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

Manual Transmittal

November 21, 2013

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 memorandum AP-08-0713-03, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project (Attachment 3), and the other editorial changes noted in the table below:

IRM Section Description of Change
8.23.2.4(8) and 8.23.2.4.5(2) Added that a case will not be returned as a premature referral because issues were not fully developed.
In General Changed "SBSE" references to "Compliance"
In General Revised for grammar and other editorial changes
In General Updated IRM cross-references
In General Throughout, referred to Appeals Technical Employees (Appeals Officer, Settlement Officer, Appeals Account Resolution Specialists) as "Appeals hearing officer" .

Effect on Other Documents

IRM 8.23.2, dated August 31, 2012, is superseded. Incorporates Interim Guidance memorandum AP-08-0713-03, Implementation of the Appeals Judicial Approach and Culture (AJAC) Project (Attachment 3), and other editorial changes.

Audience

Appeals Employees

Effective Date

(11-21-2013)


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

8.23.2.1  (11-21-2013)
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 8.22.2.

  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 8.23.6, OIC Processing and Closing Procedures, for initial case receipt guidance for Account and Processing Support (APS) personnel.

8.23.2.2  (11-21-2013)
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 using “Obvious Full Pay” criteria will generally require less technical expertise. See IRM 8.23.3.9, Centralized Offer in Compromise and “Obvious Full Pay” Offers, for guidance on working these types of cases.

  3. OICs rejected by a COIC site but not based upon “Obvious Full Pay” criteria can generally be resolved through written or telephone contact. The Appeals hearing officer working these cases 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. Appeals hearing officer working these more complex cases 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 commensurate with 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  (09-13-2011)
Transfer of OIC Cases

  1. The 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 Appeals 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, conduct a preliminary review to avoid unnecessary delays. If the review shows that the taxpayer is not in compliance with filing or payment requirements or the entire liability is clearly collectible and the taxpayer presents no special circumstances, the offer's rejection may be sustained without transfer. See IRM 8.23.2.6(4)(b) for possible exceptions where a new assessed liability is owed. In the case of a taxpayer who is not in filing or payment compliance, if an opportunity has not been given to the taxpayer to correct the issue of non-compliance, then an opportunity should first be given to the taxpayer to resolve the matter.

  6. If acceptance of the offer is possible and the Appeals office with the case 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
    DC Transfer or reassignment was denied due to compliance issues.
    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  (11-21-2013)
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. 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. Appeals 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 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. Compliance 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 Compliance 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:

      Compliance 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. Appeals 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 Compliance .

  7. IRM 5.8.7 allows for certain OICs to be closed as a processable return. Under certain circumstances, Compliance will agree to reconsider its return, and open the case anew. 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 Compliance 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 four instances where Appeals may receive an OIC without a decision (reject, return, withdrawal) first being made by a Compliance function, 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.

    • OIC based upon Doubt as to Liability (DATL) where Appeals originally determined the liability (e.g., income tax, TFRP, etc.)

    • Appeals accepts transfer of an OIC from COIC or Collection because it is directly related to an OIC that is already under consideration in Appeals. See IRM 8.23.2.3.1.

      Note:

      See IRM 8.23.2.4 and related subsections for criteria before returning any DATL offer as a premature referral.

  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 Doubt as to Liability offer in which Appeals determined the original liability or is a new offer resulting from the perfection of a previously rejected offer or is a related offer transferred to Appeals by Compliance (see (10) immediately above). 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 are 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. The Appeals hearing officer is 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. The Appeals hearing officer is 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  (11-21-2013)
Assignment of Related Offers

  1. It is sometimes the case that 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 Appeals, if Appeals becomes aware that there is an open, related offer under consideration elsewhere in Appeals, then Appeals should 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).

    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:

    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.

  3. Per IRM 5.8.1.4, all 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. It is generally not Appeals' policy to consider an offer for liabilities that have not been formally submitted on Form 656, so if these related liabilities exist, and a related offer has not been submitted, Appeals should secure the related offer as soon as possible.

  4. If an initial offer is already assigned in Appeals, Appeals will coordinate with Compliance to immediately accept assignment of any related offer that fits example (2)(a) above.

  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  (11-21-2013)
Premature Referral Issues

  1. Non-CDP OIC receipts must be checked 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. Compliance will, occasionally, receive an appeal of a joint offer that is signed only by one individual. If Compliance 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 the original liability was previously determined by Appeals, a DATL offer will generally be sent directly to Appeals without first being considered by Exam or Collection. Policy Statement P-8-3, which may be found in IRM 1.2.17.1.3, shows the approval level needed to reconsider a case that was previously closed by Appeals with a signed Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment. If the prior Appeals case was closed with a Form 870-AD, send the case back to the Brookhaven DATL OIC 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 (870)" , which is available on the Appeals OIC Web Page. The same applies to a Trust Fund Recovery Penalty (TFRP) case that was previously closed by Appeals with a Form 2751-AD, Trust Fund Recovery Penalty - Offer of Agreement to Assessment and Collection. Use the same templated Form 3210 available on the Appeals OIC Web Page, but change the referenced Form number and title.

    Note:

    While Policy Statement P-8-3 precludes Appeals from being the first to consider the DATL offer if the prior Appeals case was closed with a Form 870-AD or Form 2751-AD, the Policy Statement does not eliminate the taxpayer's statutory right to appeal Exam's or Collection's rejection of the offer. IRC 7122(e)(2) allows "a taxpayer to appeal any rejection of such offer or agreement to the Internal Revenue Service Office of Appeals." If Exam or Collection rejects the DATL offer and the taxpayer appeals, the approval level to consider the appealed offer that is dictated by Policy Statement P-8-3 is not required because IRC 7122(e)(2) is superior authority to Policy Statement P-8-3.

  6. If the prior 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.

  7. 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 IRMs 5.8.4.13.2 and 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.

  8. 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  (11-21-2013)
Premature Referral Issues - Estimated Tax Payments and Withholdings

  1. IRM 5.8.7.2.2.2 states that a processable DATC offer must be returned by Compliance when the investigation reveals the taxpayer does not have sufficient estimated tax paid or income tax withheld to cover the current year estimated tax due. This IRM section goes on to provide instructions on who should make estimated tax payments and how much they should make. Compliance is required to give the IMF taxpayer an opportunity to make up the missed estimated tax payment(s) or withholding underpayment before returning the offer. Review the Automated Offer in Compromise (AOIC) case history to determine when the taxpayer's missed estimated tax payment(s) or withholding underpayment occurred in relation to when the Compliance offer investigator issued its preliminary determination letter to the taxpayer. If the AOIC history is not in the case file, it is available through the Appeals Centralized Database System (ACDS) eCase.

  2. The following table provides instructions for determining whether Compliance neglected to follow significant IRM requirements resulting in the premature referral of an IMF case:

    If... And... Then...
    The taxpayer's failure to make required estimated tax payments or correct a withholding underpayment occurred before the issuance of the preliminary determination letter by the Compliance offer investigator Compliance did not give the taxpayer an opportunity to make up the missed estimated tax payment or correct the withholding underpayment, and the taxpayer is still not in compliance Compliance did not follow IRM 5.8.7.2.2.2. Send the offer back to Compliance as a premature referral to address the estimated tax or withholding underpayment. If the taxpayer corrects the estimated tax or withholding underpayment, Compliance may send the case back to Appeals to consider the OIC appeal.
    The taxpayer's failure to make required estimated tax payments or correct a withholding underpayment occurred before the issuance of the preliminary determination letter by the Compliance offer investigator Compliance previously gave the taxpayer an opportunity to make up the missed estimated tax payments or correct the withholding underpayment but the taxpayer did not do so, and the taxpayer is still not in compliance Compliance did not follow IRM 5.8.7.2.2.2 procedures and the offer should have been returned by Compliance and not rejected. Send the offer back to Compliance as a premature referral.
    The taxpayer's failure to make required estimated tax payments or correct a withholding underpayment occurred after the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer is still not in compliance with estimated tax payments or withholding requirements Compliance did not neglect to follow IRM procedures and Appeals must keep the OIC case. Review IRM 5.8.7.2.2.2 and IRM 8.23.2.4 regarding cases when an IMF taxpayer does not remain in compliance.

    Reminder:

    While it may seem easier in some instances for the Appeals hearing officer to keep the non-CDP OIC case and try to get the taxpayer current with estimated tax payments or withholding requirements, tax deposits, or missed proposed periodic OIC payments, such omissions by the taxpayer, if they occurred before the issuance of the preliminary determination letter by the Compliance offer investigator, should be left to Compliance. Addressing the estimated tax or withholding deficiencies, or missed tax deposits or proposed periodic payments that occurred before the issuance of the preliminary determination letter by the Compliance offer investigator forces Appeals to first resolve a compliance issue that had nothing to do with why the offer was rejected. If the compliance problem cannot be resolved, then Appeals may need to sustain rejection of the taxpayer's offer without ever being able to engage in a dialogue with that taxpayer over the substantive issue(s) in dispute.

8.23.2.4.2  (11-21-2013)
Premature Referral Issues - Federal Tax Deposits

  1. IRM 5.8.7.2.2.3 states that a processable DATC offer must be returned by Compliance when the investigation reveals an in-business trust fund (IBTF) taxpayer is required to make employment tax deposits and missed one or more deposits during the quarter in which the offer was submitted, or subsequent quarters. Compliance is required to give the IBTF taxpayer one opportunity to make up the missed tax deposit(s) and return the offer if the IBTF taxpayer misses a subsequent tax deposit. Review the Automated Offer in Compromise (AOIC) case history to determine when the taxpayer's missed tax deposit(s) occurred in relation to when the Compliance offer investigator issued their preliminary determination letter to the taxpayer. If the AOIC history is not in the case file, it is available through the ACDS eCase.

  2. The following table provides instructions for determining whether Compliance neglected to follow significant IRM requirements resulting in the premature referral of an IBTF case:

    If... And... Then...
    The IBTF taxpayer's failure to make required tax deposit(s) occurred before the issuance of the preliminary determination letter by the Compliance offer investigator Compliance did not give the taxpayer an opportunity to make up the missed tax deposit(s) Compliance did not follow IRM 5.8.7.2.2.3. Send the offer back to Compliance as a premature referral to address the tax deposit underpayment. If the taxpayer corrects the tax deposit underpayment, Compliance may send the case back to Appeals to consider the OIC appeal.
    The IBTF taxpayer's failure to make required tax deposit(s) occurred before the issuance of the preliminary determination letter by the Compliance offer investigator Compliance previously gave the taxpayer an opportunity to make up the missed tax deposit(s) but the taxpayer did not do so Compliance did not follow IRM 5.8.7.2.2.3 procedures and the offer should have been returned by Compliance and not rejected. Send the offer back to Compliance as a premature referral.
    The IBTF taxpayer's failure to make required tax deposit(s) occurred either before or after the issuance of the preliminary determination letter by the Compliance offer investigator Compliance previously gave the taxpayer an opportunity to make up missed tax deposit(s), the taxpayer made up the missed tax deposit(s) and then missed a subsequent tax deposit(s) Appeals will follow IRM 5.8.7.2.2.3 and not give the IBTF taxpayer a second opportunity to make up the subsequently missed tax deposit. Notify the IBTF taxpayer by telephone or correspondence that Appeals must sustain rejection of the offer because the taxpayer was previously given an opportunity to make up a missed tax deposit and has now missed a subsequent tax deposit, or contact the taxpayer or power of attorney and advise of the same. After issuing the letter or contacting the taxpayer or POA, close out the case as rejection sustained.
    The IBTF taxpayer's first failure to make required tax deposits occurred after the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer is still not in compliance with tax deposits Compliance did not neglect to follow IRM procedures and Appeals must keep the OIC case. Review IRM 5.8.7.2.2.3 and IRM 8.23.2.6 regarding cases when an IBTF taxpayer does not remain in compliance.

    Note:

    See the Reminder after the table in IRM 8.23.2.4.1(2).

8.23.2.4.3  (11-21-2013)
Premature Referral Issues - Delinquent Returns

  1. Per IRM 5.8.7.2.2.1, Compliance may return an offer, without appeal rights, if a taxpayer failed to timely file a tax return while an offer is under consideration. If a tax return is delinquent, including extensions, and the delinquency occurred before the issuance of the preliminary determination letter by the Compliance offer investigator, return the case as a premature referral. In such a case, the offer should have been returned by Compliance, and not rejected. A delinquent return may likely also produce a delinquent tax liability, and Appeals should not be looked upon to first address these tax compliance issues having nothing to do with why the offer was rejected (See the "'Reminder" after the table in IRM 8.23.2.4.1(2)). If the taxpayer submits the delinquent return to Compliance, or verifies that it was filed, and the liability (if any) is addressed by Compliance either by securing full-payment of the liability or adding the new liability to the Form 656, then the case may be sent back to Appeals for consideration of the taxpayer's OIC appeal.

  2. The following table illustrates when a premature referral for delinquent return issues may be appropriate:

    If... And... Then...
    The taxpayer's failure to file a delinquent tax return occurred before the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer is still not in filing compliance Compliance did not follow IRM 5.8.7.2.2.1 procedures by neglecting to address the delinquent return filing with the taxpayer. Send the offer back to Compliance as a premature referral to address the delinquent return and tax due (if any). If the taxpayer files the delinquent return or provides evidence of filing, and Compliance addresses the tax due (if any), by securing full-payment or including the new liability in the offer, then Compliance may send the case back to Appeals to consider the OIC appeal.
    The taxpayer's failure to file a delinquent return occurred after the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer is or is not still in filing compliance Compliance did not neglect to follow IRM procedures and Appeals must keep the OIC case. Review IRM 8.23.2.6regarding cases when an IMF taxpayer does not remain in filing compliance.
    The taxpayer filed a timely or delinquent return before the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer had an unpaid balance due on the return Compliance did not follow IRM 5.8.7.2.2.1 procedures by neglecting to address the balance due with the taxpayer. Appeals may elect to send the offer back to Compliance as a premature referral to address the delinquent tax. If the taxpayer pays the delinquent tax or Compliance elects to include it in the offer, then Compliance may send the case back to Appeals to consider the OIC appeal. Appeals may also simply include the liability in the offer and continue with its consideration of the case.
    The taxpayer filed a timely or delinquent return after the issuance of the preliminary determination letter by the Compliance offer investigator The taxpayer did not pay the balance due on the return Compliance did not neglect to follow IRM procedures and Appeals must keep the OIC case. Review IRM 5.8.7.2.2.1 and IRM 8.23.2.6 regarding cases when an IMF taxpayer does not remain in filing compliance.

    Note:

    A return is not considered delinquent if a timely extension has been filed but the return is not yet due. If the return is unfiled but not delinquent as of the date of the Compliance offer examiner's preliminary determination letter, then the return is not delinquent, and the case will not be returned as a premature referral.

    Example:

    If a return is unfiled on September 15th, but the taxpayer was granted an extension to file by October 15th, then the return is not delinquent if the Compliance offer examiner's preliminary determination letter was dated October 15th, or earlier.

    Note:

    See the Reminder after the table in IRM 8.23.2.4.1(2).

8.23.2.4.4  (11-21-2013)
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 Compliance 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 Compliance offer investigator.

  3. The following table provides instructions for determining whether Compliance 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 Compliance offer investigator Compliance did not give the taxpayer an opportunity to make up the missed proposed periodic installment payment(s) Compliance 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 Compliance as a premature referral to address the missed proposed periodic installment payment(s). If the taxpayer corrects the proposed periodic installment payment issue, Compliance 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 Compliance offer investigator Compliance 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 Compliance determined special circumstances exist Compliance 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 Compliance 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 Compliance offer investigator The taxpayer did not make up the payment Compliance 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 Compliance offer investigator Compliance 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 Compliance 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.

    Note:

    See the Reminder after the table in IRM 8.23.2.4.1(2).

8.23.2.4.5  (11-21-2013)
Premature Referral Issues - Other Issues

  1. Initial case review may show that Compliance 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 Compliance failed to follow in documenting the reason for referral to Appeals.

  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 should have been returned and not rejected. The instructions for fraud development are in IRM 5.8.4.18. These procedures instruct Compliance to return the offer without appeal rights based on other investigations pending that may impact the liability to be compromised or the grounds upon which it was submitted.

    • 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.

      Note:

      See IRM 8.23.3.3.1.1 if a claim for relief from joint and several liability was filed after the offer was rejected and the taxpayer is either the requesting or the non-requesting spouse.

    • Taxpayer filed bankruptcy before the Compliance offer examiner issued their preliminary determination letter. Compliance should have returned the offer without appeal rights per IRM 5.8.10. Return the offer to Compliance 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 File Control (PIFC) 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 is based upon doubt as to liability and the prior case was closed in Appeals with a Form 870-AD or Form 2751-AD

    • 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  (11-21-2013)
Liability Previously Determined by Appeals

  1. When an OIC is based upon doubt as to liability and the liability was previously determined by Appeals, the offer will be assigned directly to Appeals for consideration without Compliance first rejecting the offer. These cases may involve Examination based tax liabilities or those resulting from Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET). This means the case will arrive in Appeals with an open TIPRA statute. On these OIC cases, Appeals is responsible for:

    • Determining the proper TIPRA statute expiration date and ensuring the WUNO has the necessary statute controls (See IRM 8.23.2.3.)

    • Assembling the information and documents necessary to evaluate the offer

    • Determining the merits of the offer

    • Reaching a conclusion

    • Preparing the closing documents

    Note:

    See IRM 8.23.2.4 for premature referral issues involving cases previously closed by Appeals with either a Form 870-AD or Form 2751-AD, or prior cases closed on ACDS using Closing Code 21.

  2. The taxpayer must offer some amount of consideration. An offer of $0.00 is an abatement request and not an offer. The offer would generally be the amount of the expected corrected liability, penalties and interest. The taxpayer is not required to pay an OIC application fee or make any sort of TIPRA payment if the basis of the offer is doubt as to liability.

  3. The Appeals hearing officer should negotiate a settlement in a manner similar to an audit reconsideration examination or, in the case of TFRP or PLET liabilities, in a manner similar to considering hazards of litigation. See also IRM 8.23.3.9 for details on Appeals consideration of DATL offers.

    1. If an agreement is reached, the Appeals hearing officer will request that the taxpayer withdraw the offer and then process the necessary adjustment by completing Form 3870, Request for Adjustment.

    2. If the prior case disposition involved a Form 870-AD agreement, special approval is required for re-opening. (See Policy Statement P-8-3 (formerly P-8-50), which is also IRM 1.2.17.1.3.).

    3. If an agreement is not reached or the taxpayer will not withdraw the offer, the Appeals hearing officer will act upon the offer based upon the settlement negotiations and recommend acceptance or rejection of the offer, as appropriate.

  4. Process the offer in accordance with IRM 8.23.6, OIC Processing and Closing Procedures.

8.23.2.6  (11-21-2013)
When Taxpayer Does Not Remain in Compliance

  1. IRM 5.8 generally does not require a processable offer to be returned or rejected because a previously unfiled or delinquent IMF return produces a new liability, or another assessment is made for any other reason during the time an offer is being considered. Appeals applies the same standard. While the continued tax compliance of the taxpayer is integral to the success of the OIC program, in certain circumstances, it is reasonable to include a new assessment in an offer even though the assessment was made after the OIC was accepted for processing, and prior to a formal recommendation. As is the case with most OIC related issues, Appeals hearing officers are expected to apply independent judgment and discretion when weighing the facts and circumstances of each individual case. Weigh the overall possible benefits of acceptance of the offer against the reasons for the new assessment, and how that new assessment may, or may not, accurately reflect the taxpayer's current compliance, or prospects for future compliance. See (5) below, for some examples of when it may be appropriate to include a new IMF liability in an offer that is under consideration.

  2. Carefully review the premature referral criteria to determine when the specific issue(s) of noncompliance occurred in relation to when the preliminary determination letter was issued by the Compliance offer investigator. See IRM 8.23.2.4 and related subsections. Compliance problems affecting the acceptability of an offer may include instances in which the taxpayer failed to:

    • timely file all required federal tax returns,

    • pay all tax, penalties and interest due on federal returns filed after the offer was submitted (see (5) below), or

    • pay current taxes, which includes required estimated tax payments or a sufficient amount of tax withheld from wages for Individual Master File (IMF) taxpayers, and timely federal tax deposits for In-Business Trust Fund (IBTF) taxpayers.

    Note:

    The look-back period for unfiled returns is generally six years. See IRM 5.8.3.7.

  3. If the issue(s) of noncompliance occurred after the preliminary determination letter was issued by the Compliance offer investigator, Appeals will contact the taxpayer and attempt to verify and remedy the problem. The issue(s) of noncompliance should be promptly resolved.

    If... And... And Also... Then...
    The issue of noncompliance involves an IMF taxpayer with insufficient estimated tax payment(s) or a withholding underpayment The missed estimated tax payment(s) or withholding underpayment occurred after the preliminary determination letter was issued by Compliance but before substantive contact is made by Appeals Contact with the taxpayer or POA is made by telephone, in person or via correspondence (substantive contact letter or other correspondence) Appeals will follow IRM 5.8.7.2.2.2 guidelines and allow the IMF taxpayer up to 30 days to provide the necessary payment and/or sufficient documentation to show the problem has been corrected. See paragraphs (4) and (5) below for instructions for cases in which the taxpayer did not remedy the compliance problem by the established deadline.
    The issue of noncompliance involves an IMF taxpayer with insufficient estimated tax payment(s) or a withholding underpayment The missed estimated tax payment(s) or withholding underpayment occurred after the preliminary determination letter was issued by Compliance The Appeals conference was either previously held or the date for the scheduled conference has passed and the taxpayer did not participate in the conference. If the conference was held, the noncompliance issue must have been discussed with the taxpayer. Sustain rejection of the offer where Appeals has met its obligations to give the taxpayer an opportunity for the Appeals conference he/she asked for and an opportunity to correct the prior estimated tax and/or withholding underpayment problem
    The issue of noncompliance involves an IBTF taxpayer with a missed tax deposit(s) The missed tax deposit(s) occurred after the preliminary determination letter was issued by Compliance but before substantive contact is made by Appeals Contact with the taxpayer or POA is made by telephone or in person Appeals will follow IRM 5.8.7.2.2.3guidelines and allow the taxpayer 15 calendar days to provide sufficient documentation to show the tax deposit(s) was made and the associated late deposit penalty(s) paid in full. See paragraph (4) below for instructions for cases in which the taxpayer did not remedy the tax deposit and/or late deposit penalty problem by the established deadline.
    The issue of noncompliance involves an IBTF taxpayer with a missed tax deposit(s) The missed tax deposit(s) occurred after the preliminary determination letter was issued by Compliance but before substantive contact was made by Appeals and the IBTF taxpayer did not previously miss and make up a tax deposit while the case was being considered by Compliance Contact with the taxpayer or POA is made via Substantive Contact Letter or other correspondence Appeals will follow IRM 5.8.7.2.2.3 guidelines and allow the taxpayer 30 calendar days to provide sufficient documentation to show the tax deposit(s) was made and the associated late deposit penalty(s) paid in full. See paragraph (4) below for instructions for cases in which the taxpayer did not remedy the tax deposit and/or late deposit penalty problem by the established deadline.
    The issue of noncompliance involves an IBTF taxpayer with a missed tax deposit(s) The missed tax deposit(s) occurred after the preliminary determination letter was issued by Compliance The Appeals conference was either previously held or the date for the scheduled conference has passed and the taxpayer did not participate in the conference. If the conference was held, the noncompliance issue must have been discussed with the taxpayer. Sustain rejection of the offer because Appeals has met its obligations to give the taxpayer an opportunity for the Appeals conference he/she asked for and an opportunity to make up the missed tax deposit(s)
    If the issue of noncompliance is a tax debt(s) (which includes tax, penalties and/or interest) incurred by the taxpayer after the offer was processed and the tax debt(s) is not listed by Compliance as being part of the rejected offer (check the Form 656 and Form 1271 for tax debt(s) that Compliance considered to be part of the offer) Substantive contact has not yet been made by Appeals Contact with the taxpayer or POA is made by telephone, in person, or correspondence Allow the IMF taxpayer up to 30 days to fully pay the liability, or elect to include the liability in the offer. See paragraph (5) below for instructions for cases in which the taxpayer does not fully pay the subsequent liability(s) by an established deadline.
    If the issue of noncompliance is a tax debt(s) (which includes tax, penalties and/or interest) incurred by the taxpayer after the offer was processed and the tax debt(s) is not listed by Compliance as being part of the rejected offer (check the Form 656 and Form 1271 for tax debt(s) that Compliance considered to be part of the offer) The Appeals conference was either previously held or the date for the scheduled conference has passed and the taxpayer did not participate in the conference The SO
    • elected not to include the new liability in the offer

    • previously informed the taxpayer of the subsequent liability,

    • gave the taxpayer an opportunity to pay the subsequent liability including a specific deadline for payment, and

    • advised the taxpayer that Appeals may sustain rejection of the offer if the subsequent liability was not paid in full by the deadline

    Appeals may sustain rejection of the offer. Appeals has met its obligation to give the taxpayer an opportunity for the Appeals conference he/she asked for and an opportunity to fully pay the subsequent tax liability.

    Note:

    Appeals may also include the liability in the offer, and continue with consideration of the offer (See the examples at (5), below)

  4. In these instances, it is important for Appeals to provide the taxpayer with clear and specific instructions as to exactly what is required of the taxpayer, specific deadlines, and the consequence if the compliance issue is not promptly resolved. The noncompliant taxpayer should, generally, do all of the following by the established deadline:

    1. File all past-due returns or provide sufficient documentation to support a claim of having had no filing requirement.

    2. Make all required estimated tax payments or federal tax deposits by the established deadline or provide sufficient documentation to support claim of having a lower estimated tax requirement.

    3. IBTF taxpayers must pay all liabilities and late deposit penalties incurred after the offer was submitted

    4. A wage earner with insufficient year-to-date withholding must provide sufficient evidence that the proper amount of federal income tax is now being withheld and make an estimated tax payment for any projected underpayment for the current tax year caused by the previous under withholding.

  5. As stated in (1) above, IRM 5.8 does not require a processable 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. Appeals applies this same standard. It may be reasonable to include a new assessment in an offer even though the assessment was made after the OIC was rejected, but before a formal recommendation was ready for the OIC. As is the case with most OIC related issues, Appeals hearing officer should apply independent judgment and discretion when weighing these compliance issues. Weigh the overall benefits of acceptance against the reasons for the new assessment, and how that new assessment may, or may not, accurately reflect the taxpayer's current compliance or prospects for future compliance. Below are some examples (not at all inclusive) of when it may be prudent to include a new assessment in an OIC that is under consideration:

    Example:

    A trust fund recovery penalty assessment is made against a taxpayer who has an otherwise viable offer proposal under consideration, and a good overall compliance record in recent years. In this case, it may be prudent to continue negotiation of the offer and include the new assessment(s).

    Example:

    An assessment is made against a taxpayer who has an otherwise viable offer proposal under consideration, and a good compliance record in recent years. The offer has been under consideration for some time and the Service has expended much time and resources considering the case. Past collection efforts against the taxpayer have yielded very little funds over the years. In this case, it may be prudent to continue negotiation of the offer and include the new assessment.

    Example:

    An assessment is made against taxpayers who have an otherwise viable offer proposal under consideration, and a good compliance record in recent years. The assessment resulted from the liquidation of a small retirement account that was used by the taxpayers for necessary living expenses. Their offer proposal is for short-term payment terms, and they have insufficient liquid assets to immediately pay the new assessment. In this case, it may be prudent to continue negotiation of the offer and include the new assessment.

    Example:

    A taxpayer does not immediately have the funds to pay a new assessment that has been made since the offer was processed. However, the taxpayer offers to increase the offer by an amount equal to or exceeding the new liability. It may be prudent to accept the offer and include the new assessment.

  6. Per IRM 8.23.1.3, one of the four primary obligations Appeals has 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). Noncompliance with a filing and/or payment requirement does not preclude Appeals from giving the taxpayer an opportunity for a conference. Even if the taxpayer does not remedy the 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, the Appeals hearing officer does 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. The Appeals hearing officer may, generally, proceed with closing out the case.

    Note:

    An initial Substantive Contact Letter may be used to provide IMF and IBTF taxpayers with the opportunity to remedy a compliance issue that arose before the Appeals conference. The letter should inform the taxpayer in unambiguous terms that it is important for the taxpayer to resolve the compliance issue by the established deadline and that Appeals will proceed with the conference as scheduled even if he/she does not. Be sure to schedule the date of the Appeals conference on or after the date by which the taxpayer must have all compliance issues resolved.

  7. IRM 5.8.7 provides instructions to Collection on when to return an offer based upon a taxpayer's noncompliance. Appeals cannot "return" an offer that has already been rejected by Collection, but the same criteria in IRM 5.8.7 may be used by Appeals as a basis to sustain Collection's rejection of the taxpayer's offer.


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