8.23.2  Receipt and Control of Non-Collection Due Process (CDP) Offers

Manual Transmittal

October 14, 2014

Purpose

(1) This transmits revised IRM 8.23.2, Offer in Compromise, Receipt and Control of Non-Collection Due Process (CDP) Offers.

Material Changes

(1) Revised to include Interim Guidance memorandums AP-08-0614–0003 and AP-08-0714–0005, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project - Collection Phase 2 (Attachment 2), and AP-08–0814–0008, Appeals Judicial Approach and Culture (AJAC) Feature Codes and Premature Referral Reason pertaining to the OIC program, and the other editorial changes noted in the table below:

IRM Section Description of Change
Throughout Revised to incorporate Interim Guidance memorandums AP-08-0614-0003, AP-08–0714-0005 and AP-08-0814-0008 pertaining to the OIC program.
In General Revised for grammar, plain language and other editorial changes
In General Updated IRM cross-references

Effect on Other Documents

IRM 8.23.2, dated November 21, 2013, is superseded. Incorporates Interim Guidance memorandums AP-08-0614–0003 and AP-08-0714–0005, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project - Collection Phase 2 (Attachment 2), and AP-08–0814–0008, Appeals Judicial Approach and Culture (AJAC) Feature Codes and Premature Referral Reason pertaining to the OIC program.

Audience

Appeals Employees

Effective Date

(10-14-2014)


John V. Cardone
Director, Policy, Quality and Case Support

8.23.2.1  (10-14-2014)
Receipt

  1. This section provides guidance for the receipt and control of non Collection Due Process (CDP) offers in compromise (OICs). Procedures for OICs received as an alternative to collection in a CDP or equivalent hearing (EH) case are found in IRM 8.22.7, Alternatives to Collection Action.

  2. Field Collection, Field Examination and the Centralized Offer in Compromise (COIC) sites forward taxpayer appeals of rejected offers. The campus Appeals offices in Brookhaven and Memphis work the bulk of the cases coming out of the COIC sites. The most complex COIC offers, and cases where the taxpayer wants to meet with Appeals for a face-to-face conference, are generally assigned to the Appeals office that covers the taxpayer's location. Appeals management will occasionally assign or re-assign cases to other areas as part of effectively managing inventory levels.

  3. The Appeals Team Manager (ATM) or their designee will generally issue the Uniform Acknowledgement Letter (UAL) to the taxpayer within 30 days from the date of receipt by Appeals. Enclose Publication 4227, Overview of Appeals Process, and Publication 4167, Appeals-Introduction to Alternative Dispute Resolution. The purpose of this acknowledgement letter is to:

    • Advise the taxpayer of receipt of the case in Appeals

    • Provide the Appeals contact person's name and telephone number

    • Explain what the taxpayer can expect from Appeals during the appeal process, including information on opportunities to meet in person with an Appeals hearing officer

    • Explain what Appeals generally expects from the taxpayer during the Appeals process

    Note:

    Appeals campus sites in Brookhaven and Memphis should not enclose Publication 4167 with the Uniform Acknowledgement Letter because OICs considered at an Appeals campus site are not presently eligible for alternative dispute resolution processes.

  4. See IRM 8.20.5.30, for initial case receipt guidance for Account and Processing Support (APS) personnel.

8.23.2.2  (10-14-2014)
Assignment of OIC Case

  1. As previously indicated, Appeals receives rejected OIC cases from a variety of sources. Assignments should be based upon case complexity and the experience level of the employee. Appeals must also strive to accommodate a taxpayer's reasonable request for an in-person conference. Taxpayers should make clear their desire for an in-person hearing before substantive negotiations begin. If the complexity of a certain case extends beyond the technical skills available in a particular location, the case should be re-assigned. See IRM 8.23.2.2.1, below.

  2. OICs rejected by a COIC site as an “Obvious Full Pay” may require less technical expertise. See IRM 8.23.3.9, Consideration of Obvious Full Pay Offers, for guidance on working this type of case.

  3. OICs rejected by a COIC site but not as an “Obvious Full Pay” may generally be resolved through written or telephone contact. In working these cases, you must be knowledgeable with this IRM text as well as with IRM 5.8, Offer in Compromise, IRM 5.14, Installment Agreements, IRM 5.15, Financial Analysis, and IRM 5.16, Currently Not Collectible.

  4. Higher graded OICs are generally more complex and require more detailed financial analysis skills, familiarity with asset valuation techniques, and sound negotiation and communication skills. In working these more complex cases, you must be well versed in the aforementioned IRM sections and have an in-depth understanding of the following:

    • the impact and priority of the federal tax lien,

    • the impact of state and local statutes on asset ownership, valuation and equities,

    • enforced collection actions such as levy and administrative seizure and sale,

    • judicial actions such as a suit to foreclose a federal tax lien or reduce a tax claim to a judgment, and

    • Trust Fund Recovery Penalty (TFRP) liability issues.

  5. OICs filed on the basis of Effective Tax Administration (ETA) or Doubt as to Collectibility with Special Circumstances (DATCSC) require a level of experience sufficient to consider the facts of the case as described above.

  6. The OIC case grading matrix is found in IRM 1.4.28, Resource Guide for Managers - Appeals Managers Procedures.

8.23.2.2.1  (10-14-2014)
Transfer of OIC Cases

  1. The Uniform Acknowledgement Letter (UAL) is sent to the taxpayer within 30 days of assignment of a case in Appeals. Along with an introduction to the Appeals process, the UAL advises the taxpayer that a request for an in-person, face-to-face conference can be made. If such a conference is not requested, the standard OIC conference Letter 4462 advises the taxpayer that the conference will be conducted by telephone, although the taxpayer remains generally free to request a face-to-face conference at any time prior to a conference being held.

  2. Except as outlined in this section, there is no separate Appeals policy for OIC cases and face-to-face hearings. The general face-to-face hearing policies and procedures for Appeals are found in IRM 8.6.1.3 and IRM 8.20.6.9, and apply to appealed non-CDP OIC cases as well. If you cannot resolve a case easily and it requires a face-to-face discussion, the case may be transferred to the Appeals office nearest to the taxpayer. To reduce the length of time a case is in Appeals, it is important to initiate the transfer of appropriate cases as quickly as practical in the overall Appeals process.

  3. IRM 8.6.1.3.1.1 contains Appeals' circuit riding procedures. Where the taxpayer has requested a face-to-face conference, and where a face-to-face conference is appropriate, Appeals will accommodate taxpayers by circuit riding, on no less than a quarterly basis, if the nearest Appeals location is more than 150 miles from the taxpayer's residence (or business address for business entities). The conference will be held at the nearest Appeals office or other location, following the procedures in IRM 8.6.1.3.1.1. See also IRM 8.20.6.9.5 for general circuit riding guidance.

  4. Situations occur where a taxpayer will request to have a case transferred to the Appeals office closest to the taxpayer after engaging in substantive negotiations with Appeals. This often occurs when the taxpayer believes an adverse decision is likely or imminent. It is important to point out to the taxpayer in both the acknowledgement letter and substantive contact letter or during an initial telephone contact that he/she may ask to meet with someone from Appeals in person, but that the decision to do so should be made before meaningful negotiations begin and must be made well in advance of an imminent decision. Appeals will not transfer a case simply because the taxpayer disagrees with its determination.

    Note:

    Appeals began post-Appeals mediation and arbitration test programs on December 1, 2008, in eight test locations. As stated in Announcement 2011-6, the test period was extended for another two years, including the same locations as were in the original test program. The alternative dispute resolution (ADR) programs are designed to supplement and not replace the standard appeals process. Appeals' primary emphasis both inside and outside of the test programs is on the standard appeals process and not on ADR. Cases in which the taxpayer and Appeals have already engaged in substantive negotiations will not be transferred for ADR reasons because in order to properly assess the overall effectiveness of ADR during the test, Appeals must maintain its ability to assign work in a manner that most benefits the standard appeals process.

  5. Prior to transferring a case, you should conduct a preliminary review to avoid unnecessary delays. If the review shows that the entire liability is clearly collectible and the taxpayer presents no special circumstances, the offer's rejection may, generally, be sustained without transfer.

  6. If acceptance of the offer is possible and you cannot resolve it easily, transfer the case to the Appeals office nearest to the taxpayer.

  7. If the taxpayer asks to meet face-to-face, input the necessary ACDS CARAT codes.

  8. Action Code TF:

    1. Input the TF Action Code on the date the taxpayer's request to have the case transferred for a face-to-face conference is either approved or denied.

  9. Sub-Action Codes for Approved Transfers:

    1. Use one of the following three Sub-Action Codes if the transfer request is approved for a face-to-face conference:

      Sub-Action Code Definition
      AT Transfer or reassignment was approved to help the taxpayer better understand the process even though the taxpayer would not otherwise qualify for a face-to-face conference.
      ET Transfer or reassignment was approved to an office closest to taxpayer's residence.
      OT Transfer or reassignment was approved to accommodate the taxpayer at an office closer to their employer or school.
  10. One of the following three Sub-Action Codes must be used when the transfer request is denied for a face-to-face conference.

    Sub-Action Code Definition
    DF Transfer or reassignment was denied because taxpayer raised only frivolous issues.
    DO Transfer or reassignment was denied for other reasons.
  11. The definitions for these codes are also available on the ACDS Utilities menu, under "CARATS Operational Definitions" .

8.23.2.3  (10-14-2014)
Initial Case Review and Statute Controls

  1. This section provides procedures for preliminary case review to make sure the offer is ready for Appeals' consideration. If the offer was sent to Appeals prematurely, it must be returned to the referring office. You should follow the procedures in IRM 8.23.3 after determining the case is ready for Appeals' consideration.

    Note:

    Most premature referrals should, generally, be returned to the originating Compliance office within 45 days of Appeals' receipt of the case. See IRM 8.23.2.4 for details on premature referral issues including those that must be sent back even after 45 days, due to jurisdictional issues.

  2. You must screen new OIC receipts to make sure:

    • the appeal was timely (see below)

    • TC 480 date is the same as shown on the Form 656, and has been input on the Integrated Data Retrieval System (IDRS) for all periods

    • periods are in Master File (MF) status 71, as required

      Note:

      MF status 71 is not automatically input in all instances. See IRM 5.8.3.

      Note:

      If the TC 480 date is not the same as the date shown on Form 656, or periods are not in St. 71, make a request to APS to make the necessary corrections.

    • there are no statute issues (see below), and

    • if there is an open 24 month statute under the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), the work unit number (WUNO) contains the proper statute controls, meaning both ACDS Statute Code = 'TIPRA' and the correct 24-month statute expiration date (see the table in paragraph (10) below).

  3. Non-CDP OIC receipts must be checked to make sure the appeal was timely. A taxpayer has 30 calendar days from the date of the rejection letter to request an administrative Appeals hearing. If the appeal was not timely, it must be returned as a premature referral because Appeals does not have the jurisdiction to consider the appeal. See IRM 8.23.2.4 for specific instructions on determining the timeliness of the appeal.

  4. Taxpayers occasionally submit a written appeal before the offer is rejected. IRC 7122(e) states there must be an independent administrative review of any rejection of an OIC before such rejection is communicated to the taxpayer, and Treasury Regulation 301.7122-1(f)(1) provides that an offer in compromise has not been rejected until IRS issues a written notice to the taxpayer or his representative advising of:

    • The rejection,

    • The reason(s) for rejection, and

    • The right to an appeal

    See IRM 8.23.2.4 for information on what to do if the taxpayer's appeal pre-dates the actual rejection of the offer.

  5. If a joint offer filing is rejected and only one taxpayer appealed timely, then the appeal is not valid for the party who did not sign the appeal request. Collection should have contacted the taxpayers to have the request for appeal perfected, and documented the case history with the contact. If the request for appeal was not perfected, then it is valid only for the spouse who appealed, and Collection should have taken the following actions (for necessary actions by Appeals, see (6), below):

    1. Input a TC 481 for CSED code "B"

    2. Input a new TC 480 using the original offer date, with CSED code "P" or "S" , as applicable. Do not create a new offer on AOIC

    3. Amend AOIC to the name of the individual who appealed the offer

      Note:

      If the above actions were not taken, Appeals should request the above corrective actions be taken by APS.

      Note:

      Collection will not attempt to amend the Form 656 in this situation.

  6. For the situation in (5), if the Appeals work unit reflects a joint offer, change it to an individual filing by the taxpayer who requested the appeal. You will amend the Form 656 for the individual taxpayer only if an acceptance recommendation is made. The taxpayer receives credit for the TIPRA payment and application fee that were paid with the initial offer, although an additional TIPRA payment may be required if the amended offer includes an increase in the offer amount, or change in terms. This is considered an amended offer, and no separate processability determination will need to be made by Collection .

  7. IRM 5.8.7 allows for certain OICs to be closed as a processable return. Under certain circumstances, Collection will agree to reconsider its return, and reopen the case. When this happens a new Form 656 is, generally, not secured. If a return letter is issued to the taxpayer, the issuance of that letter closes the original TIPRA statute under IRC 7122(f). Thus, any reopened case will have a new, later TIPRA statute. See IRM 5.8.7.3. This may be of importance where Appeals secures an OIC case on which there was not a decision (rejection, return, withdrawal) made by Collection prior to its assignment in Appeals, as may be seen in (10) below.

  8. Document the following in the case activity record:

    • Verification of timely appeal

    • Statute and statute control verification

    • TC 480 verification (see (2) above)

    • All ACDS correction requests

  9. Per IRC 7122(f) and Notice 2006-68, an OIC shall be deemed accepted if it is not rejected, returned, withdrawn or treated as withdrawn under section 7122(c)(1)(B)(ii) because the taxpayer failed to make the second or later installment due on a periodic payment OIC (see IRM 5.8.8.6), before the date which is 24 months after the date of the submission of the offer. Any period during which any tax liability that is the subject of the OIC is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period. The date of submission of an offer for purposes of section 7122(f) is the date on which the offer is received by the Service.

    Note:

    Except for suspension of the 24-month period during which any tax liability that is the subject of the OIC is in dispute in any judicial proceeding, there are no means to extend or suspend the 24-month TIPRA period. The 24-month period includes whatever time a case may be pending in Counsel awaiting their opinion on an acceptance recommendation. There is no statutory basis for the taxpayer and the Service to enter into any sort of agreement to extend or suspend the 24-month period.

  10. There are two instances where Appeals may receive an OIC without a final decision first being made by Collection, and thus, have an open TIPRA statute (see also table (11) below):

    • OIC submitted as an alternative to collection in a CDP or EH case.

    • OIC processed as a single, processable OIC filing for two (or more) entities, and which is in need of perfection to create a second or third related offer. See IRM 5.8.3.5. In this case, when the second or third OIC is received, a new TC 480 date and TIPRA statute date will be present. If the related offer(s) is secured by Appeals, then since the new offer(s) was never rejected by Compliance, it will have an open TIPRA statute. New offers must be sent to COIC for a processability determination..

  11. Use the following table to check for open TIPRA statutes:

    STEP QUESTION If YES If NO
    One Was a formal rejection letter issued by either Collection or Examination? The 24-month TIPRA period under IRC 7122(f) does not apply and no further action is needed. Any ACDS Statute Code 'TIPRA’ input onto the WUNO should be removed and replaced by Statute Code ‘SUSP’. Steps 2 – 5 do not apply, unless the rejected OIC case is to be associated with a CDP case, in which case, proceed to step 5. Proceed to Step Two
    Two Was ACDS Statute Code ‘TIPRA' input onto each tax period on the WUNO? Proceed to Step Three Submit a request to APS to have Statute Code ‘TIPRA’ input on each tax period and be sure to use the proper date stamped on the original Form 656 plus two years as the statute date. Proceed to Step Three.
    Three If ACDS Statute Code ‘TIPRA’ was input onto each tax period on the WUNO, is the corresponding statute date the date stamped on the originally submitted Form 656 for the entity under consideration, plus two years? The Statute Code and date are accurate - proceed to Step Four Submit a request to APS to have the statute date (STATDATE) changed to the proper date on each tax period and proceed to Step Four
    Four Was the offer submitted as part of a CDP or EH case? Proceed to Step Five The case must be a new offer resulting from the perfection of a previously rejected offer. Make sure steps two and three above are done and double check the WUNO to make sure the TIPRA Statute Code with the proper statute date is present on each tax period. Step Five does not apply.
    Five If the OIC is part of a CDP/EH case, was ACDS Feature Code ‘DP’ input onto both the CDP/EH and OIC WUNOs? If the case was originally a non-CDP offer that is being associated with a CDP case after issuance of a rejection letter, also input a DP feature code. All necessary actions are done and the OIC WUNO will show up on a Statute Expiration Report and/or an Ad Hoc report Submit a request to APS to have Feature Code ‘DP’ added to both the CDP/EH and OIC WUNOs
  12. Cases identified with an open TIPRA statute must have the proper ACDS statute controls appear on each tax period on the OIC WUNO.

  13. Cases with an open TIPRA statute are subject to the same back-end processing time frames as listed in IRM 8.21.3.1.7 and IRM 8.21.4.2, meaning:

    1. Written concurrence from the ATM is required to keep the OIC case open beyond 120 days remaining on the 24-month TIPRA statute period, and

    2. You are responsible to ensure the OIC case is presented to APS for closing with at least 90 days remaining before expiration of the 24-month TIPRA statute period.

      Note:

      The 24-month TIPRA statute period under IRC 7122(f) includes any amount of time a case may be pending in Counsel while awaiting its opinion on an acceptance recommendation. You are responsible to make sure the case is presented to Counsel for review with a sufficient amount of time remaining to meet the requirement of having the case presented to APS for closing with at least 90 days remaining before expiration of the 24-month TIPRA statute period.

  14. Various types of offers or offers with specific issues are assigned unique ACDS feature codes. If the following case types or issues are present, check the OIC WUNO to make sure it reflects the appropriate ACDS feature code:

    • DO = Potential default case on previously accepted offer

    • DP = OIC that is part of a related CDP or EH case (same 'DP' feature code should also be on the CDP/EH WUNO - see IRM 8.22.2)

    • ETA = Effective Tax Administration offer

    • LI = OIC based upon doubt as to liability

    • SP = OIC based upon doubt as to collectibility with "special circumstances"

  15. If it is determined that the case is ready for Appeals' consideration, send the Uniform Acknowledgement Letter (UAL) if one was not previously sent and document such in the case activity record. The UAL must be sent within 30 days of the Appeals received date.

8.23.2.3.1  (10-14-2014)
Assignment of Related Offers

  1. Sometimes taxpayers have liabilities for multiple entities. For various reasons, it is also sometimes the case that these related offers are submitted by taxpayers after an initial offer is submitted for a different entity. During the course of the consideration of an offer by you, if you become aware that there is an open, related offer under consideration elsewhere in Appeals, then coordinate with whomever the related case is assigned to accept transfer of the related case, so that the cases may share a consolidated assignment, review and disposition.

  2. For purposes of this subsection, related cases will be those related to any joint or individual offer as follows:

    1. Any additional offer involving the separate liabilities of one or both spouses (e.g. sole-proprietorship liabilities, trust fund recovery penalties, liabilities from a prior marriage).

      Note:

      In a situation involving married taxpayers where two separate offers involving jointly owed liabilities are under consideration, the offers will be considered related only if the taxpayers are domiciled together.

    2. Any additional offer involving one or more closely-held corporations or LLCs owned by one or both spouses in the joint or individual offer.

      Note:

      Appeals will not accept immediate assignment from Collection of any related offer that appears in example (2)(b). Such cases are considered related only for purposes of consolidating assignment once in Appeals. There is no authority for Appeals to accept assignment of these cases from Collection unless the taxpayer has first undergone the administrative review and rejection process under IRC 7122(e).

  3. If an initial offer is already assigned to you, coordinate with Collection to immediately accept assignment of any related offer that fits example (2)(a) above. Any undeveloped information that is included with a related offer that is transferred to Appeals will be considered “new information” submitted to Appeals. If necessary, undeveloped information will be sent to Collection following the ARI procedures in IRM 8.23.3.3.2.6.

  4. Per IRM 5.8.1.4 and IRM 5.8.1.4.1, all assessed taxpayer liabilities should be included in any offer acceptance. If related liabilities exist (as in example 2(a) above), an offer cannot be accepted that does not also include offer(s) for related liabilities. Therefore, if you are accepting an offer, secure the necessary forms and payments needed for the related offer, and forward the package to COIC for the necessary processing. COIC will generally determine processibility within 24 hours.

  5. If an initial offer is already assigned in Appeals, Appeals will not accept immediate assignment from Compliance of any related offer that appears in example (2)(b) and its associated Note. Such cases are considered related only for purposes of consolidating assignment once in Appeals. There is no authority for Appeals to accept assignment of these cases from Compliance unless the taxpayer has first undergone the administrative review and rejection process under IRC 7122(e).

8.23.2.4  (10-14-2014)
Premature Referral Issues

  1. Non-CDP OIC receipts must be reviewed to make sure the appeal is timely. A taxpayer has 30 calendar days from the date of the rejection letter to request an administrative Appeals hearing. If the appeal was not timely, it must be returned as a premature referral because Appeals does not have the jurisdiction to consider the appeal.

    Note:

    IRC 7502 and IRC 7503 apply to OIC appeals. Per IRC 7502, if the appeal is mailed within 30 calendar days after the date of Compliance's rejection letter, it is a timely appeal. It must be postmarked so that the mailing date can be established. If the postmark is made by a non-U.S. Postal Service system such as a private postage meter stamp or a non-USPS carrier such as UPS or Fedex, Treasury Regulation 301.7502-1(c)(iii)(B) provides that such postmark must be legible and dated on or before the due date and the appeal must be received not later than the time when a letter sent by the same class of mail would ordinarily have been received if it were sent from the same point of origin by the U.S. Post Office on the last day for timely mailing the appeal. Per IRC 7503, if the 30th day falls on a Saturday, Sunday, or legal holiday, a request for appeal is considered timely if mailed on the next business day.

    Note:

    IRC 7508 postpones certain time-sensitive acts when a person is serving in the armed forces, in support of the armed forces, in an area designated by the President by Executive Order as a combat zone, or when deployed outside the United States while participating in an operation designated by the Secretary of Defense as a contingency operation. IRC 7508A postpones certain time-sensitive acts when a person is effected by a Presidentially declared disaster or a terroristic or military action. Rev. Proc. 2007-56 includes the 30-day period for appealing a rejection of an OIC as an act that may be postponed.

  2. Taxpayers occasionally submit a written appeal before the offer is rejected. IRC 7122(e) states there must be an independent administrative review of any rejection of an OIC before such rejection is communicated to the taxpayer and Treasury Regulation § 301.7122-1(f)(1) provides that an offer in compromise has not been rejected until IRS issues a written notice to the taxpayer or his representative advising of:

    1. The rejection,

    2. The reason(s) for rejection, and

    3. The right to an appeal.

    If the taxpayer's written appeal pre-dates the actual rejection of the offer, it is not a valid appeal under IRC 7122 and its regulations. Before returning such an offer to Compliance as a premature referral, check the case file and the AOIC eCase and ICS histories to see if the taxpayer submitted a separate and timely written appeal within the prescribed time period. If the only written appeal pre-dates the actual rejection of the offer, the appeal is not timely and it must be returned as a premature referral because Appeals does not have the jurisdiction to consider the appeal.

  3. Occasionally, an appeal is received and the postmark, meter or fax transmission date is illegible or the envelope is missing. This presents challenges in determining whether or not the appeal was timely. To determine timeliness if the postmark, meter or fax transmission date is illegible, or the envelope is missing:

    1. Mailing: Ask the taxpayer when he or she mailed the request. If the taxpayer appears credible, use that date. If you can not reach the taxpayer or the taxpayer is not credible, subtract 3 days for regular mail and 7 days for overseas mail from the IRS received date.

    2. Faxed: Use the date the Service received the request unless the taxpayer can show otherwise as in (a).

    3. If there is no IRS received date, use the signature date.

    4. If there is no IRS received date or signature date, consider timely if received within 45 days of date required to be timely.

  4. Collection will, occasionally, receive an appeal of a joint offer that is signed only by one individual. If Collection did not take appropriate action to perfect the appeal request, do not return the case as a premature referral. Initiate a request to APS to take corrective action. See IRM 8.23.2.3 (5) and (6).

  5. If an earlier case was listed on the Appeals Centralized Database System (ACDS) simply because it was a docketed case and it was closed using Closing Code 21, then Appeals did not determine the original liability. The original liability was determined by Exam and was defended in Tax Court by Counsel. The case was added to ACDS only because Appeals provides computational and/or assessment processing support to Counsel on its docketed cases. No one in Appeals was involved in determining whether the taxpayer actually owed the tax. Send such cases back to the Brookhaven DATL unit alerting them to the fact that the case still has an open TIPRA statute by using the Form 3210 entitled, "Appeals Returning DATL OIC (CC21)" , which is available on the Appeals OIC Web Page.

  6. If the case involves unpaid trust fund tax, the assessment statute expiration date (ASED) is not suspended by the offer in compromise. There are two possible instances in which such offers may have been referred to Appeals prematurely:

    1. If the OIC was received by the Service on or before February 4, 2008, Collection should have taken the necessary steps to protect the ASED(s) prior to sending the case to Appeals. See the September 2005 revision of IRM 5.8.4.13.2 and IRM 5.8.4.13.3. If an ASED in a pre-February 5, 2008 offer was not properly protected by Collection, return the OIC case as a premature referral.

    2. If the OIC was received by the Service after February 4, 2008, the September 2008 revision of IRM 5.8.4.13.2, as well as the current revision, states the trust fund portion of the taxes must be paid or the TFRP must be assessed against all responsible persons or trust fund package forwarded for assessment. If a post-February 4, 2008 OIC involving trust fund tax is received on appeal and the trust fund portion is not paid, assessed or in the process of being assessed, return the case as a premature referral.

      Exception:

      Do not return the case as a premature referral if Collection has clearly documented either a non-assertion determination or the case being under Law Enforcement Manual (LEM) criteria.

  7. A case will not be returned as a premature referral where Collection did not fully develop certain issues. weigh Collection's development of the issue versus information and testimony provided by the taxpayer, and make the decision based upon those factors.

8.23.2.4.1  (10-14-2014)
Premature Referral Issues - Delinquent or Insufficient Estimated Tax Payments and Withholdings

  1. When a collectibility issue OIC is considered and rejected by Collection, the disposition of the case as a rejection indicates that the taxpayer was in current compliance at the time of rejection. If not, Collection should have closed the case to the taxpayer as a “return” with no appeal right. Therefore, you will consider the taxpayer as being in verified tax compliance whenever a rejected case is received, and will not request estimated tax payments or withholdings, even if those appear to have been delinquent or miscalculated prior to the rejection of the case.

  2. You will not return a case as a premature referral to Collection to address issues indicated in (1) above.

  3. You will not monitor a taxpayer's ongoing tax compliance while a rejected offer is under consideration, except as specified in IRM 8.23.2.4 and its related subsections, IRM 8.23.2.4.3, and the “Note” below.

    Note:

    If the amount of estimated tax payments or withholdings is disputed in a taxpayer’s appeal, then you may verify them as expense items on the Income/Expense Table, but will not otherwise address these issues. The Form 656-B contains tax compliance provisions which the taxpayer must follow while an offer is under consideration.

8.23.2.4.2  (10-14-2014)
Premature Referral Issues - In-Business Trust Fund (IBTF) Compliance Issues

  1. Because of the risk of rapid and substantial losses to the government due to failure to make Federal Tax Deposit (FTD) payments, you should generally follow IRM 5.8.7 with respect to verification of FTD compliance, and IBTF return filing compliance, but with some noted exceptions.

  2. As explained in IRM 8.23.2.4.1 above, when a collectibility issue OIC is considered and rejected by Collection, the disposition of the case as a rejection indicates that the taxpayer was in current FTD and filing compliance at the time of the rejection. If not, Collection should have closed the case to the taxpayer as a “return” with no appeal right. Therefore, you will consider the taxpayer as being in verified FTD compliance whenever a rejected case is received, and will not demand federal tax deposits to be made even if those appear to have been delinquent or miscalculated prior to the rejection (See also (4) below).

  3. You will not return a case as a premature referral to Collection to address issues indicated in (1) or (2) above.

  4. You will not monitor the taxpayer’s regular FTD schedule. However, if you recognize a new IBTF assessment while you are considering the offer, you should give the taxpayer 14 days to pay the entire liability (including penalties and interest) so that the consideration of the offer may continue. If the taxpayer does not pay the new liability in full, you should either sustain rejection of the offer or, in unique circumstances (left to Appeals’ discretion), determine to include the liability in the offer and proceed with consideration of the case. See also IRM 8.23.2.5, When a Taxpayer Does Not Remain in Compliance.

  5. If an IBTF tax return becomes delinquent while an OIC case is under your consideration, you should:

    • Request that the taxpayer provide proof of the filing of the return (within 14 days)

    • Sustain the rejection of the case if the return is not filed

8.23.2.4.3  (10-14-2014)
Premature Referral Issues - Delinquent Returns (non-IBTF)

  1. The taxpayer must timely file returns that become due while an offer is under consideration. You will treat these situations as follows:

    If... Then...
    A return is due but unfiled (includes a return that was due when the case was assigned to Appeals). Provide the taxpayer with a 14 day deadline to file the return or provide adequate proof of filing. Allow additional time if the taxpayer is contacted by mail.
    After providing time to file the return, it either remains unfiled or adequate proof of filing was not provided You will sustain rejection of the offer.
    The return is filed and there is no tax due You will proceed with the appeal.
    The return is filed and there is tax due It will be at your discretion to determine if the liability should be included in the offer, or if payment is required. Weigh the unique circumstances of each case.
    Full payment of the new liability is required You will allow the taxpayer 14 days to make the payment, or the offer rejection will be sustained.
  2. You will not return a case as a premature referral to Collection to address issues indicated in (1) above.

8.23.2.4.4  (10-14-2014)
Premature Referral Issues - Periodic Payment Offers

  1. A taxpayer submitting either a Short-Term Periodic Payment Offer or a Deferred Periodic Payment Offer is required to make the periodic installment payments proposed in such offer. If the taxpayer failed to make the periodic installment payments he/she proposed on the Form 656 before the Collection offer examiner issued the preliminary determination letter, the case should be returned as a premature referral for Compliance to secure the necessary TIPRA payments.

    Note:

    Most taxpayers submitting a Periodic Payment offer will propose monthly payments, but monthly payments are not required under IRC 7122(c)(1)(B). The taxpayer is simply required to make the periodic installment payments in accordance with how they were proposed on the Form 656. Also, the TIPRA requirement for a taxpayer to make proposed periodic installment payments while a Periodic Payment offer is being considered ends when Collection issues the rejection letter. Taxpayers are not required to continue making proposed periodic installment payments while a rejected offer is being considered by Appeals unless Appeals secures an amended offer. See IRM 8.23.1.4.1 and IRM 8.23.3.4.

  2. Review the periodic payment proposal carefully before making a determination whether the taxpayer failed to make required proposed periodic installment payments before the preliminary determination letter was issued by the Collection offer investigator.

  3. The following table provides instructions for determining whether Collection neglected to follow significant IRM requirements resulting in the premature referral of a Periodic Payment OIC case:

    If... And... Then...
    The taxpayer's failure to make a proposed periodic installment payment(s) occurred before the issuance of the preliminary determination letter by the Collection offer investigator Collection did not give the taxpayer an opportunity to make up the missed proposed periodic installment payment(s) Collection did not follow IRM 5.8.4.25 procedures by neglecting to monitor the proposed periodic installment payment requirements and/or address the missed proposed periodic installment payment issue with the taxpayer. Send the offer back to Collection as a premature referral to address the missed proposed periodic installment payment(s). If the taxpayer corrects the proposed periodic installment payment issue, Collection may send the case back to Appeals to consider the OIC appeal.
    The taxpayer's failure to make a proposed periodic installment payment(s) occurred before the issuance of the preliminary determination letter by the Collection offer investigator Collection previously gave the taxpayer an opportunity to make up the missed proposed periodic installment payment(s) but the taxpayer did not do so and there is no indication in the case file that Collection determined special circumstances exist Collection did not follow IRM 5.8.4.25 and IRC 7122(c)(1)(B)(ii) and the offer should have been considered withdrawn by Compliance and not rejected. Send the offer back to Collection as a premature referral
    The taxpayer's failure to make a proposed periodic installment payment(s) occurred after the issuance of the preliminary determination letter by the Collection offer investigator The taxpayer did not make up the payment Collection is not required to have offered the taxpayer the opportunity to make up the payment. Appeals will follow IRM 5.8.4.25 and provide the taxpayer with the opportunity to make the delinquent payment. If the payment is not made, Appeals will close the case as a mandatory withdrawal.
    The taxpayer's failure to make a proposed periodic installment payment(s) occurred after the issuance of the preliminary determination letter by the Collection offer investigator Collection previously gave the taxpayer an opportunity to make up a missed proposed periodic payment(s), the taxpayer made up the missed payment(s) and then missed a subsequent proposed periodic payment after submitting an amended offer to Appeals Appeals will follow IRM 5.8.4.25 and not give the taxpayer a second opportunity to make up the subsequently missed proposed periodic payment unless special circumstances exist. Contact must have been made with the taxpayer to properly determine whether special circumstances exist. If special circumstances do not apply, then Appeals will close the case as a mandatory withdrawal.
    The taxpayer's failure to make a proposed periodic payment(s) occurred after an amended offer was secured by Appeals Collection previously gave the taxpayer an opportunity to make up a missed proposed periodic payment(s), the taxpayer made up the missed payment(s) and then missed a subsequent proposed periodic payment after submitting an amended offer to Appeals Appeals will follow IRM 5.8.4.25 and not give the taxpayer a second opportunity to make up the subsequently missed proposed periodic payment unless special circumstances exist. Contact must have been made with the taxpayer to properly determine whether special circumstances exist.
    The taxpayer's first failure to make a proposed periodic payment(s) occurred after an amended offer was secured by Appeals The taxpayer is still not in compliance with proposed periodic payment requirements Review IRM 5.8.4.25 and IRM 8.23.3.4.1 for mandatory withdrawal case procedures for amended offers received by Appeals.

    Note:

    To be applicable, special circumstances should generally involve something out of the taxpayer's control that has caused their inability to make the payment, and not a mere oversight or financial inability to make the payment.

8.23.2.4.5  (10-14-2014)
Premature Referral Issues - Other Issues

  1. Your initial case review may show that Collection did not adequately identify reasons why a case was referred to Appeals. Any feedback transmittal should clearly identify why the referral was inadequate, including any IRM (or other) requirements that Collection failed to follow in documenting the reason for referral to Appeals. See also (2) below.

  2. A case will not be returned as a premature referral where Collection did not fully develop certain issues. Weigh Collection’s development of the issue versus information and testimony provided by the taxpayer, and make the decision based upon those factors.

  3. There are other issues that should be screened out before proceeding with case evaluation. These are rare, but if found, the case should be returned to Compliance as a premature referral:

    • Taxpayer paid in full before direct or written contact was initiated by Appeals.

    • The 24-month period under IRC 7122(f) (commonly known as the TIPRA statute) lapsed before the offer was rejected by Compliance. In this instance, the offer was accepted by operation of law before Compliance rejected it and therefore Appeals has no jurisdiction to consider the appeal. A Form 3999, Statute Expiration Report, or other statute reporting method is not needed in this instance. Simply send the case back to Compliance as a premature referral due to lack of jurisdiction to consider the appeal.

    • There is an unreversed TC 914 or TC 916 that posted to the account before the offer was rejected. The offer should have either remained open in Compliance until the criminal investigation was closed or been returned and not rejected. See IRM 5.8.4.19. If the TC 914 or TC 916 posted to the account after the offer was rejected, see IRM 8.23.3.3.1.1 for Appeals procedures concerning coordination with other functions.

    • The Compliance Fraud Technical Advisor agreed there is potential fraud and Compliance's fraud development investigation remains open. If this occurred before the offer was rejected, the offer may have been returned or rejected. The instructions for fraud development are in IRM 5.8.4.18. Consider these procedures that instruct Compliance to return or to reject the offer without appeal rights, to see if a premature referral may be appropriate..

    • Taxpayer submitted a claim for relief from joint and several liability (innocent spouse claim) as the requesting spouse and the claim was filed before the offer was rejected and the claim is still open. IRM 5.8.4.23 states that Compliance should have suspended the offer pending disposition of the claim. If the claim was filed before the offer was rejected and is still open, the case may be returned to Compliance as a premature referral.

    • Taxpayer filed bankruptcy before the Collection offer examiner issued their preliminary determination letter. Collection should have returned the offer without appeal rights per IRM 5.8.10. Return the offer to Collection as a premature referral. See IRM 8.23.3.3.2.2 if the taxpayer filed bankruptcy after the offer was rejected.

    • The Partnership Investor Control File (PICF) code on AMDIS is '5', indicating at least one open TEFRA key case linkage exists. Compliance should have returned the DATC offer without appeal rights per IRM 5.8.4.17 because of the unresolved TEFRA partnership issue. Return the offer to Compliance as a premature referral.

  4. The premature referral issues identified above that cause jurisdictional problems for Appeals are when:

    • The taxpayer did not submit a timely appeal

    • The taxpayer paid the liability in full

    • The 24-month period under IRC 7122(f) lapsed before the offer was rejected by Compliance

    • The taxpayer filed bankruptcy before the offer was rejected by Compliance

    • The offer was received by the Service after a Notice of Determination or Decision Letter was issued in a CDP or EH case

    • The offer was received by the Service after issuance of a CDP closing letter with an executed Form 12257

    • The offer was received by the Service after issuance of a closing letter for a withdrawn CDP or EH case

    • The offer was received after a related OIC was closed in any manner other than acceptance. See IRM 8.23.2.3.1 for related offers.

    In the above instances, Appeals has no jurisdictional basis to consider the offer. As a courtesy, if any of these issues are identified after 45 days has lapsed since the date Appeals received the case, either the Appeals hearing officer or the ATM should contact the Compliance manager and explain why the case will be returned as a premature referral before sending it back. The other premature referral issues listed above do not cause jurisdictional problems for Appeals, so the cases should generally not be sent back as premature referrals if more than 45 days has lapsed since the date Appeals received the case.

  5. If it is determined that the case is ready for Appeals' consideration, send the UAL if one was not previously sent and document such in the case activity record. The UAL must be sent within 30 days of the Appeals received date.

8.23.2.5  (10-14-2014)
When a Taxpayer Does Not Remain in Compliance

  1. IRM 5.8 generally does not require a processible offer to be returned or rejected because a previously unfiled or delinquent return produces a new liability, or because another assessment is made for any other reason during the time an offer is being considered. The same standard is applied in Appeals. You may include new liabilities on the Form 656 using pen-and-ink additions, and continue consideration of the offer (see IRM 8.23.2.4.2 for an exception for IBTF cases).

  2. Carefully review the premature referral criteria to determine when a specific issue of non-compliance occurred in relation to when the preliminary determination letter was issued by the Collection offer examiner. As explained earlier in IRM 8.23.2.4 and related subsections, current tax compliance issues will generally not be reviewed by you unless a tax return is due. Compliance problems that may affect the acceptability of an offer will generally only include instances in which the taxpayer failed to:

    • Timely file all required returns

    • Timely pay all tax, penalties and interest due on returns assessed after the offer was received by Appeals (see (5) below), or

    • Make payments required for a Periodic Payment OIC proposal.

  3. In the instances above, it is important for you to provide the taxpayer with clear instructions as to exactly what is required of them, specific deadlines, and the consequence if the compliance issue is not promptly resolved.

  4. As stated in (1) above, Appeals generally does not require a processible offer to be returned or rejected because a previously unfiled or delinquent IMF return produces a new liability, or because any other new assessment is made while the offer is being considered. New liabilities may be included on the Form 656, and consideration of the appeal will continue. See IRM 8.23.2.4 and related subsections for exceptions.

  5. Per IRM 8.23.1.3, one of the four primary obligations you have in a non-CDP OIC appeal is to offer the taxpayer an opportunity for the Appeals conference that he/she asked for under IRC 7122(e)(2). Non-compliance with a filing and/or payment requirement does not preclude you from giving the taxpayer an opportunity for a conference. Even if the taxpayer does not remedy a compliance issue prior to or at the scheduled conference, the opportunity for a conference must be given. If the taxpayer does not take part in the conference when scheduled, you do not need to offer the non-CDP taxpayer a second opportunity.

    See also IRM 8.23.1.3 for more information about granting extensions of time in a non-CDP OIC case.


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