5.8.3 Centralized Offer in Compromise Transfers, Perfection, and Case Building

Manual Transmittal

May 25, 2018

Purpose

(1) This transmits revised IRM 5.8.3, Offer in Compromise, Centralized Offer in Compromise Transfers, Perfection and Case Building.

Material Changes

(1) This IRM contains the following correction and clarification:

  • 5.8.3.4(1) - Corrected group 320 to 3200

  • 5.8.3.5(5) If/Then (12) & (14) - Clarified that the offer will be perfected by the Offer Examiner(OE)/Offer Specialist(OS).

(2) Editorial changes throughout sections as needed.

Effect on Other Documents

This material supersedes IRM 5.8.3, dated February 9, 2018.

Audience

SB/SE Collection and Campus Compliance employees

Effective Date

(05-25-2018)

Kristen E. Bailey
Director, Collection Policy

Program Scope and Objectives

  1. Purpose - This chapter explains the procedures to be followed for determining jurisdictional responsibility, perfecting and case building, and transferring offers in compromise.

  2. Audience - These procedures apply to offer in compromise employees who are responsible for initial case processing of offer in compromise receipts. It also provides information to other collection employees when considering an offer in compromise a collection alternative.

  3. Policy Owner - Director, Collection Policy, SB/SE

  4. Program Owner - SBSE Collection Policy, Offer in Compromise (OIC) Program

  5. Primary Stakeholders - The primary stakeholders are OIC process examiners.

  6. Program Goal - Policy Statement P-5-100 explains the objectives of the OIC as a collection tool. By following the processes and procedures in this IRM, employees will be able to accurately and timely complete initial processing and case building of OIC receipts.

Background

  1. This section provides initial procedures for the transfer, perfection and case building of offer in compromise receipts.

Authority

  1. Authorities relating to this section include:

    • IRC 7122 - Compromises

    • Treasury Regulation § 301.7122-1 - Compromises

    • IRC 6702(b) - Civil penalty for specified frivolous submissions

    • Policy Statement P-5-100

    • Policy Statement 1-236

    • Rev. Procedure 2003-71

    • IRM 1.2.44.2, Servicewide Policies and Authorities, Delegations of Authority for the Collecting Process - Delegation Order 5-1

    • Internal Revenue Service Restructuring and Reform Act of 1998, Section 1203

Responsibilities

  1. The Director, Collection Policy is responsible for all policies and procedures within the Offer in Compromise program.

  2. The National Program Manager, Offer in Compromise, is responsible for development and delivery of policies and procedures within the program.

  3. IRM authors are responsible for writing policies and procedures and clearing documents through all affected offices.

  4. The taxpayer has been afforded fundamental rights under the Taxpayer Bill of Rights (TBOR) and employees are obligated to protect these rights when taking actions as discussed below. For additional information go to http://www.irs.gov/Taxpayer-Bill-of-Rights

  5. Offer in compromise employees responsible for initial case processing of OIC receipts are responsible for following the procedures in this IRM.

Program Management and Review

  1. Operational and program reviews are conducted on a yearly basis with the use of data and reports from the Automated Offer in Compromise (AOIC) system and Integrated Collection System (ICS). See IRM 1.4.52, Resource Guide for Managers, Offer in Compromise Manager’s Resource Guide - Field Program and IRM 1.4.54, Offer in Compromise Manager’s - Centralized Offer in Compromise Program Guide.

  2. AOIC Inventory Management Listing, Inventory Listing and Follow-Up Listing reports are utilized to monitor OIC cases.

  3. Managerial case reviews are completed as defined in IRM 1.4.54, Offer in Compromise Managers - Centralized Offer in Compromise Program Guide.

  4. National quality reviews and consistency reviews are routinely conducted.

Program Controls

  1. AOIC is used to track offers submitted by taxpayers and record case actions and history. Ability to take action on AOIC is limited to specific offer employees. Additional permissions are provided based on an employee’s duties and responsibilities.

  2. AOIC is used by COIC employees for inventory control and history documentation.

  3. Offers are distributed and worked on a first-in, first out basis using IRS received date criteria.

  4. Managerial requirements for case approval are defined in Del. Order 5-1.

Terms/Definitions/Acronyms

  1. The following table is a list of common abbreviations, acronyms and definitions used throughout this IRM.

    Acronym Definition
    AOIC – Automated Offer in Compromise Computer application where offers in compromise are recorded and monitored from receipt to closure. History of the offer investigations conducted by COIC employees and of actions taken by Monitoring OIC (MOIC) units are also maintained on this system.
    CDP – Collection Due Process Allows taxpayers a right to a hearing before Appeals regarding proposed collection enforcement actions or filed Notice of Federal Tax Lien.
    COIC – Centralized Offer in Compromise Units located in Brookhaven and Memphis campus that complete initial processing and work less complicated offers to completion. Do not confuse this with MOIC – COIC units do not monitor or default accepted offers.
    CSED – Collection Statute Expiration Date The date the statutory period for collecting the tax expires.
    DATC – Doubt as to Collectibility Basis for acceptance of an offer where there is doubt that the liability is correct.
    ETA – Effective Tax Administration Basis for acceptance of an offer where this is no doubt that the liability is correct or can be paid in full. However, requiring the taxpayer to fully pay the tax would either create an economic hardship or be a public policy/equity issue.
    ICS - Integrated Collection System Computer application used by Compliance employees to monitor inventory. Histories of OIC investigations conducted by area office employees are maintained on this system.
    MOIC – Monitoring OIC Unit Unit in Compliance Services located in a campus that completes end processing and monitoring of accepted offers.
    OE – Offer Examine A tax examiner appointed as an offer investigator and located in COIC.
    OS – Offer Specialist A revenue officer appointed as an offer investigator, generally located in an area office.
    PE – Process Examiner A tax examiner who completes initial processability determinations on offers and is located in COIC.
    SRP - Shared Responsibility Payment Beginning in 2014, IRC § 5000A required all individuals to have qualifying health care coverage (called minimum essential coverage or MEC) in each month of the year, qualify for an exemption, or make an individual shared responsibility payment (SRP) when they file their tax return for the year.
    TFRP – Trust Fund Recovery Penalty Assessments made on individual taxpayers for the withheld or trust fund portion of delinquent employment taxes.
    TIPRA – Tax Increase Prevention and Reconciliation Act of 2005 Legislation enacted in May, 2006, which made major changes to the OIC program.
  2. Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at http://rnet.web.irs.gov/OldRnet/Other/acronymdb.asp.

Related Resources

  1. Additional resources can be found in:

    • IRM 5.8, Offer in Compromise, for procedures collection employees follow when considering a taxpayer’s proposal to compromise their tax liability.

    • Document 12360, Embedded Quality Job Aid, Offer in Compromise, for case reviews.

    • Document 12990, Records and Information Management Records Control Schedules, for record retention.

  2. Employees can find helpful information on these websites:

    • SERP: http://serp.enterprise.irs.gov/

    • IMD site for IGM http://imdtrack.web.irs.gov/search.asp

Perfection and Case Building Timeframes

  1. If an offer is received with payment(s), processability must be determined within 24 hours of IRS received date and case building completed within 16 days of Area Office( AO) received date.

  2. If no payment(s) is submitted, processability and case building must be completed within 16 days of the AO received date.

Routing Cases Based on Jurisdictional Responsibility

  1. Except for CDP offers meeting COIC criteria, for all cases cited in the table below, generate and send the transfer letter to the taxpayer and/or POA, if applicable. Ensure all TC 480 or STAUPs have been input, as appropriate.

  2. The following table provides guidance on jurisdictional responsibility:

    If responsibility lies with… Then…
    (1) DATL, other than Trust Fund Recovery Penalty (TFRP) - DATL and Personal Liability Excise Tax (PLET) - DATL Send the offer directly to the centralized DATL processing unit located at the Brookhaven campus. No fee is required for these offers. If the offer was loaded to the Automated Offer in Compromise system (AOIC) delete the offer. The offer will be loaded to AOIC, AO 19, by the DATL team.
    (2) Appeals - Non-Collection Due Process (CDP) Move the payments from the AOIC Payment Screen to the AOIC Appeals Fee Screen. Delete the offer from AOIC and forward the case to Appeals using the Appeals Transmittal Form 3210 . See Exhibit 5.8.3-1 .
    (3) Appeals - CDP offers meeting COIC criteria
    • Load offer on AOIC

    • Select OCC 10

    • Assign offer to next appropriate inventory; 51XX, 60XX.

    (4) Appeals - CDP offers that meet field criteria
    • Load offer on AOIC

    • Select OCC 10

    • Update AOIC Remarks screen - "Open CDP"

    • Annotate front of case folder with "CDP"

    • Transfer case to the appropriate field drop point once case building and perfection are completed. See IRM 5.8.3.7.

Field Cases – Identification and Transfer

  1. Once the COIC sites have loaded the offer to AOIC and completed initial processing and perfection, pending offers in the following categories will be immediately transferred to the appropriate Area Office to be worked in a field group:

    • Corporations

    • Employment Tax from Partnerships

    • Estates and trusts

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

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

    • Any business with employees

    • IMF taxpayers involved in a closely-held corporation. Transfers are limited to in-business corporations with employees or with 1120-C filing requirements.

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

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

    • International taxpayers

    • Docketed court cases, see IRM 5.8.10.11

    • Offers involving court-ordered restitution

    • Department of Justice, see IRM 5.8.2

    • MFT 74/76 - Employee Benefit Plan assessments - Transfer to Territory 1 Group 3200

    • Offers involving third party Payroll Service Providers (PSP)/Professional Employer Organization (PEO)

      Note:

      Offers alleging wrongdoing by a PSP or PEO must be transferred to the Territory 2 NEH-ETA group in Austin, TX.

  2. Prior to transfer to the field, COIC will generate the AOIC transfer letter or Combo A letter and send to the taxpayer. When preparing the letter, the PE must use 120 days as the time frame for taxpayer contact.

  3. All offers forwarded to Area offices for investigation will be sent to a central point designated by the Area office.

Processing Forms 656 and Initial Offer Payments

  1. Taxpayers are required to include separate checks for the application fee and TIPRA payment unless they check the Low Income Certification box and qualify for the waiver on Form 656 for each Form 656, Offer in Compromise, submitted. No payment is required for DATL only submissions.

    Note:

    Taxpayers can now forward offer payments via the Electronic Federal Tax Payment System (EFTPS). If electronic offer payments are found update to the correct corresponding DPC code per IRM 5.8.2. PEs must ensure all payments received have the correct Designated Payment Codes (DPC).

  2. There should only be as many Forms 656 as there are entities. An entity is the individual or business that is assessed the liability(ies). In conjunction with an acceptance letter, the Form 656 constitutes a binding agreement between the government and the taxpayer.

    Example:

    (1) Two taxpayers who jointly owe the same liability (including spouses living separately or divorced) may submit a joint OIC on one Form 656 showing each name, address, and taxpayer identification number. However, separate OICs (one for each person) may be submitted if the individuals deem it to be appropriate for their particular situation.

    Example:

    (2) Taxpayers who owe both joint liabilities and TFRP liabilities for the same quarters and the same amount, must submit two offers.

  3. When determining the number of offers required for taxpayers with identical assessments (e.g. MFT 55, MFT 31), if the original assessments are established against the individual taxpayer, separate offers are required. The chart in paragraph 5 below provides examples.

  4. There may be instances when a taxpayer sends in three offers when only two are required. In those cases you should:

    • Add the applicable MFTs from the third offer to each of the remaining two offers.

    • Load the third offer onto AOIC and return as not processable because all the liabilities are included in an open offer in compromise(s). See 5.8.2.4.1(2) Determining Processability.

    • Return the additional application fee and apply any additional TIPRA payment unless designated as a deposit (apply it to the 4710 account).

    • Inform the taxpayer, preferably by telephone, of the actions taken.

  5. The table below is intended to assist in identifying and loading a processable offer and provides guidance on advising the taxpayer when more than one Form 656 , application fee, and/or TIPRA payment may be required.

    If... Then the requirement is...
    (1) two TPs owe joint liabilities only (without checking the Low Income Certification box on the Form 656 ) to send in one Form 656 with one application fee and TIPRA payment.

    Note:

    The taxpayers have the option of submitting two OICs with user fees and TIPRA payments, if they so choose.

    (2) two TPs owe joint liabilities only but they send in two Forms 656 with one check for the application fee and TIPRA payment (without checking the Low Income Certification box on the Form 656) to send in one Form 656, application fee, and TIPRA payment. PEs will:
    • Load all liabilities to the AOIC MFT screen.

    • Load the second offer that does not include the required payments onto AOIC and return as not processable.

    .
    (3) two TPs have separate liabilities only and they send in two Forms 656 but one application fee and TIPRA payment (without checking the Low Income Certification box on the Form 656) to send in two separate Forms 656 with two separate application fees and TIPRA payments. However, if only one application fee and TIPRA payment was sent with the two separate offers PEs will:
    • Load the offer containing the oldest CSED.

    • Load the second offer that does not include the required payments onto AOIC and return as not processable.

    (4) two TPs have joint liabilities and one or both of the TPs also have separate liabilities and the TPs submit one Form 656 with both the joint and separate liabilities and only one application fee and TIPRA payment (without checking the Low Income Certification box on the Form 656) to send in two separate Forms 656 with two separate application fees and TIPRA payments. The offer will be deemed processable and the PE will:
    • Load all liabilities to the AOIC MFT screen using the appropriate "B" , Both, "P" , Primary, or "S" , Secondary, designation.

    • The offer will be perfected by the OE or OS. The PE will not secure the second offer.

    • Input a history indicating a second offer is required.

    (5) two taxpayers have joint liabilities and either or both of the taxpayers also have separate liabilities and they submit two Forms 656 listing the joint liabilities on one and the separate liabilities on the other, but only one application fee and TIPRA payment (without checking the Low Income Certification box on the Form 656) to send in two separate offers with two separate application fees and TIPRA payments. However, if the taxpayers submitted two offers and one application fee and TIPRA payment, the PE will:
    • Load the joint Form 656 .

    • Load the offer containing the separate liabilities that does not include the required payments onto AOIC and return as not processable.

    (6) an individual is submitting an OIC and one Form 656 is submitted with entity section 1 completed. The taxpayer included both individual and corporate liabilities with one application fee and TIPRA payment. (without checking the Low Income Certification box on the Form 656 )

    Note:

    If the taxpayer completes both 1 and 2 entity sections on the Form 656 and includes both individual and corporate liabilities, the individual will take priority.

    Note:

    If section 1 and 2 are both completed, verify the type of entity for the liabilities listed in Section 2. If the liabilities relate to a sole proprietorship of the taxpayer, a second offer is not required.

    to send in two separate Forms 656, one for the corporation and one for the individual if the intent is to compromise both.
    • Load the offer under the individual name and SSN.

    • Load the individual liabilities only.

    • Send the taxpayer a Combo letter with the open paragraph:" We are proceeding with the offer you submitted for your individual tax debts. A separate Form 656, Form 433-B(OIC) and applicable payments are required if you want to compromise corporate tax debts. Please be advised that collection activity may continue on any corporate tax debts. A Form 656 is included for your convenience."

    • Complete the entity section of the Form 656 to be included with the Combo letter.

    • If the taxpayer subsequently submits the corporate offer it will be transferred to the field after any perfection issues are addressed. The original offer for the individual taxpayer will be retained and worked in COIC if the filing requirement for the corporation is an 1120S with no employees. All other individual offers with closely held corporations will be transferred to the field.

    (7) a corporation is submitting an OIC and one Form 656 is submitted with entity section 2 completed. The taxpayer included both the corporation and individual liabilities with one application fee and TIPRA payment to send in two separate Form’s 656, one for the corporation and one for the individual if the intent is to compromise both.
    • Load the offer under the corporate name and EIN.

    • Load the corporate liabilities only.

    • Send the taxpayer a Combo letter with the open paragraph: "We are proceeding with the offer you submitted for your corporate tax debts. A separate Form 656, Form 433-A(OIC) and applicable payments are required if you want to compromise individual tax debts. Please be advised that collection activity may continue on any individual tax debts. A Form 656 is included for your convenience."

    • Complete the entity section of the Form 656 to be included with the Combo letter.

    • Transfer offer to the field once case building and case perfection is completed.

    • If the taxpayer subsequently submits the individual offer, the offer will be transferred to the field.

    (8) an individual who is a partner in a partnership submits an offer and includes the partnership liabilities on one Form 656 with one application fee and TIPRA payment To send in one offer for the partnership and separate offers for the partners if the intent is to compromise both.
    • Load the offer under the individual’s name and SSN. Do not include the partnership liabilities.

    • Load the individual liabilities only.

    • Send the taxpayer a Combo letter with the open paragraph: "We cannot proceed with the offer you submitted for your individual tax debts until we receive an offer for your partnership tax debts. A separate Form 656, Form 433-B(OIC) and applicable payments are required. Please be advised that collection activity will continue on any partnership tax debts. A Form 656 is included for your convenience."

    • Annotate the Form 656 included with the Combo, "Related to Offer #" (number of original offer).

    • Complete the entity section of the Form 656 to be included with the Combo letter.

    • Assign the original offer to 5150.

    • If the taxpayer fails to submit the partnership offer, return the original offer.

    • If the taxpayer submits the partnership offer, transfer both cases to the field.

    (9) the partnership is submitting an OIC and includes the individual liabilities of one partner with one application fee and TIPRA payment To send in one offer for the partnership and separate offers for the partners if the intent is to compromise both.
    • Load the offer under the partnership's name and EIN.

    • Load the partnership liabilities only.

    • Send the taxpayer a Combo letter with the open paragraph:" We are proceeding with the offer you submitted for your partnership tax debts. A separate Form 656, Form 433-A (OIC) and applicable payments are required to compromise any tax debts from individual partners. Please be advised that collection activity may continue on any individual tax debts, A Form 656 is included for your convenience. " .

    • Annotate the Form 656 included with the Combo, "Related to Offer #" (insert original offer number).

    • Complete the entity section of the Form 656 to be included with the Combo letter,

    • Transfer offer to the field once case building and case perfection is completed.

    • If the taxpayer subsequently submits the related offer, transfer it to the field to be associated with the original offer.

    (10) an LLC is submitting an OIC and one Form 656 is submitted that includes both the LLC and individual liabilities with one application fee and TIPRA payment for the individual (without checking the Low Income Certification box on the Form 656 ).

    Note:

    To assist in the identification of an LLC see IRM 5.1.21.7.2 ,Offers In Compromise

    they may be required to send in two separate Forms 656.
    • Individuals or individual operating as a disregarded single member LLC taxed as a sole proprietor that have tax liabilities, including employment taxes, incurred before January 1, 2009 may be included on one Form 656.

    • In those instances where an LLC incurred employment taxes after January 1, 2009 or excise taxes after January 1, 2008, two Forms 656 must be submitted with applicable initial payments for each. One Form 656 will be the individual liabilities and the second Form 656 will be for the LLC employment tax liabilities.

    (11) two taxpayers file one offer and one of the taxpayers has a CDP Two offers are required. Follow guidelines in the appropriate Combo Y paragraph.
    (12) two taxpayers file one offer to compromise MFT 55 liabilities Two offers are required. The offer will be perfected by the OE/OS.
    (13) two taxpayers file one offer to compromise MFT 31 liability where the liability is mirrored (identical TC 150/290/300) One offer is required

    Note:

    The taxpayers may elect to submit two separate offers.

    (14) two taxpayers file one offer to compromise MFT 31 liability where the liability is allocated; not mirrored Two offers are required. The offer will be perfected by the OE/OS..
  6. Individuals or self-employed taxpayers filing a DATC or ETA offer should complete and attach Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals.

  7. All other forms of business entities (partnerships, corporations, limited liability companies, etc.) should submit Form 433-B(OIC), Collection Information Statement for Businesses.

    Note:

    The business assets, income and expense sections of Form 433-B (OIC) may not be required if information provided by the taxpayer includes a current Profit and Loss statement and/or sufficient information to make a determination.

  8. Taxpayers who submit an offer to compromise individually owed tax and also have a substantial interest in an ongoing business may be required to submit a Form 433-B(OIC) for that business.

Perfecting Offers

  1. Prior to beginning an OIC investigation, certain critical errors must be corrected to perfect the offer. The Combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to request the necessary corrective action. If there is no response to the request letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. The following errors must be corrected before beginning the investigation:

    • The Form 656, Offer in Compromise is missing a signature.

      Note:

      A faxed signature is acceptable.

    • Form 433-A(OIC) and/or Form 433-B(OIC) is missing, blank, partially completed, or unsigned.

    • Balance of any TIPRA shortfall due at the time of submission.

    • The offered amount is blank or zero, unless terms are present.

    • Requesting required estimated tax payments from self-employed taxpayers.

    • Requesting Federal Tax Deposit (FTD) payments when appropriate.

    • Signature is missing on a required tax return received with the offer. If applicable, take the following actions: If the unsigned tax return is an original or a copy, and your research provides no evidence the tax return has been filed, make a copy for the case file. Return the original or unsigned copy of the tax return to the taxpayer with a request that: if the tax return was recently filed (within 60 days prior to offer submission), provide the date of mailing, or; if the tax return has not been filed, to electronically file, or sign and file the paper return in the appropriate location. Request that the taxpayer provide to OIC the date the return was filed. If the taxpayer does not respond to this issue, prior to returning the offer, internal research must be completed to determine if the required tax return has been received for processing.

  2. If you receive two offers, one for joint liabilities and one for separate liabilities and both offers were submitted with either the applicable payments or low income certification you will load both offers and perfect as follows:

    • Send the taxpayers two Forms 656 with the Combo letter.

    • The primary taxpayer's Form 656 should be annotated as" Amended to" inserting the original offer number. Complete the Form 656 to include all joint and any individual liabilities.

    • The secondary taxpayer's Form 656 should be annotated "Amended to" inserting the original offer number. Complete the Form 656 to include all joint liabilities and any individual liabilities.

    • Use paragraph "B" in the Combo letter with the open paragraph stating, "Please complete Sections 3 and 4 of the enclosed amended Forms 656. The taxpayer identified in Section 1 of the form must sign and date Section 8. No additional initial payments or application fees will be required"

    • If this is the only perfection issue, the offer will not be returned if the taxpayers fail to respond. The OE must perfect if the offer is to be accepted.

      Note:

      If you receive one offer that combines joint and separate liabilities, follow the guidelines in appropriate Combo "Y" paragraph.

  3. When sending a Combo letter to perfect the errors listed above, also request correction of the information shown below, if necessary.

    • The taxpayer's name, physical address or taxpayer identification number (TIN) is missing or incorrect.

      Note:

      If the information can be located on IDRS or other documents submitted with the offer, input the correct information on AOIC and continue processing the offer.

      Note:

      If the taxpayer is homeless and is living on the street then they do not have a physical address. The physical address line could be left blank and a statement provided that the taxpayer is living on the street and the city and state where he or she is living could be listed. If the taxpayer indicates they are staying with friends then the friend’s home address will suffice as a physical address. All mail should be sent to the taxpayer’s mailing address. On the home mailing address line, the taxpayer could note an address where to contact them, e.g. post office box, employer, relative, LITC if they are represented.

    • An amount of money is offered, but the payment terms are not specified.

    • The taxpayer submitted an old revision of Form 656.

  4. If the taxpayer did not include a tax period with an outstanding liability on the original Form 656 and the entity is the same, the PE will add the periods to the AOIC MFT screen. If the taxpayer has a separate entity that was not included on the original Form 656, the PE will no longer be responsible for loading those periods on the AOIC MFT screen until such time the OE/OS secures the amended and related Forms 656. This includes any liability under MFT 35, assessed under the Affordable Care (ACA) Provision 1501, Individual Shared Responsibility Payment (SRP) IRS §5000A.

  5. When a taxpayer has included a tax period(s) for which there is no apparent amount due, do not add the tax period(s) to AOIC. Contact the taxpayer to determine if any issues are pending that may result in additional tax.

  6. If the basis for compromise is not indicated but it can be determined by reviewing the package, continue processing the offer.

  7. Document the AOIC history to summarize any perfection issues.

  8. An offer can be investigated but cannot be accepted until all errors are corrected and/or an amended Form 656 is signed. Therefore, offers will not be returned by the PE if the taxpayer fails to respond to any perfection issue listed in paragraph 3 above.

Field Cases Requiring Perfection

  1. Field cases requiring perfection must be flagged while in the hold file waiting for the taxpayer's response.

  2. If the taxpayer fails to perfect critical errors, return the offer without further contact.

  3. Upon receipt of the response the case must be immediately pulled, case building completed, and shipped to the receiving field office.

    Note:

    PEs must ensure all payments received have the correct Designated Payment Codes (DPC).

COIC Cases Requiring Perfection

  1. COIC cases requiring perfection will be placed in the hold file waiting for the taxpayer's response.

  2. If the taxpayer fails to perfect critical errors, return the offer without further contact.

  3. Upon receipt of the response the case must be pulled, case building completed, and moved to the next appropriate COIC inventory.

    Note:

    PEs must ensure all payments received have the correct Designated Payment Codes (DPC).

Case Building Offers

  1. Case building for field and COIC cases should be minimal. Include the following in each case file:

    • Copy of the NFTL, if notice of filing is on the Automated Lien System (ALS)

    • Prints of IMFOLT, BMFOLT for each tax period.

  2. PEs will generate the TC 480 and Status 71 through the AOIC system. However, there may be situations when the TC 480/Status 71 cannot be systemically generated (e.g., MFT 31 modules created prior to January 2005, imminent statute, etc.). In those cases where AOIC does not systemically generate the appropriate TC 480 and/or Status 71, COIC must manually input the appropriate codes.

    Note:

    If the TC 480 was manually input it must be manually reversed. Place the letters "TC" in red directly after the offer number on the outside of the case file and notate the AOIC history to identify the need for a manually reversal when the case is closed.

  3. When the need for mirroring is identified, place a prominent red "M" directly after the OIC number on the case file. This could be caused by one spouse submitting an offer separately; one spouse appealing an offer rejection; or submission of separate offers by the spouses with different waiver dates for joint period(s).

PE Requests for Estimated Tax Payments

  1. PEs will request delinquent estimated tax (ES) payments as part of their case perfection actions for all self-employed taxpayers.

  2. Determine if the taxpayer is currently self-employed. If research indicates the taxpayer is no longer self-employed, and has not been self-employed for the entire calendar year, no ES payments are required.

  3. In order to be considered for an OIC, the self-employed taxpayer must be current with filing and payment requirements for the year in which the offer was submitted. ES payments are generally due quarterly; April 15th, June 15th, September 15th and January 15th of the following year.

  4. Self employed taxpayers are required to pay an amount equal to 90% of their current year self employment tax liability or 100% of the self employment tax owed in the prior year, whichever is less.

  5. To determine whether ES payments are required:

    • Check IMFOLT for estimated payments due for the year the offer was received. ES payments may be identified by TC 660, TC 670 or TC 430.

    • If quarterly ES payments are posted to the account for each quarter that is due when the offer is reviewed for case building, no further action is necessary.

  6. If there are no payments, or missing payments, take the following actions

    • Check the prior year TXMOD to determine the taxpayer's total tax liability (TC 150). If the prior year tax return is processing on TRDBV or if the taxpayer provides a copy you may use the figures from that tax return to calculate the ES payments.

      Note:

      If the prior year return has not yet been filed you may use the year just prior to that one. If the taxpayer has not filed a tax return for the last two years do not request ES payments. Include paragraph BA in the combo letter.

    • Subtract any withholding tax (TC 806)

    • Subtract any known tax credits

    • If the result is $1,000 or more, this would be the amount due for ES payments in the current year. If the result is under $1,000, the taxpayer is not liable for ES payments.

    • Divide the total amount by 4 to get the quarterly amount due.

    • Determine the amount due up to the current date and request the shortfall using the Combo letter, paragraph AZ.

    • Annotate the remarks section of AOIC with your request and schedule the appropriate follow-up.

AOIC Combo Letter

  1. The Combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to advise the taxpayer that their offer has been received or to request the necessary corrective action(s).

  2. If no perfection is required, issue the AOIC Combo letter, Paragraph A. The date of possible taxpayer contact must reflect 120 days from the date of the Combo letter. Document the AOIC remarks with this information. Include Pub 1, Your Rights as a Taxpayer, and Pub 594, The IRS Collection Process.

    Note:

    Phone contact in lieu of the combo letter is acceptable and must be annotated in the AOIC Remarks, including discussion of the publications. After the call mail Pub 1, Your Rights as a Taxpayer and Pub 594, The IRS Collection Process to the taxpayer.

  3. If perfection is required, prepare the Combo letter using the paragraphs that address all deficiencies. Include Pub 1 and , Pub 594.

    Note:

    Phone contact in lieu of the combo letter is acceptable and must be annotated in the AOIC Remarks, including discussion of the publications. After the call mail Pub 1 and Pub 594 to the taxpayer.

  4. Before mailing the AOIC Combo letter to the taxpayer and representative, if appropriate, you must ensure the representative is authorized to receive correspondence. If a disclosure issue exists, use the applicable paragraph to indicate this in the AOIC Combo letter, and do not send a copy of the letter to the representative. Instead, send the representative a letter notifying him or her that correspondence has been sent to his or her client and he or she must contact his or her client for the information.

  5. Post-date all AOIC Combo letters five (5) calendar days. Schedule follow-up for the 45th day from the date of the letter. This means that at least 50 calendar days (5 post-date plus 45 calendar days from the date of the letter) will have elapsed before an established follow-up date.

  6. Envelopes containing the AOIC Combo letter, which require a response (paragraph options B, C, or D), must be stamped or otherwise marked "URGENT-TIME SENSITIVE" .

  7. Document the AOIC remarks to summarize all applicable perfection issues and the mailing date of the letter.

  8. Input the appropriate follow-up date.

  9. Retain a copy of the signed and dated AOIC Combo letter in the file.

  10. Assign the offer to the applicable AOIC assignment number.

  11. If there is no response to the Combo letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271 , Rejection Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. For additional information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

Processing Taxpayer Responses to Combo Letters

  1. If the Combo letter requested critical perfection information, but the taxpayer fails to respond, the offer may be returned with no further contact.

  2. If the offer is assigned to 51XX and the taxpayer responds, incorporate the response into the file and assign to 5500 or 5558, as appropriate.

  3. Responses received on cases assigned to 5150 (field) must be reviewed immediately, assigned to a PE for expedite processing, and transferred to the appropriate field drop point.

  4. All other responses must be reviewed within 10 calendar days of assignment to the PE.

  5. Upon reviewing the response, take the next appropriate action; assign to 60XX or return.

  6. If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or the representative fails to meet the additional deadline, return the offer with no further contact.

  7. If the request included:

    • Missing TIPRA payments,

    • Perfection of Form 656, Offer in Compromise (missing signature(s)),

    • Missing Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B(OIC), Collection Information Statement for Businesses,

    and the taxpayer failed to provide or address the missing payments or forms, internal research does not reflect the payment(s) have been received, and no special circumstances were identified, the offer may be returned with no further contact. For additional information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

  8. Update the AOIC remarks summarizing the documents or payments received.

  9. Sign any amended or revised Forms 656 with the current date. Retain the original and any amended Forms 656 in the file.

  10. PEs are required to initiate the next appropriate action on cases where taxpayers have responded to the Combo letter within 10 calendar days from the date the offer is assigned to the PE.

  11. An interim letter, advising 90 days for the next taxpayer contact, must be sent after the PE reviews the response, prior to assignment to an OE holding inventory. Document the AOIC Remarks that the interim letter was issued.

Processing Telephone Responses to Combo Letters

  1. PEs are responsible for answering incoming calls from taxpayers, tax representatives and internal customers on the COIC toll-free telephone line.

  2. Generally these calls involve taxpayer inquiries regarding the status of pending offers or questions about a letter they received.

  3. For the majority of the calls, the PE should access the offer on AOIC and, by reviewing the remarks screen, satisfactorily answer the taxpayer's questions.

  4. There will be times when it will be necessary for the PE to take additional follow-up actions to address the taxpayer's concerns.

  5. The table below illustrates when follow-up actions must be taken.

    If the taxpayer... Then the PE will...
    (1) states they received a letter indicating the need to submit ES tax payments however their business closed and they are not liable for any ES tax payments for the current year
    • Accept oral testimony.

    • Document the conversation in AOIC Remarks.

    • If this is the only corrective action that was requested, pull the case from 51XX and assign to 60XX once an interim letter has been sent to the taxpayer.

    (2) wishes to withdraw their offer
    • Accept oral testimony (withdrawal requests are not required to be made in writing). Inform taxpayer that there are no Appeal rights if the offer is withdrawn.

      Note:

      For joint offers the request must be made from both taxpayers. If both taxpayers are not available on the phone, request a call-back or the withdrawal request in writing.

    • Document the conversation in AOIC remarks.

    • Pull the case from 51XX

    • Assign case for withdrawal processing.

    (3) states they have special circumstances which may require expedite handling, such as:
    • Imminent foreclosure on home

    • Medical conditions

    • Funds for offer only available for a limited time

    • Document AOIC remarks.

    • Pull case from assigned inventory.

    • Give case to manager to expedite.

      Note:

      See "Expedite Handling" in IRM 5.8.3.18.

  6. Any additional discussions with the taxpayer or tax representative that may require follow-up actions should be discussed with the manager.

  7. All phone calls must be well documented in the AOIC Remarks Screen.

Processing Tax Returns

  1. There may be times when taxpayers submit original tax returns directly to COIC with the offer submission. If the tax return is unsigned follow IRM 5.8.3.6(1) procedures. If the taxpayer fails to respond, the offer will be returned without further consideration.

  2. If the tax return is properly signed:

    • Make a copy for the case file

    • Annotate "OIC" in red in the middle of the top margin of the return

    • Complete a Form 3210, Document Transmittal, and write "OIC - Expedite" in the Remarks area.

      Note:

      Include your fax number on the Form 3210 so that the acknowledgement copy can be faxed back.

    • Mail to the Austin Service Center following PII shipping guidelines. Complete Form 9814, Request for Mail/Shipping Service, with the following address: Internal Revenue Service, 3651 South I-H 35, Mail Stop 6054AUSC, Austin, TX 78741

    • Document AOIC.

No Reply Procedures

  1. After the offer is determined processable and a Combo letter has been sent, the offer should be held until the follow-up date expires to allow the taxpayer to provide the requested information.

  2. If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response and update the follow-up date. If the taxpayer and/or the representative fail to meet the additional deadline, return the offer with no additional contact.

  3. After the designated time period has passed and no response has been received, the "No Reply" return process will be initiated by the COIC site designated manager. The AOIC system will generate all the necessary letters and documents to allow for the closing of the case off of AOIC.

  4. Before closing the offer, check AOIC to verify that no response was received. Check IDRS to ensure there is no Combat Zone, -C Freeze, on the account. For additional information see IRM 5.19.10.6, Combat Zone Freeze Codes.

  5. When returning the offer:

    • Retain the original Form 656, Offer in Compromise, any amended Forms 656, and a copy of the return letter in the file.

    • Cross out all IRS received dates with an "X" .

    • Stamp the Form 656 with RETURN and add the current date.

    • Update the case remarks on AOIC, including the reason for the return.

    • Include a copy of the history in the file and give the file to the manager for approval.

    • Forward the entire case file to Appeals, if the offer is part of an open Collection Due Process (CDP), once the case is closed.

    Note:

    For information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

Processing Form 657, Offer in Compromise/Revenue Officer Report

  1. Form 657, Offer in Compromise/Revenue Officer Report, serves to establish coordination between the field Collection RO group, the field OIC group and the COIC sites.

  2. All OICs forwarded with a Form 657, will be processed following expedite handling. See IRM 5.8.3.18 , Expedite Handling, below for additional instructions on expedite handling.

  3. If the offer account is in Status 26 and the Form 657 was not received, the COIC site will contact the RO by E-mail to request Form 657 and continue processing the offer. Update the account(s) to Status 71. Copy the E-mail request into the AOIC Remarks

    Note:

    The RO should complete the Form 657 and forward it to the COIC site that received the original offer within four business days of receipt of the offer package or notification that an offer has been submitted by the taxpayer.

Offers Submitted Solely to Delay Collection per Forms 657

  1. When an RO determines that an offer is submitted solely to delay collection, the offer can be returned to the taxpayer after obtaining appropriate approval. See IRM 5.8.4.20.2, Procedures for Return of Offers Submitted Solely to Delay Collection.

    Note:

    The term solely to delay collection is defined as an offer that was submitted for the sole purpose of avoiding or delaying collection activity. See IRM 5.8.4.20, Offer Submitted Solely to Delay Collection, and IRM 5.8.4.20.1, Solely to Delay Examples and Discussions, for examples of solely to delay.

  2. The field OIC Group Manager and the COIC Team Manager have delegated authority to approve returns based on solely to delay collection. The field OIC Group Manager or the COIC Team Manager must review Form 657 , the ICS history and any other documentation relating to the offer. If they do not agree with the RO’s solely to delay decision, the field OIC Group Manager or COIC Team Manager should discuss the issue with the RO Manager. The field OIC Group Manager or COIC Team Manager must document the AOIC or ICS history with the reason(s) for concurring with or overruling the RO recommendation to return the offer.

  3. An OIC is not considered submitted solely to delay collection just because there is an imminent CSED issue or if an offer has been rejected after investigation and the taxpayer exercises appeal rights.

  4. If the offer is returned as solely to delay collection, the COIC site will contact the originating RO to advise when the return letter has been issued. Unless a jeopardy situation exists, the RO must wait for COIC notification that the return letter has been issued before taking any collection enforcement action. See IRM 5.8.4.20, Offer Submitted Solely to Delay Collection , for solely to delay procedures.

    Note:

    The account(s) will remain in Status 26 and should not be updated to Status 71.

  5. If a taxpayer or POA contacts the COIC site or field offer group concerning an offer deemed as solely to delay based on an RO recommendation before a return letter has been issued the call should be referred to the field Collection RO group manager. However, once the return letter is issued, the call should be handled by the COIC or field OIC group manager.

  6. Generally, an offer submitted during a CDP hearing should not be returned under solely to delay criteria, as discussed in IRM 5.8.4.20, Offer Submitted Solely to Delay Collection, unless the OE/OS manager agrees IRM requirements are met and the RO manager verifies enforcement action is anticipated subsequent to the offer return.

Input and Verification of TC 480

  1. The PE must verify that the TC 480 has posted to each tax period shown on the Form 656.

  2. If the TC 480 has not posted, it must be manually input. If a manual input is required, input the TC 480, place the letters TC in red directly after the offer number on the outside of the case file and, notate the AOIC history to identify the need for a manual reversal when the case is closed.

  3. The table below provides instruction for inputting the TC 480.

    If ... Then ...
    (1) TC 480 is not present Input the TC 480 using CC REQ77. Use the date the Form 656 was signed by the IRS official as the transaction date, not the date the taxpayer signed.

    Note:

    If the TC 480 is manually input, it must be manually released.

    2) All TC 480s present do not have the same date the Form 656 was signed by the IRS official
    • Input TC 483 using CC REQ77.

    • Input STAUP to prevent balance due notices from issuing.

    • Input TC 480 using CC REQ77 with the correct date; include a posting delay code of 1.

Dishonored Payments

  1. For payments processed through Paper Check Conversion (PCC) Cincinnati Accounting receives the initial notification of a dishonored OIC payment from the Federal Reserve Bank through the Electronic Verification and Image Services (ELVIS) automated system.

  2. The Cincinnati Dishonored Check Unit will notify the taxpayer by mailing them a copy of the dishonored check and Form 12993-A, Check for Offer in Compromise Payment Not Accepted by Bank.

  3. Cincinnati Accounting will E-fax copies of the dishonored payments to the COIC site that originated Form 3210, Document Transmittal .

  4. Notification of dishonored payments that are processed through Remittance Strategy-Paper Check Conversion ( RS-PCC) will originate from Ogden Accounting and E-faxed to the originating site.

  5. Upon notification of a dishonored application fee and/or TIPRA payment, the site will determine the current AOIC offer assignment.

  6. If the payment has been moved from the 4710 Account to the Master File, the Dishonored Check Unit will reverse the payment with a TC 671. If no notification of the dishonored payment is received, the dishonored check can also be identified by the TC 671 posted on IDRS.

  7. Upon notification of a dishonored application fee and/or TIPRA payment, the offer will be immediately returned to the taxpayer with the appropriate AOIC letter for a dishonored check. Document the AOIC history with the following information:

    • Which check(s) (application fee, TIPRA payment, or both) was returned,

    • The check number; and

    • Date the check was dishonored

      Note:

      If the dishonored check was for a subsequent periodic payment, it will be treated as a missed payment and addressed by the offer examiner or offer specialist. See IRM 5.8.4.24, Periodic Payments Required With Offer in Compromise Submissions.

  8. There may be no notification of dishonored checks.. Check IDRS for the posting of a TC 671 that may also include a secondary TC 280 or TC 286, dishonored check penalty.

  9. If the payment was dishonored while still in the 4710 account, Accounting will annotate their copy of the Form 3210 as appropriate.

    If... Then...
    (1) The dishonored check was a deposit Notify Monitoring Offer in Compromise (MOIC) and continue investigation of the case.
    (2) The dishonored check was for either the application fee or TIPRA payments Notify MOIC and stop investigation of the case.
  10. If the taxpayer or an authorized representative offers to replace the dishonored check and requests reconsideration of their offer, contact by the taxpayer or their representative must be made within 30 days of the date of the initial AOIC return letter. The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for reconsideration procedures.

  11. When contacted:

    • Inform the taxpayer or the authorized representative that the offer will not be reconsidered if the payment is not made with certified funds.

    • A due date for receipt of the payment must be provided to the taxpayer or the authorized representative.

    • Advise the taxpayer or their representative to submit the payment by overnight mail.

    • Document the case history.

  12. Inform the taxpayer or the authorized representative that the certified funds must be mailed to either of the following addresses:

    Brookhaven:

    Mail Stop 681, PO Box 9011, Holtsville, NY 11742, or for Private Delivery Service (PDS)

    5000 Corporate Court, Stop 680, Holtsville, NY 11742

    Memphis:

    AMC-Stop 880, PO Box 30834, Memphis, TN 38130-0834, or for Private Delivery Service (PDS)

    533 Getwell Rd., Memphis, TN 38118

  13. To ensure proper handling, advise the taxpayer to include a letter requesting reconsideration of the offer.

  14. If the payment was dishonored while still residing in the 4710 Account, the payment should be processed through established deposit procedures. A copy of Form 3210 must be forwarded to the appropriate MOIC function. Clearly indicate on the copy of Form 3210 that the payment is a replacement for a dishonored check. MOIC will load the payment on the AOIC deposit screen once the AOIC record is reloaded. MOIC is responsible for ensuring the payment is applied to the Master File as originally intended.

    Note:

    The offer will be reloaded, and a new offer number will generate. The new Form 3210 will reflect the new offer number. Cross reference the original offer number in the AOIC history, and in the remarks section of Form 3210 to ensure Accounting is aware there may be two Forms 3210 with different offer numbers for the same taxpayer.

  15. If the payment was dishonored with a TC 671 on the Master File, prepare a Form 3244, Payment Posting Voucher, to post the payment as a replacement for the dishonored payment.

  16. Upon receipt of the replacement payment, the employee that processes the payment must also:

    • Reload the offer on AOIC, if appropriate.

    • Verify if the payment was received within the established deadline as annotated in the AOIC remarks.

  17. If the payment is not received by the specified due date, the payment will be processed in accordance with TIPRA payment requirements, and the case will not be opened as a reconsideration. See IRM 5.8.7.3, Return Reconsideration, for reconsideration procedures.

Additional Procedures for Dishonored Payments

  1. If the offer is still assigned to a COIC site, COIC will immediately cease processing the associated offer, update AOIC and return it to the taxpayer, utilizing letter option RET-AA.

  2. If the offer is assigned to an Area office, COIC will telephone the employee assigned the offer (or the manager of the assigned function, if no individual is specified on AOIC) to advise of the dishonored payment. Once contact is made with the assigned area employee or manager, COIC will fax a copy of the dishonored check to include in the case file and document AOIC to indicate to whom the information was communicated.

  3. If the case was processed as an Appeals CDP offer, COIC should query the Appeals Centralized Database System (ACDS) to determine which Appeals employee is assigned the case. COIC will telephone the Appeals employee to advise of the dishonored check and fax a copy to include in the Appeals case file. COIC will update the AOIC remarks.

  4. If notification of the dishonored check occurs after the offer was closed on AOIC, the designated AOIC liaison within the COIC site will contact the Headquarters AOIC analyst to correct the application fee record of the closed offer.

"Fee Refund/Apply Listing" Validation

  1. When an erroneous processability determination is corrected because the taxpayer was in bankruptcy at the time the offer was filed, if the related application fee remittance was forwarded for deposit, the COIC sites will need to determine whether the remittance has been deposited and credited to the taxpayer’s liability. An application Fee Refund/Apply Listing should be generated from AOIC to identify application fees that were initially determined to be processable, but later determined to be not processable. Generation of this listing is required in order for the COIC site to verify and authorize a manual refund.

  2. The COIC sites must generate the Application Fee Refund/Apply Listing on a monthly basis.

  3. Generally, when an offer is deemed not processable, the Service includes the taxpayer's application fee, and in some cases the initial TIPRA payment, see IRM 5.8.2.3, Processability, with the return disposition letter. However, depending on the elapsed time between inputting a processability change on AOIC from "Y" to an "N" , the Service may have already deposited the related application fee and applied the payment to the taxpayer's liability on Master File.

    If... Then...
    (1) the payments were deposited and still reside in the 4710 Account at the time the offer is deemed not processable prepare a Form 3753, Manual Refund Posting Voucher, to manually refund.
    (2) the processability determination is erroneous because the taxpayer was in bankruptcy at the time the offer was filed, and the payments were deposited and have been applied to the taxpayer’s liability to avoid the stay in bankruptcy prepare the Form 5792, Request for IDRS Generated Refund, to manually refund the payments.

    Note:

    The comments recorded on the Form 5792 must specifically state that the offer was deemed not processable due to bankruptcy and the taxpayer is entitled to the refund of the application fee. Include a contact name and number on the Form 5792 to provide Accounting a contact if questions should arise.

  4. To determine whether or not a manual refund of the application fee should be issued, research the completed Form 3210 , Document Transmittal, to see whether the application fee was deposited by the Service or returned to the taxpayer via manual refund procedures.

  5. Thorough research and care is required when determining which offers on the application Fee Refund/Apply Listing should receive manual refunds.

    If... Then...
    (1) Research indicates that the application fee and TIPRA payment, if applicable, were returned to the taxpayer(s) Access the offer payment screen on AOIC and clear the refund indicator to remove it from the Refund/Apply Listing.
    (2) Research indicates that the application fee and TIPRA payment, if applicable, were deposited and still reside in the 4710 Account Contact the Monitoring Offer in Compromise (MOIC) function co-located with the COIC site and request a manual refund be generated to the taxpayer(s) using Form 3753 .
    (3) Research indicates that the application fee and TIPRA payment, if applicable, were deposited and applied to the Master File, and the offer was deemed not processable due to bankruptcy
    • Prepare Form 5792 to manually refund the application fee payment and TIPRA payment.

    • Access the offer payment screen on AOIC and clear the refund indicator to remove the payment from the Refund/Apply Listing.

  6. To request the MOIC function to issue manual refunds from the 4710 account, prepare a Form 4442 that includes:

    • The offer number,

    • The taxpayer(s) name and

    • The taxpayer(s) identification number (TIN).

  7. Records that support the COIC site's decision to either remove the offer record from the Refund/Apply Listing or to issue a manual refund must be retained for one year. At a minimum, the file should consist of:

    • Copies of the Refund/Apply Listing or a memorandum detailing the requested information,

    • Copies of the Form 3210 and

    • Any other supporting documentation necessary to support the decision, including, but not limited to, the Remittance Processing System daily remittance registers.

  8. Refunds of the applied application fee and TIPRA payment(s) are allowed if the taxpayer was in bankruptcy at the time the offer was received. The taxpayer’s deposit is always refundable in erroneous processability determination situations.

    Note:

    If it is found the taxpayer was in bankruptcy at the time the offer was filed the application fee and all TIPRA payments must be refunded to the taxpayer to avoid the stay in bankruptcy.

  9. All IDRS manual refunds must be monitored to ensure they are issued to the taxpayer and to avoid duplicate refunds.

  10. When a manual refund is generated:

    • Open an IDRS control base and place in "M" status.

    • The status of the refund must be updated weekly on the Manual Refund listing.

    • Monitor open controls until posting of the TC 840.

    • Close IDRS control when the manual refund has posted.

    Note:

    For additional information see IRM 21.4.4.5.1, Monitoring Manual Refunds.

Expedite Handling

  1. There may be occasions where a taxpayer or Power of Attorney requests expedited processing of their OIC due to an emergency or perceived emergency situation. Situations that may warrant expedited case processing include (but are not limited to):

    • A contract or business agreement requiring the taxpayer, as a condition of the contract or agreement, to resolve the tax liability by a specific date,

    • Availability of the money to fund the offer is limited to a certain time; and

    • A terminal illness may affect the ability to complete the payment terms.

    Note:

    Contact by phone, fax, or mail may identify an emergency situation not initiated by the taxpayer. Once identified, expedite processing may become necessary. Follow the procedures in paragraphs (3) and (4) below and discuss with your manager.

  2. Processing Forms 656, Offer in Compromise, must be given priority consideration and handled expeditiously due to pending collection action.

  3. Refer offers received with a request for expedited processing to management for a decision on whether or not expedited treatment is warranted.

  4. If a decision is made to expedite offer processing, document the AOIC history indicating the basis for the decision. Form 656 should be clearly labeled at the top "Emergency Processing Requested." Immediate processability and assignment for investigation should be made.

  5. Every effort should be made to close the offer within 90 calendar days of receipt. In an attempt to bring the case to a prompt and timely resolution and to meet the special needs of the taxpayer, immediate contact should be made with the taxpayer to request any additional information needed.

  6. If a decision is made not to expedite the case, document the basis for the decision on the AOIC history. The manager will contact the taxpayer by telephone or correspondence explaining the basis for the decision. The case should be worked under routine processing.

Expedite Handling for Short Collection Statute Expiration Dates on Related Offers

  1. The Collection Statute Expiration Date (CSED) is ten years from the date of a tax assessment.

  2. PEs are responsible for ensuring there are no tax liabilities with less than one year remaining on the CSED for any offer received that will require a request for a related offer prior to acceptance. CSED dates can be found on the AOIC MFT screen and on the IDRS prints in the case files.

  3. If any CSED is identified that is less than one year from the date the offer was received and there are no perfection issues:

    • Document AOIC Remarks screen,

    • Send Combo A to the taxpayer and representative, if applicable and

    • Give case file to manager to be expedited to an OE.

    Note:

    If case is to be transferred to the field, write: "Expedite - Short CSED" , on the front of the case folder.

  4. If a CSED is identified that is less than one year from the date the offer was received and perfection of the offer is required:

    • Send a Combo letter to request the needed perfection,

    • Document the AOIC Remarks screen and

    • Flag case for expedited handling,

    • When the response is received, give case file to the manager to be expedited to an OE.

    • If no response is received, return offer following IRM 5.8.3.13, No Reply Procedures.

    Note:

    If case is to be transferred to the field, write: "Expedite - Short CSED" , on the front of the case folder.

Third Party Authorizations

  1. Taxpayers who wish to be represented must submit a properly executed Form 2848, Power of Attorney and Declaration of Representative. Review the form to ensure it includes required essential elements for validity as listed in IRM 21.3.7.5.1. Input the representative's information on AOIC and retain a copy of the form in the paper case file. Forward the original for recording on the Centralized Authorization File (CAF).

    Note:

    The Office of Professional Responsibility has given special authorizations to students working with the Qualified Low Income Taxpayer Clinic (QLITC) or Student Tax Clinic Program (STCP) which resulted in the addition of designation "k" to the Form 2848. The students that correctly complete the Form 2848 with the" k" designation have the same privileges that any other representatives have unless exceptions are listed in Part 1, Power of Attorney.

  2. Send all original correspondence to the taxpayer and provide a copy to the representative if the taxpayer has checked the box in Part 2 of Form 2848.

  3. Individuals who are not authorized to practice before the IRS with respect to a collection matter (such as unenrolled return preparers and registered tax return preparers) may accompany taxpayers to meetings with a completed Form 8821, Taxpayer Information Authorization, or other proper authorization, and receive and provide information that relates to the offer investigation. They are not authorized to represent the taxpayers or sign documents relating to offers in compromise. See IRM 5.1.10.7.2, Right to Representation.

  4. If the offer contains liabilities for tax years or periods that are not also included on Form 2848, a letter cannot be sent to the representative covering these periods. Instead, send a redacted letter to the representative. The letter sent to the taxpayer can request completion of a Form 8821 or a Form 2848 to cover the missing periods.

  5. If, during the investigation, it is discovered that the POA no longer represents the taxpayer, secure a letter revoking the POA and document the case history. Remove the POA information from AOIC.

  6. Where a recognized representative has unreasonably delayed or hindered an examination, collection, or investigation by failing to furnish, after repeated requests, non-privileged information necessary to the examination, collection or investigation, the IRS employee conducting the examination, collection, or investigation may be given permission to bypass the representative and contact the taxpayer directly for such information [26 C.F.R. § 601.506 (b) (Statement of Procedural Rules)]. Prior to contacting the taxpayer directly, the IRS employee must first initiate bypass procedures. See IRM 5.1.23.5, By-Passing a Taxpayer's Representative, for procedures to bypass a POA.

Third Party Authorization Requests

  1. During the course of the investigation, a taxpayer may submit a Form 2848 designating a third-party as their representative or power of attorney, or the taxpayer may submit a Form 8821 designating an appointee. When properly completed and filed by the taxpayer, each of these documents should be recognized during an investigation, and interaction with the third party should be governed by the parameters allowed within each of these authorization forms.

    • Form 2848 - authorizes an eligible individual (e.g., attorney, CPA, enrolled agent, or enrolled actuary) to represent a taxpayer before the IRS and allows the individual to receive confidential information.

    • Form 8821 authorizes any individual, corporation, or partnership to inspect and/or receive a taxpayer's confidential information for the type of tax and the years listed on Form 8821 , Item 3.

  2. The table below provides guidance to assist in distinguishing the differences between the Form 2848 , Form 8821 , and Form 656 .

    Type of Form Designee may be individual or entity Designee can inspect limited tax info Designee may receive limited written info Designee can represent TP on collection matters Designee can execute waivers, consents, etc TP can designate more than one individual/ entity on the form Designee may redelegate to another individual or entity Unenrolled return preparer or registered tax preparercan be designated
    Form 8821 Either Yes Yes No No Yes No Yes
    Form 2848 Individual Only Yes Yes Yes Yes Yes Yes (Individuals Only) Yes (but only for examination matters with respect to a return he/she prepared)

Form 8821, Tax Information Authorization (Rev. 03/2015)

  1. If Form 8821 is missing critical information that can only be provided by the taxpayer (e.g., tax years, type of tax, missing taxpayer signature, date), return to the taxpayer.

  2. Information that may be disclosed to the designee is limited to the type of tax, tax form number, tax years or periods, or specific tax matter that is listed on the Form 8821, item 3.

  3. If Form 8821, item 5a is checked, the designee is also entitled to receive copies of tax information, notices, and other written communication on an ongoing basis for the type of tax, tax form number, tax years, or specific tax matter listed under item 3.

  4. The designee is not authorized to respond to any type of correspondence on behalf of the taxpayer if the response advocates a position that would indicate that the designee is taking on a representational role.

  5. Mail the original Form 8821 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International), depending on the taxpayer’s state of residence.

  6. Form 8821 may also be faxed. If the form is faxed, retain the original in the case file. Document the history to indicate the date and campus to which the form was sent.

Form 2848, Power of Attorney and Declaration of Representative (Rev. 1/2015)

  1. As of March 2004, the IRS will not honor a Form 2848, Power of Attorney and Declaration of Representative, if it designates a representative who is not authorized to practice before the IRS. Further, the form will not be treated as a Taxpayer Information Authorization. Form 8821, Taxpayer Information Authorization, is required to allow those individuals, who cannot practice before Collection personnel to access tax information beyond what would be allowed if they completed the Third Party Designee section of Form 656, Offer in Compromise.

  2. Taxpayers may authorize a student who works in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) to represent them under a special order issued by the Office of Professional Responsibility (OPR). A copy of the letter from OPR authorizing practice before the IRS must be attached to Form 2848 . Students who have been authorized to practice by a special order may, subject to any limitations set forth in the letter from OPR, represent taxpayers before any IRS office and should be treated the same as any other taxpayer representative designated on Form 2848.

  3. The power to sign the taxpayer's tax returns can be granted only in limited situations. Refer to Form 2848 and Treasury Regulations 1.6012-1(a)(5) and 1.6061-1(a) for additional information.

  4. If a joint return has been filed, one or both spouses may choose to be represented by a POA. However, beginning in October, 2011, If both spouses choose to be represented by the same individual(s) or different individuals, both the husband and wife are required to file and sign separate Forms 2848. If only one spouse is to be represented, only the one that will be represented is required to sign the Form 2848. Regardless, any authorized representative of either spouse is allowed access to tax information related to the joint tax return.

  5. Mail or fax Form 2848 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International) depending on the taxpayer's state of residence. Refer to the Instructions on the Form 2848 for mailing addresses and fax numbers. If the Form 2848 is faxed, retain the original in the case file. Document the case to indicate the date and campus to which the form was sent.

Processing Forms 4442 from Automated Collection Services, Toll Free, or Other Service Divisions

  1. Form 4442, Inquiry Referral, will be prepared by Automated Collection System (ACS), Toll Free, and Walk-in operations to provide information submitted by the taxpayer on a previously filed offer in compromise. Normally, these forms will be prepared if the taxpayer has yet to be contacted or notified of the status of the offer within 45 calendar days of the offer being submitted for processing.

  2. Form 4442 will be faxed to the appropriate COIC sites. The forms should be reviewed within 48 hours of receipt and any necessary action taken on the account based on the information provided.

Form 3210 – To Appeals with Open TIPRA Statute

Appeals Transmittal used for transmitting OICs worked in conjunction with a CDP.

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