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5.19.24  Doubt as to Liability Offer in Compromise (Cont. 1)

5.19.24.13  (07-14-2016)
Death of a Taxpayer

  1. 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.

  2. Offers closed as terminations do not require preparation of the Form 1271, Rejection Memorandum.

  3. The following actions should be taken to close an offer as a termination;

    1. Prepare an AOIC termination letter inserting the termination paragraph.

    2. Submit termination letter and offer file to the authorized approving official see Del. Order No. 5-1 (Rev. 4) in IRM 1.2.44.2.5, Termination Authority for Review and Concurrence. The approving official will indicate concurrence by signing the termination letter.

    3. Date and copy the termination letter for closed file retention. For additional information regarding closed file and records retention see IRM 5.19.24.22, Closed File Retention.

    4. Mail the termination letter to the taxpayer's address of record and a copy to the taxpayer's representative if one is on file.

    5. Input of TC 540 if the exact date of death is confirmed.

    6. Document the history indicating the date of death and how notification was received.

    7. Document AOIC history.

    8. 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.

    9. 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.

      Note:

      If the date of death is prior to the TC 480, when closing the offer on AOIC, use the pending date of the TC 480.

  4. 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 5.8.10.4(2),Death of a Taxpayer and IRM 5.17.13.9, Decedents' Estates, for more information about decedent taxpayers and probate proceedings

5.19.24.14  (07-14-2016)
Withdrawn DATL Offers

  1. 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.

  2. The taxpayer may also decide to withdraw the offer for other reasons unrelated to the examiner's determination.

  3. A voluntary withdrawal request may be made orally, by fax, or in writing.

  4. 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.

  5. See IRM 4.18.2.7 (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.

  6. If the taxpayer withdraws the offer:

    1. There is no requirement to prepare Form 1271, Rejection or Withdrawal Memorandum.

    2. 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
    3. Review the AOIC record to ensure the information is accurate.

    4. 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.

    5. Generate the POA letter for any authorized representative, if applicable.

    6. Submit the withdrawal acknowledgement letter and offer file to the authorized approving office see Del. Order No. 5-1 (Rev. 4) at IRM 1.2.44.2.3, Withdrawal Authority for review and concurrence. Approving official will indicate concurrence by signing the letter.

    7. Date and photocopy the letter for closed file retention. For additional information regarding closed file and records retention see IRM 5.19.24.22, Closed File Retention.

    8. Mail the withdrawal acknowledgement letter to the taxpayer.

    9. 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.

    10. Add a history narrative to AOIC remarks with the necessary information that the offer was withdrawn.

    11. 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.

    12. 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.

5.19.24.15  (07-14-2016)
DATL Offer Rejections

  1. 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.

    Note:

    Include Form 13711, Request for Appeal of Offer in Compromise with the Rejection letter.

  2. Generally, rejections on offers based on DATL are because the tax is believed to be correct as assessed.

  3. If the taxpayer does not agree with the examiner's conclusion and does not withdraw the offer take the following actions:

    1. Update the proposed disposition on AOIC;

    2. Prepare Form 1271, entering the reason(s) for the action;

    3. Prepare an AOIC rejection letter citing the reason(s) for the action;

    4. Submit the Form 1271 and offer file to the authorized approving official see Del. Order No. 5-1(REV. 4) at IRM 1.2.44.2.2, Rejection Authority for Review and Concurrence. The approving official will indicate concurrence by signing the Form 1271.

    5. Forward the Form 1271 to the Independent Administrative Reviewer (IAR);

    6. Input a follow up on AOIC for one week to ensure cases are received back from the IAR timely;

    7. Document AOIC remarks;

    8. If the IAR sustains the rejection recommendation they indicate approval by signing Form 1271 as reviewer. See IRM 5.19.24.15.3, Rejections Sustained by the Independent Administrative Reviewer;
      1. Obtain appropriate managerial signature on the rejection letter;
      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 30 day hold file.

    9. If the IAR does not sustain the rejection recommendation, follow guidance outlined in IRM 5.19.24.15.3.1, Rejections Not Sustained by the Independent Administrative Reviewer.

5.19.24.15.1  (07-14-2016)
Rejection Not Appealed

  1. 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.

    Note:

    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.

  2. 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.

  3. 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:

    1. Close the offer record as a rejection with no appeal on AOIC.

    2. 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.

    3. Add a history narrative to AOIC remarks with the necessary information that the offer was rejected.

    4. 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.

    5. 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.

    6. Route the offer file to the closed files. For additional information regarding closed file and records retention see IRM 5.19.24.22, Closed File Retention.

5.19.24.15.2  (07-14-2016)
Taxpayer Response to DATL Rejection Letter

  1. 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:

    1. If the new information results in the complete resolution of the assessment(s) in question, follow procedures in IRM 5.19.24.6, Processing DATL Offers.

    2. 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 5.19.24.6, Processing DATL Offers, to adjust the account. Then follow procedures (3) below to forward the case to Appeals for further consideration.

    3. If the taxpayer responds by sending in a signed withdrawal, agreeing in full with the tax examiners decision, follow procedures in IRM 5.19.24.13, Withdrawn DATL Offers, to close the offer.

    4. 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.

  2. 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.

    Note:

    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.

    Note:

    Special rules apply in determining the postmark date for documents sent by private delivery service. See IRM 3.10.72.6.2.3, What is a Designated Private Delivery Service (PDS), or IRM 3.10.72.6.2.4, Determining Postmark Date

    .

  3. 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.

  4. Assign on AOIC to the appropriate Appeals area.

  5. 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.

  6. If the request for appeal is unsigned, the request will not be considered timely and the taxpayer should be notified appropriately.

    Note:

    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.

  7. 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.

  8. 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.

  9. 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.

  10. If an appeal is received that includes additional or new information to consider but it does not change the rejection determination:

    1. 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.

    2. Refer to Rev. Proc. 2012-18, IRM 5.1.9.5, 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.

    3. Assign the case to Appeals on AOIC.

    4. Mail the case to the appropriate Appeals Area office.

  11. 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.

    Note:

    A new rejection letter will not be sent.

5.19.24.15.3  (07-14-2016)
Appeals Consideration of Rejected DATL Offers

  1. After consideration of a rejected offer, Appeals will make the final determination, adjust accounts, if applicable and close the case on AOIC.

  2. Appeals will send DATL offers it accepts to the MOIC function for final processing.

  3. Appeals will not send any offers under their jurisdiction back to the DATL Unit.

5.19.24.16  (07-14-2016)
Independent Administrative Review Overview

  1. 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.

  2. The Independent Administrative Reviewer (IAR) is responsible for conducting this review.

5.19.24.16.1  (07-14-2016)
Role of the Independent Administrative Reviewer

  1. 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.

5.19.24.16.2  (07-14-2016)
The IAR Review

  1. The Tax Examiner's analysis of the taxpayer's offer should be reviewed to determine if the basis for the rejection determination was appropriate.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. The review must be conducted prior to the final determination of rejection being communicated to the taxpayer.

5.19.24.16.2.1  (07-14-2016)
IAR Case File

  1. The following items should be present in the file and used as an aid for the IAR to ensure the decision was appropriate.

    1. Form 656-L, Offer in Compromise

    2. Form 1271, Rejection or Withdrawal Memorandum

    3. Preliminary Rejection letter

    4. Rejection summary

    5. Case history

    6. Any pertinent supporting documents

  2. 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.

5.19.24.16.3  (07-14-2016)
Rejections Sustained by the Independent Administrative Reviewer

  1. If the proposed rejection of the offer is sustained by the IAR, the reviewer will:

    1. Update the IAR "Check Sheet" on AOIC indicating the appropriate disposition.

    2. Sign the Form 1271 as the reviewer, indicating concurrence with the proposed disposition.

    3. Return the case file to the originator using a Form 3210, Document Transmittal.

    4. Assign the offer back to the DATL manager.

5.19.24.16.3.1  (07-14-2016)
Rejections Not Sustained by the Independent Administrative Reviewer

  1. If the proposed rejection is not sustained by the IAR, the reviewer will:

    1. Update the IAR "Check Sheet" on AOIC indicating the appropriate IAR disposition.

    2. Document AOIC check sheet providing an explanation of why the determination was not sustained and indicating additional actions necessary by the investigating employee.

    3. 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.

5.19.24.17  (07-14-2016)
DATL Acceptances

  1. 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.

  2. 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.

  3. 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.

  4. 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 5.8.8.12.1, Counsel Review and Concurrence (Legal issue).

  5. Refer to IRM 5.8.8, Acceptance Processing, and Del. Order No. 5-1 (Rev. 4) in IRM 1.2.44.2.1, 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.

  6. 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)

      Note:

      If the transcript is generated from other than the AOIC system, such as through the Transcript Delivery System (TDS), additional redactions may be required. If the zip code + 4 is present it will be necessary to redact the + 4 digit code.

    • Number of exemptions

    • Filing status

    • Adjusted gross income

    • Taxable 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.

  7. 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.

    Note:

    For additional information see IRM 5.8.8.6, Required Actions Prior to Closing an OIC as an Acceptance, IRM 5.8.8.7, Closing Actions on Accepted Offers, IRM 5.8.8.8.8, Public Inspection File.

  8. 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.

5.19.24.17.1  (07-14-2016)
Mandatory Acceptance

  1. 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.

  2. If a mandatory acceptance is warranted, refer to IRM 5.8.8.11,24 month Mandatory Acceptances under § 7122 (f).

5.19.24.18  (07-14-2016)
Disposition of DATL Good Faith Deposits

  1. On occasion, taxpayers submit deposits when they submit DATL offers. 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.

  2. 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, the funds received will be returned as non-negotiable with the offer. If DATL cannot make a processability determination within 24 hours, the funds received will be loaded as a deposit.

  3. 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.

  4. 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.

  5. If the taxpayer does not authorize application of the deposit, it will be refunded.

5.19.24.19  (07-14-2016)
Manual Refunds

  1. 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 21.4.4.4.1, Preparation of Form 5792, IDRS Generated Refund, and IRM 21.4.4.4.2, Preparation of the Form 3753, Manual Refund Posting Voucher. The Accounting function requires a signature from 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 21.4.4.5.1, Monitoring Manual Refunds, for more information.

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

5.19.24.20  (07-14-2016)
Indicators of Taxpayer Fraud

  1. The following are potential fraud warning signs most identifiable during an interview:

    1. Failing to keep proper books and records in a business or profession.

    2. No records, poorly kept records, or attempts to falsify or alter records.

    3. Destroying books and records without plausible explanation or refusal to make certain records available.

    4. Extent of taxpayer's control of sales and receipts and the apparent unwillingness to delegate this function to employees.

    5. Engaging in illegal activities.

    6. Personal living standard and asset acquisition is inconsistent with reported income.

    7. Indications that valuable assets belonging to the taxpayer are being acquired and held in the name of others.

    8. Self-serving statements with no documented proof.

    9. Repeated procrastination on the part of the taxpayer in making and keeping appointments.

    10. Hasty agreement to adjust and undue concern about immediate closing of the case may indicate a more thorough examination may be necessary.

  2. The following are potential fraud warning signs most identifiable during verification of the financial statement:

    1. Uncooperative attitude displayed by:

      • Not providing requested information

      • Refusal to make certain records available

      • Not furnishing adequate explanations for discrepancies or questionable items

    2. Trying to conceal a pertinent fact or record.

    3. Failing to deposit all receipts to the business account.

    4. Use of nominees or false names.

    5. Unusual depletion of assets shortly before filing an offer.

    6. Inflated salaries, payment of bonuses or cash withdrawals by officers, directors, shareholders, or other insiders.

    7. Transfers of property to insiders, shareholders, or relatives shortly before filing the offer.

    8. Payoff of loans to directors, officers, shareholders, relatives, or other insiders shortly before filing of the offer.

    9. Complicated corporate structures and relationships.

    10. Undervaluing of assets.

    11. Overstatement of liabilities.

  3. The fraud indicators below can fall into any of the categories in paragraphs (1) and (2) above:

    1. Making false, misleading, and inconsistent statements.

    2. Using currency instead of bank accounts or making large expenditures in currency.

    3. Concealment of bank accounts and other property.

  4. If indications of fraud are identified, follow the procedures outlined in IRM 5.8.4.18 - Potential Fraud Referrals.

  5. Refer to IRM 5.8.4.19, Criminal Investigations, relative to the appropriate actions if the taxpayer is involved in an open criminal investigation.

5.19.24.21  (07-14-2016)
Third Party Authorizations

  1. 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).

  2. 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).

  3. 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.

  4. 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.

  5. 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.

  6. 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.

    Note:

    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.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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 5.1.23.5, By-Passing a Taxpayer's Representative, for procedures to bypass a POA.

    Note:

    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.

5.19.24.22  (07-14-2016)
Return Reconsideration

  1. 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

  2. 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.

5.19.24.22.1  (07-14-2016)
Criteria for Return Reconsideration

  1. 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).

  2. Acceptable criteria for potential situations where return reconsideration may be applicable based on IRS error are listed below. These are not all inclusive.

    1. The offer was closed as a returned offer in error by the DATL unit.

    2. The information was sent timely, but it was not associated with the case.

      Note:

      Special rules apply in determining the postmark date for documents sent by private delivery services. See IRM 3.10.72.2.4.3, Private Delivery Services (PDS), and IRM 3.10.72.6.2.4, Determining Postmark Date.

    3. The taxpayer was affected by a federally declared disaster as defined in IRC 7508A.

    4. The taxpayer is in a combat zone as defined in IRC 7508.

  3. 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.

    1. Serious illness or injury prevented the taxpayer from submitting the information timely.

      Note:

      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.

    2. There was a death in the taxpayer's immediate family that prevented timely mailing of the information.

5.19.24.22.2  (07-14-2016)
Conditions for Return Reconsiderations

  1. 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.

  2. The following would not be acceptable reasons for return reconsideration:

    1. Lack of availability of either the taxpayer or representative, absent circumstances identified in IRM 5.19.24.21.1, Criteria for Return Reconsideration, above.

    2. Representatives’ filing season activity, unless the representative made reasonable requests for an extension prior to return of the OIC.

5.19.24.22.3  (07-14-2016)
Approval Authority for Return Reconsideration

  1. Approval to reconsider a returned, processable offer(s) will be obtained from the DATL Department Manager. This authority may not be re-delegated.

  2. 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.

5.19.24.22.4  (07-14-2016)
Reconsideration Procedures

  1. 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 5.19.24.21.1, 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.

  2. If the employee receiving a telephone request for reconsideration determines that the request does have merit based upon the acceptable criteria outlined in IRM 5.19.24.21.1, 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.

  3. If the taxpayer or their representative fails to provide the requested information, annotate the closed AOIC remarks that there will be no reconsideration.

  4. 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.

  5. 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.

      Note:

      If the reconsideration is due to IRS error, the pending date of the reopened or newly uploaded offer is the same as the pending date of the original offer.

    • For additional information regarding closed file and records retention see IRM 5.19.24.22, Closed File Retention.

5.19.24.22.4.1  (07-14-2016)
Denial of the Reconsideration

  1. 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.

5.19.24.22.4.2  (07-14-2016)
Approval of the Reconsideration

  1. 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.

  2. 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.

5.19.24.22.4.3  (07-14-2016)
Reloading the Reconsideration Offer

  1. 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.

      Note:

      AOIC will allow an offer to be reopened, if it is within a certain time frame (This is normally 30 calendar days). If the offer is being reopened based on "IRS error " , then the returned offer record may be reopened on AOIC and would not require the creation of a new offer record.

    • 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.

5.19.24.23  (07-14-2016)
Closed File Retention

  1. 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.

  2. For additional information, record retention requirements and input requirements, See IRM 5.8.7.12, Closed File Retention.

5.19.24.24  (07-14-2016)
DATL Reports

  1. In order to summarize activity occurring each week, the centralized DATL units will prepare reports for DATL offers to include:

    1. Opening inventory;

    2. Offer receipts;

    3. Offers returned because they could be processed;

    4. Offers returned after processing;

    5. Offers withdrawn;

    6. Offers accepted;

    7. Offers rejected, not appealed;

    8. Appealed offer rejections;

    9. Offers transferred to the Area Office Examination function;

    10. Offers transferred to the Appeals function (other than those included under "h" above;

    11. Ending inventory;

    12. Dollar amounts of adjustments, abatements, etc.

  2. The report will cover the weekly period ending on Thursday.

5.19.24.24.1  (07-14-2016)
AOIC Inventory Management Reports

  1. There are multiple AOIC inventory Management reports available on AOIC that should be used to track and monitor inventory. See IRM 1.4.54.5, Case Responsibilities and Requirements, for additional information.

5.19.24.25  (07-14-2016)
AOIC Transaction Listing

  1. 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.


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