5.8.8 Acceptance Processing

Manual Transmittal

October 20, 2016

Purpose

(1) This IRM transmits a revision to IRM 5.8.8, Offer in Compromise - Acceptance Processing, to incorporate procedural changes.

Material Changes

(1) Below is a table containing changes impacting this revision of IRM 5.8.8. This IRM incorporates Interim Guidance Memorandums (IGM) SBSE-05-1115-0069, Allowing Inclusion of the Basis of the Offer in Compromise on the Form 14640, Addendum to Form 656, and SBSE 05-1115-0072, Offer in Compromise Public Inspection Files.

IRM Reference Change
All sections Changed some formatting and language to improve flow and make the IRM more user friendly.
5.8.8.2(1) b) Added "Basis" as a reason to secure an addendum.
5.8.8.2.1(2) Added new (2) discussing the 3 reasons requiring an amended Form 656.
5.8.8.2.1(4) Corrected terminology to match the AOIC screens.
5.8.8.2.2
  • Included in this IRM Interim Guidance Memorandum SBSE-05-1115-0069, Allowing Inclusion of the Basis of the Offer in Compromise on the Form 14640, Addendum to Form 656. For example, the taxpayer submitted the offer under ETA but it was accepted under DATC, an amended Form 656 is no longer required to correct the basis of the accepted offer.

  • Corrected procedure to reflect an offer be rejected rather than returned if the taxpayer fails to sign and return the addendum. Also added reference to IRM 5.8.7.7, Rejection for Additional Information.

5.8.8.2.2 (3) Corrected titles of the location of the addendum and letter found on AOIC.
5.8.8.2.2 (5) Included instruction to update the AOIC Summary screen by inputting "A" (Amended) to reflect receipt of an addendum Form 656. The "A" now applies to both amended and the addendum indicating a change to the original offer.
5.8.8.2.2 (7) Now includes instruction that the addendum must be date stamped and attached to the original Form 656.
5.8.8.2.2 (9) Changed the term “should” to “must” reflect the date of the original Form 656.
5.8.8.2.2.1 (1) a) Added language that only the last 4 digits of the EIN or SSN must be used. This is in accordance to current ServiceWide Identity Theft requirements. The Form has been modified to only allow the entry of 4 digits.
5.8.8.2.2.1 (1) b) Added "original offer date" in addition to the amount of the original offer.
5.8.8.2.2.1 (1) d) Provided examples on language to be used when preparing the addendum on periodic payment offers, further defining the 24-month period for acceptance.
5.8.8.2.2.1(1) e) New paragraph (e) to include new Part 5, Basis, on the addendum.
5.8.8.3 (1)
  • Added a reference to providing the ability to update the taxpayer’s address, including adding or editing a PO Box and zip code, in the 6th bullet.

  • The last bullet now references the removal and/or inclusion of periods as "overlooked" periods.

5.8.8.3 (2) Added a note that if the situation is other than those discussed in the examples, an amended Form 656 or an addendum will be required.
5.8.8.4 New section on related offers.
  • Defines the appropriate waiver date to use on AOIC when a related is secured.

  • Discusses the treatment of pre and post January 1, 2009 assessments when an LLC submits an offer as a single member or disregarded.

5.8.8.5 (3) Changed the language in the Note to state that documentation should include a brief synopsis supporting the case decision and should be based on specifics of the case and type of closing action.
5.8.8.7 (5)
  • Added a Reminder when refreshing Masterfile Data, to make sure the Form 7249 accurately reflects entity information in cases involving an LLC.

  • Added a caution statement that AOIC should be the first choice when creating a transcript for the public inspection file (PIF) since those transcripts are systemically redacted while transcripts generated through other sources must be manually redacted before inclusion in the PIF.

5.8.8.7 (6)
  • Took references to EIN and SSN out of body of text and included as part of the list of information to be redacted.

  • (i) added "including self-employment income and all self-employment tax" .

  • (m) added "redacting the POA including any POA/TIA indicator" .

  • (n) added "cross-reference SSN or EIN associated with a TC 672" .

  • Added new (o) to redact any telephone numbers, if shown.

5.8.8.7 (7)
  • Added a requirement to add a short summary paragraph on AOIC that explains the reason for the acceptance, what adjustments were made to determine the RCP (do not put a line-by-line entry of the AET/IET or CIS).

  • Added instruction for ICS users to include a notation that the complete history is on ICS.

  • Added a requirement to include a information or special instructions for MOIC, including whether any refund should be recouped or not.

5.8.8.7 (9) Removed the requirement to retain the order for the Document 9600 B.
5.8.8.7 (5); 5.8.8.7 (6); 5.8.8.9 (3) Removed MFTRAX as an option for preparing transcripts to be included in the public inspection file. If other than AOIC generated transcripts are used, they must be sanitized in accordance to instruction defined in IRM 5.8.8.6(6).
5.8.8.8 (4) Added new (4) to include instruction to document the AOIC Remarks with the date the files were sent and the location of the PIF.
5.8.8.8 (5) Added a table providing guidance on whether recoupment of a taxpayer’s refund should take place if the offer is accepted under ETA criteria.
5.8.8.9 Included IGM SBSE 05-1115-0072, Interim Guidance for Offer in Compromise Public Inspection Files, updating procedures for processing and filing the public inspection files.
5.8.8.9 (6) g) Note Changed the length of time to retain Form 3210 from 1 year to 3 years.
5.8.8.10 Added new (4) to discuss processing CDP files returned after acceptance.
5.8.8.12.2
  • Added new (6) to state the date of the acceptance letter should reflect the date the letter is mailed while the date of acceptance referenced in the body of the letter should reflect the date the 24-month period expired.

  • Added new (7) to state the TC 780 must reflect the date the 24-month period expired.

5.8.8.13 (2) Clarified instruction that if the total liability(ies) equal to or exceed $50,000 during the investigation the offer requires Counsel review.
5.8.8.13 (3) Added new (3) that states when preparing the package to forward to Counsel, the OE/OS should include IDRS prints as well as a current print of the AOIC Masterfile screen.
5.8.8.13.1(2) and (3) Removed language that stated a case could move forward for acceptance when legal insufficiencies exist. Changed the language to state that if legal issues exist, they must be resolved before acceptance. If the issues cannot be resolved, the offer must be rejected.
Exhibit 5.8.8-1, 5.8.8-2, 5.8.8-3 Removed Form 7249, Addendum, and letter to the addendum as an exhibits. Inserted links to the Forms. See IRM 5.8.2.2 for details on locating the addendum letter.
Exhibit 5.8.8-1 Updated the letter to include new directive to make the date of the letter the date mailed while the date of acceptance is the date the 24-month period expired.

Effect on Other Documents

IRM 5.8.8 published 11-04-2014 is superseded.

Audience

SB/SE Collection and Campus Compliance employees

Effective Date

(10-20-2016)

Rashaunda Simmons
Acting Director, Collection Policy

Overview

  1. The determination to accept an offer is based on sound decisions relating to an analysis of the taxpayer's facts, circumstances, and financial situation. Documentation supporting this decision and approval at the proper levels are required to complete the acceptance. This section describes the process for accepting an offer.

Amendment or Addendum to Form 656

  1. When an offer is being recommended for acceptance, there may be a need to make changes to the Form 656, Offer in Compromise. Depending on the type of change, the taxpayer may be required to submit either an amended Form 656 or an addendum.

    1. Secure an "amended" Form 656 when there are changes to the entity; the taxpayer identification number; and/or the signature.

      Exception:

      No amended Form 656 is required if the changes meet the criteria defined in IRM 5.8.8.3, Pen and Ink Changes to the Form 656, below.

    2. Secure an "addendum" when the only changes are to the payment amount; the payment terms; and/or the basis of the offer.

  2. The submission of an amended Form 656 or addendum may also require an additional payment of either 20% of the revised offer amount (less the amount previously submitted) or the revised periodic payment. The taxpayer will be given credit for payments made with the original offer, including any payments made throughout the offer process.

Amending Form 656

  1. An amended Form 656 will be required if the changes are for other than those defined in:

    • IRM 5.8.8.2.2, Addendum to Form 656 or

    • IRM 5.8.8.3, Pen and Ink Changes to Form 656.

  2. Secure an amended Form 656 when changes are required to change or update the:

    • Entity, other than those defined in IRM 5.8.8.3 below, this includes those instances when a related offer is required.

    • Taxpayer identification number, other than those defined in IRM 5.8.8.3 below.

    • Signature

      Note:

      If an original Form 656 was made processable without a signature or electronic signature and the offer is now ready to be accepted, then an amended Form 656 with an original signature must be secured.

  3. Upon receipt, the amended Form 656 should be date stamped with the IRS received date and signed.

  4. When accepting the offer requires an amended Form 656, the following actions will need to be taken on AOIC:

    1. Update the Summary screen by inputting "A" (Amended) to reflect receipt of an amended Form 656.

    2. Update the Offer Amount on AOIC, if applicable.

      Note:

      Include the total offer amount, not the amount remaining after any applied TIPRA payments.

    3. Update the Terms Type (Cash/Deferred) on AOIC, if applicable.

    4. Do not change the Pending Date.

  5. Write "AMENDED" on the top margin of Page 1 of the Form 656 .

  6. Document the case history.

Form 14640, Addendum to Form 656

  1. The Form 14640 Addendum to Form 656 (addendum) is secured in lieu of an amended Form 656 and should be obtained when the payment terms, the offer amount, and/or the basis are the onlychanges required.

    Note:

    See IRM 5.8.8.2.2.1 below for instructions on the completion of the addendum.

  2. Prior to sending the addendum to the taxpayer, contact by telephone should be attempted to inform him or her of the purpose and importance of promptly reviewing, signing, dating, and returning the addendum. Also, inform the taxpayer that the offer may be rejected if they should fail to sign and return it within the agreed time. See IRM 5.8.7.7, Rejection, for additional information.

  3. Prepare the letter to the addendum.

    Note:

    The letter may be found on AOIC. Open AOIC, (Select)"OIC Transmittal" ; (Select)"Click here for Addendum to Form 656" ; (Select)"Addendum_Letter_Format-09262014.pdf" .

  4. Complete the addendum before sending it to the taxpayer.

    Note:

    The addendum may also be found on AOIC. Open AOIC, then (Select)"OIC Transmittal" ; (Select) "Click here for Addendum to Form 656" ; (Select) "F14640-Addendum_to_Form_656-01252016.pdf" .

  5. Update the AOIC Summary screen by inputting "A" (Amended) to reflect receipt of an addendum Form 656.

  6. Update the AOIC terms screen and/or offer amount, if changed.

  7. When the signed, dated addendum is received, do not cross out or update the original Form 656.

    Note:

    The signed and dated addendum may be mailed or faxed by the taxpayer.

  8. The addendum must be:

    1. date stamped, and

    2. attached to the original Form 656.

    Note:

    There is no requirement for the receiving IRS employee to sign the addendum upon receipt.

  9. The acceptance letter must reflect the date of the original Form 656.

  10. The addendum does not reset the 24-month mandatory acceptance period.

  11. Only one addendum is required for joint offers.

Instructions for Completion of Form 14640, Addendum to Form 656
  1. It is the responsibility of the OE or OS to complete the addendum before sending to the taxpayer or POA following the instructions below.

    1. Part 1 — Enter the taxpayer name; original offer number; the last 4 digits of the taxpayer(s) Social Security Number (SSN) or Employee Identification Number (EIN); original IRS received date; original offer amount; and original tax periods to be compromised.

    2. Part 2, Revised Offer in Compromise Amount — Enter the revised, agreed offer amount. Line A – Enter the original offer date and the amount paid with the original offer; Line B – Enter the amount and date of TIPRA payment(s) submitted with an amended/revised Form 656; Line C – Enter the amount of any additional payment to be included with the addendum; Line D – Enter the total of all periodic payments received since the original offer was submitted.

    3. Part 3, Revised Offer in Compromise Payment Amount — Enter the revised amount for a lump sum cash offer. Lines E through I — define the amount and number of payments.

      Note:

      Generally, a lump sum cash offer cannot exceed 5 payments made within 5 months from the acceptance date. In rare situations, an exception may be allowed to the five month payment requirement when instances such as the ones shown in the examples below exist (not all inclusive). In these cases, more flexible payment terms may be warranted, but may not exceed 24 months. Also, in these cases, while they may be submitted and considered as lump sum cash offers, the RCP should be calculated as a periodic offer (24 months).

      Example:

      A non-profit organization submits a Doubt as to Collectibility with Special Circumstances offer. This organization’s services are critical to the community and it receives funding through grants from federal and state sources. Based on when the grant funds are received, monies to pay out the offered amount will be available in months six, nine and twelve. The financial statement appears to support the offer and the taxpayer’s overall compliance history does not weigh against acceptance. Therefore, the offer is accepted as a lump sum cash payment offer payable in months six, nine and twelve.

      Example:

      The taxpayer submits an offer under Effective Tax Administration based on non-economic hardship. The taxpayer was using a payroll service provider (PSP) who deducted all tax payments from the taxpayer’s bank account, yet did not remit them to the Service. The taxpayer is a food service company who has been in business since 1987. Their main customer is the Department of Defense. Their overall compliance history has been positive. The majority of funding from DOD is received in October and January. The financial statement appears to support the offer. The offer is accepted as a lump sum cash payment offer payable in months eight and eleven.

      Note:

      The balloon payment must be in the government's best interest. See IRM 5.8.5.28.

    4. Part 4, Revised Offer in Compromise Payment Terms — Periodic Payment Offer payable in 6 — 24 months — Enter the revised terms for a periodic payment.

      Note:

      A periodic payment offer cannot exceed 24 months. Part 4 must equal the amended offer amount minus any payments entered in Part 2, lines A through D. The terms for periodic payments allow the taxpayer to make a final balloon payment or unequal monthly payments. Below are some examples of language that may be used when completing the addendum for periodic payment offers.

      Example:

      (1) The original offer was in the amount of $2,400 payable in 24 months at $100 per month. An addendum was secured increasing the offer amount to $25,400 payable at $1,000 per month. It would be unreasonable in this case to require the taxpayer to pay the balance of the agreed offer amount in the remaining 10 months. In this case, it would benefit the taxpayer and the government to begin the 24 months with the acceptance of the offer.

      Part Will read
      Part 2 — Revised Offer in Compromise Amount Accordingly, I/we offer to pay $25,400, which includes the following amounts already paid or include with this addendum: (A) $100 paid with the original offer dated 11/28/2013. (D) $1,300 periodic payments, if any, made since original offer was submitted.
      Part 4 — Revised Offer in Compromise Payment Terms - Periodic Payment Offer payable in 6-24 months $1,000 will be sent beginning on the 20th day of January 2015 and then $1,000 will be sent on the 20th day of each month for a total of 24 months with a final payment of $1,000 due on the 20th day of the 24th month.

      Example:

      (2) An offer was made for $3,600 with payments set at $150 per month for 24 months. The offer has been deemed to be acceptable with an increase to $5,000. After discussion with the taxpayer, it was determined that the taxpayer agreed to increase the payments to $250 per month paying the entire offer amount within the original 24-month timeframe.

      Part Will read
      Part 2 — Revised Offer in Compromise Amount Accordingly, I/we offer to pay $5,000, which includes the following amounts already paid or included with this addendum: (A) $150 paid with the original offer dated 11/28/2013. (D) $2,100 periodic payments, if any, made since original offer was submitted
      Part 4 — Revised Offer in Compromise Payment Terms - Periodic Payment Offer payable in 6-24 months $250 will be sent beginning on the 18th day of January 2015 and then $250 will be sent on the 18th of each month for a total of 10 months with a final payment of $250 due on the 18th day of the 10th month of the agreement
    5. Part 5 – Reason for the Offer – Check the revised basis for the offer.

    6. Signature(s) — The taxpayer(s) or authorized Corporate officer must sign and date the addendum.

      Note:

      A joint offer must be signed by both taxpayers.

Pen and Ink Changes to Form 656

  1. Pen and ink changes may be made to correct the below issues. No amended Form 656 or addendum will be required in these instances.

    Note:

    If the situation is other than those defined in the below examples, an amended Form 656 or addendum must be secured. See IRM 5.8.8.2.1 and IRM 5.8.8.2.2 above.

    • Middle initial is incorrect or missing. It may be added or removed to match IDRS.

    • SSN or EIN does not match IDRS and it is apparent that the reason for the mismatch is a transposition of numbers.

    • A business name and EIN was included on the Form 656 but conversation with the taxpayer confirmed they do not want to compromise the liabilities of the company (LLC, LLP, etc.). Remove the name by lining through the entity information. Reverse the related TC 480(s) and remove the related periods on AOIC, if applicable.

    • When the terms are completed but the total amount offered is blank, has a simple addition error, or is not completed. Total the payments as stated in the terms and fill in or correct the total amount of the offer.

    • Changing the day of the month of the payment(s) when requested by the taxpayer or POA.

    • Filling in the physical address or updating the taxpayer’s current address (including updating or adding a zip code, apartment number, PO Box, etc.), after verification with the taxpayer or POA.

    • Check the low income certification box when the taxpayer or POA includes a Form 656-A, Income Certification for Offer in Compromise Application Fee (For Individual Taxpayer Only), with the new Form 656 but fails to check the Low Income Certification box.

    • Round payments up or down to the nearest dollar, as appropriate. Below is an example of rounding the payments to eliminate odd cents.

      Note:

      There is no requirement to make the payments in equal monthly installments.

      Example:

      The taxpayer offers to pay $7,810 over 24 months for an average of $325.42 per month. Rounding the offer payments to $326 would equal an offer amount of $7,824. You may consider taking one of two options. Option 1 - Discuss increasing the offer to $7,824 paid at $326 a month for 24 months. Option 2 - The first payment could be set at $335 with the rest of the payments at $325 for the remaining 23 months to equal a total offer amount of $7,810. Any adjustments require telephone contact to discuss the options.

    • Add or delete overlooked periods. If an additional period is assessed after the original Form 656 pending date on AOIC, the Transaction Code (TC) 480 date will reflect the TC 150, TC 290, or TC 300 date, if there is a dollar amount associated. Do not include any TC date with zero amounts. If a period has been full paid through other than TIPRA payments, remove the period.

      Note:

      Update the AOIC MFT screen by adding any new tax periods not included on the original Form 656 and/or deleting any tax periods that are no longer owed, unless the liabilities were paid as a result of TIPRA. The terms of the agreement on the Form 656 allows the IRS to add or delete any liabilities that were not listed or not found on IDRS. Therefore, an amended Form 656 is not required for the sole purpose of adding or deleting periods. If a new period is added, the TC 480 may need to be manually input. Document the case history that if the TC 480 is manually input, it will need to be manually released.

  2. In all instances when a pen and ink change is appropriate, the OE, OS, or PE must contact the taxpayer and/or POA by telephone to secure verbal approval before making the change(s). Conversations and approvals must be well documented in the case history.

    Note:

    If no telephone contact for approval can be secured, an amended Form 656 or addendum must be secured correcting all deficiencies before acceptance, as defined in IRM 5.8.8.2 above.

  3. When pen and ink changes are made to the Form 656 the OE, OS, or PE must initial and date each change.

Securing Related Offers

  1. Taxpayers who owe joint and separate liabilities are required to file two Forms 656. If one Form 656 was submitted and the PE is unable to perfect prior to being assigned to an OE/OS, the OE/OS must perfect the offer before acceptance. In these cases, an amended Form 656 will be required.

  2. The amended offers should be one Form 656 for the primary taxpayer, which includes his or her joint and separate liabilities and one Form 656 for the secondary taxpayer, which includes his or her joint and separate liabilities. See IRM 5.8.3.7(2) for additional information.

  3. When loading the offer on AOIC, the waiver date will depend on whether the original offer included all the periods or if related periods were discovered during the offer investigation and not included on the original offer. The table below provides guidance on when AOIC should reflect the original waiver date versus a new waiver date.

    If... The amended offer will...
    The original offer included all joint and separate liabilities Show the same waiver date as the original offer.
    The original offer did not include all joint and separate liabilities Show the date the amended Form 656 was signed as being the pending date.
  4. For offers including liabilities of a single member or disregarded entity accrued after January 1, 2009, a related offer will be required regardless how the taxpayer reports their income. You must also request any related TIPRA payment and application fee.

    Note:

    If the original offer was submitted with the low income waiver box checked and the taxpayer qualifies, the waiver would apply only to the original offer since the waiver cannot apply to a corporation.

    Example:

    The taxpayer is a single member LLC that reports solely on a Schedule C. One Form 656 was submitted and included liabilities for Form 941 for 2007-03, 2007-06, 2008-03, 2009-06, and 2011-03. A related offer will be required to compromise the 2009 and 2011 liabilities because they were accrued on or after January 1, 2009. Any application fee and related TIPRA payments would also need to be collected, even if the original offer was submitted under (and the taxpayer qualified for) the low income waiver. After January 1, 2009, the business is treated as a corporation for tax purposes, therefore, cannot qualify for the waiver. The original offer would not require any payments if the taxpayer qualified for the waiver at the time of submission.

Use of Electronic Signature on Offer Forms and Letters

  1. When employees are not co-located with approving officials, to expedite case closing actions certain documents have been approved to be signed with electronic signature. In order to secure the approval signature electronically it must meet the current security and verification standards of the IRS.

    Note:

    The ability to use electronic methods of signature does not forego the delegation of authority defined in IRM 1.2.44.2, Delegation Order 5-1 (Rev. 4).

  2. The below documents have been approved for electronic signature on accepted offers.

    • Form 7249, Offer Acceptance Report

    • Offer Acceptance Letter

    • All Collateral Agreements — Form 2261, Collateral Agreement Future Income - Individual , Form 2261-A, Collateral Agreement Future Income - Corporation / Limited Liability Company; Form 2261-B, Collateral Agreement Adjusted Basis of Specific Assessment; and Form 2261-C, Collateral Agreement Waiver of Net Operating Losses, Capital Losses, and Unused Business Credits.

  3. Necessary documents for the approving official to determine the appropriateness of the closing action must be provided with the request.

    Note:

    Documentation should include a brief synopsis supporting the case decision and should be based on the specific case and type of closing action.

  4. A printed copy of the electronically executed document, form and/or letter, must be included in the case file.

  5. Follow the below procedures to prepare documents for electronic signature:

    • E-mail, E-Fax, or scan and save the documents in PDF format.

    • Internal use forms, including Form 7249, Offer Acceptance Report, may be signed (certified with visible signature) using the approved signature method.

  6. The letter being provided to the taxpayer should include a graphic signature in the Signature block.

    Note:

    Specific instructions on how to include an image of your handwritten signature in the digital signature selections are available through (Select) "Adobe Acrobat Help" (Select) "How to Sign" (Select) "Create a Signature Appearance" .

  7. The ICS and/or AOIC history must clearly indicate the documents that are being submitted to the approving official.

Faxed Amended Forms 656

  1. The amended Form 656 may be accepted by fax if:

    • there is an open offer;

    • contact has been made with the taxpayer by phone or in-person;

    • the taxpayer history file is documented with the date of contact and notation is made that the taxpayer requests to send the form by fax; and

    • the original Form 656 has an original signature(s).

Required Actions Prior to Closing an Offer as an Acceptance

  1. Re-check IDRS Command Codes AMDIS and TXMODA — Tax must not be compromised unless it is assessed and legally due. On those cases where an audit, AUR, SFR, or ASFR was discovered during the investigation IDRS must be re-checked to ensure that all taxes included on the accepted offer have been properly assessed and are still due and owing. If an open audit or AUR is found on a period included as part of the offer, contact should be made to resolve the issue per IRM 5.8.4.17, Pending Assessments. If an amended return has been processed, the adjustment must post before acceptance. Document the case history.

    Note:

    SRP/MFT 35 modules and/or the mirrored SRP/MFT 65 modules must also be included in the offer when identified. Do not include these periods in any lien request.

  2. Check IDRS for Department of Justice or Docketed Court Controls — Status code 71 or 72 identifies more than a DOJ case. The OE or OS should check IDRS before acceptance for any Transaction Code (TC) identifying an open DOJ, tax court case, bankruptcy court case, or judgment. If a Status Code 71 or 72, TC 520 or TC 550 with an indicator of 04 is present, the offer cannot be accepted without the approval of Counsel or DOJ. A list of status indicators may be found in Document 6209, Section 11 – Collection or on SERP under Document 6209. Area Counsel must be contacted to share your recommendation for acceptance with DOJ. See IRM 5.8.1.3.1, Tax Cases Controlled by Department of Justice, and IRM 5.8.1.3.2, Docketed Tax Court Cases, for additional information.

    Note:

    A copy of the IDRS transcript must be included in the file if the offer is to be reviewed and approved by Counsel.

  3. Credit Report request— Verify that a full credit report has been requested when the current balance meets the amount defined in IRM 5.1.18.18.2.4, Required Credit Reports, and IRM 5.8.5.3.1.2, Securing Credit Reports to Verify Taxpayer Information. All requests for credit reports require managerial approval.

    Note:

    When appropriate, a full credit report may be secured on any case to assist in locating taxpayer assets and verifying financial information. After reviewing the credit report, the case history must be documented with an analysis of the findings as well as the reason(s) for the request .

  4. Update AOIC — Update the AOIC record as follows:

    1. Main Screen — Update to reflect the correct basis for compromise, if changed, and document the existence of special circumstances, if applicable. Update the disposition code to 1 (proposed acceptance).

    2. MFT Screen — Verify the correct assessment date, including any individual shared responsibility payment (SRP) assessed pursuant to IRC §5000A (MFT 35 and MFT 65 [mirrored assessments]). Update module(s) that may have changed. Go to the MFT screen; Select the "Update Accrued Date" tab; Input the date the interest is to be computed to; Go to the "Request Interest" tab and re-input the date for the accrual of interest; Review the data to make sure it is correct; Press "Submit" to populate the information into AOIC .

      If... Then...
      Any modules have restricted penalty or interest Use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.
      Any modules are Non-Masterfile, and not on IDRS Secure an Automated Non-Masterfile (ANMF) transcript. Update as necessary using IDRS command code COMPAD and/or COMPAF.
      The module was full paid as a result of a payment action other than TIPRA (such as, refund offset, prior levy payment, etc.) Remove the period from the MFT screen on AOIC, and update the Form 656 to reflect the periods to be compromised.

      Note:

      No amended Form 656 is required. See IRM 5.8.8.3, Pen and Ink Changes to the Form 656, above for instructions to add or remove periods on the Form 656.

      The payment(s) that satisfied the tax period included both a TIPRA payment, and other payment (such as, refund offset, prior levy payment) The MFT screen will reflect a zero balance due. Do not remove the period from the MFT screen on AOIC. Do not update the Form 656 to remove the periods that were full paid.

      Note:

      No amended Form 656 is required. See IRM 5.8.8.3 above for additional information.

    3. Terms Screen — Update the Accepted Terms screen to those reflected on the accepted offer. Do not update the Proposed Terms.

      Note:

      If a collateral agreement is secured, you must also update the Collateral section of the Terms screen a reference that a collateral was secured. Because MOIC received a copy of the collateral it is not necessary to include specific detail of the agreed terms but to only state that a [Form #] was secured; i.e. Form 2261, Collateral Agreement - Future Income (Individual).

  5. Refresh Masterfile Data — Go to the "MFT" screen, select Master File, then select "Refresh Masterfile Data" . This action should be completed prior to generating the Form 7249. This action ensures the Form 7249 and the AOIC Masterfile Screen (information is systemically redacted on this type of transcript) are in close agreement since the Form 7249 requires various levels of approval, and both become public documents.

    Reminder:

    When preparing the Form 7249 that involved an LLC verify the name line accurately reflects the appropriate title, whether it is in the name of a single member or name of the LLC. For those entities with employment taxes incurred on or after January 1, 2009, the LLC is the taxpayer and the name on the Form 7249 should be the name of the LLC. See Treasury Regulation 301.7701-2T(c)(2)(iv)(A). For those excise tax liabilities imposed on or after January 1, 2008, the LLC is the taxpayer and the name on the Form 7249 should be the name of the LLC. See Treasury Regulation 301.7701-2(c)(2)(v)(A).

    Caution:

    AOIC Public Transcripts option on the drop down list should always be used before any other system when preparing transcripts for the PIF. In those rare instances when AOIC transcripts are not available and you have access to TDS you should use that system. When using TDS, you must redact or sanitize per instruction in IRM 5.8.8.6(6) below. Failure to redact appropriately will result in the file being returned for corrective action.

  6. Redacting the Transcript — Request a transcript using AOIC Masterfile Screen as close to the acceptance date as possible without delaying acceptance. A complete copy should be retained with the case file. If the data has not been systemically redacted (as in most AOIC transcripts) for the public inspection file, the OE/OS must redact critical information by blacking out all tax information that is not to be disclosed to the public. Required redacted items are listed below.

    Note:

    If the information is not systemically redacted, a grease pencil is the most effective method when manual redaction is required. Do not use marker, ink pens, or white out. Review the Form 7249 and transcripts and redact any visible identification information.

    Note:

    Files with significant redaction errors will be returned to the originating office for corrective actions. However, minor errors, including redaction of visible identification information, will be corrected by the receiving office. The Form 3210 must be used when files are returned to the originator.

    1. Entire Taxpayer’s Social Security Number (SSN) (both the primary and secondary number, if joint)

    2. Entire Employee Identification Number (EIN)

    3. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise

    4. Address (house number and street name )

    5. +4 of the zip code (if the address contains the zip +4, redact the +4 only)

    6. Number of exemptions

    7. Filing status

    8. Adjusted gross income

    9. Taxable income (including taxable self-employment income and all self-employment tax),

    10. Principal Industry Activity Code

    11. Transaction Codes with no dollar amounts (redact the entire line including the date )

    12. Transaction Codes and explanations dealing with fraud, negligence, or criminal investigations (do not redact the date and dollar amount of the transaction).

      Note:

      If a TC 240 reflects a description of the type of miscellaneous penalty [for example, IRC 6662(c), (d), (e), (g), or (h) Accuracy-Related Penalty] redact the description only. Do not redact the date and dollar amount of the transaction. This will only be required on other than AOIC transcripts. Below is an example of the definition.

      Example:

      240 Miscellaneous penalty
      IRC 6662(c), (d), (e), (f), (g), or (h) Accuracy-Related Penalty
      [Note: Redact this line only.]

    13. Power of Attorney/Tax Information Authorization (POA/TIA) on file (including any POA/TIA indicator).

      Note:

      If the name of an officer, POA or agent shows, this information must also be redacted. It is not necessary to redact a doing business as (DBA) in addition to the sole proprietors name.

    14. Cross reference SSN or EIN associated with any TC 672.

    15. Telephone numbers, if shown.

  7. Document the Case History — Before closing a case as an acceptance, document the case history on AOIC regarding the decision.

    • ICS Users – ICS users must also include a short summary paragraph on AOIC that explains the reason for the acceptance, any discrepancies between information provided on the CIS and the RCP, and that "The complete history can be found on ICS" .

    • Special Instructions for MOIC – Include any special instructions for the MOIC Unit regarding application of funds, the total offer payments received during the pendency of the investigation. For example, whether the refund will be recouped, if a business is defunct, and/or requesting a NFTL or the re-filing if one will be required during the terms of the periodic payment offer. See IRM 5.12 , Federal Tax Liens, for more information about when to re-file a NFTL.

    Note:

    If SRP/MFT 35 modules or the mirrored SRP/MFT 65 modules were included in the offer, the related periods will not be included in the NFTL.

  8. Generate and print letters and reports — Generate and print letters and report as follows:

    1. The Acceptance Recommendation Report should only be prepared on those cases meeting Counsel criteria (see IRM 5.8.1.3.6, Counsel). Make sure the Acceptance Recommendation Report and case history clearly and accurately reflect the reason for the acceptance. This is particularly important in Effective Tax Administration (ETA) and Doubt as to Collectibility with Special Circumstances (DATC-SC) cases (see Exhibit 5.8.8-1 below). The report should include the following information: (1) The cause of the delinquency and status of current compliance; (2) The amount of the RCP and an explanation of how the RCP was calculated; (3) Whether or not special circumstances exist and how they affected the agreed offer amount; such as age or existing health issues, etc.; (4) Negotiations resulting in the acceptable offer amount; (5) A conclusion that summarizes the basis for acceptance.

    2. The Confidential Information Report may be required in those rare situations where relevant facts of a confidential nature exist that should not be included in the acceptance recommendation report. Complete a supplemental memorandum and include it in the case file. Do not include information already discussed in the acceptance recommendation report.

    3. Generate and print the appropriate acceptance letter and POA letter, if applicable, for the signature of the delegated official(s). Attach copies of the accepted Form 656 and addendum, if appropriate, and any applicable collateral agreement(s).

    4. Generate Form 7249 verify that it reflects the current liability(s).

    5. Print Form 7249 for the required signatures. The accepting official has delegated authority for acceptance based on the type and dollar amount of the case. IRM 1.2.44.2, Delegation Order 5-1 (Rev. 34), provides the level of authority for approving all offer dispositions.

      Note:

      The approving official as defined in IRM 1.2.44 must be the final signature.

  9. Assemble file using Document 9600 B — The file must be assembled using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document. The current revision of the labeled dividers is required.

    Note:

    When using the Document 9600 B IMFOLI and SUMRY should be the top pages under the "Account Transcript" tab, followed by the balance of current transcripts. Credit Report, and Power of Attorney, should be the first 3 pages under the "Miscellaneous" tab, followed by current additional miscellaneous information.

  10. Submit the file for approval — Submit the file for all required signatures including routing to Counsel for review, if required. See IRM 5.8.8.11, Legal Opinion of Counsel, below and IRM 1.2.44, Delegations of Authority for the Collection Process, for approval levels.

Closing Actions on Accepted Offers

  1. Upon securing all required approval(s) and signature(s), date and mail the acceptance letter(s). Acceptance letters generated at the end of the year should be dated and mailed the same calendar year that the letters are signed. Signed and dated copies must retained in the offer file.

  2. Make a copy of the Form 7249 for the public inspection file. The copy must be redacted in accordance to IRM 5.8.8.6(6), above, and include all required signatures. Mail it together with the required sanitized transcripts to the appropriate office for filing in the public inspection file.

  3. Close the case on AOIC and process in accordance with procedures defined in IRM 5.8.8.9, Processing the Closed Offer File, below.

  4. Document the AOIC Remarks with the date and location where the public information was sent.

  5. When closing the offer on AOIC you will be prompted to answer whether the offer is being accepted under ETA criteria or not. The below table provides guidance on whether recoupment of the taxpayer’s refund should take place when the offer is accepted under ETA criteria. Document the AOIC Remarks with information about whether recoupment is required or not.

    If the basis for acceptance is... Then... Remarks
    Economic Hardship ETA Select option 1 when prompted on AOIC Refund recoupment through the year of offer acceptance applies.
    Equity/Public Policy ETA Select option 2 when prompted on AOIC Refund recoupment through the year of offer acceptance does not apply.
    DCSC Select option 3 when prompted by AOIC Refund recoupment through the year of offer acceptance applies.
    Equity/Public Policy DCSC Select option 4 when prompted by AOIC Refund recoupment through the year of offer acceptance does not apply.

Public Inspection File

  1. Public inspection of certain information regarding all offers accepted under IRC § 7122 is authorized by IRC § 6103(k)(1).

  2. Treas. Reg. § 601.702 (d) (8) provides that, for one year after the date of execution, a copy of Form 7249 Offer Acceptance Report, for each accepted offer with respect to any liability for a tax imposed by Title 26 shall be made available for inspection and copying. A separate file of accepted offer records will be maintained for this purpose and made available to the public for a period of one year.

    Note:

    Revenue Ruling 117, 1953-1 C.B. 498 complements section 601.702(d)(8) and explains that Form 7249 serves two different purposes. First, it provides the format for public inspection, which is mandated by Executive Order 10386. Second, it satisfies the filing requirement and other criteria arising under section 7122(b).

  3. For each accepted offer, the file will only contain the following items:

    • A copy of the redacted Form 7249.

      Note:

      See IRM 5.8.8.6(6) above for a list of redacted information.

    • The sanitized AOIC Masterfile Screen transcript. If the AOIC transcript is unavailable, a redacted TDS transcript may be used.

  4. The office that has accepted the offer will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the PIF.

  5. The PIF must:

    • Be maintained for one-year.

    • Setup a drop file by month of acceptance using the signature date or the date stamped at the top of the Form 7249, whichever is latest.

      Note:

      (1) Do not create individual folders for each file. (2) Do not file alphabetically, by state or residence, or numeric date. (3) Do not archive to NARA.

    • Dispose of PIFs the month following the one-year retention period.

      Example:

      Offers accepted in August 2015 will be destroyed at the beginning of September 2016.

  6. Due to the potential disclosure of Personally Identifiable Information (PII) each designated office must assign an employee to have oversight of the PIFs. The PIF will be maintained in a location designated by the Area office and must be maintained in the Area where the taxpayer resides. The designee will have responsibility to:

    1. Confirm receipt of all files listed on the Form 3210.

    2. Acknowledge receipt by returning the signed acknowledgement copy of the Form 3210 to the originator within 5 workdays of receipt.

    3. Take appropriate action to immediately resolve discrepancies.

    4. Ensure appropriate redactions are completed on each file in accordance to IRM 5.8.8.6(6) above.

    5. Ensure the files are in the correct designated geographic location. If they are not, forward the files to the appropriate office with a Form 3210.

    6. Ensure the Form 7249 and appropriate transcripts are included. No additional documentation or information should be included in the PIF.

      Note:

      If transcripts are received without the Form 7249, return the document to the originator for correction. If additional documents are received with the file that appear to be PII, return the information to the originator for the appropriate disposition determination, except IDRS prints. IDRS prints must be shredded rather than returned to the originator.

    7. Maintain a separate binder for sent/received Form 3210 in each location sending or receiving the PIFs.

      Note:

      Per Document 12990, Records Control Schedules, the Form 3210 may be destroyed no sooner than 60 days after the end of the three-year retention period.

  7. Requests to view PIFs will require an appointment in advance, which will be held in a conference or interview room, not in a public lobby or work area. A Service employee to be present while the files are being viewed. A record of the date of all requested viewings must include the date, if the requestor was a private citizen or other (CPA, representative, etc.), and a general description of the files viewed (months requested; for example, January through March 2016).

    Note:

    A paper log with this information will be retained with the PIFs. There is no restriction or limit to the number of files a visitor may view at one time as long as the files provided do not exceed the one-year retention period, there is space available, and the employee remains present at all times.

    Example:

    The visitor submitted a request to view all PIFs in your location for the past year. Limited table space restricts the number of files that can be viewed at one time. It would be recommended that you bring one to two months at a time, or as many as space would allow. You must remain present at all times during the actual viewing.

  8. Requests for copies of PIFs:

    • Must be made in person, not by telephone.

    • Requests for specific taxpayer files will not be granted.

    • If a request is received that exceeds 100 pages, a fee may be imposed. If a request to copy more than 100 pages is received, contact the OIC Policy Analyst.

  9. If a visitor has requested to view the Public Inspection File and attempts to take a picture either with a camera or camera phone, they should be informed that photos are prohibited in IRS facilities. If they continue to attempt to take unauthorized photos, local Physical Security and Emergency Preparedness (PSEP) security staff should be immediately contacted, as well as TIGTA, and/or Federal Protection Service (FPS) and the local police, as appropriate, to file a complaint in violation of CFR, Title 41, Subpart 101-20.310, (Conformity with Signs and Directions).

Processing the Closed Offer File

  1. Once an offer has been closed on AOIC, it should be held in-house until Embedded Quality (EQ) has had sufficient time to pull for review. Field Area Office EQ randomly selected cases are identified on the AOIC Quality Review Listing the following Monday after closure. If the case is not selected for review, the offer should be released on AOIC on the following Monday after closure or as soon as practical thereafter, and the entire file mailed to the applicable MOIC unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC.

  2. If the case is chosen for EQ review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded for review. The offer should be validated and released on AOIC on the following Monday after closure or as soon as practical before sending the original documents to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to EQ.

    1. Original and amended Form 656, Offer in Compromise, or addendum

    2. Form 7249, Offer Acceptance Report

    3. Copy of the Acceptance letter(s)

    4. Any collateral agreements

  3. Before forwarding the case to the MOIC unit take the following steps:

    1. Verify that the original, any amended Form(s) 656, and addendum, if required, are in the case file.

    2. Check to be sure the Form(s) 656, Form 7249, IDRS, and AOIC all reflect the same tax liability(ies).

    3. Verify that the waiver dates on the Form(s) 656, IDRS, and AOIC are correct and consistent.

    4. Update Data Download before releasing jurisdiction to MOIC. This action will ensure the Primary Location Code and Collection Location Code are updated.

    5. Document AOIC Remarks with any special instructions; such as, addressing recoupment, lien filing, etc.

  4. A CDP file is sent to the OE/OS after an offer has been accepted – After Appeals closes the CDP, the CDP case will be forwarded to the OE/OS that accepted the offer. The OE/OS must first verify that the accepted offer is still in MOIC. If the offer is still in MOIC, the CDP file should be forwarded to MOIC to associate with the accepted offer. If the offer is no longer in MOIC and has already been forwarded to FRC, the OE/OS should forward the Appeals file to FRC following procedures in IRM 5.8.7.12.1.

  5. Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact must be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing or lost files.

Acceptance Processing for Related, TFRP, Federal Employee, and Federal Contractor Offers

  1. When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. A separate file should be created for each entity containing the separate items that pertain to each offer. It is not necessary to duplicate information that pertains to both or all files. The files must remain together and clearly marked indicating that there are related offers (for example "1 of 2" and "2 of 2" ).

  2. When the accepted offer includes Trust Fund Recovery Penalty (TFRP) assessments, a careful review must be made to ensure all TFRP assessments are included. Generally, TFRP assessments made before August 2000, combine all unpaid corporate tax quarters and were assessed under the tax period of the latest quarterly period owed by the corporation. TFRP assessments after August 2000, are made for each quarterly period that is owed by the corporation. The Forms 656 and 7249 must match and must reflect each individually assessed TFRP tax period.

  3. Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee’s position or area of responsibility. The result of this consideration should be documented in the case file. Offer acceptances for employees of the IRS also require the approval of the SBSE Collection Area Directors or SB/SE Compliance Services Operations Manager (COIC).

    Note:

    Offers from Federal civil service retirees are to be considered under normal procedures.

  4. Offers from a Federal Contractor require a determination of whether public policy implications exist. The result of this consideration should be documented in the case file. Offer acceptances for Federal Contractors also require the approval of the SBSE Collection Area Directors or SB/SE Compliance Services Operations Manager (COIC). See IRM 5.7.9.2, Identifying Federal Contractors, for additional information.

24-Month Mandatory Acceptance under IRC § 7122(f)

  1. An offer will be deemed accepted if the IRS does not make a decision on the offer and/or notify the taxpayer of its determination within two years of the IRS received date, which is stamped on the Form 656 upon receipt. The postmark date is not relevant in determining when an offer is received.

    Note:

    Any period during which any tax liability that is included on the Form 656 is in dispute in any judicial proceeding will not be taken into account in determining the expiration of the 24-month period.

  2. An OIC will not be deemed to be accepted pursuant to IRC § 7122(f), if within the 24-month period, the offer is:

    • Rejected by the IRS,

    • Returned by the IRS to the taxpayer as not-processable or no longer processable,

    • Voluntarily withdrawn by the taxpayer,

    • Withdrawn under IRC § 7122(c)(1)(B)(ii) because the taxpayer failed to make the second or later installment(s) due on a periodic payment offer, or

    • Terminated by the IRS.

  3. Expedited processing should take place if 18 months or more have expired from the IRS received date. There may be cases where a field Revenue Officer secured the offer several months (or years), before forwarding to COIC for processing. When identified, these cases must be brought to the immediate attention of Headquarters Policy Analyst and worked expeditiously.

  4. To determine if 24 months have expired since the IRS received date, the OE/OS should conduct a thorough review of the offer file to determine if the provisions of IRC § 7122(f) apply. This should include (at a minimum):

    • A review of the Form 656 to determine the IRS received date. If the IRS received date is prior to July 16, 2006, the offer is pre-TIPRA and the 24-month mandatory acceptance period does not apply.

    • A review to determine if the offer was received after July 16, 2006 and 24 months have elapsed since the IRS received date. If 24 months have not elapsed, then the offer is not a mandatory acceptance.

    • A review to determine if a decision letter has been issued to the taxpayer within 24 months of the IRS received date. Decision letters include issuance of rejection, return, withdrawal (voluntary and mandatory), termination, and/or acceptance letters. If a decision letter was issued within 24 months of the IRS received date, then the offer is not a mandatory acceptance.

    • Determine if any tax liability listed in the offer was disputed in a judicial proceeding during the 24-month period following the IRS received date. The length of time that any tax liability included on the offer was disputed in a judicial proceeding should be excluded in the calculation of the 24-month TIPRA determination. If, after the revised calculation, 24 months have not elapsed, then the offer is not a mandatory acceptance. If a total of 24 months have expired (after subtracting the length of time any tax liability was disputed in a judicial proceeding), the offer will be deemed a mandatory acceptance.

      Note:

      If there is any question about whether the 24-month period has expired, refer the case through your local IRS Counsel for review. Do not assume that the tax liability was in dispute merely because the Department of Justice litigated issues in a bankruptcy case. A bankruptcy litigation may not raise a dispute as to the taxpayer-debtor’s tax liability, e.g., the trustee sues the United States to recover a preference payment.

  5. If the criteria meets the requirements for Counsel review as described in IRM 5.8.8.12, the offer must receive Counsel review and approval.

Employee Responsibilities for 24-Month Mandatory Acceptance under IRC § 7122(f)

  1. If the 24-month period has expired, the following actions are required:

    1. As soon as the 24-month period expiration is identified, the OE/OS currently assigned the offer or the group manager if the case is not assigned, will document the AOIC history and ICS history, if applicable, addressing the reason(s) the 24-month period expired. The assigned employee must also immediately inform their group manager or department manager of the 24-month period expiration.

      Note:

      If the offer is not on AOIC, a history statement will be entered in the system of record, i.e., ICS, AMS, etc. The statement should include any unusual or mitigating circumstances.

    2. The group or department manager will review the AOIC history, summary statement, and the ICS history as well as any other relevant information to determine if further administrative action is warranted and if disciplinary action is appropriate.

    3. The group or department manager will prepare a memorandum within 30 calendar days of notification of the expired TIPRA statute to the Territory or Operations Manager detailing the reason(s) the 24-month period expired without the IRS making a decision on the offer, why further administrative action is or is not warranted, and include any proposed disciplinary actions, if appropriate. The memorandum will also include the following information: (1) IRS received date; (2) COIC site of original receipt; (3) Date assigned to and received by the field area (if applicable); (4) Date received by the OE/OS who is currently assigned the case; (5) Date and type of any proposed recommendations made by an OE/OS; (6) Dates of discussion between manager and employee beginning 18 months after the IRS received date concerning the impending expiration of the 24-month TIPRA statute; (7) Any mitigating circumstances.

    4. The Territory or Operations Manager will review the memorandum and within two calendar days of receipt will forward a copy by overnight mail to the Area or Campus Director, if not co-located, along with a cover memorandum outlining recommended disciplinary action, if any.

Acceptance Letter Issued under IRC § 7122(f)

  1. After confirming that the IRS did not make a determination with regard to the offer within 24 months of the IRS received date, the taxpayer must be issued an acceptance letter (see Exhibit 5.8.8-4 below).

  2. See IRM 1.2.44.2 , Delegation Order 5-1 (Rev. 4) for the level of authority delegated permission to sign the offer and acceptance letter.

  3. Mail the signed letter to the taxpayer.

  4. Mail a copy of the memorandum described in IRM 5.8.8.9.1, above, and a copy of the acceptance letter to the National OIC Program Manager within 45 calendar days of discovery.

    Note:

    The National OIC Program Manager is not the delegated official required to sign the acceptance letter or memorandum.

  5. Update AOIC to reclassify the basis of compromise as "A" (Alternative Basis for compromise). Use the date the 24-month period expired as the AOIC acceptance date.

    Note:

    Updating the basis to "A" on AOIC is for tracking purposes only and has no impact on the levels of approval defined in IRM 1.2.44.2.

  6. The date on the Acceptance Letter should reflect the date the letter is mailed while the date of acceptance referenced in the body of the letter should reflect the date the 24-month period expired.

  7. The TC 780 should reflect the date the offer was deemed accepted.

  8. The offer file will be processed in accordance with procedures defined in this IRM.

Legal Opinion of Counsel

  1. Counsel is required to review offers when the total liability(ies) for all related offers on the same taxpayer is $50,000 or more. The purpose of Counsel's review is to determine whether the offer legally meets the standards of DATL, DATC or the promotion of Effective Tax Administration (ETA). Counsel also reviews the offer to ensure it conforms to the Service's policies and procedures.

  2. The requirement for Counsel review is not based on the liability(ies) at the time of submission. Counsel review is required if:

    • The initial submission was less than $50,000 but during the investigation additional assessments increase the total liability(ies) to $50,000 or more.

    • The initial submission was $50,000 or more and TIPRA payments or refund offsets reduced the liability(ies) below the required $50,000 threshold.

  3. When preparing the package to send to Counsel, whether through SharePoint or mailing the physical package, the OE/OS should also include IDRS prints; such as, IMFOLI and SUMRY, as well as a current print of the AOIC Masterfile screen.

  4. A follow-up should be scheduled for 60 days from date of submission for Counsel review. If Counsel has not responded within 60 days, contact Counsel to determine the status of the review.

Counsel Review and Concurrence (Legal Issues)

  1. Counsel’s signature on Form 7249 Offer Acceptance Report, constitutes the legal opinion required by IRC § 7122(b). By signing the form and checking the "agree" box for legal sufficiency, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign or checks the "disagree" box for legal sufficiency on the Form 7249, discussion with Counsel must be pursued to attempt to resolve the outstanding issues before the OE/OS can move forward with consideration of the offer. Rejecting Counsel advice is not a preferred course of action.

  2. If Counsel does not sign the form, the case cannot be compromised until all legal issues are resolved. The recommendation to accept cannot move forward without the concurrence of Counsel. If agreement cannot be reached and legal issues remain unresolved, the offer must be rejected, affording the taxpayer their right to appeal. See IRM 5.8.7.7, Rejection.

Counsel Review and Concurrence (Non-Legal Issues)

  1. In some cases, Counsel may determine that the compromise is legally permissible, but may raise policy concerns or other issues of a non-legal nature. In these cases, Counsel must sign the Form 7249 and communicate the remaining issues by separate memorandum.

    Note:

    Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. It may be necessary to contact Counsel to discuss the outstanding issues.

  2. There is no requirement for Counsel to concur with the decision to accept the offer in order to go forward for approval. In those cases where Counsel does not concur and the issue is not of a legal nature, the accepting official must review and consider any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised but not agreed, thoroughly document the case history with the issues and the supporting reasons for moving forward with the acceptance.

  3. If, after discussion, agreement with Counsel cannot be reached, and only Policy issues exist, and Counsel has not signed the Form 7249 or otherwise agreed with the acceptance recommendation, the offer may be accepted without Counsel signature.

    Note:

    Rejecting Counsel opinion is not a preferred course of action. An attempt to resolve issues with Counsel should take place prior to accepting the offer.

  4. Cases that do not have concurrence of Counsel but meet legal sufficiency, must be approved by the Area Director. The Area Director must sign the acceptance letter, Form 7249, and any collateral agreements.

  5. Thoroughly document the case history with the issues and supporting reasons for moving forward with acceptance. Include Counsel’s memorandum or other communication with the case file.

Continuous Wage Levy

  1. When the taxpayer has a continuous wage levy it must be addressed or released prior to forwarding the case to MOIC.

  2. See IRM 5.8.1.10, Withholding Collection, for additional information on levy.

  3. Take the following actions:

    1. Research for the levy source.

    2. Prepare a levy release, Form 668-D, Release of Levy / Release of Property from Levy.

    3. Obtain the authorizing signature.

      Note:

      COIC should use the Campus Revenue Officer.

    4. Mail the release to the employer.

    5. Notify the taxpayer informing him or her of the levy release. If a letter is used as the method of communication, the following text is recommended: "Our records show that there is a levy on your account. This levy will be released. A copy of the Form 668-D , Release of Levy / Release of Property from Levy, is enclosed for your records. We are processing your levy release and it should be effective within 30 days."

    6. If a levy is issued in error (during investigation or after processability), the levy proceeds must be returned to the taxpayer unless the taxpayer provides a request in writing for the IRS to keep the payments and be considered part of the offer funds. If the taxpayer requested the levy funds be applied as a payment toward the offer, the designated payment code (DPC) must be changed to the appropriate DPC for offer.

  4. If a Transaction Code (TC) 971 Action Code (AC) 060 is present and it is identified as an open Federal Payment Levy Program (FPLP) levy, coordinate with Advisory to facilitate the release. See IRM 5.11.7.2.6, Blocking or Releasing FPLP Levy, for additional information concerning the identification of an FPLP levy.

Destruction of Credit Reports

  1. All credit reports must be destroyed on accepted offers after all approving signatures have been obtained.

  2. If a credit report was requested, verify that the case history includes a summary of all relevant information.

Forwarding Case Files to the Federal Record Center (FRC)

  1. After the case has been closed on AOIC, the case should be retired to FRC when it is no longer needed for current business. It should be destroyed 11 years after acceptance of the offer.

    Note:

    Because the closed case will be retained longer than two years, field offer specialists should include a hard copy of the ICS history.

  2. See IRM 5.8.7.12.2, Loading FRC Information on AOIC, for instructions on loading the information on AOIC.

Notification of Dishonored Application Fee and/or TIPRA Payment after Notification of Acceptance

  1. If the case has been closed on AOIC but not yet forwarded to MOIC, upon notification of the dishonored check immediately notify the taxpayer or their power of attorney and request a replacement check.

  2. The replacement payment should be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time.

    • Inform the taxpayer or the authorized representative that the accepted offer will be rescinded if the payment is not received within a reasonable time .

    • Provide a due date for receipt of the replacement payment to the taxpayer or the authorized representative.

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

    • Document the case history.

  3. If the case has been closed on AOIC and forwarded to MOIC, the case will be returned to the OE/OS for taxpayer contact.

  4. Upon receipt of the case from MOIC, the OE/OS should immediately contact the taxpayer and request replacement payment in certified funds, if possible. Follow the procedures in paragraphs (1) and (2) above.

  5. If the taxpayer fails to replace the dishonored check, the accepted offer will be rescinded based on a mutual mistake of fact in accordance with IRM 5.8.9.2, Rescission of Accepted Offers.

  6. Document the AOIC case history.

24-Month Acceptance Letter (Letter 5540)

Letter 5540 is to be used if the offer is accepted under IRC § 7122(f). The letter may be accessed by signing on to AOIC then click on "AOIC Transmittals" click on "Click here for Sample TIPRA Letter" .

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