5.8.8 Acceptance Processing

Manual Transmittal

August 31, 2018

Purpose

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

Material Changes

(1) Below is a table containing changes impacting this revision of IRM 5.8.8.

IRM References Changes:
5.8.8 Added and updated Program Scope and Objectives and its related subsections to comply with the Deputy Commissioner’s for Services and Enforcement and Operations Support memo, dated September 14, 2016, entitled Heightened Awareness, Sensitivity, and Understanding of Internal Controls.
5.8.8.2 (3) Added: If the taxpayer agreed to the increased amount which was provided when the rejection letter was issued, notify the taxpayer that the amended offer requires managerial and if appropriate, Counsel review for approval of the offer, before the offer may be accepted.
5.8.8.2.1(2) Added: NOTE: Additional Form(s) 656 which may be required involving related offer(s). Refer to IRM 5.8.3.5., Processing Forms 656 and Initial Offer Payments, which discusses when securing related offers is appropriate.
5.8.8.2.1(3) Updated (3): The receiving official will not sign the amended and related Forms 656 until the Process Examiner (PE) has determined processability. Added Note: Retain the original and any amended Forms 656 in the file.
5.8.8.2.2.1 (1a) Change: Form 656 signature date
5.8.8.2.2.1 (1c) note Update: Also, in these cases, while they may be submitted and considered as lump sum cash offers, the IET should be calculated using the factor of 24 months or the CSED, whichever is shorter.
5.8.8.2.2.1 (1c) Example 2 Clarification: The offer is accepted as a lump sum cash payment offer in February, payable in month eight (October) and month eleven (January) after acceptance of the offer.
5.8.8.3 Removed: paragraph (g)
5.8.8.3 (i) Removed: the TC 150, TC 290, or TC 300 date, if there is a dollar amount associated. Added: original waiver date Updated: TC 480 date will reflect the original waiver date. Do not include any TC date with zero amounts.
5.8.8.3 (2) Updated: In all instances when a pen and ink change is appropriate, except to add an additional tax period with a balance owed or delete a tax period with no balance owed, the OE, OS, or PE must contact the taxpayer. Conversations and approvals must be well documented in the case history. Added: Caution: Prior to deleting any tax period, be certain to verify there are no open audits which would impact the tax period being deleted.
5.8.8.3(3) Added: Note: if the taxpayer failed to indicate under which basis the offer should be considered, the assumption should always be DATC first and if appropriate, ETA/Special Circumstances may be considered if they don't qualify under DATC.
5.8.8.4 (3) Incorporated IGM SBSE-05-0917-0058, Securing Related Offers; When loading the offer on AOIC, the waiver date will depend on whether the original offer included all periods or if related periods were discovered during the offer investigation and not included on the original offer, refer to IRM 5.8.4.7, Additional Initial Offer Actions for instructions. This section will include guidance on the appropriate waiver date for any tax liability not included on the original offer.
5.8.8.4 (3) Removed: If - Then Chart
5.8.8.4 (5) Deleted: Paragraph 5
5.8.8.5 (4) Updated: A printed copy of the electronically executed document, form and/or letter, which includes the approving signature(s), must be included in the case file.
5.8.8.5 (5) bullet Updated: may be signed using the approved visual typed signature and digital ID signature method.
5.8.8.7 Updated IRM references
5.8.8.7(1) Added Note: AMDIS is not required unless there is a -L freeze on SUMRY.
5.8.8.7(2) Correct IRM number- IRM 5.8.1.6.1 Tax Cases Controlled by Department of Justice, IRM 5.8.1.6.2, Docketed Tax Court Cases for additional information.
5.8.8.7(3) Updated: When appropriate, a full credit report may be secured on 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. A full credit report must be requested when the current aggregate balance meets the amount as defined in IRM 5.8.5.3.1.2.
5.8.8.7(4)(a) Updated: update mirroring requirements- When a case is closed on AOIC, AOIC requires a yes or no answer regarding the need for mirroring or the need for manual code reversal by requiring responses to: (1) MFT 30 to 31 Required; (2) MFT 35 to 65 Required; and (3) Manual TC Input Required. The results will appear on the AOIC Summary Screen.
5.8.8.7(4c) Added: Terms Screen -to improve consistency in structure and reduce errors on the AOIC terms screen or when completing the Form 7249 from the Publishing website, use the terms templates below.
5.8.8.7(4c4) Updated: NOTE: If a collateral agreement is secured, you must update the Collateral section of the AOIC Terms screen to reference a collateral was secured. MOIC will receive a copy of the collateral agreement, 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).
5.8.8.7(4) Updated: Do not update the Proposed Terms. To improve consistency in structure and reduce errors on the AOIC terms screen, use the terms templates Added: IGM SBSE-05-0118-0003, Terms Template for Accepted Offers.
5.8.8.7 (5) Updated: Caution: AOIC Public Transcripts are no longer required to be uploaded to the Public Inspection File SharePoint with Form 7249 however, they are still required to be included with the case file when sending to Counsel.
5.8.8.7 (6) Deleted Paragraph per IGM SBSE-05-0318-0011.
5.8.8.7 (7) Added Bullet: Form 656 Revision Document AOIC remarks with the revision date of the Form 656 of the accepted offer. This provides MOIC with the agreed provisions of the accepted offer.
5.8.8.7(9) Added: Clear Forms and Letters: AOIC Remarks is systemically populated with the date the form/letter is cleared on AOIC; therefore, it is essential that the OE/OS clear the forms and letters upon issuance. Delays in this action will cause false decision dates to appear in the AOIC remarks.
5.8.8.7(9) Added: Example: The final determination letter was mailed on February 20, 2017 which is the date showing in the AOIC history section. The OE/OS does not clear the forms/letters until May 30, 2017. Since May 30, 2017 is the date the form/letter was cleared the AOIC remarks will reflect any open paragraph information with a May 30, 2017 date.
5.8.8.7 (10) Deleted: The current revision of the labeled dividers is required. Updated Note: IDRS prints. Generally, within each tab, the case file documents are placed in chronological order, with the most current on top.
5.8.8.8 (2) Updated: Ensure Form 7249 has all required signatures and all tax periods, which were compromised based on the Form 656, Offer in Compromise included and any additional name lines such as "in care of" have been redacted prior to loading to the PIF OIC SharePoint site. Note: It is no longer necessary to retain transcripts with closed paper files.
5.8.8.9(3) Updated: For each accepted offer, a copy of the Form 7249 should be uploaded to the PIF SharePoint site. Form 7249 must be free of any PII.
5.8.8.9(3) Updated: Note: Form 7249 must be free of any PII.
5.8.8.9 (4) Updated: The PIFs should be uploaded, without delay, to the PIF SharePoint site after acceptance.
5.8.8.9 Removed: the sanitized AOIC Masterfile Screen transcript. If the AOIC transcript is unavailable, a redacted TDS transcript may be used.
5.8.8.9(5) Added bullet: Uploaded in the appropriate monthly folder and designated location based on the taxpayer’s entity address at the time of acceptance.
5.8.8.9(5) Added bullet: Created with the established naming convention for uploading documents to the PIF SharePoint site. Offer number, Name Control, Date Accepted i.e (1234567890.ABCD.MMDDYY.
5.8.8.9(5) Added bullet: If within one year of acceptance a Form 7249 needs to be corrected (e.g. to remove periods that were discharged in bankruptcy, compromise of a compromise, or to obtain the signatures required in Delegation Order 5-1), the original Form 7249 should be deleted from the PIF, and the corrected Form 7249 uploaded with the same naming convention.
5.8.8.9(5) Removed: 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.
5.8.8.9(6) Removed: Confirm receipt of all files listed on the Form 3210.
5.8.8.9(6) Removed: Acknowledge receipt by returning the signed acknowledgement copy of the Form 3210 to the originator within 5 workdays of receipt.
5.8.8.9(6) Updated: Due to the potential disclosure of Personally Identifiable Information (PII) each designated office must assign an employee (designee) to have oversight of the PIFs SharePoint site location. The designee will have responsibility to: Updated (c) Ensure the files are in the correct designated SharePoint site location. If they are not, an e-mail is to be sent to the originator for corrective action. Remove the file from the incorrect site and upload it to the correct SharePoint site location. Updated (d) Reconciliation of the PIF Sharepoint location for all accepted offers for each month. Updated e) Ensure the Form 7249 is properly redacted and uploaded. Do not include additional documentation or information in the PIF.
5.8.8.9(6) Removed: 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.
5.8.8.9(6) Removed: i) 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.
5.8.8.9(7) Updated: October and November 2017
5.8.8.9(7) Updated: Note: A visitors log with this information will be retained on the PIF Sharepoint site. There is no restriction or limit to the number of files a visitor may view as long as the employee remains present at all times.
5.8.8.9(7) Removed: 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.
5.8.8.9(9) Updated: Facilities Management and Security Services (FMSS).
5.8.8.10 (1) Removed: Embedded Quality – Updated with National Quality
5.8.8.10(3 d) Added: Verify the offer amount on AOIC is correct
5.8.8.11(1) Added Note: When there are related offers, which include joint and separate liabilities, where identical financial information has been provided and one or both of the related offers needs to be sent to Counsel for approval, both offers must be provided for Counsel review so the approvals may be processed simultaneously.
5.8.8.11 (2) Removed: 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.
5.8.8.11 (3) Removed: 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). Added: See Del Order 5-1 for approval authorities for offer acceptances for employees of the IRS.
5.8.8.11 (4) Remove: 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.
5.8.8.12(4) Added bullet: If a decision letter has been issued, the 24-month period is no longer an issue. If there is a question relative to whether the letter which was later determined to be issued in error stopped the 24 month timeframe, Counsel should be consulted.
5.8.8.12(4) bullet Revised: A review to determine when the offer was received and if 24 months have elapsed since the IRS received date.
5.8.8.12.2 (4) Removed Note: The National OIC Program Manager is not the delegated official required to sign the acceptance letter or memorandum.
5.8.8.13 (3) Updated: When preparing the package to send to Counsel through SharePoint, include IDRS prints such as IMFOLI and SUMRY, as well as a current print of the AOIC Masterfile screen. Use the manager approval date when assigning to the SharePoint Counsel inventory for assignment.
5.8.8.13(4) Updated: If Counsel has not responded and did not provide a signed Form 7249
5.8.8.13.1(1) Revised and Added: additional information or clarification is required from the taxpayer, discuss with the taxpayer and Counsel before moving forward with the offer. Any changes should be resubmitted to Counsel to resolve any outstanding issues.
5.8.8.13.1(2) Updated: If Counsel checks the disagree box on the form, as a policy matter, the case should not be compromised until all legal issues are resolved. The recommendation to accept should not move forward without the concurrence of Counsel.
5.8.8.13.2(2) Revised: In those cases where Counsel does not concur, the accepting official must review and consider any opinion from Counsel prior to making the acceptance or rejection final 5.8.8.13.2(3) Revised: If, after discussion, agreement with Counsel cannot be reached, and Counsel has not signed the Form 7249 it should be returned to Counsel for signature. If Counsel has signed the Form 7249 and checked “agree” but attached a memorandum disagreeing on policy grounds, then the offer may be accepted 5.8.8.14(1)Updated: When the taxpayer has a continuous wage levy, it must be addressed or released prior to forwarding the accepted case to MOIC 5.8.8.14(3) Updated: Take the following actions prior to forwarding the accepted offer to MOIC: Updated Note: COIC should use the Campus Revenue Officer to obtain authorizing signature of levy release. 5.8.8.14 (3f) Added: Note: Proceeds from a valid outstanding levy may not be used as payments toward the offer amount even if received after the offer pending date. 5.8.8.15 (1) Updated: All credit reports must be destroyed on accepted offers after all approving signatures have been obtained 5.8.8.17 (5) Updated: If the taxpayer fails to replace the dishonored check, the accepted offer will be rescinded based on the taxpayer breached the OIC-contract by failing to make the offered payment,
5.8.8.13.2(3) Revised: If, after discussion, agreement with Counsel cannot be reached, and Counsel has not signed the Form 7249 it should be returned to Counsel for signature. If Counsel has signed the Form 7249 and checked “agree” but attached a memorandum disagreeing on policy grounds, then the offer may be accepted
5.8.8.14(1) Updated: When the taxpayer has a continuous wage levy, it must be addressed or released prior to forwarding the accepted case to MOIC.
5.8.8.14(3) Updated: Take the following actions prior to forwarding the accepted offer to MOIC: Updated Note: COIC should use the Campus Revenue Officer to obtain authorizing signature of levy release.
5.8.8.14 (3f) Added: Note: Proceeds from a valid outstanding levy may not be used as payments toward the offer amount even if received after the offer pending date.
5.8.8.15 (1) Updated: All credit reports must be destroyed on accepted offers after all approving signatures have been obtained.
5.8.8.17 (5) Updated: If the taxpayer fails to replace the dishonored check, the accepted offer will be rescinded based on the taxpayer breached the OIC-contract by failing to make the offered payment,

Effect on Other Documents

IRM 5.8.8 published 10-20-2016 is superseded. This revision includes IGM SBSE-05-0917-0058, Securing Related Offers; IGM SBSE-05-0917-0060, Inclusion of a Complete Transcript in the Closed Case file; IGM SBSE-05-0118-0006, Action for Compromise Accounts Requiring Mirroring: or the Input of Manual Closing Codes; and IGM SBSE-05-0118-0003, Terms Template for Accepted Offers; IGM SBSE-05-0318-0011, Changes in Procedures for Public Inspection Files (PIF) for Accepted Offers in Compromise (OIC).

Audience

SB/SE Collection and Campus Compliance employees

Effective Date

(08-31-2018)

Kristen E. Bailey
Director, Collection Policy

Program Scope and Objectives

  1. Purpose: This chapter pertains to the acceptance of an offer 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 is required to complete the acceptance. This section describes the process for accepting an offer.

  2. Audience: These procedures apply to Internal Revenue Service (IRS) employees who are responsible for investigating offers:

    • Offer Examiners (OE) in Centralized Offer in Compromise (COIC)

    • Offer Specialists (OS) in the Field offer territories

    • Additional IRS employees assigned to the offer program and employees who conduct offer in compromise acceptances.

  3. Policy Owner: Director, Collection Policy

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

  5. Primary Stakeholders: The primary stakeholders are COIC and Field offer employees.

  6. Program Goals: Policy Statement P-5-100 explains the objective of the offer as a collection tool. This Internal Revenue Manual (IRM) section provides the fundamental knowledge and procedural guidance for the OE and OS engaged in the investigation of the offers. The procedures in the IRM include guidance so employees will be able to effectively and efficiently close their cases as an acceptance, when appropriate.

Background

  1. An offer in compromise (referred to as an offer or OIC) is a way for the IRS to collect a portion of the monies owed by taxpayers unable to pay their taxes in full. Revenue Procedure 2003-71 explains the procedures applicable to the submission and processing of offers to compromise a tax liability under Section 7122 of the Internal Revenue Code. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) also provided additional requirements for submission of an offer. Notice 2006-68 provides an extensive discussion of the TIPRA changes.

Authority

  1. Authorities relating to this section include:

    • Treasury Regulations §301.7122-1 Compromises

    • Internal Revenue Code (IRC) 7122

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

    • Policy Statement P-5-100

    • 26 CFR § 300.3, Offer to compromise fee

    • Revenue Procedure 2003-71

    • Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

    • Notice 2006-68

    • IRM 1.2.44 Delegations of Authority for the Collecting Process

Responsibilities

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

  2. The National Program Manager (OIC) is responsible for development and delivery of policies and procedures within the program.

  3. Managers of employees investigating offers are responsible for ensuring these procedures are followed and employee actions are timely and accurate.

  4. Offer examiners, offer specialists, and other employees investigating offers are responsible for following the procedures in this IRM.

Program Management and Review

  1. Operational and program reviews are conducted on a yearly basis by the Director, Specialty Collection Offers and Collection Policy respectively, with the use of data and reports from the Automated Offer In Compromise system and ENTITY case management system. Additionally, ad hoc reports which provide information on the inventory levels, hours per case, and age of offers in inventory or at time of closure are also available. 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 OIC Program Guide.

  2. Managerial case reviews are also completed as defined in 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 OIC Program Guide. These reviews are a method to determine if the offer amount accurately reflects the reasonable collection potential (RCP) as defined in Policy Statement P-5-100.

  3. National quality reviews and consistency reviews are routinely conducted to ensure program consistency and effectiveness in case processing. As a result of these reviews, procedural changes may be identified to improve the quality and effectiveness of the program.

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. ICS is used by field employees as a method for inventory control and history documentation.

  3. Managers are required to follow program management procedures and controls addressed in 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 OIC Program Guide.

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

  5. The review conducted by the Office of Chief Counsel on certain offers is in accordance with Treasury Regulations § 301.7122-1 - Compromises.

Terms/Definitions/Acronyms

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

    • AET – Asset Equity Table – A table listing all the taxpayer’s assets, encumbrances, and exemptions. It then calculates the equity which is included in the reasonable collection potential (RCP) calculation.

    • 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.

    • DATC – Doubt as to Collectibility – Basis for acceptance of an offer where there is doubt that the tax can be paid in full.

    • DATL – Doubt as to Liability – Basis for acceptance of an offer where there is doubt that the liability is correct.

    • DCSC – Doubt as to Collectibility with Special Circumstance – Basis for acceptance of an offer where there is doubt that the tax can be paid in full and special circumstances exist that warrants accepting the offer for less than the reasonable collection potential (RCP).

    • 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 collection employees to monitor inventory. Histories of OIC investigations conducted by area office employees are maintained on this system.

    • IET – Income/Expense Table – A table that lists the income and expenses, both claimed and allowed for purposes of calculating reasonable collection potential (RCP).

    • MOIC – Monitoring OIC Unit – Unit in Compliance Services located in a campus that completes end processing and monitoring of accepted offers.

    • NFTL – Notice of Federal Tax Lien.

    • OE – Offer Examiner – A tax examiner appointed as an offer investigator and located in COIC.

    • OI – Other Investigation – Form 2209, Courtesy Investigation, is used for Area investigations in locating taxpayers or to gather information in collecting on assigned cases.

    • OS – Offer Specialist – A revenue officer appointed as an offer investigator, generally located in a field office.

    • PE – Process Examiner – A tax examiner who completes initial processability determinations on offers and is located in COIC.

    • PII - Personal Identifiable Information - Information that can be used to distinguish or trace an individuals identity, such as name, social security number, date and place of birth, mothers maiden name, or biometric records. Refer to http://awss.web.irs.gov/News/03-Mar/PII-guidance.htm for further guidance.

    • RCP – Reasonable Collection Potential – The amount that could reasonably be collected from the taxpayer.

    • SRP – 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 – Section 509 – 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/Resources/Acronymdb.asp.

Related Resources

  1. Below are recommended resources, which can be used when processing an offer.

    • IRM 1.2.14, Policy Statements for Collecting Process Activities

    • IRM 1.2.44, Delegations of Authority for the Collecting Process

    • IRM 5.8.1 through 5.8.12, Offer in Compromise

  2. Employees can find helpful information on the below websites:

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

    • IMD site for Interim Guidance Memorandums: http://imdtrack.web.irs.gov/search.asp

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 amendedForm 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.

  3. If the taxpayer agreed to the increased amount which was provided when the rejection letter was issued, notify the taxpayer that the amended offer requires managerial approval and if appropriate, Counsel review before the offer may be accepted. Ensure the taxpayer understands that the submission of the amended offer does not extend the appeal period. Since the review process may extend past the time frame for submitting an appeal, advise the taxpayer they may wish to consider submitting a signed Form 13711 to protect their right to appeal, in the event the approving official does not approve the acceptance recommendation or Counsel’s review determines the offer is not legally sufficient. Advise the taxpayer they only need to include the statement “I wish to appeal” in the “reason for disagreement” section on the Form 13711. No supporting documentation is required, the OE/OS will secure additional documentation if necessary.

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 processablewithout 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.

      Note:

      Additional Form(s) 656 may be required involving related offer(s). Refer to IRM 5.8.3.5, Processing Forms 656 and Initial Offer Payments, which discusses when securing related offers is appropriate.

  3. Upon receipt, the amended Form 656 should be date stamped with the IRS received date. The receiving official will not sign the amended and related Forms 656. The Process Examiner (PE) will sign any related offer after processability has been determined.

    Note:

    Retain the original and any amended Forms 656 in the file.

  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 only changes 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); Form 14640- 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,

    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 it 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 Form 656 signature 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 5 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 IET should be calculated using the factor of 24 months or the CSED, whichever is shorter.

      Example:

      1) 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:

      2) 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 in February, payable in month eight (October) and month eleven (January) after acceptance of the offer.

      Note:

      The balloon payment must be in the government's best interest. See IRM 5.8.5.29 Payment Terms.

    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 included with this addendum: (A) $100 paid with the original offer dated 11/28/2017. (D) $1,300 periodic payments 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 2018 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.
      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 11/28/2017. (D) $2,100 periodic payments, 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 2018 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

      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.

    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 or in addition to 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.

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

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

    • c) 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.

    • d ) 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.

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

    • f) 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.

    • g) 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.

    • h) 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 original waiver date. 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 allow 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, except to add an additional tax period with a balance owed or delete a tax period with no balance owed, the OE, OS, or PE must contact the taxpayer. Conversations and approvals must be well documented in the case history.

    Caution:

    Prior to deleting any tax period, be certain to verify there are no open audits which would impact the tax period being deleted.

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

    Note:

    If the taxpayer failed to indicate which basis the offer should be considered, the assumption should always be DATC first and if appropriate, ETA/Special Circumstances may be considered if they don’t qualify under DATC.

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 it prior to being assigned to an OE/OS, the OE/OS must perfect the offer before acceptance, refer to IRM 5.8.4.7, Additional Initial Offer Actions for additional information. 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 5.8.3.6 (2) for additional information.

  3. When loading the offer on AOIC, the waiver date will depend on whether the original offer included all periods or if related periods were discovered during the offer investigation and not included on the original offer, refer to IRM 5.8.4.7, Additional Initial Offer Actions for addition information. This section will include guidance on the appropriate waiver date for any tax liability not included on the original offer.

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. 5).

  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, which includes the approving signature(s), 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 using the approved visual typed signature and digital ID 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, follow procedures in 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:

    Rechecking AMDIS is not required unless there is a -L freeze on SUMRY.

    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. 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 5.8.1.6.1, Tax Cases Controlled by Department of Justice, and IRM 5.8.1.6.2,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— 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. A full credit report must be requested when the current aggregate balance meets the amount as defined in IRM 5.8.5.3.1.2. All requests for credit reports require managerial approval.

  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).
      Update mirroring requirements- When a case is closed on AOIC, it requires a “yes or no” answer regarding the need for mirroring or the need for manual code reversal by requiring responses to:
      (1) MFT 30 to 31 Required;
      (2) MFT 35 to 65 Required;
      (3) Manual TC Input Required.
      The results will appear on the AOIC Summary Screen.

    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. To improve consistency in structure and reduce errors on the AOIC terms screen or when completing the Form 7249 from the Publishing website, use the terms templates below.

      Note:

      It is recommended the templates be saved, copied and pasted into the Terms Screen on AOIC or on the Form 7249 from the Publishing Website.

      1. Lump Sum Cash: Lump sum offer of $XXX with $XXX paid the with offer. The remaining balance of $XXX to be paid as follows: $XXX paid 1 month after acceptance, $XXX paid 2 months after acceptance, $XXX paid 3 months after acceptance, $XXX paid 4 months after acceptance and $XXX paid 5 months after acceptance. After making all the payments, you must still comply with all the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

        Note:

        Payments cannot exceed 5 months from the date of acceptance for exception to this requirement. (Refer to IRM 5.8.8.2.2.1(c), Instructions for Completion of Form 14640, Addendum to Form 656)

        Example:

        (1) Lump sum cash offer of $500 with $100 paid with the offer. The remaining balance of $400 to be paid as follows: $100 paid 1 month after acceptance, $100 paid 2 months after acceptance, $100 paid 3 months after acceptance, $100 paid 4 months and $0 paid 5 months after acceptance. After making all the payments, you must still comply with all other contract provisions as contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

        Example:

        (2) Lump sum offer of $500 with $100 paid with the offer. The remaining balance of $400 to be paid as follows: $0 paid 1 month after acceptance, $0 paid 2 months after acceptance, $0 paid 3 months after acceptance, $400 paid 4 months after acceptance and $0 paid 5 months after acceptance. After making all the payments, you must still comply with all the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

      2. Lump Sum Cash- Full paid at acceptance Lump sum cash offer of $XXXXX with $XXXXX paid with the offer; offer amount full paid. You must still comply with all the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

        Example:

        1) Lump sum cash offer of $500 with $500 paid with the offer; offer amount full paid. You must still comply with all the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

      3. Periodic payment: Offer terms of $XXXXX to be paid within XX months. The amount paid with the offer is $XXXX, then $XXXX on the XX day of each month for a total of XX months with the final payment of $XXX due on the XX day of the XX month. After making all the payments, you must still comply with all of the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

        Note:

        Payments must be made within 6 to 24 months. Payments cannot exceed 24 months. The payment due date must be between the 1st and 28th day of the month only. Periodic payments are not required to be equal monthly payments. For example, if the taxpayer is employed seasonally or has seasonal income, then the payments may vary from month to month. Use appropriate suffix with the number i.e. 1st, 2nd, 3rd, 20th etc.

        Example:

        Periodic payment offer terms of $10,500 to be paid within 10 months. The amount paid the with offer is $1,000, then $1,000 on the 20th day of each month for a total of 9 months with the final payment of $500 due on the 20th day of the 10th month. After making all the payments, you must still comply with all of the other contract provisions contained in Section 7, Terms, Conditions, and Legal Agreement, of Form 656.

        Caution:

        It is the responsibility of the OE/OS accepting the offer to verify the payment terms do not extend beyond the CSED before finalizing the accepted offer.

      4. If a collateral agreement is secured, update the Collateral section of the AOIC Terms screen to reference a collateral was secured. MOIC will receive a copy of the collateral agreement. 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).

    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 the Form 7249 becomes a public document.

    Reminder:

    When preparing the Form 7249 that involves 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 301.7701-2(c)(2)(iv). 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).

    Caution:

    AOIC Public Transcripts are no longer required to be uploaded to the Public Inspection File SharePoint with Form 7249. However, they are still required to be included with the case file when sending to Counsel.

  5. 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." Approving officials must indicate concurrence of the closing action.

    • 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.

    • Form 656 Revision - Document AOIC remarks with the revision date of the Form 656 of the accepted offer. This provides MOIC with the agreed provisions of the accepted offer.

    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.

  6. Generate and print letters and reports — Generate and print letters and reports as follows:

    1. The Acceptance Recommendation Report should only be prepared on those cases meeting Counsel criteria (see IRM 5.8.1.6.6, 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 may be found on ICS or OIC SharePoint. 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 and 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. 5), 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.

  7. Clear Forms and Letters: AOIC Remarks is systemically populated with the date the form/letter is cleared on AOIC; therefore, it is essential that the OE/OS clear the forms and letters upon issuance. Delays in this action will cause incorrect dates to appear in the AOIC remarks.

    • Example: The final determination letter was mailed on February 20, 2017 which is the date showing in the AOIC history section. The OE/OS does not clear the forms/letters until May 30, 2017. Since May 30, 2017 is the date the form/letter was cleared the AOIC remarks will reflect any open paragraph information with a May 30, 2017 date.

  8. Assemble file using Document 9600 B — The file must be assembled using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document.

    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 IDRS prints. Generally, within each tab, the case file documents are placed in chronological order, with the most current on top.

  9. Submit the file for approval — Submit the file for all required signatures including routing to Counsel for review, if required. See IRM 5.8.8.13, 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 be retained in the offer file.

  2. Make a copy of the Form 7249 for the public inspection file. Ensure Form 7249 has all required signatures and all tax periods, which were compromised based on the Form 656, Offer in Compromise, included and any additional name lines such as "in care of" have been redacted prior to loading to the PIF OIC SharePoint site. .

    Note:

    It is no longer necessary to retain transcripts with closed paper files.

  3. Close the case on AOIC and process in accordance with procedures defined in IRM 5.8.8.10, Processing the Closed Offer File, below.

  4. 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. Treasury Reg. § 601.702 (d) (8) 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 Treasury Reg. § 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, a copy of the Form 7249 should be uploaded to the PIF SharePoint site. Form 7249 must be free of any PII.

  4. The office that has accepted the offer will be responsible for providing the Form 7249. . The PIFs should be uploaded, without delay, to the PIF SharePoint site after acceptance.

  5. The PIF must be:

    • Maintained for one-year.

    • Uploaded in the appropriate monthly folder and designated location based on the taxpayer’s entity address at the time of acceptance.

    • Created with the established naming convention for uploading documents to the PIF SharePoint site.(Offer number. Name Control. Date Accepted) i.e. (1234567890.ABCD.MMDDYY)

    • If within one year of acceptance a Form 7249 needs to be corrected (e.g. to remove periods that were discharged in bankruptcy, compromise of a compromise, or to obtain the signatures required in Delegation Order 5-1), the original Form 7249 should be deleted from the PIF SharePoint site, and the corrected Form 7249 uploaded with the same naming convention.

  6. Due to the potential disclosure of Personally Identifiable Information (PII) an employee (designee) is assigned to have oversight of the PIFs SharePoint. The designee will have the responsibility to:

    1. Take appropriate action to immediately resolve discrepancies.

    2. Ensure the Form 7249 is properly redacted. Do not include additional documentation or information in the PIF.

    3. Ensure the files are in the correct designated SharePoint site location. If they are not, send an e-mail to the originator for corrective action. Remove the file from the incorrect site and upload it to the correct SharePoint site location.

  7. Requests to view PIF 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 must be present while the files are being viewed. A record of the date of all requested viewing 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, October and November 2017)

    Note:

    A visitors log with this information will be retained on the PIF Sharepoint site. There is no restriction or limit to the number of files a visitor may view as long as the employee remains present at all times.

  8. Requests for copies of PIFs:

    • Must be made in person, not by telephone.

    • 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 Facilities Management and Security Services (FMSS) physical 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).

    Note:

    For additional information on Photography and Video Recordings Prohibition, see IRM 10.2.11, Physical Security Program, Basic Security Concepts.

Processing the Closed Offer File

  1. Once an offer has been closed on AOIC, it should be held in-house until National Quality (NQ) has had sufficient time to pull for review. Field Area Office NQ 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 NQ 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 NQ.

    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. Verify the offer amount on AOIC is correct.

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

    6. 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" ).

    Note:

    When there are related offers, which include joint and separate liabilities, where identical financial information has been provided and one or both of the related offers needs to be sent to Counsel for approval, both offers must be provided for Counsel review so the approvals may be processed simultaneously.

  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. 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. See Del. Order 5-1 for approval authorities for offer acceptances for employees of the IRS.

    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.

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):

    • If a decision letter has been issued, the 24-month period is no longer an issue. If there is a question relative to whether the letter which was later determined to be issued in error stopped the 24 month time-frame, Counsel should be consulted.

    • A review to determine when the offer was received and if 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 5.8.8.13, 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 5.8.8-1 below).

  2. See IRM 1.2.44.2, Delegation Order 5-1 (Rev.5 ), 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.

  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 through SharePoint, include IDRS prints such as IMFOLI and SUMRY, as well as a current print of the AOIC Masterfile screen. Use the manager approval date when assigning to the SharePoint Counsel inventory for assignment.

  4. A follow-up should be scheduled for 60 days from date of submission for Counsel review. If Counsel has not responded and did not provide a signed Form 7249 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 7249 and checking the Agree box , Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel checks the Disagree box on the Form 7249, , and additional information or clarification is required from the taxpayer, discuss with the taxpayer and Counsel before moving forward with the offer. Any changes should be resubmitted to Counsel to resolve any outstanding issues. Rejecting Counsel advice is not a preferred course of action.

  2. If Counsel checks the disagree box on the form, as a policy matter, the case should not be compromised until all legal issues are resolved. The recommendation to accept should not move forward without the concurrence of Counsel. If agreement cannot be reached and legal issues remain unresolved, the offer must be rejected, affording the taxpayers 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 check the agree box and 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, the accepting official must review and consider any opinion from Counsel prior to making the acceptance or rejection 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 Counsel has not signed the Form 7249 it should be returned to Counsel for signature. If Counsel has signed the Form 7249 and checked “agree” but attached a memorandum disagreeing on policy grounds, then the offer may be accepted.

    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 have the concurrence of the Director, Specialty Collection OIC.

  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 accepted case to MOIC or the AOIC history noted if the levy should remain in place.

  2. See IRM 5.8.1.14, Withholding Collection, for additional information on levy.

  3. Take the following actions prior to forwarding the accepted offer to MOIC:

    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 to obtain authorizing signature of levy release.

    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.

      Note:

      Proceeds from a valid outstanding levy may not be used as payments toward the offer amount even if received after the offer pending date.

  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 the taxpayer breached the OIC-contract by failing to make the offered payment, 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 then click on: Click here for Sample TIPRA Letter.

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