is the liable taxpayer) may offer to full pay the trust fund liability to avoid a TFRP investigation and have an OIC considered. A corporate/LLC taxpayer also may choose to designate OIC payments prior to acceptance of the offer. In both instances, the taxpayer needs trust fund computations from the Automated Trust Fund Recovery program to proceed.

  2. Revenue officers are responsible for all aspects of the TFRP on CDP cases that originate from the field. If the taxpayer proposes to full pay the trust fund portion or designate OIC payments, issue an ARI to Collection per IRM 8.22.7.4.2, ARI for Corporate and LLC Offers. Collection calculates the trust fund and processes any payment as per IRM 5.7.4.4, Payments by Responsible Party on Behalf of the Employer.

  3. Once the Trust Fund computation is complete, Collection returns one of the following results to Appeals:

    • The trust fund amount was paid, or

    • The trust fund amount was not paid

8.22.7.10.12.2  (11-05-2013)
TFRP Investigation

  1. Appeals is not 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. 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 per IRM 8.22.7.4.2, ARI for Corporate and LLC Offers.

  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

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

  4. Appeals does 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.

8.22.7.10.13  (11-05-2013)
Doubt as to Liability (DATL) Offers

  1. A DATL submitted in a CDP hearing is a challenge to the underlying liability. Examine the liability at issue to determine if the taxpayer had a prior opportunity per IRM 8.22.8, Liability Issues and Relief from Liability.

  2. When a DATL is not precluded:

    1. Upon receipt, forward a DATL offer to COIC for a processability determination and open an OIC WUNO following IRM 8.22.7.10.5.

    2. Follow IRM 8.22.8.5.1, Referring a Liability Issue, for reassigning the DATL OIC to an AO (other than for TFRP assessments which an SO may work).

    3. Suspend the CDP case using CARATs codes SU-PI, pending a decision by the AO. Take the CDP case out of suspense using CARATS codes SU-TO upon receipt of the AO's decision. Adopt the AO's decision and consider any other relevant issues.

    4. Your determination/decision letter attachment must clearly state the offer was accepted, rejected, withdrawn or returned to close the TIPRA statute

  3. When a DATL is precluded:

    1. Upon receipt, forward the DATL to COIC for a processability determination.

    2. Note on Form 3210 that "Appeals is precluded from considering the liability"

    3. Document the determination/decision letter attachment acknowledging the taxpayer submitted a DATL OIC. Note that the OIC was forwarded to Compliance for consideration because the OIC could not be considered as a CDP issue. Note how you determined the taxpayer was precluded from raising a challenge to the liability in CDP.

  4. When a DATL is precluded AND the liability was determined in Appeals:

    1. Upon receipt, forward the DATL to COIC for a processability determination, generally following IRM 8.22.7.10.5, but omitting Letters 3820 and 3821.

    2. Note on Form 3210 to "Return the offer after processability is determined. Inform the taxpayer if the offer is processable. Letters 3820 and 3821 are not included as Appeals has jurisdiction to consider the offer outside of CDP."

    3. Follow the procedures at IRM 8.22.8.5.1, Referring a Liability Issue for reassigning the DATL OIC to an AO, (other than for TFRP).

    4. Proceed with the CDP hearing since the DATL OIC is being considered outside of CDP

  5. The taxpayer must offer something in a DATL; generally, the amount offered should be the amount of the expected liability, penalties and interest .

  6. The taxpayer is not required to pay an OIC application fee or make a TIPRA payment in a DATL.

  7. In the case of trust fund recovery penalty (TFRP) or personal liability excise tax (PLET) liabilities, negotiate a settlement in a manner similar to considering hazards of litigation.

8.22.7.10.14  (11-05-2013)
Terminated OICs

  1. When the Service determines 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.

  2. Appeals retains jurisdiction of the offers it accepts. When an offer Appeals accepted is in potential default, MOIC unit sends a Form 2209 to Appeals to consider issuing a default letter per IRM 8.23.6.1.2, Previously Accepted OIC (Potential Default) Cases Returned to Appeals. See IRM 8.23.6.1.2.

  3. Appeals will not reinstate an OIC where there was a default and the OIC was properly terminated. In CDP, you may consider a new OIC proposed by the taxpayer as a collection alternative.

  4. The taxpayer may contend that the termination was improper because the default was insignificant or not a "material breach." The only relevant question is whether there was a default of an express condition. Whether the taxpayer “materially breached” the OIC or “substantially complied” with the OIC is irrelevant.

  5. If you determine that the termination was improper because there was no default, the purported termination by the Service was improper. You may determine that the OIC is still in effect.

8.22.7.11  (11-05-2013)
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.

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


More Internal Revenue Manual