- 5.19.24 Doubt as to Liability Offer in Compromise
- 126.96.36.199 Program Scope and Objectives
- 188.8.131.52.1 Background
- 184.108.40.206.2 Authority
- 220.127.116.11.3 Responsibilities
- 18.104.22.168.4 Program Management and Review
- 22.214.171.124.5 Program Controls
- 126.96.36.199.6 Terms/Definitions/Acronyms
- 188.8.131.52.7 Related Resources
- 184.108.40.206 Centralized Doubt as to Liability (DATL) Offers in Compromise
- 220.127.116.11 Centralized Doubt as to Liability (DATL) Processing
- 18.104.22.168 Timeliness of Offer Investigations
- 22.214.171.124 Initial Processing of DATL Offer in Compromise
- 126.96.36.199 Processability
- 188.8.131.52.1 Not Processable Offers
- 184.108.40.206.2 Routing Cases Based on Jurisdictional Responsibility
- 220.127.116.11.3 Closing an Offer as a Not Processable Return
- 18.104.22.168.4 Solely to Delay Collections
- 22.214.171.124.5 Processable DATL Offers
- 126.96.36.199 Processing DATL Offers
- 188.8.131.52 Processable Return Procedures
- 184.108.40.206 DATL Innocent Spouse Processing
- 220.127.116.11 DATL Offers assigned to Specialty Groups
- 18.104.22.168.1 Customer Assistance for Specialty Groups
- 22.214.171.124.2 Research for Referral Criteria
- 126.96.36.199.3 Initial Processability Determination
- 188.8.131.52.4 Returning Processable Offers
- 184.108.40.206.5 Offer Rejections for Specialty Groups
- 220.127.116.11.6 Withdrawal for Specialty Groups
- 18.104.22.168.7 Acceptance of Offers
- 22.214.171.124.8 Offer Closure for Specialty Groups
- 126.96.36.199 Identity Theft Overview
- 188.8.131.52.1 Identity Theft Procedures
- 184.108.40.206.2 Identity Theft Offer Determinations
- 220.127.116.11.3 Identity Theft Referral Procedures
- 18.104.22.168.4 Determining Receipt of Paid Preparer Misconduct Issues
- 22.214.171.124 Bankruptcy Filed During DATL Investigation
- 126.96.36.199 Death of a Taxpayer
- 188.8.131.52 Withdrawn DATL Offers
- 184.108.40.206 DATL Offer Rejections
- 220.127.116.11.1 Rejection Not Appealed
- 18.104.22.168.2 Taxpayer Response to DATL Rejection Letter
- 22.214.171.124.3 Appeals Consideration of Rejected DATL Offers
- 126.96.36.199 Independent Administrative Review Overview
- 188.8.131.52.1 Role of the Independent Administrative Reviewer
- 184.108.40.206.2 The IAR Review
- 220.127.116.11.2.1 IAR Case File
- 18.104.22.168.3 Rejections Sustained by the Independent Administrative Reviewer
- 22.214.171.124 DATL Acceptances
- 126.96.36.199.1 Mandatory Acceptance
- 188.8.131.52 Disposition of DATL Good Faith Deposits
- 184.108.40.206 Manual Refunds
- 220.127.116.11 Indicators of Taxpayer Fraud
- 18.104.22.168 Third Party Authorizations
- 22.214.171.124 Return Reconsideration
- 126.96.36.199.1 Criteria for Return Reconsideration
- 188.8.131.52.2 Conditions for Return Reconsiderations
- 184.108.40.206.3 Approval Authority for Return Reconsideration
- 220.127.116.11.4 Reconsideration Procedures
- 18.104.22.168 Closed File Retention
- 22.214.171.124 DATL Reports
- 126.96.36.199.1 AOIC Inventory Management Reports
- 188.8.131.52 AOIC Transaction Listing
- 184.108.40.206 Documentation
- 220.127.116.11 Usage of IAT Tools
Part 5. Collecting Process
Chapter 19. Liability Collection
Section 24. Doubt as to Liability Offer in Compromise
June 01, 2017
(1) This transmits revised IRM 5.19.24, Liability Collection, Centralized Doubt as to Liability (DATL) Offers in Compromise.
(1) Numerous IRM link changes made throughout the IRM.
(2) IRM 18.104.22.168 7 (3) added verbiage to state employees should use other Internal Revenue Manuals for case specific issue including IRM 5.8 as well as other available IRMs as applicable to case related issues.
(3) IRM 22.214.171.124 (1) removed “by the clerical function”, added a new (b) to address application of payments received with the offer not designated as a deposit, (c) clarified payment disposition when designated as a deposit, (f) removed verbiage, “in CSCO”, (h) ensure the AOIC deposit screen is updated when a payment is designated as a deposit, (i) added paragraph regarding sending the offer to the DATL unit, (j) updated assignment of the offer on AOIC to the DATL unit.
(4) IRM 126.96.36.199(2)(b) Added: Verify address on Form 656-L matches IDRS.
(5) IRM 188.8.131.52.6.1 (1)(c) added clarification that open offers being considered as DATC or economic hardship ETA.
(6) IRM 184.108.40.206.1(1) (j) added a reference link to 220.127.116.11, Criminal Investigations,(k) added for Restitution based assessments, see IRM 18.104.22.168.2, ( i) for DOJ cases, added a link to 22.214.171.124.1,(q) updated to inform the taxpayer the offer is outside the DATL unit’s jurisdiction and advise them to submit a Form 1040X to the IRS office per the form instructions, (r) added procedures to include SS-8 cases, (s) added procedures to include Injured Spouse issues, (q) added to move information in the note a paragraph.
(7) IRM 126.96.36.199.2 (1) chart DOJ section removed “pending bankruptcy”, Appeals section updated to clarify Appeals CDP, and Exam section added to include in the transfer letter the taxpayer will be contacted in 120 days.
(8) IRM 188.8.131.52.3 (1) (g) updated to include and clarify additional information required for case file.
(9) IRM 184.108.40.206.3 (3) clarified disposition of funds submitted with a DATL offer.
(10) IRM 220.127.116.11.3 removed (4) to be consistent with the IRM 18.104.22.168 which renumbered (5) to (4) and updated to return the Form 656-L to the taxpayer.
(11) IRM 22.214.171.124.5(1) 1st bullet changed name associated with link to IRM 21.5.7
(12) IRM 126.96.36.199(6) added reference to new subsection on Documentation, (8) Note - revised to include sending Publications 1 & 594 through the Elite system, when available and the Note was removed and add to a paragraph,(10) added new paragraph on special search requirements and IRM reference, (11) added verbiage to send a Quick note, (17) updated procedure to change closing process. If no balance is due after adjustments are made, return the offer
(13) IRM 188.8.131.52.2 added ”or local management”
(14) IRM 184.108.40.206.3 (3) first bullet added to include in the transfer letter the taxpayer will be contacted in 120 days, added to 3rd bullet “or information needed to perfect the offer”, added to the 4th and 5th bullets “designated as a deposit”, added to 5th bullet “and the deposit tab”, updated 6th bullet to remove requirement to document AMS, added additional bullet that states to ensure the Form 3210 has deposit information listed, if applicable.
(15) IRM 220.127.116.11.4 removed the exception for TEGE since they will be processing the entire case.
(16) IRM 18.104.22.168.5 updated reference to coincide with the change to the TEGE process.
(17) IRM 22.214.171.124.6 updated reference to coincide with the change to the TEGE process.
(18) IRM 126.96.36.199.8 (1) removed requirement to refer to 5.8 procedures and added the Specialty groups will establish their own procedures to ensure records are sent to the Federal Records center.
(19) IRM 188.8.131.52 (1) updated (5) (7) and (9) IRM references and titles.
(20) IRM 184.108.40.206.4 (1) removed SERP Alert and added reference to IRM 25.24.3, Return Preparer Misconduct-Compliance.
(21) IRM 220.127.116.11 (3) (d) changed IRM tittle, (e) updated to forward offer to IAR, (f) removed requirement to set a one week follow up, (g) added a requirement to document AOIC before assignment to the IAR, (h) 1 updated to obtain signature on 1271, changed (h) 6 changed to reflect 45 days instead of 30 days.
(22) IRM 18.104.22.168 added paragraph (4) to address pen and ink changes to form 656-L.
(23) IRM 22.214.171.124 (1) added clarification when payment is designated as a deposit, and (2) added information to update AOIC deposit screen.
(24) IRM 126.96.36.199 added paragraphs (6)-(10) with instruction on entering a closing paragraph on AOIC with deposit information and information for Appeals and CDP case with a deposit on the account.
(25) IRM 188.8.131.52 (1) added verbiage and link to the 5.8 when multiple representatives are listed on the 656-L.
(26) IRM 184.108.40.206 Note: added reference to 220.127.116.11 for additional information on Third Party Authorizations.
(27) IRM 18.104.22.168 (1) c corrected to state could not be processed.
(28) IRM 22.214.171.124.1 (1) added management responsibilities and reviews that should be adhered to. Changed reference link to 1.4.54 for additional information.
(29) IRM 126.96.36.199 added paragraph (2) which discusses maintaining binder for transaction listing errors. Added paragraph (3) which discusses unusual errors or an increase in a particular error
(30) IRM 188.8.131.52 added new subsection titled documentation. This renumbered IAT Tools to IRM 184.108.40.206.
(31) IRM 220.127.116.11 titled Usage of IAT Tools was added and updated to include new mandated tools.
Kristen E. Bailey
Director, Collection Policy
Small Business/Self Employed
Purpose: During the investigation of an offer in compromise (OIC), certain situations may be encountered that require consideration before a final determination can be made. This section discusses how to treat these situations when evaluating a Doubt as to Liability (DATL) offer.
Audience: These procedures apply to IRS employees who are responsible for investigating and processing Doubt as to Liability offers.
Tax Examiners (TE) in Centralized offer in compromise (COIC).
Additional IRS employees assigned to the offer program and employees who conduct OIC investigations.
Policy Owner: Director, Collection Policy.
Program Owner: SBSE Collection Policy, Offer in Compromise (OIC) Program
Primary Stakeholders: The primary stakeholders are COIC offer employees.
Program Goals: The government, like other creditors, encounters situations where there is a legitimate dispute as to what is owed. It is an accepted business practice to resolve these issues through negotiation and compromise. This IRM discusses doubt as to liability (DATL) offers in compromise. By following the processes and procedures provided by this IRM, employees will process DATL offers in a manner that follows IRS policy and procedures while promoting the best interests of the Government.
This section provides direction on special case processing consideration when working Doubt as to Liability offers in compromise. Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law. These offers are different from Doubt as to Collectibility since they are not based on the ability to pay the outstanding liability.
Authorities relating to this section include:
IRC 7122 -Compromises.
IRC 6702(b) -Civil penalty for specified frivolous submissions.
Rev. Proc. 2003-71
Treasury Regulation 300.3 Offer to Compromise Fee
IRM 1.2.44Service wide Policies and Authorities, Delegations of Authority for the Collection Process.
The Director, Collection Policy is responsible for all policies and procedures within the Offer in Compromise program.
The National Program Manager, Offer in Compromise is responsible for development and delivery of policies and procedures within the program.
IRM authors are responsible for writing the policies and procedures and clearing documents through all affected offices.
Employees in DATL and certain employees in COIC are responsible for the processes and procedures outlined in this IRM.
Operational and program reviews are conducted on a yearly basis with the use of data and reports from the Automated Offer In Compromise system. See IRM 1.4.54 , Offer In Compromise Manager’s – Centralized OIC Program Guide
National quality reviews and consistency reviews are routinely conducted to ensure case actions are timely and in accordance with the procedures in this IRM.
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.
Managers are required to follow program management procedures and controls addressed in IRM 1.4.54Offer In Compromise Manager’s – Centralized OIC Program Guide.
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 IRM.
Additional acceptable acronyms and abbreviations are found in the Reference Net Acronym Database, which may be viewed at: http://rnet.web.irs.gov/Resources/Acronymdb.asp .
Additional resources can be found in:
IRM Title Guidance on IRM 5.8 IRM 5.8 Offer in Compromise
Employees can find helpful information on these websites: SERP: http://serp.enterprise.irs.gov/ and IMD site for Internal Guidance memorandum (IGM) http://imdtrack.web.irs.gov/search.asp.
Employees should also refer to additional Internal Revenue Manuals for case special information, including IRM 5.8, Centralized Offer in Compromise,. as well as, other available IRMs as applicable to case related issues.
Taxpayers who have a legitimate doubt that they owe part or all of a tax debt, may file an offer in compromise under the Doubt as to Liability basis. Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law.
Offers submitted based solely on doubt as to liability are received in COIC and Field Collection Area Offices and forwarded to the Centralized DATL processing units located at the Brookhaven campus.
Offer in Compromise (Doubt as to Liability), DATL offers are submitted on Form 656-L.
The Centralized DATL processing unit located at the Brookhaven campus will receive from COIC and Collection area offices all Forms 656-L submitted on the basis of DATL, except those offers involving Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET). COIC and collection area offices will process TFRP and PLET offers.
When a taxpayer submits separate offers, one for a TFRP issue and one for a 941 issue at the same time both offers should be transferred to the appropriate drop point area in the field and worked together if both offers are submitted for the same issue.
If one Form 656-L is submitted with both TFRP and any other tax liability the DATL unit can work, the Tax Examiner should request separate offers.
TFRP cases are identified by the MFT 55 with a reference code 618. PLET cases can be identified by a Master File Transaction (MFT) 45 on Non-Master File (NMF) or by an assessment on an SSN for a BMF MFT 03. For additional information refer to IRM 18.104.22.168.10.3, Trust Fund Recovery Penalty (TFRP) Cases and IRM 22.214.171.124.10.4, Personal Liability Excise Tax (PLET).
The timeliness of case actions in an offer investigation is important not only to ensure the efficiency of the process but also is a key component of taxpayer satisfaction.
The guidelines for timely case actions defined in this IRM are intended to provide structure for the overall offer process and to ensure investigations are completed in a responsive and efficient manner.
Managers and employees must make sure communications from taxpayers are addressed in a timely manner. Timeliness of case actions ensures the length of the offer investigation process is appropriate given the taxpayers specific set of facts and circumstances.
On July 16, 2006, the Tax Increase Prevention Reconciliation Act of 2005 (TIPRA) was implemented. TIPRA mandates an acceptance of any offer where a decision is not made in 24 months. If a liability included in the offer is disputed in any court proceeding, that time period is not included when calculating the two-year time frame. Issuance of a determination letter stops the 24 month time frame. The 24 months does not include the time that a protested, rejected offer is under consideration in Appeals.
If a mandatory acceptance is warranted refer to IRM 126.96.36.199, 24 month Mandatory Acceptance, under IRC 7122 (f).
Upon receipt of the offer, the following actions will be performed:
Date stamp the form, upon receipt, in the IRS Received Date Stamp block of Form 656-L.
If funds received with the DATL offer are not designated as a deposit and the taxpayer has an assessed liability, the funds will be applied to the liability in the best interest of the government. Document AOIC remarks with the payment information and tax year the funds were applied.
If funds received with the offer are designated as a deposit refer to IRM 188.8.131.52, Disposition of Good Faith Deposits.
Query the AOIC system by the taxpayer's TIN to ensure the receipt is a new offer and to identify any previous offers filed by the taxpayer that were loaded to AOIC. If another offer is found, annotate that case file. If there is another open offer on AOIC, do not load the new case. Forward the new offer to the Tax Examiner who has the related offer to determine appropriate action. Refer to IRM 5.8.11 , Offer in Compromise- Effective Tax Administration.
Load the offer to AOIC if no additional open offers are found.
Enter a history item on the AOIC system to indicate the DATL offer was received and the date it was received.
Write the AOIC offer number on the top right corner of the Form 656-L.
Write the AOIC offer number in blue or black ink in the upper left hand corner of the Form 2515 if a payment received with the offer was designated as a deposit and not addressed by the process examiners, update AOIC remarks and ensure the AOIC deposit screen is updated with the deposit information.
Send the offer to the DATL unit on Form 3210.
Assign the offer on AOIC to the DATL unit.
Tax Examiners will perform initial offer actions within 15 days calendar days of IRS received date. These actions include:
Processability Determination, See IRM 184.108.40.206, Processability.
Verify address on Form 656-L matches IDRS.
Requesting internal research documents.
Requesting additional information from the taxpayer.
Offer evaluation when further information is not required.
Verify the jurisdiction of the offer. See IRM 220.127.116.11.2, Routing Cases Based on Jurisdictional Responsibility.
Research IDRS for entity verification, bankruptcy, cross reference TINS and freeze codes.
Research CC CFINK. If valid POA information is found, load the information on the AOIC POA screen.
Tax Examiners are solely responsible for determining processability on all DATL offers received and worked by the Service, with the exception of those offers listed in IRM 18.104.22.168, Centralized Doubt as to Liability (DATL) Processing.
Each new receipt will fall into one of the following categories:
Not processable - The taxpayer does not meet one or more of the minimum established criteria for offer consideration.
Processable - The taxpayer meets the minimum criteria for offer consideration.
An offer will be deemed not processable if one or more criteria below are present:
The taxpayer offers no consideration (i.e., zero dollar amount offered or the dollar amount is blank)
The CSED for which the liability is in dispute is expired and it is the only tax period included on the offer.
CSEDs on modules with multiple assessments do not automatically clear IRM 22.214.171.124.3, CSED Fields on Integrated Data Retrieval System (IDRS). Check CC IMFOLT for the CSED (FIRST, LAST, NEXT) and if a balance remains associated with an expired CSED, refer the case per Who/Where-CSED referrals campus to clear the CSED.
The taxpayer currently has an open offer being considered based on DATC or economic hardship ETA for any of the liabilities listed in Section 1 or Section 2 of Form 656-L.
If the taxpayer currently has an open ETA-OIC based on public policy or equity, the DATL-OIC must be considered before the ETA-OIC. DATL will contact the appropriate area to discuss the DATL
issue per IRM 5.8.11 , Offer in Compromise, Effective Tax Administration.
It is clearly not the taxpayer's intention to compromise the tax liability based on the belief that it is incorrect. Example: The taxpayer offered $1000. In Section 5 the taxpayer states he does not have the money to pay the tax in full. It is clear the taxpayers intent was to file a DATC offer.
If the liabilities involve Bureau of Alcohol, Tobacco and Firearms and Explosives penalties, forward the case to the appropriate regional office.
The taxpayer is currently involved in a bankruptcy proceeding.
An innocent spouse claim was previously denied by the Service and the taxpayer is arguing that there is DATL because the taxpayer is entitled to innocent spouse relief. See IRM 126.96.36.199.2, Innocent Spouse Indicator Transaction Code TC 971 TC 972.
The taxpayer is questioning the liability on a tax year where an innocent spouse claim was previously denied by the Service.
The taxpayer seeks to compromise a tax period for an unassessed liability:
1) Pending in Automated Underreporter (AUR), Substitute for Return (SFR/ASFR), combined annual wage reporting (CAWR) or Federal Unemployment Tax Adjustment (FUTA).
2) Still under examination (-L freeze, CC AMDISA area office status codes 10 - 56), for which the 30-day letter reporting the examination changes or statutory notice of deficiency has been issued.
3) Currently pending in appeals (-L freeze, CC AMDISA area office status codes 80 -89).
The offer includes periods for which a determination is pending before or upheld in a final determination made by the Tax Court, other courts or by the Commissioner's final Closing Agreement authorized under IRC 7121(e.g., Form 866 or Form 906).
Research for any open or closed TC 912 or TC 914 which indicates criminal investigations activity. If found notify Criminal Investigations that an offer was filed. Refer to IRM 188.8.131.52, Criminal Investigations.
For Restitution based assessments, see IRM 184.108.40.206.2, Offers in Compromise Submitted that include Restitutions.
The offer is submitted on a case under the jurisdiction of the Department of Justice (DOJ), refer to IRM 220.127.116.11.2, Routing Cases Based on Jurisdictional Responsibility and for additional information, refer to IRM 18.104.22.168.1, Tax Cases controlled by Department of Justice..
Defining a DOJ case; Any module in status 72 and/or with an un-reversed TC 520 cc: 70, 75, 80, 82 or any module with a TC 550 and definer code 04 (judgment). Actions on cases where DOJ is litigating or has secured a judgment, without DOJ concurrence/approval, may have a negative and serious impact on the ongoing litigation or secured judgment. Users should refer to IRM 22.214.171.124.46 regarding a -W freeze, IRM 126.96.36.199.44 (3) regarding a -V freeze.
There is an open control on IDRS for the same tax period as the offer. In such a case, forward only the attached documentation on a Form 3210 to the appropriate area.
The offer is submitted solely for the purpose of delaying collection. See IRM 188.8.131.52.4, Solely to Delay Collections.
For offers requesting compromise for the same tax period that the taxpayer included in an accepted DATL or DATC offer, and the IRS later defaulted the offer.
When the liability is due entirely, or in part, to an erroneous refund.
If the offer has an MFT 35 or MFT 65 inform the taxpayer the offer is outside the DATL unit’s jurisdiction and advise them to submit a Form 1040X , Amended U.S. Individual Income Tax Return, to the IRS office per the form instructions.
If the offer is submitted with a Form SS-8, Worker Classification Determination request, it will not be considered. Inform the taxpayer this is outside DATL’s jurisdiction and forward any documentation or correspondence, except Form 656-L, to the appropriate function.
Offer submitted with Form 8379, Injured Spouse Allocation, is outside the DATL unit’s jurisdiction. Inform the taxpayer or representative any documentation or correspondence, except Form 656-L will be forwarded to the appropriate function.
If the Tax Examiner is unclear as to what the taxpayer is requesting, the Tax Examiner needs to make a phone call to the taxpayer.
If any of the conditions mentioned above apply, follow procedures in IRM 184.108.40.206.3, Closing an Offer as a Not Processable Return.
All other offers will be deemed Processable.
The following table provides guidance when it has been determined that the Collection function does not have jurisdictional responsibility:
If responsibility lies with.... Then.... Department of Justice (DOJ) Contact Area Counsel to determine the status of the litigation and whether Collection has jurisdiction to process the offer. If the DOJ request the offer be sent directly to them, delete the offer from the AOIC system and forward the case to the DOJ. Add a history narrative to AOIC that the offer was sent to DOJ. Ensure all TC 480 or Staup's have been input, as appropriate. Appeals- Collection Due Process (CDP) See IRM 220.127.116.11.5, Processable DATL Offers. For additional information. See Exhibit 5.8.3-1, Form 3210 - To Appeals with Open TIPRA Statute.Ensure all TC 480 or Staup's have been input, as appropriate.
Change the jurisdiction code by manually inputting a TC 480. Use the date the IRS employee signed “IRS Use Only” box on page 8 of Form 656-L, as the transaction date. Input jurisdiction code 3, for each period listed in Section 1 and Section 2 of Form 656-L.
Add a history narrative to AOIC remarks that the offer was transferred to Appeals and also annotate any manual input of transaction codes.
Send AOIC transfer letter notifying the taxpayer of the transfer.
Assign case to the appropriate appeals office.
Exam (prior audit TC 300)
Change the jurisdiction code by manually inputting a TC 480. Use the date the IRS employee signed the “IRS Use Only” box on page 8 of Form 656-L, as the transaction date. Input jurisdiction code "2" , for each period listed in Section 1 and Section 2 of Form 656-L.
Add a history narrative to AOIC that the offer was transferred to the area office Examination function and also annotate any manual input of transaction codes.
Forward the offer and all attachments, via Form 3210Document Transmittal, to the appropriate Area Office Examination function Contact Point for consideration.
Send AOIC transfer letter notifying the taxpayer of the transfer and include a paragraph, notifying them they will be contacted within 120 days..
Assign case to the appropriate area office on AOIC.
If the offer is based only on ID Theft, follow procedures in IRM 18.104.22.168, Identity Theft Overview .
For offers that are deemed not processable:
Issue an AOIC return letter using the appropriate paragraph(s).
Obtain appropriate signature approval on the return letter see Del. Order No. 5-1 ( Rev. 4) in IRM 22.214.171.124.3, Return Authority.
Stamp the Form 656-L"Returned" and write the date the offer was determined to be not processable. Cross out all prior IRS received dates with a red X.
Do not sign the Form 656-L.
Annotate the AOIC remarks with the deposit information, if this was not previously addressed and include specific reason(s) for the not processable determination.
Managers and Tax Examiners may sign and date the letter and close the case on AOIC with a final disposition code of 10.
Caution should be exercised to ensure that no IDRS prints or other internally generated documents are sent to either the taxpayer or the POA. All internal documents not necessary for the offer determination should be destroyed.
If the offer was originally determined processable, but it was later concluded that the determination was made in error, processing should stop. The case should be closed using not processable procedures defined above. In these cases, it is important to ensure AOIC is updated to "not processable" to reverse the TC 480(s). This will result in the generation of a TC 483 posting to the appropriate modules.
If a payment was received with the offer and was not previously addressed by a Process Examiner, and the taxpayer did not designate the payment as a deposit, take the appropriate action to have the payment applied to their tax liability. The designated payment code (DPC) will be 99. See IRM 126.96.36.199, Disposition of DATL Good Faith Deposits.
The unsigned forms will be forwarded to MOIC with attached documentation to support either the refund or application of the deposit. Include the AOIC case history which should contain all appropriate documentation MOIC will need to take action. MOIC will complete the process by either faxing the Form 3753 to Cincinnati or applying the deposit to the liability.
Send the Form 656-L, the return letter, Publication 1, Your Rights as a Taxpayer, and Pub 594, The IRS Collection Process, to the taxpayer along with all other documents originally sent. If a POA is authorized to receive correspondence, send the representative a copy of the letter. If disclosure issues exist, use the appropriate paragraph to indicate this in the return letter, and do not send a copy to the representative.
When it is determined that an offer is submitted solely to delay collection, the offer can be returned to the taxpayer without further consideration after securing managerial approval. The term solely to delay collection means an offer was submitted for the sole purpose of avoiding or delaying collection activity. A determination that an offer is submitted solely for the purpose of delaying collection should be apparent to an impartial observer.
The group manager and the unit manager have delegated authority to return an OIC if it was submitted solely to delay collection.
An offer is not considered submitted solely to delay collection just because there is an imminent CSED issue or if an offer has been rejected after investigation and the taxpayer exercised appeal rights.
The following claims and/or circumstances should be considered as possible reasons for returning an offer as Solely to Delay Collection:
Claims that the liability stems from the operation of a law which is unfair (e.g., liability based on withdrawing funds from a 401 (k) plan)
Claims based on a divorce decree which stipulates the spouses each owe only portions of a joint liability (the government is not party to such agreements).
Claims which do not provide a reason for DATL basis.
Claims which are based on a Transferee, Nominee/Alter Ego Lien situations when there is no assessment against the party submitting the offer.
Frivolous or patently groundless offers such as those that assert the types of tax arguments listed in IRS Notice 2010-33 located at http://www.irs.gov/irb/2010-17_IRB/ar13.html.
The taxpayer crosses out any portion of Section 4 or the language above their signature relating to signing under the penalty of perjury on Form 656-L. This is one example but also includes any alteration to the language in the Form 656-L..
See IRM 188.8.131.52, Offer and Compromise Submission with Frivolous, Delaying, or Impeding Issues, and IRM 184.108.40.206, Offer Submitted Solely to Delay Collections, guidance in identifying and asserting the frivolous penalty on a frivolous filed OIC. For guidance on issuing a letter to the taxpayer, refer to IRM 5.8.10-2, Letter Requesting Taxpayer Withdraw Offer Submitted Which Includes a Frivolous Position.
The taxpayer submits an offer that is not materially different from a previous offer that was considered.
When only claims as per the above are cited, with the exception of E, contact should be made by telephone to advise the taxpayer why their offer can not be considered. When one of the above is cited, along with other processable issues, the DATL OIC should be processed as normal.
The DATL team will:
Screen out all Form 657.
Make all Form 657 a priority.
Promptly process; and
Immediately return the offer as solely to delay collection, if management agrees with the RO’s recommendation.
Form 657 serves to establish coordination between the field RO group and the site to provide case documentation regarding these determinations, and to ensure collection action is not pursued until the offer is closed.
A DATL offer may be returned as solely to delay if a Revenue Officer has submitted Form 657, Offer in Compromise-Revenue Officer Report, with the "Yes" block checked for item 9 and includes an acceptable explanation for the decision, including required approval of management. See IRM 220.127.116.11.1, Offers Submitted Solely to Delay Collection per Forms 657.
If the liabilities covered by Form 656-L are in IDRS Status 26 and a Form 657 was not received, contact should be made either by telephone or email to the RO assigned the balance due account to advise them a DATL offer was received. Request Form 657 to determine whether to process the offer. Two contact attempts should be made over a one week period. If no response is received from the RO, make the offer processable and continue with the offer investigation. The final processability determination should not be made until the Form 657, is received or the time frame for receipt has passed.
If the DATL unit manager agrees with the determination , the DATL manager or employee will contact the originating RO to advise them the return letter has been issued.
If the DATL unit manager disagrees with the determination, discussions should be initiated with the field RO manager to reach an agreeable solution.
Although other remedies are available (audit reconsideration, amended returns, request for penalty abatements) as an alternative, taxpayers may submit DATL offers to compromise liabilities based on a variety of issues that can be addressed within the campus environment. The role of the DATL unit is to utilize campus resources to resolve legitimate issues raised relative to the underlying liabilities. Examples of these issues include:
Payment tracer or credit transfer research.
Comparison of filed returns with information now claimed by the taxpayer.
Claims concerning bankruptcy discharges.
Claims involving expiration of the statutory collection period.
Disagreement with assessed examination deficiencies.
Reasonable cause for penalties.
Administrative abatement of interest.
Missing payment application.
Disagreement with AUR, SFR/ASFR assessments.
Disagreement with CAWR or FUTA assessments.
Claims made after the Service assessed a liability, the taxpayer appealed the decision and Appeals sustained the liability. Follow procedures in IRM 5.19.24.-6.2, Routing Cases Based on Jurisdictional Responsibility and forward to Appeals.
Taxpayers may submit Form 656-L prepared incorrectly or claim DATL without supporting documentation to prove their position. If the Form 656-L is prepared incorrectly or the merits of the offer cannot be judged without additional information, contact the taxpayer or his representative by telephone or send the taxpayer and POA an additional information letter specifying corrections or additional information required. The AOIC COMBO letter is used for this purpose.
Examples of Form 656-L perfection issues, time frames and documentation to be requested from the taxpayer depending on the grounds of the DATL claim include the following:
Section 1 or Section 2 of Form 656-L lists tax periods not addressed in the taxpayer's reason for submission of a DATL offer.
Original tax returns if the taxpayer disputes an ASFR or SFR assessment.
Documentation to support reasonable cause claims for penalty offers.
For processable offers take the following actions to perfect the offer:
If there is another related DATL offer either in a centralized unit, area office or Appeals for the liability(ies) listed in Section 1 or Section 2 of Form 656-L, forward it to the unit or area where the related offer is assigned;
If there is an open criminal investigation (Z freeze code) on any tax period, whether included on the Form 656-L or not, contact the Criminal Investigation area assigned to the case.
Verify the taxpayer has submitted the most current Form 656-L.
Review the offer for appropriate signatures. For additional information refer to IRM 18.104.22.168.8, Signatures.
If the offer seeks to compromise liabilities in conjunction with an open Appeals CDP case:
Open CDP cases: research ACDS to ensure the CDP is still open. In addition to researching ACDS, the tax Examiner must contact the Appeals Settlement Officer to determine if the CDP is still open and if the taxpayer is legally able to challenge the liability in CDP. If the taxpayer is able to challenge the liability, the offer will be transferred to the Appeals hearing officer. If Appeals advises that the CDP case is closed or the CDP case is still open but the taxpayer is legally precluded from raising the liability in CDP, the DATL tax examiner will proceed with offer processing.
Contacting Appeals and discussing the details listed above is a permissible ex parte communication. See section 2.03(2) of Rev. Proc. 2012-18 regarding ministerial, administrative or procedural matters.
Do not send to Appeals if the following two situations are present: If the notice of determination was issued by Appeals during the CDP process or the notice of determination preceded the original assessment.
a. Update the processability code to "Y."
b. Generate and send the taxpayer a AOIC COMBO letter acknowledging that the offer can be processed and the offer was transferred to the Settlement Officer (SO)assigned to the CDP case. Include the SO’s contact information in the letter.
c. Assign the offer on AOIC to AO 21.
d. Forward the offer and attachments via Form 3210, Document Transmittal, to the Appeals settlement officer assigned to the CDP case.
Ensure an acknowledged copy of the 3210 is received within 30 days of transferring the case. If not, follow-up to secure the required acknowledgement.
e. Update AOIC remarks to reflect the CDP offer was transferred to Appeals.
f. Send an email to the SO alerting them the offer was transferred to them.
In certain instances, Appeals may request a review of additional documents submitted by the taxpayer.
In these situations, an Appeals Referral Investigation (ARI) will be routed to the DATL group manager. These offers will not be transferred to the DATL on AOIC, so appropriate controls will need to be established by the group manager.
These investigations should be assigned expeditiously, and if possible, closed within 45 days of receipt. If the ARI is not completed within 45 days of receipt, Appeals should be contacted to request an extension. Upon return to Appeals, the ARI must be noted if there remains less than 180 days on the TIPRA statute.
For all other offers where the liability was determined or sustained by appeals, reject the offer. The offer will only be sent to Appeals if the taxpayer submits a timely appeal as a response to the rejection. These offers may include but are not limited to the following:
1. Determined by Appeals (TC 30X with a 3-digit Appeals location code present, unless the ACDS closing code is 10 or 17);
2. Previously sustained by Appeals, such as the denial of a reasonable cause request for penalty abatement (TC 29X with DLN blocking series 96, penalty reason codes 039-042);
3. Offers on assessments of this nature that were determined by Appeals or that received an Appeal hearing should have a rejection letter mailed to provide the taxpayer appeal rights. Collection is not responsible for any initial development of the case or securing the closed administrative file. The rejection letter should state the offer is being rejected since the initial determination was made by Appeals. The offer file should be transferred to Appeals for consideration if a timely appeal is submitted. If the offer was submitted containing multiple tax years but not all tax years were previously considered by Appeals, request an amended offer. Submit one offer for the tax year (s) which was previously considered by Appeals and a second offer for any additional year (s) that were not previously considered by Appeals. The number of offers will depend on the number of issues the taxpayer is addressing.
4. Denied innocent spouse treatment by Appeals (TC 971 AC 065) and the Innocent Spouse Tracking System IRM 25.15.14, Relief from Joint and Several Liability, Innocent Spouse Tracking System Inventory Validation Instructions.
If the offer is based on a claim of Identity Theft, see IRM 22.214.171.124.1, Identity Theft Procedures.
Update Processability code to "Y" .
Complete the Terms Screen on AOIC.
Sign and date Form 656-L, in “IRS Use Only” box on page 8 on behalf of the IRS.
Update the AOIC MFT screen to include tax periods listed in the offer.
Update status to ST 71, if applicable.
Document the AOIC history. Refer to IRM 126.96.36.199, Documentation.
For processable offers that do not require internal document requests or additional information from the taxpayer, send the AOIC Combo A letter indicating taxpayer contact in 45 days from the date of the letter and proceed with the offer evaluation.
On initial contact, the tax examiner should include Publication 1, Your Rights as a Taxpayer andPublication 594, The IRS Collection Process, with correspondence addressed to the taxpayer and the taxpayer's representative. These publications should be sent through the ELITE system, when available.
For offers that are deemed processable and an internal document request is needed, send the AOIC Combo A letter indicating you will contact the taxpayer 45 days from the date of the letter. The tax examiner's follow up date will be 30 days from the date of the internal document request. Document AOIC remarks of action taken.
To ensure the 45 day contact time frame is met the internal document request should be made at the same time the initial letter is sent to the taxpayer. If the offer is not resolved within the initial time frame provided to the taxpayer and/or representative, another letter or telephone contact must be made providing a new contact date.
If you have completed a request for internal documents and have not received a response within 14 days of the original request, initiate a Special Search. For additional information on a special search refer to IRM 188.8.131.52, Special Search Procedures.
For processable offers that do not require internal document requests but require additional information from the taxpayer, contact the taxpayer or the representative by telephone. Generally, two attempts to contact the taxpayer/representative via telephone must be made before correspondence is sent requesting a return phone call or additional information. The contacts or attempted contacts must be documented in the history. The attempts to contact the taxpayer should be made within three business days. If contact by telephone cannot be made after two attempts, send a quick note requesting a call back within 10 calendar days of the date of your letter. Document AOIC remarks summarizing the information requested.
All cases must have internal research performed prior to contact with the taxpayer or POA. Examples of this would be when working ASFR cases the AMS system should be researched for prior case activity and actions taken. When working AUR cases the AUR system should be checked for prior case activity and actions taken. Internal research is not limited to the two examples listed.
A time frame of 30 days should be given to the taxpayer to send in all requested documentation. Document the AOIC history indicating the deadline for the response. The Combo B will be post-dated five calendar days from the date it was prepared. Allow an additional five days for mail time. Set the follow-up for 45 days from the date the letter was generated. If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted.
If the request is made by telephone, give the taxpayer 14 calendar days to provide the documentation. The taxpayer must be advised that the failure to submit the requested documentation within this time frame may result in the offer being returned without further consideration. Document AOIC remarks.
TEs are required to initiate the next appropriate action within 10 calendar days on cases where the taxpayer has responded to the Combo letter or have received internal documents that were requested. All follow up actions must be taken within 10 calendar days of an established deadline.
The TE should also remember the initial contact time frames are the maximum time frames for contact. Wherever possible, the TE should strive to make initial contact as soon as possible after case receipt to avoid unwarranted delays.
If the taxpayer or the representative does not send all requested documentation by the follow up date, return the offer as a Processable return. See IRM 184.108.40.206, Processable Return Procedures.
If the examiner completely agrees with the taxpayer's position regarding the correct tax liability, take the action necessary to resolve the assessment(s), wait for the adjustment(s) to post to IDRS. Once all actions are taken to reconcile the taxpayer's account including the release of -K freeze, TC 820, etc., then send a AOIC combo letter with paragraph V and provide a copy of the account transcript(s) to the taxpayer and the POA if applicable. Advise the taxpayer that the liability(ies) which were the subject of the offer are resolved and that a compromise is not necessary. If there is no balance due after adjustments are made, a return of the offer is recommended. If there is still a balance due after adjustments are made, a withdrawal of the offer is recommended.
If the examiner partially agrees with the taxpayer's position regarding the correct tax, take the appropriate action necessary to adjust the liability(ies). Wait for the adjustment(s) to post to IDRS. Once all actions are taken to reconcile the taxpayers account including the release of -K freeze, TC 820, etc. then send AOIC combo letter with paragraph V and provide a copy of the account transcript(s) to the taxpayer and the POA, if applicable. Advise the taxpayer that the assessment(s) which were the subject of the offer have been adjusted and a balance remains, for which the Service expects full payment. Include the amount due, projecting accrued penalty and interest for 30 days. Also, advise that, if the taxpayer agrees with the IRS determination, it is necessary to withdraw the offer.
If the examiner does not agree with the taxpayer's position regarding the correct tax liability and, therefore, no changes will be made to any of the periods that were the subject of the offer, advise the taxpayer that the balance is still due. Include the amount due, projecting accrued penalty and interest for 30 days. Also, advise that if the taxpayer agrees with the IRS determination, it is necessary for the taxpayer to withdraw the offer.
If the taxpayer withdraws the offer, follow procedures in IRM 220.127.116.11, Withdrawn DATL Offers, to close the offer.
If the taxpayer does not withdraw the offer, follow procedures, in IRM 18.104.22.168, DATL Offer Rejections, to reject the offer.
Prepare an AOIC return letter citing all reasons for the return.
Generate the POA letter for any authorized representative. If a disclosure issue exists, use the appropriate paragraph to indicate this in the return letter, and do not send a copy to the representative.
Obtain appropriate approval and signature on the return letter see Del. Order No. 5-1 (Rev. 4) in IRM 22.214.171.124.3, Return Authority.
Stamp the Form 656-L"Returned" , annotate the date below the stamp, and cross out all prior IRS received dates with an "X" .
Keep the original Form 656-L with attachments, and a copy of the return letter for closed file retention. For additional information regarding closed file and records retention see IRM 126.96.36.199, Closed File Retention.
Mail the return letter, copies of Form 656-L and attachments, to the taxpayer as well as a copy of the return letter to the taxpayer's representative if one is on file.
Close the case on AOIC as a "return" once the letter is signed.
If there is a deposit and the taxpayer has requested that the deposit be applied to the tax liability, input "A" in the prompt for disposition of the offer and mail a copy of the taxpayer's written request for application of the funds to the appropriate MOIC Unit. If there is a deposit and the taxpayer has asked for a refund or provided no instructions for disposition, input "R" in the prompt for disposition of the offer, to refund the deposit.
Add a history narrative to AOIC remarks with the necessary information that the offer was returned.
Prepare a Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 481 to reverse the TC 480 for any NMF tax period that is listed on the MFT screen and not on Form 656-L.
If the file or case history reflects a TC 480 was manually input, it must be manually reversed by the person inputting closing actions on AOIC. Ensure all TC 480s are reversed with a TC 481.
If relief from joint and several liability "innocent spouse" claim is the only issue present in the offer, and if:
The innocent spouse claim was not previously denied, and is not currently being evaluated by the Innocent Spouse Unit, contact the taxpayer and suggest the taxpayer withdraw the offer and file a Form 8857, Request for Innocent Spouse Relief, or complete a signed statement as referenced in the note below which in most cases, will expedite processing of the claim. See IRM 188.8.131.52.7, Offer in Compromise (OIC), and IRM 184.108.40.206, Offers in Compromise.
The taxpayer withdraws the offer, follow procedures in IRM 220.127.116.11, Withdrawn DATL Offers, or;
The taxpayer declines to withdraw, reject the offer following procedures in IRM 18.104.22.168, DATL Offer Rejections.
If Form 8857, Request for Innocent Spouse Relief, or a signed statement is received:
Forward Form 8857 to the Innocent Spouse unit.
Return the offer for other investigations pending.
These procedures apply when DATL receives an offer that meets the criteria for Employment Tax, Excise Tax, Estate and Gift Tax, International including Large Business and International (LB&I) cases, Tax Exempt Government Entities- Exempt Organization (TEGE-EO), Tax Exempt Government Entities – Indian Tribal Government (TEGE-ITG), TEGE State and Local Government, TEGE Employee Plans and TEGE Tax Exempt Bonds.
The Brookhaven DATL unit may need to provide assistance with AOIC systemic issues or questions from the Specialty Groups. If the issue cannot be resolved in the DATL unit, it will be elevated to Collection Policy.
A Specialty group is unclear on a DATL procedure. If the group is requesting assistance, assist by explaining the process. If the issue involves closing the case on AOIC, walk them through the process. The DATL unit will elevate to Collection Policy any trend they identify in the requests received.
If a Taxpayer Assistance Order (TAO) or Operational Assistant Request (OAR) is received, the Taxpayer Advocate Service (TAS) Liaison for Speciality Offers Liens and Advisory (SOLA) will be responsible to send the information to the correct Specialty Group Coordinator.
The DATL unit will conduct all research to determine proper routing and assignment of the offer based on the below criteria. If there are any questions regarding the referral criteria for the Specialty Groups, contact the Specialty Coordinator or local management prior to assigning the case.
Estate and Gift
Tax period involves an audit assessment previously made by Primary Business Code (PBC) 213 for Estate and Gift Tax (TC300 or TC308); or
Tax period involves an assessment from an original filed Estate and Gift tax return, Form 706, 706A, 706D,706NA, and 706 QDT, & 709, that has not had an audit assessment made from another area
Taxpayer’s BOD code is either SBSE or LB&I
Tax period involves an audit assessment previously made by (PBC) 214 Excise Tax (TC300 or TC308)
Tax period involves an assessment from an original filed Excise Tax return (Form 720, 730,11-C, 2290, 8849, that hasn’t had an audit assessment made from another area.
International Tax and LB&I
Primary Business Code (PBC) 315
PBC 301-307 & 316-317 & 398 LB&I
Campus Exam assessments only when the taxpayer and/ or the POA reside outside the United States
Previous TC 300, TC 308 made by PBC 212
Form 940, 941, 943, 944, 945, MFT 13 Penalty Reference Number (PRN) 549 & 550that has not had an audit assessment made from another area
Employment Tax (ET) determination is based on the taxpayer’s Business Operating Division (BOD) and previous audit location. If the taxpayer’s issues in Large Business & International (LB&I) or Self - Employed/ Small Business Division (SBSE) were previously addressed by PBC 212 (SBSE ET), the case will be forwarded to ET.
Tax Exempt Government Entities
The easiest way to determine which Tax Exempt Organization to refer the offer, is to look at Command Code INOLE. The INOLE screen has an EO section at the bottom. It will list the subsection-code, foundation code, ruling date, etc. It will also list the filing requirements. INOLE “TE-CLIENT-CD” values are
B - Tax Exempt Bonds (TEB)
F - Federal, State & Local Government (FSL)
I - Indian Tribal Governments (ITG)
1 - Combo ITG & TEB
2 - Combo FSL & TEB
3 - Combo Exempt Organization & TEB
Tax Exempt Organizations
Form 990, 990EZ, 990PF, 990BL, 990T, 990C
State and Local Governments
Tax Exempt Bonds
Form 8038, 8038-G, 8038-GC, 8038-T, 8038-R, 8038-CP, 8703, 8323 MFT 46
Form 8038-B MFT 85
Form 8038-TC MFT 86
8038 – CP: This return is a claim for refundable tax credits allowed for certain types of municipal bonds. This is the only Tax Exempt Bond return for which tax may be assessed. Please contact the Tax Exempt Bonds coordinator before processing any of these offers.
8038-T, 8038- R: These returns deal with payments that affect the effective investment yields allowable on municipal bonds. These payments do not constitute a "tax" and cannot be assessed by the Service unless the taxpayer agrees. If the payments are not made, the bonds are simply not exempt. These do not qualify as DATL Offers.
Indian Tribal Governments
The DATL Tax Examiner will follow processability procedures per the IRM 22.214.171.124, Processability, and IRM 126.96.36.199.5, Processable DATL Offers.
If the offer is processable, but meets other criteria in the IRM 188.8.131.52.5, Processable DATL Offers, review all criteria, and take appropriate actions.
Offers where the liability was previously determined or sustained by Appeals should be rejected and sent to Appeals, if the taxpayer files a timely Appeal.
If the offer is processable and does not meet other criteria in IRM 184.108.40.206.5, Processable DATL Offers, take the following actions:
Send the taxpayer an Automated Offer in Compromise (AOIC) transfer letter informing them that their case is being transferred to the appropriate Specialty Coordinator; use the Specialty group open paragraph and include a statement the taxpayer will be contacted within 120 days. Generate the transfer letter prior to assigning the offer to the Specialty group.
Print and attach copy of the Exam/Specialty Checklist to the outside cover of the case file.
Case building is not required by DATL. Any requests for internal information (original returns or audit files) or information needed to perfect the offer will be obtained by the Specialty groups.
The DATL Coordinator will ensure the payment received and designated as a deposit is on the checklist and the deposit tab. If the payment was not designated as a deposit, the DATL coordinator will have the payment applied to the liability.
Document AOIC with the location and contact information of the group where the case is being transferred.
Update the AOIC assignment number to reflect the correct Area Specialty Coordinator/Group.
Send the case with Form 3210 to the Specialty Coordinator based upon the coordinator listing for assignment to the appropriate field group.
Ensure the Form 3210 has deposit information listed, if applicable.
The Specialty Coordinators will review the offer within 10 calendar days of receipt to determine if the offer meets their criteria. If they determine the offer does not meet their criteria or was mis-routed, they will contact the DATL unit before returning the case.
Employment Tax and TEGE have 15 calendar days to review and return to DATL, if the offer does not meet their criteria.
The time frame for returning the offer to the DATL unit may be extended due to case building to validate the offer is processable.
The Specialty Group reviews the offer and any applicable documents and determines the offer is not processable, including Solely to Delay, the offer will be returned to the DATL Unit for review and to take appropriate actions.
If the DATL unit disagrees with the return of the offer, it will be elevated to DATL Management. DATL management should review the return issue for concurrence, and initiate a conversation with the Specialty Coordinator’s manager.
When the Form 3210 acknowledgement is received, enter a history on AOIC remarks. If the Form 3210 is not received within 15 calendar days, the DATL unit should contact the respective Coordinator. Allow 20 calendar days for the Form 3210 acknowledgement for Employment tax and TEGE.
If the offer is not processable, follow procedures in IRM 220.127.116.11.1, Not Processable Offers.
All Specialty Groups will handle all actions involved with returning Processable DATL offers. Processable Offers are returned following IRM 18.104.22.168, Processable Return Procedures.
All Specialty Groups, including TEGE, are responsible for inputting any tax adjustments to the accounts. They are also responsible to contact the taxpayer to request and obtain a withdrawal of the offer, if appropriate.
All Specialty Groups will handle all actions involved with withdrawals of a DATL offer. The Specialty Coordinator will resolve offers based on IRM 22.214.171.124, Withdrawn DATL Offers.
All Specialty Group Coordinators must review all recommended acceptances prior to closing an accepted offer on AOIC.
If there is any question regarding the acceptance, contact should be made with management to determine if it is a valid acceptance.
For all acceptances, certain case information must be sent to the Public Inspection File. For additional information, please refer to IRM 126.96.36.199, DATL Acceptances, and IRM 188.8.131.52, Required Actions Prior to Closing an OIC as an Acceptance.
All Specialty Groups will close their respective offers on AOIC. The appropriate records should be sent to the Federal Records Center (FRC) per procedures established by the Specialty groups. For additional information regarding closed file and records retention see IRM 184.108.40.206, Closed File Retention.
All Specialty Groups should fax the Exam/ Specialty Checklist to the DATL unit with a copy of the withdrawal/rejection letter for the case file.
The DATL Unit will confirm all closing actions.
Identity theft occurs when someone uses an individual’s personal information, such as name, Social Security Number (SSN), or other identifying information without permission, to commit fraud or other crimes. Taxpayers should notify the IRS when they believe they have experienced an identity theft incident. Tax Examiners should become familiar with the IRM 25.23.1, Identity Protection and Victim Assistance - Policy Guidance, for additional information regarding Identity Theft procedures
Taxpayers who have experienced identity theft are already victims, either emotionally or financially. IRS employees need to be aware of that impact and handle the contact with an additional level of sensitivity and understanding.
Identity theft can affect tax administration in two primary ways:
Employment or Income Related - This occurs when the identity thief uses the Victim’s SSN to obtain employment, resulting in what may appear as unreported income under the victims account.
Refund Related - This occurs when the identity thief uses the victims SSN to file a false federal income tax return to obtain funds. If the thief files before the victim, the victim may not receive his or her refund within a reasonable time.
The Identity Theft issue can be discovered during your offer investigation, or the taxpayer can self-identify by providing any of the following;
Form 14039, Identity Theft Affidavit
Information provided on Form 656-L
Statement provided by the taxpayer claiming they are a victim
In these instances, taxpayers must provide documentation to establish their identity and documentation to support the claim of identity theft.
The Tax Examiner will be responsible for:
Identifying the Identity Theft issue.
Working the Identity Theft inventory on a first in first out basis. These cases should take priority over other assignments.
Researching what documentation was received with the offer and if additional information is needed to perfect the Identity theft claim.
Inputting the appropriate TC 971 code. See IRM 220.127.116.11, Initial Allegation or Suspicion of Tax-Related Identity Theft - IMF Identity Theft Indicators.
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. If the exact coding already exists for the tax year, do not input it a second time. No tax year should have duplicate identical codes input for that specific year.
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 SSNs.
Identifying and addressing the need for input of TC 971/522 on a case with an EIN. Refer to IRM 18.104.22.168, Identity Theft Research.
In situations where the taxpayer initially asserts identity theft and provides supporting documents at the same time, follow the procedures in IRM 22.214.171.124, Identity Theft Supporting Documentation - Overview.
Requesting 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. See IRM 126.96.36.199.1, When to Request Identity Theft Supporting Documents.
Setting a follow up on AOIC for 45 days for receipt of taxpayer response.
If the taxpayer does not provide substantiation documentation when requested, proceed with case resolution assuming the taxpayer is not an identity theft victim. Follow procedures in IRM 188.8.131.52.4.1, IMF Identity Theft- Taxpayer Initiated Allegations of Identity Theft - TC 971 AC 522 PNDCLM , for additional information.
Ensuring the statute is protected when receiving multiple returns.
Upon receipt of Identity Theft documentation, research the taxpayer’s account to determine if the assessment that caused the liability was the result of an ASFR, AUR or Exam assessment. If the liability was due to a prior assessment, the ID theft determination will be made by the function that input the TC 300 or TC 290. See IRM 184.108.40.206.3, Identity Theft Referral Procedures.
Reporting Time spent on Identity Theft issues - All time associated with working ID theft issues in DATL should be reported to 810 – 61972.
For complex issues where the DATL tax examiner can not make the Identity theft determination; refer the case to the Collection Identity Theft Liaison for technical review on Form 4442, Inquiry Referral.
Determine if the Identity Theft issue was the only basis for the offer or the issue did not affect the tax year in question. See table below for closing instructions:
If ... Then ... The Identity theft was the only basis for the offer
Send AOIC Return letter for other investigations pending. In an open paragraph explain to the taxpayer the Identity Theft issue was transferred to the appropriate area.
A TC 470 CC 90 must be input on the account to suspend collection activity. If the account is in status 71 take the following actions:
Monitor for reversal of status 71
Input TC 470 CC 90 once status 71 is reversed.
Document AOIC remarks.
ID Theft was claimed by the taxpayer but did not impact the tax year of the offer
Follow normal processing guidelines for working the offer.
Follow TC 971/522 guidelines and referral procedures to address the Identity Theft claim.
Call the taxpayer and explain you will continue working the offer and forward the Identity Theft claim to the appropriate area.
Document AOIC Remarks.
Determine the source of the ID theft liability (Exam, SFR. AUR).
Go to SERP, "Who Where" tab and click on ID Theft Liaisons to determine the correct area to route the referral to.
Prepare Form 4442, Inquiry Referral. Annotate "ID Theft" and attach any documentation received from the taxpayer or representative. If the Identity theft claim was made on theForm 656-L ,before forwarding ensure the Form 656-L is stamped "Returned" .
Send the taxpayer Letter 86 C, indicating the ID theft issue has been transferred.
To address the offer disposition, Refer to IRM 220.127.116.11.2, Identity Theft Offer Determinations.
Document AOIC remarks with all available research and methods of resolution used to determine the validity of the liability.
If the liability was not assessed in ASFR, AUR or Exam forward the completed Form 3870 to DITA. The contact information for the new SB/SE Designated Identity Theft Adjustment (DITA) team is as follows: Internal Revenue Service DITA Mail Stop 4-G20.500, 2970 Market St., Philadelphia, PA 19104. Fax (855) 786-6575.
To determine receipt of Paid Preparer Misconduct issues take the following actions:
Follow guidance in IRM 25.24.3, Return Misconduct- Compliance to research account and request documentation from the taxpayer.
Forward documentation to Collection Identity Theft liaison on Form 4442, Inquiry Referral, for a determination on the validity of the taxpayer’s claim.
Set an AOIC follow up for 14 calendar days to ensure a timely response is received from the liaison.
To address the offer disposition, Refer to IRM 18.104.22.168.2, Identity Theft Offer Determinations.
Document AOIC remarks.
If a taxpayer files bankruptcy during investigation of a DATL offer, stop the investigation and close the offer as a return.
Follow procedures provided above in IRM 22.214.171.124, Processable Return Procedures, but cite the bankruptcy filing as reason for return in the return letter.
When the Service is notified of the death of a taxpayer who submitted an offer (or either spouse on a joint offer) that is currently under consideration, the Service can no longer consider the offer. A termination letter will be generated and the offer closed.
Offers closed as terminations do not require preparation of the Form 1271, Rejection Memorandum.
The following actions should be taken to close an offer as a termination;
Prepare an AOIC termination letter inserting the termination paragraph.
Submit termination letter and offer file to the authorized approving official see Del. Order No. 5-1 (Rev. 4) in IRM 126.96.36.199.4, Termination Authority for Review and Concurrence. The approving official will indicate concurrence by signing the termination letter.
Date and copy the termination letter for closed file retention. For additional information regarding closed file and records retention see IRM 188.8.131.52, Closed File Retention.
Mail the termination letter to the taxpayer's address of record and a copy to the taxpayer's representative if one is on file.
Input of TC 540 if the exact date of death is confirmed.
Document the history indicating the date of death and how notification was received.
Document AOIC history.
Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a TC 482 to reverse the TC 480 for any NMF tax period that is listed on the MFT screen and not on Form 656-L.
If the file or case history reflects a TC 480 was manually input, it must be manually reversed by the person inputting closing actions on AOIC. Ensure all TC 480s are reversed.
Many times the DATL OIC under consideration was submitted jointly by a husband and wife. In that situation, contact with the surviving spouse should be made to determine whether there is a probate proceeding pending. See IRM 184.108.40.206(2), Death of a Taxpayer, and IRM 220.127.116.11, Decedents' Estates, for more information about decedent taxpayers and probate proceedings.
If the examiner can resolve the issue to the mutual satisfaction of the taxpayer and the Service, a compromise is not required. In such cases, the examiner should take the appropriate action as agreed and request that the taxpayer withdraw the offer.
The taxpayer may also decide to withdraw the offer for other reasons unrelated to the examiner's determination.
A voluntary withdrawal request may be made orally, by fax, or in writing.
Receipt of a withdrawal request (either in writing or orally) must be clearly documented in the case file as well as how the request was received.
See IRM 18.104.22.168 (2), Doubt as to Liability Offer Withdrawn, for examples of written statements the taxpayer may submit to withdraw the offer. Inform the taxpayer that the act of withdrawal the offer forfeits any appeal rights. The AOIC Withdrawal Letter includes a statement the taxpayer must sign to indicate the disposition of any deposit.
If the taxpayer withdraws the offer:
There is no requirement to prepare Form 1271, Rejection or Withdrawal Memorandum.
The effective date of the withdrawal will depend on the method of receipt of the request to withdraw. The following chart shows the correct date to use as the withdrawal date:
If taxpayer withdraws an offer in compromise by ... Then the offer will be considered withdrawn ... Personal delivery When notification of the withdrawal is received by the Service. Mailing written notification of the withdrawal via U.S. certified mail On the date the Service receives the certified mail Non-certified mail or fax On the date the Service mails (date of the correspondence), or personally delivers a written letter to the taxpayer acknowledging the withdrawal Phone On the date the Service mails, or personally delivers, a written letter to the taxpayer acknowledging the withdrawal
Review the AOIC record to ensure the information is accurate.
Generate a withdrawal letter on AOIC, inserting the appropriate paragraph. Use the chart above to determine the correct date to use as the effective date of the withdrawal.
Generate the POA letter for any authorized representative, if applicable.
Submit the withdrawal acknowledgement letter and offer file to the authorized approving office see Del. Order No. 5-1 (Rev. 4) at IRM 22.214.171.124., Withdrawal Authority for review and concurrence. Approving official will indicate concurrence by signing the letter.
Date and photocopy the letter for closed file retention. For additional information regarding closed file and records retention see IRM 126.96.36.199, Closed File Retention.
Mail the withdrawal acknowledgement letter to the taxpayer.
Close the case on AOIC as withdrawn after approval has been received. If there is a deposit and the taxpayer has requested that the deposit be applied to the tax liability, input "A" in the prompt for disposition of the offer and mail a copy of the taxpayer's written request for application of the funds to the appropriate MOIC Unit. If there is a deposit and the taxpayer has asked for a refund or provided no instructions for disposition, input "R" in the prompt for disposition of the offer, to refund the deposit.
Add a history narrative to AOIC remarks with the necessary information that the offer was withdrawn.
Prepare a Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 482 to reverse the TC 480 for any NMF tax period that is listed on the MFT screen and not on Form 656-L.
If the file or case history reflects a TC 480 was manually input, it must be manually reversed by the field or DATL person inputting closing actions on AOIC. Ensure all TC 480s are reversed.
When the offer is rejected, the taxpayer will be notified in writing and the letter will explain how the taxpayer may exercise their appeal rights. Information received from the taxpayer in response to a conversation or letter must be considered before proceeding with the rejection.
Generally, rejections on offers based on DATL are because the tax is believed to be correct as assessed.
If the taxpayer does not agree with the examiner's conclusion and does not withdraw the offer take the following actions:
Update the proposed disposition on AOIC;
Prepare Form 1271, entering the reason(s) for the action;
Prepare an AOIC rejection letter citing the reason(s) for the action;
Submit the Form 1271 and offer file to the authorized approving official see Del. Order No. 5-1(REV. 4) at IRM 188.8.131.52.2, Rejection Authority .
Forward the Form 1271 and offer file to the Independent Administrative Reviewer (IAR)
Document AOIC remarks before assignment of the offer to the IAR
If the IAR sustains the rejection recommendation they indicate approval by signing Form 1271 as reviewer. See IRM 184.108.40.206.3, Rejections Sustained by the Independent Administrative Reviewer;
1. Obtain appropriate managerial signature on the rejection letter and Form 1271.
2. Date the letter to the taxpayer;
3. Enter the date of the rejection letter in the corresponding field on Form 1271;
4. Copy the rejection letter for the file and for the representative, if one is indicated;
5. Mail the letter(s) to the taxpayer and representative if appropriate.
6. Assign the case on AOIC to the 45 day hold file.
If the IAR does not sustain the rejection recommendation, follow guidance outlined in IRM 220.127.116.11.3.1, Rejections Not Sustained by the Independent Administrative Reviewer.
Treasury Regulation 301.7122-1 (f) (5) provides that the 30-day period to request an appeal starts the day after the date on the rejection letter. The rejected offer must be suspended during this 30-day period to allow the taxpayer an opportunity to request an appeal, even if the taxpayer advises the Service that no appeal is desired. These cases should be monitored for receipt of a request for appeal.
IRC 7508 provides for postponement of certain acts, including submission of an appeal in OIC cases, during the period of time a taxpayer is in a combat zone (CZ) plus 180 days. This postponement would be in addition to the 30 days allowed in the rejection letter. If the taxpayer enters a CZ during the appeal period, the appeal period would be the time the taxpayer is in the CZ, plus any remaining time in the appeal period, plus 180 days.
Rejected offers should be held in the suspense file for 15 calendar days past the 30-day deadline to allow time for an appeal request to be received and associated with the offer file.
If no appeal request is received by the 45th day from the day after the date on the rejection letter, the following actions should be taken:
Close the offer record as a rejection with no appeal on AOIC.
If there is a deposit and the taxpayer has requested that the deposit be applied to the tax liability, input "A" in the prompt for disposition of the offer and mail a copy of the taxpayer's written request for application of the funds to the appropriate MOIC Unit. If there is a deposit and the taxpayer has asked for a refund or provided no instructions for disposition, input "R" in the prompt for disposition of the offer, to refund the deposit.
Add a history narrative to AOIC remarks with the necessary information that the offer was rejected.
Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a TC 481 to reverse the TC 480 for any NMF tax period that is listed on the MFT screen and not on Form 656-L.
If the file or case history reflects a TC 480 was manually input, it must be manually reversed by the person inputting closing actions on AOIC. Ensure all TC 480s are reversed.
Route the offer file to the closed files. For additional information regarding closed file and records retention see IRM 18.104.22.168, Closed File Retention.
If the taxpayer responds timely to the rejection letter with new information sufficient to adjust the liability, make the appropriate adjustments as indicated by the new documentation. Contact the taxpayer to advise of the results following consideration of the additional information and:
If the new information results in the complete resolution of the assessment(s) in question, follow procedures in IRM 22.214.171.124, Processing DATL Offers.
If the new information results in partial resolution of the liability(ies) in question and the taxpayer filed a timely appeal, follow procedures in IRM 126.96.36.199, Processing DATL Offers, to adjust the account. Then follow procedures (3) below to forward the case to Appeals for further consideration.
If the taxpayer responds by sending in a signed withdrawal, agreeing in full with the tax examiners decision, follow procedures in IRM 188.8.131.52, Withdrawn DATL Offers, to close the offer.
Review the Form 13711 to ensure it is signed under penalties of perjury by the taxpayer and/or authorized representative ,as applicable. The authorized representative must check the appropriate box. If the taxpayer submits a written statement of Appeal it must include the “under penalties of perjury” statement.
If a request for an appeal is received within 30 calendar days of the date after the date of the rejection letter, the case must be forwarded to Appeals function for consideration.
If the 30th day falls on a Saturday, Sunday, or holiday the date for timely submission will be the next business day. For example, the 30th day for appeal falls on Saturday, August 2, 2014. The request for the appeal is dated Monday August 4, 2014. This is considered to be a timely appeal because it was postmarked on the first regular business day following the 30th calendar day. If the Postmark Date is missing on USPS Certified Mail, go to https://tools.usps.com/go/TrackConfirmAction_input, type in the Tracking Numbers, and find the Acceptance Date.
Special rules apply in determining the postmark date for documents sent by private delivery service. See IRM 184.108.40.206.2.3, What is a Designated Private Delivery Service (PDS), or IRM 220.127.116.11.2.4, Determining Postmark Date
Timely appeals - Upon transfer of the case to Appeals, notify the taxpayer that the case is being transferred and provide the telephone number of Appeals Customer Service. Notification may be verbal or in writing but should be documented. Written notification may be completed using the AOIC transfer letter, paragraph B.
Assign on AOIC to the appropriate Appeals area.
Untimely appeals - Notify the taxpayer that the appeal was not timely and will not be forwarded to Appeals for consideration. Notification should be in writing and should be documented. Written notification may be completed using AOIC transfer letter, paragraph C.
If the request for appeal is unsigned, the request will not be considered timely and the taxpayer should be notified appropriately.
If you receive an unsigned request for appeal, give the taxpayer or the taxpayer's POA an additional 15 calendar days from the date the request was received to perfect the request. This is in addition to the 30 calendar days initially provided for the appeal request. In all cases, the taxpayer is entitled to at least 30 calendar days from the day after the date of the rejection letter, but no more than 45 days if the request required perfection.
If a joint offer is rejected and only one spouse signs the request for appeal, an effort should be made to perfect the request. Contact the taxpayers and have the other spouse sign the request for appeal. The spouse who initially signed the appeal may provide a statement affirming that they are appealing on their spouse's behalf. If there is no response to the request for perfection, then the appeal will only be considered for the spouse who signed the request for appeal. Manually input TC 481 for "B" and reinput TC 480 for "P" or "S" , as needed, using the same date as the original TC 480. Change the AOIC entity to the name of the spouse who requested the appeal. Appeals will secure an amended Form 656-L if the offer is ultimately accepted.
The taxpayer should provide specific information with the appeal letter, including a list of items of disagreement and evidence to support any of those items. If the letter provides new information not previously considered, the case must be reassigned to a tax examiner for reconsideration.
The taxpayer is entitled to an appeal of the offer rejection, even if items of disagreement are not provided or argued. If it can reasonably be determined that the letter is a request for an appeal, the taxpayer should be afforded that right.
If an appeal is received that includes additional or new information to consider but it does not change the rejection determination:
Attempt to reach the taxpayer by phone to advise that we have received and considered the information provided, however, the decision to reject the offer has not changed, so the offer will be forwarded to Appeals for consideration as requested.
Refer to Rev. Proc. 2012-18, IRM 18.104.22.168, Communications with Appeals, and IGM 05-0812-062 for information regarding ex-parte communication with Appeals to determine what information should be included in the case file going to Appeals.
Assign the case to Appeals on AOIC.
Mail the case to the appropriate Appeals Area office.
If the taxpayer's documentation changes the determination then adjust the account and follow the withdrawal procedures. If the taxpayer does not agree to the withdrawal forward the case to Appeals.
After consideration of a rejected offer, Appeals will make the final determination, adjust accounts, if applicable and close the case on AOIC.
Appeals will send DATL offers it accepts to the MOIC function for final processing.
Appeals will not send any offers under their jurisdiction back to the DATL Unit.
IRC § 7122(e) requires the Service to conduct an independent administrative review of a proposal to reject an OIC. The review must be conducted prior to the rejection being communicated to the taxpayer.
The Independent Administrative Reviewer (IAR) is responsible for conducting this review.
The IAR is responsible for reviewing each case to determine if the proposed rejection is reasonable based on the taxpayer's facts and circumstances. The IAR is not responsible for conducting a quality analysis of the accuracy of the documents used to support the case.
The Tax Examiner's analysis of the taxpayer's offer should be reviewed to determine if the basis for the rejection determination was appropriate.
The IAR should consider if the taxpayer's rights have been observed during the offer investigation and during communication and discussions with the taxpayer or POA. These considerations should be based on issues that would impact the recommended rejection.
The IAR should ensure that all of the facts and circumstances of the case were considered during the investigation and that the decision to reject the offer is reasonable, based on the case analysis.
The case file should indicate an attempt to communicate the results of the offer investigation with the taxpayer or POA, prior to recommending the rejection. This communication can be accomplished by telephone contact or by letter.
When circumstances dictate, the employee should use problem solving and negotiation techniques, and in so doing consider the taxpayer’s/POA/third party’s perspective when working toward case resolution.
The review must be conducted prior to the final determination of rejection being communicated to the taxpayer.
The following items should be present in the file and used as an aid for the IAR to ensure the decision was appropriate.
Form 656-L, Offer in Compromise
Form 1271, Rejection or Withdrawal Memorandum
Preliminary Rejection letter
Any pertinent supporting documents
If any information is missing or unavailable that hinders the IAR in making a determination that the decision was appropriate, the case file should be returned or a memorandum sent to the tax examiner or the manager requesting the missing documentation or supporting information.
If the proposed rejection of the offer is sustained by the IAR, the reviewer will:
Update the IAR "Check Sheet" on AOIC indicating the appropriate disposition.
Sign the Form 1271 as the reviewer, indicating concurrence with the proposed disposition.
Return the case file to the originator using a Form 3210, Document Transmittal.
Assign the offer back to the DATL manager.
If the proposed rejection is not sustained by the IAR, the reviewer will:
Update the IAR "Check Sheet" on AOIC indicating the appropriate IAR disposition.
Document AOIC check sheet providing an explanation of why the determination was not sustained and indicating additional actions necessary by the investigating employee.
Route the case back to originator on a Form 3210 .The original Form 1271 and any other documentation regarding second level management involvement and decisions must be retained in the offer file as a record of actions taken during the IAR process.
An offer to compromise a tax liability should set forth the legal grounds for compromise and should provide enough information for the Service to determine where the offer fits within its acceptance policies. Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax liability under the law. Doubt as to liability does not exist where the liability has been established by a final court decision or judgement concerning the existence of the liability.
An offer to compromise based on doubt as to liability generally will be considered acceptable if it reasonably reflects the amount the Service would expect to collect through litigation.
An acceptable offer may be for an amount greater than the taxpayer offered on the original Form 656-L. If you have determined a new offer amount is acceptable, request an amended Form 656-L from the taxpayer. Mark the amended Form 656-L with "amended" on the top margin of page one of the Form 656-L. Update AOIC by inputting "A" (amended) on the summary screen of the AOIC record to reflect receipt of an amended offer. Do not change the offer pending date.
In certain situations pen and ink changes are acceptable on Form 656-L. For additional information and requirements see IRM 22.214.171.124, Pen and Ink Changes to Form 656.
Counsel is required to review offers when the total unpaid amount of tax assessed (including any interest, additions to tax, and penalties) for all related offers from the same taxpayer is $50,000 or more at the time the offer was submitted. The purpose of Counsel's review is to determine whether the offer legally meets the standards of Doubt as to Liability (DATL). Counsel also reviews the offer to ensure it conforms to the Service's policies and procedures. The IRS has the legal right to accept the offer, regardless of Counsel’s opinion. However, rejecting Counsel advice is not a preferred course of action. See IRM 126.96.36.199.1, Counsel Review and Concurrence (Legal issue).
Refer to IRM 5.8.8, Acceptance Processing, and Del. Order No. 5-1 (Rev. 4) in IRM 188.8.131.52.1, Acceptance Authority, for procedures and levels of approval when recommending acceptance of a DATL offer in compromise. However, review and approval authority will remain within the SBSE Compliance Services Department Managers over the Centralized DATL processing units.
Prepare a copy of the Form 7249, Offer Acceptance Report, and a sanitized transcript based on the list below and forward for inclusion in the public inspection file.
Name and SSN of a co-obligor spouse if the spouse is not the party to the compromise
Cross reference SSN or EIN associated with any Transaction Code (TC) 672
Address(house number and street name only)
Number of exemptions
Adjusted gross income
Principal Industry Activity Code
Transaction codes with no dollar amounts. The entire line including the date should be redacted.
Transaction Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.
Power of Attorney/Tax Information Authorization (POA/TIA) on the file.
The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed.
Review the Form 7249 and transcripts and redact any visible taxpayer identification information. If the information is not systemically redacted, a grease pencil is the most effective method when manual redaction is required. Do not use marker, ink pens, or white out.
Forward the accepted offer file to the appropriate Monitoring Offer in Compromise (MOIC) function based on the taxpayer's state of residence. MOIC will process offer payments and input appropriate OIC transaction codes.
On July 16, 2006, the Tax Increase Prevention Reconciliation Act of 2005, TIPRA was implemented. TIPRA mandates the acceptance of any offer that has not been explicitly rejected by the Service within 24 months of the date the IRS received the offer. Furthermore, Notice 2006-68 provides that offers are not deemed accepted if they are returned by the IRS to the taxpayer as non processable or no longer processable, withdrawn by the taxpayer, or deemed withdrawn under IRC 7122(c)(1)(B)(ii) because the taxpayer’s failure to make the second or later installment due on a periodic payment offer. Any period during which any liability that is included in the offer is in dispute in any judicial proceeding will not be taken into account in determining the expiration of the 24-month period. Additionally, for any period when a timely filed appeal from a rejection is being considered by Appeals the 24- month period is not taken into consideration.
If a mandatory acceptance is warranted, refer to IRM 184.108.40.206,24 month Mandatory Acceptances under § 7122 (f).
On occasion, taxpayers submit payments when they submit DATL offers. If the payment is designated as a deposit, COIC deposits these funds into a 4710 RACS account, and attaches a Form 13479, a Form 2515, and a copy of the form of payment to the offer case before forwarding to the DATL Unit. The deposit is held in this account until the DATL offer determination is made.
When a DATL offer is received in the mail room with a remittance, a mail room employee will contact DATL to determine processability. If the offer is deemed not processable, and the funds received were designated as a deposit, the funds will be returned as non-negotiable with the offer. If DATL cannot make a processability determination within 24 hours, the funds designated as a deposit will be loaded as a deposit on the AOIC deposit screen. If the offer is processable, the payment is processed and the offer is sent to the Tax Examiner to work.
If a deposit has been made with an offer, Service employees should ask taxpayers if they wish to have deposit funds applied to the unpaid tax debt when a withdrawal is solicited or when advising taxpayers that an acceptance cannot be recommended.
If the taxpayer agrees to the application of the deposit, a written authorization or Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, should be completed, signed and submitted to the MOIC unit when the case is closed.
If the taxpayer does not authorize application of the deposit, it will be refunded.
Before you close the case input a summary paragraph on the AOIC remarks screen to indicate if there is a deposit on the offer. If there is a deposit, indicate whether it should be refunded to the taxpayer or applied to the liability. If the deposit is going to be applied you must indicate what tax year the taxpayer has elected to apply it to.
Employees should be entering a summary paragraph on cases that are sent to Exam or a Specialty group so they know to address the deposit when they are working the case.
If the offer is being forwarded to Appeals the DATL Checklist will be in the case file, except for CDP offers. If the offer is a CDP offer a Checklist will have to be generated. Annotate in the comments box whether or not there is a deposit on the account and ensure the Checklist is stapled to the outside cover of the folder.
For cases transferred to Exam or a Specialty group you will generate the Exam/Specialty Checklist. This Checklist should have deposit information on the form. Ensure this Checklist is stapled to the outside of the case file before transferring.
Employees should use the automated Form 3210 and select the drop down option for deposit information.
If the tax examiner determines a manual refund is necessary due to an overpayment, prepare a manual refund, use Form 3753 or Form 5792. See IRM 220.127.116.11.1, Preparation of Form 5792, IDRS Generated Refund, and IRM 18.104.22.168.2, Preparation of the Form 3753, Manual Refund Posting Voucher. The Accounting function requires a signature from authorized individual to sign the manual refund request form. After the form has been signed, it should be forwarded 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 22.214.171.124.1, Monitoring Manual Refunds, for more information.
The above procedures are for funds being refunded from an IDRS account, these procedures are not necessary for refunds from the 4710 RACS Account.
The following are potential fraud warning signs most identifiable during an interview:
Failing to keep proper books and records in a business or profession.
No records, poorly kept records, or attempts to falsify or alter records.
Destroying books and records without plausible explanation or refusal to make certain records available.
Extent of taxpayer's control of sales and receipts and the apparent unwillingness to delegate this function to employees.
Engaging in illegal activities.
Personal living standard and asset acquisition is inconsistent with reported income.
Indications that valuable assets belonging to the taxpayer are being acquired and held in the name of others.
Self-serving statements with no documented proof.
Repeated procrastination on the part of the taxpayer in making and keeping appointments.
Hasty agreement to adjust and undue concern about immediate closing of the case may indicate a more thorough examination may be necessary.
The following are potential fraud warning signs most identifiable during verification of the financial statement:
Uncooperative attitude displayed by:
Not providing requested information
Refusal to make certain records available
Not furnishing adequate explanations for discrepancies or questionable items
Trying to conceal a pertinent fact or record.
Failing to deposit all receipts to the business account.
Use of nominees or false names.
Unusual depletion of assets shortly before filing an offer.
Inflated salaries, payment of bonuses or cash withdrawals by officers, directors, shareholders, or other insiders.
Transfers of property to insiders, shareholders, or relatives shortly before filing the offer.
Payoff of loans to directors, officers, shareholders, relatives, or other insiders shortly before filing of the offer.
Complicated corporate structures and relationships.
Undervaluing of assets.
Overstatement of liabilities.
The fraud indicators below can fall into any of the categories in paragraphs (1) and (2) above:
Making false, misleading, and inconsistent statements.
Using currency instead of bank accounts or making large expenditures in currency.
Concealment of bank accounts and other property.
If indications of fraud are identified, follow the procedures outlined in IRM 126.96.36.199 - Potential Fraud Referrals.
Refer to IRM 188.8.131.52, Criminal Investigations, relative to the appropriate actions if the taxpayer is involved in an open criminal investigation.
Taxpayers have the right to retain an authorized representative of their choice by submitting a properly executed Form 2848, Power of Attorney and Declaration of Representative, or to seek assistance from a Low Income Tax Clinic if they cannot afford representation. If POA information is located on CFINK, load the information on the AOIC POA Screen and follow procedures as defined below. Input the representative's information on AOIC and retain a copy of the form in the paper case file. Forward the original for recording on the Centralized Authorization File (CAF). If there are multiple POA’s listed, refer to IRM 184.108.40.206 (12), Initial Processing of offers in Centralized Offer in Compromise Sites.
Send all original correspondence to the taxpayer and provide a copy to the representative unless the taxpayer has indicated they do not want their representative to receive correspondence. The boxes in section 2 of Form 2848 indicate whether copies of notices and communications should be sent to the representative(s).
Individuals who are not entitled to practice before the IRS with respect to a collection matter (such as unenrolled return prepares) may accompany taxpayers to meetings with a completed Form 8821, Taxpayer Information Authorization, or other proper authorization, and receive and provide information that relates to the offer investigation. They are not authorized to represent the taxpayers or sign documents relating to offers in compromise.
If the Form 2848 does not include the matter(s) and year(s) that are included on the offer, send a redacted letter to the representative. The letter to the taxpayer may inform him/her that he/she can file a Form 8821 or new Form 2848 that includes all matter(s) and year(s) covered in the offer.
If during the investigation it is discovered that the POA no longer represents the taxpayer, secure a letter from the taxpayer revoking the POA and document the case history. Remove the POA information from AOIC.
Attorneys, Certified Public Accountants (CPA), enrolled agents, or enrolled actuaries are generally the only practitioners authorized to represent taxpayers before the IRS on collection matters.
An unenrolled return preparer is an individual, other than an attorney, CPA, enrolled agent, or enrolled actuary, who prepares and signs a taxpayer’s return as a preparer, or who prepared a return but is not required to sign the return. An unenrolled return preparer cannot represent a taxpayer before the IRS on any collection matter. An unenrolled return preparer, however, may represent a taxpayer before the IRS in certain other limited situations. Students working in LITCs and STCP who have submitted a Form 2848 and authorization letter from the Office of Professional Responsibility are also authorized to represent taxpayers before the IRS on collection matters.
During the course of the investigation, a taxpayer may submit a Form 2848 designating a third-party as their representative or power of attorney, or the taxpayer may submit a Form 8821 designating an appointee or may complete the third party designee section on the Form 656-L, Doubt as to Liability Offer in Compromise. When properly completed and filed by the taxpayer, each of these documents should be recognized during an investigation, and interaction with the third party should be governed by the parameters allowed within each of these authorization forms.
Form 2848 authorizes an eligible individual (e.g. attorney, CPA, enrolled agent, or enrolled actuary) to represent as well as receive confidential information.
Form 8821 authorizes an appointee to inspect and/or receive the taxpayer’s confidential tax information.
The taxpayer may use Form 656-L to authorize a third party designee to discuss the offer with the IRS.
If Form 8821 is missing critical information that can only be provided by the taxpayer (e.g., tax years, type of tax, missing taxpayer signature, date) it will be returned to the taxpayer.
Information that may be disclosed to the designee is limited to the type of tax, tax form number, tax years or periods, or specific tax matter that is listed on the Form 8821, item 3.
If Form 8821, item 5a is checked, the designee is also entitled to receive copies of tax information, notices, and other written communication on an ongoing basis for the type of tax, tax form number, tax years, or specific tax matter listed under item 3.
The designee is not authorized to act as the taxpayer’s representative. For example, the designee may not advocate the taxpayer’s position when responding to IRS correspondence.
Where a recognized representative has unreasonably delayed or hindered an examination, collection, or investigation by failing to furnish, after repeated request, non-privileged information necessary to the examination, collection or investigation, the Internal Revenue Service employee conducting the examination, collection, or investigation may be given permission to bypass the representative and contact the taxpayer directly for such information. 26 C.F.R. § 601.506(b) (Statement of Procedural Rules). Prior to contacting the taxpayer directly, the IRS employee must first complete bypass procedures. See IRM 220.127.116.11, By-Passing a Taxpayer's Representative, for procedures to bypass a POA.
For additional information on Third Party Contact, refer to IRM 25.27.1, Third Party Contacts - Third Party Contact Program. This IRM is intended to serve as a general reference for the Third - Party Contact (TPC) program
and IRM 18.104.22.168, Third Party Authorizations.
This section does not apply to the return of offers deemed not processable or apply to processable offers returned for any of the following reason codes, unless the return was determined to have been in error.
P — filed bankruptcy after offer submission
R, V, W — "solely to delay" submissions
S — collection is in jeopardy
X — "other investigations are pending that may effect …"
Y — original assessment fully abated
Situations may arise when the reconsideration of a returned offer would best serve the interests of both the Service and the taxpayer. Upon receipt of a return letter, taxpayers may telephone to object to the return of an offer. Below are the criteria for possible reconsideration.
Generally, the taxpayer or the representative must contact the Service to raise objections and provide an explanation for failure to provide the requested items. The objection must be raised within 30 calendar days from the date of the return letter (unless the condition that caused the failure to supply the substantiation continued for a prolonged period).
Acceptable criteria for potential situations where return reconsideration may be applicable based on IRS error are listed below. These are not all inclusive.
The offer was closed as a returned offer in error by the DATL unit.
The information was sent timely, but it was not associated with the case.
The taxpayer was affected by a federally declared disaster as defined in IRC 7508A.
The taxpayer is in a combat zone as defined in IRC 7508.
Acceptable criteria for potential situations where returned offer reconsideration may be applicable based on specific taxpayer issues are listed below. These are not all inclusive.
Serious illness or injury prevented the taxpayer from submitting the information timely.
Serious illness or injury may not apply to the taxpayer's representative, if the taxpayer controlling the information receives a copy of the combo or additional information letter and is aware he or she should respond directly. Inquire with the representative and/or use POA bypass procedures if necessary. See IRM 5.1.23, Taxpayer Representation, for bypass procedures.
There was a death in the taxpayer's immediate family that prevented timely mailing of the information.
Before reconsidering the returned offer, the taxpayer or authorized representative must have requested return reconsideration within 30 calendar days from the date of the return letter.
The following would not be acceptable reasons for return reconsideration:
Lack of availability of either the taxpayer or representative, absent circumstances identified in IRM 22.214.171.124.1, Criteria for Return Reconsideration, above.
Representatives’ filing season activity, unless the representative made reasonable requests for an extension prior to return of the OIC.
Approval to reconsider a returned, processable offer(s) will be obtained from the DATL Department Manager. This authority may not be re-delegated.
The manager will indicate approval or denial of the request by making a history entry on AOIC. If approved the entry should specify the reason for approval and if the reconsideration is due to IRS error.
If the employee receiving a telephone request from a taxpayer or authorized representative for reconsideration determines the request does not have merit, based upon the acceptable criteria outlined in IRM 126.96.36.199.1, Criteria for Return Reconsideration above, the employee will advise the taxpayer or their authorized representative of the decision and the taxpayer's right to discuss the issue with the employee's manager. Annotate the closed offer record history on AOIC.
If the employee receiving a telephone request for reconsideration determines that the request does have merit based upon the acceptable criteria outlined in IRM 188.8.131.52.1, Criteria for Return Reconsideration above, the employee will:
Contact the taxpayer or their representative and request additional information to support the reconsideration request, if applicable.
The information must be received within 10 calendar days of the contact. Fax is the preferred method of receipt.
Annotate the closed AOIC offer history.
If the taxpayer or their representative fails to provide the requested information, annotate the closed AOIC remarks that there will be no reconsideration.
If the taxpayer or their representative provides the requested information, the recommending employee will:
Annotate the returned offer AOIC remarks and request the reconsideration by making a history entry on the returned offer record on AOIC, describing the taxpayer's claim or supporting verification and why the reconsideration request is justified.
Submit the returned offer case file, along with any verification submitted by the taxpayer to support the reconsideration request, through the appropriate management channels to the approving official.
Retain the original Form 656-L in the case file and take the following actions on the original Form 656-L retained in the case file:
Sign and insert the employee’s title in the “IRS Use Only” box on page 8 of Form 656-L for the authorized Service official. This information is to be inserted alongside the entries on the original offer.
Enter on the date line of AOIC Pending Dt used for the new offer record.
For additional information regarding closed file and records retention see IRM 184.108.40.206, Closed File Retention.
If the approving official denies the reconsideration request, the employee assigned the case should clearly communicate by telephone to the taxpayer or their representative that the request for reconsideration was denied and that the matter is closed. Document the AOIC remarks with the information.
If the approving official agrees that a returned offer should be reconsidered, the employee assigned the case will telephone the taxpayer or their representative and advise that the offer is being reconsidered. They should also be advised that they must be able to provide the missing or required information, substantiation, Form 656-L within 10 calendar days of the telephonic communication of the reconsideration approval.
The offer information will not be reloaded to AOIC or worked until receipt of any required information or substantiation and IRM 656-L. If the taxpayer fails to submit the promised items within the agreed time frame, document the AOIC remarks of the returned offer and take no further action.
For purposes of an approved return reconsideration, take the following actions:
If the offer is being reloaded due to IRS error then create a new AOIC offer record by reloading the same AOIC data as the returned offer.
If the offer is not being reopened based on IRS error then create a new AOIC offer record by reloading the same AOIC data as the returned offer, except for IRS Rcvd Dt,AO Rcvd Dt and Pend Dt fields which will contain the date any missing information, substantiation, and Forms 656-L was received.
Associate the documents from the returned offer with the new, reloaded offer folder.
Enter an AOIC remarks notation in the returned offer record to indicate the documents were re-filed with the reloaded offer.
Place a hard copy of the AOIC remarks in the returned offer folder.
Closed offer cases (other than acceptances) will be retained within the centralized DATL processing units for a period of 2 years. Write or stamp "Closed" with the closed date on the case file. This file can be sent to the Federal Record Center(FRC). Document AOIC history and case history sheet with the FRC location, box number, ascension number, and date. Refer to Document 12990, Records Control Schedule, and IRM 1.15.4, Retiring and Requesting Records. In addition this information should be input into AOIC under FRC tracking.
For additional information, record retention requirements and input requirements, See IRM 220.127.116.11, Closed File Retention.
In order to summarize activity occurring each week, the centralized DATL units will prepare reports for DATL offers to include:
Offers returned because they could not be processed;
Offers returned after processing;
Offers rejected, not appealed;
Appealed offer rejections;
Offers transferred to the Area Office Examination function;
Offers transferred to the Appeals function (other than those included under "h" above;
Dollar amounts of adjustments, abatements, etc.
The report will cover the weekly period ending on Thursday.
There are multiple AOIC inventory Management reports available on AOIC that should be used to track and monitor inventory, management responsibilities and reviews which should be adhered to. See IRM 1.4.54, Offer in Compromise Managers-Centralized Offer in Compromise Program Guide, for additional information.
At a minimum, the AOIC Transaction Listing (Parts 2 and 3) must be resolved on a weekly basis to ensure all reversing transactions are correctly posted. Additionally, any open IDRS control bases assigned to XXXXXXXXXX (first 2 digits represent the area), must be closed, once the systemic posting error has been resolved. There could be a delay from the time the error is on the AOIC transaction listing to when the control base is opened on IDRS.
Management must keep a binder of all reports pulled throughout the fiscal year with annotations on actions taken to resolve errors that appear on the report. If there are no errors for a certain day those pages must also be placed in the binder for a complete audit trail.
Any unusual errors or and increase of a particular error should be elevated to the SOLA and Policy staffs.
Documentation must include, but is not limited to:
The basis of the processability determination.
The tax type and periods covered on the 656-L.
Requests for information/documentation.
Conversations with taxpayers or representatives and the fact disclosure was verified.
Results of internal information analysis.
Special issues or circumstances.
All documentation must be entered on AOIC.
As is the case with all offer determinations, employees must exercise good judgment. This good judgment needs to be clearly evident and articulated in the case file documentation and should be supported by the known case facts, circumstances, and supporting documents.
Prior to final processing, AOIC must be updated to indicate the correct basis for closing the offer and the dollar amount of the offer considered or adjusted. This will ensure that all final closing reports generated from AOIC reflect the correct basis and dollar amount. The approval levels indicated on closing reports and letters must be consistent with the basis for closure.
Documentation must be recorded the day the action occurs or as soon as practical thereafter.
IAT provides tools that simplify research, reduce keystrokes, eliminate repetitive typing, and increase the accuracy of regular work processes.
The use of IAT is mandatory and limited to the certain IAT Tools listed below. For User Guides, see the IAT web site at http://iat.web.irs.gov/JobAids/iat.asp
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. The employee must report the issue to the manager to determine if the issue should be reported to the IAT team. See the IAT Website, for how to report/fix problems with IAT tools.
Additional IAT tools will be added to the following list when one is deemed beneficial and seen as adding quality to Campus Specialty Offer work processes.
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.
The use of IAT tools are mandatory, if applicable, during the work process. Below is a list of IAT tools used in the DATL unit.
EMT- Case Monitor
Disclosure (Phone Calls Only)
CSI- Code Search Look up