The purpose of this section is to provide Appeals personnel with the procedures necessary to properly evaluate a taxpayer's appeal of a rejected offer in compromise (OIC). Appeals does not have its own set of rules or procedures for determining reasonable collection potential (RCP) in an OIC case. For this reason, this section does not reiterate what is already in IRM 5.8, Offers in Compromise. Rather, it discusses some of the more basic elements of the OIC evaluation process and provides guidance unique to Appeals' role in the OIC process.

Collection, under the Commissioner, Small Business/Self Employed (SBSE), is responsible for processing and analyzing a taxpayer's offer, negotiating with the taxpayer, making an RCP determination and communicating the final determination to the taxpayer. IRM 5.8.4, Offer in Compromise, Investigation, and IRM 5.8.5, Offer in Compromise, Financial Analysis contain OIC guidance concerning:

If it is determined that the taxpayer cannot pay in full, there is a legal basis for compromise under IRC 7122 based on doubt as to collectibility. If the taxpayer has the ability to pay in full, there may still be a legal basis for compromise if it is further determined that such compromise would promote effective tax administration. See IRM 8.23.3.8 for guidance on Effective Tax Administration (ETA) offers.

Policy Statement P-5-100 ( IRM 1.2.14.1.17) states, in part:

IRM 5.8 is the primary authority for evaluating offers and should be followed when evaluating an appealed rejection. Appeals does not have the authority to disregard established guidance. However, the Appeals process in an OIC case is not merely an extension of the SBSE Collection process. The role and mission of Appeals is different than that of SBSE Collection and Appeals Officers and Settlement Officers (AO/SOs) must employ general Appeals settlement and conference practices applicable to all Appeals cases to appealed offers as well.

IRC 7122(d)(2) requires IRS to publish schedules of national and local allowances designed to ensure that taxpayers seeking to compromise their tax debts have an adequate means to provide for basic living expenses. This code section further requires that IRS (including Appeals) "shall determine, on the basis of the facts and circumstances of each taxpayer, whether the use of the schedules published under subparagraph A [of that IRC section] is appropriate and shall not use the schedules to the extent such use would result in the taxpayer not having adequate means to provide for basic living expenses."

If the taxpayer disagrees with the rejection of an offer by Collection, they can request Appeals consideration and review of Collection's determination. The appeal must be in writing. A Form 13711, Request for Appeal of Offer in Compromise , will generally be used but is not required.

Appeals and Settlement Officers evaluating appealed OICs must be knowledgeable in the procedures detailed in IRM 5.8 and other parts of the IRM as well as the law and regulations governing offers and Appeals such as:

When evaluating offers (other than "Obvious Full Pay" offers - See IRM 8.23.3.9), Collection generally sends a pre-decision letter to the taxpayer telling them why they are proposing to reject the offer. This letter provides the taxpayer with the rationale and financial analysis for Collection’s preliminary conclusion and an opportunity for the taxpayer to supply additional information or, if applicable, to amend the offer to reflect the RCP determined by Collection.

If SBSE rejects the offer, copies of Collection's Income/Expense (IET) and Asset/Equity (AET) Tables will be attached to their rejection letter.

As a result of the pre-decision letter and IET and AET information provided with the rejection letter, a taxpayer should be fully aware of why the offer was rejected. The Form 13711, Request for Appeal of Offer in Compromise, though not mandatory, directs the taxpayer to provide in the appeal:

Appeals must exercise independent judgment concerning the RCP determination made by Collection and the issues disputed by the taxpayer on appeal. IRM 5.8 is the primary authority for evaluating offers and should be followed when evaluating an appealed rejection. Appeals does not have the authority to disregard established guidance. However, the Appeals process in an OIC case is not merely an extension of the SBSE Collection process. The role and mission of Appeals is different than that of Small Business/Self Employed (SBSE) Collection and Appeals Officers and Settlement Officers (AO/SOs) must employ general Appeals settlement and conference practices to appealed offers.

Appeals and Settlement Officers evaluating appealed OICs must be knowledgeable in the procedures detailed in IRM 5.8, IRM 8.23, and other parts of the IRM and administrative guidance such as those listed in IRM 8.23.3.1 above.

RCP issues that were previously addressed during the investigation by Collection should not generally be re-examined unless there is convincing evidence that such reinvestigation is necessary. Appeals will generally consider only the items disputed in the taxpayer's appeal, provided the case referred from Collection is fully and adequately developed. However, the overall acceptability of the taxpayer's offer remains the primary issue before Appeals, so if Collection has overlooked or underdeveloped an important issue that will affect whether the offer is accepted or rejected, then the issue must be properly developed and/or addressed. Counsel's opinion is statutorily required for acceptance of an offer in which the unpaid amount of tax assessed (including any interest, additional amount, addition to the tax, or assessable penalty) is equal to or more than $50,000.00 (See IRM 8.23.4.2.2) and Appeals must present an acceptance recommendation that adequately addresses all aspects of the taxpayer's RCP.

If Collection neglected to address or did not fully develop an issue that significantly affects the taxpayer's overall RCP determination and the Appeals employee cannot quickly resolve the issue, consider returning the offer to Collection as a premature referral so that the information can be considered and the issue fully developed and addressed. If Collection continues to believe that the offer should be rejected after considering and addressing the issue, the offer will be returned to Appeals with Collection's views and Appeals will continue to process the appeal. See IRM 8.23.2.3.1 for premature referral issues on appealed OIC cases.

The financial information in the case file should generally be less than 12 months old. If the financial information becomes older than 12 months, contact the taxpayer to update the necessary information. Updated financial information and/or a new Form 433-A and/or Form 433-B is not necessary unless the taxpayer's financial situation has significantly changed. Appeals also needs to be aware of situations where the financial information became outdated because of delays by Collection (or Appeals) and through no fault of the taxpayer. Pen and ink changes to the existing Form 433-A/B are sufficient for cases where the taxpayer's financial situation has not changed significantly. IRM 5.8.5.3.2 contains additional guidance for cases with old or outdated information. See IRM 8.23.3.3.1.2 regarding requesting supplemental information if updated financial information is needed.

The Settlement Officer is responsible to monitor and address the IMF taxpayer compliance with current estimated tax and withholding requirements, or a BMF taxpayer's compliance with federal tax deposits while the DATC OIC case is being considered by Appeals. See IRM 8.23.2.4 for Appeals guidance on when a taxpayer does not remain in compliance while on appeal.

A taxpayer who had a Periodic Payment offer rejected by Collection is not required to continue making the periodic installment payments while the case is being considered in Appeals. See IRM 8.23.3.1.1.1. The TIPRA requirement to make periodic installment payments ended when Collection rejected the offer. However, if Appeals secures an amended Periodic Payment offer, then the taxpayer must once again start making the periodic installment payments proposed in the amended offer. See IRM 5.8.4.7.2.1 for a table with guidance on TIPRA payment requirements for amended offers.

Document all significant case actions on the case activity record in a timely, accurate and complete manner.

Because a taxpayer may propose not just the amount of the offer, but also the terms of the payment, consideration must be given to such terms before deciding to recommend acceptance. Appeals must now evaluate and negotiate not just an acceptable offer amount , but agreeable payment terms as well. Appeals is not required to accept the taxpayer's offer simply because it otherwise meets or exceeds RCP. If the taxpayer's proposed payment terms cause the offer itself to be unacceptable, the terms must be sufficiently renegotiated. If the taxpayer is not willing to propose acceptable terms, the offer may be denied as not being in the best interest of the government.

During the course of an offer investigation, if a TIPRA payment(s) (which includes the initial payment submitted with the offer, subsequent periodic installment payments, and/or the payment submitted with an amended offer) contributes to the full payment of a tax period, that period must remain part of the offer and must be listed on any subsequent amended Form 656 and the Form 7249. Even though the tax debt is fully paid, the payment or payments used to satisfy the tax debt are still part of the overall offer amount, so all satisfied periods must remain part of the offer. See IRM 5.8.8.3. If a tax period is paid in full exclusively via a non-TIPRA payment, such as a refund offset, there is no need to list such period on the amended Form 656 or the Form 7249. Before securing an amended Form 656 with the tax period removed, make sure no TIPRA payment was applied to the satisfied tax period.

If Appeals secures an amended offer, the AO/SO must sign and date the Form 656 as the " Authorized Internal Revenue Official" .

Taxpayers who do not meet the Form 656-A exemption criteria may be required to remit an additional offer payment with the amended offer depending on the amount and payment terms of such amended offer relative to the amount and payment terms of the original offer. Review the table in IRM 5.8.4.7.2.1 for various amended offer scenarios and the associated TIPRA payment requirements.

The taxpayer is given credit toward the amount of the amended offer for all OIC payments made prior to receipt of such amended offer. See IRM 5.8.4.7.2.1 and IRM 5.8.8.2. The OIC Acceptance Letter should indicate the total amount of offer payments received as of the date of issuance as well as the date and amount of the last offer payment received.

Appeals may process the OIC payment received with the amended offer. See IRM 8.23.1.4.1.1 for guidance on how to process OIC payments.

If an amended offer is received without the required partial payment, Appeals will follow IRM 5.8.4.7.2.1 by sustaining rejection of the offer if the taxpayer does not make the required TIPRA payment after being given a reasonable opportunity to do so. If an amended offer is received without the required additional TIPRA payment

If the amended offer secured by Appeals is a Periodic Payment offer from a taxpayer who is not exempt from TIPRA payment requirements (see IRM 8.23.1.4.1 for exemption criteria), the taxpayer must once again start making the proposed periodic installment payments. Appeals is responsible to make sure the taxpayer makes the periodic installment payments proposed in the amended offer while the OIC case is pending in Appeals. The offer may be considered withdrawn under IRC 7122(c)(1)(B)(ii) if the taxpayer fails to make all proposed periodic installment payments. See IRM 8.23.3.4.1 for Appeals mandatory withdrawal procedures.

Appeals occasionally receives an appealed rejected offer from a husband and wife in which two Forms 656 are required, but only one was received. SBSE will often not secure the second Form 656 unless they intend to accept the offer. Review IRM 5.8.2.3 to determine how many Forms 656 are needed. If Appeals is able to negotiate an acceptable offer in such a case and a second Form 656 is required, Appeals must secure the additional Form 656 along with any applicable OIC application fee and TIPRA payment or Form 656-A. See IRM 8.23.1.4.1 and IRM 5.8.3.7 for information on required fees and payments. Even though the new or second Form 656 is related to the offer that has already been rejected, SBSE's Centralized Offer in Compromise (COIC) site must complete the processability review and process the applicable fee and payment. As part of such processing, COIC will add the related offer to their Automated Offer in Compromise (AOIC) system so that offer may be properly monitored if accepted. Because the new Form 656 doesn't represent a new "offer" , COIC will provide expedited processing of the related offer within 1-2 business days of receipt. To initiate this expedited processing, the SO must:

Paragraph (o) in Section V of Form 656 allows the Service to add any assessed liabilities the taxpayer failed to list to Section II of the Form. If the only revision needed before acceptance is the addition of a missing period, an amended Form 656 is not necessary. As a courtesy, contact the taxpayer to advise him/her that you are adding the missed liability(s).

Follow IRM 5.8.6 with regard to collateral agreements. In addition to the terms specifically stated in the offer, collateral agreements enable the government to either collect funds or restrict a taxpayer's ability to claim future losses or credits. Do not use them to allow the taxpayer to submit an offer for a lower amount than the collection potential of the case dictates. You can also use a collateral agreement to clarify an offer, as in the case of a co-obligor agreement. Usage of collateral agreements should not be routine. Secure them only when you expect significant recovery or the taxpayer has identifiable future losses or credits. It may be appropriate to secure a collateral agreement when a significant increase in income is expected.

Do not secure a future income collateral agreement

If a future income collateral agreement is secured, the offer must be approved by the Area Director of Appeals. See IRM 5.8.6.3.1 for additional information.

Use standard collateral agreements whenever possible to aid in the monitoring of the agreements. The standard agreements are listed below:

The collateral agreement must be signed by the Appeals official authorized to approve the underlying offer. See Delegation Order 5-1, which is also IRM 1.2.44.2 and is available on the Appeals OIC web page.

When an offer is accepted to compromise trust fund tax owed by an operating business, the taxpayer is relieved of a significant operating expense. The effect is to grant the delinquent taxpayer an economic advantage over competitors who are in tax compliance. Recovery of the unpaid trust fund tax amount is a significant issue when considering an offer from a business taxpayer. In the interest of "fairness to all taxpayers" the Service must be cautious to avoid providing financial advantages to those taxpayers through the forgiveness of employment tax debt, as this may be detrimental to competitors who are remaining in compliance with their tax obligations. Procedures in IRM 5.8.4.13 must be followed when considering an appealed offer from all In-Business Trust Fund (IBTF) taxpayers, including sole proprietorships, partnerships, LLCs and corporations.

On February 5, 2008, SBSE Collection changed its procedures for evaluating offers involving trust fund taxes. An interim guidance memorandum dated January 28, 2008 was issued by SBSE and later incorporated into the 9/2008 revision of IRM 5.8.4.13.1 and IRM 5.8.4.13.2. Offers received by the Service on or before February 4, 2008, are still subject to procedures found in the 9/2005 revision of IRMs 5.8.4.13.1 and 5.8.4.13.2. Offers received on or after February 5, 2008 are subject to the procedures found in the current revision of IRMs 5.8.4.13.1 and 5.8.4.13.2.

If the offer under consideration was received by the Service on or before February 4, 2008 to compromise trust fund tax , all issues outlined in the 9/2005 revision of IRM 5.8.4.13.2 must have been addressed by Collection before sending the non-CDP offer case to Appeals. This includes proper protection of the ASED(s) for the Trust Fund Recovery Penalty (TFRP). Per IRM 8.23.2.3.1, return the case as a premature referral if Collection did not adequately protect the ASED(s) on a pre-February 5, 2008 trust fund offer before sending the case to Appeals.

If the offer under consideration was received by the Service on or after February 5, 2008 to compromise trust fund tax, all issues outlined in the 9/2008 revision of IRM 5.8.4.13.2 must have been addressed by Collection before sending the non-CDP offer case to Appeals. This includes:

Per IRM 8.23.2.3.1, return the case to Collection as a premature referral if the offer was received by the Service on or after February 5, 2008, and the trust fund tax is not fully paid or the TFRP(s) is either assessed or in the process of being assessed, unless Collection has clearly documented either a non-assertion determination or the case being under LEM criteria.

IRM 5.8.4.13 contains additional guidance for offers involving:

If it is determined that there is no basis to accept an offer under doubt as to collectibility (DATC) or doubt as to liability (DATL), the offer may still be accepted if it is determined that doing so:

IRM 5.8.11, Offer in Compromise, Effective Tax Administration, contains information about Effective Tax Administration (ETA) offers and doubt as to collectibility offers where the taxpayer presents "special circumstances" (DATC-SC) as a basis to accept the offer, and the procedures for evaluating such offers.

Under ETA, the taxpayer does not dispute being financially capable of paying the liability in full. To accept an ETA offer, the taxpayer must establish that:

Under DATC-SC, the taxpayer does not have the ability to pay in full, but does not dispute being financially capable of paying more than the amount being offered. To accept a DATC-SC offer, the taxpayer must establish that:

ETA and DATC-SC offers require a more subjective evaluation. Although IRM 5.8.11 is comprehensive, it is simply not practical to try to draft guidance that encompasses every event or situation.

ETA and DATC-SC offers based upon economic hardship are not uncommon. The definition of an economic hardship for ETA and DATC-SC offer purposes is found in Treasury Regulation 301.6343-1. Often a taxpayer presents circumstances reflecting one or more of the factors outlined in IRM 5.8.11.2.1, or closely resembling many aspects of an example cited in the IRM or Treasury Regulation 301.7122-1, but the case for ETA or DATC-SC acceptance for the amount proposed by the taxpayer falls apart when actual dollars are factored in. A decision in an ETA or DATC-SC hardship offer requires a three-tiered approach:

Offers based upon public policy or equity considerations are rarer.

See Delegation Order 5-1, which is IRM 1.2.44.2, and is also available on the Appeals OIC web page.

IRM 5.8 does not contain separate ETA offer procedures for when filing a NFTL is generally required. See IRM 8.23.3.3.2 for information regarding lien filing criteria and procedures if the offer is going to be accepted.

All new offers are either received in or forwarded to the Centralized Offer in Compromise (COIC) sites for initial processing. Once the COIC unit has loaded the offer onto the Automated Offer in Compromise (AOIC) system and determined the offer to be processable, a decision is made as where the case will be assigned. Collection's field offer groups work the more complex cases.

Some taxpayers look to compromise their tax debts yet their application ( Form 433-A , Form 433-B and their attachments) reflects an ability to pay the account in full. COIC will reject such offers unless the taxpayer presents special circumstances warranting consideration under ETA. COIC will not contact the taxpayer to clarify any information or submit any further documentation if it is apparent to COIC that the account can be paid in full based upon the financial information provided by the taxpayer. The formal rejection letter will be the first response the taxpayer receives from COIC.

If the taxpayer submits new information with his or her appeal, COIC is required to consider such information before sending the case to Appeals. If Collection did not consider the information and such information could result in a different determination, the offer may be returned to COIC as a premature referral so that the information can be considered. If COIC still believes the offer should be rejected after considering the information, they will return the offer to Appeals with their response and Appeals will process the appeal.

Appeals considers offers based in whole or in part on doubt as to liability (DATL) where

The OIC work unit (WUNO) should have ACDS feature code 'LI' indicating it is a DATL offer.

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was enacted May 17, 2006 and became effective July 16, 2006. One of the significant changes under TIPRA provides that an offer shall be deemed to be accepted if it is not rejected, returned or withdrawn before the date which is 24 months after the date of receipt by the IRS of such offer. This 24-month TIPRA period ends when the offer is rejected by SBSE, so most non-CDP offers considered by Appeals will not have open TIPRA statute issues. There are, however, instances in which a non-CDP OIC case arrives in Appeals with an open TIPRA statute, such as when SBSE sends an offer directly to Appeals because Appeals determined the original liability, so the Appeals Officer assigned the case must carefully review IRM 8.23.2.3 , Initial Case Review and Statute Controls to make sure the OIC WUNO contains the proper statute controls.

IRM 4.18, Exam Offer in Compromise, and IRM 5.8.4.2 contain administrative procedures for working DATL offers. A DATL offer must be payable within 90 days of acceptance per the payment terms listed on the Form 656-L, Offer in Compromise (Doubt as to Liability).

Appeals will make an independent determination regarding the offer, which should generally be evaluated in the same manner as an audit reconsideration case. Consider the facts and law as well as the hazards of litigation in determining the degree of doubt as to the liability. IRC 7122(d)(3) provides that a DATL offer may not be rejected solely because the Service cannot locate the taxpayer’s return or return information. The Service is also prohibited from requesting a financial statement if an offer is based solely on doubt as to liability.

If the DATL offer case came to Appeals after being rejected by Exam, the case file should be fully developed and documented. If the DATL offer case came to Appeals because the liability at issue was previously determined by Appeals, then Appeals has exclusive jurisdiction over the case and Exam is not responsible for either developing the case or securing the closed administrative case file before forwarding the case to Appeals. The case will also arrive in Appeals with an open TIPRA statute, so make sure the OIC WUNO contains the proper statute controls. See IRM 8.23.2.3.

The DATL Specialty Unit in Brookhaven serves as a clearing house for the Service's DATL offers. There are instances in which the DATL Specialty Unit will prematurely send a DATL offer directly to Appeals because it appears as though Appeals determined the original liability, or they are not able to tell the manner in which the case was closed by Appeals. The following cases should be sent back to the Brookhaven DATL Specialty Unit using the appropriate Form 3210 template available on the Appeals OIC web page -- see IRM 8.23.2.3.1 for full details:

The following table reflects general decision and post-conference case closing guidelines.

If an agreement is reached in the case, it is generally better to use a Form 3870 and make the proper adjustment than to proceed with accepting the offer. If Appeals determines the taxpayer owes less than the assessed amount, the taxpayer would still have to pay the offered amount. If the case is closed via the Form 656-L and for any number of reasons the taxpayer ends up not paying the full offer amount, the accepted offer will be terminated and IRS must reinstate the original assessment. If the agreed upon adjustment is made with a Form 3870, such adjustment is not dependent on any further action or performance by the taxpayer.

If the DATL offer is accepted and no Form 3870 adjustment is made, remove the 5-year compliance and refund/overpayment offset provisions from the OIC Acceptance Letter on APGolf.

Bankruptcy filing or non-compliance in filing other required federal tax returns does not preclude Appeals from considering and accepting an appealed DATL offer or from making appropriate adjustments via Form 3870.

Combination offers based upon both doubt as to collectibility (DATC) and doubt as to liability (DATL) should be rare because IRS has utilized a Form 656–L since January of 2006, and a Form 656 without DATL as an available option since February of 2007. Nonetheless, there are still some combination offers out there that were submitted after July 16, 2006.

A combination DATC/DATL offer must be fully considered by both the Collection and Examination functions prior to being transmitted to Appeals. See IRM 5.8.4.10 and IRM 4.18.4. However, if Appeals previously determined the original liability, the DATL aspect of the offer will be sent directly to Appeals to consider the offer after Collection determines there is no basis for acceptance under DATC. A combination offer case will be returned to the referring Collection function as a premature referral if both functions have not yet completed their respective reviews and the original liability was not previously determined by Appeals. If both functions have completed their reviews and continue to believe that the offer should be rejected, Collection will return the offer to Appeals with each function's recommendation and Appeals will continue to process the appeal.

Because a combination DATC/DATL offer can in some instances arrive in Appeals with an open TIPRA statute, carefully review IRM 8.23.2.3, Initial Case Review and Statute Controls to make sure the OIC WUNO contains the proper statute controls. If Appeals previously determined the original liability and thus the case has an open TIPRA statute, make sure the OIC work unit (WUNO) has the proper statute controls and have the case first assigned to an Appeals Officer to consider the DATL aspect of the offer before a Settlement Officer considers the DATC aspect of the offer.

Except as noted above, the DATC aspect of the offer should be reviewed first. Collectibility determinations generally take less time and if the matter can be resolved as a DATC offer, then it saves Appeals time and resources. If a Settlement Officer determines that there is no basis to accept the DATC offer, the DATL aspect of the offer should be reviewed by an Appeals Officer. The Settlement Officer, however, can generally make the DATL determination on the following:

Combination offers may arrive in Appeals after a prolonged period in Collection and/or Exam. See IRM 8.23.3.3 and IRM 5.8.5.3.2 if the financial information is outdated. Appeals should avoid sending these financial statements back to Collection to be reworked whenever possible.

Consideration of an offer in compromise (OIC) must be terminated upon the death of a single offer proponent. The date of termination and the date for the TC 482 shall be the date of the taxpayer's death. A sample OIC Termination Letter is available on the Appeals OIC web page.

If the offer under consideration was submitted jointly by a husband and wife and only one spouse died, follow the procedures in IRM 5.8.10.4 to determine whether to continue with consideration of the jointly submitted offer.

Taxpayers will occasionally express an interest in alternative resolutions when it' i apparent that an offer is not a viable option. If the AO/SO determines that an alternative resolution such as an installment agreement (IA) or having the account placed in currently not collectible (CNC) status is appropriate, Appeals may initiate the alternative resolution using its general authority.

Refer to:

If the taxpayer wants to enter into an IA and Appeals agrees that such is an appropriate resolution, follow the procedures in IRM 5.14. Similarly, follow procedures in IRM 5.16 to determine the propriety of placing the account in CNC status.

Appeals is responsible for inputting Transaction Code (TC) 971 with Action Code (AC) 043 upon receipt of an installment payment proposal. Use a Form 4844, Request for Terminal Action, to request input of the TC 971 AC 043 to all tax periods. Appeals does not input the TC 971 AC 063.

Appeals is also responsible for making a lien filing determination as part of the alternative resolution. See IRM 5.14.1.4.2 for general NFTL filing criteria for installment agreements, and IRM 5.16.1 for NFTL information for CNC determinations. If a NFTL will be filed per standard administrative procedures, advise the taxpayer accordingly. Explain CDP rights under IRC 6320 and document the case activity record. Indicate in the "Brief Remarks" section of the Form 5402 that the IRM calls for a lien to be filed and indicate the tax periods to be listed on the NFTL. The circumstances and reasons for not filing a NFTL if a NFTL is generally required must be clearly documented in the case activity record.

The Appeals Processing Section will input/process the applicable alternative resolution. Be sure to prominently indicate the alternative resolution on the Form 5402 so it is clearly visible to the Appeals technician handling the back-end processing. See IRM 8.23.4 for specific non-CDP OIC case closing procedures.

If the account will be placed in CNC status, add the following details to the closing letter:

A taxpayer must agree to the terms set forth in the Form 656, and the compromised amount remains a tax liability until the taxpayer meets all the terms and conditions of the offer. See Paragraph (i) of Section V of Form 656.

Taxpayers entering into either a DATC or ETA offer must agree to comply with all filing and paying obligations under the Internal Revenue Code for a period of 5 years after the offer is accepted. See Paragraph (d) of Section V of Form 656.

If a taxpayer fails to meet any of the terms of the offer, the Service has the right to terminate the offer, reinstate the compromised liability, and pursue collection action against the taxpayer. The default provisions apply only to the party failing to comply if the liabilities are jointly owed and the offer was jointly submitted. See Paragraph (d) of Section V of Form 656.

If an offer was originally accepted by Appeals, Monitoring Offer in Compromise (MOIC) will refer the case to the appropriate Appeals office for review and, if necessary, issuance of the default letter. See IRM 5.8.9.3, Possible Actions on Accepted Offers, Potential Default Cases.

The referral from Collection is usually on Form 2209, Courtesy Investigation. The case will be opened as an offer on ACDS in order to place time on a specific case. APS should note it as a pending defaulted offer in compromise.

If the offer in default was accepted as part of a CDP hearing, the taxpayer may be entitled to a retained jurisdiction hearing before Appeals. See IRM 8.22 concerning retained jurisdiction. These defaults will be worked like offers accepted by Appeals upon review of rejected offers. Do not establish a retained jurisdiction case on ACDS. It should be noted on ACDS as a defaulted offer and not a new offer.

The Service may accept a compromise of a compromise. There is no standard form for such a proposal. It should be submitted in letter format and addressed to the Commissioner of the Internal Revenue. IRM Exhibit 5.8.9-1 should be used for this purpose. If Appeals initially accepted the offer, Appeals will consider the taxpayer's compromise of a compromise proposal. IRM Exhibit 5.8.9-2 and IRM Exhibit 5.8.9-3 should be used to notify the taxpayer of either acceptance or rejection of the compromise of a compromise proposal. See IRM 5.8.9.4 and the February 2, 2009, Interim Guidance for an Offer to Compromise an Accepted Offer, for procedures.

When the Form 2209 advises Appeals of the death of a taxpayer, Appeals must determine whether there is an estate. An Appeals Referral Investigation (ARI) may be needed. See IRM 8.23.3.3.2.4 regarding ARI procedures. If there is an estate, the Service should file a proof of claim for the balance owed on the offer. If there is no estate, the offer should simply be closed out as satisfied.

For information on CDP Hearings on terminated OICs refer to IRM 8.22.

The Internal Revenue Service Restructuring and Reform Act of 1998 established IRC 7123(b), which requires the Secretary to prescribe procedures under which a taxpayer or Appeals may request non-binding mediation on an issue unresolved at the conclusion of an unsuccessful attempt to enter into a compromise under section 7122. This section also requires the Secretary to establish a pilot program under which a taxpayer and Appeals may jointly request binding arbitration on an issue unresolved at the conclusion of an unsuccessful attempt to enter into a compromise under section 7122.

Policy Statement 8-1, which is also IRM 1.2.17.1.1, affirms the Service's commitment to the development and use of alternative dispute resolution (ADR) techniques.

Revenue Procedure 2002-44, 2002-26 I.R.B. 10 was published on July 1, 2002 and formally established the overall Appeals mediation program. Collection cases, including offers in compromise (OICs), are excluded under this revenue procedure.

Revenue Procedure 2006-44, 2006-44 I.R.B. 800 was published on October 30, 2006 and formally established the overall Appeals arbitration program. Collection cases, except for OICs and Trust Fund Recovery Penalties (TFRPs), are excluded under this revenue procedure.

Announcement 2008-111, 2008-48 I.R.B. 1224 was published December 1, 2008. It modified Revenue Procedures 2002-44 (mediation) and 2006-44 (arbitration) and established a two-year test period for both arbitration and post-Appeals mediation (PAM) for taxpayers whose appeal is considered in one of the following cities: