8.22.7 Alternatives to Collection Action

Manual Transmittal

August 09, 2017

Purpose

(1) This transmits revised IRM 8.22.7, Collection Due Process, Alternatives to Collection Action.

Material Changes

(1) The following is a description of the material changes in this revision:

IRM Description of Changes
8.22.7.2, Requesting a Credit Report Obsolete subsection; removed and replaced with 8.22.7.2, Collection Information Statement (CIS)
8.22.7.2, Collection Information Statement (CIS) Formerly IRM 8.22.7.1.1
8.22.7.3, Third-Party Contacts Obsolete subsection, removed and replaced with 8.22.7.3, Agreed Resolutions
8.22.7.3, Agreed Resolutions New introduction to existing and reorganized content
8.22.7.3.1, Form 12257 Summary Notice of Determination Formerly IRM 8.22.7.1.2
8.22.7.3.2, Agreed Resolution and Open TDI Formerly 8.22.7.10.12
8.22.7.4, Appeals Referral Investigation (ARI)
  • Added a 3rd bullet for when the taxpayer provides complex, new information requiring Collection’s assistance in verifying such information

  • Removed instructions regarding ACDS from this section

  • Removed instructions for actions in response to an ARI

8.22.7.4.1, ARI to Field Collection to Verify CIS
  • Put ARI process into a Step Table

  • Added new ARI suspense codes SU/RI to suspend a case with an ARI and SU/RT to take the case out of suspense when the ARI is returned

  • Removed reference to Form 10467, Appeals Division Feedback Report and Transmittal Memorandum, as this form is not being used

  • ARI is now routed through the Revenue Officer’s manager for better control

  • Added instructions for actions to take in response to ARI

8.22.7.4.2, ARI to Field Collection or COIC to Review New Information in an OIC Added reference to Letter 5208, Notification of Appeals Referral Investigation, for providing notification of an ARI to the taxpayer.
8.22.7.4.3, ARI to ACS to Verify CIS
  • Put ARI process into a Step Table

  • Added new ARI suspense codes SU/RI to suspend a case with an ARI and SU/RT to take the case out of suspense when the ARI is returned.

  • Removed reference to Form 10467, Appeals Division Feedback Report and Transmittal Memorandum ,as this form is not being used.

  • Removed ACS Campus EEfax numbers and replaced them with a description of where they're located and a hyperlink out to a document with the EEfax numbers.

  • Added the 45 day deadline for ARI completion

8.22.7.5, Installment Agreements (IA)
  • Added instructions regarding when a taxpayer requests that their joint account be mirrored

  • Removed the sentence "If a judicial review is filed, the TC 972 AC 043 is not input until the review is final." Per Chief Counsel, this is unnecessary and incorrect.

  • Added a reminder to include all balance due periods in an IA, including the MFT 35 individual Shared Responsibility Payment liabilities

8.22.7.8.1, Interim Adjustments
  • Added new form, APS Request Form for Collection Cases, to the process

  • Removed e-mail addresses for APS.

8.22.7.9.3, Discharges and Subordinations Added instruction to remind Advisory to share the results of the ARI with the taxpayer and Appeals and suggested use of Letter 5208 for notifying the taxpayer that an ARI was referred to Collection
8.22.7.10, Offers in Compromise (OIC) Added reference to IRM 5.8.3.5 for instruction on the number of Forms 656 to secure
8.22.7.10.1.2, Associating Separated CDP and OIC cases
  • Removed reference to feature code "CO." Since Collection now investigates all CDP OICs, the feature code is no longer used

  • Corrected the reference for finding the COIC Coordinators-now found on Appeals CDP webpage

8.22.7.10.2, Requesting an OIC WUNO
  • Added references to new forms to use for instructing APS

  • Removed reference to feature code "CO."

8.22.7.10.4.5, Collection Recommends Rejection Added note: Collection does not provide a Form 1271, Rejection or Withdrawal Memorandum, to Appeals with their recommendation.
8.22.7.10.5, Mandatory Withdrawals, Returns and Terminated Offers Rewritten, reorganized and expanded subsection covering procedures for mandatory withdrawals, returns and terminations
8.22.7.10.5.1, Mandatory Withdrawal for Missed Periodic Payment Formerly 8.22.7.10.5
8.22.7.10.5.2, Return for Dishonored Payments Formerly 8.22.7.5.6
8.22.7.10.5.3, Return for Filing Noncompliance New subsection for OICs where a taxpayer fails to remain in filing compliance
8.22.7.10.5.4, Return for Inadequate Estimated or Insufficient Withholding Tax Payments New subsection for OICs where a taxpayer fails to remain in payment compliance
8.22.7.10.5.5, Return for Failure to Make Timely Federal Tax Deposit (FTD) New subsection for OICs where a taxpayer fails to remain in payment compliance
8.22.7.10.5.6, Return for Failure to Provide Information New subsection for OICs where a taxpayer fails to provide necessary information
8.22.7.10.5.7, Return for Open Criminal Investigation New subsection for OICs where a taxpayer has an open criminal investigation
8.22.7.10.5.8, Return for Bankruptcy
  • Formerly 8.22.7.10.7

  • Replaced Letter 3821 with new Letter 5010, Collection Due Process Offer in Compromise Bankruptcy Return. Letter 3821 is no longer used.

8.22.7.10.5.9, Return for Solely to Delay New subsection for OICs when a taxpayer has an open criminal investigation
8.22.7.10.5.10, Termination due to Death of Taxpayer Formerly 8.22.7.10.8
8.22.7.10.6, Taxpayer Withdrawals
  • Formerly 8.22.7.10.9

  • Title changed from Withdrawals to clarify that this section is for taxpayer withdrawals

8.22.7.10.6.1, Withdrawal of the CDP Formerly 8.22.7.10.9.1
8.22.7.10.6.2, Withdrawal of the OIC Formerly 8.22.7.10.9.2
8.22.7.10.2, Requesting an OIC WUNO At (1), added to also include a copy of page 3 of the Form 656 when requesting a new WUNO, or indicate the OIC amount on the chosen transmit form.
8.22.7.10.7, Doubt as to Liability (DATL) OIC
  • Formerly 8.22.7.10.10

  • Added reference to Collection's IRM 5.8.4.22.3 DATL process

  • Reorganized and added a table for clarity

8.22.7.10.8, Defaulted OICs
  • Formerly 8.22.7.10.11, Terminated OICs

  • Updated reference to IRM 8.23.3.13, Potential Default Offers.

  • Added reference to IRM 5.19.7.3.20.4 (2) defaulted OICs reopened based upon a taxpayer’s exceptional circumstance

8.22.7.10.9, OICs with Department of Justice (DOJ) Controlled Tax Periods New subsection describing the process of working CDP OICs with DOJ controlled tax periods
Throughout Revised to:
  • Update citations and references.

  • Incorporate plain language writing, active voice and organization.

Effect on Other Documents

IRM 8.22.7 dated September 23, 2014, is superseded.

Audience

Appeals hearing officers, Appeals Account Resolution Specialists and Appeals Team Managers

Effective Date

(08-09-2017)

Anita M. Hill,
Director, Case and Operations Support

Overview

  1. This section provides guidance to hearing officers considering alternatives to collection action in CDP, EH and retained jurisdiction cases.

  2. All open tax periods must be included when resolving a case through:

    • Installment Agreement (IA)

    • Offer in Compromise (OIC)

    • Currently not Collectible (CNC)

  3. If a CDP liability is full paid, Appeals does not have jurisdiction to consider a collection alternative or CNC for non-CDP period(s) alone.

Collection Information Statement (CIS)

  1. A current CIS is required if a taxpayer requests an alternative to collection action and does not qualify for a:

    • Guaranteed, Streamlined, In-Business Trust Fund Express IAs

    • Currently not Collectible (CNC) hardship status in limited situations. See IRM 5.16.1.2.9, Hardship.

      Note:

      The exception in IRM 5.8.11.4.2(1) provides that a current CIS is not needed if the taxpayer has established fraudulent activity of a payroll service provider (PSP) and seeks penalty and interest abatement.

  2. A CIS is current if it is dated 12 months or less from the date received in Appeals. Do not request a new CIS from the taxpayer if it is less than 12 months old or if the information became outdated due to IRS delay. If you need to update financial information in this situation, “pen-and-ink” changes to the existing CIS are sufficient.

  3. Treat a current CIS that comes with a CDP as verified since Collection had an opportunity to review it.

  4. A taxpayer's financial information may be reported on:

    • Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.

    • Form 433-B, Collection Information Statement for Businesses

    • Form 433-F, Collection Information Statement

    • Form 433-A (OIC) and Form 433-B (OIC)

  5. Form 433-F is routinely used by ACS and campus. If Collection requested a Form 433-F and the taxpayer provided it, Appeals will rely on it.

    Exception:

    If the taxpayer proposes an OIC, the taxpayer must complete the CIS included in Form 656-B, the offer in compromise booklet.

  6. Ensure current Allowable Living Expenses are used prior to making a determination or decision that requires a CIS.

Agreed Resolutions

  1. The subsection below contains guidance on agreed resolutions in CDP.

Form 12257 Summary Notice of Determination

  1. Form 12257 serves as a summary Notice of Determination that waives the taxpayer's right to go to court and the suspension of levy action.

  2. When you reach an agreed resolution in a timely CDP, ask the taxpayer to sign Form 12257, Summary Notice of Determination, after advising that:

    1. The taxpayer is not obligated to sign and the agreed resolution will be input with or without the Form

    2. The right to petition Tax Court is waived

    3. The right to a 30 day suspension of levy action is waived

    4. Without it, Appeals delays the input of the agreed resolution by 60 or more days to see if the taxpayer petitions Tax Court

Agreed Resolution and Open TDI

  1. Resolve open Taxpayer Delinquent Investigation (TDI) filing requirements when resolving a case through:

    • IA

    • OIC acceptance

    • CNC, except cases closed with a hardship closing code described in IRM 8.22.7.7, Currently Not Collectible.

  2. Policy Statement 5-133 (P-5-133) allows closing of a TDI because the non-filing is not willful and:

    • There would be no tax due on the delinquent return

    • There would be minimal tax due on the return

    • The cost to the Service to secure a return would exceed anticipated revenue

      Note:

      Refer to IRM 5.1.11.6.1, Enforcement Determination, for further discussion on P-5-133.

  3. Document 6209, Section 11.8(3) lists TDI closing codes. See IRM 5.1.11.7, Delinquent Return Investigation Closures, for more information on closing TDIs. Note how the TDI module was resolved in the "Remarks" section of Form 5402.

Appeals Referral Investigation (ARI)

  1. An ARI may be necessary if:

    • The appropriateness of a collection alternative or CNC hardship can't be determined without additional information that Appeals can't secure from internal sources or the taxpayer

    • The taxpayer provides a new CIS to Appeals that requires verification and proposes an IA or CNC

    • The taxpayer provides complex, new information requiring the assistance of Collection to verify

  2. If you determine investigation is needed or verification is required, use an ARI to forward the information to Collection.

  3. If the taxpayer proposes a collection alternative but does not qualify for the alternative based on other facts (e.g. non-compliance), an ARI is not necessary.

  4. Field Collection is responsible for ARIs on field sourced CDPs. See IRM 8.22.7.4.1, ARI to Field Collection to Verify CIS, below.

  5. ACS is responsible for ARIs on ACS sourced CDPs. See IRM 8.22.7.4.3, ARI to ACS to Verify CIS, below.

ARI to Field Collection to Verify CIS

  1. When issuing an ARI to Field Collection, follow the step table below:

    Step Action
    1 In ACDS:
    • Input SU/RI to suspend the case. This automatically puts the case in E/ARI status showing the case is suspended.

    • Add Feature Code (RI) Referral Investigation. The RI feature code remains on the case after it is taken out of suspense.

    • Input SU/RT to take the case out of suspense once the ARI is returned

    2 Prepare Form 2209, Courtesy Investigation and state in the remarks section: "We are conducting a CDP/EH hearing and the taxpayer raised [collection alternative] which require [specify what is Collection to do]."

    The deadline for completing the ARI is:
    • 45 days after issuance if the action address is within the United States, Puerto Rico or the Virgin Islands

    • Six months after issuance if the action address is any other US possession or territory or located within a foreign country

    Note:

    Collection may request an extension of time to complete the ARI based on complexity, workload or other circumstances. An extension of time may be granted based on the facts of the case.

    3 Prepare a letter to the taxpayer notifying them a referral was made. You may use Letter 5208, Notification of Appeals Referral Investigation, to notify the taxpayer that information they provided to Appeals is being referred to Collection for evaluation.

    Example:

    "You requested Appeals consider [specify issue]. Appeals has asked Collection to review the information you provided while we retain jurisdiction of your case. It may be necessary for Collection to contact you and/or third parties for information to complete the review. You'll have an opportunity to respond once the results of the review are shared with you."

    4 Route the ARI to the Manager of the Revenue Officer who referred the CDP request to Appeals. Look at Form 14461, Transmittal of CDP/Equivalent Hearing Request, block 14 for the Manager and block 12 for his or her address. Send the ARI and a copy of:
    • The CIS

    • The taxpayer referral letter to assure Collection the taxpayer is aware contact may be necessary

  2. In response to your ARI, you may receive:

    • No response: Follow up within 30 days of the deadline for completing the ARI via secure email. Limit your inquiry to the status of the ARI to avoid prohibited ex parte communication. Print Collection's response for your case file. If there is no response to your ARI follow up, treat the CIS as verified and proceed with the information you have.

    • An incomplete response: Treat the CIS as verified and proceed with the information you have.

  3. See the table below for sharing the results of the ARI with the taxpayer:

    ARI results ... Actions required... Suggested language...
    Collection responds to ARI
    1. Share the ARI results with the taxpayer and ask for his or her review

    2. Allow the taxpayer 30 calendar days to respond before scheduling a follow-up conference or using the information in your determination

    "Enclosed are the results of Collection's review of [specify issue]. If you disagree, tell me what you disagree with and why you disagree by MM/DD/YY. I'll consider Collection’s review and your response before making a decision in your Collection Due Process hearing."
    Collection does not respond to ARI Tell the taxpayer that Collection did not respond to the request for review "Collection did not respond to Appeals' request for review of [specify issue]. I'll proceed with the information in your file in making a decision in your Collection Due Process hearing. "

ARI to Field Collection or COIC to Review New Information in an OIC

  1. If Collection returns a CDP OIC to Appeals with a recommendation to reject and the taxpayer subsequently submits new information to Appeals, see IRM 8.23.3.3.1.2, Review of Supplemental Information – Collection Issue Offers, to determine if an ARI is necessary.

  2. If an ARI is necessary, issue it to the Collection office that recommended rejection of the OIC. Instructions for preparing the ARI are found in IRM 8.23.3.3.2.6, Requesting Assistance from Collection.

  3. Prepare a letter to the taxpayer advising that a referral is being made to the OIC unit for verification. You may use Letter 5208, Notification of Appeals Referral Investigation, to notify the taxpayer that information they provided to Appeals is being referred to Collection for evaluation.

    Example:

    “You requested Appeals consider [specify issue]. Appeals asked Collection to review the information provided while we retain jurisdiction of your case. It may be necessary for Collection to contact you and/or third parties for information to complete the review. You'll have an opportunity to respond once the results of the review are shared with you.”

ARI to ACS to Verify CIS

  1. If the table in the ACS IRM 5.19.1.1.6 (8), Financial Analysis, Verification and Substantiation, shows ACS would verify a CIS based on the taxpayer's balance due and type of case resolution, you may request an ACS ARI. If the table indicates no verification is needed, Appeals will not request verification through an ACS ARI.

    Note:

    ACS CIS verification is limited to checking internal sources.

  2. When issuing an ARI, follow the step table below:

    Step Action
    1 ACDS actions:
    • Input SU/RI to suspend the case. This automatically puts the case in E/ARI status showing the case is suspended.

    • Add Feature Code (RI) Referral Investigation. The RI feature code remains on the case after it is taken out of suspense.

    • Input SU/RT to take the case out of suspense once the ARI is returned

    2 Prepare Form 2209, Courtesy Investigation, and state in the remarks section: "We are conducting a CDP/EH hearing and the taxpayer has raised [collection alternative] which require [specify what ACS is to do]."

    The deadline for completing the ARI is:
    • 45 days after issuance if the action address is within the United States, Puerto Rico or the Virgin Islands

    • Six months after issuance if the action address is any other US possession or territory or located within a foreign country

    Note:

    ACS may request an extension of time to complete the ARI based on the complexity of the ARI, workload or other circumstances. An extension of time may be granted.

    3 Prepare a letter to the taxpayer notifying them a referral was made. You may use Letter 5208, Notification of Appeals Referral Investigation, to notify the taxpayer that information they provided to Appeals is being referred to Collection for evaluation.

    Example:

    "You requested Appeals consider [specify issue]. Appeals has asked Collection to review the information you provided while we retain jurisdiction of your case. It may be necessary for Collection to contact you and/or third parties for information to complete the review. You'll have an opportunity to respond once the results of the review are shared with you."

    4 Prepare a fax cover sheet and fax Form 2209 and the CIS to the ACS Campus EEfax number of the originating ACS site. These are found on the Appeals CDP webpage under the Resources tab labeled ACS Campus EEFax numbers.
    5 ACS returns the ARI to the hearing officer by secure email.
  3. In response to your ARI, you may receive:

    • No response: Follow up within 30 days of the deadline for completing the ARI via secure email. Limit your inquiry to the status of the ARI to avoid prohibited ex parte communication. Print ACS’ response for your case file. If there is no response to your ARI follow up, treat the CIS as verified and proceed with the information you have.

    • An incomplete response: Treat the CIS as verified and proceed with the information you have.

  4. See the table below for sharing the results of the ACS ARI with the taxpayer:

    ARI results ... Actions required... Suggested language...
    ACS responds to ARI
    1. Share the ARI results with the taxpayer and ask for his or her review

    2. Allow the taxpayer 15 business days to respond before scheduling a follow-up conference or using the information in your determination

    "Enclosed are the results of Collection's review of [specify issue]. If you disagree, tell me what you disagree with and why you disagree by MM/DD/YY. I'll consider Collection’s review and your response before making a decision in your Collection Due Process hearing."
    ACS does not respond to ARI Tell the taxpayer that Collection did not respond to the request for review "Collection did not respond to Appeals' request for review of [specify issue]. I'll proceed with the information in your file in making a decision in your Collection Due Process hearing. "

Installment Agreements (IA)

  1. Appeals may secure IAs as a collection alternative in CDP. CDP IAs are not limited by the multifunctional restrictions that apply to other IAs secured by Appeals.

    Caution:

    An IA may not be granted if any of the taxpayer's liabilities have been referred to the Department of Justice (DOJ) until DOJ agrees the IA is appropriate. See IRM 8.22.6.9, Tax Cases Controlled by the Department of Justice.

  2. IAs must be a document signed by taxpayer and IRS, or a written confirmation of an agreement mailed or delivered to the taxpayer. Form 433-DInstallment Agreement or Form 2159Payroll Deduction Agreement is used to establish an IA. The taxpayer's signature on the form is not required unless it is a payroll deduction or direct debit IA. If using a written confirmation in lieu of securing a Form 433-D from the taxpayer, you must:

    • Include all pertinent information that is found on the Form 433-D, such as payment terms, balance due, any conditions of the payment, NFTL information, and how to make payment.

    • Provide the Agreement Locator Number on the Form 5402 for APS processing

  3. An ARI to Collection to address TFRP is not necessary when the IA includes trust fund taxes owed by a corporation or an LLC (when the single member owner is not the liable taxpayer). When considering an In-Business Trust Fund (IBTF) IA, Appeals is not involved in any aspect of:

    • Soliciting or securing Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty, or Form 2751Proposed Assessment of Trust Fund Recovery Penalty

    • Determining who is responsible for the TFRP

    • Determining non-assertion based upon collectibility

    Collection is solely responsible for TFRP determinations and assessment statutes. Securing Forms 2750 or 2751 or making responsibility and collectibility determinations compromises Appeals' independence.

  4. Within 24 hours of a processable request for an IA, request input of TC 971 AC 043 (pending IA) by secure mail to Account and Processing Support (APS) for all CDP/EH and non-CDP periods. The transaction code:

    • Prevents levy action on non-CDP periods

    • Suspends the running of the collection statute (CSED) during consideration of the agreement

  5. When determining the acceptability of an IA, consider all relevant facts including the taxpayer’s compliance history, ability to pay and equity in assets.

  6. If it appears a taxpayer will have a balance due at the end of the current year, the accrued liability may be included in an IA per IRM 5.14.1.4.2, Compliance and Installment Agreements. From the date of the IA, the taxpayer must be in compliance with filing, paying estimated tax payments and federal tax deposits.

  7. Add the statement “an NFTL may be filed by Collection” to Form 433-D, Additional Conditions/Terms box unless you determine an NFTL will not be filed as a condition of an IA.

  8. If you determine an NFTL will not be filed as a condition of an IA, check the box on Form 433-D that says “May be filed if this agreement defaults.”

    Note:

    Advise Collection on Form 5402 when you determine no NFTL will be filed as Form 433-D is not always returned to Collection.

  9. Include all balance due periods in an IA, both CDP and non-CDP. List non-CDP periods in the “remarks” section of Form 5402 so APS can input ALL tax periods to IA status.

    Note:

    This includes MFT 35 Affordable Care Act (ACA) individual Shared Responsibility Payment (SRP) liabilities.

  10. When one spouse in a joint liability requests separate treatment on an IA or CNC, the account must be mirrored. Refer to IRM 5.19.1.5.4.12.1, Front End Mirror Assessments Process for IA and CNC Closures, for situations in which an account cannot be mirrored. Advise the taxpayer that once an account is mirrored, the change cannot be reversed. At closing, include instructions to APS to effect the mirroring and note on Form 5402 the following:

    • Identify where APS will forward the case to ACS Support for the mirroring process (APS does not mirror accounts but will forward the mirroring request (Form 5402) as directed by the ATE).

    • In Remarks state: “The taxpayer was advised that once the account is mirrored, the change cannot be reversed.”

  11. Do not request input of TC 971 AC 063 (approved IA) as it is systemically generated on input to status 60.

  12. If you reject a pending IA, instruct APS in the "Remarks" section of Form 5402 to input TC 972 AC 043 to reverse the TC 971 AC 043. APS does not input the TC 972 AC 043 until the conclusion of the 30 day suspense period for filing for a judicial review.

Direct Debit Installment Agreements (DDIA)

  1. A DDIA automatically transfers funds from the taxpayer's bank account to the IRS. If the taxpayer has a bank account, encourage the use of the DDIA.

  2. The following is required to establish a DDIA:

    1. Form 433-D

    2. A CIS, unless the agreement meets streamlined or guaranteed IA criteria

    3. a voided check or the taxpayer's legibly written routing and account number

    4. The taxpayer's signature, which is a legal requirement

    Caution:

    Avoid delays in DDIA processing by verifying the legibility of a hand written routing and account number.

  3. A faxed signature on Form 433-D can be accepted after speaking with the taxpayer. The faxed copy must be documented with the date of the contact.

    Example:

    "04/07/2011 TP REQ FAX"

  4. Monthly reminder notices are not issued on DDIAs.

  5. The taxpayer may request a notice of federal tax lien withdrawal from Collection once certain conditions of the DDIA are met. See IRM 8.22.7.9.1, NFTL Withdrawals for additional information.

  6. See IRM 5.14.10.4 Direct Debit Installment Agreements, for additional information on DDIAs.

  7. At closing, select "DDIA" from the Form 5402 Installment Agreement drop down box. This alerts APS to return the "DDIA" to the originator for processing.

Manually-Monitored Installment Agreements (MMIA)

  1. Some IAs are not compatible with IDRS monitoring. The following agreements must be manually monitored in Centralized Case Processing (CCP) to ensure compliance with the terms of agreements:

    • NMF assessments

    • Agreements with variable or percentage amounts

    • Agreements with irregular payment intervals

    • Agreements secured from two or more parties at different addresses on the same liability (e.g. divorced taxpayers, partnerships, etc.)

    • L Freeze modules during pending Joint and Several Liability Relief Under IRC 6015 claims

    • IBTF IAs (except Express Agreements)

    • Restitution Based Assessments and related civil assessments

    • Any other agreement not compatible with IDRS monitoring

  2. At closing, select "MMIA" from the Form 5402 Installment Agreement drop down box. This alerts APS to return the "MMIA" to the originator for processing.

Full Pay Within 60 Day Agreement

  1. If a taxpayer proposes an agreement to full pay an ACS-sourced account within 60 days, an agreement is authorized per IRM 5.19.1.5.3, Full Pay Within 60 or 120 Day Agreement. A request may be granted based on:

    • Personal funds available to full pay the balance due

    • Third party assets available to full pay the balance due

    • Refund return or amended return that full pays the balance due

  2. Request in the remarks section of Form 5402 that APS input STAUP to any non-CDP tax periods if the agreement is that the liability will be satisfied within 60 days as well. Advise APS as to the next status and the number of cycles of delay until the next status. See IRM 2.4.28.2, CC STAUP Notice Requests, for the sequence of master file status codes.

Currently Not Collectible (CNC)

  1. A taxpayer may challenge the appropriateness of collection activity by claiming they are in a hardship situation or by requesting CNC status.

  2. CNC is not a collection alternative. It is a determination that a case should not be in collection at this time.

  3. If the taxpayer's CIS confirms hardship per IRM 5.16.1.2.9 Hardship:

    • It is not appropriate to sustain the proposed levy action. IRC 6343(a)(1) requires release of a levy if the IRS determines the levy is causing economic hardship to the taxpayer due to the taxpayer's financial condition.

    • CNC may be granted even if the taxpayer hasn't filed all required returns.

  4. Form 53,Report of Currently Not Collectible Taxes, is not needed to report a CDP account CNC. APS inputs CNC using Form 5402 and the closing code selected in the drop down menu. List all non-CDP periods in the "remarks" section of Form 5402 so APS can input ALL tax periods to CNC.

    Note:

    Prepare Form 53 if the closing code is CC 13, In-business corporation. APS sends the paper Form 53 to Collection for input.

  5. When resolving trust fund liabilities as CNC, no ARI is necessary. Note on Form 5402 that Compliance is responsible for any TFRP determination and close the case.

  6. When resolving a case as CNC, advise the taxpayer verbally or in writing that a lien may be filed by Collection.

  7. Avoid making a CDP determination that a CDP liability is uncollectible on the basis of TC 530 CC 39 in the module. A TC 530 CC 39 only indicates the module has been assigned in Collection to a hold file.

Adjustments-Form 3870

  1. Adjustments on accounts may involve:

    • Credit transfers

    • Tracing payments

    • Penalty abatements

    • TFRP adjustment

    • Tax abatement (FUTA, 6020(b), CAWR, SFR/ASFR, AUR Reconsiderations, Audit Reconsiderations)

    • Tax assessed under wrong entity or tax period

    • 941-X increase or decrease

    • Statute consideration

  2. See the table below for a description of the forms used for making adjustments and transferring credits:

    Form Used for...
    2424, Account Adjustment Voucher transferring credits
    8765, IDRS Control File Credit Application transferring credits from excess collection.
    3870, Request for Adjustment for all other adjustments.

    Note:

    To request the Statute Unit clear a payment located in the Excess Collection File for credit or refund to the taxpayer's account, see IRM 25.6.1.10.2.5.1.1, Appeals Determinations.

  3. When adjusting Form 941, 940, and 1040 tax assessments, you must include item or credit adjustment codes. See Document 6209, Section 8. Below are some of the commonly used codes for adjusting Forms 941, 940, and 1040:

    Form 941
    Item Reference Number Explanation
    003 Adjusted total of income tax withheld
    004 Taxable social security wages
    005 Taxable social security tips
    007 Adjusted total of social security/medicare taxes
    Form 940
    WCA – Wage increase/decrease
    TCA – Tax increase/decrease
    Form 1040
    806-W-2 Withholding tax and/or excess FICA contribution Credit
    807-W-2 Withholding tax and/or excess FICA contribution Debit
    886-Taxable income (valid 7712 and subsequent)
    888-Adjusted gross income adjustment
    889-Self-Employment Tax Adjustment

Interim Adjustments

  1. A tax adjustment may be required before a case can be closed. Adjustments requested prior to closing a case are called interim adjustments. Interim adjustment requests should be made judiciously.

  2. To request an interim adjustment:

    Step Action
    1 Generate an on-line Form 3870 from the IRS Intranet publishing catalogue.
    2 Complete the form and mail it to your ATM for a digital signature.
    3 Generate the “ACDS Update Request Form” or “APS Request Form for Collection Cases” found on APGolf under ACDS Updates and open in WORD
    4 Change the caption of the form to CDP Interim Adjustment Request form.
    5 After establishing which APS campus services your office, send an e-mail to the respective site with the retitled update form and Form 3870
    6 In the subject line of your secure mail, type: CDP Interim Adjustment
  3. APS alerts the originator via mail when the interim adjustment is complete.

Notice of Federal Tax Lien (NFTL)

  1. This subsection describes actions with respect to an NFTL including NFTL withdrawals, and lien releases, discharges and subordinations.

NFTL Withdrawals

  1. IRC 6323(j) gives the Service the authority to withdraw an NFTL under certain circumstances. Taxpayers requesting NFTL withdrawal must meet one of the following conditions:

    • IRC 6323(j)(1)(A): The filing was premature or not in accordance with the Service's administrative procedures

    • IRC 6323(j)(1)(B):The taxpayer entered into an agreement under IRC 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments unless such agreement provides otherwise

    • IRC 6323(j)(1)(C): Withdrawal facilitates the collection of the tax liability

    • IRC 6323(j)(1)(D): With the consent of the taxpayer or the National Taxpayer Advocate, withdrawal would be in the best interest of the taxpayer and the United States

  2. See IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien, for examples of when a withdrawal is or is not appropriate.

  3. Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien , is used by a taxpayer to indicate the basis for a withdrawal request under IRC 6323(j). This form is not needed in a CDP hearing if the taxpayer's request for withdrawal falls under one of the IRC 6323(j) criteria.

  4. Use the table below after considering a taxpayer's request for an NFTL withdrawal:

    Did you determine withdrawal is appropriate under IRC 6323(j)? Then... Does Appeals retain jurisdiction on the NFTL withdrawal?
    Yes
    • Issue a determination or decision that the NFTL will be withdrawn

    • See table IRM 8.22.7.9.1.3, NFTL Withdrawal Procedures

    Yes
    No Issue a determination or decision explaining the NFTL is not withdrawn and explain the basis of your decision. No
DDIA NFTL Withdrawals
  1. A taxpayer may request withdrawal of an NFTL under IRC 6323(j)(1)(B) when in an established DDIA. See IRM 5.12.9.3.2.1Special Provisions for Direct Debit Installment Agreements, for conditions which must be met prior to a determination to withdraw under this provision. Appeals ATMs have the delegated authority to approve or deny such requests. For Appeals NFTL withdrawal procedures, see IRM 8.22.7.9.1.3 below.

  2. If a taxpayer enters into an IA other than a DDIA, the taxpayer may still qualify for an NFTL withdrawal under IRC 6323(j)(1)(B) if the IA did not provide for the NFTL.

Withdrawal of NFTL after Release
  1. A taxpayer may request withdrawal of an NFTL under paragraphs (A) and (D) of IRC 6323(j)(1) after the notice has been released. See IRM 5.12.9.9.1, Processing Withdrawals After Release, for conditions which must be met prior to a determination to withdraw under this provision. Appeals ATMs have the delegated authority to approve or deny such requests. For Appeals NFTL withdrawal procedures, see IRM 8.22.7.9.1.3 below.

NFTL Withdrawal Procedures
  1. Use the table below to request an NFTL withdrawal:

    Step Who Action
    1 hearing officer Prepare Form 13794-W, Request for Withdrawal or Partial Withdrawal of Notice of Federal Tax Lien, explaining which of the 4 IRC provisions is the basis for the withdrawal. Use the .pdf Form 13794-W in the Publishing catalog pending deployment in APGOLF.
    2 hearing officer Insert your name in the "requested by" field on the form and forward the Form 13794-W .pdf file by encrypted mail to the ATM.
    3 ATM The ATM signs Form 13794-W and transmits it by encrypted mail or fax to the Collection Advisory manager for the office that covers the taxpayer's residence. See Pub 4235, Collection Advisory Group Addresses, for the appropriate Advisory area office contact information.
    4 Advisory Advisory processes the withdrawal request in accordance with 5.12.9.8.1 Withdrawal Based on Appeals Decision:
    • Confirms the accuracy of Form 13794-W, and

    • Forwards it to Centralized Lien Processing Operation (CLO) within 5 days of receipt

  2. A copy of the withdrawal is available through ALS. If requested by the hearing office, a copy of the withdrawal form is returned by CLO.

  3. When an NFTL is withdrawn in response to a CDP determination, the taxpayer may not request another CDP lien hearing if the NFTL is later filed.

    Exception:

    If Collection timely rescinded the original CDP notice, the taxpayer would be entitled to another CDP lien hearing request.

Partial Release and Manual Release

  1. Circumstances may dictate a partial release of an NFTL is necessary. A partial release is necessary when:

    • An OIC is accepted from only one party on a joint liability

    • Innocent spouse relief is granted

    • The taxpayer requests a release for a specific tax period that has been satisfied on an NFTL with multiple tax periods

  2. Use the following procedures for requesting a partial release after receiving concurrence from your ATM:

    1. Prepare Form 13794

    2. Forward the request to Centralized Lien Processing Operation (See SERP)

    3. Request acknowledgment of the request for a partial release

    4. Once acknowledgment is received, you may close your CDP without waiting for the partial release to be recorded

  3. Use the procedures above for requesting a manual release for satisfied or unenforceable accounts as per IRM 5.12.3.3.2, Liability is Unenforceable.

Discharges and Subordinations

  1. If a taxpayer requests a subordination or discharge of a tax lien, see the table below:

    Alternative Definition
    Discharge- IRC 6325(b) Permits the Service to discharge property from a tax lien. Taxpayers typically seek a discharge in connection with the sale of real property when there is insufficient equity to full pay the NFTL. See:
    • Pub 783, Instructions on How to Apply for Certificate of Discharge from Federal Tax Lien

    • IRM 5.12.10.3, Discharge of Property, for additional information

    Subordination- IRC 6325(d) Permits the Service to subordinate a tax lien to another lien or interest. Taxpayers typically seek subordination in connection with refinancing a loan where there is insufficient equity to full pay the NFTL. See:
    • Pub 784, Instructions on How to Apply for a Certificate of Subordination of Federal Tax Lien

    • IRM 5.12.10.6, Subordination of Lien, for additional information

  2. If the taxpayer completes Form 14135, Application for Certificate of Discharge of Federal Tax Lien, or Form 14134,Application for Certificate of Subordination of Federal Tax Lien, submit the application on an ARI to the Advisory Unit for the state where the property is located. See Pub 4235 for Advisory Unit addresses. In your ARI, remind Advisory to share the results with the taxpayer and Appeals. You may use Letter 5208, Notification of Appeals Referral Investigation, to notify the taxpayer that information they provided to Appeals is being referred to Collection for evaluation.

  3. Input SU/RI to suspend the case. This automatically puts the case in E/ARI status showing the case is suspended. Add Feature Code (RI) Referral Investigation. The RI feature code remains on the case after it is taken out of suspense. Input SU/RT to take the case out of suspense once the ARI is returned.

  4. Advisory considers the request, processes any payments and issues the certificate. Advisory shares the results of the request with the taxpayer.

  5. If Advisory rejects the discharge/subordination request and the taxpayer disputes it, review the decision and make a final determination prior to closing the CDP.

  6. The results of the discharge/subordination request are communicated to the taxpayer in the determination/decision letter attachment or Form 12257 waiver.

Offers in Compromise (OIC)

  1. This subsection discusses the unique procedures in CDP OICs. General guidance for working OICs in Appeals is found at Appeals IRM 8.23, Offer in Compromise. See IRM 5.8.3.5 , Processing Forms 656 and Initial Offer Payments for instruction on the number of Forms 656 to secure.

  2. An OIC may be a viable collection alternative in a CDP hearing. Key components of an OIC discussion include:

    • Different types of offers and payment options

    • How reasonable collection potential (RCP) is determined

    • Compliance and acceptance requirements

    • The application fee is refundable if the offer is not processable. The application fee is not refundable once an offer is determined processable

    • TIPRA payments are generally not refundable and are applied to the liability along with the application fee

    • The taxpayer's right to designate application of TIPRA payments, but that the designation must be in writing at the time the payment is made, and that the right to designate offer payments ends once the offer is accepted

    • The application fee and TIPRA payment requirements don't apply if the offer is doubt as to liability or the taxpayer meets the low-income qualifications

  3. Advise the taxpayer that a search of the phrase"offer in compromise" at www.irs.gov provides additional resources.

  4. The taxpayer is responsible for initiating the offer and determining the amount of the offer as per IRM 1.2.14.1.17, Policy Statement 5-100. Do not prenegotiate the offer amount as this leads to the government negotiating against itself and the taxpayer offering as little as possible.

  5. Advise the taxpayer of any conditions that might prevent an offer from being considered including:

    • Failure to remain in filing compliance

    • Insufficient estimated tax paid or income tax withheld to cover the estimate of the current year's tax

    • Federal tax deposits not timely made during the course of the investigation

    • Failure to provide requested information needed to determine the acceptability of the offer

    • Dishonored check for application fee or TIPRA payment

    • Failure to make periodic payments

    • Filing for bankruptcy

  6. If the taxpayer wants an offer considered, provide Form 656-B, Offer in Compromise, and a deadline for the offer to be returned.

  7. You may assist the taxpayer in preparing the offer forms if necessary. For example, the taxpayer may need assistance if they have limited proficiency in English, reading or writing.

Responsibilities in CDP OICs

  1. The subsections below discuss responsibilities in CDP OICs.

Functional Responsibilities
  1. COIC makes the offer processability determination. When a taxpayer disagrees with COIC’s not-processable determination, Appeals makes a final OIC processability determination and includes it in the NOD. See IRM 8.22.7.10.4.1, OIC is Not Processable, below.

  2. Collection investigates the offer and either:

    1. Accepts it, or

    2. Provides Appeals a recommendation of rejection, or

    3. Determines if the criteria for returning a processable offer or a mandatory withdrawal is met, or

    4. Secures a voluntary withdrawal

  3. For offers recommended for rejection, Appeals considers disputed items and makes a final determination following IRM 8.23.3.3, Appeals OIC Evaluation Procedures.

  4. For offers returned by Collection, Appeals makes a final determination by noting in the NOD that the basis for the return was correct.

  5. If all CDP periods are satisfied while an OIC is pending with Collection, there is no issue with respect to the NFTL or the proposed levy for Appeals to consider. Notify Collection that:

    • Appeals releases jurisdiction, and

    • Collection will make the final determination on the OIC

  6. If a taxpayer withdraws a CDP request, the OIC is returned to Collection for the determination.

Associating Separated CDP and OIC cases
  1. If the taxpayer submits an OIC while a CDP is open, associate the OIC with your CDP/ EH case and incorporate the OIC decision into the CDP determination. Failure to do so may result in a remand by the Tax Court to address the OIC. Examples of OICs that must be associated and addressed in a CDP include:

    • A taxpayer requests a CDP hearing while an OIC is pending with Collection

    • A taxpayer timely requests an appeal of a rejected OIC, and the OIC hearing is pending in Appeals when the taxpayer requested a CDP hearing

    • A taxpayer submits an OIC directly to Collection while a CDP hearing is pending i.e. before the date the CDP closing letter is mailed

  2. An ecase notification in the CAR, ecase found new AOIC information for this case, indicates COIC received an offer which must be carded in and considered by Appeals as a collection alternative in CDP unless, prior to the date of the TC 480:

    • The determination/decision letter was mailed in a CDP case, or

    • The ATM signed Form 12257 in an agreed CDP case

      Note:

      See also IRM 8.22.7.10.6.1, Withdrawal of the CDP

  3. When you see the CAR entry, "ecase found new AOIC information for this case," and don't have an OIC, check IDRS for a TC 480 and confirm receipt with the COIC CDP coordinator. Do not make a final determination without confirming whether an OIC is pending. If an OIC is pending, the CDP determination/decision must comment on it as a collection alternative.

  4. If you discover an OIC is pending in Collection, notate it in the CAR and:

    1. Alert the COIC CDP Coordinator found on the Appeals CDP web page by secure mail that a CDP/ EH is pending in Appeals

    2. Obtain a copy of Form 656 and request APS card in a OIC WUNO per instructions below.

    3. Suspend action on the CDP unless other issues need to be addressed besides the OIC

    4. Issue the Substantive Contact Letter within 30 days of receiving COIC’s recommendation, if the letter has not already been sent

  5. If you discover an OIC appeal pending before another Appeals employee, request the OIC WUNO to be transferred to you to associate with your CDP. A DP feature code is applied to both WUNOs.

  6. If Collection is considering an OIC and discovers a CDP pending in Appeals, Collection sends Appeals a secure email to notify of the OIC and faxes a copy of Form 656.

  7. Upon receipt of Form 656:

    1. Update the CAR to note Collection’s investigation of the OIC

    2. Add "DP" feature code to the CDP/EH WUNO

    3. Request APS create an OIC WUNO with "DP" feature codes; REQAPPL = the date the taxpayer requested an Appeal. APS will determine the RECDATE and ASGNDATE in generating the OIC WUNO.

    4. Request APS input on OIC WUNO new STAT code "TIPRA" with the OIC received date + 2 years

    5. Suspend both WUNOs by selecting carats history Action Code SU, sub action=PI, and suspense action=E/OIC

    6. Suspend further actions on the CDP/EH case unless other issues besides the OIC need to be addressed

TIPRA Statute Responsibilities
  1. When an OIC is submitted in CDP, Appeals has 24 months to make a determination. If the offer is not rejected, returned or withdrawn within 24 months of submission, it is deemed accepted.

  2. An OIC is "submitted" as of the day IRS receives the offer. The postmark is irrelevant in determining when an offer was submitted.

  3. An amended Form 656 is not a new offer and it does not impact the 24 month TIPRA statute that started on the date the original offer was received.

  4. TIPRA statute cases are subject to the same back-end processing requirements listed in IRM 8.21.3.1.7, Closings, and IRM 8.21.4.2, Appeals Team Manager, which means:

    • Written ATM concurrence is required to keep the OIC open beyond 120 days remaining on the TIPRA statute

    • You are responsible for ensuring the OIC is shipped to APS for closing with at least 90 days remaining on the TIPRA statute

    • If less than 90 days remain when the case is being closed, notify the PTM by encrypted mail when the case is being closed to APS

    • Responsibility for the TIPRA statute is shared jointly by the PTM and the ATM

Requesting an OIC WUNO

  1. Upon receipt of Form 656, request an OIC WUNO by providing APS with:

    1. “ACDS Update Request Form” or “APS Request Form for Collection Cases” found on APGolf under ACDS Updates.

    2. A copy of page one and/or page two of the Form 656 listing all periods on the OIC

    3. To include the amount of the OIC, include a copy of page three of the Form 656 or clearly indicate the amount of the OIC on whichever form is used to transmit the request (see "a)" above.

    4. The related CDP Case Summary Card noted "Please create OIC WUNO." Include feature code DP and enter into the NOTES field the following: XREF- WUNO of the related CDP/EH case.

    5. TIPRA statute date = oldest date stamp on form 656 of OIC plus two years

  2. Feature Codes:

    1. All CDP OICS: Input Feature Code “DP” to the OIC WUNO. Input a “DP” to the CDP WUNO

    2. DATL-OICs: Input Feature Code “LI” to the OIC WUNO

  3. Entries in SOURCE, DO, and PBC for the OIC are the same as the entries in the related CDP.

  4. A CDP/EH case can result in more than one OIC. For example, related entities such as a joint return and a sole proprietorship are each carded in as a separate OIC work unit. Related case files are associated and worked together unless there is a DATL OIC where the liability is precluded from CDP.

Receipt of Form 656

  1. Upon receipt of a new OIC, date stamp the upper right corner of Form 656 with the date the offer was received.

    Example:

    The IRS mail room receives and date stamps an envelope containing Form 656 on 11/14/15. You get the Form 656 in your office mail on 11/18/15. The IRS receipt date of the form 656 is 11/14/15.

  2. DO NOT SIGN FORM 656 as COIC is responsible for signing it as part of the processability determination. Forward the offer to COIC for processing, even if it was received without a user fee or TIPRA payment.

  3. If the address on Form 656 doesn't match IDRS, confirm the current address with the taxpayer. Update ACDS with the current address as well.

  4. Appeals may take jurisdiction over non-CDP periods for the purpose of resolving a case through an OIC. Examples of tax periods included in a CDP OIC but not the subject of the CDP/EH may include:

    • Tax debts owed by the CDP/EH taxpayer but not listed on the CDP notice

    • Joint tax debts of a co-residing spouse who did not request a CDP/EH hearing, or

    • sole proprietorship or an LLC where the single member owner is solely responsible

Processing OICs

  1. When receiving an OIC in CDP, prepare Form 13933, Collection Due Process/Equivalent Hearing Offer in Compromise Cover Sheet, and Form 3210, Document Transmittal, in the OIC section of APGolf. Send them with the items below to the appropriate COIC site for a processability determination and Collection investigation:

    • Form 656

    • The OIC application fee and TIPRA payment, if applicable

    • Any written designation of the TIPRA payment from the taxpayer

    • Form 433-A/B

    • A signed Letter 3820, Appeals Received Your Offer in Compromise and We Can Consider It

    • A self-addressed return envelope

      Note:

      The requirement to sign Letter 3820 before sending it to COIC is a new requirement. COIC mails Letter 3820 for processable OICs notifying the taxpayer that their offer has been forwarded to Collection for investigation.

  2. The requirement to send COIC Letter 3821 has been eliminated. COIC uses its own letter if the offer is not processable.

OIC is Not Processable
  1. If COIC determines an offer is not processable, COIC:

    1. Mails the taxpayer Form 656 and a Return letter, explaining why the OIC isn't processable

    2. Faxes Appeals a copy of the Return Letter.

    3. Refunds the application fee, if applicable

  2. COIC's Return Letter advises the taxpayer to contact Collection if she or he disagrees with the decision to return the OIC. If the taxpayer raises the return in CDP, ask the taxpayer how the processability criterion at IRM 5.8.2.3, Processability, was incorrectly applied. Independently evaluate the claim and if you agree the return was in error, resubmit Form 656 to COIC for a processability determination with the new information.

  3. If the return was not in error, close the OIC WUNO when closing the CDP case:

    1. Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason

    2. Document the not-processable determination in the attachment to the determination/decision Letter

      Example:

      "The offer in compromise submitted during your Collection Due Process hearing was returned on 01/31/2015 because it was not processable."

OIC is Processable
  1. If COIC determines the offer is processable, COIC:

    1. Signs Form 656

    2. Mails Letter 3820 to the taxpayer and POA, if applicable, and

    3. Inputs TC 480 for OIC periods

    4. Inputs STAUP to EH and non-CDP periods to move those periods to status 71 (if not in status 53)

    5. Mails a copy of Form 13933 ,Letter 3820 and Form 656 to the originating Appeals employee within 14 days

OIC Investigation
  1. Collection investigates the offer and either:

    1. Accepts it, or

    2. Provides Appeals a recommendation of rejection, or

    3. Determines if the criteria for returning a processable offer or a mandatory withdrawal is met, or

    4. Secures a voluntary withdrawal

  2. COIC may transfer an OIC to Field Collection for investigation based on complex issues.

  3. Collection must return an OIC to Appeals with no less than 9 months on the 24 month TIPRA statute for Appeals to make a final determination. If there is less than 9 months remaining, Collection must contact the Appeals employee assigned the case and provide a report on the anticipated completion of the investigation.

    Note:

    If Collection does not return an OIC with 9 months remaining on the TIPRA statute, elevate this to your ATM to elevate to Collection.

Collection Recommends Acceptance
  1. If Collection accepts the OIC, Collection will:

    1. Issue the acceptance letter

    2. Forward original documents to MOIC and the required documents to the Public Inspection File

    3. Return to Appeals copies of the acceptance letter, Form 7249, and Form 656

    4. STAUP CDP periods to status 71 to prevent them from reverting to collection status when TC 520 cc 76/77 is reversed

  2. Once you are notified of the accepted offer, ask the taxpayer to sign Form 12257 to resolve the CDP. If the taxpayer declines to sign, adopt the decision to accept the offer in the attachment to the Determination/Decision and close the CDP/EH if the taxpayer has no other relevant issues.

  3. To close the OIC WUNO:

    1. Generate the OIC 5402 and select closing code 15

    2. Select “CDP OIC acceptable” as the Resolution Reason

    3. In “Remarks” section, type “Collection accepted OIC and issued the acceptance letter.”

Collection Recommends Rejection
  1. Collection shares the results of the OIC investigation with the taxpayer. If Collection recommends rejection, Appeals makes a final determination under IRC 7122(f) within 24 months of the date the offer was received.

    Note:

    Collection does not provide a Form 1271, Rejection or Withdrawal Memorandum, to Appeals with their recommendation. Form 1271 is not used in CDP OICs. Aee IRM 8.22.9.4.3.1, Rejection.

  2. If Collection erroneously issued a final rejection letter, Collection will not rescind it. Instead, inform the taxpayer that the OIC is under Appeals’ jurisdiction and Appeals will make the final determination regarding the OIC in the CDP determination/decision letter. Locate the COIC CDP coordinator http://appeals.web.irs.gov/tech_services/collection/cdp.htm and request that the offer be reopened on AOIC under reconsideration procedures in IRM 5.8.7.3, Return Reconsideration.

    Note:

    In this circumstance, the TIPRA statute continues to run until Appeals makes the final determination.

  3. In most instances, the CDP and OIC files are closed and retained together in case the OIC is raised as an issue in a CDP Tax Court petition.

Mandatory Withdrawals, Returns and Terminated Offers

  1. During Collection’s offer investigation, there are situations that may result in a processable offer being returned, terminated or withdrawn. Collection advises the taxpayer of issue(s) preventing the offer from proceeding and provides an opportunity for the problem to be cured. If the taxpayer fails to do so, the OIC is returned with a letter advising them to contact Collection if she or he disagrees with the decision to withdraw, return or terminate the OIC.

  2. When an OIC is returned, terminated or deemed a mandatory withdrawal, review the OIC file and confirm Collection followed their policy:

    If you confirm... Then...
    The withdrawal, return or termination was proper
    • The OIC is closed

    • See the tables below for the language used to close the OIC out in your CDP determination or decision.

    The withdrawal, return or termination was in error
    • Resubmit Form 656 to the attention of the Group Manager of the OIC group that returned it, requesting it be reopened.

    • Explain how the withdrawal, return or termination process was incorrectly followed or applied.

Mandatory Withdrawal for Missed Periodic Payment
  1. If a taxpayer fails to make a payment other than the first installment, Collection asks the taxpayer to make up the missed payment. If the taxpayer fails to do so, Collection notifies Appeals the OIC was closed as a mandatory withdrawal.

  2. Confirm that the taxpayer had the opportunity to make up the missed payment and failed to do so. Once confirmed, close the OIC WUNO as a mandatory withdrawal:

    Step Action
    1 Remove the DP feature code from the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 16 withdrawal
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “You submitted an offer which required periodic payments according to a schedule you proposed. You failed to pay after being reminded of the payment requirement. Under the law, your offer was withdrawn.”
  3. If the OIC must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following to close the OIC WUNO:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Dishonored Payments
  1. If Collection discovers a dishonored application fee and/or TIPRA payment after the offer is deemed processable, Collection returns the offer to the taxpayer with a letter giving 30 days to make the payment good and request reconsideration. If the taxpayer fails to provide replacement payment, Collection notifies Appeals of the return for dishonored payment.

  2. Confirm that the taxpayer had the opportunity to provide a replacement payment and failed to do so. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you did not provide the required down payment and/or the first initial payment of a proposed Periodic Payment Offer.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Filing Noncompliance
  1. If Collection discovers a taxpayer has not remained in filing compliance, Collection attempts to secure the delinquent return(s). If the taxpayer fails to file, the OIC is returned.

  2. Confirm the taxpayer's requirements and that the taxpayer had an opportunity to file the delinquent returns and failed to do so. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you did not remain in filing compliance.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Inadequate Estimated or Withholding Tax Payments
  1. If Collection discovers a taxpayer is delinquent in estimated tax payments or does not have sufficient withholding, Collection attempts to get the taxpayer current. If the taxpayer fails to do so, the OIC is returned.

  2. Confirm the taxpayer's payment requirements, that the taxpayer was delinquent on the date of the return and that the taxpayer had an opportunity to cure the delinquency and failed to do so. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you didn’t remain in compliance with your estimated tax payments or withholding.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Failure to Make Timely Federal Tax Deposit (FTD)
  1. If Collection discovers a taxpayer is delinquent on FTDs, Collection asks the taxpayer to get current. If the taxpayer fails to do so, the OIC is returned.

  2. Confirm the taxpayer's payment requirements, that the taxpayer was delinquent on the date of the return and that the taxpayer had an opportunity to make up the missed deposit(s) and failed to do so. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you didn’t remain in compliance with your Federal Tax Deposits.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Failure to Provide Information
  1. Collection identifies information needed to determine RCP and requests it from the taxpayer or their representative. If the taxpayer fails to provide requested information, the offer is returned.

  2. Confirm that the taxpayer had an opportunity to provide the information and failed to do so. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you did not provide necessary information.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for an Open Criminal Investigation
  1. Once a taxpayer has been advised of an open criminal investigation, the taxpayer is asked to withdraw the offer until the criminal matter is resolved. If the taxpayer declines, Collection returns the offer.

  2. Confirm that the return was correct. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned due to an open criminal investigation.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Return for Bankruptcy
  1. If a taxpayer files bankruptcy while an OIC is open, the OIC is returned. Close the OIC WUNO immediately upon notification with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 If the OIC is to be returned by Appeals and not Collection, generate Letter 5010, Collection Due Process Offer in Compromise Bankruptcy Return, from Publishing.
    4 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because you filed bankruptcy while your offer was under consideration.”
  2. Retain the OIC file with the bankruptcy-suspended CDP file and send APS the following to close the OIC WUNO:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Form 656

    • Return Letter 5010 if the OIC is being returned by Appeals instead of Collection

Return for Solely to Delay
  1. Collection may determine an OIC was submitted solely to delay collection.

  2. Confirm the return was correct following IRM 5.8.4.20, Offer Submitted Solely to Delay Collection. Once confirmed, close the OIC WUNO as a return:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer you submitted was returned because it was submitted solely to delay collection.”
  3. If the OIC WUNO must be closed before the CDP WUNO, retain the OIC file with the CDP file and send APS the following:

    • Form 5402 for the OIC WUNO

    • OIC CAR

Termination due to Death of Taxpayer
  1. When the IRS is notified of the death of the taxpayer who submitted an OIC that is currently under consideration, the IRS may no longer consider the OIC. If the OIC was jointly submitted and one spouse dies, see IRM 5.8.10.4, Death of Taxpayer, to determine whether to continue.

  2. If an OIC is terminated due to the death of the taxpayer, close the OIC WUNO with the following actions:

    Step Action
    1 Remove the DP feature code from both the OIC and CDP WUNOs in ACDS.
    2 Prepare Form 5402 using cc 20 premature referral and the appropriate resolution reason code.
    3 If the OIC is to be terminated by Appeals and not Collection, generate the Termination Letter using the template found on the Appeals OIC Web Page
    4 Note the OIC in your CDP NOD or applicable closing letter with the following language: “The offer was terminated due to the death of the taxpayer while the offer was under consideration.”
  3. When a taxpayer dies, the OIC WUNO is closed at once while the CDP case may remain open. Retain the OIC file with the CDP file and send APS the following to close the OIC WUNO:

    • Form 5402 for the OIC WUNO

    • OIC CAR

    • Termination Letter, if the OIC is being returned by Appeals instead of Collection

Taxpayer Withdrawals

  1. The subsections below discuss withdrawals in combination CDP OIC cases.

Withdrawal of the CDP
  1. A taxpayer may ask to withdraw a CDP hearing while an offer is being considered by Collection. Explain that the consequences of withdrawal include:

    • No Appeals verification that all applicable laws and procedures were followed

    • Collection issues a decision on the OIC

    • No right to petition Tax Court for an abuse of discretion review

  2. If the taxpayer withdraws a CDP/EH hearing while an OIC is:

    • Pending in Collection: inform Collection immediately by encrypted email. Collection will issue the OIC decision letter and does not return any paperwork to Appeals.

    • Pending in Appeals: return the OIC to Collection on Form 3210 for a final determination. Form 3210 must say that Appeals released jurisdiction. Ensure Form 3210 is acknowledged and follow up with Collection to resolve any issues concerning receipt of the OIC before closing the OIC WUNO to insure the TIPRA statute is protected.

  3. Close the OIC WUNO using closing code 20 and the premature referral reason “CDP withdrawn while related OIC pending in Collection”.

Withdrawal of the OIC
  1. A taxpayer may ask to withdraw an OIC any time after the OIC is submitted. The request may be made verbally, by fax or letter.

  2. Document receipt of a withdrawal in your case history and how the request was made.

  3. If a withdrawal is not hand-delivered or received by certified mail, it is considered withdrawn when it is acknowledged in writing by the IRS. For a CDP OIC, Form 12257 or the closing letter must acknowledge the taxpayer's withdrawal of the offer to close the TIPRA statute.

Doubt as to Liability (DATL) OIC

  1. A DATL OIC submitted in a CDP hearing is a challenge to the underlying liability. Examine the liability at issue to determine if the taxpayer had a prior opportunity per IRM 8.22.8, Liability Issues and Relief from Liability.

  2. The taxpayer must offer at least $1.00 in a DATL OIC. The amount offered should be the amount of the expected liability, penalties and interest.

  3. The taxpayer is not required to pay an OIC application fee or make a TIPRA payment in a DATL OIC.

  4. In the case of trust fund recovery penalty (TFRP) or personal liability excise tax (PLET) liabilities, consider hazards of litigation when appropriate. See IRM 8.6.1.4.1.6, Case Evaluation for Settlement Purposes. The ACM should adequately explain the basis of the settlement. See IRM 8.6.2.5.4.2, Resolved Based on Hazards of Litigation.

  5. On receipt of a DATL OIC, examine the underlying liability issue and consult with the table below:

    When... Actions
    the liability is not precluded
    1. Open an OIC WUNO and forward the DATL to COIC for a processability determination

    2. Follow IRM 8.22.8.5.1, Referring a Liability Issue, for reassigning the DATL OIC to an AO (other than TFRP which an SO may work).

    3. Suspend the CDP using CARATs codes SU-PI, pending an AO decision. Take the CDP out of suspense using CARATS codes SU-TO upon receipt of the AO's decision.

    4. Adopt the AO's decision and consider any other relevant issues

    5. To close the TIPRA statute, clearly state in your determination or decision letter attachment that the offer was accepted, rejected, withdrawn or returned

    the liability is precluded
    1. Forward the DATL to COIC for a processability determination

    2. Note on Form 3210 that "Appeals is precluded from considering this DATL in CDP"

    3. In the determination/decision letter attachment, note that the taxpayer submitted a DATL OIC which could not be considered in CDP. Explain how you determined the taxpayer was precluded from raising the liability challenge in CDP.

    the liability is precluded but was determined in Appeals
    1. Forward the DATL to COIC for a processability determination

    2. Note on Form 3210"Appeals is precluded from considering this DATL in CDP. Process following IRM 5.8.4.22.3."

      Note:

      Collection will reject the DATL OIC and send it to Appeals for consideration. This appeal is not worked or associated with the CDP since the liability is precluded.

    3. In the determination/decision letter attachment, note that the taxpayer submitted a DATL OIC which could not be considered in CDP. Explain how you determined the taxpayer was precluded from raising the liability challenge in CDP.

Defaulted OICs

  1. When the IRS determines an OIC is in default, it sends the taxpayer a default letter to cure the noncompliance items. If the taxpayer does not cure the default, the OIC is terminated. A taxpayer does not have a right to appeal the termination of an OIC.

  2. Appeals retains jurisdiction of the offers it accepts. When an offer Appeals accepted is in potential default, MOIC unit sends a Form 2209 to Appeals to consider issuing a default letter per IRM 8.23.3.13, Potential Default Offers.

  3. The taxpayer may contend that the termination was improper because the default was insignificant or not a "material breach." The only relevant question is whether there was a default of an express condition. Whether the taxpayer “materially breached” the OIC or “substantially complied” with the OIC is irrelevant.

  4. If you determine the termination was improper because there was no default, the purported termination by the Service was improper. You may determine that the OIC is still in effect.

  5. In CDP, you may also consider a new OIC proposed by the taxpayer as a collection alternative.

  6. In rare situations, a defaulted OIC may be reopened based upon a taxpayer’s exceptional circumstance. See IRM 5.19.7.2.20.4, Reopening Defaulted Offers.

OICs with Department of Justice (DOJ) Controlled Tax Periods

  1. OICs with DOJ controlled tax periods require special handling. DOJ controlled tax periods are identified via the IDRS codes listed at IRM 8.22.6.9 (1), Cases Controlled by the Department of Justice (DOJ).

  2. When you receive an OIC with DOJ controlled periods, note that on Form 13933, Collection Due Process/Equivalent Hearing Offer in Compromise Cover Sheet, to alert COIC. COIC will make a processability determination based on IRM 5.8.2.3.1.

  3. If Collection notifies you that DOJ accepted the OIC, ask the taxpayer to sign Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, to resolve the CDP. If the taxpayer declines, adopt the decision to accept the OIC in your Notice of Determination or Decision letter.

  4. If Collection returns a recommendation to reject, consider the OIC in the CDP hearing. If your decision is to:

    • Reject: Convey the rejection in your Notice of Determination or Decision letter

    • Recommend Acceptance: Advise the taxpayer that DOJ has sole authority to settle the liabilities and that the OIC will be referred for DOJ consideration. Contact Area Counsel to share your OIC recommendation with DOJ for their review and determination. If DOJ does not approve of your recommendation to accept the OIC, convey the rejection of the OIC in the Notice of Determination or Decision letter.