5.19.7 Monitoring Offer In Compromise

Manual Transmittal

August 25, 2017

Purpose

(1) This transmits revised procedural updates for IRM 5.19.7 , Liability Collection, Monitoring Offer in Compromise.

Material Changes

(1) Various editorial changes were made throughout the IRM, e.g., updating IRM references; correcting spelling or grammatical errors; updating website addresses/links; adding or correcting IRM references; formatting; changed references from CSCO to MOIC, name changed from Special Case Unit to DATL Unit ; name changed from P&A Analyst to SOLA Analyst; updated tax year used in examples, etc.

(2) Various editorial changes throughout the IRM changing references from installment payments clarified to offer payments, an editorial change from Compliance Campus to Service Center, and an editorial change from E-Mail to email.

(3) IRM 5.19.7.1 section changed to include required internal control information.

(4) IRM 5.19.7.1 .1 moved the IAT tool information from this section to a new subsection 5.19.7.2.9.8.

(5) IRM 5.19.7.2 added additional IRMs needed as a reference for MOIC procedures, (6) changed the reference from section 4 to the check box on the form 656 for the Low Income Certification.

(6) IRM 5.19.7.2.1 changed the verbiage from installment payment to offer payment, added clarification to (2) Note regarding breach of contract.

(7) IRM 5.19.7.2.1.1 (3) removed reference to the Form 656 Section 4 and added reference to the check box.

(8) IRM 5.19.7.2.5 updated the TAS referral language and Service Level Agreement (SLA) information.

(9) IRM 5.19.7.2.6 (2) removed outdated charts, (4) added reference to the IRM 5.8.10.7, (5) added clarification of transaction codes, (8) added information to the Note regarding the CSED calculator including the link to the calculator, and removed (10) no longer in effect.

(10) IRM 5.19.7.2.9 (3) deleted bullets 3 and 4 and added year when offers were not on AOIC, (8) removed Co-obligor, updated table in (14) to update ST71, and (15) added clarification in the Exception regarding non-CDP status.

(11) IRM 5.19.7.2.9.1 (2) removed (e) requirement to generate Form 3244, (3) added to use CC ENMOD, and (5) added to contact Policy to correct a waiver date.

(12) IRM 5.19.7.2.9.2 (4) added reference to Overlooked Periods, (5) changed amended to related offer, and (6) added in the last row of the table verbiage to state when contract is breached.

(13) IRM 5.19.7.2.9.3 (1) added clarification on establishing follow-ups when an action is pending, (2) added reference to TIPRA IRM 5.8.1.11, (2)(c) added clarification on self-released liens, and changed (d) through (g) to (3) through (5)..

(14) IRM 5.19.7.2.9.4 (1) added clarification on receipt of NW inventory, (5) changed verbiage from required to should, and (6) added responsibility to verify systemic transactions post.

(15) IRM 5.19.7.2.9.6 (1) added reference to the IRM 5.8.11 and (8) added AOIC offer type “A” to identify ETA/DCSC offers.

(16) IRM 5.19.7.2.9.7 (1) (g) added a Note requiring AMS history documentation at least once a year.

(17) IRM 5.19.7.2.9.8 revised list of IAT tools utilized in MOIC.

(18) IRM 5.19.7.2.10.1 (3)(b) clarified offers involving Identity Theft in MOIC inventory, (3)(h) changed wording to any applicable documentation and in the Note added a link to the SERP IDT Liaison, (3)(i) changed contact to the site Revenue Officer, deleted (5), and updated all references to the IRM 25.23.

(19) IRM 5.19.7.2.10.3 removed (3) as no longer applicable, removed information in (4) and moved the Note to (4), updated (5) and (6, and removed (8) as no longer applicable.

(20) IRM 5.19.7.2.10.5 (9) (b) editorial correction change bankruptcy to insolvency, corrected the first Note to state allow 25 days follow-up and second Note changed the word end to default.; (11) added an example on reactivating offer payments after Bankruptcy, added a Reminder to collect only the non-dischargable amount, and updated the table to provide clarification on journalizing the next payment.

(21) IRM 5.19.7.2.10.6 (3) c added an Exception regarding Combat Zone and the CSED.

(22) IRM 5.19.7.2.10.7 (1) changed the wording by removing default or close to state MOIC will follow the below procedures, and (2) updated the scenarios in the If And Then table for deceased taxpayers accounts to provide consistency.

(23) IRM 5.19.7.2.10.8 (3) added references to the IRMs for the disaster freeze codes -O and -S.

(24) IRM 5.19.7.2.10.12 (2) changed the word deposit to TIPRA payment and (3) changed the structure of the sentence.

(25) IRM 5.19.7.2.10.14 (2) added a list of conditions for a rescission of an offer, and (3)(e) added clarification on the actions required for a rescission and reference to the 5.8.9.2.

(26) IRM 5.19.7.2.11 (3) added to establish and update follow-ups to ensure timeliness of actions.

(27) IRM 5.19.7.2.12 (2) removed reference to the IRM 5.8.9.2 was not applicable.

(28) IRM 5.19.7.2.12.6 clarified tables in (7) and (9) deposit missing for 30 days or more.

(29) IRM 5.19.7.2.12.7 (2) added steps (a) through (g) for researching and handling undeliverable or returned checks and added new (3) on documenting AOIC and AMS.

(30) IRM 5.19.7.2.13 (4) removed the example from the Note and added reference to the Interest IRM, (6) removed statement on TC 470 and added refer to the IRM 21.5.8.3.6 for input of TC 570 on credit transfers, and added a note to not pursue offer balances under tolerance, (7) clarified verbiage when payment is returned due to expiration of the collection statute, and (13) clarified guidance when there is an overpayment under $50. .

(31) IRM 5.19.7.2.13.1 (2) (c) editorial change from a bullet list to a step list.

(32) IRM 5.19.7.2.13.3 removed previous (4) and (5) and renumbered (4) added a Note regarding tolerance of balance due on offer, renumbered (5) to provide guidance on overpayments per the revised Form 656.

(33) IRM 5.19.7.2.13.5 removed (5) information was moved to 5.19.7.2.13.3.

(34) IRM 5.19.7.2.13.8 (1) added clarification , and (2) removed outdated information and tables.

(35) IRM 5.19.7.2.14.5 removed the Note in (11) and added the information to a new section 5.19.7.2.14.10 Reversing a Previously Mirrored Module.

(36) IRM 5.19.7.2.14.6 (1) added clarification that extended offers were prior to the 2012 revision of the Form 656.

(37) IRM 5.19.7.2.14.7 (1) changed the word separately to severally.

(38) IRM 5.19.7.2.14.10 added new section on Reversing a Mirrored Module.

(39) IRM 5.19.7.2.15 (1) IPU 17U0214 issued 1/31/2017 to provide updates regarding electronic Form 2209 submission, (3) edited the format and grammar.

(40) IRM 5.19.7.2.18.1 (5) added clarification the IRS lacks the authority to accept an offer from DOJ.

(41) IRM 5.19.7.2.19 added (6) to create a dummy file to maintain copies of AOIC letters issued to the taxpayer as also stated in 5.19.7.2.20 (11).

(42) IRM 5.19.7.2.19.1 (2) added additional information when a an offer payment is not received and contacting the taxpayer, updated information throughout the charts in (2) and (3), and provided the suggested verbiage for an open paragraph.

(43) IRM 5.19.7.2.19.2 (2) added clarification in the If/Then Chart to send the 2908 letter and provide the date the payment is due, and updated the example to include the issuance of the letter with the appropriate paragraphs addressing default.

(44) IRM 5.19.7.2.19.3 (2) added Appeals to the chart.

(45) IRM 5.19.7.2.19.4 (1) added clarification on filing and payment compliance during the 5 year monitoring, (5) added reference to the IRM to identify TDI accounts, (6) added to conduct all internal research, made various changes to the If And Then charts in (6), (7), (8) and (9) to provide clarification of failure to adhere to compliance terms.

(46) IRM 5.19.7.2.20 (1) changed the wording from written off to state an accounting entry will be reversed, (3) clarified complies with information requested, (4) added a Note with guidance if the taxpayer requests an extension after the default letter, and (11) added clarification to create a dummy file for FRC when defaulting an offer.

(47) IRM 5.19.7.2.20.3 (1) added reference to the IRM 5.12.3.14.1, and (2) various changes throughout this paragraph including procedure changes to use Form 14466, and (4) updated the Advisory contact information.

(48) IRM 5.19.7.2.20.4 (3) changed reviewer from analyst to the MOIC Department manager.

(49) IRM 5.19.7.2.21 (2) added a clarification on the recoupment amounts at the time of the acceptance, (5) added guidance on applying recoupment to the SRP prior to other liabilities, and (8) added instructions when reversing a recoupment to a balance due.

(50) IRM 5.19.7.2.22.1 (2) added Note on offer terms exceeding the 60 month monitoring.

(51) IRM 5.19.7.2.22.4 (4) added a note to not update IDRS, (5) added reference to the EFT Number IRM, and added clarification identifying the credit and debit card payment EFT digit.

(52) IRM 5.19.7.2.22.5 (5) removed redundant steps mentioned in previous parenthesis.

(53) IRM 5.19.7.2.22.7 (6) added guidance on closing an Estate only offer when all terms are met, and added (7) guidance on researching and contacting other areas when there is an open IDRS control. that may impact the 5 year monitoring.

(54) IRM 5.19.7.2.25 (1) IPU 17U0214 issued 1/31/2017 to provide updates regarding electronic Form 2209 submission.

Effect on Other Documents

IRM 5.19.7 dated July 25, 2016 is superseded. This document includes incorporated interim guidance: IPU 17U0214 issued 01/31/2017

Audience

Small Business Self Employed (SB/SE) campus employees who process Collection work.

Effective Date

(08-25-2017)

Related Resources

For additional information, please visit SERP to view the Automated Offer in Compromise (AOIC) Job Aid at: http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/5.19.dr/5.19.7.dr/5.19.7a.htm .

For information and listings for the OIC Program, see the SBSE web site at: http://mysbse.web.irs.gov/collection/toolsprocesses/CaseRes/oic/default.aspx .

Kristen E. Bailey
Director, Collection Policy

Program Scope and Objectives

  1. Purpose: An accepted Offer in Compromise (OIC) is a legally binding agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability. IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. The Service has a requirement to monitor all accepted offers for payment of the offered amount, refund recoupment through the year of acceptance, monitoring lien releases, and the mandatory 5 year compliance period with the exception of Doubt as to Liability (DATL) offers. After the IRS has determined the disposition of an Offer in Compromise, various procedures must be followed. This section discusses how to treat these situations that involve the Monitoring Offers in Compromise (MOIC) program.

  2. Audience: These procedures apply to IRS employees who are responsible for the processing and monitoring of closed offers in compromise.

    • Tax Examiners in Monitoring Offer in Compromise (MOIC)

    • Additional IRS employees assigned to the offer program

  3. Policy Owner: Director, Collection Policy

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

  5. Primary Stakeholders: The primary stakeholders are MOIC employees

  6. Program Goals: This IRM provides the fundamental knowledge and procedural guidance for the tax examiners engaged in the monitoring of offers. By following the processes and procedures provided by this IRM, employees will process accepted offers in a manner that follows IRS policy and procedures while promoting the best interests of the Government.

Background

  1. This section provides direction for monitoring accepted offers in compromise and other related processing action taken by the MOIC program.

Authority

  1. Authorities relating to this section include:

    • IRC 7122 Compromise

    • Code of Federal Regulations (CFR) § 301.7122-1 - Compromises

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

    • Delegation Order 5.-1 (Rev. 4) To Accept, Reject, Return, Terminate, or Acknowledge Withdrawals of Offers in Compromise

    • IRC 7809- Deposit of Collections

Responsibilities

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

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

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

  4. Employees in MOIC are responsible for the processes and procedures outlined in this IRM.

Program Management and Review

  1. Operational and program reviews are conducted on a yearly basis with the use of data and reports from the Automated Offer In Compromise (AOIC) system . See IRM 1.4.17Compliance Manager Guide.

  2. National quality reviews and consistency reviews are routinely conducted to ensure case actions are timely and in accordance with the procedures in this IRM.

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. Manually Monitored offers are tracked on IDRS and Accounts Management System (AMS).

  2. Managers are required to follow program management procedures and controls addressed in IRM 1.4.17Compliance Managers Guide.

Terms/Definitions/Acronyms

  1. For a list of common abbreviations, definitions and acronyms used throughout this IRM see IRM 5.8.1 Exhibit 1, Common Abbreviations Used in the IRS

  2. Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: http://rnet.web.irs.gov/OldRnet/Other/acronymdb.asp

Related Resources

  1. Additional resources can be found in;

    IRM Title Guidance On
    IRM 5.8 Offer in Compromise Offer in Compromise processes and procedures
    Document 6209 Document 6209 (IRS processing Codes & Information ) IRS Processing Codes and Information
    IRM 1.2.44 Delegations of Authority for the Collecting Process Delegation Order 5-1 to Accept, Reject, Return, Terminate or Acknowledge the Withdrawal of Offers in Compromise
    IRM 5.19.24 Doubt as to Liability Offers in Compromise Doubt as to Liability offer process and procedures
  2. Employees can find helpful information on these websites: SERP: http://serp.enterprise.irs.gov

Monitoring Offers in Compromise (MOIC)

  1. An accepted Offer in Compromise (OIC) is a legally binding agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability. IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. The Service has a requirement to monitor all accepted offers for payment of the offered amount and for the mandatory 5 year compliance period.

    Note:

    DATL accepted offers are not monitored for 5 year payment and filing compliance.

  2. This subsection provides:

    • Procedures for processing OIC deposits

    • Procedures for accepting OICs into the campus inventory

    • Procedures for monitoring accepted OICs

    • Procedures for processing OIC payments and refund recoupments

    • Procedures for applying or refunding the OIC application fee

    • Procedures for transferring accounts to NMF (non master file)

    • Procedures for creating mirror assessments (MFT 31 accounts)

    • Procedures for processing compliance listings and / or EUREKA™ reports

    • Procedures for processing defaulted offers

    • Procedures for processing OIC collateral agreements

    • A guide for Customer Service Representatives assisting taxpayers with an OIC inquiry

  3. The following reference documents must be available to MOIC tax examiners for procedural guidance, this is not an all inclusive list of IRMs. Additional IRMs needed to complete their procedures can be found on SERP;

    • IRM 4.18, Examination Offer in Compromise

    • IRM 5.8, Offer in Compromise

    • IRM 5.19.7, Monitoring Offers in Compromise

    • IRM 8.23, Offer in Compromise

    • IRM 11.3 Disclosure of Official Information

    • IRM 21.1, Accounts Management and Compliance Services Operations

    • IRM 25.6Statute of Limitations

    • Document 12803, AOIC-SC User Guide for MOIC Campus Tax Technicians

    • The Internal Revenue Code (IRC)

    • Document 6209, IRS Processing Codes and Information

  4. Generally offers in compromise are accepted to meet the following objectives:

    • To resolve accounts when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects the collection potential

    • To resolve accounts with a legitimate dispute as to the amount of tax assessed

    • To collect an amount which can reasonably be collected at the earliest time possible and at the least cost to the Government

    • To collect funds which would not be collectible through any other means

    • To give taxpayers "a fresh start" toward future compliance with the tax laws

  5. If contacted by a taxpayer wishing to submit an offer, advise that before the offer can be processed all applicable lines on the Form 656 or Form 656-L should be complete, and only the most recent revision of the Form should be submitted. Missing information may result in significant delays. The following information must be included:

    • Taxpayer's full name and address

    • Taxpayer's identification number

    • All outstanding balance due liabilities by tax period

    • Basis for compromise

    • Amount offered

    • Payment terms

    • Signatures of all persons submitting the offer

  6. Except with respect to DATL offers, a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed IndividualsForm 433-B, Collection Information Statement for Businesses, is also required with requested attachments, required application fee or the Low Income Certification check box on Form 656 , , if applicable, and required initial offer payments, if applicable.

  7. If the taxpayer indicates during contact that an offer will be submitted:

    • Send the Correspondex Letter 278C, Offer in Compromise,: Forms requested , provide the appropriate COIC address. Refer to the SERP website on the intranet, click on the Who/Where tab and scroll down to Offer in Compromise(OIC) Centralized Service Center Locations.

      Note:

      If the taxpayer has internet access, he/she can get forms and publications by accessing our web site at https://www.irs.gov/ or by calling 1-800-829-FORM (3676).

OIC Payment Terms

  1. Taxpayers are expected to pay the entire amount offered in the shortest time possible based on the terms of their accepted agreement.

  2. The amount and due dates of payments must be specified.

    Note:

    The taxpayer and the IRS can agree to modify the OIC-contract by changing the monthly payment date. lf the taxpayer misses a monthly payment, that is a breach of the OIC-contract.

  3. For non-DATL offers there are two (2) types of payment terms that the Service and the taxpayer may agree to:

    • Lump sum cash - payable in five or fewer offer payments within 5 or fewer months of the date of the notice of acceptance; Form 656 must be accompanied by a payment of 20% of the amount offered.

      Note:

      An exception may be allowed to the five month payment requirement when more flexible payment terms are warranted. Also, in these cases, while they may be submitted and considered as cash offers, the RCP should be calculated as a periodic offer (24 months). See IRM 5.8.4.

    • Periodic payment - offer payments payable in 6 - 24 months. Form 656 must be accompanied by the first proposed offer payment, and additional offer payments must be paid in accordance with the taxpayer's proposed offer terms while the Service evaluates the offer.

    Note:

    DATL offers are payable within 90 days of the notification of acceptance, unless an alternative payment term is approved at the time the offer is accepted. See Form 656 - L section 3.

OIC Application Fee
  1. The IRS established this fee to recover part of the cost of processing, reviewing and providing a specialized service to a limited segment of taxpayers.

  2. When required, the application fee for submitting an OIC is $186. The application fee will be applied to the taxpayer's liability as a payment once the processability determination has been made.

    Note:

    The OIC application fee changed on 1/1/14. It went from $150 to $186.

  3. All taxpayers who submit a Form 656-B, Offer in Compromise Booklet, must pay the $186 application fee, except in two instances:

    • The taxpayers total monthly income falls at or below income levels based on the Department of Health and Human Services (DHHS) poverty guidelines. Form 656-B , Low Income Certification check box, must be completed by the taxpayer. The form may be used to help taxpayers determine whether they qualify for the poverty guidelines exception.

    • The OIC is submitted based solely on Doubt as to Liability (DATL), including DATL of Trust Fund Recovery Penalty.

    The fee is either refunded or applied against the amount of the offer if the offer is accepted to promote effective tax administration, or accepted based on certain economic hardship criteria (special circumstances).

  4. Submission of the fee with the Form 656 is also a processability criteria.

  5. If multiple offers submitted with one remittance intended as the application fees and required TIPRA payments are deemed processable the payments will be applied to tax liabilities and any shortage will be requested.

OIC Determinations

  1. COIC process examiners are responsible for determining processabilty and perfecting offers before they are assigned for investigation.

  2. An offer may be returned for various reasons, including failure to provide information and solely to delay. See 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for additional reasons for returns.

  3. OIC determinations are made by the Collection Area Office, Examination, Appeals, or COIC. The Department of Justice may settle court cases that are ultimately sent to MOIC for monitoring.

  4. One of the following determinations will be made following the OIC investigation:

    1. Rejection: A determination is made that more can be collected than is being offered or acceptance will not be in the best interest of the government. All reject determinations must be reviewed and agreed to by an independent reviewer. The taxpayer will be given appeal rights with the rejection letter.

    2. Withdrawn: The taxpayer requests or agrees to withdraw the offer. The taxpayer is asked to provide the withdrawal in writing in the form of a letter. A Form 3040 should be obtained to state the disposition of any deposit that may have been submitted with the offer.

    3. Accepted: The offer is accepted and forwarded to MOIC for monitoring through the completion of the mandatory 5-year compliance period.

      Note:

      DATL accepted offers are not monitored for 5-year payment and filing compliance.

  5. COIC loads the offer, the application fee, and TIPRA payment onto the AOIC database. If the offer is determined to be processable, AOIC systemically uploads the following to IDRS:

    1. Transaction code (TC) 480 With the appropriate jurisdiction code (1= Collection, Field Function or COIC, 2= Examination, 3= Appeals). Jurisdiction codes 2 and 3 are manual inputs.

    2. CSED indicator P= Primary taxpayer, S= Secondary taxpayer, B= Both taxpayers.

    3. Status 71 Creates a "-Y" freeze, suppresses balance due notices and suspends collection and levy action.

Powers of Attorney (POA)

  1. Taxpayers who wish to be represented submit a properly executed Form 2848,Power of Attorney and Declaration of Representative.

  2. When an offer is received with a Form 2848, COIC checks it across CC CFINK and if the POA is not there the original is forwarded to the Centralized Authorization File (CAF) for input on to the CAF system. If the POA sends in a copy of an already recorded Form 2848 then it is not forwarded unless additional tax periods are being added or there is some change to what the current CAF reflects.

  3. The representative's information is loaded onto AOIC and a copy is placed in the paper case file.

  4. When responding to a third party (anyone other than the taxpayer), who indicates he/she has a third party authorization on file, complete the appropriate search using CC CFINK before providing any tax account information.

  5. If the POA information is on the CAF file but not on AOIC due to an oversight, add the POA information and continue your contact as long as guidelines found in IRM 21.1.3, Operational Guidelines Overview are followed.

Automated Offer in Compromise (AOIC)

  1. The AOIC program tracks and controls offers in compromise. Area Offices, MOIC, DATL and Appeals Area Office share a common database that contains relevant offer information. AOIC allows the user to process, view, and track the status of each offer. The program also generates forms, letters, and managerial reports.

  2. AOIC consists of four parts:

    1. The Area Office segment is designed to assist COIC staff, Field OIC specialists, and other Area Office personnel manage offers up to the point the offer is returned, rejected, withdrawn, or accepted.

    2. The Service Center segment is designed to assist compliance campus personnel control inventories; post and journalize payments, deposits, refund recoupments; prepare and generate forms, letters reports; and monitor collateral agreements and taxpayer compliance for offers that are accepted.

    3. The Appeals segment is designed to assist the Appeals staff up to the point the offer is rejected, withdrawn or accepted.

    4. The DATL segment is also designed to assist the DATL staff up to the point the offer is rejected, withdrawn, return or accepted.

  3. Generally all offers investigated by Collection are on the AOIC program. Department of Justice (DOJ) Settlement cases are not loaded on AOIC.

  4. Cases not on AOIC must be manually monitored. See IRM 5.19.7.2.9.7, Accepted OICs Requiring Manual Monitoring.

Taxpayer Advocate Service (TAS)

  1. Per the Taxpayer Bill of Rights (TBOR), taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay, or ability to provide information timely.

  2. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. For additional information on the Taxpayer Bill of Rights, visit https://taxpayeradvocate.irs.gov/About-TAS/Taxpayer-Rights

  3. Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), is attached and steps cannot be taken to resolve the taxpayer's issue the same day.

  4. "Same day " includes cases that can be resolved in 24 hours, as well as cases where steps can be taken within 24 hours to begin resolving the issue. See also IRM 13.1.7.4 , Same Day Resolution by Operations.

  5. When making a TAS referral, use Form 911, and forward to TAS in accordance with your local procedures.

  6. The National Taxpayer Advocate has reached agreements with the Commissioners of the various IRS Divisions, including the Small Business & Self Employed (SB/SE) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).The SLAs are located at http://tas.web.irs.gov/policy/sla/default.aspx.

  7. When appropriate, TAS employees may issue Form 12412, Operations Assistance Request (OAR). Upon receipt of an OAR, MOIC management should:

    1. Control the request and ensure a response is provided to the TAS office within the requested time frames.

    2. Research AOIC or pull the case file (manually monitored) to review the case history.

    3. Discuss actions taken with the assigned tax examiner.

    4. Contact the TAS office and discuss the OAR issue with the TAS employee.

    5. Contact the TAS office and negotiate additional time if it is determined that the time frame cannot be met.

    6. Respond to the OAR indicating how the issue is being addressed or resolved within the requested or extended time frame.

    Note:

    See IRM 5.8.1.6.7, Taxpayer Advocate Service, for a detail of responsibilities and time frames for SB/SE.

  8. As part of the Identity Theft Program, the AM IPSU Team will begin assisting taxpayers whose situations meet TAS criteria 5–7 and involve identity theft. Applicable cases will now be considered IPSU criteria.

    Note:

    If the taxpayer specifically requests TAS assistance, or is facing economic burden (TAS criteria 1-4), refer the case to TAS. IRM 13.1.7.2, TAS Case Criteria.

  9. Generally, the AM IPSU Team will assist taxpayers whose situations meet TAS criteria 5-7 and involve identity theft.

    Note:

    There will, however, be situations where it is in the best interest of the taxpayer to have TAS work the case, for example when the taxpayer declines referral to IPSU or the taxpayer is facing an economic burden. See IRM 13.1.16.11.3.1, Criteria 5-7 Identity Theft Cases Not Eligible for Referral to IPSU, for a complete list of conditions where referral to TAS would be appropriate.

Extension and Suspension of the Statutory Period for Collection

  1. The Collection Statute Expiration Date (CSED) is the length of time established by law that the Service can collect any unpaid liabilities.

  2. The CSED is normally ten years from the date of assessment.

  3. Each assessment on a module has a separate CSED. Assessments include but are not limited to:

    • TC 150, Entity Created by Posting of a Return

    • TC 290, Additional Tax Assessment

    • TC 300, Additional Tax or Deficiency Assessment by Examination or Collection Division

  4. Generally, the CSED is suspended when the taxpayer files for or submits a request for a specific case action. See IRM 5.1.19.3, Case Actions That Can Suspend and/or Extend a CSED and IRM 5.8.10.7, Effect of Previous Offers on Collection Statute.

  5. When an offer is deemed processable, a TC 480 is systemically uploaded via AOIC on each tax module included on the offer. If the offer is not on the AOIC system, then TC 480 is manually input. TC 480 suspends the CSED until a TC 481, TC 482, or TC 780 posts. The CSED is extended by the amount of time between the posting of TC 480 and the reversing or accepted transaction code.

    • TC 481 = Rejected or Returned (Processable)

    • TC 482 = Withdrawn or Terminated

    • TC 483 = Erroneous Posting of a TC 480, Returned (Not Processable)

    • TC 780 = Accepted

    Reminder:

    Input of TC 480 and a subsequent TC 483 on the tax module does not suspend the CSED, as this was an erroneous input of TC 480. The CSED reverts back to the original CSED.

  6. Several legislative changes have provided or revoked the Service's ability to suspend the statutory period of collection for Offers in Compromise.

    Law Change
    The IRS Restructuring and Reform Act of 1998 (RRA '98) Section 3461 of RRA '98 eliminated the Service's ability to extend the CSED after December 31. 1999. All extensions secured prior to December 31, 1999, and extended beyond December 31, 2002, expired on December 31, 2002 or the original CSED date whichever is later. (Offers that were accepted for processing prior to December 31, 1999, but remained pending after that date were treated the same.) Thereafter, the CSED is only suspended while the offer is pending, during the 30-day period following the rejection of the offer, or during the time an appeal of the offer rejection is under consideration.
    Community Renewal Tax Relief Act dated December 21, 2000 The CSED was not suspended for pending offers for the period of December 21, 2000 to March 09, 2002 because the CRTRA inadvertently removed the suspension provision from the IRC.
    The Job Creation and Worker Assistance Act of 2002 Enactment of the Job Creation and Worker Assistance Act of 2002 on March 9, 2002, reinstated the suspension. Effective March 09,2002, input of the TC 480 suspends the CSED period during the time an offer is pending, during the thirty days following rejection of an offer, and for any period when a timely filed appeal from the rejection is being considered by Appeals. That is for the period of time between the TC 480 and the TC 481, TC 482, or TC 780 only (do not add a year to this suspension). This law change is not retroactive.

    Note:

    Enactment of the Job Creation and Worker Assistance Act of 2002 on March 9, 2002, reinstated the suspension.

  7. Computing the CSED using the Julian date:

    If Then
    The date of the transactions will extend through the calendar year, take the Julian date for the last day of the year. This will give the amount of days the CSED was suspended for that period. Convert the date of the TC 480, 481, 482, 521, or 780 to the Julian date for that date. Add the two dates together and that is the amount of days the CSED was suspended. Once the days of suspension is obtained it will then be added to the TC 150, TC 290, or TC 300 date for the correct CSED.
  8. When a payment is received on an accepted OIC, determine which module has the earliest CSED. Use the table below as a guide to determine the CSED suspension periods:

    If Then Limited to:
    The offer was pending on or after March 9, 2002 The statute is suspended for the period the offer is open (including any time the offer was open prior to December 21, 2000) The number of days the statute was suspended. Upon acceptance, the statute begins running again.
    The offer was submitted on or after January 1, 2000 and closed on or after December 21, 2000 The statute is suspended until December 21, 2000 The days the offer was pending prior to December 21, 2000.
    The offer was submitted and pending prior to January 1, 2000 and closed on or after 12/21/2000 The statute is suspended while the offer was pending up to December 21, 2000 and extended for an additional year The time the offer was pending. Upon acceptance, the statute begins running again.
    The offer was submitted and pending prior to January 1, 2000 and closed between 01/01/2000 and 12/21/2000 The statute is suspended for the period the offer was pending to the date of acceptance and extended an additional year The original CSED or December 31, 2002, whichever is later.
    The offer was submitted, pending and accepted prior to January 1, 2000 The statute is suspended for the period the offer is pending, during the time the terms are monitored and extended for an additional year The original CSED or December 31, 2002, whichever is later.

    Note:

    Several events can suspend or extend the statute. Guidance is provided in IRM 5.19.10.4.4, Determining the Correct CSED. In addition, on the My SB/SE Collection Tools and Processes web page, http://mysbse.web.irs.gov/collection/toolsprocesses/csedcalculator/default.aspx there is a downloadable CSED calculator, CCalc, and a CSED Calculator (CCalc) Quick Start Guide which can assist in complex calculations of the CSED.

  9. COIC and Area Offices are responsible for calculating the CSED and ensuring all statute issues are addressed.

Amended Offer in Compromise (OIC)

  1. While an offer is under consideration, taxpayers may make changes to the original offer. Changes to the amount, terms, tax class, or tax periods, are considered amendments. The taxpayer can submit a new Form 656 or make changes to the original Form 656. The form should be marked "Amended" in red on the top margin of page one.

    Reminder:

    If a Form 656 is inadvertently sent to MOIC marked "Amended" , forward the form to the MSC/BSC COIC Unit or Area Office where appropriate changes and updates to the AOIC record can be made.

Overlooked Periods

  1. Occasionally additional periods or years are discovered subsequent to the acceptance of an offer. Missing liabilities assessed before the acceptance are considered only a defect of the offer. When such liabilities are discovered, the offer agreement should be modified to include the additional period(s).

    Note:

    Such modification of the offer agreement would not require a determination of "mutual mistake of material fact" . If the modification results in the unpaid amount of tax equaling or exceeding $50,000 and an opinion from Counsel had not previously been obtained, the file must be sent to Counsel for the required opinion.

  2. When overlooked period(s) are discovered by MOIC (after acceptance), update AOIC to add a history narrative referencing the overlooked periods.

    Note:

    DATL offers are accepted only on disputed modules. Not all liabilities are included.

  3. Return the case file to the originator for a determination via Form 3210 and follow-up for receipt of the acknowledgement copy.

  4. If the file has been sent to Federal Record Center (FRC), update AOIC history and request the file be returned to MOIC. Send the file to the originator for a determination and any necessary pen and ink changes to the appropriate forms as well as for the required signatures.

  5. If the overlooked period(s) are discovered by the field or COIC, they will add the periods to AOIC and make pen and ink changes to the Form 7249 and Form 656 to include the additional period(s). The appropriate official must initial the recommended change on the Form 7249.

Processing Accepted OICs

  1. MOIC units monitor accepted offers from COIC, Collection Field function, Appeals and Examination and settlements referred to the IRS by the Department of Justice.

  2. The majority of paper case files for accepted offers controlled on AOIC will be held for a short period at the campus before being sent to the Federal Record Center (FRC). The frequency of the shipment will be per FRC guidelines. MOIC will use the AOIC system to ensure receipt and control of these files to the FRC as well as to ensure timely release of the Federal tax lien on any of these cases that are paid in full prior to receipt at the campus for monitoring.

    Note:

    Subsequent requests for any accepted offer file from the FRC is the responsibility of the function needing the file.

  3. There are specific case files that will be held by the campus during the monitoring period. In addition, offers accepted prior to 2012 were not loaded on AOIC, these case files are considered manually monitored. They include but are not limited to:

    • Examination and Appeals DATL offers

    • Appeals CDP offers that are not loaded on AOIC

    • Accepted offers with collateral agreements

    • Department of Justice (DOJ) offers

      Note:

      Defining a DOJ case: **Any module in status 72 and/or with an unreversed TC 520 cc: 70, 75, 80, 82 **Any module with a TC 550 and definer code 04 (judgment) Actions on cases where DOJ is litigating or has secured a judgement, without DOJ concurrence/approval may have a negative and serious impact on the ongoing litigation or secured judgment. The IRS generally does not have the authority under IRC 7122 to compromise periods DOJ is litigating or for which DOJ has secured a judgment. Please refer to: IRM 21.5.6.4.46, -W freeze, or IRM 21.5.6.4.44 (3), -V freeze.

    • Any other offer requiring manual monitoring

  4. When COIC or the Area Office accepts an offer and closes their assignment (release and validate) on AOIC, the offer record transfers to the campus (service center) side of AOIC. The record appears on AOIC in NW status.

    1. The "Release and Validate" Screen is selected from the Maintenance Menu on the Area Office side of AOIC.

    2. The "Destination Listing Report" displays which compliance campus the case is assigned.

    3. COIC accepted offers will be forwarded to the same Campus MOIC site for acceptance into inventory.

    4. AOIC will systemically load the correct campus monitoring address on the Acceptance Letter.

  5. Taxpayers required to submit more than one offer may have the accepted offers directed to different campuses for monitoring:

    If And Then
    There are two accepted offers filed by the same taxpayer one is accepted before the other the first site assigned to monitor will monitor both offers.
    “A taxpayer has more than one accepted offer; the offers are accepted, released and validated at the same time one is assigned to Brookhaven and the other to Memphis the site that monitors offers for the taxpayer's state of residence will monitor both or all.
  6. There are two SBSE sites (Brookhaven and Memphis) that monitor accepted offers.

  7. MOIC accepts transfer of the accepted offer by updating the service center status on AOIC to "OU" . The open unassigned record is now part of the MOIC inventory.

  8. Manually monitored or cases listed under exceptions must include the following documents:

    • Acceptance Letter

    • Form 7249, Offer Acceptance Report

    • The "original" Form 656, Offer in Compromise

    • Any Amendments or addendum(s) to the original Form 656

    • Collateral Agreement, if applicable

    • Related TFRP forms i.e. Form 2750, etc, if applicable

      Note:

      Copies of the above documents are acceptable.

  9. For those offers listed under the exceptions that are not loaded onto AOIC, check the file for the above documents before accepting into MOIC inventory. If any of the documentation listed above is missing or the case file is missing, contact the originating office and request the missing information (or file) be faxed or mailed to the campus. Allow the originating office 15 days to provide the missing information.

    Note:

    Once the campus accepts the transfer on AOIC, the case can not be reassigned to COIC or the Area Office.

  10. Update AOIC status code NW with the appropriate sub code:

    1. MC = Missing Case.

    2. IC = Incomplete Case.

  11. Campuses should generate a report using the NW and sub status code to follow up with the originating office.

  12. If the missing information is not received after the 15 day period or the case file can not be located, accept transfer and follow procedures for processing accepted offers without the case file below.

  13. Research IDRS to verify that all balance due modules assessed at the time the offer was accepted are included on the Form 656 or Addendum. When overlooked period(s) are discovered by MOIC, update AOIC and add a narrative in the remarks referencing the overlooked periods and follow the procedures in IRM 5.19.7.2.8, Overlooked Periods.

  14. While researching IDRS:

    Check for And Then
    Check for TC 922, an indication of URP processing If present Follow procedures in IRM 5.19.7.2.10.11, Automated Underreporter (AUR) Assessments.
    Check for an unreversed TC 530 If present Input TC 531 to reverse the currently non-collectable transaction code.
    Update the module to Status 71
  15. TC 480 and Staup 71 is uploaded onto each tax module for offers controlled on AOIC. The Staup updates the module to Status 71, OIC. Occasionally the TC 480 or the Staup will go unpostable. If the unpostable is not corrected by the Area Office or COIC, TC 480 and Status 71 will not show on the tax module.

    Exception:

    OICs accepted by Appeals through a timely-requested CDP hearing will be in Status 72. Any periods of liability not included in the CDP but included on the offer would be in Status 71.

    Note:

    It is the responsibility of the MOIC Tax Examiner to verify that the MFT screen has been input correctly and that all IDRS systemic actions created due to the input of the MFT screen are correct. An example is the correct Statute Exp Codes (CSED indicator) B, (Both), P (Primary), S (Secondary), and Status 71 if appropriate.

  16. Ensure that TC 480 has posted to each tax period shown on the Form 656:

    If Then
    TC 480 is not present, Input TC 480 using CC REQ77. Use the date the Form 656 was signed by the IRS official for the transaction date or the pending date on AOIC, not the date the taxpayer signed.
    All TC 480s present do not have the same date the Form 656 was signed,
    1. Input TC 483 using CC REQ77.

    2. Input TC 470 using CC REQ77 to prevent balance due notices from issuing.

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

      Note:

      If the posted date does not agree with signature date on the amended Form 656, follow the above procedures.

    NMF period (MFT 20) on MFT screen
    1. Verify TC 480 has been input with the correct date.

    2. If not present, input TC 480 via Form 3177.

    3. If present, verify the waiver date is correct.

Processing OICs With the Case File on AOIC
  1. Review and compare Form 656 /(Amended) Form 656 and AOIC to ensure all tax modules are included.

    If And Then
    The module is on Form 656 or an amended Form 656 is not on AOIC, Add the module on AOIC.
    The module is not on Form 656 or an amended Form 656 is on AOIC,
    1. Contact the investigating employee to determine if the period should be on Form 656 .

    2. If it should be, follow their direction.

    3. If not, zero out the period on AOIC. This will prevent payments from applying to the module.

    4. Enter a full explanation in the History file why this period was deleted.

  2. Refer to the AOIC User Guide, Chapter 5, Receipt of Accepted Offers and Chapter 6, Processing Accepted Offers for instructions on acceptance and control of OICs.

    1. Update the campus Main Screen and assign the offer to a tax examiner.

    2. Update the Balance (Liabilities) Screen.

      Note:

      Ensure that the liability screen matches IDRS, this will prevent TC971/032 errors.

    3. Set up the Journal to post and schedule payments.

    4. Process deposits and payments.

  3. When the campus accepts transfer of an offer on AOIC, the system creates a TSIGN 8500 and TC 130 transaction for each unique TIN in the MFT Screen, then systemically uploads both to IDRS. Tax Examiners should review IDRS Tax modules and ENMOD when an offer is initially assigned to them to ensure the TSIGN 8500 and TC 130 are on each period included in the offer. If not posted within 3 weeks, input manually. Follow- up to monitor for posting.

  4. Review the case file and AOIC to ensure that the correct date has been entered in the waiver and acceptance date field on the Service Center Main Screen. TC 780 uploads to IDRS systemically using this acceptance date when the AOIC record changes to a monitoring status. Therefore, the correction(s) should be made prior to moving the offer to a monitoring status on AOIC. If TC 780 are manually input, remove from the transaction screen when accepting offer into inventory.

  5. If the error is identified after the systemic upload, then the TC 780 should be reversed and manually re-input on IDRS. Be sure to correct the AOIC waiver date and document the case history with your actions. In order to correct the waiver date, forward the request with all information to HQ Policy.

  6. Update NMF (MFT 20) period(s) by requesting input of TC 780, TC 550 with the new CSED date, and accrued penalty and interest up to offer acceptance date via Form 3177. Send Form 3177 to the Cincinnati NMF unit.

    Note:

    All CSED computation must be reviewed and approved by a manager before a TC 550 may be requested on a NMF.

Processing OICs Without the Case File
  1. The following procedures apply to accepted offers that have been sent directly to FRC or offers missing from a shipment.

  2. Perfection of case files sent directly to the FRC is the responsibility of the originator.

  3. If the file is missing from a shipment (manually monitored cases) for less than one year, attempt to secure a copy of the file from the Public Information file.

  4. Research IDRS to verify that all balance due modules assessed at the time the offer was accepted are included on the AOIC MFT screen. If any module is missing, refer to IRM 5.19.7.2.8, Overlooked Periods.

  5. Ensure that TC 480 has posted to each tax period shown on the MFT Screen:

    If Then
    TC 480 is not present, Input TC 480 using CC REQ77. Use the processable date/waiver date shown on AOIC.

    Note:

    Overlooked periods that were assessed prior to the acceptance date should have a TC 480 date of the original Form 656 processable date/waiver date since an amended form 656 is not required for overlooked periods. See IRM 5.19.7.2.8, Overlooked Periods, for instructions on pen and ink changes.

    All TC 480s present do not have the same date,
    1. It is assumed that the originating office received a related offer with new periods.

    2. If there is no indication that a related offer was filed the TC 480 dates will need to be the same for correct CSED calculations.

    3. Input TC 483 using CC REQ77 on the tax period with the different TC 480 date.

    4. Also input TC 470 using CC REQ77 to prevent balance due notices from issuing.

    5. After the TC 483 posts, re-input TC 480 using CC REQ77 with the correct date, include a posting delay code of 1.

    Note:

    Related offers will not always have the same TC 480 date. The TC 480 date is determined by the date the IRS employee signed the Form 656 . If an additional fee was requested with the new offer then it is not an amended offer but a new offer.

    NMF period (MFT 20) on MFT screen
    1. Verify TC 480 has been input with the correct date. (Waiver date shown on the MFT or AOIC Service Center Main Screen.)

    2. If not present, request input of TC 480 via Form 3177.

    3. If present, verify the waiver date is correct. (If not make the correction via Form 3177.)

  6. Review the terms screen; research IDRS to determine if the taxpayer is in compliance.

    If Then
    The taxpayer is in compliance with the terms of the offer
    1. Update AOIC appropriately. (Including the history.)

    2. Journal all payments on AOIC in date order.

    3. Place the offer in the correct AOIC status.

    4. Release Federal Tax Liens, if appropriate. IRM 5.19.7.2.22.4, Releasing the Federal Tax Lien.

    5. Proceed with monitoring the offer.

    The taxpayer is not in compliance with the terms of the offer
    1. Update AOIC.

    2. Place the offer in the correct AOIC status.

    3. 3. Send the potential default letter.

    The taxpayer does not respond or adhere to the potential default letter within the allowed schedule time frame. Since the taxpayer has breached the OIC contract, the IRS employee will
    1. Default the offer.

    2. Place the offer in correct default AOIC status. (IRM 5.19.7.2.20, Default Procedures)

  7. Update the AOIC Remarks and status.

Case History Documentation
  1. Initial case review and documentation are required as each case is received into the Tax Examiner inventory and/or re-assigned to another Tax Examiner's inventory. Required documentation includes the following:

    • Case type (IMF, BMF, NMF, Corporate, TFRP)

    • TC 130 (state whether input is required or not required).

    • Related offers (include offer number in history)

    • Collateral agreement (type)

    • Offer type (lump-sum cash, or periodic payment )

    • NFTL (document filed or not filed and also document whether a release is required when the offer is received in MOIC inventory)

    • Offer amount

    • Accepted CDP offer

    • POA indicated

    • Payments received before acceptance and remaining balance on amount offered

    • Follow-up action and the date required (enter a history narrative and the appropriate date on the AOIC follow-up screen). Any offer in a status other than MP, 5M, or MR should have a follow-up established to timely work the actions on the account.

      Note:

      If the offer has not been paid in full, a follow-up is required on all cases where liens are on the accounts. The follow-up may not be longer than 25 calendar days.

    • Offers in ML status which have the follow up adjusted due to not finding a payment on IDRS require no additional remark in AOIC since the Follow up will flow to the case remark section. This is only when no action was taken due to a payment not being found

    • Assigned SC status

  2. Accepted offers processed under TIPRA guidelines will have payments applied to the liability while the offer is under consideration and after the liability has been established on AOIC. Refer to IRM 5.8.1.11 The Tax Increase Prevention and Reconciliation Act of 2005. Take the following actions on all accepted TIPRA offers:

    1. Review pre-acceptance history entries and verify all payments using IDRS.

    2. If the lump-sum or periodic payment offer has been paid in full, take the necessary actions and follow normal processing procedures for full paid offers, including release of the federal tax lien, if appropriate.

    3. If the lump-sum or periodic payment offer has remaining payments due, follow normal processing for each offer type and schedule appropriate follow-ups based on the terms of the offer. If there is a lien on the account, the maximum number of days for the follow-up can not exceed 25 days in order to meet the requirement for timely lien release within 30 days of the final payment. If the lien was self-released on ALS, it does not require a lien check follow-up.

      Note:

      There should be a prior history entry to indicate how any payments received before acceptance were applied. Both the tax period and the amount applied should be evident in the history and verified using IDRS. MOIC is not responsible for the movement of pre-acceptance payments as long as they are on the correct taxpayers account and were posted to an offer period.

  3. All initial case actions on all offers, AOIC and manually monitored, must be documented in the history with the appropriate OFP codes from count actions taken.

    Note:

    The TE should only be placing an OFP code in the remarks when a count is taken for their action

  4. All subsequent case actions, (e.g., journaling of payments, recoupment completed or not applicable and why, checked for lien, lien released, 3439 verified, collateral to exam or returned from exam, letter sent to taxpayer/POA, received response and state the nature of the response, etc.) must be documented.

    Note:

    If taking actions using an IAT/GII tool and multiple transactions are completed due to the tool use, not all actions need to be stated. Example Credit Transfer Completed. No need to state TC 470 transmitted by the IAT tool.

  5. All contacts, written or verbal, with the taxpayer/POA or internal contacts (e.g., collateral package sent or received, phone calls received or made) or any other contacts relevant to the offer must be documented

  6. AOIC remarks should be documented with the date a letter is issued if it is not the date it was generated.

Timely Acceptance of Incoming OICs
  1. Incoming OICs must be accepted and updated on AOIC within twenty-five days of MOIC receipt (NW status) when liens are present to ensure timely release of liens on all full paid offers. On offers where no liens are present, the OIC should be accepted and updated on AOIC within 30 days.

    Exception:

    Incomplete offers with missing documents (Acceptance letter, Form 7249, Offer Acceptance Report, the original Form 656, Offer In Compromise and any amendments, Collateral Agreement, if applicable), signatures, etc. require contacting the originator. A history note should be made when requesting additional information from COIC or the Area Office. If documentation indicates the offer is paid in full, verify payment received and posted on IDRS. Take appropriate steps to ensure timely release of liens on such cases.

  2. Appropriate AOIC screens must be updated to an "MX" status or Form 6314 Deferred Payment Offer Payment Record, prepared for incoming accepted cases.

  3. TSIGN 8500 and TC 130 systemically upload when the AOIC status is changed from "NW" (new work unassigned) to "OA" (open assigned).

    Note:

    If the offer is a joint offer then a manual TC 130 should be placed on the related TIN to hold any refunds due to the Service. The TE must input a TC 131 once the recoupment is completed.

  4. When the AOIC status is updated to a "MX" (monitoring) status TC 780 uploads.

    Note:

    When placing an offer in MO (monitor other) status the AOIC history should be updated, stating the reason why the case is being monitored. This will allow anyone researching the file to know what is being monitored.

  5. If incoming accepted offers have not been updated on AOIC within three weeks of receipt, campuses should have the clerical staff make INTST prints and manually input TC 780 to ensure specific restrictions are in place and accounts with recent payments are identified to ensure timely release of the federal tax lien when appropriate. When the case is eventually accepted on the system, delete the systemic upload of TC 780 from the MFT summary screen.

    Note:

    If the amount offered has been paid in full, the IRS should release the federal tax lien within 30 days of satisfaction of the payment terms of the offer. For payments made by credit/debit cards see IRM 5.19.7.2.22.4(5). If there are delays in posting payments or transferring credits that may impact the timely release of the lien, contact the centralized lien unit.

  6. Employees are responsible to verify systemic transactions post to the modules.

Automated Offer-In-Compromise (AOIC) Transaction Listing
  1. The AOIC Transaction Listing is a report of error listings for each individual tax examiner and shows all transactions that did not automatically post to IDRS. The report will not give examiners an individual listing, but a listing of all errors for the Campus that is selected. Identify the error by the assigned IDRS number. If there are no employee numbers listed, look up the offer number to determine assignment.

  2. The Daily Transaction Listing on AOIC should be printed daily. Review the information from the report and determine the actions needed on each offer, if any. Some offers may indicate a pending transaction due to another AOIC download. No required action is needed on these. The listing has three parts.

    1. Part one shows the transactions that have been sent for processing.

    2. Part two shows the errors, which must be input manually on IDRS.

    3. Part three shows Non-Master File transactions which must be input manually on IDRS.

    Note:

    Notate AOIC history with corrective actions, including no action required.

  3. To resolve the errors, view TXMOD on IDRS. The unpostable will be notated by a transaction "UPC" code. Refer to the 6209 for the explanation of the unpostable and what code will correct it. Refer to the error listing to see if the transaction is being sent out again. Check on IDRS to see if the unpostable is closed. If it hasn't been closed then you can use CC UPDIS to request how to close or correct with the appropriate transaction. If the control has already been closed, you need to contact the Unpostable Unit (SERP, Who/Where, Campus Directory, Unpostable unit for SC) that issued the transaction. These can be either phoned or faxed. The first two digits of the DLN of the unpostable transaction will show where the code originated. The If/Then table listed below has the required action based upon the error received.

    Note:

    If there is a request for a related offer no further action is required until the related offer is received.

  4. Please see the table below to resolve errors on TC 780/788 errors.

    TC 780/788 Errors

    IF THEN
    Warning: AOIC corrected name CNTRL - AOIC sending again Verify on IDRS per ENMOD for valid name control and update AOIC entity screen to correct name control.
    Duplicate Status Requested No action is required.
    Data Not on IDRS - Required Manual entry of Transaction Research IDRS and AOIC to determine correct transaction codes are input on IDRS.


  5. Please see the table below to resolve TSIGN errors:

    TSIGN Errors

    IF THEN
    Error invalid DO/AO code Verify TSIGN is valid on IDRS.
    Duplicate assignment requested Verify TSIGN is valid on IDRS.
    Warning: OIC corrected a Name CNTRL - AOIC sending again Verify IDRS per ENMOD for valid name control and update AOIC entity screen to correct name control.
    Data Not on IDRS - Required Manual entry of Transaction Research IDRS and AOIC to determine correct TIN for input of appropriate transaction code.


  6. Please see the table below to resolve errors on TC 130/131:

    TC 130/131 Errors

    IF THEN
    Duplicate Status Requested No action is required.
    Data Not on IDRS - Required Manual entry of Transaction Research IDRS and AOIC to determine correct TIN for input of appropriate transaction code.
    Warning: OIC corrected a Name CNTRL - AOIC sending again Verify IDRS per ENMOD for valid name control and update AOIC entity screen to correct name control.


  7. Please see the table below to resolve errors on TC 971:

    TC 971 Errors

    IF THEN
    Warning: OIC corrected a Name CNTRL - AOIC sending again Verify IDRS per Enmod for valid name control and update AOIC entity screen to correct name control.
    Data not on IDRS Research IDRS and AOIC - A balance is showing on the liability screen, liability screen should be updated to reflect no current balance.
    Data not on IDRS TC 971 will not post if TC 780 did not post. Verify posting of the TC780. Manually input if not post to IDRS.


  8. MF and NMF transaction error corrections must be input on the same day as the listing is generated.

    Note:

    Although NMF corrections can be requested timely the action may take 6 to 8 weeks to show on the account.

Applying or Refunding the Application Fee
  1. Most offers require an application fee when submitted, however, the fee may become refundable on Offers accepted under Effective Tax Administration (ETA) or Doubt as to Collectibility with Special Circumstances (DCSC). Refer to IRM 5.8.11, Offer in Compromise, Effective Tax Administration . Whether the offer will be accepted under ETA or DCSC is not known until completion of the offer investigation.

  2. The Acceptance Letter for ETA or DCSC offers will include a paragraph asking the taxpayer if they want the fee applied or refunded. The taxpayer decides whether the application fee will be refunded or applied.

  3. The taxpayer is given 30 days from the date of the letter to notify us in writing. The paragraph reads:

    Note:

    "Your offer was accepted based on effective tax administration or doubt as to collectibility with special circumstances. The application fee of $186 you paid when you submitted your offer will therefore be applied against the amount of the offer. If you would like the application fee refunded to you rather than applied against the amount of the offer, you must notify us in writing at the address below within 30 days of the date of this letter. If you request a refund, any amount due under the offer will not be reduced by the amount of the fee."

  4. The application fee will be applied to the offer amount and tax liability if the taxpayer does not respond or replies late. Allow an additional 15 days following the 30 days from the date of the letter (total 45 days) before applying the fee.

  5. Applying the application fee from the AOIC application fee screen is similar to processing OIC deposits from the Deposits Screen.

  6. If the fee is larger than the offer amount the balance must be refunded to the taxpayer.

    Example:

    The accepted offer amount is $100. Apply $100 of the fee to the offer amount/tax liability and refund the remaining $86 to the taxpayer.

  7. AOIC provides an "Old Application Fee Refund/Apply Listing." MOIC is required to generate the listing on a weekly basis to verify and authorize the manual refund. The listing will indicate offer numbers on which a refund/apply action is needed.

  8. Offers listed as ETA/DCSC will show as an offer type “A” on AOIC. These offers pertain to accepted offers only and should be resolved by MOIC within 45 days of acceptance.

  9. The AOIC system will generate a Form 2424 and journal the fee through the Journal and Balance screens. The Form 2424 must be mailed or remotely printed to the Accounting function affiliated with the COIC site where the offer was initially loaded. Form 2424 will show the designated application fee fund account.

  10. If the taxpayer requests a refund of the fee, prepare a manual refund, using Form 3753 or Form 5792. See IRM 21.4.4.4.1, Preparation of Form 5792, IDRS Generated Refund and IRM 21.4.4.4.2, Preparation of the Form 3753, Manual Refund Posting Voucher. The Accounting function requires a signature from someone authorized to sign the manual refund request form. After the form has been signed by someone authorized, it should be sent to Cincinnati for refunding. All requests for manual refunds must be controlled and monitored on the Integrated Data Retrieval System (IDRS) by the initiator (or other management designated employee) to prevent duplicate, erroneous refunds. See IRM 21.4.4.5.1, Monitoring Manual Refunds, for more information

    Note:

    The above procedures are for funds being refunded from an IDRS account, these procedures are not necessary for refunds from the 4710 RACS Account.

Accepted OICs Requiring Manual Monitoring
  1. Some offers can not be loaded onto AOIC (e.g., Department of Justice settlements, Doubt as to Liability OICs received prior to August 24, 2012, CDP OIC's received prior to October 1, 2012 .) and must be manually monitored by MOIC. Upon receipt of these cases:

    1. Prepare Form 2515, Record of Offer in Compromise, to document actions taken on the case. (Use information on Form 656 to prepare Form 2515 and Form 7249, Offer Acceptance Report, total of liability). Item 10 may be left blank since it is a duplication of the information entered on Form 6314.

    2. Prepare Form 6314, Deferred Payment Offer Payment Record (to be attached to Form 2515).

    3. Prepare Form 6313, Collateral Agreement Payment Record, if offer has a collateral agreement attached.

    4. Verify that Forms 2515, 656, and 7249 have the same tax class and periods and that TC 480 has been input.

      Note:

      If tax class and periods do not agree, notify the originating office.

    5. Review the terms of the offer to ensure the terms match the acceptance letter. If there is a discrepancy, resolve the differences by contacting the originator to verify the correct terms. Include a history narrative identifying the issue and it's resolution.

    6. Input TC 780, TC 130 and TSIGN 8500.

      Note:

      If the offer is a joint offer, then a manual TC 130 should be placed on the related TIN to hold any refunds due to the Service. The TE must input a TC 131 once the recoupment is completed.

    7. Control all manually monitored cases on IDRS and input history on AMS.

      Note:

      The offer status update on AMS history must be entered at least once a year per IRM 21.2.1.8, Account Management Services (AMS) (4) histories are retained for 24 months from the last time the account is assessed.

Integrated Automation Technologies (IAT) Tools
  1. IAT provides tools that simplify research, reduce keystrokes, eliminate repetitive typing, and increase the accuracy of regular work processes.

  2. The use of IAT is mandatory, if applicable, during the work process. For User Guides, see the IAT web site at http://iat.web.irs.gov/JobAids/iat.asp.

  3. If an IAT tool is not available, or an employee has a problem with the IAT Task Manager, the case should be processed through IDRS, following established procedures. See the IAT Website for how to report/fix problems with IAT tools.

  4. Additional IAT tools will be added to the following list when one is deemed beneficial and seen as adding quality to MOIC work processes.

  5. IAT tool users can visit the IAT Website to become a subscriber to the IAT newsletter. The iNews details all ongoing IAT activity with tool retirements and rollouts.

  6. Various IAT tools are available for MOIC employees, the list below is not all inclusive:

    • Manager Security Tool (MST)

    • Erroneous Manual Refund Tool (EMT)

    • Manual Refund

    • Disclosure (Phone Calls Only)

    • Address

    • REQ54

    • REQ77

    • FRM49

    • Compliance Suite

    • Credit Transfer

    • Payment Tracer

    • TC Tracer

    • UP Histories

Accepted OICs Requiring Special Handling

  1. The following categories of accepted offers require special or unique handling.

    • OIC Taxpayer has experienced identity theft

    • Federal Employee/Retiree Delinquency Initiative (FERDI)

    • Trust Fund Recovery Penalty (TFRP)

    • Personal Liability Excise Tax (PLET)

    • Bankruptcy Filed After Acceptance

    • Combat Zone

    • Deceased OIC Taxpayer

    • OIC Taxpayers Residing in Disaster Areas

    • Non Master File (NMF) Accounts

    • CAWR Assessments

    • Automated Underreporter (AUR) Assessments

OIC Taxpayer has Experienced Identity Theft
  1. Instances of identity theft can either be alleged by the taxpayer or can be identified by a Service employee. The taxpayer can self identify by providing any of the following:

    • Form 14039, Identity Theft Affidavit

    • Police report

    • A statement claiming they are a victim

  2. Below are procedures for inputting the identity theft transaction codes and preparing a referral to report the identity theft case. Prior to inputting an identity theft TC 971 Action Code, review IDRS CC ENMOD to prevent inputting a duplicate TC971 Action.

  3. The Tax Examiner will be responsible for:

    1. Identifying the Identity Theft by a TC 971 cc 522 on a offer or recoupment year or if the claim is received from the taxpayer in response to a potential default letter.

    2. Working offers involving Identity Theft on a first in first out basis and should take priority over other assignments.

    3. Input TC 971 code. See IRM 25.23.16, Initial Allegation or Suspicion of Tax-Related Identity Theft - IMF Identity Theft Indicators, Use Tax Administration Source Code "IRSID" for IRS identified suspected Identity theft cases.

      Note:

      Reviewing CC ENMOD is necessary to help prevent duplicative (identical) TC 971 AC 5XX entries. Prior to marking an account with TC 971 AC 522 PNDCLM or IRSID, research CC ENMOD/CC IMFOLE to ensure the account has not already been marked.

      Note:

      When the identity theft victim is the secondary SSN on a joint account, the identity theft indicator is input on the secondary SSN. Identity theft indicators are not input on the primary SSN in these instances. If both primary and secondary taxpayers are victims, place the indicator on both SSN's

    4. In situations where the taxpayer initially asserts identity theft and provides supporting documents at the same time, follow the procedures in IRM 25.23.2.17.1, When to Request Additional Information to Support an Allegation of Identity Theft.

    5. Request supporting documentation, when appropriate. Generally, taxpayers alleging identity theft will be required to provide supporting documentation. However, there are situations where the taxpayer will not be required to submit documentation. .

    6. Set a follow up on AOIC for 45 days for receipt of taxpayer response.

    7. If the taxpayer does not provide substantiation documentation when requested, proceed assuming the taxpayer is not an identity theft victim. Follow procedures in IRM 25.23.2.16.4, Reversing Unsupported Allegations of Identity Theft and IRM 25.23.2-16.4.1, Invalid Identity Theft Determinations - TC 972 AC 522 NORPLY or NOIDT .

    8. If the liability was assessed in ASFR, AUR or EXAM, determine the source of the identity theft liability (ASFR, AUR, EXAM, etc.) and forward as appropriate with any applicable documentation.

      Note:

      Complete and Forward a Form 4442 referral and route based on SERP ID Theft Liaison Listing on the Who Where tab http://serp.enterprise.irs.gov/databases/who-where.dr/idt-liaison-listing.html

    9. The liability was not assessed in ASFR, AUR or EXAM. Complete and Forward a Form 4442 referral and route to the site Revenue Officer. They will determine the validity of the taxpayer's claim and forward to the DITA group if necessary.

  4. Although MOIC may not be working the Identity Theft issue, it is crucial to know the impact the theft has on the monitoring of the offer. If another program is working the identity theft, contact should be made with that program to find out the impact. In some cases, such as a Criminal Investigation (CI) case the program may request you not notify the taxpayer of the pending investigation.

Federal Employee/Retiree Delinquency Initiative (FERDI) Cases
  1. OICs may be accepted on federal employees, including IRS employees. Monitoring of accepted IRS employees' offers should be coordinated with the MOIC Tax Examiner designated to work FERDI cases. See IRM 5.19.1.4.6, Federal Employee/Retiree Delinquency Initiative (FERDI).

Trust Fund Recovery Penalty (TFRP) Cases
  1. The TFRP is a penalty imposed by IRC 6672 against any person required to collect, account for and pay over taxes held in trust by an employer and who willfully fails to perform any of these activities. Taxpayers are assessed the penalty on the IMF equal to the unpaid trust fund amount (TC 240 Reference Number 618) under MFT 55. See IRM 5.19.14, Trust Fund Recovery Penalty.

  2. There are three different possible types of offers related to the TFRP assessment:

    • An offer filed by an employer before the TFRP is assessed against responsible parties

    • An offer filed by an employer after the TFRP is assessed against responsible parties

    • An offer filed by one or more responsible parties assessed the TFRP

  3. Effective September 2005, (based on Counsel opinion) the Service will continue to collect any remaining trust fund portion of the Form 941, Employer’s Quarterly Federal Tax Return, balance due via TFRP (MFT 55) assessments after the offer amount has been full paid by the employer.

  4. When the TFRP is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

  5. Therefore, if the tax has been assessed at the time of acceptance, the area office will not request abatement when the offer terms have been met..

  6. After all offer payments have been received (BMF accounts containing a TC 971 AC 093, or an MFT 55 account that contains a TC 240/RN 618) take the following actions before the accounts are written off:

    Reminder:

    Do not consider TC 538 credits on the Form 941 account, or TC 241 / RN 697 credits on the MFT 55 account, after the date of acceptance as offer payments.

    1. MOIC must contact the TFRP liaison. Brookhaven MOIC will contact Brookhaven TFRP and Memphis MOIC will contact Ogden TFRP. These contacts can be found on SERP under Who/Where.

    2. The TFRP liaison will determine if there is an open TFRP case in current inventory. If so, TFRP will expedite those case actions and close the case. If there is no open case in TFRP inventory, no case actions are required. Then, the TFRP Liaison will inform MOIC that they can proceed with necessary actions to close the offer.

    3. Initiate closing actions on the account per IRM 5.19.7..22 ,Closing an OIC.

Personal Liability Excise Tax (PLET)
  1. The Personal Liability Excise Tax (PLET) under IRC 4103 is a collection tool used to collect certain unpaid excise taxes from responsible person(s) affiliated with a business reported on Form 720, Quarterly Federal Excise Tax Return.

  2. Excise taxes reported on Form 720 subject to PLET assessment are identified on the return as "IRS Numbers " . The abstract IRS numbers listed below are for fuel taxes:

    • 060 (a) - Diesel, tax on removal at terminal rack.

    • 060 (b) - Diesel, tax on taxable events other than removal at terminal rack.

    • 060 (c) - Diesel, tax on sale or removal of biodiesel mixture (not at terminal rack).

    • 104 - Diesel-water fuel emulsion.

    • 105 - Dyed diesel, LUST tax.

    • 107 - Dyed Kerosene, LUST tax.

    • 119 LUST tax, other exempt removals.

    • 35 (a) - Kerosene, tax on removal at terminal rack.

    • 35 (b) - Kerosene, tax on taxable events other than removal at terminal rack.

    • 69 - Kerosene for use in aviation.

    • 77 - Kerosene for use in commercial aviation (other than foreign trade).

    • 111 - Kerosene for use in aviation, LUST tax on nontaxable uses.

    • 014 - Aviation gasoline.

    • 079 - Other fuels.

    • 62 (a) - Gasoline, tax on removal at terminal rack.

    • 62 (b) Gasoline, tax on taxable events other than removal at terminal rack.

    • 13 - Any liquid fuel used in a fractional ownership program aircraft.

  3. The following IRS Numbers are subject to the PLET for liabilities incurred before January 1, 2005:

    • 078 - Dyed diesel fuel used in certain intercity or local buses.

    • 058 - Gasoline removed or entered for production of 10% gasohol.

    • 073 - Gasoline removed or entered for production of 7.7% gasohol.

    • 074 - Gasoline removed or entered for production of 5.7% gasohol.

    • 059 - 10% Gasohol.

    • 075 - 7.7% Gasohol.

    • 076 - 5.7% Gasohol.

  4. Separate documents must be prepared for each tax period and separate assessments for each type of excise tax if the Form 720 contains multiple types of excise tax. It is also possible to make the assessment against more than one responsible person.

  5. Unlike the TFRP which is an assessment of a civil penalty under MFT 55, the PLET is an assessment of the actual unpaid tax and is assessed under TC 150 or TC 290 on NMF. The NMF assessment is made under the individual's SSN on MFT 45 using tax class 6, blocking series 600-619, and Doc Code 30. The literal "Section 4103" appears on the face of the balance due.

    Note:

    When master file programming is completed, assessments of the PLET will be made with the individual's SSN on BMF MFT 03. Prior NMF assessments will be moved to the BMF when programming permits.

  6. When the PLET is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

  7. Therefore, if the tax has been assessed at the time of acceptance, the area office will not request abatement when the offer terms have met.

Bankruptcy Filed After Acceptance of an Offer
  1. Taxpayers may file for bankruptcy relief after an offer has been accepted. The offer should not be defaulted and payment should not be solicited while the taxpayer is in bankruptcy. Defaulting the offer or soliciting payments could violate the bankruptcy automatic stay.

  2. The Insolvency Interface Program searches for Status 71 upon receipt of bankruptcy notification from the courts. When the application identifies Status 71, Insolvency should contact and work cooperatively with the local OIC specialist group or the campus sites to maintain close coordination.

  3. A tax liability is either discharged in bankruptcy or excepted from discharge (non-dischargeable). If the taxpayer receives a discharge of a tax liability, any request for payment by the Service would be a violation of the discharge injunction.

  4. If the tax liability is excepted from discharge, the Service is able to take collection action on any remaining unpaid balance. However, the decision to request payment of unpaid offer balances after the bankruptcy depends on the particular facts of each case and direction provided by Insolvency.

  5. You may learn that the taxpayer filed bankruptcy by:

    1. Notification from the taxpayer or the taxpayer's representative.

    2. Notification from the Insolvency Unit.

    3. Discovery of a posted TC 520.

  6. A posted TC 520 indicates that the taxpayer's account is in bankruptcy, Appeals or is involved in some other type of litigation. The function having jurisdiction is determined by the related closing code. Generally, the bankruptcy closing codes range from 60 to 67 and from 81 to 89. See IRM 5.9, Bankruptcy and Other Insolvencies, for additional information.

  7. The freeze indicators used for bankruptcy (-V and -W) affect notices, offsets and refunds depending on the closing code used.

  8. Contact Centralized Insolvency Operation (CIO) at ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If the case is not assigned to CIO, the CIO caseworker will refer the caller to the Field Insolvency caseworker assigned to the case and provide the caller with the caseworkers telephone number. Depending on the bankruptcy chapter and status of the OIC, Insolvency will provide the appropriate instruction. The following questions must be asked:

    1. What is the docket number?

    2. What is the bankruptcy chapter the taxpayer has filed under? If Chapter 7, ask if assets are involved. See note in item 9 below.

    3. Is there a bankruptcy plan involved? If so, how long is the taxpayer expected to make payments under the plan?

    4. Are the offer periods included in the proof of claim? (Only applies to Chapter 13 otherwise N/A.)

    5. Should we suspend OIC monitoring or should we continue?

    6. When can we resume monitoring?

    7. Will MOIC be notified of the discharge order and provided with appropriate instructions regarding the offer?

  9. Immediately following your contact with the Insolvency:

    1. Document in the AOIC or manual history file including all information secured.

      Note:

      If the taxpayer has already paid the offer amount and the bankruptcy is a Chapter 7 with no assets, the Tax Examiner may continue monitoring as usual. The offer will only be impacted if the taxpayer has a tax liability assessed while the TC 520 is still on the account or fails to comply with any other terms of the offer. Insolvency will then need to be notified to see if collection actions may be taken.

    2. Set a six month follow up for the bankruptcy issue.

      Note:

      A 25-day follow-up to check for full payment is still required if there is a lien on the account.

      Note:

      At the 6 month follow up check IDRS for a TC 520 reversal. If the Insolvency contact states that payments are involved and it will be several years of payments then consider a follow up with Insolvency when the last payment is near. The taxpayer could default the bankruptcy.

    3. Update the AOIC status to MB.

    Reminder:

    Always follow Insolvency's direction on whether to close or continue monitoring an offer.

  10. The taxpayer's account should be monitored for discharge:

    If the And Then
    Tax liability is fully discharged The offer amount has been full paid and the offer is in 5M status Close the offer and move the offer to CF status.
    Tax liability is fully discharged The offer amount has been full paid but not in 5M status
    1. Input the offer to 5M status.

    2. Delete all 5M systemic uploads except TC 788 using the XMIT screen.

    3. Input the offer to CF status.

    Tax liability is fully discharged The offer amount has not been full paid
    1. Input the offer to 5M status.

    2. Delete all 5M systemic uploads except TC 788 using the XMIT screen.

    3. To provide a complete audit trail, do not alter any AOIC screen.

    4. Input the offer to CF status.

    5. Input history documentation on AOIC.

    Tax liability is partially discharged (excepted) The offer amount has been full paid and all refund recoupments complete
    1. Input the offer to 5M status.

    2. Input the offer to CF status.

    Tax liability is partially discharged (excepted and TC 521 has posted) The offer amount has not been full paid Contact the Insolvency Unit to ask if we can resume monitoring terms of the offer. (See below)

    Note:

    When placing an offer in CF status, be sure to remove the OIC indicator.

  11. A full discharge of debt in bankruptcy enjoins the collection of the debt of a personal liability of the debtor. Tax liabilities unpaid at the close of the bankruptcy proceedings must be adjusted, reactivated or reported currently not collectible. However, a partial or excepted discharge allows the remaining liability to be collected according to terms of an accepted OIC. For example, after the 5th payment of a 24 month Periodic Payment offer, taxpayer filed bankruptcy and has a non-dischargeable liability, the taxpayer wants to continue with the monthly offer payments (after bankruptcy), thus when the IRS continues the OIC contract after bankruptcy, the taxpayer would submit his 6th payment and continue making payments based on the terms of the accepted offer.

    Reminder:

    IRS can collect only the non-discharged tax liabilities. Offer payments should only be accepted up to the amount of the non-discharged liability.

    If Then
    Insolvency states that we should not resume monitoring
    1. Input the offer to 5M status to systemically upload transaction codes to write off the remaining liabilities.

    2. Send Letter 2908 to advise the taxpayer that the offer terms have been fully satisfied.

    3. Input the offer to CF status.

    Insolvency states that we should resume monitoring
    1. Change the AOIC status from MB to MX.

    2. Send Letter 2908 to advise the taxpayer that we are reactivating the offer in compromise and provide the date their payment is due

    3. If the offer amount exceeds the tax liability, advise the taxpayer of the adjusted offer amount.

    4. Update the AOIC remarks to indicate the adjusted amount.

    5. Reactivate the offer; start monitoring for payments at the payment that the offer was placed on hold. Update the Journal Screen with the new payment date.

Combat Zone
  1. IRC 7508 postpones the time for performing various tax acts for individuals serving in the Armed Forces of the United States, or serving in support of such Armed Forces, in a designated combat zone, or when deployed outside the United States away from the individual's permanent duty station while participating in a contingency operation (as defined in 10 U.S.C. Section 101(a)(13)). See IRM 5.19.10.6.3, Combat Zone Freeze Code.

  2. The postponement lasts for the period of time the individual serves in, or in support of, the combat zone or contingency operation, plus the period of continuous qualified hospitalization attributable to an injury received while serving in, or in support of, such combat zone or contingency operation, plus another 180 days.

  3. The acts postponed include filing any return of income, estate, gift, employment, or excise tax; payment of any income, estate, gift, employment, or excise tax or any installment thereof; filing certain petition with the Tax Court; filing a refund claim; and bringing a refund suit. The time for performing certain acts performed by the Service are also postponed, including giving or making a notice or demand for payment of tax, collecting by levy or otherwise, assessing any tax, charging any penalty or interest, or taking enforcement activities against individuals during the postponement period. This includes attempts to collect offer payments or instituting potential default actions against individuals with an accepted offer.

    Exception:

    Per IRC 7508(e)(3) the collection statutory period is not extended (even if a deadline is postponed) during any period of continuous qualified hospitalization as a result of injury received while serving in the combat zone or contingency operation and the following 180 days. Refer to IRM 5.1.19.3.8, Combat Zone or Contingency Operation.

    Note:

    If contacted by the taxpayer affected by the combat zone freeze, at their request, any postponement may be overridden.

  4. Because Section 7508 only applies to individuals, the relief does not apply to partnerships or personal service corporations (e.g., doctor, dentist, CPA, etc.) where the key individual is/was serving in the combat zone. Thus, while the Service can make an administrative determination to allow additional time to make a payment or to not default the partnership or personal service corporation, interest and penalties (unless reasonable cause exists) will continue to accrue while such key individual is/was serving in a combat zone or contingency operation. Section 7508 does, however, apply to sole proprietorships because the individual in the sole proprietorship is serving in the combat zone or contingency operation, while the partnership or personal service corporation itself is not serving in the combat zone or contingency operation. Thus, no penalties and interest will accrue against an income tax liability of a sole proprietorship during the postponement period. For purposes of employment and excise liabilities, however, penalties and interest will accrue for payments due before August 25, 2005. Section 403(a) of the Katrina Emergency Relief Act of 2005.

  5. Those serving in support of the Armed Forces in a combat zone include any support personnel on official duty in the combat zone such as Merchant Marines, Department of Defense contractors, Red Cross workers, etc.

  6. Determining whether a taxpayer is entitled to section 7508 relief can be based on correspondence, case history entries or telephone contact.

  7. The following provides instructions for handling taxpayers identified as being entitled to section 7508 relief:

    1. Input TC 500 with the appropriate closing code (CC) for the following combat zones:
      Input TC 500 CC 52 (entry date) or closing code 53 (exit date) - Desert Storm
      Input TC 500 CC 54 (entry date) or closing code 55 (exit date) - Bosnia
      Input TC 500 CC 56 (entry date) or closing code 57 (exit date) - Enduring Iraqi Freedom

      Note:

      See IRM 5.19.10.6.3, Combat Zone Freeze Code in evaluating -C Freeze accounts.

    2. Use the current date for an incoming telephone call or the IRS received date for correspondence when a service member advises of impending deployment to a combat zone.

    3. The case should be suspended for 180 calendar days without taking any further action. Cases can be placed in MO status and a follow-up date entered on AOIC (or IDRS if manually monitored).

    4. Management should use the AOIC Follow up Screen to monitor the progress of the case until the TC 500 is reversed.

    5. If a joint offer and the spouse is willing to maintain terms, monitoring may continue.

    6. The Service established an email site that military personnel, support personnel and their families may use to contact the IRS. It is combatzone@irs.gov .

Death of the Taxpayer While Monitoring the OIC
  1. When the Service receives notification or identifies that an OIC taxpayer has died while monitoring an offer, MOIC will follow the below procedures in working the offer, unless it is a joint offer and there is a surviving spouse.

  2. Record or note the taxpayer's date of death on Form 6314 or on the AOIC history, if available.

    If And Then
    The offer is not full paid and the recoupment has not been completed The liabilities have not been written off
    1. If the account is not in filing and payment compliance, which is a breach of the OIC contract, send a potential default letter and then follow the default procedures in IRM 5.19.7.2.20 , Processing Defaulted OICs

    2. Input TC 540 on the tax year of death and update the name line on CC ENMOD.

      Note:

      If the year of death is on a tax year not yet posted, create a dummy module using CC MFREQD.

      Reverse accruals on IDRS by overlaying CC TXMODA with REQ54, input TC 272 and TC 342 for $.00.

    3. Input TC 781 on each offer module by overlaying CC TXMODA with REQ77, using the date of the default letter and a posting delay of 1.

    4. Reverse TSIGN from 8500 to 0000 by overlaying CC ENMOD with ASGNID.

    5. Input TC 131 on ENMOD to stop refund hold by overlaying CC ENMOD with REQ77.

    6. Remove the OIC indicator. Overlay ENMOD with ENREQ and input 1966 by the OIC year.

    7. Input TC 591/75 for the tax year following the death by using CC FRM 49. The unpaid balance due tax periods will return to open collection status and any federal tax liens will remain in priority.

    8. Update AOIC to the appropriate closing status corresponding with whichever monitoring status the offer case was in.

      Example:

      Offer was in MP then close using CP, if 5M then C5 etc

    The offer is full paid and the account is in 5-Year (5M) compliance monitoring Single assessment (FS 1, 3, or 4) and the last legally due return was not filed and or paid
    1. If the account is not in filing and payment compliance, which is a breach of the OIC contract, send a potential default letter and follow default procedures per IRM 5.19.7.2.20 , Processing Defaulted OICs.

    2. Input TC 540 on the tax year of death and update the name line on CC ENMOD.

      Note:

      If the year of death is on a tax year not yet posted, create a dummy module using CC MFREQD.

    3. Input TC 480, 780 and 781. Overlay CC TXMODA with REQ77 and input TC 480 and 780 with original dates with a posting delay of 2.

    4. Remove the OIC indicator by overlaying CC ENMOD with CC ENREQ, input 1966 by the OIC year.

    5. Input TC 591/75 on the year following the death using CC FRM 49.

    6. Reinstate the tax liabilities.

    7. Update AOIC to C5.

    The offer is full paid and the account is in 5-Year (5M) compliance monitoring we know the last legally due return was filed and paid,
    1. Close the offer.

    2. Update the case or AOIC history.

    3. Input TC 540 and update the name line on ENMOD.

      Note:

      If the year of death is on a tax year not yet posted, create a dummy module using CC MFREQD.

    4. Remove the OIC indicator by overlaying CC ENMOD with ENREQ and input 1966 by the OIC year.

    5. Verify that TC 788 has posted to all modules.

    6. Input TC 591/75 for the tax year following the year of death using CC FRM 49.

    7. Do not reinstate the tax liabilities.

    8. Do not generate or send the default letter.

    9. Update AOIC to CF.

    The offer is a full paid joint assessment in 5M compliance monitoring the surviving spouse is not in compliance Follow potential default procedures in IRM 5.19.7.2.19.5, Defaults on Joint Offers Due to Non-Compliance.

    Note:

    In the case of a joint offer if one spouse dies and the other remains compliant with the terms of the offer no action is necessary.

  3. If a copy of the death certificate is submitted and there is a physical file, place the copy in the file and return the original to the submitter. If no case file, annotate the AOIC history and return the original to the submitter.

  4. Terminate the offer as directed above unless the offer was accepted by DOJ. If the offer was accepted by DOJ:

    1. Record the Date of Death (DOD) on Form 6314 or on AOIC.

    2. Prepare a Form 2209, Courtesy Investigation, to request a determination to either keep the offer open or to close the offer without reinstating the liability.

    3. Provide your information source in the "Remarks" section.

    4. Send Form 2209 to the Area Office where the original DOJ case is on file.

    5. Update AOIC to "OI" status, if the account is on AOIC.

    6. Update IDRS control to reflect Form 2209 issued to DOJ, if the account is not on AOIC.

  5. If DOJ requests the case file, send the case file via Form 3210. Place Form 2275, Records Request, Charge and Recharge, in the suspense file. Request the case file if it was previously sent to FRC. See IRM 1.15.4 for guidance on how to return the case files to the FRC.

  6. Upon receipt of Form 2209 response, with or without the case file, follow the directed disposition.

Disaster Relief for OIC Taxpayers
  1. Section 7508A provides the IRS with authority to postpone the time for performing various acts for a taxpayer affected by a federally declared disaster. These acts include, but are not limited to: the filing of certain tax returns; the payment of certain taxes (including any installment of these taxes); the filing of a Tax Court petition; the filing of a claim for credit or refund of tax; and the bringing of a refund suit. See IRC 7508(a) and 7508A(a) and Treasury Regulation 301.7508A-1(c)(1).

  2. Taxpayers identified by the IRS as "affected taxpayers" are eligible for the relief stated in (1) above. These affected taxpayers include any individual whose principal residence, and any business entity whose principal place of business, is located in county, or parish identified as being part of a "covered disaster area" by the IRS.

  3. OIC taxpayers may contact the Taxpayer Advocate Service (TAS) or MOIC stating that they have suffered a disaster, such as a fire, or flood that prevents timely mailing of a payment, return, or other information. Taxpayers should be allowed a reasonable amount of time to adhere to the offer terms. No relief from interest is available unless the disaster is a federally declared disaster, and then only for current year taxes. Refer to IRM 21.5.6.4.30 -O Freeze or IRM 21.5.6.4.37 -S Freeze for additional information.

    Note:

    Disasters affecting the taxpayer's representative generally would not apply since the taxpayer has the responsibility to maintain terms of the offer. The only exception might be in a federally declared disaster where the representative is located in the covered disaster area and the representative maintains the taxpayer's books and records necessary to meet a filing or payment deadline. In such a circumstance, the taxpayer is considered to be an affected taxpayer.

Non Master File (NMF) Accounts
  1. Non-Master File (NMF) was centralized on September 26, 2006, in Cincinnati (CSPC). All new assessments and/or documents to establish accounts on NMF must be sent to CSPC.

  2. The following NMF account types are established at the Cincinnati Campus:

    • Business Master File (BMF)

    • Internal Revenue Service Closing Agreements

    • Form 7804(c), Embezzlement Cases

    • Form 1120 DISC and 1120 IC-DISC

    • Full Collection Child Support

    • Form CT-2, Employee representative Quarterly Railroad Retirement Tax Returns

    • Individual Master File (IMF)

    • International Returns BMF

    • IRC 6702, Frivolous Income Tax Return Penalty

  3. To find the contact go to SERP, Who/Where, Accounts Management and Accounting Point of Contact, see the Accounting and Cincinnati contact listed.

CAWR Assessments
  1. The IRS CAWR (Combined Annual Wage Reporting) program ensures that employers have paid the proper amount of taxes, withholding, and advanced earned income credit. This is done by comparing the Forms W-3, W-2, W-3C, W-2C totals and the Form 1099-R and W-2G withholding amounts to the amounts reported on the employment tax returns.

  2. The SSA-CAWR program addresses apparent "missing" Form W-2. These cases are referred to IRS by SSA (Social Security Administration) for follow-up and, if necessary, to make penalty assessments for failure to file.

  3. Cases that are determined to have discrepancies or that are referred by SSA, are loaded onto the CAP (CAWR Automated Program) Tier II SUN at TCC. CAP is a stand alone computer (inventory) application that houses the CAWR programs. All master file actions that affect the taxpayer's account for the years being worked will result in an update to the CAP system. This includes Entity changes, IDRS adjustments and additional Forms W-3, Transmittal of Wage and Tax Statement, and Forms W-2, Wage and Tax Statement, processing by the SSA.

  4. BMF taxpayers identified during processing CAWR may have pending or accepted offers on file with IRS. Additional assessments can be made while the offer is pending but, not after the offer is accepted.

  5. If a TC 780 or TC 788 is on the BMF tax modules, CAWR examiners will forward CAWR CAP documents (Money Screen and Entity Screen) to be associated with the OIC case file.

    Note:

    If the offer file is located at the FRC, create a dummy file to hold the CAWR documents.

  6. Make a note in the history on AOIC or manually monitored file that the CAWR assessments documents have been placed in the case file or a dummy file has been created.

    If Then
    The taxpayer defaults As part of the default process:
    1. Return the documents to CAWR for assessment determination if the tax year is within two years of the current year.

    2. If more than two years, destroy the documents.

    The taxpayer meets all terms of the offer
    1. Close the offer. (If the CAWR assessment documents are in the case file, they will remain in the closed case file.)

    2. If in a dummy file, destroy the documents. (No additional assessment will be made.)

    Note:

    The authority to destroy records is according to the IRS Records Control Schedules, Document 12990 and Document 12829. Guidance is provided in IRM 1.15.3, Disposing of Records.

  7. In accordance with IRC 6721, a penalty for "intentional disregard" systemically generates for CAWR assessed tax periods. Because the CAP system does not recognize Status 71 on an OIC entity, the penalty assessment will generate and is established under MFT 13.

  8. When this penalty generates following acceptance of an offer:

    If Then
    Assessed on any offer tax period The penalty must be abated.
    Assessed on a non-offer tax period Follow potential default procedures IRM 5.19.7.2.19.4, Failure to Adhere to Compliance Terms.
Automated Underreporter (AUR) Assessments
  1. The Automated Underreporter Program identifies taxpayers who have not reported all of the income on a filed income tax return. The program compares the total amount from all income reporting documents such as Form W-2, Form 1099, etc. to the amount shown on the filed income tax return.

  2. When an accepted OIC is transferred into MOIC's inventory by updating to a MX status on AOIC, a TC 780 (-Y freeze) is generated on IDRS. Input of the TC 780 freezes the tax module and causes attempts to input subsequent underreporter adjustments to unpost.

  3. The Offer Examiner or Offer Specialist must review IDRS before inputting TC780 because AUR issues must be resolved before transferring an accepted OIC into MOIC's inventory.

  4. TC 922 with process code 03 or 06 indicates that AUR has selected the taxpayer's return for processing.

    Note:

    TC 922 without a process code means the return has not been selected. If there is no process code or process code 03 or 06 is the only process code, TC 780 can be input without contacting AUR.

  5. If a TC 922 is present followed by one of the following closure process codes (process codes are shown to the right of TC 922), TC 780 can be input without contacting AUR.

    If Then
    TC 922 is not followed by a process code
    1. The case can be transferred to MOIC on AOIC without contacting AUR, if all other review conditions are met.

    2. For manually monitored cases input TC 780 using CC REQ77 without contacting AUR.

    TC 922 is present and followed by one of the following closure process codes:
    10 through 18
    20 through 29
    35 through 53
    61 through 69
    70 through 74 and 76
    80
    82 through 89
    90 through 94
    96
    1. The case can be transferred to MOIC on AOIC, if all other review conditions are meet.

    2. For manually monitored cases input TC 780 using CC REQ77 without contacting AUR.

    TC 922 is present and has a process code other than those shown above
    1. Contact AUR Branch to advise that an OIC has been accepted and AUR should close their case. (A list of AUR Coordinator contacts is on SERP.)

    2. Wait 2 cycles for the closure process to post.

    3. Cases on AOIC: Transfer the case to MOIC on AOIC, if all other review conditions are meet.

    4. For manually monitored cases input TC 780 using CC REQ77.

    Note:

    If TC 780 has been input before AUR closes the case, TC 290 .00, using Blocking Series 8XX must be input. Blocking Series 800 is restricted to Collection.

Acceptance of a DATL offer
  1. A DATL offer is filed on Form 656-L and will only be accepted for the tax period (s) in question.

    Note:

    All modules with a balance owed by the taxpayer may not be included in the offer. Compliance is not a requirement for the acceptance of a DATL offer.

  2. No TIPRA payment or application fee is required for a doubt as to liability offer.

  3. Accepted DATL offers are not monitored for the 5 year payment and filing compliance nor is the refund recoupment of the offer year part of the terms.

Amended Returns After Acceptance
  1. Taxpayers may attempt to amend a return for a tax period(s) included on the offer, however, once the tax period has been compromised, changes cannot be made to the amount assessed.

  2. If an amended return is received for an offer period return the original form, and remittances (if submitted with the amended return), to the taxpayer with a letter advising that we can not process an amended return on a tax period included in an accepted offer.

  3. If the offer is being monitored with a physical case file make a copy for the file.

  4. Update the AOIC or case file history.

Rescission of an Accepted Offer
  1. During the 5-year compliance monitoring period of an accepted offer, a determination to rescind an existing compromise agreement may need to be made.

  2. An offer is an agreement which is binding and conclusive on both the taxpayer and the government, and prohibits further action on periods related to the offer unless

    1. the taxpayer supplied false information or documents in connection with the offer;

    2. the taxpayer concealed his ability to pay or assets; and

    3. a mutual mistake of a material fact is discovered.

  3. Requests regarding rescission of accepted offers are routed to the MOIC area from COIC, the Area offices, Appeals or Counsel. MOIC will take the following action to return the original offer file to the originator as required:

    1. Use AOIC to determine who the originator of the accepted offer was and advise them of the call/contact.

    2. If the offer file is immediately available, MOIC will forward it to the originator on Form 3210 and annotate AOIC or the case file if the offer is manually monitored.

    3. If the offer has been shipped to FRC, MOIC will request the file, forward it to the originator on Form 3210 when received and annotate AOIC or the case file.

    4. The originator will prepare the appropriate letter(s), secure required approval and place a copy of the letter(s) in the case file. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

    5. The originator will return the accepted offer file to MOIC via Form 3210 and provide guidance regarding any necessary changes to AOIC and/or IDRS as a result of the rescission. The guidance will be either to have the offer returned to the accepting official on AOIC so that a final determination can be made or MOIC will be instructed to close the offer. If MOIC closes the offer they will place the offer in CX status. Refer to IRM 5.8.9.2Rescission of Accepted Offers.

    6. MOIC will take the required actions, document AOIC as appropriate and return the case file to the FRC. See IRM 1.15.4 for guidance on how to return the case files to the FRC.

OIC Case Maintenance and Inventory Control

  1. The AOIC program provides a report feature to monitor and maintain control of offer inventories, titled the "Employee Inventory Report " . This report should be used to generate a periodic list of all offers in the same status for a certain period of time.

  2. Procedures for accessing the listings/reports are included in the AOIC User Guide.

  3. Offers with a "L" Process Definer code (usually ML status) are required to be reviewed for full payment of the offer every 25 days. This is to ensure the timely release of all liens. Tax examiners will establish and update appropriate follow-ups to ensure timeliness of actions pending.

  4. Two of the most important listings are the Journal Payment Due Date List and Follow Up List. The Journal Payment Due Date List must be generated monthly to determine a missed payment.

  5. If a payment is missed or another offer term is not being met, the follow up listing must be used to monitor your attempts to get the taxpayer back into compliance.

  6. Doubt as to Liability offers are not subject to the 5-year compliance monitoring.

  7. In order to assist with OIC case maintenance, the following established schedule for generation of Eureka/DAE reports will be upheld. All related case actions will be completed within 60 days of receipt of the reports:

    • Refund Recoupments - May 30th and November 30th.

    • Compliance - November 15th.

    • Aged 5M - January 15th, April 15th, August 15th and December 10th.

    Note:

    Eureka/DAE reports can only verify IMF module information.

OIC Deposits

  1. Deposits may be received when the offer is submitted, while the offer is pending, or both.

    Note:

    Deposits are not required or necessary for consideration of an OIC.

  2. Deposits received with new or pending OICs are not applied to the taxpayer's liability.

  3. Deposits are held in a Special Deposit Fund (4710 Account), a non-interest bearing account in Revenue Accounting. Deposits received in Appeals for CDP cases and Examination for Doubt as to Liability OICs will be forwarded to Receipt and Control (R&C) via Form 2515 with notification to the monitoring unit.

  4. All remittances must remain within Receipt and Control's (R&C) secured area.

  5. If a deposit is received while an offer is pending in a Area Office, field personnel must prepare Forms 2515 and Form 3244, then forward the deposit to Cincinnati via overnight express indicating in which 4710 RACS Account the deposit should be placed in. The MOIC state mapping determine's in which account the money should be deposited.

  6. Deposits must be processed timely in accordance with IRC 7809(b), which requires a deposit fund account for sums offered to compromise an assessed tax liability.

Processing Deposits on AOIC
  1. Update AOIC with the deposit information from the Form 2515, Form 656, or other documentation. Follow procedures in the Compliance Services AOIC User Guide, Chapter 3.

  2. After the deposit information has been input, generate the Form 3244 CG from AOIC.

  3. Route a copy of the Form 2515 and generated AOIC forms to the RACs Unit through Receipt & Control (R&C), R &C will forward Form 2515 to RACS in Accounting. The remittance will be deposited by R &C.

Processing Deposits on Manually Monitored Cases
  1. Deposits made on offers not controlled by the AOIC program must be processed manually.

  2. Manually processed deposits must be assigned an 8 or 10-digit RACS control number. This number may be created by RACS or the OIC Unit.

    1. Assign one RACS number per offer. If multiple deposits are received on an offer, all deposits will use the same RACS number.

    2. Maintain a log of manually assigned RACS numbers.

  3. Research the RACS Report Control File and determine if a previous remittance was recorded as a deposit for the OIC taxpayer.

    If Then
    The remittance is the initial deposit
    1. Assign a RACS control number.

    2. Make a copy of the Form 2515 for RACS (the original form is maintained in the 4710 Account File).

    3. Prepare Form 3244. Enter in the remarks box, ''OIC Pending, Apply to 20X6879.9 (4710 Account) and show the RACS control number in the lower left corner.

    The remittance is a subsequent deposit
    1. Pull the original Form 2515 from the 4710 Account File.

    2. Record the amount and date of the subsequent payment (deposit) on the Form 2515.

    3. Make a copy of the Form 2515.

    4. Re-file the original Form 2515.

    5. Prepare Form 3244, enter in the remarks box. ''OIC Pending, Apply to 20X6879.9 (4710 Account) and show the RACS control number in the lower left corner. (Use the same RACS control number that was used for the initial deposit.)

  4. For both initial and subsequent deposits, route the copy of Form 2515 and Form 3244 to the RACS Unit in Cincinnati Accounting. The remittance will be deposited through R & C.

  5. Form 3244 will be returned by Accounting with a journal number and date.

  6. Associate and attach the Form 3244 to the Form 2515 in the 4710 Account File.

  7. Maintain the Form 2515 until the remittance has been either applied or refunded and the 4710 account cleared of the funds.

Disposition of OIC Deposits
  1. When the offer investigation is completed and a determination has been made, deposits in the 4710 Account must be refunded to the taxpayer or applied to the tax liability.

  2. Deposits on accepted offers will be applied to the taxpayer's liability.

  3. Deposits on withdrawn, rejected or returned offers will be refunded to the taxpayer by completing Form 3753, Manual Refund Posting Voucher, unless the taxpayer has provided a written statement or signed Form 3040Authorization to Apply OIC Deposit to Liability, authorizing the Service to transfer the deposit to the tax liability. This authorization can be secured at anytime during or following the investigation.

    Note:

    The 4710 Account is a non-interest bearing account. Therefore, refunds never include interest.

  4. Although IRM 21.4.4-2, Manual Refund Checklist, instructs employees requesting manual refunds to contact the Financial Management System (FMS), it is not necessary for refunds from the 4710 RACS Account.

Deposit Dispositions for Offers on AOIC
  1. Take the following actions to process deposits through AOIC. (Refer to the AOIC User's Guide, Chapter 3.)

  2. Print the AOIC Offer Deposit Disposition Listing monthly. This listing identifies withdrawn, rejected and returned offers and also indicates the type of disposition. (A= Applied/R= Refund.)

    If the listing Then
    indicates "A" Complete the following actions to apply the deposit to the taxpayer's liability:
    1. On AOIC, use the Apply option from the Deposit RACS Screen to generate Form 2424CG.

    2. Verify the taxpayer's address and update if necessary.

    3. Highlight the word Debit on the debit copy with a blue marker.

    4. Highlight the word Credit on the credit copy with a pink marker.

    5. Attach the source documents. (If an accepted offer, a copy of the acceptance letter. If a withdrawn, rejected, or returned offer, a copy of the Form 3040, Authorization to Apply OIC Deposit to Liability, or a written, statement signed by the taxpayer.)

    6. Route Form 2424CG with appropriate documentation to the RACS Unit to Accounting.

    indicates "R" Note:IRC Section 7809(b) requires deposits to be returned to the maker of a rejected offer. This includes deposits made by a third party. Complete the following actions to refund the deposit to the taxpayer:
    1. Prepare Form 3753, Manual Refund Posting Voucher.

    2. Verify the taxpayer's address and update if necessary. Attach a copy of ENMOD.

    3. Attach a copy of the 4710 page that indicates the offer number and amount.

    4. Route the original Form 3753 (with management approval) to the RACS Unit in Accounting.

  3. All monitoring units must apply or refund deposits controlled by their sites.

  4. Although OIC deposits submitted with incoming offers may be physically located in the RACS accounts at another campus, each campus is responsible for the deposit disposition for the states serviced by their site.

    Note:

    Memphis and Brookhaven will apply or refund deposits related to their monitoring inventory only.

  5. When disposing of AOIC offers with deposits residing in the RACS Unit of another campus:

    If Then
    Applying the deposit:
    1. Generate and print Form 2424 from AOIC.

    2. Fax the request to the RACS Unit where the deposit resides.

    3. Make a history note on AOIC.

    Refunding the deposit:
    1. Prepare Form 3753.

    2. Sort and batch all manual refund requests.

    3. Contact the receiving campus(es) (OIC Unit) to notify requests have been prepared.

    4. Mail to receiving campus OIC Unit.

    Receiving requests for a manual refund ( Forms 3753)
    1. Each Form 3753 received from the sending campus must be signed by local management.

      Note:

      Each campus RACS maintains a Form 14031, Manual Refund Signature Authorization.

    2. Forward or route to RACS unit.

  6. When a request to refund a deposit is made and it is not on the deposit disposition list, secure written evidence that this is what the taxpayer wants from the requestor (Area, COIC, etc.). R &C requires a source document when refunding deposits.

  7. The Area Office, Exam or Appeals will provide disposition instructions for manually monitored offers when the offer is rejected, withdrawn or returned. If the Area Office does not specify what should be done or does not provide the required documentation, refund the deposit.

Deposit Dispositions for Manually Monitored OICs
  1. Deposits are recorded on Form 2515 and Form 6313 for manually monitored cases. When the manual control card, Form 2515 or Form 656 indicates the taxpayer made a deposit(s):

    1. Check the 4710 Account file and/or the 4710 Monthly report to be sure a credit is available.

    2. Add any additional deposit amounts to Form 2515.

    3. Record transfer of the deposit on Form 2515 (enter the amount and periods where the deposit was applied) to zero out the credit.

    4. Once RACS deposits post secure an INTST print to the date of acceptance to compute the amount(s) to be applied on each period affected by the deposit.

    5. Annotate the 4710 Account list indicating the date, amount and tax examiner making the transfer of the funds to master file.

    6. Re-file Form 2515 in 4710 Account file.

    7. After reconciliation, file Form 2515 in the case file.

    Note:

    For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

  2. Apply the deposit as follows:

    If the deposit is... Then
    to be applied to the taxpayer's liability
    1. Prepare Form 2424, Account Adjustment Applied Voucher.

    2. Use the received date of the deposit as the received date of the payment.

    3. Attach the source document. ( Form 3040 or written statement signed by the taxpayer.)

    4. Route or fax Form 2424 with documentation attached to the RACS Unit in Accounting where the deposit is located.

    to be refunded to the taxpayer

    Note:

    IRC Section 7809(b) requires deposits to be returned to the maker of a rejected offer. (This includes deposits made by a third party.)

    1. Prepare Form 3753, Manual Refund Posting Voucher.

    2. Attach the source document (copy of Form 1271, Rejection, Returned or Withdrawn Memorandum, if available).

    3. Attach a copy of ENMOD.

    4. Attach a copy of the 4710 page that indicates the offer number and amount.

    5. Route Form 3753 with attachments to the RACS Unit in Accounting where the deposit is located.

  3. For applying deposits to ANMF tax periods:

    1. Research the ANMF account via AMS or ANMF, if available.

    2. Attach an ANMF print for each applicable period to the Form 2424.

    3. Apply amounts to the oldest CSED on the NMF 1300 Account first.

    4. Mail the form with attachments to the appropriate NMF site.

  4. After month-end reconciliation with Accounting, Form 2515 will remain with the open file until the deposit is either refunded or applied to the taxpayer's liability.

4710 Account Reconciliation
  1. On the 3rd workday of each month the RACS Accounting function closes the 4710 Account activity for the month and forwards the Offers in Compromise Inventory Detail Report showing all OIC deposits in the 4710 Account to Brookhaven and Memphis. The OIC unit at each site must reconcile the OIC deposits with the general ledger balance.

  2. Upon receipt of the RACS report from the RACS 4710 Account Coordinator, an MOIC tax examiner generates a Deposits (RACS) Open Balance Report (selection A on the AOIC Reports menu) to reconcile balance amounts.

  3. The "manual" RACS Report Control File must also be pulled to verify that all credits and debits for the month have been recorded for manually monitored offers.

  4. The MOIC tax examiner must compare the two reports and research all deposits that do not match.

  5. Copies of the following documents that will impact the 4710 account should be routed, on a daily basis, to the designated MOIC employee responsible for reconciling the account:

    • Form 3753

    • Form 2424

    • Bad Check notification

    • Form 2515

  6. If a payment does not appear on both Accounting's report and AOIC/Manual RACS report, take the following actions:

    1. Research to determine where the deposit was applied and the appropriate application.

    2. Determine if the deposit was placed in the 4710 Account using an incorrect RACs number, refunded to the taxpayer or applied to a tax liability.

    3. Contact Accounting and take the appropriate actions to reconcile accounts (submit Form 2424 or Form 3753, etc.).

  7. If the deposit is on AOIC but not listed on the 4710 Account Report:

    If And Then
    The deposit is missing for less than 30 days Consider the amount reconciled (Accounting has probably not yet posted the amount to the RACS account.)
    The deposit is missing for 30 days or more the offer is pending 1. Research the AOIC history to verify there was deposit made with the offer.
    2. Call Cincinnati RACS to determine if the deposit is in the 4710 Account.
    3. If the deposit has posted to the account considered the amount reconciled.
    4. If the deposit has not posted to the account; follow the steps below in (8).
  8. Research IDRS to see if the payment was applied to the tax liability.

    If Then
    Found on IDRS Prepare Form 2424 to journal the deposit to the 4710 Account.
    Not found on IDRS Research for a related offer.
    A related offer is found 1. Determine by reading the history if a deposit was received and posted.
    2. Contact RO or OE if unable to make a determination.
  9. If the deposit is not on AOIC but is on the 4710 Account Report:

    If And Then
    The missing deposit is less than 30 days Consider the amount reconciled. (Accounting has not yet forwarded documentation to MOIC for journalizing AOIC.)
    The deposit is missing for 30 days or more the offer is not on AOIC 1. Research the history on DI, ICS and IDRS to determine if this is a manually monitored offer.
    2. If so, contact the person assigned the offer investigation for instruction.
    3. If a DATL offer, the research must be forwarded to the DATL Unit with a monthly follow up until the deposit is disposed.
    The missing deposit is over 30 days the offer is pending on AOIC, but the deposit is not on the Deposit Screen 1. Call Cincinnati RACS for documentation to support the amount shown on the 4710 Report.
    2. When documentation received post deposit on to AOIC.
    Offer has been accepted assigned to a tax examiner Contact the tax examiner to have the deposit applied to the tax liability.
    Offer has been rejected, returned or withdrawn Contact the RO or OE to determine if the deposit should be applied or refunded.
    The deposit RACS number (also the AOIC number) is not on AOIC Research the TIN, DI and related numbers.
  10. As of April 1, 2005, COIC payments may be processed through the Paper Check Conversion System (PCC) at Brookhaven and Memphis. PCC is a process for converting checks into electronic fund transfers. There will not be a paper check if it is processed through PCC.

Undelivered or Uncashed Deposit Refunds
  1. Refunds issued to the taxpayer may be redeposited into the 4710 Account for two reasons:

    • The refund check was returned as undelivered mail.

    • The refund check was not cashed within one year of the issue date.

  2. If the refund check was undelivered, research for a new address. Research should include, but not limited to:

    1. Check IDRS for last return filed, current address, and a telephone number

    2. Contact taxpayer by telephone, if a number is available. Follow IRM 11.3.2.7.1 Leaving Information on Answering Machines/Voice Mail

    3. BMF accounts check IDRS to see if there is a cross-reference TIN

    4. Check AMS for comments or correspondence

    5. Review income information reported on CC IRPTR

    6. Send a Quick Note with a Form 8822, Change of Address. In the open paragraph inform the taxpayer: "We need your assistance in updating our records. We have attempted to contact you regarding an Offer in Compromise you filed with the IRS in (MONTH/YEAR). Please contact us to discuss your account within 15 days of this letter. If your address has changed, please complete, sign, and return the enclosed Form 8822, Change of Address." In the letter, provide your desk phone number or the MOIC Hotline number and the IRS toll free number. If the letter is returned as undeliverable, did post office provide a new address? Refer to IRM 3.13.5.63.1Processing Undeliverable Mail Procedures.

    7. See also IRM 5.1.18.3 Performing Research on the Internet/Intranet

    If Then
    A new address is found Using the procedures in IRM 5.19.7.2.19.6, Undelivered Potential Default Letter, reissue the refund check.
    A new address is not found The returned deposit must remain in the 4710 Account.
  3. Document AOIC and AMS to indicate MOIC is attempting to validate the taxpayer’s current address and telephone number to discuss a deposit that was made on a returned, rejected, or withdrawn offer. If sending a letter or leaving a voice mail, document AMS and AOIC with detailed information as to the address letter(s) was sent to and what information was on the voice mail.

Deposits with Insufficient Funds
  1. Accounting will notify the OIC Unit when a deposit made by check was returned due to insufficient funds.

  2. A correction should be made to the Deposit screen.

  3. If the deposit is located at your campus and the account is controlled by another campus, notify the other site that the deposit on their records must be reversed due to insufficient funds.

Applying Payments on Accepted OICs

  1. OIC units at the compliance campuses monitor offer payments based on the offer terms agreed upon at the time of acceptance.

  2. Service policy directs that remittances remain in a secured area. Therefore, in accordance with Service policy, payments received at the Fresno campus are processed by Receipt & Control (R&C) employees who have access to AOIC and are able to research to which module to apply the payment.

  3. Payments processed by Receipt and Control must be timely input through the AOIC system. Action on the offer case should be taken within 30 days of posting on IDRS. This includes payment transfers for misapplied payments and payment tracers for posted but missing payments.

    Note:

    If there is a lien on the account the maximum number of days for the follow-up cannot exceed 25 days in order to meet the requirement for timely lien release within 30 days of the final payment

  4. Payments are applied in the best interests of the Government, usually this is the earliest Collection Statute Expiration Date (CSED), not always the earliest tax period. See Section 3 of Rev. Proc. 2002-26. 2002-1 C.B. 746. See also IRM 5.19.10.4.4, Determining the Correct CSED.

    Note:

    If the total offer payments exceed the existing balances on the accepted offer tax modules, determine accruals computed to the acceptance date of the offer, and assess the accruals to the account. If the taxpayer has multiple offer periods and not all will need an offer payment posted, complete accruals on the modules to which a payment will post. Document AOIC with accrual information. When performing a manual calculation of interest follow procedure in IRM 20.2.1.5.2, Manual Computation of Interest.

    .

  5. When a payment is received on an accepted OIC, determine which module has the earliest CSED. Use the table in IRM 5.19.7.2.6 , Extension and Suspense of the Statutory Period for Collection, as a guide to determine CSED suspension periods.

    Note:

    If two modules with the same MFT have the same CSED, apply in the order listed on the MFT screen in AOIC.

    Caution:

    When applying a payment to modules with multiple assessments check CC IMFOLT for the CSED (FIRST, LAST, NEXT) and if a CSED is expired, refer the case per Who/Where-CSED referrals campus to statute clear the expired assessment per IRM 5.19.10.4.3.

  6. When moving a credit from one module to another, refer to IRM 21.5.8.3.6TC 570 and Bypass Indicator to determine if a TC 570 is required. A follow up should be entered on AOIC to ensure the credit transfer has posted and the module is still in ST71.

  7. If the CSED has expired on all the periods compromised by an offer:

    1. Return or refund any subsequent payment received after expiration of the CSED.

    2. Send a letter to the taxpayer stating that the payment is being returned because the collection statute has expired and no further offer payments are due.

    3. Do not make changes to any AOIC screens.

    4. Update the AOIC history.

    5. Close and place the offer in AOIC "CF" status.

  8. Prepare Form 3244 to apply payments.

    1. Use TC 670 with DPC 09 to indicate OIC.

    2. Use the date the payment was received as the transaction date.

    3. For zero balance periods, use TC 570, .00 as secondary code.

  9. Occasionally acceptance letters from the Area Offices, Appeals, Exam or COIC may direct taxpayers to send their offer payment to the wrong monitoring site. When this occurs:

    1. Prepare Form 3244 to process the payment.

    2. Advise the taxpayer that future contacts, payments, or correspondence should be made to the appropriate site. (Provide the site, address and contact name.)

    3. Update the AOIC History.

  10. If there are MFT 30 and MFT 31 accounts for the same tax period due to an innocent spouse claim, payments made by the OIC taxpayer should be applied to the MFT 31 account first.

  11. Monitor the account on IDRS to verify the payment has posted to the non-offer mirrored assessment.

  12. Calculate the remaining balance.

  13. Previously, overpayments of $1.00 or more must be refunded to the taxpayer. The 2016 or later revision of the Form 656 states if the taxpayer overpays their offer by any amount under $50 the funds will be applied to the liability. Any amount $50 and over will be refunded. This applies only to the offers received on this or later versions of the Form 656 and subsequent versions that include this provision. For payments meeting the less than $50 exception, apply the amount that full pays the offer on the journal screen and document AOIC remarks stating the amount of overpayment that will be applied to the liability and not refunded.

  14. Refund recoupments are not considered offer payments. The credit is, however, applied in the same manner as the offer payment.

  15. Lien units receiving requests for payoffs from taxpayers with an accepted OIC will be referred to MOIC.

Application of OIC Payments on All BMF OICs
  1. By signing Form 656, taxpayers agree to Section 3.03(2) of Revenue Procedure 2002-26 which calls for payment application to periods in the order of priority that the Service determines will serve its best interest. The payment will be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed.

  2. If the following corporate liabilities are included in the offer, apply OIC payments in the following descending order:

    1. to all Forms 1120 (regardless of CSED).

    2. to all Forms 940 (regardless of CSED).

    3. to the unpaid portions of all Forms 941 periods in earliest CSED order as follows:

    1. Non-trust fund portion of tax (employer’s share of FICA)

    2. Trust fund portion of tax (withholding and employee’s share of FICA)

    3. Assessed fees and collection costs

    4. Assessed penalty

    5. Assessed interest

    6. Accrued penalty to date of payment

    7. Accrued interest to date of payment

Payments on Expired Liabilities
  1. If a taxpayer wishes to make a voluntary payment on a liability with an expired CSED, the payment should be accepted and the taxpayer should be asked to sign a statement indicating that they are aware collection of the tax is barred and the payment will not be credited to a specific liability.

  2. Attach the statement to the payment posting document and process the payment through normal remittance processing. The payment should be applied to Excess Collections.

  3. Do not treat these payments as offer payments.

Processing Payments on AOIC
  1. Check the AOIC Balance (Liability) screen to determine if the payment will full pay the period with the oldest CSED date. If it will, update the balance.

  2. Go to the Journal (payments) screen to generate and print Form 3244CG (AOIC). AOIC applies the payment posting rule systemically.

  3. Refer to Chapter 6 of the AOIC User's Guide.

  4. Payments should be applied to these and all other offers based on the balance due amount shown on the INTST prints and updated when the offer was first received into inventory.

    Note:

    As long as some payment has been made against the offer amount, remaining offer balances less than ≡ ≡ ≡ ≡ will not be pursued. Consider the offer paid in full and proceed with closing actions. The balance will remain on AOIC with a history item stating that the offer is considered paid in full.

  5. Previously, overpayments of $1.00 or more must be refunded to the taxpayer. The 2016 revision and later of the Form 656 states if the taxpayer overpays their offer by any amount under $50 the funds will be applied to the liability. Any amount $50 and over will be refunded. This applies only to the offers received on this version of the Form 656 and subsequent versions that include this provision. For payments meeting the less than $50 exception, apply the amount that full pays the offer on the journal screen and document AOIC remarks stating the amount of overpayment that will be applied to the liability and not refunded.

Processing Payments Manually
  1. Analyze tax periods being monitored to determine to which period the payment should be applied. This may have been done when the case was initially processed.

  2. Prepare Form 3244 to process the payment. Along with taxpayer entity information Form 3244 should include:

    1. TC 670 with DPC 09 to indicate OIC.

    2. The date of the payment for the transaction date.

    3. TC 570 with 00 as a secondary code for zero balance periods.

  3. Record the payment on Form 6314, Deferred Payment Offer Payment Record.

  4. Payments erroneously applied to IDRS must be moved to NMF with Form 2424.

  5. If the 5 year compliance terms have been met when the final deferred payment is received, use procedures outlined in IRM 5.19.7.2.22, Closing an OIC.

Applying Payments on NMF Accounts
  1. If the tax period(s) is on NMF, the centralized ANMF databases should be accessed.

    1. Use DI or ANMF to verify the payment has been posted and the NMF account and the balance is correct.

    2. Notate on Form 6314, OIC Deferred Payment Record"Verified with NMF" .

  2. ANMF was centralized in Cincinnati on September 26, 2006. All NMF processing is now completed in Cincinnati.

  3. On AOIC or Form 6314, record payments and calculate the remaining balance.

  4. When the final deferred payment is applied to an NMF account:

    1. Review the NMF account.

    2. Attach an ANMF print for the applicable period to the Form 2424.

    3. Apply the final amount to the oldest CSED on the NMF 1300 Account first. Apply payments in the following order; first to tax, second to penalties, interest last.

    4. Abate all remaining liability by reversing the individual transactions and posting a TC 788 on each NMF account covered by the offer.

    5. Mail the form with attachments to the Cincinnati NMF site.

Releasing Continuous Wage Levies
  1. Occasionally the investigating individual overlooks the release of a continuous wage levy. Contact the person who recommended acceptance to determine if the release is appropriate.

  2. If the release is appropriate:

    1. Research for the levy source.

    2. Prepare a levy release, Form 668-D.

    3. Obtain authorizing signature i.e, campus revenue officer or follow local procedures.

    4. Mail the release to employer.

    5. Send a letter to the taxpayer regarding the levy release. Insert the text in the note below in an open paragraph of AOIC Letter 2908.

      Note:

      Our records show that there is a levy on your account. This levy needs to be released; a copy of the Form 668–D, Release of Levy/Release of Property from Levy, is attached for your records. We are processing your levy release and it should be effective within 30 days.

    6. Keep a copy of the letters in a file until the offer is closed.

      Note:

      Levy payments received after the TC 780 date are to be refunded to the taxpayer or, at the taxpayer's request, applied to the offer amount.

  3. For information for other levy programs see IRM 5.19.9.3, Federal Payment Levy Program, Federal Payment Levy Program (FPLP) Coordinators, IRM 5.19.9.2, State Income Tax Levy Program (SITLP) General, State Income Tax Levy Program (SITLP) Coordinators.

Cross-Referencing TFRP Payments
  1. The investigating function should guarantee that all TFRP payments made prior to acceptance have been cross-referenced, thus the offer taxpayer's TFRP assessment will show the correct balance due.

  2. Accepting an offer from the employer, or one or more of the responsible officers, does not change the policy that the tax is to be collected only once. All payments should be cross-referenced as they normally would be as if there were no OIC. The TFRP Units will cross-reference OIC payments to the related TFRP accounts. TFRP transcripts will not be forwarded to MOIC.

  3. For one offer filed jointly by husband and wife with identical TFRP assessments, apply OIC payments to the primary taxpayer. A TFRP transcript will issue so the payment will be cross referenced by the TFRP Units to the secondary and related accounts. When all terms are met, both TFRP assessment accounts will be compromised. See IRM 5.19.7.2.13.8, Interest, for IRS policy regarding computation of accruals.

  4. When the offer is full paid, see IRM 5.19.7.2.10.3, Trust Fund Recovery Penalty (TFRP) Cases, for detailed closing requirements.

Interest
  1. The input of the TC 780, Offer Acceptance, will prevent computer generated interest. Tax Examiners in MOIC will calculate interest to the acceptance date on the tax modules offer payments will be applied to. If the taxpayer breaches their offer contract, an accounting entry will be reversed and update accrued penalty and interest.

  2. Compute interest using CC COMPA or the InterestNet (ACT/DMI). .

Dishonored Checks
  1. A dishonored check is a check received and processed as a payment by the IRS, but the bank does not accept the check as valid.

  2. A dishonored check penalty should not be assessed on offer payments.

    Note:

    If assessed, abate the dishonored check penalty.

  3. If a taxpayer's check is dishonored, issue Letter 274, Potential Default Letter, and follow guidance in IRM 5.19.7.2.19.1 , Failure to Make OIC Payments, if payment is not received.

    If Then
    If the taxpayer sends a replacement check within 30 days, Process the payment per IRM 5.19.7.2.13, Applying Payments on Accepted OICs.
    If the taxpayer fails to send a replacement check within 30 days, Refer to IRM 5.19.7.2.19.1, Failure to Remit an OIC Payment .

Separate OICs on Joint Liabilities

  1. An offer in compromise may be submitted separately by one or more of the responsible individuals on joint liabilities.

    Note:

    Taxpayers will be required to submit two offers. One for the joint liabilities and one for any BMF or each party must submit an offer that includes all the liabilities. See IRM 5.8.3, COIC Perfection.

  2. Prior to January 1, 2001, all separately submitted accepted offers on IMF joint accounts were moved to Non-Master File (NMF). After January 1, 2001, split accounts were transferred to master file code, MFT 31. Two MFT 31 accounts were established. The offer taxpayer's balance due was for the offer amount with the remaining balance due(s) placed on the non-offer spouse.

  3. Effective January 1, 2005, OICs on joint liabilities (MFT 30) must be transferred to two MFT 31 accounts which mirror the MFT 30.

  4. Effective January 1, 2016, OICs on joint liabilities of a shared responsibility payment (MFT 35) must be transferred to two MFT 65 accounts that mirror the MFT 35.

Mirror Assessments
  1. The Chief Financial Officer set policy on October 21, 2002, that changed processing of a joint account when one spouse requests tax relief.

  2. The policy states that the Service will split the joint return into two separate modules, one for the primary taxpayer and one for the secondary taxpayer, both mirroring the original return. The policy statement also called for a linkage for transaction codes between the modules and systemic intervention to accommodate payment and credit cross-referencing. The mirror functionality became operational January 2005.

  3. Each taxpayer has a mirrored MFT 31 (MFT 65 if the module is a result of mirroring a MFT 35 liability) account under their SSN that accurately reflects his/her tax liability and correct CSED/ASED.

  4. Mirror assessments must be established on master file when:

    • A separate offer is accepted by one or both taxpayers on a joint IMF liability.

    • One spouse on a jointly accepted OIC becomes noncompliant during the 5 year or longer compliance period.

      Note:

      The Mirroring process should began as soon as it is feasible. Modules that are paid in full by the offer amount should not be mirrored.

  5. This also includes offers submitted separately that are eventually rejected or withdrawn. COIC or the field investigating offices will be responsible for mirroring rejected or withdrawn offers.

Identifying Separate Offers on Joint Liabilities
  1. The majority of accepted offers are controlled on AOIC. If the AOIC MFT screen displays a CSED indicator of P for primary or S for secondary then research IDRS to identify the joint periods that must be mirrored.

    Note:

    The CSED indicator is also displayed on IDRS under the TC 480 posting.

  2. For manually monitored offers review the acceptance letter or the Form 656; if only one name appears and IDRS research of each tax period (CC TXMOD) shows a joint filing status (FS2) then the MFT 30 period(s) must be mirrored to MFT 31 and MFT 35 must be mirrored to MFT 65.

Preliminary Mirror/MFT 31/65 Procedures
  1. Review the MFT 30 module(s) before beginning the transfer process to ensure all appropriate actions have been completed.

  2. For accepted offers controlled on AOIC:

    1. Make INTST prints for each tax period to the date of the offer acceptance. See IRM 5.19.7.2.9.4, Timely Acceptance of Incoming OICs.

    2. Update the AOIC Balance Screen.

    3. Set up the AOIC Journal Screen to post and schedule payments.

    4. Apply 4710 Account deposits. If the deposit full pays a period on the offer, do not mirror the module.

    5. Update the AOIC status to "MS" , Monitor Split.

  3. For accepted offers manually monitored:

    1. Make INTST prints for each tax period to the date of the offer acceptance. See IRM 5.19.7.2.9.4, Timely Acceptance of Incoming OICs.

    2. Prepare Form 2515, Record of Offer in Compromise.

    3. Verify Form 2515, Form 656 and Form 7249 have the same tax class and periods. (If the tax class or periods do not agree, notify the originating office.)

    4. Prepare Form 6314, Deferred Payment Offer Payment Record, if necessary.

    5. Apply 4710 Account deposits. If the deposit full pays a period on the offer, do not mirror the module.

    6. Ensure TC 480 has been input on each period, if not, input TC 480 onto the MFT 30 account.

  4. The secondary spouse's SSN must be validated. See IRM 5.19.7.2.14.4 below.

Validating the Secondary SSN
  1. Before beginning the mirror/transfer process the secondary spouse's SSN must be validated. Master file will not create an MFT 31/65 if the secondary SSN is not valid.

  2. To verify the secondary spouse's SSN use CC IMFOLE to review the entity information:

    If Then
    The SSN is valid Proceed with the mirroring process
    The SSN is invalid (*) Research to determine the reason for the invalid condition:
    • SSN transcription Error

    • Incorrect transcription of surname

  3. Correct the SSN or Name Line using CC ENMOD/ENREQ and monitor until the SSN moves into a valid segment (in about 3 weeks) then continue with the mirroring process.

  4. If you determine that an invalid name control is due to the secondary spouse not notifying the Social Security Administration of a change in surname due to divorce or marriage, then validate the SSN using CC IRCHG. The validation (correction) must be made for each tax period.

  5. Use CC ENMOD to monitor for TC 017 to post (about 3 weeks) then continue the mirroring process.

  6. If unable to validate the secondary SSN, the MFT 30/35 modules can not be mirrored. They must be transferred to NMF by completing Form 12810, Account Transfer Request Checklist, and routing to the appropriate consolidated NMF site as indicated on SERP.

  7. Establish a control on the account being moved to NMF.

  8. Set appropriate follow up dates for all actions taken and update the case history.

Mirror Assessments - MFT 31/65 Procedures
  1. When all preliminary actions and validations have been completed then the joint liability periods are ready to be mirrored. Follow the steps below using CC REQ77:

    Note:

    Do not change the TSIGN 8500 so that MOIC can maintain control.

    1. Input TC 971 - AC 101, MFT 30/35 x-ref Primary TIN, Input TC 971 - AC 101, MFT 30/35 x-ref Secondary TIN .Also input TC 971 - AC 145 on the MFT 30/35 at the same time with a delay of 2.

      Note:

      Approximately two weeks after input, of the TC 971 -AC 101 "mirror modules" on MFT 31/65 will generate under each spouse's SSN. Input of TC 971 - AC 145 on the MFT 30 module establishes TC 400 and creates both MFT 31/65 modules. MFT 31/65 modules will post in the next cycle. IMF will mirror all transaction from MFT 30 to MFT 31 including the TC 400.

    2. Monitor for MFT 31/65 modules and posting of TC 400 on MFT 30/35. For AOIC: Input a 4 week follow up date with an action note: "Check with Mirror MFT 31/65 posting." For Manually Monitored: Establish a control base on IDRS using CC ACTON.
      - Activity Code "MFT31/65sXXXX" where XXXX is date to check for posting of MFT 31/65 (4 weeks from day TC 971 AC 101 and TC 971 AC 145 input.)
      - Category Code "SPC4"
      - Status "M"

      Note:

      Verify there are 3 modules present:
      - one joint MFT 30/35 module
      - one MFT 31/65 for the primary
      - one MFT 31/65 for the secondary

    3. After both MFT 31 modules are established and TC 400 has posted to the MFT 30/35 and MFT 31/65 modules, input TC 972-AC 145 on MFT 30/35 and MFT 31/65 modules:
      1. Input TC 972-AC 145 on MFT 30/35.
      2. Input TC 972-AC 145 on MFT 31/65 Primary SSN.
      3. Input TC 972-AC 145 on MFT 31/65 Secondary SSN.
      4. Input TC 470 posting delay 2 (no closing code) to the offer taxpayer's MFT 31/65 module.

      Note:

      TC 972-AC 145 generates a TC 402 to bring the module balance back on all 3 MFTs. A TC 971-AC132 will systemically generate on the MFT 30/35 module after the TC 402 posts. TC 971-AC 132 will generate TC 604 to close out the balance due on MFT 30/35. This will leave a balance due on the MFT 31/65 modules.

    4. Monitor for the posting of the TCs on MFT 30/35 and both MFT 31/65 modules.
      AOIC: Input a follow up date for 4 weeks from the date of input with action" Monitor TC 402 on MFT 31/65."
      Manually Monitored:
      1. Update the IDRS control base using CC ACTON:
      - Activity Code "Monitor 402"
      - Category Code "SPC4"
      - Status "M"

    5. Input TC 782 and 483 with posting delay of 1 on the MFT 30/35 module after the TC 604 posts.

    6. Input TC 782 and 483 with posting delay of 1 on the MFT 31/65 module of the non-offer spouse.

      Note:

      If there were two separate offers that were accepted leave TC 780 on each MFT 31/65 module.

    7. Input TC 472 to non-offer spouse once all TC's have posted.

  2. As a part of establishing the two MFT 31/65 modules a TC 370 is systemically generated with one DLN identifying the primary SSN from the copy and both will carry a complete mirror of the MFT 30/35 module.

  3. If the offer taxpayer is the secondary taxpayer and TC 400 posts, the TSIGN should be reversed back to 0000 and the OIC indicator shut off on primary taxpayer's SSN. (This can be done at the same time of TC 972 - AC145 input.)

    Note:

    When the mirroring of the modules are complete be sure that the non-offer taxpayer's accounts do not restrict penalty and interest.

  4. MFT 31/65 mirrored modules will generally reflect the collection status immediately prior to Status 29. TC 470 is input on the MFT 31/65 of the offer taxpayer in order to suppress collection notices that are systemically generated when the mirrored accounts are established on IDRS.

    Note:

    Reverse TC 470 with a TC 472 on the non offer spouse, all applicable modules.

  5. Update the AOIC MFT Screen to reflect the MFT 31/65 modules.

  6. Update the liability on the MFT screen on AOIC from MFT 30/35 to MFT 31/65.

  7. Offer payments received on the offer MFT 31/65 after mirroring will systemically cross reference to the MFT 31/65 module of the non offer spouse.

  8. Because the CSED on the mirrored accounts differ, periodically check to see if the offer payment will cross reference to a period of the non offer spouse with an expired CSED.

  9. OIC payments received after the initial mirroring process has begun should be placed in the 4710 account and applied immediately following establishment of the MFT 31/65 accounts.

  10. Cross referenced payments reduce the unpaid balance of the co-obligor but are nonrefundable.

  11. When an offer with mirrored modules is being placed in monitoring status of 5M, input a TC 972 AC 110 on both MFT 31/65 modules for the offer to prevent the cross-referencing of any future payments made by the spouse.

Mirror Assessments Due to Non-Compliance
  1. Both taxpayers on a joint tax liability must remain compliant with filing and paying subsequent returns following acceptance of an offer in compromise. The taxpayers must be compliant for the 5-year period following acceptance of the offer or during an extended offer payment period, whichever is longer. Extended offers were accepted prior to the 2012 revision of the Form 656 .

  2. If one taxpayer is noncompliant during the compliance period and the other compliant, only the noncompliant spouse will be in default. The account is split and the offer will remain in effect for the compliant taxpayer.

    Note:

    Apply TC 470 with no closing code to prevent notices from issuing on the compliant taxpayer's account.

  3. Tax examiners should first follow Default Procedures in IRM 5.19.7.2.19, OIC Defaults, and correspond only with the noncompliant spouse.

  4. When the noncompliance occurs during the 5-year monitoring (5M), all previously written off tax periods must be reversed and established as a separate MFT 31/65 account.

    1. Input TC 972 AC 32 to reverse all TC 604 write-offs.

    2. Input TC 480, 780 because after input of TC 788 IDRS no longer reads prior transactions.

    3. Input TC 971 AC 101 to create the MFT 31/65 account cross referencing the non compliant spouse's SSN. Also input TC 971 AC 101 to create the MFT 31/65 account for the compliant spouse. The transaction date is the action date.

    4. Input 971/145 with a posting delay.

    5. Monitor for the TC 400 to post.

    6. Input TC 972 AC 145 to the MFT 30/35 and both MFT 31/65 mods.

    7. Monitor for the TC 402 to post.

    8. Input 781 to non-compliant taxpayer's MFT 31/65.

    9. Turn off OIC indicator on the Non-complaint Taxpayer, input ENMOD - ENREQ and enter "1966" for the OIC indicator.

  5. Before inputting any transactions to MFT 31 research IMFOL to ensure that the MFT 31/65 module(s) have posted with the correct entity.

    Note:

    If the name is not correct all subsequent transactions will go unpostable.

  6. When noncompliance occurs while extended offer payments are being made (usually beyond the 5-year compliance period).

    1. Input TC 971 AC 101 on the MFT 30/35 account, cross-reference the noncompliant spouses' SSN. The transaction date is the action date.

    2. Remove the Y freeze using CC REQ77 on IDRS:

      Input TC 483, TC 782 or TC 788, whichever is appropriate.

      Input TC 470 (no closing code) to prevent notices from issuing.

    3. Input TC 016 (1966) on ENMOD on the primary SSN (with a one cycle delay) to turn off the OIC indicator, if the default is for the secondary taxpayer.

Innocent Spouse Claims
  1. A taxpayer who files a joint return with a spouse is generally jointly and severally liable for all tax due in that tax year. If a taxpayer believes he/she should not be required to pay the tax (including penalties and interest) for a tax year in which he/she filed a joint return, the taxpayer may be eligible for relief from joint and several liability.

    Note:

    The Innocent Spouse Team will review cases in which the account shows a joint return, but the taxpayer claims no joint return was filed or the taxpayer's signature on the joint return was forged. See IRM 25.15.1.2.3, Return Signed Under Duress, IRM 25.15.1.2.4, Forged Signatures, and Form 8857 instructions.

  2. Taxpayers generally request Innocent Spouse Relief via Form 8857. The taxpayer filing the Form 8857 is referred to as the requesting spouse or requesting taxpayer. The Form 8857 claim is referred to as an Innocent Spouse claim. Innocent Spouse will indicate on the account with a TC 971 AC 065 when request has been received.

  3. When the spouse filing the Innocent Spouse claim is granted relief the Service may still collect the entire liability from the other spouse. Innocent spouse examiners generally set up an assessment on the other spouse separately via MFT 31. Related Examination paper work will be forwarded to the OIC monitoring unit.

  4. Exam will forward Innocent Spouse determination letters to the back end OIC Unit when there is an unreversed TC 780 on the module. This determination letter should be held in the case file pending closure of the OIC case.

    If And Then
    The OIC taxpayer defaults both account(s) have been moved to NMF (prior MFT 20) 1. Default the offer on the NMF but, do not reopen the MFT 30 account. (The innocent spouse examiner will have abated the NMF assessment on the innocent spouse.)
    2. Retain the Innocent Spouse determination letter in the case file for an audit trail.
    3. Update the AOIC or manual history file.
    The OIC taxpayer defaults the other spouse was granted relief under innocent spouse
    Update the AOIC or manual history file.
    The OIC taxpayer defaults separate MFT 31 accounts were previously established for both taxpayers The innocent spouse examiner will have already abated the innocent spouse MFT 31 account.
    1. Default the OIC taxpayer.
    2. Leave the determination letter in the case file for an audit trail.
    3 Update the AOIC or manual history file.
    The OIC taxpayer complies with all terms of the offer his account(s) remained on MFT 30 1. Contact the innocent spouse examiner to be sure TC 290 with reason code 98 is input on the MFT 30 account.
    2. Establish the MFT 31 on the OIC taxpayer.
    3. Retain the determination letter in the case file for an audit trail.
    4. Update the AOIC or manual history file.
    The OIC taxpayer complies with all terms of the offer both account(s) were moved to NMF or MFT 31 The innocent spouse examiner will have already abated the innocent spouse MFT 31 account.
    1. Close the offer.
    2. Do not return the determination letter to the innocent spouse examiner.
    3. IRS has compromised all of the liabilities.
  5. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

  6. For instances where the OIC has been closed on MFT 30 (TC 788) prior to processing the innocent spouse claim, Innocent Spouse will issue the letter to the requesting spouse. A copy of the letter will not be sent to the OIC unit because the OIC taxpayer has complied with all terms of the offer and his/her liabilities have been compromised.

Subsequent Payments on Co-Obligor MFT 31 Accounts
  1. A master file account must be established for the co-obligor using current MFT 31/65 procedures. There may be special circumstances i.e. invalid TIN, requiring an NMF account be established.

  2. If establishment of the co-obligor's account is pending on master file or NMF, prepare a Form 3244 to apply payments on a deferred NMF account.

    Note:

    Per local policy, you may place payments in the 4710 Account while waiting for the account to transfer from master file to non-master file or MFT 31/65.

Correcting Unpostable TC 788 on MFT 31 Accounts
  1. TC 788 goes unpostable on MFT 31 accounts established from January 2001 through January 2005. The -Y freeze does not release and subsequent refunds due the taxpayer may be frozen.

  2. Although TC 780 displays on IDRS TXMOD, it did not set on master file when the MFT 31 account was created. Without an established TC 780 on the account input of TC 788 goes unpostable.

  3. To correct this condition re-input the OIC transactions using REQ77.

    1. Re-input TC 480, TC 780 and TC 971 (if applicable).

    2. Input TC 788 with appropriate posting delays.

    3. The -Y freeze should then drop off and allow taxpayers to receive refunds due.

Reversing a Mirrored Module
  1. Verify that the module should be reversed. To reverse a mirrored module you must input the transactions on MFT 30 and wait until all transactions post before inputting transactions to MFT 31.

  2. On the MFT 30 module input:

    1. TC 972 AC 101 with the XREF TIN of the primary taxpayer.

    2. TC 972 AC 101 with the XREF TIN of the secondary taxpayer.

    3. TC 972 AC 145 (the date of the TC 972 AC 145 should be the same as the original TC 971 AC 145) using a PDC of 1 cycle. This will generate a TC 605 (debit). This reopens the module balance on MFT 30.

  3. After verifying all required transactions listed above posted to the MFT 30 module, input the following transactions on the MFT 31 modules,
    On the primary taxpayer’s module:

    1. TC 972 AC 101 with a cross-reference to the secondary TIN

    2. TC 971 AC 145 . This is required before the next transaction listed below will post.

    3. TC 971 AC 131. This will adjust the MFT 31 modules to zero.

    4. TC 972 AC 145


    On the secondary taxpayer’s module:

    1. TC 972 AC 101 with a cross-reference to the primary TIN.

    2. TC 971 AC 145. This is required before the next transaction listed below will post.

    3. TC 971 AC 131. This will adjust the MFT 31 modules to zero.

    4. TC 972 AC 145.

Compromise of an Accepted Offer

  1. When a taxpayer is unable to pay the balance of an accepted offer and/or the balance due under the terms of a collateral agreement, the Service has the option to accept a Compromise of a Compromise. The taxpayer must be current with their filing and payment compliance requirements or a compromise of an accepted offer will not be considered. . In this situation, the IRS has the option to:

    1. Adjust the payment terms of the offer.

    2. Formally compromise the existing offer, See IRM 5.8.9.5, Compromise of a Compromise.

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

    Note:

    A Compromise of a Compromise is not appropriate if the taxpayer is unable to fulfill his 5 year filing and payment requirement of the existing offer. However, he has the option to file a new OIC.

  2. The taxpayer must submit the request to compromise an accepted compromise in letter format.

    Note:

    Filing a new Form 656 is not acceptable.

  3. Advise the taxpayer that:

    • MOIC is referring the request to the originating office.

    • A current financial statement will be required.

    • They must remain current with their filing and payment compliance requirements subsequent to the acceptance date of the original offer.

    • They are allowed 15 calendar days to submit a written request.

  4. Use Form 2209 (allow 90 calendar days for Appeals and 45 calendar days for COIC and the Area Office), with a 90 day follow up and update Form 6314 and AOIC.

    1. The Form 2209 should be sent via secured email with a read receipt. Send the request to Appeals, COIC or the Area Office where the offer was accepted. The Form 2209 and attachments should be emailed to the drop point. In order to flag the Form 2209 for the recipients the subject line in the e-mail should read “New 2209 OIC on OIC.” The Form 2209 must reflect the return MOIC mailbox address and e-fax number.

    2. The table below describes the steps needed depending on where the offer was closed or if it is manually monitored.

    If Then Include
    The offer was accepted in Appeals
    • Form 2209 with a clear description of why the need for an Offer on Offer. Include a statement whether the taxpayer is current or in potential default.

    • Letter from the taxpayer as to why an Offer on Offer is being requested.

    • Attach copy of letters received/issued to the taxpayer.

    • Copy of AOIC- Terms screen , MFT screen, Remarks (pertaining to the 2209 issue only) and a copy of the Journal Screen or amount paid to date on the offer.

    The case was accepted in COIC
    • Form 2209 with a clear description of why the need for an Offer on Offer. Include a statement whether the taxpayer is current or in potential default.

    • Letter from the taxpayer as to why an Offer on Offer is being requested.

    • Provide statement on current offer amount paid by taxpayer to date.

    The case was accepted in the Field
    • Form 2209 with a clear description of why the need for an Offer on Offer. Include a statement whether the taxpayer is current or in potential default.

    • Letter from the taxpayer as to why an Offer on Offer is being requested.

    • Provide statement on current offer amount paid by taxpayer to date.

    The case is a manually monitored case
    • Print SUMRY, ENMOD, CFINK from IDRS.

    • Print history from AMS (only the section pertaining to the 2209 issue).

    • Attach copy of letters received/issued to the taxpayer.

    • Copy of Form 7249 and Form 6314.

    • Taxpayer telephone number.

    Note:

    If the file is needed from the FRC, the originating office will request the file. See IRM 1.15.4 for guidance on how to request case files from the FRC.

    1. Ex parte communication rules prohibit attempts to influence Appeals. Do not include in the Form 2209 addressed to Appeals or its attachments any statements directing Appeals to make a particular determination in the compromise of an accepted offer case.

  5. It is the responsibility of the Form 2209 liaison (MOIC) to set a follow up for 7 calendar days to verify acknowledgment of the Form 2209 by the receiving person. If the Form 2209 is not acknowledged within 7 calendar days with a read receipt, the liaison should follow up by contacting the intended recipient by email or telephone call. This follow up will also be documented in the AOIC remarks.

  6. The courtesy investigation will be given priority by the field or COIC. An extension request ( Form 2209A), Status Report, to complete the investigation should be based on extenuating circumstances. .

  7. Upon receipt of the Form 2209:

    If Then
    The compromise offer is accepted Update AOIC or Form 2515 with the appropriate adjustments.
    The compromise offer is not accepted Proceed with default procedures, see IRM 5.19.7.2.19, OIC Defaults.

Collateral Agreements

  1. A collateral agreement is additional consideration for an Offer in Compromise that enables the Government to collect funds beyond the amount paid with the offer, thereby recouping part or all of the difference between the amount of the offer and the liability compromised.

Types of Collateral Agreements
  1. One or more of the following collateral agreements may be part of the OIC.

    Type Form Used Explanation
    Future Income Form 2261 (IMF)Form 2261 A (BMF) A collateral agreement that creates a potential obligation for the taxpayer to pay a graduated percentage of future income for a specified number of years. The obligation is contingent on the taxpayers income exceeding a negotiated annual income amount.
    Reduction of Basis Form 2261-B An agreement by the taxpayer to reduce the basis of specifically identified stock and real or personal property. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Waiver of Loss Form 2261-C An agreement by the taxpayer to waive the benefit of net operating losses, bad debts, capital losses per IRC 166 and non-business capital losses, passive losses and/or unused investment tax credits in the computation of income tax for years stated in the agreement.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  2. Managers are required once a year to review all collateral offers that are over 5 years old to determine if all collateral terms have been met or are correctly listed as an open collateral.

Setting Up Collateral Agreement Files
  1. The collateral agreement file is a part of the open offer file.

  2. To set up the collateral agreement file:

    1. Remove the collateral agreement form from the accepted offer file.

    2. Associate Form 2515, Record of Offer in Compromise, (or set up the collateral file on AOIC) with the collateral agreement.

    3. Indicate type of collateral agreement, e.g., Form 2261, Form 2261-B, and years involved on Form 2515 or AOIC.

    4. Update the AOIC collateral screen with information from the collateral agreement, or

    5. For manually monitored offers prepare Form 6313, Collateral Agreement Payment Record.

  3. Collateral files are to be maintained at the campus until the offer is closed.

Processing Future Income Collateral Agreements
  1. Future income collateral agreements for an individual or a business run for a specified period, beginning the year following the year the offer is accepted.

  2. For each year of the collateral agreement, forty-five (45) days prior to the due date of the taxpayers annual income tax return, prepare and send a "collateral" package to the taxpayer. Include the following items in the package:

    1. Letter 294C or AOIC Letter 279 SC/CG.

    2. Two Forms 3439, Statement of Annual Income for IMF or two Forms 3439 -A, Statement of Annual Income (Corporate) for BMF accounts.

    3. An addressed return envelope.

    4. A cover sheet is suggested to avoid having copies of returns misdirected through the pipeline.

    5. Copy of Collateral Agreement.

    Note:

    For requests for blank tax forms, provide: (1) the toll-free number for forms to be mailed (1(800)829-3676), or (2) the IRS Internet Web site www.irs.gov.

  3. After compiling the collateral package take the following steps:

    1. Record on Form 6313 the tax year and date the package is mailed to the taxpayer.

    2. Mail the package to the taxpayer.

    3. Update AOIC recording the information in (a).

Processing Future Income Collateral Responses
  1. When a signed Form 3439 or Form 3439-A is received from the taxpayer, record the date received on the AOIC history and the Form 6313. If with remittance, also record the amount received.

    1. Prepare or generate and print Form 3244 from AOIC for remittances received with Form 3439:
      • Input TC 670 with the amount.
      • Input designated payment code (DPC) 09.
      • Apply the payment to the oldest CSED offer tax period.
      • Enter TC 570 with .00 (second TC).
      • If an NMF account, enter in "Remarks" 6530 Account Collateral Agreement.

    2. Prepare Form 8485 to reverse any write-offs on manually processed cases; use:
      • Priority Code 3 or 8 (per campus policy)
      • Hold Code 3
      • Blocking Service 80 (except for MFT 55)

  2. For the accounts previously written off using TC 971 AC 32:

    1. Input TC 972 AC 32.

    2. Assess applicable accruals if the TC 605 is less than the payment amount.

      Note:

      When performing a manual calculation of interest follow procedure in IRM 20.2.8.3 (5) (a).

    3. Monitor the account for the payment to post.

    4. Re-input TC 480, 780 with delay code of 1, when the total amount paid has posted to the tax periods.

    5. Also, re-input TC 971 AC 032 delay code 2 and TC 788 delay code 4.

  3. If the taxpayer submits a copy of a Form 1040 or Form 1040A tax return or a Form 1040 (A) return has been filed (CC RTVUE), and a Form 3439

    1. Verify the income on the tax return using the Information Returns (IRs) found under IDRS command code IPRTR (available by the end of May for the previous calendar year) as indicated in the following table:

      Type of Income IR Item and Box in Which it Should Appear Where to Find Income on Form 1040 / 1040A (dollar amount on those lines should be equal to or more than the total dollar amount for the IR Type)
      W-2 Wages, tips, other compensation (box 1) Form 1040, line 7
      Form 1040A, line 7
      W-2G Gambling Winnings
      (box 1)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 (if taxpayer is professional gambler)
      1099-G Unemployment compensation (box 1) Form 1040, line 19
      Form 1040A, line 13
      State & local income tax refunds (SITR) (box 2) Form 1040, line 10 (taxpayer must report this as income if claimed as an itemized expense on prior tax year Schedule A)
      1099-INT Interest Income (box 1) Form 1040, line 8a or 8b
      Form 1040A, line 8a or 8b
      1099-DIV Dividend Income
      (box 1a)
      Form 1040, line 9a or 9b
      Form 1040A, line 9a or 9b
      1099-MISC Rent
      (box 1)
      Form 1040, line 17 or 21 or
      Schedule C, line 1 or 6 or
      Schedule E, line 3
      Other Income (box 3) Form 1040, line 21 or
      Schedule C, line 1 or 6
      Non-Employee Compensation (NEC),
      (box 7)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 or
      Schedule F, line 10
      1099 -R IRA Distribution Form 1040, line 15a and / or 15b
      Form 1040A, line 11a and / or 11b
      Distribution from pension, annuities Form 1040, lines 16a and / or 16b
      Form 1040A, lines 12a and / or 12b
      Capital gain (box 3) Form 1040, line 13 or
      Schedule D, line 1
      Form 1040A, line 10
      SSA -1099 Benefits received
      (box 3)
      Form 1040, line 20a and / 20b
      Form 1040A, line 14a and / or 14b

      Note:

      If the accepted offer was for a single taxpayer, and the taxpayer is now filing a joint return, you must include the spouse's IRPTR income in the verification to determine if all of your taxpayer income is included on the return.

    2. If unable to identify and verify all IRPTR income listed in the above table on the tax return, or the IRPTR includes any Forms 1099 other than those listed above, send to Exam for review, along with the submitted Form 3429 , Form 2261, Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested. Only the IRs listed above are to be verified. All other IRs (i.e. 1098 Mortgage Interest Expense) are not income documents.

      Note:

      NEC income of $400 or more is subject to self-employment tax (SET). If the taxpayer did not include SET on his tax return, send the case to Exam for review, along with submitted Form 3439 , Form 2261, Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.

    3. If the IRPTR information lists IRs that can only be reported on a Form 1040, and the taxpayer files a Form 1040A , send the case to Exam for review, along with submitted Form 3439 , Form 2261, Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.

  4. Verify Form 3439, Statement of Annual Income:

    1. Include all applicable non-taxable and taxable income (see back of Form 3439 for a complete list).

      Note:

      Tips for completing the statement of annual income, Form 3439 :

      Example:

      Line 2 - Non-taxable income other than social security and railroad retirement benefits should be included on this line. Please see IRS Publication 525, Taxable and Non-Taxable Income .

      Example:

      Line 3(a) - Enter the total tax as indicated on your Form 1040 on this line.

      Example:

      Line 5 - Enter the information from Item 1 of your Form 2261, Collateral Agreement.

    2. Include all offer payments received during the calendar year that covers the tax return period.

    3. Math verify all calculations:

    1. If Form 3439 needs correction, prepare Form 3440, Adjustments to Statement of Annual Income.

    2. Forward the Form 3439 and / or Form 3440 , along with the tax return and print of the AOIC journal screen to the Lead Tax Examiner for review. The Lead will initial and date the upper left corner of the Form 3439/3440 and return to the Tax Examiner for processing within three days.

    3. If the tax return and Form 3439 submitted by the taxpayer are correct, accept as filed.

    4. If the tax return is correct, but the Form 3440 is prepared, and the taxpayer has a balance due over tolerance or they have overpaid, send Collateral Letter 279 . If there is a balance due, inform the taxpayer of a potential default, and request the additional amount due. If the taxpayer has overpaid, he should agree and request the refund before it can be released.

      Note:

      If the Form 3440 indicates no balance due, annotate AOIC history and accept as file.

    5. Suspend case for 45 days from the date of letter.

    6. If no response to a balance due, default offer.

    7. If no response to a potential overpayment, annotate AOIC history and accept as filed.

  5. If the taxpayer submits a tax return other than a Form 1040 or Form 1040A (i.e., Forms 1120, Form 1120S, Form 1065) and a Form 3439 -A :

    1. Verify Form 3439-A , Statement of Annual Income:

    • Verify all Math calculations.

    • Include all offer payments received during the calendar year that cover the tax return period.

    • If Form 3439 needs correction, prepare Form 3440.

    • Forward the Form 3439 and Form 3440 (if applicable), along with the tax return and print of the AOIC journal screen to the Lead Tax Examiner for review. The Lead will initial and date the upper left corner of the Form 3439 / Form 3440 , and return to the Tax Examiner for processing within three days.

    • Route the tax return to Exam for review, along with Form 3439 -A , Form 3440 (if applicable), Form 2261 -A, Collateral Agreement, IDRS prints, RTVUE/BRTVU, IRPTR the AOIC Journal Screen, and the original case file if requested.


    2) Route the tax return to Exam for review, along with Form 3439, Form 3440 (if applicable), Form 2261, Collateral Agreement, IDRS prints RTVUE / BRTVU, IRPTR, the AOIC Journal Screen, and the original case file if requested.

    1. If the tax return and Form 3439 submitted by the taxpayer are correct, accept as filed.

    2. If the tax return is correct, but the Form 3440 is prepared, send Collateral Letter 279 which should inform the taxpayer of a potential default if there is a balance due over tolerance, and request either the additional amount due or notify the taxpayer that they have overpaid.
      • Suspend case for 45 days from the date of letter.
      • If no response, default the offer.
      • If no response to a balance due, default offer.
      • If no response to a potential overpayment, annotate AOIC history and accept as filed.
      • If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908.

    3. If Exam advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.
      • If no response, default the offer.
      • If you receive the amended return, route to Exam for review along with a copy of the letter that was sent to the taxpayer.
      • Route amended tax return for processing, and retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

  6. If the taxpayer submits a Form 1040 / Form 1040A or files a Form 1040 / Form 1040A tax return (CC RTVUE), but does not submit a Form 3439 :

    1. Verify the taxable income on the tax return to the Information Returns (IRs) found under IDRS command code IPRTR (available by the end of May for the previous calendar year) as illustrated in the following table:

      Type of Income IR Item and Box in Which it Should Appear Where to Find Income on Form 1040 / Form 1040A (dollar amount on those lines should be equal to or more than the total dollar amount for the IR Type
      W-2 Wages, tips, other compensation (box 1) Form 1040, line 7
      Form 1040A, line 7
      W-2G Gambling Winnings
      (box 1)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 (if taxpayer is professional gambler)
      1099-G Unemployment compensation (box 1) Form 1040, line 19
      Form 1040A, line 13
      State & local income tax refunds (SITR) (box 2) Form 1040, line 10 (taxpayer must report this as income if claimed as an itemized expense on prior tax year Schedule A)
      1099-INT Interest Income (box 1) Form 1040, line 8a or 8b
      Form 1040A, line 8a or 8b
      1099-DIV Dividend Income
      (box 1a)
      Form 1040, line 9a or 9b
      Form 1040A, line 9a or 9b
      1099-MISC Rent
      (box 1)
      Form 1040, line 17 or 21 or
      Schedule C, line 1 or 6 or
      Schedule E, line 3
      Other Income (box 3) Form 1040, line 21 or
      Schedule C, line 1 or 6
      Non-Employee Compensation (NEC),
      (box 7)
      Form 1040, line 21 or
      Schedule C, line 1 or 6 or
      Schedule F, line 10
      1099-R IRA Distribution Form 1040, line 15a and / or 15b
      Form 1040A, line 11a and / or 11b
      Distribution from pension, annuities Form 1040, lines 16a and / or 16b
      Form 1040A, lines 12a and / or 12b
      Capital gain (box 3) Form 1040, line 13 or
      Schedule D, line 1
      Form 1040A, line 10
      SSA-1099 Benefits received
      (box 3)
      Form 1040, line 20a and / 20b
      Form 1040A, line 14a and / or 14b

      Note:

      If the accepted offer was for a single taxpayer, and the taxpayer is now filing a joint return, you must include the spouse's IRPTR income in the verification to determine if all of your taxpayer income is included on the return.

    2. If unable to identify and verify all IRPTR income on the tax return, send to Exam for review, along with Form 2261, Collateral Agreement, and IDRS prints RTVUE, IRPTR, the AOIC Journal Screen, and the original case file if requested.
      • If Exam review advises the request of an amended return, send Letter 279 and a Form 3439 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.
      • If no response, default the offer.
      • If you receive the amended return, but not a Form 3439: prepare the Form 3439 and route the amended return and the Form 3439 to Exam for review, along with a copy of the letter that was sent to the taxpayer.
      • If you receive the amended return and a completed Form 3439 , verify the Form 3439, create a Form 3440 if necessary, and route to Exam for review along with a copy of the letter that was sent to the taxpayer.
      • Route the amended tax return for processing, and retain a copy in the offer file. (Monitor for posting of the adjustment to IDRS.)
      • If there is a balance due over tolerance per the Form 3439 or Form 3440, send another Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3439, and the amount due.
      • Suspend case for 45 days from the date of the letter. If no response, default the offer.

    3. If the tax return includes all IRPTR income, prepare Form 3439. If there is a balance due over tolerance per the Form 3439, send Collateral Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3439, and the amount due. Suspend case for 45 days from the date of letter. If no response, default the offer.

    4. If there is no balance due per the Form 3439, notate AOIC history and accept as filed.

    5. If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908.

  7. If the taxpayer submits a tax return other than a Form 1040/ Form 1040A (i.e., Form 1120, 1120S, 1065), but does not submit a Form 3439-A, send to Exam for review, along with a blank Form 3439-A, Form 2261-A Collateral Agreement, IDRS prints RTVUE / BRTVU, IRPTR, and the AOIC Journal Screen.

    Note:

    All Form 2261-A A agreements should be forwarded to Exam.

  8. If the taxpayer does not respond to the collateral package within 45 days and a return or extension to file is not posted within 60 days of the due date of the return, or responds that he is not liable, compare the W-2 Income or IRPTR information to determine filing requirements. See IRM 5.19.2, Return Delinquency.

    If... Then
    The taxpayer does not respond or does not file
    1. Send potential default letter.
    2. Suspend case for 45 days from date of letter. If no response, follow procedures in IRM 5.19.7.2.20 , Processing Defaulted OICs.
    It appears that the taxpayer is not liable to file 1. Document Form 6313 or AOIC.
    2. Return Form 6313 to the case file.
    3. Update AOIC to the appropriate status.
    Close TDI. MOIC inputs the FRM49, TC590/76.
  9. If a tax period included in the Future Income Collateral Agreement is amended / adjusted at a later period in time, MOIC should compute the Form 3440 to determine if there is an additional balance due.

    1. If there is no balance due per the Form 3440, notate AOIC history and accept as filed.

    2. If there is a balance due over tolerance per the Form 3440, send Collateral Letter 279 to the taxpayer which informs him of potential default, request a signature on the Form 3440, and payment for the amount due.

    3. Suspend case for 45 days from the date of letter.

    4. If no response, default offer.

    5. If the taxpayer responds with a request for an extension to pay the balance due, MOIC can grant up to a 120 day extension to pay. Research IDRS to ensure the CSED will not expire before the payment is received at the end of the extension period. Send Letter 2908 .

  10. If an Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.

    1. If no response, default the offer.

    2. If you receive the amended return, route to Exam for review.

    3. Route amended return for processing, retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

Processing Other Collateral Agreements
  1. Form 2261-B, Collateral Agreement - Adjusted basis of Specific Assets, will be sent to Exam between six and eight weeks after the due date of the return, and the original case file if requested.

    1. Examination determines compliance with terms of the collateral agreement and forwards the file back to the offer unit.

    2. Based on Exam's guidance, the tax Examiner will take the next appropriate action (i.e. file case, start potential default actions).

  2. MOIC tax examiners should review the tax returns included on the Form 2261-C, Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, Unused AMT credit, and/or any "unexplained" credits to evaluate if the package should be sent to Exam for review. This review should occur no later than 6 - 8 weeks after the due date of the tax return or valid extended due date of the tax return.

    Reminder:

    Form 3439 or Form 3439-A are not sent to the taxpayer.

    1. If the taxpayer files a Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits a capital loss, review Form 1040, line 13 ( Form 1040A, line 10) for a negative dollar amount. If present, forward to Exam for review, along with Form 2261-C, Collateral Agreement, IDRS RTVUE print, and the original case file if requested.

    2. If the taxpayer's Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits a net operating loss (NOL), review Form 1040 for a negative entry on lines 12, 14, 17, 18, and / or 21 ( Form 1040A, line 15), or an NOL identified by a negative entry on Form 1040, line 22 caused by a negative amount on line(s) 12, 14, 17 (other than Schedule E Part I), 18, or the indication of a carryover NOL on line 21. If present, forward to Exam for review, along with Form 2261-C Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, and the original case file if requested.

    3. If the taxpayer's Form 1040 or Form 1040A (CC RTVUE) and the Collateral agreement prohibits an Unused Investment Credit, review Form 1040 for a negative entry on line 55, box "c" , with 3468 written in the blank. If present, forward to Exam for review, along with Form 2261-CCollateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, and the original case file if requested.

  3. If the Form 1040 taxpayer does not claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / or an "unexplained" credit,"accept as filed" .

  4. If the Form 1040 taxpayer does claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / "unexplained" credit, or an income tax return other than a Form 1040Form 1040A, forward the case to Exam for review, along with Form 2261-C, Collateral Agreement, and the original case file if requested.

    Note:

    Losses cannot be carried on Form 94X, Form 1040EZ, or Form 1065 tax returns. Any Form 1120-S loss would pass to the shareholder(s), and are limited to credits which would be included on the taxpayers Form 1040. MOIC can close these cases "accepted as filed" . All other types of tax returns go to Exam for review.

  5. If Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.

    1. If no response, default the offer.

    2. If you receive the amended return, route to Exam for review along with a copy of the letter that was sent to the taxpayer.

    3. Route amended return for processing, retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

  6. MOIC processes basis and other collaterals per the terms and the years included on the collateral as indicated in the chart below:

    If Then
    Terms of the basis or other collateral agreement have been satisfied. 1. Input TC 788
    2. File collateral in closed file.
    Terms of the basis or other collateral agreement have not been met, i.e., the asset has not been sold. Continue to review the collateral file annually, forwarding to the Exam function as needed.
    After satisfactory conclusion of the 5-year monitoring period for compliance, the basis or other collateral agreements will be reviewed yearly until all CSED's of all tax periods included in the offer have expired or the Collateral offer terms have been satisfied, whichever comes first. 1. Input TC 788
    2. File collateral in closed file.
Examination Function Review
  1. The Campus Examination Function reviews the Collateral Agreements to determine if the terms of the agreement have been met. If during this review, Exam determines that an audit is warranted, they will request the original return from files, attach an explanation and forward the package to the Area Office.

  2. Campus Exam will provide a response to all IMF referrals within 30 days and to all BMF within 45 days. If no response from Exam within the allotted time frame, send a reminder and wait an additional 5 days. If no response, elevate to MOIC manager for action.

  3. If the terms of the Collateral Agreement are beyond Campus Exam's ability to validate, (e.g. sale of property, proceeds from a business) prepare a Form 2209 and route to appropriate Field Office with copies of the acceptance letter, Form 656, and Form 2261. Suspend case for 60 days. If no response within the allotted time frame, send a reminder and wait an additional 15 days. If no response, elevate to MOIC Manager for action.

Death of a Taxpayer With a Collateral Agreement
  1. When the taxpayer dies during the monitoring of the terms of a collateral agreement, follow the procedures in IRM 5.19.7.2.10.7, Death of the Taxpayer While Monitoring the OIC.

  2. Update AOIC history or Form 6313, as appropriate, showing the date of death.

Transfer of Collateral Agreements
  1. A request to transfer an accepted OIC when we are monitoring for the collateral should be rare. The request to transfer must be made by the taxpayer in writing.

  2. Follow transfer procedures in IRM 5.19.7.2.17.3, Transfer of Accepted OICs.

Transfers

  1. An offer may be transferred from one campus's jurisdiction to another's if a related offer is being worked at the other campus.

  2. If the offer is under consideration, the Area Office will be responsible for the transfer of the case, including notifying the taxpayer and updating AOIC and IDRS. The campus is contacted only when there is an offer deposit. The campus will be responsible for the transfer of the deposit.

Transfer of Deposits on Pending OIC
  1. When a pending OIC is transferred from one campus's jurisdiction to another's, the Accounting function at the losing campus must transfer OIC deposits from the 4710 Account to the Accounting function at the receiving campus. The Area Office will notify the campus of the transfer.

  2. If the account is on AOIC, update AOIC with the transfer information following procedures in the AOIC User Guide, Chapter 3.

  3. Prepare Form 2158, Credit Transfer Voucher showing (per local policy):

    • 4710 Account symbol 20X6879.9

    • The taxpayers name, new address and TIN

    • RACS number

    • Amount of deposit

    • The address of the receiving campus

  4. Route the completed Form 2158 to the RACS unit in Accounting.

Transfer of Pending OICs on NMF
  1. When the tax periods on the Form 656 are on the ANMF, follow the steps below:

    1. Secure an ANMF transcript via ICP/DI or ANMF.

    2. Complete Form 3177 to input TC 483, use the TC 480 date.

    3. Advise Accounting to transfer the RACS account via a two-way memo with a photocopy of the Form 656.

    4. Review the AOIC or the 4710 Account File for OIC deposits. If there is a deposit follow procedures in IRM 5.19.7.2.17.1, Transfer of Deposits on Pending OICs, to notify Accounting.

    5. Send the offer file to the appropriate campus on a Form 3210.

    6. Close out manually monitored deposits by zeroing out the deposit amount on Form 2515.

    7. Notify the taxpayer using Correspondex Letter 86C that: (1) the offer has been transferred; (2) one balance due notice may erroneously issue during the transfer; and (3) give the address and telephone number of the receiving campus.

    8. File Form 2515 (if applicable) in the closed Form 2515 file. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

Transfer of Accepted OICs
  1. On IDRS take the following actions.

    1. Input the new address and location codes on ENMOD.

    2. Input TC 470 using CC REQ77 without a closing code to prevent notices from issuing.

    3. When the TC 470 posts (within 2 weeks), input TC 483/782 to reverse TC 480/780.

  2. Use Form 3177 to input TC 483 for NMF periods.

    Reminder:

    Form 3177 must be mailed to the appropriate consolidated NMF site.

  3. Record your actions and the new address on AOIC or Forms 2515, Form 6313 and/or 6314, if applicable.

  4. Close the OIC control base on IDRS.

  5. Send Letter 86C notifying the taxpayer of the transfer, providing the address of the receiving campus.

AOIC Transfers
  1. A transfer option has been programmed on AOIC in the Headquarters module. Before a case may be transferred it must be accepted into the SC inventory. If a case is in NW the transfer will not be completed. Once the case is in the Service Center (SC) inventory an email may be sent to the Headquarter's analyst requesting the case be transferred to the other MOIC site. Be sure to explain in the email why the transfer is necessary.

    Note:

    Generally, a transfer of an offer case files should be limited to related offers.

Department of Justice (DOJ) Settlements

  1. The Department of Justice (DOJ) settles certain tax litigation cases by accepting an Offer in Settlement. DOJ sends accepted Settlement cases to the Collection Advisory office responsible for that geographic area. See Pub 4235 for a list of Collection Advisory offices by state.

  2. The Advisory office retains the original accepted case file. If the compromised liability has a deferred payment or collateral agreement, the campus monitors the case to ensure that the taxpayer complies with the terms of the settlement agreement.

Processing Accepted DOJ Settlements
  1. Advisory sends copies of pertinent documents from the DOJ Settlement file on a Form 3210, Document Transmittal, to MOIC.

  2. The file should include copies of:

    1. A copy of Judgment.

    2. DOJs acceptance letter.

    3. DOJs letter concerning any collateral agreement.

  3. The documents will provide:

    1. Amount of the offer.

    2. Amount of the liability.

    3. MFTs.

    4. Tax years or periods compromised.

    5. Terms of the agreement.

  4. Review the DOJ case file to determine if the necessary information is present for monitoring. If any item is missing, send a written request for the missing documentation to the Advisory office. Place the response from Advisory in the case file and follow the guidance provided below to proceed with monitoring actions.

  5. The IRS lacks the authority to accept an offer for a year referred to DOJ. Do not input TC 480 or TC 780 on DOJ cases. Request Advisory to input TC 520 (litigation) with a closing code (cc) 74 to freeze account during MOIC monitoring period. When the MOIC monitoring period is complete, request Advisory input the TC 521. No CC is used when the TC 520 uses a CC 74.

  6. To set up the DOJ case for monitoring;

    1. Prepare Form 2515, Record of Offer in Compromise. Annotate "DOJ Offer in Settlement. "

    2. Prepare Form 6314, Deferred Payment Offer Payment Record, and maintain in chronological order by payment due anniversary date.

    3. If a collateral is included in the terms of agreement, prepare Form 6313, Collateral Agreement Payment Record, and file in alphabetical order.

  7. Payments required by the terms of the agreement are sent directly to MOIC by the taxpayer.

    1. Payments are deposited as revenue received and applied to tax, penalty and interest of the earliest CSED tax period and to the next earliest CSED tax period of the taxpayers module(s).

      If Then
      Deferred payment is not received within 30 days after the due date. Send Letter 274 to the taxpayer.
      Payment not received within 45 days after Letter 274 was sent. Prepare Form 2209 with copy of Letter 274 and Form 6314 to the Advisory function requesting DOJ be advised of the taxpayers default. DOJ will take necessary actions to get the taxpayer into compliance or otherwise advise MOIC.
    2. Payments made based on terms of the collateral are applied in the same manner.

    If Then
    Taxpayer fails to comply with the terms of the collateral agreement within 30 days after the due date. Send Letter 279.
    Payment not received within 30 days after Letter 279 sent. Prepare Form 2209, Courtesy Investigation, with a copy of Letter 279 and Form 6313 to the appropriate Advisory function requesting that DOJ be advised of the taxpayers default. DOJ will take necessary actions to get the taxpayer into compliance or otherwise advise MOIC.
  8. If the taxpayer requests modifications of the settlement or collateral agreement, immediately notify DOJ through the Advisory function via Form 2209.

    Note:

    Send copies of any correspondence to the Advisory contact.

  9. Send to DOJ via Advisory a copy of all Forms 6314 in October of each year and all Forms 6313 in May of each year.

Closing DOJ Settlements
  1. When the terms of the deferred payment agreement have been fulfilled, input the appropriate adjustments to zero out any remaining open tax periods.

  2. When the terms of a collateral agreement have been fulfilled, the offer tax examiner should close out the collateral agreement account.

  3. When all the amounts under the settlement agreement, including accrued interest and amounts due under a collateral agreement have been received, immediately notify DOJ through the Advisory contact.

    1. Forward copies of Form 6314 and/or Form 6313.

    2. Request release of Federal Tax Lien(s).

OIC Defaults

  1. When a taxpayer fails to meet any term of an offer, the offer may be defaulted and all liabilities reinstated. Any of the following may result in a default of the offer.

    • Failure to remit any OIC payment due (Cash or deferred).

      Note:

      See IRM 5.19.7.2.22 for payment tolerance.

    • Failure to return overpayments erroneously refunded.

    • Failure to meet terms of a collateral agreement, including payments based on a future income collateral agreement.

    • Failure to timely file subsequent tax returns and pay all taxes due during the compliance period.

  2. Prior to issuance of MOIC correspondence, use IDRS to determine if the AOIC record has the most current address for the taxpayer.

    Example:

    The OIC was accepted in 2003 and IDRS ENMOD shows an address update for 2005. Update the AOIC.

  3. Failure to meet any of the above may be due to the death of the taxpayer. IRM 5.19.7.2.10.7, Death of the Taxpayer While Monitoring the OIC.

  4. If one taxpayer on a joint offer dies and the surviving spouse maintains the offer terms, do not terminate the offer.

  5. Taxpayers who default an accepted offer do not have appeal rights.

  6. When issuing a letter advising the taxpayer of a potential default, prepare a dummy file to maintain a copy of the potential default, extension to pay, and default letters, if applicable, to be sent to FRC after the offer has been close.

Failure to Remit an OIC Payment
  1. Review your inventory weekly for missing or overdue OIC payments.

    1. AOIC Cases: Generate Journal Payment Due Report showing payments due.

    2. Manually Monitored Cases: Review OIC Deferred Offer Payment Record File.

  2. When you determine a payment is more than 30 days past due, research IDRS to look for the missing payment.

    1. If the overdue payment is located, update AOIC or Form 6314 by recording the payment using the TC 670 amount and date.

    2. If the payment is not located, review AOIC to determine if the taxpayer has received the one time extension to pay within the last 24 months. If the taxpayer has been provided an extension to pay a missing offer payment within the last 24 months, send a potential default letter but do not offer the 120 day extension. If an extension to pay was not previously granted within 24 months, include the opportunity to request an extension to pay as outlined in the table below.

      Note:

      Contact must be initiated before the payment is 45 days over due.

      If Then
      The offer is controlled on AOIC, 1. Send AOIC Letter 274 SC/CG with the appropriate paragraphs. In the open paragraph inform the TP, if eligible: “You may request a one- time extension to pay the missed offer payment, however future payments must be paid timely. If there has been a major change in your financial situation, please contact us to discuss your options.”
      2. On AOIC: Enter follow-up date (date letter generated plus 45 days) on the AOIC Follow up screen and update status to "IP" .
      3. Suspense the case for 45 days.

      Note:

      The Journal Screen should not be changed to reflect a new payment due date.

      The offer is being manually monitored, 1. Send Letter 274C.
      2. Update the IDRS control.
      3. Suspense the case for 45 days.
      4. Input a history on AMS.
  3. Process responses as follows:

    If the And Then
    Taxpayer pays in full 1. Process the payment.
    2. AOIC: Update AOIC Journal Screen, follow up and status.
    3. Non-AOIC: Update the IDRS control and update Form 6314.
    Taxpayer responds within the 45-day suspense period Requests any change that would revise the terms or conditions of the offer 1. Advise that the request must be in writing and must be received within 15 days.
    2. Document AOIC history and input follow-up date. If manually monitored, update IDRS control and Form 6314.
    Taxpayer responds within the 45-day suspense period Requests to pay less than the scheduled payment amount Grant the request if the CSED will not expire before the payment is due. Advise that:
    1. The request is granted for the missing payment only.
    2. the balance of that payment must be paid within 120 days.
    3. If the intent is to revise the payment amount permanently, a written request to compromise the original offer is required and must be received within 15 days.
    Taxpayer submits a written request to compromise the offer The offer was accepted by COIC, Appeals, Collection, Examination, or DOJ, 1. Prepare Form 2209 stating the taxpayers request.
    2. Send the Form 2209 and any related correspondence with a complete print of the AOIC history to the office that accepted the offer or the office that currently works offers that originate from the taxpayer's location. ) Ex parte communication rules prohibit attempts to influence Appeals. Do not include in a Form 2209 addressed to Appeals or its attachments any statements directing Appeals to make a particular determination in the potential default case.

    Note:

    The receiving office has a 45 day deadline per Form 2209 . Input a follow up for 90 days.


    3. Document AOIC remarks with the taxpayer's requested terms change per the correspondence received.
    4. AOIC : Update the database to reflect OI status.
    5. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    Failure to remit a payment on a lump sum cash offer or periodic payment The taxpayer requests an extension of time to pay (the offer was accepted by Collection, Exam, or Appeals) 1. Grant the request, allowing the number of days the taxpayer requested up to 120 days to make the payment if the CSED will not expire before the payment is due.
    1. If the request is for more than 120 days, contact the taxpayer to inform them the maximum one time extension is up to 120 days.

    2. If the request does not indicate how much time is needed or is not clear, Tax Examiners should attempt to contact the taxpayer by telephone for a clarification. If you cannot reach the taxpayer, grant 120 days.


    2. Follow IRM 5.19.7.2.19.2, Extension of Time to Remit an OIC Payment. .
    The offer was accepted by DOJ 1. Prepare Form 2209 stating the taxpayer's request.
    2. Send the Form 2209 and any related correspondence with a complete print of the offer history from AMS and any monitoring documentation from the case file to Advisory office (for DOJ offers) where the offer was accepted.
    3. AOIC: Update the database to reflect "OI" status.
    4. Non-AOIC: Update the IDRS control to reflect Form 2209 sent.
    Taxpayer does not respond, The offer was accepted by Collection, Exam, or Appeals Follow procedures in IRM 5.19.7.2.20 , Processing Defaulted OICs
    The offer was accepted by DOJ 1. Prepare a Form 2209 stating the taxpayer is not in compliance with the offer terms.
    2. Send the investigation to the Advisory .
    3. Attach a copy of :
    • Taxpayer's letter (if one was sent)

    • Complete print of AMS history and case file notes.


    4. AOIC: Update the database to reflect investigation status.
    5. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    Letter 274C (SC/CG) is returned undelivered, Follow procedures in IRM 5.19.7.2.19.6, Undelivered Potential Default Letters.
  4. If the taxpayer contacts the Service during any suspense period and states they can not pay, proceed with default actions.

Extension of Time to Remit an OIC Payment
  1. A taxpayer may be granted one extension of time to make an offer payment, if the CSED will not expire before the payment is received. The extension can be no longer than 120 days. All regular offer payments must be made timely during this extended period. The extension to pay an offer payment can only be granted once within a 24 month period.

  2. Offers with an extension to remit a missed offer payment must be monitored closely. If the terms of the extension are not met or another regular required offer payment is not received, follow procedures in IRM 5.19.7.2.20, Processing Defaulted OICs, or if applicable, send Form 2209 for DOJ offers.

    If Then
    The account is on AOIC, 1. Update the Journal screen to include the additional payment.
    2. Update the status to ML or MP whichever is applicable.
    3. Send the taxpayer the 2908 letter to advise them in writing that an extension has been granted and provide them the date the payment is due. The 2908 letter advises the taxpayer if a subsequent offer payment or payment on the extension is late, the offer will be defaulted.
    4. Input a follow -up on AOIC for the date the payment was re-scheduled.

    Note:

    If the status is ML then the follow up must be within 25 days.

    The account is not on AOIC, 1. Update the IDRS control with follow-up of next payment date. Also include the date of the rescheduled payment on control history.
    2. Advise the taxpayer in writing that an extension has been granted and provide the date the payment is due. Also advise the taxpayer if a subsequent offer payment or payment on the extension is late, the offer will be defaulted.

    Note:

    If the status is ML then the follow up date must be within 25 days.

    Example:

    The Service accepts a $5,000 offer to compromise $20,000 in tax liability on February 20, 2015 The payment terms are that $1,000 is to be paid every two months on the first of the month beginning April 1. The taxpayer makes the April and June payment but does not remit his payment for August. Following issuance of the potential default letter the tax examiner receives a response from the taxpayer requesting to pay the missed $1,000 offer payment over the next 4 weeks. On Sept. 4, the tax examiner agrees and advises the taxpayer must make the next $1,000 payment due in October along with a weekly payment of $250 to pay the missed payment. The tax examiner will issue a 2908 letter with the appropriate paragraphs to the taxpayer advising of the extension and potential default if the offer extension payment or another required monthly payment is not made.

  3. If the missed payment is not received within 30 days of the extended payment date or a subsequent payment is more than 30 days late, take the following actions:

    If Then
    The offer was accepted by Collection, Examination, or Appeals Follow procedures in IRM 5.19.7.2.20, Processing Defaulted OICs.
    The offer was accepted by DOJ 1. Prepare a Form 2209, attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the accepting office.
    2. AOIC: Update the database to reflect OI status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent..
  4. Do not grant an extension to pay a missed offer payment more than one time during a 24-month period.

Failure to Return Refunds (Refund Recoupments)
  1. The Service is entitled to any overpayment of tax or other liability for the tax periods extending through the calendar year the offer is accepted. Certain exceptions apply to DATL, DOJ and ETA offers. If an overpayment is erroneously refunded, contact the taxpayer.

    Note:

    Contact must be initiated as soon as the erroneous refund is identified.

    If Then
    The refund is under ≡ Do not contact the taxpayer for payment.
    The offer is controlled on AOIC 1. Send Letter 274 SC/CG.
    2. On AOIC, enter follow-up date (date letter is generated plus 45 days) on the AOIC follow-up screen and change the AOIC status to "IR" .
    3. Suspense the case for 45 days.
    The offer is being manually monitored 1. Send Letter 276C.
    2. Update the IDRS control.
    3. Input history on AMS.
    4. Suspense the case for 45 days.
  2. Process responses as follows:

    If the And Then
    Taxpayer repays the refund in full 1. Apply the refund to the module it refunded from. Input a a TC 570 to keep the credit from refunding.
    2. Wait for the refund to post.
    3. Apply the refund to the earliest CSED period.
    4. AOIC: Update AOIC.
    5. Non-AOIC: Update the control on IDRS.
    Taxpayer requests an extension of time to repay the refund You may grant up to 120 days for the taxpayer to repay the refund.
    1. Update the Recoupment Screen if necessary.
    2. Update the status to "MO" .
    3. Advise the taxpayer in writing that an extension has been granted. Also advise the taxpayer if a repayment of the refund is late, the offer will be defaulted.
    4. Input a follow up on AOIC for the date the refund repayment was re-scheduled.
    Taxpayer is unable to repay the refund, refuses to repay the refund, or does not respond The offer was accepted by Collection, Examination, or Appeals Follow procedures in IRM 5.19.7.2.20, Processing Defaulted OICs
    The offer was accepted by DOJ 1. Prepare a Form 2209 attach any related taxpayer correspondence and a complete print of the AOIC or Offer history. Send to the accepting office.
    2. AOIC: Update the database to reflect OI status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    Letter 274C (SC/CG) is returned undelivered Follow procedures in IRM 5.19.7.2.19.6, Undelivered Potential Default Letters.
Failure to Adhere to Compliance Terms
  1. Taxpayers agree, as a term of the offer, to timely file tax returns and timely pay taxes for the five year period beginning with the date of acceptance of this offer and ending through the fifth year, failure to do so is a breach of contract.

    Note:

    As a matter of policy, if there is no other basis to default the taxpayer's offer, the non-payment of an individual shared responsibility payment (SRP) will not default an offer. The SRP amount that the taxpayer owes is not subject to failure-to-pay penalties. filing a notice of federal tax lien, or levy on the taxpayer's property.

  2. The taxpayer is considered in compliance if the taxpayer has submitted an extension to file the current year's tax return.

  3. This compliance provision is monitored for five years via AOIC listings and / or EUREKA™(DAE) reports (for IMF) beginning with the year of acceptance.

    Note:

    For accepted offers on joint assessments and one party fails to remain compliant with the future filing of returns and payment of taxes, the offer will be defaulted for the noncompliant taxpayer only. The taxpayer who remains in compliance will be unaffected. Do not contact the compliant taxpayer. IRM 5.19.7.2.19.5, Defaults on Joint Offers Due to Non-Compliance.

  4. When checking 5-year compliance and, upon discovery that a subsequent module has been closed using closing code TC 597 or TC 598 (surveyed/shelved by National Office):

    1. Verify the taxpayer has a filing requirement via command code IRPTR.

    2. If no filing requirement, no action is necessary.

    3. If the taxpayer should file, input TC 592 to reverse and reopen the filing requirement.

  5. Update the case history to reflect your actions and process the Return Delinquency (RD) also referred to as Taxpayer Delinquency Investigation (TDI) as indicated below. Additional information about identifying TDIs can be found in IRM 5.19.2.1 What is the IMF Return Delinquency Program.?

  6. When income information is available and the taxpayer meets requirements for filing status single with one exemption, complete all internal research to determine if a return was submitted to the IRS. If not, then take the following actions:

    If And Then
    The potential default is due to non filing the TDI is assigned to ASFR (TSIGN 8000)
    1. Do not send the potential default letter.
    2. Update the AOIC history or IDRS control if a manually monitored agreement (MMA).
    3. ASFR will work the delinquency following ASFR procedures.
    4. Leave the offer in 5M status on AOIC, or update the IDRS control for MMA.
    the TDI is assigned to a revenue officer (RO) 1. Send AOIC Letter 2909 SC/CG with the appropriate paragraphs.

    Note:

    Select paragraphs E and F when requesting the tax return.


    2. Input a follow-up date (date the letter is generated plus 45 days).
    3. Change the AOIC status to I5 or update the IDRS control for a manually monitored agreement (MMA).
    4. If the taxpayer files the return, update the history.
    5. If the taxpayer does not file, contact the RO advising that the campus is defaulting the OIC and follow IRM 5.19.7.2.20, Processing Defaulted OICs.
    the TDI is unassigned 1. Check TSIGN. If not 8500, input TSIGN 8500.
    2. Send Letter 2909 SC/CG or 2909C with the appropriate paragraphs

    Note:

    Select paragraphs E and F when requesting the tax return.


    3. Input a follow-up date (date the letter is generated plus 45 days).
    4. Change the AOIC status to "I5 or update the IDRS control for a manually monitored agreement (MMA)."
    5. If the taxpayer files the return, update the history.
    6. If the taxpayer does not file, default the offer and follow IRM 5.19.7.2.20 , Processing Defaulted OICs.

    Note:

    When sending the AOIC potential default 2909 letter, in the open paragraph advise the taxpayer if they have a balance due with the return, they cannot request an installment agreement, they can request an extension to pay up to 120 days.

  7. Process responses to Letter 2909 CG/SC or Correspondex Letter 2909C that requested a missing return and full payment if there was a balance due as follows:

    If And Then
    The taxpayer files the return there is a balance due under ≡ ≡ or the module is full paid 1. If you receive the original return, input TC 599 with appropriate closing code (See Document 6209 , Document 6209, IRS Processing Codes and Information)
    2. Process the return per IRM 5.19.2.5.4, IMF Return Delinquency Responses and Inquiries.
    3. AOIC: Update AOIC and change the monitoring status to "5M" or other applicable status.
    4. Non-AOIC: Update the IDRS control.
    The taxpayer files a balance due return without a payment there is a balance due more than ≡ ≡ ≡ with no payment 1. If you receive the original return, input TC 599 with appropriate closing code. (See Document 6209 , Document 6209, IRS Processing Codes and Information).

    2. Route the return for process per IRM 5.19.2.5.4, IMF Return Delinquency Responses and Inquires.
    3. Monitor for the return to post.
    4. Review IDRS to determine if a payment was received during the processing of the tax return, if not, then follow default procedures per IRM 5.19.7.2.20Processing Defaulted Offers.
    The taxpayer submits a balance due return without a payment -IMF requests an installment agreement or submits a Form 9465 1. Process the return per IRM 5.19.2, Return Delinquency.
    2. Input TC 599 with closing code 94. (Refer to Chapter 11, Doc. 6209)
    3. 30 days after the return received date, send the AOIC 2908, select appropriate paragraphs. Advise the taxpayer they do not qualify for an installment agreement per the terms of the accepted offer.
    4. Tax Examiners should make an attempt to contact the taxpayer by telephone to explain and determine the number of days they need to make the payment up to 120 days. If the taxpayer cannot be reached by telephone, contact the taxpayer in writing. Advise the taxpayer in the open paragraph, that an extension for 120 days (or less) was granted.
    . AOIC: Update the AOIC history.
    65. Non-AOIC: Update the IDRS history.

    Note:

    If the request for an installment agreement was made in writing, or on a Form 9465 ,Installment Agreement Request, maintain a copy of the request. If the offer defaults, the request will be sent to the Balance Due unit with a Form 4442 instructing them that the taxpayer has requested an IA.

    The taxpayer files a balance due return without a payment requests an extension of 120 days or less to full pay, 1. Process the return per IRM 5.19.2, Return Delinquency.
    2. Send Letter 2908 using the appropriate paragraph verifying approval of the extension.
    3. Input STAUP 22-09 with a follow up to input after 9 cycles. STAUP will only hold notices for 9 cycles.
    4. Set up the manual agreement using the follow up screen.
    5. Destroy the transcript.
    6. AOIC: Update AOIC and change status to "MO" .
    7. Non-AOIC: Update the IDRS control.
    requests an extension to pay for more than 120 days 1. Process the return per IRM 5.19.2.
    2. Deny the request in writing, using Letter 2908 appropriate paragraph, advising that only 120 days may be granted and provide the extension date of the payment.
    3. AOIC: Update the database to reflect "I5" status or other applicable status..
    4. Non-AOIC: Update IDRS history to reflect OIC letter sent.
    5.
    The taxpayer states the return was previously filed IDRS research now shows a return was filed
    1. Update the AOIC or Manual case history.
    IDRS research shows no record of the return 1. If the taxpayer was previously advised to submit a return, and a return was not provided, proceed with default procedures.

    The taxpayer submits a signed copy of the missing return 1. Use CC FFINQ or CC TRDBV to see if the return has been received and is in the pipeline. If so, monitor for the return to post.
    2. Process the return as an original if research indicates no record.
    3. Input TC 599 with appropriate closing code. (See Document 6209, IRS Processing Codes and Information.)
    The taxpayer responds stating the return was filed another TIN was the primary 1. Research IDRS under the TIN provided to verify the filing.
    2. Input the OIC Acceptance year under this TIN using CC ENREQ if a TC 780 is posted.
    3. If a TC 780 is not present, compliance for this taxpayer must be manually monitored.
    4. Update the AOIC or Manual case history.
    The taxpayer states that he/she (they) are not required to file 1. Verify by researching SERP and CC IRPOL/SUPOL/IRPTR.
    the income shown indicates a return should be filed 1. Send the taxpayer a 2909 letter with a copy of the IRPTR income print requesting a return be filed.
    2. Input a follow up on AOIC for 30 days to allow the taxpayer to file the return.
    3. Update the AOIC or Manual case history.
    the income does not require a return 1. Input the correct closing code.
    2. Update the AOIC or manual case history.

    Note:

    When sending a letter to the taxpayer granting an extension on the balance due tax return, the TE should include the balance owed with interest to the date of the extension.

  8. When the reason for the noncompliance is failure to pay taxes on a subsequent tax period or liabilities assessed after offer acceptance on tax periods not included in the offer, take the following actions:

    Note:

    Taxpayers may request an extension to pay a new liability up to 120 days.

    If the new balance due period And Then
    The taxpayer files a balance due return without a payment there is a balance due with no payment and the amount due is more than ≡
    1. Issue a potential default 2909 letter with the appropriate paragraphs, provide the taxpayer with the correct balance due including penalty and interest. Advise the taxpayer they may request an extension to pay up to 120 days.
    2.Input a follow up date (date the letter is generated plus 45 days)
    3. .Change the AOIC status to I5 or update the IDRS control for a manually monitored agreement (MMA)
    4. If the taxpayer pays the balance, update the status and document AOIC remarks or AMS for manually monitored agreements (MMA).
    5. If the taxpayer does not submit payment, default the offer.
    6. If the taxpayer requests an extension to pay, send 2908 letter granting the extension, provide the payment due date and the full amount due with penalty and interest calculated to the extension date.
    Any status except status 26 the amount owed is below ≡ ≡ 1. Consider the account full paid.
    Status 26 (Indicates the balance due period is in TDA status) TSIGN to 8500 or to an RO
    1. Send AOIC Letter 2909C.

    2. Input a follow-up date (date the letter is generated plus 45 days).

    3. Change status to I5 or OI status on Form 6314 for manually monitored cases.

    4. Update the AOIC or Manual case history.

  9. Process responses to the potential default letter 2909 that was issued due to an unpaid liability as follows:

    If the And Then
    Taxpayer pays in full, 1. Process the payment.
    2. AOIC: Update AOIC.
    3. Non-AOIC: Update the IDRS control.
    Taxpayer requests an extension to pay of 120 days or less, 1. Send Letter 2908 with appropriate paragraph allowing the taxpayer to pay what is owed in 120 days or less on IMF modules. BMF modules see IRM 5.19.7.2.19.4.1 , Failure to Adhere to Compliance Terms - BMF Federal Tax Deposit (FTD).
    2. Open a control on IDRS with activity 470MMDDYY to indicate the date the TC 470 needs to be re-input.
    3. Input A TC 470 on REQ77 to suppress balance due notices from systemic mailing.

    Note:

    Follow-up will be needed after 12 cycles to reinput the TC 470. If the module is in Status 71, the TC 470 is not required. The control should be closed either when the liability is paid in full or the offer is defaulted.



    4. Update AOIC status to I5 for the 120 day extension period.

    Note:

    If the taxpayer is required to make additional periodic payments, leave the status in MP; or status ML as appropriate.


    5. After 12 cycles, re-input a new TC 470 to continue suppressing notices on that module. Continue monitoring AOIC and close the IDRS control.
    Non-AOIC offers update the IDRS control, continue monitoring for payment, and update remarks on AMS.
    Taxpayer requests an extension of more than 120 days, or submits an installment agreement request the OIC was accepted by Collection or Examination 1. Deny the request in writing, using Letter 2908 with the appropriate paragraphs. Advise the taxpayer they do not qualify for an installment agreement per the terms of the accepted offer and that only 120 days may be granted and provide the extension date of the payment.
    3. AOIC: Update the database to reflect I5 status or other applicable status.
    4. Non-AOIC: Update IDRS history to reflect OIC letter sent.

    Note:

    If the request for an installment agreement was made in writing maintain a copy of the request. If the offer defaults, the request will be send to the Balance Due unit with a Form 4442 instructing them that the taxpayer has requested an installment agreement.

    Taxpayer requests an extension of more than 120 days, the OIC was accepted by DOJ 1. Prepare Form 2209 attach any related taxpayer correspondence and a complete print of the AMS offer history. Send to territory Advisory contact for DOJ offers.
    2. AOIC: Update the status to OI.
    3. Non-AOIC: Update the IDRS control to reflect Form 2209 was sent.
    Taxpayer does not respond the offer was accepted by Collection or Examination 1. Follow procedures in IRM 5.19.7.2.20, Processing Defaulted OICs.
    the offer was accepted by DOJ, 1. Prepare Form 2209, attach any related taxpayer correspondence and a complete print of the AMS offer history. Send to the territory Advisory contact for DOJ offers.
    2. AOIC: Update the status to OI.
    3. Non-AOIC: Update the IDRS control to reflect Form 2209 was sent.
    Letter 2909C (SC/CG)is returned as undeliverable Follow procedures in IRM 5.19.7.2.19.6, Undelivered Potential Default Letters.
Failure to Adhere to Compliance Terms - BMF Federal Tax Deposit (FTD)
  1. Generally, every employer who pays wages to an employee must withhold income tax and the employee share of FICA (i.e., social security and Medicare) or RRTA taxes from the employee’s gross wages and report the tax liability on an employer’s federal tax return.

  2. The following steps should be taken to verify that the BMF account is in FTD compliance if the taxpayer/POA requests an extension to pay a previous payroll tax liability.

    1. Use IDRS command code ENMOD to determine if the taxpayer has an open employment tax filing requirement.

    2. Use BMFOLK to determine if a taxpayer is a monthly or semi-weekly depositor for a particular quarter. Paragraph 4 below has additional information on types of depositors.

    3. Fax the computation of Federal Tax Deposits form to the taxpayer. Allow the taxpayer/POA 10 calendar days to respond. If the taxpayer does not have access to a fax machine, send correspondence requesting the information by mail and allow the taxpayer 10 days to respond. Input a follow up.

      Note:

      Document AOIC with the fax number and who's attention it was faxed.

    4. Verify the deposits on the computation form with IDRS.

    5. Using the total wages paid on the form and the FICA tax withheld, complete a Form 941 to verify the correct amount of deposits have been made.

    6. If the deposits are not correct and the taxpayer appears to be underpaid, do not allow the extension and proceed with potential default actions.

      Note:

      If the deposits were correct, consider that only one 120 day extension is allowed in a 24 month period.

  3. There are two deposit schedules: monthly and semi-weekly.

    Exception:

    if an employer’s total tax liability for any quarter is less than $2,500, payment may be made with the Form 941 on the due date of the return in lieu of making deposits.

  4. Semi-weekly depositors must deposit accumulated taxes on payment using the following schedule;

    PAYMENT DAYS DEPOSIT BY
    Wednesday, Thursday, and/or Friday Following Wednesday
    Saturday, Sunday, Monday, and/or Tuesday Following Friday
Defaults on Joint Offers Due to Non-Compliance
  1. When one of the parties to the compromise fails to remain compliant with filing and payment terms, the offer is only defaulted on the noncompliant spouse.

  2. The several liability provision applies while payments are being made on a deferred payment offer or during the remaining compliance period following full payment of the offered amount.

  3. The several liability provision applies to all terms of the OIC including:

    • Filing all returns timely,

    • Paying all current taxes timely, and

    • Complying with collateral agreements.

  4. Do not contact the compliant spouse. Use the potential default Letter 275C or AOIC Letter 2909C /Letter 2909(SC/CG) and address it to the noncompliant spouse.

    Note:

    A DEFAULT FSC transcript should generate if the primary taxpayer changes filing status in a subsequent filing year. The account for each spouse on the joint offer should then be monitored manually for filing and payment during the compliance period.

  5. If only one spouse on a joint liability is not compliant, separate accounts will need to be established using MFT 31.

Undelivered Potential Default Letter
  1. When a potential default letter is returned as "undeliverable" the tax examiner must follow specific procedures.

  2. The tax examiner must research for a new address using appropriate guidelines outlined in IRM 21.3.3.4.12.1, Undelivered Mail Received From Campus Mail Operation, IRM 3.13.62-54, CP Notice and C-Letter Distribution and Mailing Guides, and IRM 3.13.12.21.2, Undelivered Correspondence, and/or available locator services. Then:

    If And Then
    A new address is located, there is a yellow address change sticker provided by the U.S. Postal Service on the original envelope AOIC:
    1. Reissue the letter attaching Form 8822, Change of Address.
    2. Update AOIC with a follow-up date (date letter reissued plus 30 days).
    Non-AOIC:
    1. Reissue the letter.
    2. Suspense for 30 days.
    3. Update IDRS control.
    A new address is not found, the offer was accepted by DOJ, 1. Prepare a Form 2209, attach any related taxpayer correspondence and a complete print of the AOIC history. Send to the territory Advisory contact for the DOJ offer.
    2. AOIC: Update the database to reflect "OI" status.
    3. Non-AOIC: Update IDRS control to reflect Form 2209 sent.
    the offer was accepted by Collection or Examination, Follow procedures in IRM 5.19.7.2.20, Processing Defaulted OICs.

Processing Defaulted OICs

  1. When the Service determines the OIC should be defaulted, a default letter is sent to the taxpayer and an accounting entry will be reversed on the module(s) after the IRS defaults the offer..

    1. Generate and print the default letter from AOIC for signature.

    2. Secure the signature of the designated official on the default letter.

      Note:

      If the default letter is issued on a date other than the generation date, place a history in the remarks section of AOIC stating what date the letter was mailed.

    3. If there is a case file, make a copy of the signed default letter for the file.

    4. Send the signed letter to the taxpayer.

    5. Update AOIC status to OD.

  2. The default letter is generated and sent by the MOIC unit. This action can also be taken in response to Form 2209 from the territory Advisory office (DOJ). The default letter can only be generated and printed at the campus once the case is assigned to MOIC.

  3. If the taxpayer complies with the information requested in the potential default letter before the issuance of the default letter, do not default the offer.

    Note:

    If the potential default letter is returned undeliverable follow procedures IRM 5.19.7.2.19.6, Undelivered Potential Default Letters.

  4. Often taxpayers will comply (take the actions requested of them in the potential default letter) soon after receiving the default letter. Allow 15- days following the issuance of the default letter before taking default actions. If the taxpayer complies within this time frame, do not default the offer. It is in the Service's best interest to allow the taxpayer a full 60 days before defaulting (30 days for the POTENTIAL default letter with a 15-day grace = 45 days + 15 days after the default letter = 60 days).

    Note:

    If the taxpayer responds to the default letter requesting an extension to pay due to extenuating circumstances, managerial review and approval is required prior to granting an extension after a default letter. AOIC must be documented with the facts and the concurrence.

  5. The AOIC record should be updated to OD status during the 15-day period.

  6. Research IDRS to determine if the taxpayer complied during the 15-day waiting period. If the taxpayer complied within this time frame, do not default the offer. Write to the taxpayer explaining that the unfiled return or unpaid payment was found and the offer was not terminated.

  7. Research all tax modules on the offer for an unreversed TC 470 prior to input of TC 781. Input TC 472 to reverse any unreversed TC 470.

  8. Change the TSIGN to 0000 or a TSIGN requested by the Field Office.

  9. Federal tax liens will be re-filed by the territory office when the reversed assessments are reissued.

  10. If the default was due to a balance due on a new module and the taxpayer asks for an IA, Input a TC 971 AC 043 and forward the taxpayer information to TDA on a Form 4442.

  11. Prior to closing the offer as defaulted on AOIC, prepare a dummy file containing the potential default and default letters to be sent to FRC after the offer has been closed.

    Note:

    If the defaulted offer has TFRP modules, the TFRP liaison should be contacted to update the transactions on the account.

DOJ Default Letters
  1. The OIC Unit cannot generate a default letter from AOIC for DOJ offers.

  2. In this circumstance, DOJ will issue the default letter and forward a copy to MOIC along with the Form 2209 response.

    Exception:

    MOIC can issue the default letter if the Form 2209 response from DOJ states to take such action.

  3. MOIC must manually prepare a default letter for Examination (DATL) offers if the offer is not loaded on AOIC.

Reinstating Previously Written Off Tax Periods
  1. After allowing 15 days from issuance of the default letter tax, penalty and interest previously written-off may be reinstated as appropriate per the chart below.

  2. Each previously written off tax period should be analyzed to determine if the CSED has expired.

    If Then
    The tax period was previously written off via TC 608 Do not reinstate the tax liability.
    The CSED has expired Do not reinstate the tax liability.
    The CSED has not expired and tax period was written off via TC 971 AC 032 Reinstate the tax liability.
    The tax period was full paid Do not reinstate the tax liability.
  3. If the offer is controlled on AOIC:

    1. Follow default procedures provided in the AOIC User Guide to close cases controlled on AOIC.

    2. The action date is the date of the default letter.

      Note:

      The stamped date on the signed default letter (TC 781/action date) should coincide with the date the offer is placed in OD status. If there is a variance, the history must be updated with the correct TC 781 date for a complete audit trail.

    3. Update the AOIC history indicating the appropriate closed status (CX).

  4. If the offer is a manually monitored OIC:

    1. Pull the separately maintained control cards, Form 2515 , 6313, 6314, etc.

    2. Associate the forms with the offer case file.

    3. Stamp "Defaulted" and the action date on Forms 656, 2515, 6313, 6314, and on the outside of the case folder.

    4. Determine the amount of the reassessment to be reinstated using a current transcript.

    5. Compute and determine if the CSED has expired on any period. If the CSED has expired, do not reinstate the tax liability.

    6. Input TC 781 and action date using REQ77.

    7. Update the status using CC STAUP.

    8. Change the TSIGN to 0000 or a TSIGN requested by the territory office.

    9. Input TC 972 AC 32 for accounts previously written off with TC 971 AC 32. This will generate a TC 605 to reverse the TC 604 write off.

    10. Input TC 131 (if necessary) with a delay code of one (1) to release TC 130 (credit offset). TC 130 will need to be re-input with the correct DLN indicator if the liability is on NMF.

    11. Use REQ54 to input write-off reversals and manually compute penalty and interest to a current Date of Notice and Demand (23C date).

      Caution:

      When re-establishing joint accounts on MF, notices must be suppressed.

      Caution:

      Do not use TC 340, TC 341, TC 270, or TC 271 unless the account had restrictions before input of TC 780, which need to be restored.

  5. Accounting takes the necessary actions for reinstating non-master file accounts. MOIC actions follow:

    1. Prepare Form 3177 for TC 480 / TC 780 input.

    2. Attach a copy of the default letter and a NMF transcript to each Form 3177.

    3. Prepare Form 3465 indicating TC 860 with the full amount to be reinstated, 23C date highlighted, and specific transaction codes that were previously written off. Enter in the remarks section to reinstate abated NMF module, for the defaulted offer.

    4. Prepare a statutory period worksheet and compute the new statute expiration date.

    5. Prepare Form 3177 for input of TC 550 to indicate the new statute expiration date. Attach a current NMF transcript to the Form 3177.

    6. Prepare two Form 3177 for input of TC 781 and TC 483 (using the date of the default letter for the transaction date). Attach current NMF transcripts to both Form 3177.

    7. Wait for these transactions to post.

  6. Before closing the defaulted/terminated offer:

    1. Verify all TCs have posted to IDRS or NMF.

    2. Staple Forms 2515, 6313 and/or 6314 together and place in the case file. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

    Note:

    If the defaulted offer contained mirrored modules that previously had a TC 972 AC 110 posted to prevent cross referencing of subsequent payments and the CSED has not expired, manually input a TC 766 to the offer MFT 31 module to credit it for any uncredited payments posted to the spouse's MFT 31. Then input a TC 971 AC 110 cross referencing the spouse's MFT 31. Future payment will be credited on both MFT 31 modules.

  7. ) If the offer being defaulted contains mirrored modules that have previously had a TC 972/110 posted to prevent cross-referencing of subsequent payments, complete the following:

    If Then
    The CSED on the offer taxpayer MFT 31 is expired No action needs to be taken
    The CSED on the offer taxpayer MFT 31 is not expired
    1. Manually input TC 766 Ref 337 (see IRM 5.19.7.2.24.6, Mirrorfail Transcripts), to the offer taxpayer MFT 31 module to credit it for each payment not cross-posted from the non-offer taxpayer MFT 31 module.

    2. Input a follow-up for all payments to post and to ensure the module balance is the same for each MFT 31.

    3. Input a TC 971/110 to each MFT 31 module, cross-referencing the spouse’s SSN to ensure cross-posting of future payments.

Revocation of the Certificate of Release of Federal Tax Lien
  1. MOIC requests release of the federal tax lien(s) following full payment of the amount offered and accepted on an offer in compromise. However, if the taxpayer defaults on the offer after the release of a federal tax lien, and the IRS defaults the offer, MOIC must request that Advisory Unit revoke the lien release. Refer to IRM 5.12.3.14.1 Requesting Revocation of Lien Release.

  2. The first step MOIC should take is to view the periods covered on each released lien. The paid offer amount may have full paid the liability for the periods shown on the Notice of Federal Tax lien (NFTL).

    1. Use the ALS system to identify all NFTLs filed on the offer taxpayer.

    2. Research IDRS to determine if the tax periods shown on the NFTLs were full paid by any funds received as payments on the offer or by offsets from other periods.

    3. Prepare Form 14466 , Request for Revocation of Erroneous Release of Federal Tax Lien, to request the revocation of the release of lien for tax periods being reinstated due to the default. Follow procedures in IRM 5.12.3.14.1 , Requesting Revocation of Lien Release. Do not include any periods on the request that have been full paid. Prepare a separate form for each NFTL.

    4. Use the original data on ALS to prepare the Form 14466 to reestablish the lien, if appropriate and the aggregate account balance meets the criteria to file ( See IRM 5.19.4.5.3.2 , Filing Criteria)

    5. Email or fax both forms to an Advisory Group in the appropriate Territory Office.

    6. Document the AOIC history.

      Example:

      The IRS accepted a cash offer from Jerry and Margaret Taxpayer on July 8, 2014 for $5,000 that included the following tax periods:
      • 200412 for $1,200
      • 200512 for $1,000
      • 200612 for $3,500
      • 200712 for $4,000
      • 200812 for $1,300
      There were (3) three separate federal tax liens that covered all (5) five tax periods;
      - one lien for 200412,
      - another for 200512,
      - and the last for 200612, 200712 and 200812.
      The offer amount full paid the 200412 and 200512. The offer amount also partially paid the liability for 200612. In December 2016, their offer was defaulted for failure to full pay their liability on their 201512 return of $3,000.
      The assigned tax examiner, researched the ALS system to determine which liens had previously been released and determined that because the offer amount full paid the liability for 200412 and 200512, that a request to revoke the release of the FTL (1st lien and 2nd lien) was not necessary for these tax periods. Form 14466 was prepared to request the revocation of the lien release on the applicable tax years. . All forms were sent to Advisory and the AOIC history documented.

  3. Outstanding revocations on a taxpayer's credit report can be resolved by the filing of a subsequent release of the lien, even if the lien was not refiled after the revocation. The request to release the lien in this instance must be sent to Advisory since this is also a manual process and cannot be accomplished on ALS. Release of refiled liens must also be processed through Advisory as well.

  4. Advisory contacts can be found on the SERP Who/Where Advisory web page http://serp.enterprise.irs.gov/databases/who-where.dr/advisory.html.

Reopening Defaulted Offers
  1. A situation may arise where an offer in compromise is defaulted and we later discover that the termination was an IRS error.

    Example:

    The IRS does not receive a tax return during the 5-year compliance period and the taxpayer does not timely respond to the potential default letter due to circumstances beyond the taxpayer's control. The taxpayer later, via a certified mail receipt, conclusively establishes that the return was in fact filed but somehow was never processed.

  2. In rare situations a defaulted offer may be reopened based upon a taxpayer's exceptional circumstance.

  3. All requests to reinstate a defaulted offer must be reviewed and approved by a manager and reviewed by MOIC Department Manager prior to any action taken by the Tax Examiner. Requests to re-open an offer will be forwarded via email to the SBSE Headquarters MOIC analysts.

  4. If the offer is controlled on AOIC, provide the following information to SBSE Headquarters:

    1. Provide the offer number.

    2. Briefly state why the offer was defaulted.

    3. Include the specific dates of the default actions.

    4. State the reason for the reopening.

    5. Indicate the SC status code for the offer after reopening.

    Note:

    If the offer was defaulted by Appeals, the request to reopen should be routed via Form 2209 to Appeals. IRM 5.19.7.2.19.1 regarding ex parte communication rules involving a Form 2209 addressed to Appeals.

  5. The analysts will decide whether the reinstatement is appropriate and let MOIC know if the request is approved.

  6. If approved:

    1. Re-input TC 480, TC 780, etc. using the original transaction dates.

    2. Re-compute the CSED if necessary.

    3. Send the taxpayer correspondence advising of the reinstatement.

    4. Update the case or AOIC history stating the reason for the reversal.

Refund Recoupments

  1. One of the terms/conditions of an OIC is that IRS will keep any refund, including interest, due to the taxpayer because of an overpayment of any tax or other liability, for tax periods extending through the calendar year in which the offer is accepted.

    Note:

    The only exceptions are:

    • DATL offers, unless indicated otherwise on the acceptance letter

    • Department of Justice (DOJ) offers

    • Effective Tax Administration (ETA) (if stated in the terms)

  2. When an offer is accepted for an IMF taxpayers the TC 780 freezes all credits from refunding for ALL tax modules on the account for 8 weeks.

    Note:

    If a recoupment pays off a liability prior to Acceptance, the recoupment year may be recorded as zero. Example: The taxpayer files an offer on 12/20/2015 but the offer is not accepted until May 5, 2016. He files his tax return on 3/15/16 with a refund due of $1200. The refund paid off an offer module. Since this action took place prior to the acceptance and the module has been removed from the MFT screen by the accepting official the recoupment will be noted as zero. If a refund offset occurs prior to the acceptance, but did not full pay the liability, complete the recoupment for $.00 for YYYY. The MFT and liability screens should always reflect the balance due on the day of acceptance.

    Document AOIC remarks indicating the recoupment was completed for YYYY for $.00 and the credit systemically offset prior to acceptance.

  3. Eureka/DAE reports are to be run by each site on 5/30 and 11/30 for refund recoupments. The Tax examiners are responsible for completing all related case actions within 45 days of receipt of the reports. These reports are for IMF only. The TE should generate an AOIC Open Refund Recoupment Listing or an MR (Monitor Recoupment) Listing to monitor BMF returns.

  4. Additional notification will be issued due to input of TC 130. TC 130 causes a V- freeze and keeps the module from offsetting/refunding.

    1. CP Notice 44 (IMF) or CP Notice 188 (BMF) generates to notify MOIC of the available overpayment.

    2. An OIC transcript will issue three weeks later for any module where the credit balance was not resolved.

      Reminder:

      If an account freeze (TC 130) has not been input allowing the Service to cross-reference credits between IMF and BMF, this provision does not apply.

      Reminder:

      We cannot ask for any refunds to be returned that were issued prior to the submission date of the accepted offer from the responsible party (IMF) of a business, or if TC130 was not input on the IMF account allowing the cross reference credits between IMF and BMF accounts.

  5. Outstanding available overpayments should be applied to the tax period with the earliest CSED, followed by the tax period with the next earliest CSED. Refund recoupments will be applied to the individual shared responsibility payment (SRP) MFT 35 prior to other liabilities.

    Reminder:

    Unless the OIC falls under one of the earlier exceptions, overpayments do not apply to the offer balance because the recoupment of a refund is in addition to the offer amount.

  6. Procedures for processing refund recoupments through AOIC can be found in the AOIC Compliance Center User Guide.

  7. Process refund offsets for modules previously written off per instructions below:

    If the Then
    Refund recoupment will be applied to an account adjusted by TC 971 1. Input TC 972 with A/C 32 to re-establish the liability and apply the refund amount.
    2. Input TC 470 (no closing code) to prevent notices from issuing.
    3. If the TC 788 has posted, re-input: TC 480/780 with delay code 1, TC 971/032 with delay code 2, and TC 788 with delay code 4.
    Overpayment/refund is less than the TC 605 amount 1. Input TC 972 with A/C 32 to re-establish the liability and apply the refund amount.
    2. Input TC 470 (no closing code) to prevent notices from issuing.
    3. If the TC 788 has posted, re-input: TC 480/780 with delay code 1, TC 971/032 with delay code 2, and TC 788 with delay code 4.
    Overpayment/refund is more than the TC 605 amount 1. Input assessment of accruals using TC 270 and TC 340. Caution: Do not over assess the module.
    2. Follow procedures above.

    Note:

    When performing a manual calculation of interest follow procedure in IRM 20.2.8.3 (5) (a).

    Overpayment/refund should be applied to an NMF account Prepare Form 2424 to transfer the credit from IDRS to NMF.
    Overpayment amount applies to penalty and interest only on NMF accounts prepare Form 3809, Miscellaneous Adjustment Voucher.
    Liability has been mirrored to MFT 31 or split to an NMF for a co-obligor apply the overpayment to offer taxpayer; the credit will offset systemically to spouses MFT 31 account. For the NMF account manually offset the credit to the co-obligor account.

    Caution:

    See IRM 5.19.7.2.14.6. This may result in a non-refundable credit on the spouse.

  8. When a new assessment is made on a recoupment year and the Service has already applied the overpayment, some or all of the recouped monies will be moved back to offset the new assessment.

    If Then
    The overpayment does not full pay the balance due 1. Follow appropriate default procedures.
    2. Adjust the AOIC recoupment screen.
    Part or all of the overpayment will full pay the balance due 1. Adjust the AOIC recoupment screen for the amount being reversed.
    2. Input the appropriate credit transfer to the originating tax module. Establish a follow-up to ensure posting.
    2. Continue monitoring for compliance.
    The overpayment full pays the balance due and taxpayer submitted a payment paying that assessment 1. Adjust the AOIC recoupment screen for the amount being reversed.
    2. Input the credit reversal to the originating tax module. Establish a follow-up to ensure posting. Release the TC 570 if the taxpayer submitted payment and allow a refund.
    3. Continue monitoring for compliance.
  9. If the earliest CSED has been written off by using TC 291 (accounts prior to implementation of TC 971/AC 32):

    1. Use a bypass indicator to post credits to the .00 balance module(s).

    2. Use CC REQ54/TC 290 to assess reversals of the written off tax including accrued penalty and interest due to the date of the payment and limited to the amount of overpayment.

    3. Input TC 160 and/or TC 180 with a zero money amount, if necessary.

  10. Note all actions on the case history sheet or AOIC.

    Example:

    "2010 refund recoupment applied to December 31, 2000 OIC tax period. Due to acceptance date (February 04, 2012) IRS entitled to refund from 2011."

  11. If the amount of the refund recoupment full pays the tax liability:

    1. Input TC 780, if necessary.

    2. Input TC 788 on all the offer periods.

    3. Input history on AOIC to explain why there is an open offer balance on the AOIC Main Screen.

    4. Turn off the OIC indicator as there is no need to monitor for compliance.

    5. Change the AOIC status to CF.

  12. Manually input TC 131 to reverse the TC 130 freeze if the Service is not entitled to another refund recoupment and additional offer payments are due.

    Note:

    Reverse any TC 130's on related TINs.

  13. If the refund recoupment is the last offer condition/term to be met (no collateral agreement, liens released) set up the file for 5-year monitoring. AOIC will systemically upload TC 131 when changing the status to 5M.

    Note:

    To prevent an unpostable, if TC 131 was previously input manually, delete the upload via the XMIT screen on AOIC.

  14. The Service is not entitled to any additional refund recoupment if a compromise on a previously accepted offer is accepted since the refund would have been recouped for the original offer.

Incorrect Acceptance Letters
  1. OIC Acceptance Letters are generated from AOIC or local systems by Collection and Appeals.

  2. Occasionally, the refund recoupment year(s) may be incorrectly stated. This usually occurs when an offer is accepted at the beginning of the tax year.

  3. Regardless of the year(s) stated on the acceptance letter, monitoring units are required to monitor for the refund recoupment as stated in the terms of the OIC contract and required by law.

  4. If contacted by the taxpayer or representative regarding recoupment of a refund for a year other than what is stated on the acceptance letter, apologize for the error and advise that we are entitled to the refund as a term of the OIC contract. This includes the year of filing (TC 480) through the year of acceptance (TC 780).

Refunds Erroneously Sent to Taxpayers
  1. When overpayments are erroneously refunded to the taxpayer the Service will contact the taxpayer and request the refund be returned or the offer will be defaulted.

  2. Returned refunds are applied to the tax period from which they generated and then applied to the oldest CSED period on the offer. For more information follow procedures in IRM 5.19.7.2.19.3, Failure to Return Refunds (Refund Recoupments).

Applying Refunds for Non Recoupment Tax Years
  1. Taxpayers may request the IRS apply a refund for a non recoupment tax year to the offer amount.

  2. Generally this situation may arise when a taxpayer is unable to meet payment terms of an OIC. In such situations take the following steps:

    1. Request the taxpayer send in written authorization.

      Note:

      The credit can not be applied without the written authorization.

    2. Maintain this correspondence in the OIC case file, if available.

    3. Input TC 130 immediately to hold the pending credit and TC 570 (on TXMOD) to stop the credit from offsetting.

    4. Update the history.

  3. When the credit becomes available apply the amount to the outstanding offer amount and oldest CSED period.

  4. If the credit becomes available and we have not received written authorization from the taxpayer:

    1. Contact the taxpayer making a second request for written authorization.

    2. Give the taxpayer 15 days to respond.

    3. If the written authorization is not received, release the TC 130 freeze.

  5. Enter all actions on the AOIC history or note the manually monitored history file.

    Reminder:

    DO NOT SOLICIT REFUNDS.

Closing an OIC

  1. For the most part an OIC is complete when the taxpayer fulfills all terms of the offer.

  2. Offers can be transferred to the compliance monitoring status after the following are met:

    • The offer amount is paid in full including interest, if applicable.

    • Co-obligor accounts have been mirrored.

    • Refunds have been recouped.

    • Terms of collateral agreements have been met.

      Note:

      Terms of collateral agreements may extend beyond the 5-year monitoring period.

  3. As long as some payment has been made against the offer amount, remaining offer balances less than ≡ ≡ ≡ ≡ will not be pursued. Consider the offer paid in full and proceed with closing actions. The balance will remain on AOIC with a history item stating that the offer is considered paid in full.

Closures on AOIC
  1. When the above conditions have been met, update the AOIC status to 5M. AOIC will initiate several systemic uploads to IDRS:

    1. Input TC 131 to reverse the V- freeze on the account, if not already done.

      Note:

      Until AOIC programming can be changed, tax examiners should release the V- freeze manually after the recoupment year to avoid future refunds from offsetting. Delete from the transaction screen or the TC 131 uploading via AOIC will unpost. IRM 5.19.7.2.21.1 , Incorrect Acceptance Letters.

    2. Input TC 971 with Action Code (AC) 032 to generate TC 604, TC 604 will abate all remaining liabilities.

    3. The account for each unique TIN in the MFT Screen is TSIGN 0000.

    4. TC 788 will generate the release of the Y freeze for each tax period in MFT Screen.

      Note:

      The TC 788 input is delayed by 16 days to allow the TC 604 to post and abate remaining liabilities.

  2. Place a 6 week follow up on the offer. Tax Examiners are to leave the offer in their assignment number until they can verify that the systemic transactions took place. If in 6 weeks they can not be found on IDRS, input manually.

    Note:

    After all 5M transaction codes have successfully posted, change the assignment name to 5M and ensure that all IDRS follow up are removed.

    Note:

    For offers received on Form 656 (revision prior to 2012), with periodic payments exceeding 60 months, establish a follow-up to verify 5M transactions posted and move offer to CF status, as appropriate.

  3. Research the Automated Lien System (ALS) to determine where all federal tax liens have been filed on the offer taxpayer. Follow guidelines in IRM 5.19.7.2.22.4, Releasing the Federal Tax Lien.

  4. Write or Stamp "Closed" with the closed date on the case file. This file can be sent to the FRC; note the history with box, ascension number, etc.

    Note:

    See IRM 1.15.4 for guidance on how to send case files to the FRC.

  5. Tax examiners will generate and send Letter 2908SC/CG from AOIC using selective paragraph "H" and paragraph "I" , if applicable, advising taxpayers that they have met the paying provisions of the OIC.

Closing Manually Monitored OICs
  1. Closing actions for offers not controlled on AOIC must be input manually.

  2. Input the following on each open period via IDRS:

    1. Input TC 131 using CC REQ77, if not previously input.

      Note:

      Any related TIN that had a TC 130 input must also have a TC 131.

    2. Input TC 971 with AC 032 using CC REQ77.

      Note:

      TC 971 will generate a TC 604 which will abate all remaining liabilities.

    3. Wait for the TC 604 to post.

    4. TSIGN each TIN to 0000, or as requested by the territory office.

    5. Input TC 788 using CC REQ77 with Delay Code 2 to allow TC 971/032 to post. Set a follow-up for 2 cycles to ensure TC 788 input on Masterfile.

  3. Make a photocopy of Form 6314 (showing the zero offer amount balance due) and write or stamp "Notice to Release Lien" .

  4. Notify the territory Case Processing to release the Federal Tax Lien(s). Follow guidelines in IRM 5.19.7.2.23.4, Releasing the Federal Tax Lien.

  5. If the offer is submitted by one party of a joint assessment, special rules apply. IRM 5.19.7.2.14, Separate OICs on Joint Liabilities.

  6. Note all actions on the case history sheet or AOIC (per campus policy).

  7. Write or Stamp "Closed" and the date on the case folder and file the case in the closed file.

  8. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

Adjustment of NMF Tax Liabilities
  1. For NMF accounts on IDRS, prepare a separate Form 1331-B , Notice of Adjustment (Doc Code 54), for each tax period, to adjust tax, penalty and interest.

  2. Include in Form 1331-B :

    • The OIC NMF accepted account case

    • Taxpayers name and address

    • Amount compromised

    • Total liability

    • Taxpayers SSN or EIN

    • Type of tax and period(s) ending

    • DLN of the transcript

  3. Request TC 291 and related TCs (271, 341, etc.) to remove the liability from NMF.

  4. If the NMF account is in Status 53, prepare Form 3177 to reactivate the account; request input of TC 531.

  5. Send Form 1331-B to the centralized NMF sites:

    Cincinnati Sub. Proc. Campus
    Post Office Box 12267
    Covington, KY. 41012.

Releasing the Federal Tax Lien
  1. IRC 6321 a allows the Service to file a Notice of Federal Tax Lien (NFTL) to protect the interest of the government and provides other creditors, judgment lien holders, and the public with notice of the government's lien on the taxpayer's assets.

  2. When tax, penalty, and interest for all tax periods listed on the NFTL are fully satisfied, the Government issues a Certificate of Release of Federal Tax Lien . The same applies when the full amount of an accepted offer, including interest, (if applicable) has been paid.

  3. Liens must be released no later than 30 days after the date the Secretary determines that the underlying liabilities for which the NFTL was filed have been satisfied or are legally unenforceable. The Service considers the liabilities satisfied when an offer amount is paid in full. If there are delays in posting payments or transferring credits that may impact the timely release of the lien, contact the Centralized Lien Processing Operation. Contact number(s) for the centralized lien unit can be found on SERP under the "Who/Where" tab, Lien - Centralized Lien Processing, Centralized Case Processing.

  4. Self-released liens occur when the statutory period for refiling for each module on the NFTL has expired and the lien was not refiled. Self-released liens do not have a release document issued systemically nor do they require one unless the taxpayer specifically requests it. MOIC is not required to request a release of these liens. Any request involving a self released lien should be referred to Centralized Lien Operation (CLO).

    Note:

    MOIC should not update IDRS with the lien release transaction (TC583).

  5. How the final payment is provided by the taxpayer determines the waiting period for making the release requests. The method of payment is identified in the second digit in the EFT Trace number, refer to IRM 3.17.277.5.3 EFT Number. A credit card payment is identified when the second digit in the EFT Trace number is a 6 and a debit payment is a 2.

    Exception:
    see note in (5) below:

    If Then
    Final offer payment is made by personal check 1. Verify the payment cleared after 15 workdays.
    2. Use CC BDINQ to research for a dishonored check.
    3. If not present, research ALS and request the release of all NFTLs filed.
    4. If the personal check is dishonored, follow procedures below.
    Dishonored check penalty is on IDRS. 1. Contact the taxpayer.
    2. Follow procedures in IRM 5.19.7.2.13.9, Dishonored Checks and IRM 20.1.10.4, IRC Bad Check (Dishonored Checks or Other Forms of Payment).
    3. Abate the penalty.
    Final payment is a cashiers check or money order, Research and request release of the NFTL via ALS immediately upon receipt of full payment of the amount offered.

    Note:

    If the status of the NFTL on ALS is "new" a release cannot be input. A request to release the lien must be sent to CLO using Form 13794.

  6. DO NOT issue an immediate release when credit or debit cards are used to full pay the amount offered. . See IRM 5.12.3.3.1.1.1., Electronic and Credit Card Payments

    1. If a credit card is accepted to satisfy an offered amount, the lien may not be released until the 120-day charge-back period has expired.

    2. If a debit card is used, the lien may not be released until the 100-day charge-back period has expired.

      Note:

      The charge-back period must expire before the lien is released. Even if the final payment is made with a personal check, cashiers check or money order.

    3. Document case history to indicate the method of payment and schedule a follow-up to release the lien based on payment type.

    4. Monitor for TC 583 posting.

    Note:

    TC 583 will need to be manually input on MFT 31 once NFTL's are released.

Automated Lien System (ALS)
  1. Notice of Federal Tax Liens, Forms 668-(Y)(c), are generated and printed from the Automated Lien System (ALS). ALS systemically uploads TC 582, FTL indicator.

  2. Once the lien is printed the ALS unit mails the printed document to the appropriate office designated by the state for filing. A facsimile of the lien or release of a lien can be printed from ALS as needed.

  3. Access ALS to research the Automated Lien System (ALS) database for all liens filed on a given taxpayer.

  4. A list of liens filed on the taxpayer's TIN will be displayed on ALS. Each lien is assigned a SLID number.

    1. In the upper right corner of the ALS display screen is a field that indicates if more than one lien is on file.

    2. If, for example, the display says" Selected: 5 Current: 1" this means there are multiple liens filed on this taxpayer not just the one showing on the screen.

    3. In this example, press 5 to select the lien and follow the ALS prompts.

      Note:

      If researching using the ALS slid number the "selected" field won't appear.

  5. A request to release the federal tax lien must be made for each lien on file as determined in (4) above.

  6. To request the release select Request a Lien Release from the ALS Menu option or type release at the prompt.

  7. You will be prompted by the ALS program to enter data to show that the tax liability has been satisfied.

  8. Requests for releases will go into the OIC Unit manager's queue for approval. The manager's queue must be cleared of all lien release requests on a weekly basis and a five-day follow-up placed on any requests that are returned for corrections.

  9. Once the manager approves the release it is printed in the ALS unit. ALS examiners batch and mail the releases along with the lien fee payment to the appropriate court houses.

  10. Document the AOIC History, or in the manually monitored case file history, the date of the release (AOIC - if the date of the release is not the date of the remarks entry it must be stated) and released liens from ALS. If a partial release, this must be stated.

  11. Monitor for TC 583 posting.

Lost Lien on Full Paid Offers
  1. If a lien was placed on the liability with a TC 582 and ALS shows no lien on record, it is considered a lost lien (the lien report was not processed by the county it was filed in). To correct the error, submit a request via secured email to the Case Processing Lien Unit (CLU) so it can be resubmitted to the county court for recording. Include the following in the email:

    • SLID number (if provided by the taxpayer)

    • Social Security Number (SSN) /Employer Identification Number (EIN)

    • Taxpayer name

  2. Indicate that it is identified as a lost lien and to resubmit to county court for proper filing. Also indicate that the lien is valid and either the taxpayer is still liable due to pending Offer In Compromise (OIC), or OIC is full paid and lien needs to be released. Send the request to the correct lien unit that can be found on SERP per the state in which the taxpayer resides. Copy the manager and lead when sending the email.

    Note:

    There may be instances where a manual input of the TC 583 is necessary on IDRS, if ALS does not upload the release to the system.

5-Year compliance Monitoring
  1. Taxpayers must agree to future compliance provisions when offers are accepted. The taxpayer must timely file all tax returns and pay all taxes due during the compliance period. The compliance period is five years from the acceptance date.

    Example:

    Taxpayer A has a cash offer accepted on March 14, 2008. As policy directs, MOIC will cease monitoring this offer for compliance on 03/14/2013.

  2. Prior to issuance of MOIC correspondence, use IDRS to determine if the AOIC record has the most current address for the taxpayer.

    Example:

    The OIC was accepted in 2006 and IDRS ENMOD shows an address update for 2008. Update the AOIC.

  3. Prior to reaching the above Master File statuses, the taxpayer is reminded of the compliance requirements on each issuance of a return delinquency or balance due notice. The reminder appears as a pop-up paragraph on the notice.

  4. Failure to adhere to the compliance terms could result in the default of the OIC and reinstatement of compromised liabilities. IRM 5.19.7.2.19.4, Failure to Adhere to Compliance Terms.

  5. If the offer is on a defunct business that has met all terms of the offer and we are not monitoring the individual that owned the business, then there is no need to monitor for five-year compliance.

  6. If the offer is on an estate return (MFT 52) only that has met all terms of the offer and once the final return has posted, then there is no need to monitor for five-year compliance.

  7. If you identify an IDRS Freeze Code or an open IDRS control that may impact the status of the offer, conduct internal research to determine if you can contact the area by telephone, if not, send Form 4442 Taxpayer Inquiry Referral requesting the account action be taken in order to continue monitoring the account.

OIC Suspense Files

  1. All OIC files are to be maintained until sent to FRC.

    Note:

    See IRM 1.15.4 for guidance on how to send case files to the FRC.

  2. The following suspense files must be maintained for accepted offers.

Form 2515 Suspense File
  1. Maintain a file of Forms 2515 prepared on all manually processed offers which have deposits on RACS. Maintain the forms in the suspense file for 6 months following refund of the deposit to ensure there are no undeliverable issues.

    1. Maintain the file in alphabetical order.

    2. Update Form 2515 as necessary.

RACS Report Control File
  1. Maintain a control of all offer deposits based on the Revenue Accounting Control System (RACS) number posted at the top of the Form 2515.

  2. Open offer deposits are to be reconciled monthly when the RACS Inventory Report is received.

  3. For offers on AOIC, the Form 2515 can be destroyed once the 4710 account is clear of the related funds and the AOIC history is documented as to the disposition of the deposit. Form 2515 for all manually monitored offers can be placed in the case file once the deposit has been cleared from the 4710 account listing and the case file documented.

Collateral Suspense File
  1. Maintain a file of all offers accepted with a collateral agreement.

  2. The file should be maintained by teams and in alphabetical order.

Collateral Agreement Payment Record File
  1. Maintain a file of Forms 6313, Collateral Agreement Payment Records, for all manually processed offers. It is not necessary to maintain a file for any account loaded on AOIC.

  2. Maintain the file in alphabetical order.

  3. Maintain forms in the file until the collateral is closed.

Deferred OIC Payment Record File
  1. Maintain a file of Forms 6314, Deferred Payment Offer Payment Records, for all manually processed offers. Maintain the file in chronological order by anniversary date of payment, until the offer is closed. It is not necessary to maintain a file for any account loaded on AOIC.

Closed Form 2515 File for Rejected or Withdrawn Offers
  1. Maintain a Form 2515 closed file on all manually processed Offer in Compromise cases with deposits that were closed as Rejected or Withdrawn. These files can be purged one year after the deposit account has been reconciled and the deposit either applied or refunded.

  2. Retain all Forms 2515 for deposits that post back into RACS until the funds are either refunded or applied.

  3. Maintain the file in alphabetical order.

  4. For information on the retention and disposition the case file that contains original records see the Records Control Schedule, Document 12990.

Closed OIC File
  1. Maintain a file for all closed Offer in Compromise case files.

  2. Maintain the file in alphabetical order.

  3. For information on the retention and disposition the case file that contains original records see the Records Control Schedule, Document 12990.

Transcripts

  1. Transcripts are paper documents generated by the Martinsburg Computing Center (MCC) as an alert when an identified transaction or missing action occurs on a tax module. All transcripts are issued on Form FC-4.

  2. Transcripts should be processed within 45 days of "receipt."

    Note:

    Due to the 2001 consolidation, transcripts may generate at another campus and must be sorted and shipped to the correct campus.

OIC Transcripts
  1. Transcripts generated on OIC Accounts are:

    • Unreversed TC 470 Transcript/AMO6 W Transcript

    • Diagnostic-Q Transcript/DIAG-Q Transcript

    • Non-Master File Transcript/NMF Transcript

    • MIRRORFAIL Transcripts

    • OIC Default FSC

Processing DIAG-Q Transcripts
  1. Input of TC 480 generates a Y freeze on the tax module. The freeze generates reason code 33 to Master File. When the reason code remains on the module for over one year, a Diagnostic (DIAG Q) transcript will generate annually to identify potential problem modules on the taxpayer Information File (TIF). The reason code is removed by the reversal of the TC 480.

  2. Although not all DIAG-Q's require action, these transcripts provide a means to identify and remove unnecessary modules/accounts from the TIF.

    Note:

    The following research tools are available to assist in the resolution of the DIAG-Q transcript. Accounts Management Services (AMS), Intergrated Collection System (ICS), Appeals Centralized Database System (ACDS), Automated Offer In Compromise (AOIC), and Intergrated Data Retrieval System (IDRS) using command codes IMFOLI and BMFOLI.

  3. Reverse the Y freeze by the following transactions:

    • TC 481, OIC Rejected or Returned

    • TC 482, OIC Terminated or Withdrawn

    • TC 483, Correction of Erroneous Posting of TC480

    • TC 781, Defaulted Account Compromise

    • TC 782, Correction of 780 Processed in Error

    • TC 788, All Collateral Conditions of the Offer Completed

  4. Upon receipt of the DIAG-Q transcript, review the tax module(s):

    If Then
    TC 480 freeze is valid Destroy the transcript
    Module should have been previously closed Input the appropriate TCX to close the module
    Closing code is posted to the module, indicating a systemic problem Report the problem to Information Systems (IS).
  5. Document receipt and any action taken as a result of the transcript in the case history.

  6. Destroy all transcripts after resolution.

Processing AM 06W Transcripts
  1. AM O6W transcripts issue when TC 470 is not reversed on a defaulted offer tax module (TC 781).

  2. Research and reverse all TC 470 on each module.

    Note:

    Use TC 472 when applicable.

Processing Non-Master File (NMF) Transcripts
  1. NMF transcripts generate when:

    1. A second credit posts to a module after issuance of a CP44 Notice and a V freeze created by the TC 130 remains on the taxpayers account.

    2. A TC 740 posts to the transcript module and creates a credit balance.

  2. If the NMF transcript cannot be resolved within 14 days from the computer notice date:

    1. Control the transcript using Category Code CP44 and

    2. Input in the history section of the control base "NMF."

  3. If the OIC has been paid in full and the credit is not subject to recoupment, refund the credit to the taxpayer.

  4. Release the V freeze, if necessary, by inputting TC 131.

  5. Document receipt and any action taken as a result of the transcript in the case history.

Processing DEFAULTFSC Transcripts
  1. If the Filing Status (FS) of an identified entity is updated from one FS to another based on the posting of a TC 150 within the five-year period a "DEFAULTFSC" transcript will generate.

    Example:

    Joint taxpayers Robert and Rose divorce; Rose files as single in the subsequent year. A DEFAULTFSC transcript will generate showing that Roberts filing status changed from joint to single or to head of household.

  2. Using the example above, if taxpayer Rose had accepted the offer and would be filing future returns under her or a different TIN, the OIC indicator must be placed on her TIN.

    1. Use Command Code (CC) ENMOD overlaid with CC ENREQ to place the OIC Acceptance year on the new entity. (OIC< 1998 for 1998.)

    2. This will generate TC 016 in the module.

    Caution:

    Reports indicate this action may not input the OIC Acceptance year if a TC 780 is not present under the taxpayer TIN. If this is true, manually monitor these cases.

  3. Using the example above, if Taxpayer Robert was not a party to the offer, the OIC Acceptance year must be taken off. Using ENREQ (see above) enter 1966 to remove the OIC indicator. (OIC<1966.)

  4. Document receipt and any action taken as a result of the transcript in the case history.

MIRRORFAIL Transcripts
  1. MIRRORFAIL transcripts generate when a payment does not systemically cross-reference from a mirrored module, TC 971 AC 110, to the other SSN. They may also generate when a TC 766 credit creates a credit balance on a cross-reference MFT 31 module.

  2. Cross-reference and reversal actions on MFT 31 mirrored accounts will have to be done manually.

    1. To cross reference a payment or other credit that has not systemically cross- referenced from a mirrored module, input a TC 766 Ref 337 using command code REQ54.

    2. To abate a cross-referenced payment or credit, use CC REQ54 and input the amount of the TC 766 reference code 337 with a minus sign. See IRM 21.6.8.8.2, REFMFT31 Transcripts.

  3. MIRRORFAIL transcripts are to be worked within 30 days of the date of the transcript.

Form 2209 for Offers in Compromise

  1. Form 2209, Courtesy Investigation, is used in MOIC to advise DOJ of potential default situations on accepted offers and is used to request an investigation of an offer on an offer to the office that accepted the offer. MOIC should allow a 90 calendar day response deadline for Appeals and a 45 calendar day response deadline for COIC and the Area Office. A 90-day calendar day follow up for a response will be established and take the following actions:

    1. For offers on AOIC, when generating the Form 2209 on AOIC, a 90 calendar day follow-up will be established to monitor for response. For manually monitored offers, input case action remarks in an AMS history, and update the status including the follow-up date on IDRS in the activity section of the tax module(s).

    2. Provide as much detail as possible in the remarks section of the Form 2209, attach a copy of any correspondence from the taxpayer and a complete print of the AOIC history.

    3. Place offers on AOIC in OI status. Place manually monitored offers in a suspense file.

    Note:

    For detailed procedure on the use of the Form 2209 see IRM 5.19.7.2.15 , Compromise of an Accepted Offer.

  2. Record all Form 2209 responses in the OIC case history file for manually monitored offers and include a follow up date. For offers on AOIC, document responses in the AOIC remarks and set a follow up on the system.

  3. For a DOJ Form 2209 if a response is not received by the investigation due date, send a list of all overdue courtesy investigations to the Advisory contact for offers accepted by DOJ requesting they provide a status update. This list should be sent every 30 calendar days following the initial request for a status update.

Status 71 Accounts

  1. When an OIC is filed, a TC 480 is input with Status 71. TC 480 indicates an OIC is pending.

  2. For IMF accounts, verify on IDRS using CC TXMOD that the CSED has been suspended on all taxpayers. A letter "P" for primary or "S" for secondary will appear to the right of the CSED, if the CSED has been suspended on only one of the taxpayers.

  3. Contact the OIC Unit regarding any other concerns.