5.8.9 Actions on Post-Accepted Offers

Manual Transmittal

April 23, 2018

Purpose

(1) This transmits a revision for IRM 5.8.9, Offer in Compromise, Actions on Post-Accepted Offers.

Material Changes

(1) Changes included in this revision:

IRM Reference Change
5.8.9.1 Added and updated Program Scope and Objectives and its related subsections to comply with the Deputy Commissioner for Services and Enforcement and Operations Support memo, dated September 14, 2016, titled Heightened Awareness, Sensitivity, and Understanding of Internal Controls.
5.8.9.2(1) Removed restitution from rescission section.
5.8.9.2.4(2) Added: If rescission is within one year of acceptance, remove the PIF from public access.
5.8.9.3 Added instructions to correct situations where an offer was accepted with DOJ or restitution-based assessment periods.
5.8.9.3.1 Added instructions to correct situation where an offer was accepted on a DOJ case.
5.8.9.3.2 The section has been revised to discuss current procedures when a restitution-based assessment was accepted on an offer.
5.8.9.5(2) Added MOIC section for reference when working compromise of a compromise and that MOIC will issue electronically with a read receipt a Form 2209 for a compromise of a compromise.
5.8.9.5.1(2) Added MOIC will follow up in seven days on Form 2209 if no read receipt is received.
5.8.9.5.1(3) Clarified the field will enter a history entry on AOIC Remarks screen regarding Form 2209.
5.8.9.5.1(4) Provided additional instructions if rerouting the electronic Form 2209. Document AOIC Remarks and send an e-mail to the MOIC employee who sent the original e-mail.
5.8.9.5.1(6) Clarified: If the investigation is not completed by the original response date on the Form 2209 then an extension request Form 2209-A is required.
5.8.9.5.2(2) Note added: If the taxpayer is not in five year filing and paying compliance, a compromise of a compromise cannot be considered.
5.8.9.5.3(4) Added: An attempt must be made by phone to contact the taxpayer prior to the issuance of the compromise of a compromise determination letter of the proposed acceptance or denial. If contact is made with the taxpayer on a denial then inform the taxpayer of your findings and that they must bring the payment terms of the original offer current or a default letter will be issued.
5.8.9.5.3(5) Added: If the original liability required Counsel approval, and the taxpayer's proposal is acceptable, Counsel approval is required.
5.8.9.5.3(5) Added: If the proposal is acceptable and the terms change from cash to periodic payment then a NFTL determination is needed.
5.8.9.5.3(6) Added: PIF instructions for accepted compromise of a compromise.
5.8.9.5.3(10) Added: E-mail as a means to provide information to MOIC.
5.8.9.5.3(11) Provided list of papers necessary to send to MOIC for a compromise of a compromise investigation.
5.8.9.5.3(12) Provided instructions for compromise of a compromise work papers.
Exhibit 5.8.9-2 Added instructions for the taxpayer to write void on an erroneously received refund check when returning it to the IRS.
Exhibit 5.8.9-3 Added to letter: We are denying the request for the following reason(s).

Effect on Other Documents

IRM 5.8.9 dated 1/12/17 is superseded. This IRM incorporates Interim Guidance Memorandum (IGM) SBSE-05-0318-0011, Changes in Procedures for Public Inspection Files (PIF) for Accepted Offers in Compromise (OIC), dated March 15, 2018.

Audience

SB/SE Collection and Campus Compliance employees

Effective Date

(04-23-2018)

Kristen E. Bailey
Director, Collection Policy

Program Scope and Objectives

  1. Purpose: This section provides:

    • Instructions for guidance on accepted offers in compromise such as when to rescind, terminate, or revise an existing offer in compromise (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 investigations.

  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 OIC as a collection tool. This Internal Revenue Manual (IRM) provides the fundamental knowledge and procedural guidance for offer examiners and offer specialists who address actions on completed offers such as rescission, termination and revision of an existing offer when appropriate.

Background

  1. Section 509 of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) significantly impacted the offer in compromise program. This section provides direction on completing offer investigations which are fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service. Additionally, procedures for coordinating with other functions are provided. This section provides direction on accepted offers in compromise such as when to rescind, terminate, or revise an existing offer.

Authority

  1. Authorities relating to this section include:

    • Internal Revenue Code (IRC) 7122, Compromises

    • Treasury Regulations § 301.7122-1 - Compromises

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

    • Policy Statement P-5-89

    • Policy Statement P-5-100

    • Policy Statement P-1-236

    • 26 CFR § 300.3, Offer to compromise fee

    • Revenue Procedure 2003-71

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

    • IRM 1.2.44.2, Delegation Order 5-1

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

Responsibilities

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

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

  3. The Director, Specialty Collection Offer in Compromise is responsible for the performance of the OIC program and ensuring IRM policies and procedures are followed.

  4. Program managers, Department managers, and Group Offer managers are responsible for ensuring the procedures are followed and employee actions are timely and accurate.

Program Management and Review

  1. Data and reports from the Automated Offer in Compromise (AOIC) system, Business Objects, ENTITY Case Management System, and Integrated Collection System (ICS) assist in inventory tracking, case age, and timeliness of case actions. Additional ad hoc reports which provide information on the inventory levels, hours per case, and age of offers in open or closed inventory are also provided when requested by Specialty Collection Offer in Compromise.

  2. Operational and program reviews are conducted on a yearly basis by the Director Specialty Collection Offer in Compromise (SCOIC) and Collection Policy respectively. Managerial case reviews are also completed as defined in this IRM, IRM 1.4.52, Offer in Compromise Manager's Resource Guide - Field Program, and IRM 1.4.54, Offer in Compromise Managers - Centralized Offer in Compromise 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.

Program Controls

  1. AOIC is used to track offers submitted by taxpayers, for inventory control, and to 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 OIC 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. ENTITY is utilized by OIC field managers as a method for inventory control and appropriate time utilization.

  6. Case reviews are conducted by the Office of Chief Counsel on offers when the total liability(ies) for all related offers on the same taxpayer is $50,000 or more in accordance with Internal Revenue Code section 7122(b) and Treasury Regulations§ 301.7122-1 - Compromises.

Terms/Definitions/Acronyms

  1. A list of common abbreviations, definitions and acronyms used throughout this IRM may be found in the table below.

    Acronym or Abbreviation Definition Description
    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.
    COIC Centralized Offer in Compromise Units located in Brookhaven and Memphis campuses 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.
    ETA Effective Tax Administration Basis for acceptance of an offer where there 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 there are compelling public policy or equity considerations.
    OE Offer Examiner A tax examiner appointed as an offer investigator and located in COIC.
    OS Offer Specialist A revenue officer appointed as an offer investigator, generally located in an area office.
    PIF Public Inspection File Public Inspection Files contain limited information regarding accepted Offers in Compromise such as the taxpayer name, city/state, liability amount, and offer/terms.
    RBA Restitution-Based Assessment All related accounts that are associated with specific MFT(s) and tax period(s) that have been ordered by the court to pay unpaid taxes and/or restitution resulting from criminal conduct.
    TC Transaction Code A code used on Integrated Data Retrieval System (IDRS) to signify actions performed.

Related Resources

  1. Additional resources can be found in IRM 5.8, Offer in Compromise.

  2. Employees can find helpful information on these websites:

  3. Employees should be familiar with and acting in accordance with the Taxpayer Bill of Rights.

Rescission of Accepted Offers

  1. In some instances it may be necessary to rescind an accepted offer. An offer is an agreement binding on both the government and the taxpayer, and precludes further inquiry into the matters to which it relates unless false information or documents were supplied in conjunction with the offer, the ability to pay or the assets of the taxpayer were concealed, or a mutual mistake of material fact is discovered.

  2. The function that accepted the offer is responsible for making the determination to rescind the offer and will also be responsible for completion of all required actions identified in IRM 5.8.9.2.1 through 5.8.9.2.3 below.

  3. After acceptance of the offer, Treas Reg. section 301.7122-1(e)(5) provides that neither the taxpayer nor the IRS is permitted to reopen the case, except in limited situations:

    • False information or documents are supplied in conjunction with the offer;

    • The assets of the taxpayer or the ability to pay are concealed; or

    • A mutual mistake of material fact sufficient to cause the offer agreement to be reformed or set aside is discovered.

    Note:

    Under section 164, comment (a) of the Restatement 2d of Contracts, false information or concealment may allow the IRS to rescind an accepted offer. To do so, the IRS must be able to show that (1) the misrepresentation was material; (2) the misrepresentation induced the IRS to accept the offer; and (3) the IRS was justified in relying on the misrepresentation.

False Information

  1. Under section 159 of the Restatement 2d of Contracts, false information is a misrepresentation, which is defined as an assertion that is not in accord with the facts. False information does not have to be fraudulent. Misrepresentation should not be automatically defined as fraudulent. Misrepresentation may be due to ignorance or carelessness. A half-truth may be a misrepresentation: a statement may be true with respect to the facts stated, but may fail to include qualifying matter necessary to prevent the implication of an assertion that is false with respect to other facts. A half-truth could also be used to conceal relevant information that would have made a material difference in the determination to accept the offer. A misrepresentation must relate to something that is a fact at the time that it is made; a fact does not include a future event.

  2. False information or concealment may allow the IRS to rescind an accepted offer. To do so, the IRS must be able to show the following:

    1. The misrepresentation was material.

    2. The misrepresentation must have induced the IRS to accept the offer.

    3. The IRS was justified in relying on the misrepresentation.

Concealment of Assets or Ability to Pay

  1. Under section 160 of the Restatement 2d of Contracts, concealment is an affirmative act intended or known to be likely to keep the IRS from learning of a fact that it would otherwise have learned. Concealment is the equivalent of a misrepresentation. Concealment, however, is not the equivalent of non-disclosure. The significance is that Treas Reg. section 301.7122 -1(e)(5)(ii) provides that an accepted offer may be reopened where there has been concealment of the ability to pay or the assets of the taxpayer. If you have a case that requires a distinction between concealment and non-disclosure, contact Area Counsel.

Mutual Mistake of a Material Fact

  1. Under sections 151 and 152 of the Restatement 2d of Contracts, a mutual mistake of fact is defined as an erroneous belief held by both parties about an existing fact at the time the contract was entered. The law in existence at the time of the making of the contract is part of the total state of facts at the time. The parties’ mutual mistake with respect to the law, as found in statute, regulations, judicial decisions, or elsewhere, may render the compromise subject to rescission. The mere fact that both parties are mistaken with respect to the same basic belief about an existing fact does not, of itself, provide a reason for the affected party to void the agreed offer. Rescission is only appropriate in situations where a mistake of both parties has such a material effect on the agreed exchange of performances that it upsets the very basis of the agreed offer.

Rescission Procedures

  1. When rescinding the offer, the office responsible for completing the letter will also be responsible for inputting the appropriate transaction code (TC). Prior to rescinding an offer, send a preliminary letter to the taxpayer advising of the proposed rescission of their offer. The letter will contain the grounds for the proposed rescission and will give the taxpayer 15 days to respond and provide any additional information related to the proposal.

    Note:

    AOIC Remarks must be noted with the date the preliminary proposal letter was mailed, the taxpayer's response and the analysis of any additional information provided.

  2. If the rescission is within one year of acceptance, remove the Public Inspection File (PIF) from public access. Send an e-mail to the contact person at the specific PIF location to request removal. If the date of the acceptance letter is more than a year old, a request to remove the PIF will not be required.

  3. Rescind the offer in the following manner:

    • Prepare a letter to the taxpayer identifying the offer by the day it was accepted, advising that the acceptance is rescinded, and the acceptance letter is revoked.

    • Include in the letter the grounds for rescission in general terms with a demand for payment of the original unpaid tax liability, less any payments made on the offer.

    • All rescission determinations must be reviewed and approved by Counsel before being sent to the taxpayer.

      Note:

      The letter must be signed by the same level of approval that signed the acceptance.

    • Document the case history with the basis for the decision to rescind and any taxpayer contact.

    • After all approvals have been received, including Counsel, notify the appropriate MOIC liaison of the rescission.

    • Input the appropriate TC 78X or the 48X and reassign to the field for collection action, if appropriate. In cases of false information or concealment of assets or ability to pay, use TC 781, TC 482 to indicate death of a taxpayer, and TC 483 to indicate mutual mistake.

      Note:

      If an offer was erroneously accepted after the death of a taxpayer, the office responsible for completing the letter will also be responsible for inputting the TC 482. Use the date of death as the date for the TC 482. See IRM 5.8.7.5, Termination of Consideration.

Department of Justice Controlled or Restitution Cases

  1. Occasionally an offer is purportedly accepted while a period is under the settlement jurisdiction of the Department of Justice (DOJ) or a restitution-based assessment period is on the Form 656 or Form 7249. In these situations the IRS lacks the legal authority to accept these offers and certain actions must be taken so that the offer may be deemed not processable.

Department of Justice Controlled Cases

  1. Occasionally an offer is inappropriately accepted due to all tax periods on the offer being under the settlement jurisdiction of the Department of Justice (DOJ). In these cases, although the offer was processed as an acceptance, the IRS never actually accepted the offer because it lacked the legal authority to do so. See IRM 5.8.1.6.1, Tax Cases Controlled by Department of Justice, for additional information.

  2. The offer cannot be rescinded but must be returned as not processable because the IRS had no authority to accept an offer on any period controlled by DOJ.

  3. The office which recommended the offer for acceptance is responsible for requesting the following actions:

    1. Send an e-mail to OIC Collection Policy (*SBSE Coll Policy OIC) to request the offer be reopened by an AOIC programmer. Provide the offer number, date of acceptance, and reason for the request. OIC Collection Policy will notify MOIC that the offer was inappropriately closed as an acceptance while under DOJ jurisdiction. No further actions are required by MOIC.

    2. Contact the taxpayer/POA to advise that DOJ retained jurisdiction therefore the offer was not accepted. Address any payment(s) made and advise the taxpayer the payment(s) will be applied to the liability. The designated payment code (DPC) must be modified to 99.

    3. Reverse the transaction code (TC) 780 on each applicable period by requesting input of TC 782.

    4. Prepare a revocation of lien release, if necessary. See IRM 5.12.3.14.1, Requesting Revocation of Lien Release.

    5. Secure the offer case file to be sent to COIC when all required actions have been taken.

    6. Transfer the offer to the originating COIC on AOIC and include in the remarks COIC should take action in accordance with IRM 5.8.9.3.1.

  4. The COIC site will:

    1. Change the processability criteria on AOIC.

    2. Stamp the Form 656 ‘RETURN’, and cross out the IRS received date and the IRS signature that established the waiver date.

    3. Issue the not processable letter. See IRM 5.8.2.7, Erroneous Processability Determinations.

    4. Copy the not processable letter for the offer file and return the file to the Federal Records Center.

  5. If the not processable determination is made within one year of acceptance, remove the PIF from public access. Send an e-mail to the contact person at the specific PIF location to request removal of the PIF. If the date of the acceptance letter is more than a year old, a request to remove the PIF will not be required.

Restitution Erroneously Included on Accepted Offer

  1. An offer may be accepted from a taxpayer who also has been ordered to pay restitution. Although the IRS is authorized to pursue collection of a restitution-based assessment (RBA), an OIC may only include a taxpayer’s civil tax liabilities, not any criminal restitution. Never include restitution and any associated RBAs in an OIC. If a RBA is erroneously included on the Form 656 or approved Form 7249, action needs to be taken to correct the offer. Follow the same procedures in IRM 5.8.9.3.1 to correct AOIC and related transaction codes.

  2. The acceptance of an offer to compromise with a civil tax assessment does not impact the validity of the RBA and the taxpayer is still responsible for any outstanding balance of the RBA. Payments received based on the terms of the offer will be applied to the civil tax assessments, yet in some circumstances the RBA may stem from the same type of tax and tax periods, so offer payments may partly satisfy the RBA when duplicate civil and/or codefendant assessments exist.

  3. See IRM 5.1.5, Field Collecting Procedures, Balancing Civil and Criminal Cases, and IRM 5.8.4.23.2, Offers in Compromise Submitted that Include Restitution, for more information on restitution.

Potential Default Cases

  1. An offer can reach a potential default status in one of four ways:

    1. The taxpayer failed to fulfill the payment terms.

    2. The taxpayer failed to fulfill the terms of a related collateral agreement.

    3. The taxpayer failed to adhere to the compliance provisions.

    4. The taxpayer failed to return an erroneously issued refund.

    Note:

    MFT 35 and/or MFT 65 — The taxpayer's failure to report or pay an individual shared responsibility payment (SRP) liability made under IRC § 5000A and/or any individual SRP liability assessment made after acceptance will not default the OIC.

  2. Campus MOIC units have responsibility and authority to make determinations on potentially defaulted offers where the taxpayer has not proposed an alternative to the default.

  3. The MOIC unit will make an attempt to secure compliance. If the taxpayer fails to comply with any requests for delinquent returns or payments, the MOIC unit may default the offer. After all appropriate letters have been sent and it has been determined default of the offer is the appropriate decision, MOIC will input reversal codes to put the liability(ies) back to the collection stream and close the case as a default.

Compromise of a Compromise

  1. The compromise of a compromise should be rare in light of the investigation completed in connection with the original offer. In some cases where the taxpayer is unable to pay the balance of an accepted offer, the balance of a non-rebate erroneously issued refund, or the balance of the contingent liability under the terms of a collateral agreement and the investigation reveals that extreme hardship or special circumstances exist, the Service may determine that the Government would better benefit to not accept a compromise on a compromise but it may be in the best interest of the government to:

    1. Adjust the payment terms,

    2. Formally compromise the existing compromise, or

    3. Obtain managerial approval to settle for the amount already paid and not default the offer.

  2. When a request to compromise a previously accepted offer is received by MOIC they will issue Form 2209, Courtesy Investigation, electronically with a read receipt, to the office that accepted the offer. (See IRM 5.19.7.2.15, Compromise of Compromise.) A request for a courtesy investigation should be rare, but when issued, the courtesy investigation should be worked in an expeditious manner and if ICS is used, treated as a priority assignment. The Area Office must document both receipt and assignment of the Form 2209 in AOIC Remarks.

    Note:

    A Form 2209 should only be issued by the MOIC function if a compromise of a compromise is received or the terms of an agreed collateral agreement cannot be properly monitored.

  3. A proposal to compromise the balance of an accepted offer must rest on Doubt as to Collectibility (DATC), DATC with special circumstances (DATCSC), or effective tax administration (ETA).

Receipt and Processing

  1. The proposal must be in writing and in the form of a letter.

    Note:

    Do not secure a new Form 656. No TIPRA payments are required if the terms (lump sum cash or periodic payment) of the new proposal are the same as the original, accepted offer.

  2. MOIC will send the electronic Form 2209 for a compromise of a compromise via e-mail with read receipt. Upon receipt of the proposal, verify acknowledgment by checking the read receipt box in the e-mail. If the Form 2209 is not acknowledged within 7 days, MOIC will follow up with the intended recipient.

  3. Upon receipt of the proposal:

    • COIC will add a history entry to AOIC Remarks indicating receipt and assignment of a compromise of a compromise.

    • The field will add a history entry in AOIC Remarks as to the assignment and receipt and create an Other Investigation (OI) or Collection Initiative Program (CIP) on Integrated Collection System (ICS) to open a control until the taxpayer's proposal has been considered.

  4. If you are rerouting the electronic 2209, document AOIC Remarks and send an e-mail to the MOIC employee who sent the original e-mail.

  5. The taxpayer must submit a current financial statement(s) and all required supporting documentation.

  6. The courtesy investigation will be given priority by the field and COIC. If the investigation is not completed by the original response date (90 calendar days for Appeals and 45 calendar days for COIC/field) on the Form 2209 then send an extension request, Form 2209-A, Status Report, to MOIC.

  7. When closing the Form 2209, notate AOIC with the results of the investigation.

  8. The proposal letter submitted by the taxpayer should be addressed to the Commissioner of Internal Revenue Service and include language shown in Exhibit 5.8.9-1, Pattern Letter 1603(P), below.

    Note:

    The OE or OS will share a copy of the required language, an example, or copy of Exhibit 5.8.9–1 with the taxpayer.

Consideration of Proposal

  1. Acceptance will depend on:

    1. The best interest of the Government; and

    2. The same considerations and merits being applied as if it were submitted on a Form 656.

  2. The information required to support the proposal should fit the case, such as:

    • Command Code (CC) RTVUE/BRTVU print, or if no data is available, a copy of the taxpayer's most recently filed income tax return.

      Note:

      A request for a copy of the taxpayer’s tax return should be rare. Generally, this information is secured through internal sources such as Account Management Services (AMS) and Employee User Portal (EUP). Do not request a tax return if it is not legally due, including any extension of time to file.

    • Review of CSEDs to make sure no CSEDs have expired or are about to expire.

    • Estimate of the remaining liability under the terms of the future income collateral agreement, if applicable.

    • Reasons why the request is being made to compromise the existing agreement.

    • Full compliance check.

      Note:

      If the taxpayer is not in five year filing and paying compliance, a compromise of a compromise cannot be considered. This does not include the current year estimated tax payments.

    • Statement of current financial condition.

    • Description of future prospects and any other information that might have a bearing on the acceptability of the offer.

    • Estimated and projected amount of future income over the period covered by the remaining terms of the original agreement.

Processing Completed Investigations

  1. When the investigation is complete, the taxpayer's proposal, investigative report, and memorandum containing a complete statement of the facts in the case, including the recommendation, must be forwarded to the next level of authority for approval.

  2. Prepare an acceptance or denial letter for the delegated official. See Exhibits 5.8.9–2 and 5.8.9–3 below.

  3. If the taxpayer's proposal is acceptable, the procedures for acceptance of the original offer will be followed including an opinion of Counsel as set forth in IRM 5.8.8.13, Legal Opinion of Counsel.

  4. An attempt must be made by phone to contact the taxpayer prior to the issuance of the proposed acceptance or denial letter of the compromise of a compromise. If contact is made with the taxpayer on a denial then inform the taxpayer of your findings and that they must bring the payment terms of the original offer current or a default letter will be issued.

    Note:

    Advise the taxpayer there are no appeal rights with the denial decision for the compromise of a compromise investigation.

  5. Follow the below "If/Then" chart for preparation of the file.

    If... Then....
    The proposal is acceptable Forward the case file to the delegated official for approval and signature. If the original compromise required Counsel approval, and the taxpayer's proposal is acceptable, Counsel approval is required. Include with any acceptance:
    • Copy of the Acceptance Letter

    • Taxpayer's proposal

    • Memorandum supporting the compromise of a compromise

    • Work papers and financial information

    • A new Form 7249

    Note:

    The new Form 7249 must be generated through the Publishing Website.

    Note:

    See IRM 5.8.8.9, Public Inspection File, for additional information.

    The proposal was acceptable and the terms change from cash to periodic payment A NFTL determination is needed based upon the new terms.
    Follow IRM 5.1.9.2, Informing Taxpayers of Their Appeal Rights, and IRM 5.12.6, Appeals Process Involving Liens, relative to discussion of appeal rights in the lien filing process.

    Note:

    If a CDP request is received in response to the NFTL, process it timely in accordance with IRM 5.1.9, Collection Appeal Rights.

    The proposal is not acceptable Forward the case file to the delegated official for approval and signature. Include:
    • Copy of the Denial Letter

    • Taxpayer's proposal

    • Memorandum supporting the recommendation

    Note:

    No appeal rights are granted to the taxpayer.

  6. For accepted proposals you may need to add a new PIF.

    If Then
    It has been more than one year since acceptance No action is required in regards to the PIF.
    It is under a year since acceptance and is still in the one-year retention period Pull the PIF and replace with the current Form 7249.

    Note:

    If the PIF is located on SharePoint then follow local procedures to upload the Form 7249.

  7. Update the AOIC Remarks and, if it is a field offer, update the ICS history with the results of the investigation. If the proposal is accepted, include the amount of the accepted proposal and the terms for payment in the AOIC history and ICS, if appropriate.

  8. Once the decision letter has been signed and mailed, close the OI or CIP.

    Note:

    There will be no ability to assign this action on AOIC as there is no open AOIC record. The new Form 7249 and letter must be manually generated.

  9. Document the case history indicating that the OI is closed and the final resolution.

  10. E-fax or e-mail the closing documents to the appropriate MOIC unit with instruction to either monitor if it is to be accepted, or default if it is not accepted.

  11. The closing documents are as follows:

    • Form 2209

    • Taxpayer’s proposal

    • Acceptance or denial letter with memorandum, as appropriate

    • Form 7249, with signatures, if an acceptance

  12. If the offer file is no longer in MOIC and has already been forwarded to FRC, the OE/OS group should forward the work papers and financial information for the compromise of a compromise file to FRC following procedures in IRM 5.8.7.12.1, Shipment of Closed Cases to Federal Records Center (FRC). When the case is boxed, AOIC Remarks should be documented "OIC on OIC case file information shipped to FRC as the last case in box # xxx shipped to FRC MM/DD/YYYY."

Pattern Letter 1603(P)

This is an example of a proposal letter to compromise a balance due on an offer or to compromise future income collateral agreements. This letter should be provided to the taxpayer as an example.

Note:

This letter format must be shared with the taxpayer and/or POA.

The information that is printed in bold letters should be included if there was a collateral agreement with the original offer or if the original offer had an attached collateral agreement.
Date Name
  Address
  City, State Zip
   
Commissioner of Internal Revenue
Washington, DC 20224
On [enter date of acceptance letter] you accepted [my/our] offer in compromise and the related Form 2261, Collateral Agreement, Future Income – Individual; or 2261 – A, Collateral Agreement, Future Income – Corporation. [I/we] agreed to pay $[enter the agreed offer amount from the signed, dated Form 656, Offer in Compromise] to compromise the tax liability(s) listed below:
[List type(s) of tax and period(s) ]
Instead of future payments specified in Form 2261, Collateral Agreement, Future Income – Individual; or 2261 – A, Collateral Agreement, Future Income – Corporation [I/we] propose to pay $[enter amount you are offering to pay] in full settlement of the original offer and the collateral agreement.
[Also select one of the following sentences to describe how you will pay the amount you entered in the previous sentence:]
[I/we] have enclosed full payment of the proposed amount.
[I/we] will make full payment of the proposed amount when you notify [me/us] that you have accepted [my/our] proposal.
[I/we] have enclosed a payment of $[Enter Amount] as the initial payment with the balance of $[Enter Amount] paid over [Enter number 1-23 months] when you notify [me/us] that you have accepted [my/our] proposal.
[I/we] have enclosed $[Enter amount you are sending with this letter] and will pay the balance when you notify [me/us] that you have accepted [my/our] proposal.
[The below paragraphs must be included in all proposal letters.]
[I/we] agree to file and pay all taxes as required by the Internal Revenue Code for five years, including any extensions, from the date of acceptance of the proposed, revised offer. [I/we] further agree to promptly pay any liabilities assessed after acceptance of this revised offer for tax years ending prior to acceptance that are not otherwise included in the revised offer.
[I/we] agree to waive any and all claims to overpayments of tax or other liabilities, including interest on those payments, that [I/we] may be entitled to receive under the Internal Revenue Code. This waiver is limited to overpayments which haven't already been refunded to me for any years or tax periods which end before or during the year you accept this proposal.
[I/we] have enclosed a letter with this proposal which contains the detailed reasons for submitting this offer and a completed financial statement showing [my/our] current financial condition.
[Sign and Date]
[Each person who is submitting this proposal must sign and date the letter.]
 

Pattern Letter 1604(P)

This is an example of an acceptance letter for a compromise of a compromise.

Acceptance letter for proposal to compromise balance due on offer in compromise and/or collateral agreement. The information that is printed in bold should be added for a collateral agreement.
Date: Person to Contact:
  Address
  Telephone Number:
   
Salutation  
   
We accept your proposal to pay $[Enter Amount] to settle the remaining liability under the offer in compromise accepted on [Enter Date]and/or the related collateral agreement.
[Pick one]  
Since you have paid the amount proposed, you do not need to take further action.
Since you enclosed $[Enter Amount] with your proposal, please send the balance of $[Enter Amount] by [Enter Date].
Since your payment was to be made on notice of acceptance of your proposal, please send $[Enter Amount] by [Enter Date].
Since you chose to pay your proposed amount over [Enter number of months] months, you must make the payments on the [Enter the day of the month each payment is due] of each month until the accepted offer amount is paid in full.
Make your check or money order payable to the "United States Treasury" and mail to [enter the service center address "Attn.: Collection Offer Unit" ].
If you receive a refund that you specifically waived under the terms of your proposal, please write “void” in the endorsement area on the back of the check and return it promptly to the address above.
If you have any questions, please contact the person whose name and telephone number are shown above.
  Sincerely yours,
  (Signature and title)

Pattern Letter 1607(P)

This is an example of a denial of a proposal of a compromise of a compromise.

Denial of proposal to compromise balance due on offer in compromise and/ or collateral agreement. The information that is printed in bold letters should be added for a collateral agreement.
Date: Person to Contact
  Address
  Telephone Number
   
Salutation  
We are sorry, but we cannot accept your proposal dated [Enter Date] to compromise the remaining liability under the offer in compromise accepted on [Enter Date] and/or related collateral agreement.
We are denying the request for the following reason(s). [Explain reasons]  
We must, therefore, ask you to comply with the terms of the offer in compromise including any collateral agreement. If you have any questions, please contact the person whose name and telephone number are shown above.
  Sincerely yours,
  (Signature and title)