8.23.6  OIC Processing and Closing Procedures

Manual Transmittal

January 07, 2014

Purpose

(1) This transmits the revised IRM 8.23.6, Offer in Compromise, OIC Processing and Closing Procedures.

Background

This IRM provides Appeals employees with one source of information for processing OIC cases. The primary audience for this IRM section is: Employees of Account and Processing Support (APS), Appeals hearing officers which include , Settlement Officers, Appeals Officers, Appeals Account Resolution Specialists, and Appeals Team Managers.

Material Changes

(1) This transmittal reissues existing procedures.

(2) Editorial changes have been made throughout this IRM.

(3) Website addresses, legal references, code sections and IRM references were reviewed and updated accordingly.

(4) All reference to entering a PAYCODE on ACDS have been removed as APS no longer enters PAYCODE information onto ACDS.

(5) The following significant changes were made to this IRM:

IRM Section Change Made
8.23.6.1 Clarified how to update the REQAPPL and RECDATE fields on ACDS for non-CDP offers.
8.23.6.1(4) Changed to state that when an offer is filed from an individual with income tax owed under an SSN and employment tax owed under a sole proprietor EIN, the MFT for the income tax liabilities should be used as the key case.
8.23.6.1.1 Added a NOTE to clarify when ACDS feature codes should be used for cases with TAS involvement.
8.23.6.1.4 Moved subsection entitled "Previously Accepted OIC (Potential Default) Cases Returned to Appeals" from 8.23.6.1.2 to 8.23.6.1.4 for subsection continuity.
8.23.6.2.7 Moved subsection entitled "Closing Procedures for a Potential Default Case" from 8.23.6.1.3 to 8.23.6.2.7 for subsection continuity.
8.23.6.2.7.1 Moved subsection entitled "AOIC Closing Procedures for a Potential Default Case" from 8.23.6.1.4 to 8.23.6.2.7.1 for subsection continuity.
8.23.6.1.2(6) Clarified how to update the REQAPPL and RECDATE fields on ACDS for CDP offers.
8.23.6.1.2(6) Added CAUTION statement that modules in certain status codes are not updated to status 71.
8.23.6.1.4(4) Added and clarified instructions for carding Potential Default cases including date to use when updating the REQAPPL and RECDATE fields.
8.23.6.2(1) Added CAUTION statement that manually input TC 480s will not be systemically reversed by AOIC.
8.23.6.2.1 Added NOTE to state that an offer still may be accepted by Appeals if Counsel does not sign the F7249.
8.23.6.2.3(6) Updated ACDS closing procedures and added NOTE listing the states worked by Memphis and Brookhaven COIC.
8.23.6.2.3(7) Removed directives of when Appeals was not permitted to close cases on the AOIC database.
8.23.6.2.3(10) Updated hyperlink for Public Inspection File addresses.
8.23.6.2.3.1(3) Added NOTE that periods with a -0- (zero) balance (due to TIPRA payments) should be included in the offer.
8.23.6.2.3.2 Added subsection on validating accepted offers on AOIC.
8.23.6.2.4(1) Added reference to mandatory withdrawals.
8.23.6.2.4(3) Clarified when to use Collection Drop Points when sending cases back to the Collection function.
8.23.6.2.6 Added subsection for premature referrals.
8.23.6.2.6.1 Added subsection for AOIC closing procedures for premature referrals.
8.23.6.2.7 Clarified instructions that, generally, the hearing officer issues letters and returns the Form 2209 to MOIC on potential default cases.
8.23.6.3(1) Added statement that all new DATL receipts should be carded upon receipt.
8.23.6.3.2 Added a NOTE to state that an adjustment to tax is generally not done when accepting a DATL offer.
8.23.6.3.3(10) Added NOTE to instruct APS where to send DATL completed case files.

Effect on Other Documents

IRM 8.23.6 dated September 4, 2012 is superseded.

Audience

Appeals Employees

Effective Date

(01-07-2014)

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

8.23.6.1  (01-07-2014)
Establishing New OIC Receipts

  1. This section provides instructions for APS personnel in establishing new Offer-in-Compromise (OIC) receipts and controls. These procedures apply to Exam originated and Non-Exam originated Doubt as to Liability (DATL) receipts as well.

  2. On the case inventory screen, follow normal procedures except for the following:

    1. TYPE - Enter OIC

      Note:

      If the offer is based upon Effective Tax Administration (ETA), add a Feature Code of "ET."

    2. Proposed Offer Amount (WUpropsdOfrAmt) - Enter the amount of offer as shown on the latest Form 656, Offer in Compromise, signed by the taxpayer in the case file. If the original offer has been amended, use the amended offer amount for the WUpropsdOfrAmt. This information can also be found on the Form 1271

      Note:

      One case folder could have up to two offers related to the same taxpayer. Be careful to input the proper WUpropsdOfrAmt to the work unit number (WUNO) associated with that particular Form 656 . See Form 656-B (booklet) for instructions pertaining to the number of Form 656 needed for any given situation.

    3. Request Appeal Date (REQAPPL) - For a non-CDP OIC, enter the date of the postmark of the taxpayer's request for appeal. If the envelope is not in the file, use the date the protest letter was received by the Service. Hearing Officers will decide if the taxpayer's protest was timely.

      Note:

      For both non-CDP and CDP offers, if the request for Appeals consideration is received via fax or hand delivery, the REQAPPL date is the IRS received date of the request.

      Note:

      Whether or not an OIC is considered processable is not a factor in determining the REQAPPL date for a CDP offer.

    4. Received Date (RECDATE) - For a non-CDP OIC, use the date that the case was received in Appeals.

      Note:

      The REQAPPL and RECDATE dates for a non-CDP OIC are different than the dates used for a CDP OIC. See IRM 8.23.6.1.2 for the appropriate dates to use for a CDP OIC.

  3. On the return information screen for a non-CDP OIC, enter the following:

    1. AIMS Indicator - Enter E since these cases are not controlled on AIMS

    2. Tax Period - Enter all tax periods associated with the case

    3. Statute Date - Leave blank

    4. Statute Code - Enter SUSP

    5. Proposed Def/-OA (PropdTax) - Enter the total unpaid liability amount from the Form 1271 and enter it on the earliest tax period. On all subsequent tax periods, enter $ -0- (zero). If the tax has not been assessed, enter $ -0- (zero) for all tax periods.

    6. Duplication - Leave blank

  4. Only one work unit should be created per Form 656, even if the offer involves multiple master file transaction (MFT) records. Such will generally be the case where an individual owes income tax under the SSN and employment tax as a sole proprietor under an employee identification number (EIN). In this case, the EIN will be the secondary TIN on the work unit. Use the MFT of the income tax periods as the key case, enter the amount of the offer in the WUpropsdOfrAmt field and enter the total of all unpaid liabilities on the first tax period line. Enter zero for any remaining tax periods.

    Note:

    See Form 656-B (booklet) and IRM 5.8.3.5 for instructions pertaining to the number of Forms 656 needed for any given situation.

  5. Also include the primary business code (PBC) and source code (SC) when carding a case. The PBC is determined by the business unit supplying the case to Appeals. See the ACDS utilities menu for a list of PBCs. The source code is either CO (for an offer worked by a field Collection OIC unit) or SC (for offers worked by a COIC unit).

8.23.6.1.1  (01-07-2014)
ACDS OIC Feature Codes

  1. To more accurately identify OIC cases, the following ACDS feature codes should be used when applicable:

    • CO - COIC investigated collection due process or equivalent hearing OIC

    • DO - OIC default

    • DP - OIC case resulting from a collection due process or equivalent hearing

    • ET - Effective tax administration

    • LI - Doubt as to liability

    • SP - OIC with special circumstances

    • T1 - Economic hardship - TAS

    • T5 - Systemic hardship - TAS

    • TF - Transferee/transferor case

    Note:

    The input of TAS feature codes should only occur if an Operations Assistance Request (OAR) is received by Appeals. If the file contains an OAR issued to another business unit, the feature codes should not be used. If Section III of Form 12412Operations Assistance Request is addressed to Appeals, use feature code "T1" if item 4 of Section I of Form 12412 contains the numbers 1 through 4. Use "T5" if item 4 contains the numbers 5 through 7. These procedures apply to APS when carding the case in, the hearing officer during initial review or if an OAR is received during the appeal process.

8.23.6.1.2  (01-07-2014)
OICs Received with CDP or EH Case

  1. An OIC received with or initiated during the course of a Collection Due Process (CDP) or Equivalent Hearing (EH) must be added to ACDS as a separate work unit. This includes OIC cases that are submitted before the CDP/EH case is filed and then later associated with a CDP or EH case.

  2. A CDP/EH case could result in more than one OIC. For example, related entities such as a joint return and a sole proprietorship will each be carded as a separate OIC work unit, but the case files should remain together.

  3. No periods should be added to the CDP/EH case merely because they are included on the OIC. Often, a related offer will contain more periods than a CDP or EH case.

  4. If the OIC and CDP/EH cases are received in Appeals together and the OIC has already been determined to be processable (signed on page 4 of the Form 656 by an authorized IRS employee), both the CDP/EH case and the OIC case will be carded into ACDS at the same time, as separate work units. If the OIC is not signed on page 4, the OIC and the CDP/EH case should still be carded-in as separate work units. The hearing officer will obtain a processability determination for the OIC.

  5. If the OIC is received after the CDP/EH case has been carded-in, the hearing officer will provide a package to APS requesting that they add the OIC work unit to ACDS. The package will include the following:

    1. A copy of the related CDP/EH case summary card noted at the top to "Please Create OIC Work Unit" . Include feature code DP and enter into the NOTE field the following: XREF (add the work unit number of the related CDP/EH case) The hearing officer will later request a "CO" feature code if the offer is worked by COIC.

    2. A copy of page one of Form(s) 656 identifying all periods included on the OIC, in addition to the received date-stamp. Input TPNAME, ADDRESS, TIN, MFT, Tax Periods, and offer amount as shown on Form 656.

    3. IMFOLI or BMFOLI (hearing officer will add the TOTAL ASSESSED BALANCE for all periods). This amount will be entered in the proposed tax (PROPDTAX) field on the earliest period only.

  6. Follow normal carding procedures except for the following:

    • Type = OIC

    • Feature Code = DP. Also input this feature code on the CDP/EH work unit to indicate there is a related OIC.

    • Entries in SOURCE, DO, and PBC for the OIC(s) will be the same as those entries in the related CDP/EH case(s).

    • REQAPPL = The earliest date the Form 656 was received by the Service (earliest date stamp in upper right hand portion). The TIPRA statute will be two years from this date.

      Note:

      The REQAPPL dates for CDP/EH and non-CDP/EH OICs are different. The REQAPPL date for a non-CDP OIC is the postmark date of the taxpayer's request for appeal.

    • RECDATE = The date the hearing officer’s request for a new CDP/OIC WUNO was received in the APS function.

    • STATDATE =The earliest IRS received date entered in the upper right hand portion of Form 656 + two years. Input this date for every OIC tax period.

    • STATCODE - "TIPRA" for all periods.

      Note:

      TIPRA is the statute code used to monitor the two-year mandatory TIPRA acceptance date provided by statute under IRC 7122(f). See IRM 8.23.6.1.3 below.

      Caution:

      Modules in status 53 or status 60/61 are generally not updated to status 71. Periodic payment offers in status 60 will be updated to status 71.

8.23.6.1.3  (01-07-2014)
TIPRA Statute Considerations

  1. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) created IRC 7122(f), which provides that if the IRS does not reject the OIC within 24 months from the date it is received by the IRS, it will be statutorily accepted. It is effective for all OICs received on or after July 16, 2006.

  2. If a liability included in the offer is disputed in any court proceeding, that time period is omitted from the calculation of the two-year period. In the event the taxpayer disputes in court a tax liability included in the OIC, the 24 month period will not run while the case is in litigation. Additionally, when the IRS issues a rejection letter for a non-CDP offer, the 24 month period ends and does not run during the period a non-CDP rejected OIC is being reviewed by Appeals.

  3. Cases received with an open TIPRA statute are subject to special consideration when in Appeals. See IRM 8.22.7.10.1TIPRA Statute and Responsibilities and IRM 8.23.2, Receipt and Control of Non-CDP Offers, for discussions of the TIPRA statute.

  4. Cases with an open TIPRA statute are subject to the same back-end processing time frames as are listed in IRM 8.21.3.1.7 and IRM 8.21.4.2; this means:

    1. The written concurrence of the ATM is required to keep the OIC case open beyond 120 days remaining on the 24-month TIPRA statute period; and

    2. The hearing officer is responsible for ensuring the OIC case is presented to APS for closing with at least 90 days remaining prior to the expiration of the 24-month TIPRA statute period.

    3. If less than 90 days remain on a TIPRA statute, the PTM should be notified via encrypted email when the case is to be presented to APS. To verify receipt of the case, APS should ensure a Form 3210 is received from the ATM or hearing officer.

    4. APS should ensure timely closing actions are taken on the case. Responsibility for such statutes is jointly held by the PTM and the ATM.

8.23.6.1.4  (01-07-2014)
Previously Accepted OIC Cases Returned to Appeals (Potential Default)

  1. A taxpayer must comply with the terms set forth in the Form 656. The compromised amount remains a tax liability until the taxpayer meets all the terms and conditions of the offer. See "Offer Terms" section of Form 656.

  2. Generally, if a taxpayer fails to meet any of the terms of an offer, the Service has the right to default the offer and pursue collection action against the taxpayer for the full remaining liability. If the liability is jointly owed and the offer was submitted jointly, the default provisions apply only to the party failing to comply with the terms of the offer. See "Offer Terms" section of Form 656.

  3. When an offer is proposed for default, the MOIC unit will send Form 2209, Other Investigation, to Appeals to consider defaulting the offer by issuing a formal letter of default.

  4. Using the procedures below, establish the case on ACDS as a new receipt.

    1. Card the case in as an OIC case. Locate the original OIC case on ACDS and use this card as a template to establish the new card for the defaulted offer.

    2. Identify the case as a potential default case by using ACDS feature code "DO" .

    3. Include all MFT, periods and original dollar amounts that were associated with the original OIC WUNO.

    4. Use original OIC card as a template with the following exceptions:
      REQAPPL = The date the Form 2209 was prepared by MOIC.
      RECDATE = The date APS received the Form 2209 from MOIC.

    5. The STATDATE field should be blank.

    6. For the STATCODE field, input SUSP for all periods.

    7. OFRNUM = Use the original offer number

    8. NOTE = "Potential Default"

    9. Once the case is added to ACDS, assign it to the campus team with responsibility for working DO coded cases, except as noted in (6) below.

    10. The ATM is responsible for assigning the case and presenting the Form 2209 and any attachments to the appropriate hearing officer.

  5. When the case decision has been made, the hearing officer will return the Form 2209 and any closing documents to the appropriate MOIC site. See IRM 8.23.4.5.

  6. Occasionally, Appeals also receives a taxpayer's request to consider a "Compromise of a Compromise" . This request should also come from an MOIC unit and be carded following the procedures in (4) above, with the following exceptions:

    1. In the NOTE field, enter "Compromise of a Compromise - Appeals OIC."

    2. Compromise of a Compromise proposals received on offers originally accepted by a field Appeals office will be assigned to the same Appeals team that originally accepted the offer.

    3. Compromise of a Compromise proposals on field and campus CDP offers that are subject to retained jurisdiction will be assigned to the field or campus team that accepted the CDP offer.

  7. The taxpayer's request for consideration of the potential default or Compromise of a Compromise case should be made to the MOIC unit with responsibility for the taxpayer's case. MOIC will then issue a Form 2209. Occasionally, however, the taxpayer's request is made directly to the hearing officer or ATM previously associated with the accepted OIC. In these instances, refer the taxpayer to the MOIC unit responsible for initiating the referral.

8.23.6.2  (01-07-2014)
Offer in Compromise Closing Procedures (non-CDP)

  1. This section provides procedures for closing completed OIC cases. CDP/EH offer procedures are in IRM 8.22.3, Back-end Processing for CDP and Equivalent Hearing Cases.

    Caution:

    TC 480s that were input manually to IDRS will not reverse when closing AOIC. The correct reversal code must be input manually as well.

  2. The following types of offers originate in the Collection function and are controlled on the Automated Offer in Compromise (AOIC) system:

    • Doubt as to Collectibility (DATC)

    • Effective Tax Administration (ETA) based upon both economic hardship and public policy/equity considerations

  3. DATL offers involving Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET) assessments are worked by the Collection function and are now controlled on AOIC.

  4. DATL offers involving liabilities other than TFRP and PLET assessments originate in the Examination function and are controlled on AOIC as well.

8.23.6.2.1  (01-07-2014)
Counsel Review of Accepted OIC

  1. Counsel is required to review all offers when the total unpaid liability (including all assessed and accrued penalties and interest) for all related offers for the same taxpayer is $50,000 or more. The purpose of Counsel's review is to determine whether the doubt as to collectibility, doubt as to liability, or the effective tax administration offer is legally sufficient. The total unpaid liability amount is generally shown on the Form 7249,Offer Acceptance Report. However, taxpayers must now make up-front payments when filing an offer and sometimes make additional periodic installment payments while the offer is being considered. These offer payments are applied directly to the tax debts and are not refundable. If the balance owed exceeded $50,000 before the offer payments were applied, Counsel's review is still required, so there may be cases where the Form 7249, shows a total balance owed of less than $50,000, but the case must still be sent to Counsel for review.

  2. It is the responsibility of the hearing officer who is recommending the OIC for acceptance to prepare the Form 7249 and ensure its accuracy.

  3. If acceptance of the offer is subject to Counsel's review, local procedures will dictate how to proceed. Due to the variables involved in managing different sized offices and employees in remote offices, each office may utilize APS differently in order to most effectively manage and control the flow of cases and input the required data at the appropriate time.

    1. The ATM will sign and date the Form 7249. This indicates the ATM's preliminary approval of the offer.

    2. If the ATM routes the case to Counsel through APS, ensure that ACDS is updated with "DCOTHER" , and then forward the file to Counsel using Form 3210.

    3. In offices where no APS presence exists, the ATM will forward the file to Counsel and contact the applicable APS team so ACDS can be updated accordingly.

  4. When Counsel signs and dates Form 7249, it certifies that all of the legal requirements for compromise have been met.

    1. If Counsel does not sign the form, the case must be returned to the hearing officer or ATM (per local procedures) for further action.

      Note:

      If Counsel did not sign the Form 7249 or otherwise agree with the offer recommendation, the offer may still be accepted by Appeals. A rebuttal memorandum will be written and placed in the file to address any issues presented by Counsel.

    2. If Counsel signs the Form 7249, route the case to either the hearing officer or ATM (per local procedures) so the CAR can be updated, closing documents signed and ACAPDATE input.

8.23.6.2.2  (01-07-2014)
Year-End OIC Acceptance Processing

  1. If an offer is based upon Doubt as to Collectibility or Effective Tax Administration (Hardship), the Form 656 provides that the IRS will keep any refund due the taxpayer for tax periods extending through the calendar year in which the IRS accepts the offer, as well as for prior tax years. These terms are specified on the Acceptance Letter 673 that is issued to the taxpayer and includes the year in which the offer is accepted.

  2. Appeals may encounter delays in processing an accepted OIC for the following reasons:

    • Time spent in review by IRS Counsel

    • Approval delays due to remote managers or employees

    • Processing or shipping delays

    • Other issues

  3. Because of the possibility of delay due to processing or other issues, it is important to verify that the acceptance letter contains the correct year of acceptance and years to which the refund offset provisions apply.

  4. Appeals staff preparing acceptance letters can generally help ensure they contain the correct tax years by ensuring cases are received by APS, with all approvals, by the second Friday of December. Cases that cannot be received by APS by the second Friday of December should have acceptance letters that reflect the following calendar year as the year in which the offer is accepted.

  5. If a new calendar year has begun and the acceptance letter contains the wrong years, at local discretion, APS may return the case file to the ATM to have the acceptance letter corrected, or advise the ATM via encrypted E-mail that the letter needs to be corrected and the ATM's office may sign and mail the corrected letter to APS.

8.23.6.2.3  (01-07-2014)
Collection Originated OIC Acceptance Procedures

  1. The work unit will be assigned to the Tax Examiner on the Processing Employees Automated System (PEAS) for closing, with PEAS TYPE "CLS" and the appropriate SubTYPE for the case. Generally, PEAS SubTYPE "ACDS Only" will apply.

  2. For an accepted OIC, the case will flow as follows:

    1. The hearing officer completes the case and submits it to the ATM for approval. See IRM 8.23.6.2.1 if Counsel review is required.

    2. The ATM signs the Form 7249 and OIC Acceptance Letter 673, dates and signs the Form 5402 and enters the ACAPDATE on ACDS.

    3. The ATM submits the case to APS for final closing.

  3. The Appeals Office will send the case to the appropriate APS Campus location for closing. The next section has information on closing the case on AOIC.

  4. The OIC case file will contain the following documents:

    • Original Form 656, Offer in Compromise

    • Original Amended Form 656, if applicable

    • Original Form 7249, Offer Acceptance Report

    • Redacted copy of Form 7249 attached to redacted copies of TDS or MFTRAX transcripts

    • The Collection function's rejection letter

    • Taxpayer's written request for appeal and envelope used for mailing the taxpayer's request for appeal

    • Form 5402, Appeals Transmittal and Case Memorandum

    • Appeals Case Memorandum, if applicable

    • Financial information, including Form 433-A and/or Form 433-B, bank statements, property records, and other information used to make the acceptability determination

    • Copy of the OIC acceptance letter

  5. If an offer is received from one spouse on a joint liability, the MOIC site is responsible for creating mirror assessments on the accepted OIC.

  6. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402 or Form 7249, under "Terms of this Offer" ). Enter - 0- (zero) for all other tax periods

    4. NOTE - "AOIC closed, accepted OIC file to Memphis MOIC" , or "AOIC closed, accepted OIC file to Brookhaven MOIC"

      Note:

      Monitoring Offer in Compromise (MOIC) locations for accepted offers are located on SERP here:http://serp.enterprise.irs.gov/databases/who-where.dr/coic_backend.htm

  7. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on closing applicable cases on AOIC.

  8. Date and mail the acceptance letter to the taxpayer and/or POA and include as attachments:

    1. A copy of the Form 656or amended Form 656

    2. A copy of the collateral agreement (Form 2261), if applicable (collateral agreements are not common)

  9. Make copies of the above and the Form 7249 for the administrative file.

  10. Send one copy of the redacted Form 7249 attached to copies of the redacted TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the public inspection file. The address list for where to send the OIC public inspection file is in the APS section on the Appeals web site at OIC Public Inspection File Locations.

  11. Fax a copy of the Form 5402 and ACM to the Collection function analyst named on the Form 5402 .

  12. Send the case file to the appropriate campus MOIC unit based on the state where the taxpayer resides. The listing of states associated with both the Brookhaven and Memphis MOIC units (back-end OIC) are listed above and their mailing addresses are available on SERP under the "Who/Where" tab.

  13. Close PEAS using Closing Code 03 with a completion date equal to the date the above actions were completed.

  14. Process any OIC payments with the appropriate disposal code on Form 3244, Payment Posting Voucher. After the case is closed, the taxpayer should send payments directly to the Fresno campus as stated in the acceptance Letter 673.

  15. The Collection function also works Doubt as to Liability offers when the tax debt involves a trust fund recovery penalty (TFRP) or personal liability for excise tax (PLET) assessment. These cases are also loaded on AOIC.

  16. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.3.1  (01-07-2014)
AOIC Closing Procedures for Accepted Offer

  1. This section provides general information for closing an accepted OIC case on the AOIC system.

  2. As soon as possible after the Acceptance Letter 673 is issued, the case must be closed, validated and released on AOIC and the case file sent to the appropriate MOIC campus for monitoring. It is critical that these actions are promptly taken to close the case on AOIC and the case immediately sent to MOIC because:

    • IRS releases a tax lien once the taxpayer pays the accepted offer amount in full, and

    • MOIC is responsible for monitoring the taxpayer's compliance with the terms and conditions of the offer, so the closing information and case file are needed for this purpose, and

    • The need to close aged case inventory as soon as possible.

  3. Follow the table below for general input actions related to closing accepted OIC cases on the AOIC system:

    Screen Input Fields
    Query Enter TIN
    AO Offer Query Results Select case from list
    AO Offer Update
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and move to "Input" screen

    Update AO Offer
    • Offer amount (if changed)

    • Select Original or Amended Offer

    • Verify "Offer Type"

    • Select Submit and return to "AO Offer" screen

    AO Offer Select MFT Tab
    MFT Summary
    • Update "Accrued Date"

    • Update liability amounts

    • Save inputs and return to "AO Offer" screen

    AO Offer
    • Verify total liability amounts (from Form 7249, Offer Acceptance Report) See Note below

    • Select "Terms"

    • Select "Update Terms"

    • Verify "Terms Type"

    • Input payment terms (from Form 7249)

    • Input Collateral Agreement terms, if any. Include the form number of the collateral agreement (Form 2261, Form 2261-A, Form 2261-B etc.)

    • Select "Submit"

    AO Offer
    • Select Remarks

    • Add remarks to state "Accepted in Appeals - Sending to the MOIC unit" (Brookhaven MOIC or Memphis MOIC)

    • Select "Save"

    Remarks & Case History
    • Select "Remarks and Case History"

    • Print one copy of Remarks and Case History screen (page 1 only)..

    • Return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer Select "Final Disposition"
    Update Final Disposition
    • Select "2 - Accepted by Appeals"

    • Input the mail date of the rejection with appeal rights letter

    • Input the mail date of the Appeals acceptance letter

    • Was the offer accepted under ETA/DCSC criteria? Select answer from drop-down menu.

    • Select "Submit " and return to "AO Offer" screen

    AO Offer
    • From this screen, verify the case is closed.

    • Also from this screen, check for related offers. If applicable, take necessary closing actions for related offers.

    • Print copy of the final AO Offer screen for the administrative file.

    Note:

    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 or addendum 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.

  4. As soon as possible after closing the closed accepted offer on AOIC, validate and release it to the appropriate MOIC campus for monitoring. Validation and release on AOIC is required and may be performed by the APS employee or the PTM at the discretion of APS management.

  5. Once the case is validated, control of the offer goes to MOIC and the file must be sent to them as soon as possible. Use the destination list from the drop down menu to determine where the file must be sent.

    Note:

    If there are related cases with different business operating division (BOD) codes (W&I and SBSE), the SB campus will monitor both offers.

  6. Prepare Form 3210 and mail to the appropriate MOIC campus. Be sure the file contains the following original documents:

    • Initial Form 656, Offer in Compromise

    • Amended Form 656 , if applicable

    • Signed Acceptance Letter 673 (may be a signed copy)

    • Form 7249, Offer Acceptance Report

    • Collateral agreement, if applicable

8.23.6.2.3.2  (01-07-2014)
Validating Accepted Offers on AOIC

  1. Follow the following steps to validate an accepted offer on the AOIC database:

    1. Sign on to the AOIC database and navigate to the main Appeals Menu screen.

    2. Select the SWITCH USER LOC field.

    3. Select the AOIC area location of where the case was worked (e.g. Area 05 = Gulf States; Area 17 Memphis).

    4. Select VALIDATE & RELEASE.

    5. All of the cases recently closed as an acceptance will be listed. Find the case you are closing on the list by confirming the Offer Number, Offer TIN, Name Ctrl and AO Closed Date fields.

    6. Select the RELEASE CODE box next to your case.

    7. Navigate to the bottom of the page and select SUBMIT. The case is now validated and released to MOIC.

8.23.6.2.4  (01-07-2014)
Collection Originated Withdrawn OIC Procedures

  1. A taxpayer may voluntarily withdraw an offer at any time. In certain instances, an offer may be determined to be a mandatory withdrawal if the taxpayer fails to make a proposed periodic installment payment. For non-CDP offers, this should be uncommon because the requirement to make these payments ends once the Collection function issues a rejection letter. The case file for a withdrawn Offer in Compromise should contain:

    • Form 5402

    • ACM

    • Withdrawal Letter 241 signed by the ATM

    • Collection/COIC rejection letter

    • Taxpayer's request for appeal and envelope with postmark

    • Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, if applicable

    • Form 433-D, Installment Agreement, if applicable

  2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or Collection is responsible for mirror assessment actions on a withdrawn OIC.

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 16 (OIC withdrawn)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Withdrawn offer closed on AOIC and file sent to XXXXXXXX drop point" (For Collection Field cases) or "Withdrawn offer closed on AOIC and file sent to XXX COIC" (For Collection Campus cases use Memphis or Brookhaven COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Field Collection sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  4. If an alternative resolution was reached, such as an installment agreement (Form 433-D) or having the account placed in currently non-collectible (CNC) status, process the alternative resolution. If the alternative is to have the account placed in CNC status, the hearing officer should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402 .

  5. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on closing applicable cases on AOIC.

  6. Date and mail the Withdrawal Letter 241 to the taxpayer and/or POA concurrent with closing the case on ACDS. Keep a copy in the administrative file.

    Note:

    The legal withdrawal date is the IRS received date if the taxpayer's withdrawal letter was mailed certified or hand delivered, in which case the date should be indicated by the hearing officer in the body of the Letter 241. If the request to withdraw was received by any other method, the withdrawal date is the date the Letter 241 is mailed or personally delivered to the taxpayer.

  7. If an offer deposit was made and input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.

    Note:

    An offer deposit is normally returned to the taxpayer unless the taxpayer provides written authorization allowing IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization signed by the taxpayer should be included in the file and routed to the MOIC campus that processed the payment.

  8. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

  9. The Collection function also works Doubt as to Liability offers when the tax debt involves a TFRP or PLET assessments. These cases are also loaded on AOIC.

  10. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.4.1  (01-07-2014)
AOIC Closing Procedures for a Withdrawn Offer

  1. This section provides general information for closing a withdrawn OIC case on the Automated Offer in Compromise (AOIC) system.

  2. AOIC INPUT (Query Offer Number)

    Screen Input Actions
    Query Input TIN
    AO Offer Query Results
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer
    • Select "Update Offer"

    • Select "Final Disposition"

    • Select "9 - Withdrawal"

    • Input the mail date of the rejection letter with appeal rights

    • Input the mail date of the Appeals withdrawal letter

    • Input the legal date of the withdrawal (indicated on the withdrawal letter)

    • If a deposit was made, select the appropriate response from the drop-down menu

    • Select "Submit" and return to AO Offer screen

    AO Offer Verify the case is closed
    AO Offer Add remarks - Withdrawn in Appeals and file is being sent to (appropriate address)

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  3. Print the first page of AOIC for the case and attach it to the front of the closed file. Route the case file back to the Area Office/COIC Offer Coordinators. They will maintain the closed offer file and ship it to the FRC at the appropriate time. Attaching the first page from AOIC will assist them in routing the case properly.

    Note:

    Field Collection sourced cases that have been withdrawn are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

8.23.6.2.5  (01-07-2014)
Collection Originated Rejected OIC Procedures

  1. The file for a case where Appeals sustained the Collection function's rejection of the offer should contain:

    • Form 5402

    • ACM

    • Appeals rejection Letter 5197 signed by the ATM

    • Form 1271 prepared by the Collection function

    • Form 3040, if applicable

    • Collection/COIC rejection letter

    • Taxpayer's written request for appeal and envelope with postmark

    • Form 433-D, if applicable

    • Financial information

  2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or field Collection is responsible for creating mirror assessments on a rejected OIC.

  3. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 14 (OIC rejection sustained)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as the proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Rejected offer closed on AOIC and file sent to XXXXXXXX " (For Collection Field cases, insert the Collection Drop Point location) or "Rejected offer closed on AOIC and file sent to XXXXX COIC" (For Collection Campus cases, insert Brookhaven or Memphis COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Field Collection sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  4. If an alternative resolution was reached, such as an installment agreement (Form 433-D) or having the account placed in currently not collectible (CNC) status, process the collection alternative. If the alternative is to have the account placed in CNC status, the hearing officer should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402 .

  5. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on actually closing applicable cases on AOIC.

  6. Date and mail the Appeals OIC rejection Letter 5197 to the taxpayer and/or POA concurrent with closing the case on ACDS. Retain a copy of the letter in the administrative file.

  7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on AOIC.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  8. Close PEAS using PEAS closing code 03 with a completion date equal to the date the above actions were completed.

  9. The Collection function also works Doubt as to Liability offers when the tax debt involves a TFRP or PLET assessments. These cases are also loaded on AOIC.

  10. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.5.1  (01-07-2014)
AOIC Closing Procedures for Rejected Offers

  1. This section provides general information for closing a rejected OIC case on the Automated Offer in Compromise (AOIC) system.

  2. Follow the steps in the table below for general instructions for closing AOIC for rejected OIC cases.

    Note:

    Make sure all screens are updated if an amended offer was secured.

    Screen Input Actions
    Query Input TIN
    AO Offer Query Results Select case from list
    AO Offer
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Select "Remarks" and indicate the offer was rejected
    Remarks and Case History Select "Submit" and return to "AO Offer" Screen
    AO Offer Select "Update Offer"
    Update AO Offer Final Disposition
    Update Final Disposition
    • Select "3 - Rejection Sustained"

    • Input the mail date of the rejection letter with appeal rights

    • Input the mail date of the Appeals rejection letter

    • Input the RCP amount (from Form 5402). If "0" or no amount is given on the Form 5402 , use the IMFOLI/BMFOLI "total assessed balance" from IDRS)

    • Select "Submit" and return to AO Offer screen

    AO Offer Verify the case is closed
  3. TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  4. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

8.23.6.2.6  (01-07-2014)
Premature Referrals

  1. Hearing officers may determine that an OIC case must be returned to the originating function as a premature referral. Some of the reasons for this can be:

    • The taxpayer's request for an Appeals hearing was not timely

    • The taxpayer did not request Appeals consideration

    • The offer was never rejected by the IRS

  2. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 20 (OIC Premature Referral)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as the proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Premature referral, offer reassigned to Area Office XX on AOIC and file sent to the XXXXXXXX office Drop Point" (For Collection Field cases, insert the Collection Drop Point location) or "Premature referral, offer reassigned to Area Office XX on AOIC and file sent to XXXXX COIC" (For Collection Campus cases, insert Brookhaven or Memphis COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Collection Field sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  3. Close PEAS using PEAS closing code 03 with a completion date equal to the date the above actions were completed.

8.23.6.2.6.1  (01-07-2014)
AOIC Closing Procedures for Premature Referrals

  1. When returning an OIC as a premature referral, the AOIC database is not closed but updated to reflect the Area office assignment number for premature referrals. To return an offer to the originating Area office on AOIC, take the following actions:

    1. Select the Area office that worked the offer.

    2. Select "AO Offers" under the AOIC OFFERS column.

    3. Query the database for the case you want to close. You can search by using the TIN, offer number, name control etc.

    4. When the desired case is located, click on the offer number.

    5. Then select "Update Offer" .

    6. In the "Assign to:" field, search for the area office assignment number for "Premature Appeals Referrals" in the drop down menu. The number will begin with the Area office number and be followed by several other numbers. For example, a case being returned to the Brookhaven COIC unit will have an assignment number of 1801009089. Area office 05 for the Gulf States will have a number of 0501009089.

    7. Once the Premature Appeals Referrals assignment number has been located, select "SUBMIT" . The case will now be assigned back to the originating Area office.

    Note:

    Currently for Area 21 cases, there is no mechanism in AOIC to send cases back to the Collection function as premature referrals. Instances for sending a CDP/OIC back as a premature referral should be rare. Should a situation arise where this would need to be done, raise the event through the management chain for resolution.

8.23.6.2.7  (01-07-2014)
Closing Procedures for a Potential Default Case

  1. If Appeals determines the offer is in default, the hearing officer will prepare a formal default letter for the ATM's signature. See IRM Exhibit 5.8.9-4. The hearing officer will mail the signed letter to the taxpayer and/or POA and send the Form 2209 back to the originating MOIC unit along with a copy of the signed default letter. The hearing officer will use Closing Code 14 on Form 5402 to request that APS close the case on ACDS.

  2. If the taxpayer remedies the problem that gave rise to the potential default, Appeals will not issue the default letter. The hearing officer will return the Form 2209 to the originating MOIC unit. The hearing officer will use Closing Code 15 on Form 5402 to request that APS close the case on ACDS.

  3. If the taxpayer and Appeals agree to a Compromise of a Compromise, the hearing officer will prepare a formal letter for the ATM's signature. See IRM 5.8.9.4 and IRM Exhibit 5.8.9-2. The hearing officer will mail the signed letter to the taxpayer and/or POA and send the Form 2209 back to the originating MOIC unit with a copy of the closing letter and any other documents. The hearing officer will use Closing Code 15 on Form 5402 to request that APS close the case on ACDS.

    Note:

    APS will not need to mail any letters or send any information back to MOIC unless specifically directed to do so by the hearing officer or ATM. APS will only need to close the ACDS database on Potential Default offer cases and follow IRM 8.23.6.2.7.1 below.

8.23.6.2.7.1  (01-07-2014)
AOIC Closing Procedures for a Potential Default Case

  1. When an OIC case is returned to Appeals as a potential default, take the following AOIC closing actions when the case is ready to be closed.

    1. Screen Input Actions
      AO Offers Query TIN
      AO Offer Select "Remarks"
      Add Remark to Case History
      • Select "Add Remark" and state: Defaulted or Not Defaulted.

      • If applicable, state that a compromise of a compromise was accepted.

      • State also that the case was returned to MOIC (Brookhaven or Memphis)

      • Save

8.23.6.3  (01-07-2014)
Examination Originated DATL OIC Cases

  1. Offers originating in Exam are referred to as DATL offers. All DATL offers should be carded in even if there is a jurisdictional issue. In certain instances where Appeals determined the original liability, Exam will not work the DATL offer to conclusion. This means that there is an open TIPRA statute that must be protected. Carding all DATL receipts will ensure that the TIPRA statute can be tracked. See IRM 8.23.6.1 for general carding in procedures.

  2. DATL offers originating in Exam will now be controlled on the Automated Offer in Compromise (AOIC) system as well as ETA offers based upon public policy/equity consideration.

  3. The work unit will be assigned to the Tax Examiner on PEAS for closing with PEAS TYPE "CLS" and the appropriate SubTYPE for the case.

  4. These DATL offers will be identified on ACDS by using feature code "LI" .

  5. The AOIC system will reverse the TC 480s systemically upon closure. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:

    1. Manually input TC 481 using the date the case is closed/ Appeals rejection letter date.

    2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter.

    Caution:

    AOIC will not reverse a manually input TC 480. If AOIC was not used to input the TC 480, it must be reversed on IDRS manually.

8.23.6.3.1  (01-07-2014)
Non-Examination Originated DATL OIC Cases

  1. The Collection function handles DATL offers involving TFRP and PLET liabilities. For acceptance closing procedures for TFRP and PLET cases, See IRM 8.23.6.2.3.

  2. These DATL offers will be identified on ACDS by using feature code "LI" .

    Note:

    For DATL offers, TFRP and PLET liabilities are loaded onto AOIC, so follow the AOIC closing procedures for accepted (IRM 8.23.6.2.3.1), withdrawn (IRM 8.23.6.2.4.1) and rejected (IRM 8.23.6.2.5.1) cases.

  3. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:

    1. Manually input TC 481 using the date the case is closed/Appeals rejection letter date.

    2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter.

      Caution:

      AOIC will not reverse a manually input TC 480. If AOIC was not used to input the TC 480, it must be reversed on IDRS manually.

8.23.6.3.2  (01-07-2014)
Examination Originated OIC Acceptance Procedures

  1. The OIC case file will contain the following documents:

    • Original Form 656, Offer in Compromise

    • Amended Form 656 , if applicable

    • Original Form 7249, Offer Acceptance Report

      Note:

      Counsel review is required when the total unpaid liability (including all assessed and accrued penalties and interest) for all related offers on the same taxpayer is $50,000 or more. See IRM 8.23.6.2.1.

    • Redacted copy of Form 7249, Offer Acceptance Report, attached to redacted TDS or MFTRAX transcripts

    • Form 5402, Appeals Transmittal and Case Memorandum

    • Appeals Case Memorandum, if applicable

    • Examination rejection letter

    • Taxpayer's written request for appeal and envelope with postmark (if applicable)

    • Acceptance Letter 673 signed by the ATM

  2. If the case is controlled on AIMS, close the case on AIMS according to standard procedures.

    Note:

    If it is determined that a DATL offer acceptance is appropriate, the agreement between the taxpayer and the Internal Revenue Service settles the tax debt for less than the full amount owed and adjustments to tax are generally not done.

  3. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402 or the "Terms of this Offer" section on Form 7249). For all other tax periods, enter -0- (zero).

  4. The following closing actions should occur on the date the case is closed on ACDS:

    1. Date and mail the acceptance letter to the taxpayer and/or POA and include copies of the Form 656 or amended Form 656 and any collateral agreements as attachments.

    2. Copy the acceptance letter with attachments for the administrative file.

    3. Send one copy of the redacted Form 7249 attached to redacted copies of TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the Public Inspection File. The case file should already contain a copy of the redacted Form 7249 and redacted TDS or MFTRAX transcripts. The address list for where to send the OIC Public Inspection Files is in the APS section on the Appeals web site at OIC Public Inspection File Locations.

    4. Ensure the OIC file contains the information in (1) above (except TDS or MFTRAX).

    5. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    6. Return the case file to the originating Exam office.

    7. Process any OIC payments to the campus OIC unit. After the case is closed, the taxpayer should send payments directly to the campus OIC unit.

8.23.6.3.3  (01-07-2014)
Examination Originated Withdrawn OIC Procedures

  1. When the hearing officer and the taxpayer reach an agreement on the correct tax liability, a "compromise" is not required and the taxpayer will generally withdraw the offer in compromise. The tax is adjusted to the correct amount via Form 3870.

  2. The case file for a withdrawn offer in compromise should contain:

    1. Form 5402

    2. ACM, if information not already contained in Form 5402

    3. Withdrawal Letter 241 signed by the ATM

    4. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable

    5. Examination rejection letter

    6. Taxpayer's written request for appeal and envelope with postmark

    7. Form 3870, Request for Adjustment, if applicable

    8. Form 433-D, Installment Agreement, if applicable

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 16 (OIC withdrawn)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax for earliest tax period = Should be the same as proposed tax. The "total assessed balance" from IMFOLI or BMFOLI may also be used. RevsdTax for other periods = $0

  4. If an alternative resolution was reached, such as an installment agreement (Form 433-D ) or having the account placed in currently non-collectible (CNC) status, process the alternative. If the alternative is to have the account placed in CNC status, the hearing officer should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402 .

  5. The hearing officer will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.

  6. For a case that is not on AOIC, manually input TC 482 using the same date as the withdrawal date that is indicated in the closing letter.

    Note:

    The legal withdrawal date is the IRS received date if the taxpayer's withdrawal letter was mailed certified or hand delivered, in which case the date should be indicated by the hearing officer in the body of the Letter 241 . If the request to withdraw was received by any other method, the withdrawal date is the date the Letter 241 is mailed to the taxpayer.

  7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  8. Date and mail the Withdrawal Letter 241 to the taxpayer and/or POA. Keep a copy in the administrative file.

  9. Return the case to the originating Exam office.

  10. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    Note:

    When Exam has worked the offer to conclusion before it was sent to Appeals, APS will return the case file to the originating Exam function upon completion of all closing actions. If Appeals determined the liability and is the first evaluator of the offer, APS will send the case file to "files" upon the completion of all closing actions.

8.23.6.3.4  (01-07-2014)
Examination Originated Rejected OIC Procedures

  1. A case is processed as Appeals sustaining rejection of the offer when the taxpayer does not agree with the conclusion of the hearing officer and does not otherwise withdraw the offer.

  2. The case file for a rejected Offer in Compromise should contain:

    1. Form 5402

    2. Appeals rejection Letter 5197 signed by the ATM

    3. ACM

    4. Form 1271, Rejection and Withdrawal Memorandum

      Note:

      The Form 1271 in the file will be prepared by Exam.

    5. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable

    6. Examination rejection letter

    7. Taxpayer's written request for appeal and envelope with postmark

    8. Form 3870, Request for Adjustment, if applicable

    9. Form 433-D, Installment Agreement, if applicable

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 14 (OIC rejected)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax for earliest tax period = same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = 0

  4. For a case that is not on AOIC, manually input TC 481 using the same date the case is closed/Appeals rejection letter date.

  5. If an alternative resolution was reached, such as an installment agreement or having the account placed in currently non-collectible (CNC) status, process the collection alternative. If the alternative is to have the account placed in CNC status, the hearing officer should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402 .

  6. The hearing officer will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.

  7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  8. Date and mail the Appeals OIC Rejection Letter 5197 to the taxpayer and/or POA. Retain a copy in the administrative file.

  9. Return the case to the originating Exam office.

  10. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    Note:

    When Exam has worked the offer to conclusion before it was sent to Appeals, APS will return the case file to the originating Exam function upon completion of all closing actions. If Appeals determined the liability and is the first evaluator of the offer, APS will send the case file to "files" upon the completion of all closing actions.


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