8.23.4 Acceptance, Rejection, Withdrawal and Default Procedures for Non-Collection Due Process (CDP) Offers

Manual Transmittal

April 24, 2020

Purpose

(1) This transmittal revises IRM 8.23.4, Offer in Compromise, Acceptance, Rejection, Withdrawal and Default Procedures for Non-Collection Due Process (CDP) Offers, to include updated Program Scope and Objectives and its related subsections, AP-08-0418-0005, Electronic Legal Sufficiency Review of Offers in Compromise, AP-08-0518-0007, Changes in Procedures for Public Inspection Files (PIF) for Accepted Offers in Compromise (OIC), and other editorial changes noted in the table below.

Material Changes

(1) Revised to include the following changes:

IRM Section Description of Change
8.23.4.1 Added and updated: Program Scope and Objectives and its related subsections to comply with the Deputy Commissioner’s for Services and Enforcement and Operations Support memo, dated September 14, 2016, entitled Heightened Awareness, Sensitivity, and Understanding of Internal Controls.
8.23.4.1.2(2) Added: employee responsibility to be familiar with TBOR and provided link to Publication 5170.
8.23.4.3 Removed: procedures to secure Automated Offer in Compromise (AOIC) transcripts via SharePoint.
8.23.4.3(5) Added: verify that no restitution-based assessment periods are on offer.
8.23.4.3.1(5) Removed: requirement to attach a redacted transcript to the Public Inspection File (PIF).
8.23.4.3.2(2) Revised: aggregate liability of $50,000 or greater for Counsel approval is determined when offer is submitted for approval.
8.23.4.3.2(8) Revised to incorporate Interim Guidance memorandum AP-08-0418-0005, Electronic Legal Sufficiency Review of Offers in Compromise.
8.23.4.3.3 Added new section: to incorporate Interim Guidance memorandum AP-08-0518-0007, Changes in Procedures for Public Inspection Files (PIF) for Accepted Offers in Compromise (OIC)
8.23.4.5(5) Added: verify both spouses concur with withdrawal of joint offer.
8.23.4.7(3) Revised: to include a current Form 7249, Offer Acceptance Report, only if it has been under a year since offer acceptance and it is still within one-year of retention period for a PIF.
In General Revised for grammar, plain language and other editorial changes.
In General Updated IRM cross-references

Effect on Other Documents

IRM 8.23.4 dated December 13, 2016, is superseded.

Audience

Appeals Employees

Effective Date

(04-24-2020)


Steven M. Martin,
Director, Case and Operations Support

Program Scope and Objectives

  1. Purpose. This IRM section explains the closing procedures for acceptance, rejection, withdrawal, and default of non-Collection Due Process (CDP) Offer in Compromise (OIC) cases worked by Appeals. Closing procedures for OICs that are worked by Appeals in CDP are discussed in IRM 8.22.9.

  2. Audience. The primary users of this IRM section are Appeals Technical Employees (ATEs) who work OIC cases.

  3. Policy Owner. Policy, Planning, Quality & Analysis is under the Director of Case and Operations Support.

  4. Program Owner. Appeals Policy is the program office responsible for providing technical and procedural guidance to the Appeals Organization and is under the Director of Policy, Planning, Quality and Analysis.

  5. Contact Information. Appeals employees should follow established procedures on How to Contact an Analyst. All other employees should contact the Product Content Owner provided on the Product Catalog Information page for this IRM.

Background

  1. The procedures to close an OIC appeal vary according to the final Appeals decision of the case. This IRM section discusses the actions to take and documents to prepare to close the different OICs.

Authority

  1. Authorities that are related to the offer program are:

    • IRC § 7122 – Compromises, granting broad authority to compromise tax liabilities to the Secretary of the Treasury

    • Treasury Regulation §301.7122-1, authorizing the Commissioner of Internal Revenue to compromise a liability on any one of three grounds: Doubt as to Collectibility (DATC), Doubt as to Liability (DATL), or to promote Effective Tax Administration (ETA)

    • Policy Statement P-5-89, Offer may be rejected for public policy reasons

    • Policy Statement P-5-97, Stay of collection - offer in compromise cases

    • Policy Statement P-5-100, Offers will be accepted

    • Treasury Regulation § 300.3 – Offer to compromise fee

    • Revenue Procedure 2003-71, 2003-2 CB 517, defines the procedures applicable to the submission and processing of offers to compromise tax liabilities.

    • Notice 2006-68, 2006-2 CB 105, provides additional guidance regarding offers submitted on or after July 16, 2006. This handbook further describes, in detail, those procedures.

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

    • IRM 1.2.2.6.1, Delegation Order 5-1 (Rev. 5), delegates the Commissioner’s authority to accept, reject, return, terminate, or acknowledge withdrawals of offers.

  2. The IRS adopted the Taxpayer Bill of Rights (TBOR) in June 2014. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Publication 5170, Taxpayer Bill of Rights and TBOR link, https://irssource.web.irs.gov/Lists/General%20News/DispItemForm.aspx?ID=126.

Responsibilities

  1. The Policy Analyst shown on the Product Catalog page, as the originator, is the assigned author of this IRM.

Program Controls

  1. The Appeals Centralized Database System (ACDS) is used by ATEs and Tax Examiners (TEs) as a method for casefile intake and closing, inventory control, statute validation, and history documentation.

  2. Small Business/Self-Employed (SB/SE’s) Automated Offer in Compromise (AOIC) program is used to track offers submitted by taxpayers and record case actions.

Program Reports

  1. PPQ&A provides trends and data analyses and detailed summary reports for Appeals.

Terms and Acronyms

  1. See IRM Exhibit 8.1.1-1, Common Terms Used in Appeals, for common terms and definitions used in IRM Part 8.

Procedures for Closing Non-Collection Due Process (CDP) Offers

  1. When an ATE makes a decision on an Offer in Compromise (OIC) case, the basis of that decision must be adequately documented. The ATE must also prepare the appropriate closing documents in order to obtain the necessary approvals, meet statutory requirements, and produce an accurate and professional closing package. For non-Collection Due Process (CDP) OIC cases, this section provides procedures for the ATE to close cases in acceptance, rejection, withdrawal and default situations. Back-end closing procedures for the Account and Processing Support (APS) are found in IRM 8.20.7.49, Offer in Compromise (OIC) Non-CDP Cases.

  2. The Appeals Case Memorandum (ACM) contains the detailed basis of the ATE’s recommendation. The approving official relies significantly on the information in the ACM. In addition, just as the ATE must provide to the taxpayer an explanation of why the offer was not acceptable if recommending to sustain the rejection, the ATE must also provide an explanation to Compliance of why the decision to reject the offer was overturned or sustained. The ACM’s narrative may be brief or long, depending on the complexity of the case. The ACM should include all of the information that the ATE considered in making the case decision. If the offer was originally rejected as not in the Government’s best interest and the ATE’s determination is to overturn that decision, the ACM should include the specific reason for that determination.

    Note:

    Use of Form 14559, Appeals Offer in Compromise Memorandum, is recommended.

  3. The customized Form 5402, Appeals Case Transmittal and Case Memorandum, contains essential taxpayer identification information, resolution reason codes, case closing codes and case routing information.

    Note:

    It is necessary to generate Form 5402 directly from APGolf instead of using a saved Word version. Generating Form 5402 from APGolf in the Appeals Centralized Database System (ACDS) captures the case's Resolution Reason and Closing Codes. Appeals provides this information to Collection and works with it on efforts to improve the overall OIC process based upon the data collected.

  4. APGolf generally contains the appropriate letters that notify the taxpayer of the ATE’s decision in the case. The Appeals OIC Web Page contains other letters.

Accepted Offers

  1. An OIC accepted under doubt as to collectibility (DATC) or Effective Tax Administration (ETA) provisions must include all unpaid assessed tax liabilities for which the taxpayer is liable. The ATE may consider an offer that includes an unassessed liability, but the liability must be assessed before the offer can be accepted.

    Note:

    During the course of an offer investigation, if a TIPRA payment (including the initial payment submitted with the offer, subsequent periodic installment payments, and/or the payment submitted with an amended offer) contributes to the full payment of a tax period, that period must remain part of the offer and must be listed on any subsequent amended Form 656, Form 14640, Addendum to Form 656, and Form 7249. Even though the tax liability is fully paid, the payment or payments used to satisfy the tax liability are still part of the overall offer amount, so all satisfied periods must remain part of the offer. See IRM 5.8.8.3, Pen and Ink Changes to Form 656. If a tax period is paid in full exclusively via a non-TIPRA payment, such as a refund offset, there is no need to list such period on the amended Form 656, Form 14640, or Form 7249. Before securing an amended Form 656 or Form 14640 with the tax period removed, make sure no TIPRA payment was applied to the satisfied tax period.

  2. The Secretary has delegated to Appeals the independent authority to accept an offer in compromise. See Delegation Order 5-1, which is found in IRM 1.2.2.6.1.1.

  3. A compromise is effective for the entire liability for tax, penalties, and interest (and lien fees) for the years or periods covered by the offer. An accepted OIC will conclusively settle all tax liabilities listed on the Form 656. Neither the taxpayer nor the government can re-open a compromised tax year or period unless there was a:

    • Falsification of information or documents supplied in conjunction with the offer

    • Discovery of mutual mistake of a material fact that would be sufficient to set aside or reform a contract

    • Concealment of assets and/or ability to pay

    See IRM 5.8.9, Offer in Compromise - Actions on Post-Accepted Offers, for more information.

  4. Before preparing the closing documents, check the Integrated Data Retrieval System (IDRS) to make sure there are no pending liabilities that are not included on the Form 656. A liability for a subsequent tax period could cause the offer to default. Matters that will later require the time and attention of the ATE and other IRS personnel can be avoided by checking for and resolving possible pending liability issues before closing out the case. The following are some ways to look for possible pending liabilities:

    • Check IDRS Command Code (CC) AMDIS

    • Check IDRS CC UNLCER to see if there are any Trust Fund Recovery Penalties (TFRP) not listed on the Form 656

    • Look for Transaction Codes (TCs) 420, 922, 976 or 977 to see if there is an amended return or any examination or under-reporter activity

    If an open audit is found, follow the instructions in IRM 8.23.3.3.1.5, Coordination with Other Functions.

    Caution:

    Carefully review published ex parte communications guidance before contacting another function. The ATE must document the case activity record with the purpose of the contact, what was discussed and any information that was exchanged. See IRM 8.1.10, Ex Parte Communications.

    Note:

    Also check to confirm that no unreversed TC 520 has posted or is pending for any period being compromised. TC 520 with closing codes 60-89 indicates that the taxpayer is involved in a bankruptcy or other litigation. Contact AIQ advisory to determine the nature of the litigation and whether the IRS has authority to accept the offer. If a case has been referred to the Department of Justice (DOJ), settlement authority belongs solely to DOJ.

  5. Verify that no restitution-based assessment periods are included on the accepted offer. Restitution periods may be identified with TC 550 with an indicator of 04. The offer cannot be accepted by IRS unless the restitution tax period(s) are removed from the Form 656. See IRM 5.8.4.23.2, Offers in Compromise Submitted that Include Restitution.

  6. If the offer includes Trust Fund Recovery Penalty (TFRP) assessments, confirm that all assessments are listed on the Form 656. The Form 7249, Form 656 and/or Form 14640, Addendum to Form 656, must match by reflecting each assessed TFRP period.

  7. An amended Form 656 or addendum secured by Appeals does not require a signature of an IRS representative as the "Authorized Internal Revenue Service Official" on Form 656. Since each offer only has one TC 480 date, a second signature may confuse APS or COIC and cause an erroneous input of another TC 480 date. Additional periods may be added to the existing Form 656 without need of an amended Form 656 or an addendum if the provisions in IRM 5.8.8.3, Pen and Ink Changes to Form 656, are met.

    Note:

    For any new offers submitted by related taxpayer entities that are secured subsequent to an initial offer filing by the taxpayer, a signature of an IRS official is still necessary. See IRM 8.23.2.4(10) for a discussion of related entities.

Accepted Offer Closing Documents and Appeals Technical Employee Procedures

  1. The ACM for an accepted offer should contain the following:

    1. The amount of the original offer and a description of the payment terms

    2. The amended offer amount, if applicable, and a description of its payment terms

      Note:

      Provide a complete explanation and discussion of the computation of the amount of the offer that is being recommended for acceptance.

    3. The type of tax and periods (if the report covers individual and joint liabilities, state them in separate paragraphs)

      Note:

      If a tax period that was part of the original offer is subsequently paid in full via TIPRA payments, the period must still be listed on any amended offer. Even though the tax period is fully paid, the funds used to satisfy it are part of the overall offer amount, so the tax period must remain on the Form 656 . If a tax period is paid in full via a non-TIPRA payment, such as a refund offset, there is no need to list such period on the amended Form 656.

    4. The cause of the tax problem and status of current compliance, as needed. See IRM 8.23.2.6, Taxpayer Compliance Issues, and its related subsections and IRM 8.23.2.7, When a Taxpayer Does Not Remain in Compliance, for the appropriate treatment of compliance issues.

    5. Compliance's reasons for rejecting the offer

    6. The issues raised by the taxpayer

    7. An analysis of the taxpayer's financial condition including any documentation on which the ATE’s position is based (e.g., type, location and condition of assets and the taxpayer's age, health, education, and future income prospects)

    8. A comparison of the financial figures provided by the taxpayer, the amounts allowed by Collection, and the amounts allowed by Appeals. Sample Reasonable Collection Potential (RCP) Comparison Tables are available at the Appeals OIC Web Page. If the taxpayer amends the offer to the RCP amount determined by Collection and the ATE agrees that this is the proper amount, there is no need for the financial figure comparison. Instead, attach a copy of Collection's financial analysis tables to the ACM.

      Reminder:

      It is important for the ATE to document a clear and complete explanation of the factors considered in accepting the offer. This may include information that was not previously provided to Compliance or a different interpretation of the facts of the case or of IRM policies and procedures.

    9. The source of the offer funds.

    10. The total amount of TIPRA payments already applied to the offer.

    11. An affirmative statement that the offer being recommended for acceptance reflects the reasonable collection potential or that special circumstances exist that otherwise justify compromise.

    12. An explanation of the special circumstances justifying acceptance under Doubt as to Collectibility with special circumstances (DATC-SC) or Effective Tax Administration (ETA) and why payment of more than the offered amount would either cause the taxpayer to be unable to meet necessary living expenses or would undermine public confidence that the tax laws are being administered in a fair and equitable manner.

      Reminder:

      DATC-SC and ETA acceptance recommendations also require an affirmative statement indicating acceptance of the offer would not undermine other taxpayers' compliance with the tax laws.

    13. If the offer being accepted involves a federal employee, a discussion of whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility should be documented.

      Note:

      To facilitate a rapid and organized completion of the IET/AET and acceptance memorandum, consider using the Form 14559, Appeals Offer in Compromise Acceptance Memorandum, which is available on the Electronic Publishing website.

  2. The ATE is responsible for inputting the following data on the customized Form 5402:

    • Amount of the outstanding liability

    • Amount of the taxpayer's original offer

    • Amount of RCP determined by Appeals

    • Amount of the accepted offer

  3. When recommending acceptance of two or more related offers based upon a single financial analysis, only one ACM is necessary. To ensure proper processing of the related offers, create separate files/folders marked "1 of 2," and "2 of 2," etc. It is unnecessary to duplicate information pertaining to both taxpayers, but the separate files/folders should contain the documents listed below in paragraph (5), except for only one consolidated ACM.

  4. Review the Delegation Order at IRM 1.2.2.6.1.1 to determine the appropriate approving official.

  5. When accepting a non-CDP offer, prepare and assemble the following:

    1. Form 7249, Offer Acceptance Report, with a complete unredacted transcript for each tax liability listed, if Counsel’s opinion is required.

    2. A copy of Form 7249 for the Public Inspection File (PIF).

      Note:

      Remove/redact any "plus 4" or other numbers after the initial 5-digit zip code as well as any "in care of" names. Transcripts are not attached to the PIF copy.

    3. Customized Form 5402 generated from APGolf

    4. ACM

    5. Letter 5490, OIC Acceptance Letter, or Letter 5521, DATL OIC Acceptance Letter.

    6. Form 656, Amended Form 656, and/or Form 14640, Addendum to Form 656, if applicable

    7. Collateral agreement, if applicable

    Reminder:

    Be sure to enter the Appeals RCP and accepted offer amounts on the Customized Form 5402. APS uses this information to update the applicable screens for the Automated Offer in Compromise (AOIC) system.

  6. Enclose a copy of the Form 656 and any collateral agreements with the taxpayer's (and POA's) copy of the OIC Acceptance Letter.

  7. The Fair and Accurate Credit Transactions Act of 2003 requires that persons who dispose of credit information take reasonable measures to protect against unauthorized access to or use of credit information in connection with its disposal. IRM 5.1.18.19, Consumer Credit Reports , and IRM 5.8.8.15, Destruction of Credit Reports, contain information on credit report usage and disposal requirements. The credit report should remain in the case file until all reviews are complete. The credit report must be removed and properly disposed prior to sending the file to APS for closing. Follow these procedures for proper disposal of credit reports:

    If... Then...
    The ATE determines that the Appeals approving official (Appeals Team Manager (ATM), Area Director (AD), Director Collection Appeals or Director Examination Appeals) and/or Counsel do not need to review the credit report(s) as part of the case disposition approval The ATE will remove and destroy all credit reports
    The ATE determines that the Appeals approving official and/or Counsel may need to review the credit report(s) as part of the case disposition approval The ATE will prominently 'flag' all credit reports and submit the case file for the necessary review and approvals
    The case does not require the review or approval of anyone beyond the ATM The ATM will remove and destroy all credit reports immediately prior to submitting the case to APS for closing actions
    The case requires the review or approval of the Area Director, Director Collection Appeals, Director Examination Appeals and/or Counsel and the file is returned to the ATM prior to submitting the case to APS for closing The ATE will leave the credit reports in the case file until completion of all reviews. The ATM will remove and destroy all credit reports immediately prior to submitting the case to APS for closing actions
  8. See IRM 8.20.7.49, for APS OIC case closing procedures.

Counsel Review of Acceptance Recommendations

  1. IRC section 7122(b) requires an opinion from Counsel to be placed in the file if the liability, including tax, penalties and interest, is $50,000 or more. Counsel’s review has two separate and distinct components:

    1. Certification that the legal requirements for compromise were met.

    2. If the legal requirements for compromise were met, then Counsel reviews the proposed acceptance for consistent application of the Service’s policies regarding acceptance.

    Note:

    The 24-month TIPRA statute period under IRC 7122(f) includes whatever time a case is pending in Counsel for its statutory opinion on an acceptance recommendation. See IRM 8.23.2.4 for additional information on statute responsibilities.

  2. The requirement for Counsel review is based on the aggregate liability including additions and accrued penalty and interest, on Form 7249 for all related offers on the same taxpayer at the time the offer is submitted for approval, if $50,000 or greater.

    Example:

    If a taxpayer owes $40K IMF liability and $20K BMF liability for a singlemember disregarded entity LLC owing employment taxes prior to 2009, the offers should be submitted for Counsel review.

  3. Under Chief Counsel Directives Manual (CCDM) 33.3.2, Legal Advice, Other Legal Advice, Offers in Compromise, Counsel’s finding that a proposed acceptance is not in keeping with IRS policy is not a justification for withholding an opinion if all of the legal requirements for compromise have been met. If Counsel signs the Form 7249 but disagrees with the amount of the offer, they will communicate their disagreement in a separate memorandum.

  4. Although Counsel’s opinion is required for compromise, their concurrence with Appeals’ decision to accept the offer is not required. However, the Appeals approving official must review and carefully consider Counsel’s opinion prior to accepting the offer. If Counsel raised substantive issues, it is appropriate to document the case activity record to reflect that the approving official carefully considered those issues before accepting the offer.

  5. If Counsel did not sign the Form 7249 or determined that the offer is not legally sufficient, Appeals may still accept the offer. The ATE will document the case history and include in the case file a copy of Counsel’s memorandum or other communication expressing their opinion.

    Note:

    Other than as allowed by certain exceptions in IRM 8.23.3.4.1(3), the ATE will not identify new assets or increase a determination of equity in assets made by Collection. Even where Counsel, after identifying new issues or requesting further development of existing issues, determines that the offer is not legally sufficient, the ATE will not deviate from Appeals’ guidance and dispute resolution role. If the offer is otherwise acceptable, the ATE should accept the offer.

    Note:

    If Counsel identifies errors made solely by Appeals, it is not appropriate for the ATE to accept the offer without first addressing those errors.

  6. If an offer is returned by Counsel to address specific errors and those errors have been addressed, the ATE will not resend the case to Counsel for review unless the terms of the offer changed.

  7. When an OIC is accepted in the situations described in (5) above, the Appeals management level that is required for approval of these cases does not change.

  8. If acceptance of the offer is subject to Counsel’s legal sufficiency review, proceed as follows:

    a. The ATE will create an electronic file by scanning and e-mailing or faxing to their e-fax number the following documents (where applicable), (the documents appear in their preferred order with the F7249 on top):

    • Form 7249, Offer Acceptance Report

    • Account Transcripts (un-redacted)

    • Form 1271, Rejection or Withdrawal Memorandum – if included in the administrative file

    • Form 656, Offer in Compromise, or Form 656-L, Offer in Compromise (Doubt as to Liability), including any addendums

    • IMFOLI/BMFOLI print

    • OIC Acceptance Letter (Letters 5490 or 5521)

    • Appeals Case Memorandum (Form 14559 may be substituted)

    • Appeals Reasonable Collection Potential Tables (unless embedded in Form 14559)

    • Appeals Case Activity Record

    • Compliance’s case history (AOIC history, if included. Do not submit ICS history.)

    • Form 433A/B, Collection Information Statements, (not including attachments)

    • Any previous Counsel Memorandum in the case file (including those not solicited by Appeals)

    • Form 5402, Appeals Transmittal and Case Memo

    b. The ATE will save the electronic file on their computer and will upload the documents to Counsel’s SharePoint site and assign the request to the ATM for review.

    c. The ATE will update ACDS by inputting CARATS Action Code "AC" with Sub-Action Code "DC" to the OIC Work Unit Number (WUNO).

    d. The ATM will review the approval documents through the SharePoint site and, if approved, will assign the case to Counsel by updating the SharePoint case status. If the acceptance recommendation is not approved at the ATM level, the ATM will close the request and notify the ATE.

    e. Counsel will complete the review of the documents through SharePoint and electronically sign Form 7249. The signed documents will be returned by Counsel to the Appeals ATM through SharePoint by updating the case status.

    Note:

    Upon closure of a case in which Counsel’s opinion did not recommend acceptance and Appeals agrees with the opinion, either the ATM or the ATE must input an entry into CARATS to explain Counsel’s decision and the general reason(s) why the offer was rejected. If Appeals does not agree with Counsel’s opinion, Appeals will proceed with the acceptance following guidance in IRM 8.23.4.3.2(5). The case will not be resubmitted to Counsel unless the terms of the OIC have changed.

    f. Upon receipt from Counsel the ATM will send the signed and dated Form 7249, the signed acceptance letter and signed Form 5402 to the ATE who will update ACDS by inputting:

    • CARATS Action Code "AC"

    • Sub-Action Code "FR"

    g. The ATE will ensure all final OIC documents are electronically attached to the OIC WUNO, including the Form 656, Form 7249 and transcripts and any memorandum from Counsel.

    h. The ATE will then send a secure email request to the ATM to input the ACAPDATE when closing actions have been completed on the OIC.

    Note:

    If the ATM is not the approving official, the ATM will not sign the acceptance letter or Form 5402 after receiving the case back from Counsel. Instead, the ATM will forward the documents to the approving official based on IRM 1.2.2.6.1.1 for review and approval. Once the ATE receives the signed Form 7249, OIC Acceptance Letter and Form 5402 from the approving official, the ATE will input the "AC/FR" action and Sub-Action codes and the ATM will input the ACAPDATE.

    i. The ATE or ATM will forward the case to APS for closing actions after ensuring any credit reports have been removed from the case file and destroyed per IRM 8.23.4.3.1.

    Steps for Preparing and Submitting OIC for Legal Sufficiency Review, Acceptance Approval, and Closure

    Step Description Notes/Information
    1 ATE prepares electronic copies of the required documents by scanning and emailing or faxing to their e-fax number. The final assembly of the documents is in this preferred order with the Form 7249 on top.
    • Form 7249

    • Account Transcripts (un-redacted)

    • Form 1271 – if included in the administrative file

    • Form 656 or Form 656-L, including any addendums

    • IMFOLI/BMFOLI print

    • OIC Acceptance Letter (Letters 5490 or 5521)

    • ACM or Form 14559

    • Appeals RCP Tables, if not embedded in ACM or Form 14559

    • Appeals Case Activity Record

    • Compliance’s case history (AOIC history, if included, not ICS history.)

    • Form 433A/B,

    • Any previous Counsel Memorandum in the case file (including those not solicited by Appeals)

    • Form 5402

    2 ATE navigates to the Counsel SharePoint Site and opens a request by clicking “new task” under the “Appeals Manager’s Approval” view. https://adminnondisclosure2.prod.irscounsel.treas.gov/OIC/OIC-Appeals/default.aspx
    3 ATE completes the SharePoint form. Complete the following fields:
    1. Taxpayer’s Name (Last name first, first name last)

    2. Taxpayer’s TIN

    3. WUNO

    4. Offer Amount

    5. Total Liability

    6. Appeals’ POD

    4 ATE assigns the priority level and assigns the request to their ATM.
    • The default level is normal.

    Use of the "high" priority level is limited to an impending TIPRA statute or other expedite situations subject to managerial approval.
    • Ensure the Case Status is set to "Case Uploaded."

    • Assign the request to the ATM in the "Assigned To" box. Typing in the ATM’s last name will generally bring up a selection of options from Outlook. The ATE will notify the ATM that a request is pending review either by setting an alert in SharePoint or by sending a secure email.

    5 ATE attaches the electronically created documents and saves the request. Click "attach file" , which will bring up a screen enabling the ATE to locate the file with the "Browse" button. After locating the correct file, click "OK" and then "Save" the request.
    6 ATM is notified by ATE to access Counsel SharePoint site to review the request. The ATM will navigate to the SharePoint: https://adminnondisclosure2.prod.irscounsel.treas.gov/OIC/OIC-Appeals/default.aspx
    7 ATM updates the case status based on their review.
    • The ATM reviews the uploaded closing documents.

    • If not approved, the case status will be changed to “case closed” and the ATE will be notified by secure email generated by the ATM. Once/if the employee corrects the documents or addresses the concern/s, submit a new request.

    • If approved, the ATM changes the case status to "Counsel Assigned."

    • The ATM changes the status by clicking the "edit item" button and at the "case status" field selecting the correct drop down.

    8 Counsel Review.
    • Once the case status is updated to "Counsel Assigned," a General Litigation (GL) Operator will receive a notification that a request is pending. The GL operator will access the request and assign it to an attorney or paralegal.

    • The attorney or paralegal receives an alert and accesses the request to conduct the legal sufficiency review.

    9 Counsel Determination.
    • If Counsel determines the offer is legally sufficient, they will digitally sign Form 7249 and attach the signed Form 7249 to the request. The request will be updated to "Counsel Completed" status and assigned back to the ATM.

    • If Counsel determines the offer is not legally sufficient or if there are errors, Counsel will update the request to "Counsel Returned" status and assign back to the ATM.

    10 The ATM notes that Counsel has completed the review.
    • If Counsel determined the offer is legally sufficient, the ATM accesses the signed Form 7249 from SharePoint, electronically signs the Form 7249, acceptance letter and Form 5402 and forwards it to the ATE via secure email.

      Note:

      If the ATM is not the approving official, they will forward Form 7249, the unsigned acceptance letter and closing package to the proper delegated approving official per local procedures.

    • If Counsel determined the offer is not legally sufficient or identified errors, the ATM will notify the ATE to address the issues raised by Counsel and if appropriate, resubmit the file to the ATM. The request will not be returned to Counsel unless the terms of the offer are changed.

    11 The ATM updates the case status to Case Closed. After all steps are completed the ATM edits the request, selects "Case Closed" status and the save button.
    12 ATE/ATM closes the case.
    • The ATE ensures all final OIC documents are electronically attached to the OIC WUNO, including the Form 656, Form 7249 and transcripts and any memorandum from Counsel.

    • The ATE sends a secure email to the ATM to input the ACAPDATE.

    • ATE or ATM forwards the case to APS for closing actions after ensuring credit reports have been removed and destroyed.

Gatekeeper’s Review of the Public Inspection File (PIF)

  1. 26 CFR 601.702(d)(8) requires that a PIF of all accepted OIC cases be available for inspection for one year from the date of acceptance in the location determined by the Compliance Area Director within the Small Business and Self-Employed Division (SB/SE).

  2. The PIF consists of a properly completed, signed and dated Form 7249.

  3. SB/SE has established a SharePoint site for the electronic storage of the PIF.

  4. Tax Examiners in Appeals Processing and Support (APS) will load the electronic PIF to the SharePoint site. After the electronic PIF has been uploaded to the SharePoint site, Appeals employees identified as gatekeepers will access the PIF and review the file to:

    1. Ensure that Form 7249 is complete, contains the appropriate signatures and has been dated in the upper right hand corner of the form.

    2. Insure that any "plus 4" or other numbers after the initial 5-digit zip code are redacted as well as any "in care of" names.

    3. Verify that redacted transcripts are not attached to the PIF.

  5. If the Form 7249 is complete and has been properly dated and signed, the gatekeeper will move the PIF from the Appeals library to the correct PIF location folder and correct PIF date sub-folder.

  6. If the PIF file has not been dated properly, the gatekeeper will send an email to the TE notifying the TE of the error and will return the file to the TE for correction.

  7. If there are any other errors on the Form 7249, the gatekeeper will send an email to the ATE advising them of the error and will return the file to the approving official to have the document corrected.

  8. If the PIF file is returned to either the TE or ATE for correction, they will make the necessary corrections and return the document to the gatekeeper via secure email. The gatekeeper will upload the corrected PIF to the correct SharePoint folder.

Sustaining Offer Rejection

  1. When the facts of the case do not support acceptance, the ATE should attempt to inform the taxpayer, prior to issuance of the rejection letter, of the decision to sustain the rejection of the offer. See IRM 8.23.3.2, Rejected Offers, for additional information.

  2. Generally, the ATE will sustain a rejection only under the same basis for which the offer was rejected. Note the following exceptions:

    1. If Collection rejected an offer for public policy reasons under Policy Statement 5-89 or as Not in the Government’s Best Interest, and the ATE does not sustain the rejection on those grounds, the ATE may sustain the rejection based on the collectibility determination documented by Collection.

    2. In the rare situation where the ATE determines that a collateral agreement should be included in the acceptance recommendation and the taxpayer does not agree to its terms, the ATE may reject the offer. This is true even if the ATE raised the collateral agreement as a new issue. See IRM 8.23.3.5, Collateral Agreements.

      Note:

      Instances of including a collateral agreement should be rare.

    3. The ATE may sustain rejection for a tax compliance issue as discussed in IRM 8.23.2.6, Tax Compliance Issues, its related subsections and IRM 8.23.2.7, When a Taxpayer Does Not Remain in Compliance.

    4. When a taxpayer does not propose agreeable payment terms, the ATE may sustain a rejection as Not in the Government’s Best Interest. These instances should be rare. See IRM 8.23.3.4.1(3).

    5. The ATE must sustain a rejection when a taxpayer files bankruptcy. This is true even if the taxpayer filed and received a discharge while the offer was open. This type of rejection may be approved at the ATM level.

    6. The ATE must sustain rejection of an offer when it is determined the offer should have been returned by Collection in the following circumstances:

    • For cases under Department of Justice jurisdiction. See IRM 5.8.1.6.1, Tax Cases Controlled by Department of Justice.

    • Cases involving restitution liability. See IRM 5.8.4.23.2, Offers in Compromise Submitted that Include Restitution.

  3. If Collection rejected an offer submitted under Doubt as to Collectibility provisions on the basis that the taxpayer could pay more than the amount offered, and information provided by the taxpayer or the ATE’s analysis concludes otherwise, the ATE will not independently sustain the rejection or otherwise dispose of the case under any other basis such as Public Policy, Not in the Government's Best Interest, or a finding that the submission of the offer was solely to delay collection.

    Exception:

    See IRM 8.23.3.4.1(3).

  4. If Collection rejected an offer submitted under Doubt as to Collectibility provisions on the basis that acceptance was not in the Government’s Best Interest, the ATE will sustain Collection's rejection when Appeals concurs that acceptance is not in the Government’s Best Interest or determines that the taxpayer can pay more than the offered amount. See IRM 5.8.7.7.1, Not in the Best Interest of the Government Rejection.

  5. The ATE will sustain rejection of a Doubt as to Liability (DATL) offer when Appeals determines that the tax is correct as assessed or when Appeals agrees to make an adjustment to the tax but the taxpayer will not withdraw the offer. See IRM 8.23.3.9, Consideration of Doubt as to Liability (DATL) Offers, and its related subsections.

  6. The Secretary has delegated to Appeals the independent authority to reject an offer in compromise. See Delegation Order 5-1, which is found in IRM 1.2.2.6.1.2.

  7. If sustaining the rejection of an offer, the ATE will communicate the reason(s) for the decision and discuss alternatives (such as installment agreements and Currently Not Collectible status, as applicable) that the taxpayer may pursue with Collection. Do not refer the taxpayer to COIC or field offices. The ATE should close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses), and www.irs.gov for Online Payment Agreement or other payment option.

  8. The ATE will not make any Notice of Federal Tax Lien (NFTL) filing determinations. The ATE should inform the taxpayer verbally or in writing that Collection may file an NFTL after the case is closed. If the taxpayer indicates intent to file a Collection Appeal Request, refer them to the Collection employee who worked the initial case, and close the OIC case following normal procedures.

  9. If the taxpayer submitted a deposit with the OIC, the deposit must be returned unless the taxpayer gave written authorization to apply it to the tax liability. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization may be used for this purpose. If applied to a tax liability, the deposit is credited as of the date it was received by the IRS.

    Note:

    If the offer at issue includes a TIPRA payment, the 20% initial payment for a Lump Sum Cash offer and the proposed payments for a Periodic Payment Offer are not deposits and will not be refunded, except in limited circumstances identified in IRM 5.8.2.4.1, Determining Processability. In addition, if the taxpayer pays more than 20% with the submission of a Lump Sum Cash offer, the excess amount is considered a payment of tax and will be applied in the government’s best interest, unless otherwise designated or the taxpayer indicates on the Form 656 to treat the excess amount as a deposit. The same applies to periodic installments in excess of the proposed amounts. See Form 656, Section 5.

  10. If the case is a DATL offer involving a TFRP or personal liability for excise tax (PLET) liability and the ATE recommends making an adjustment to the liability, the ATE will prepare a Form 3870. APS will forward the Form 3870, along with any TFRP or PLET administrative files, to the appropriate Collection Advisory Unit. See IRM 8.23.3.9.10 , Doubt as to Liability (DATL) - Resolution Options.

  11. See IRM 8.23.4.3.1 for instructions on destroying credit reports.

Closing Documents and Appeals Technical Employee Procedures for Sustaining Offer Rejection

  1. The ACM for a case in which Appeals sustains the rejection of the offer should contain the following:

    1. Sufficient information and explanation to support the decision, including a complete financial analysis.

      Note:

      If the decision is simply to sustain Collection's RCP determination, the Offer Examiner's financial analysis tables (Income/Expense Table (IET), Asset/Equity Table (AET) or Full Pay Worksheet) are sufficient.

    2. Any counter proposals either offered to or received from the taxpayer.

    3. Information on the disposition, either a refund or application to a tax liability, of any offer deposits.

      Note:

      The Customized OIC Form 5402 may be used in place of an ACM if there is sufficient room to reflect the above items. Also, consider using the Form 14559,Appeals Offer in Compromise Memorandum, which is available on the Electronic Publishing website.

  2. The ATE is responsible for inputting the following data on the Customized OIC Form 5402:

    • Amount of the outstanding liability

    • Amount of the taxpayer's original offer

    • Amount of RCP determined by Appeals

  3. Review the Delegation Orders at IRM 1.2.2.6.1.2 to determine the appropriate approving official to sustain rejection of the offer.

  4. When recommending Appeals sustain rejection of the non-CDP offer, prepare and assemble the following:

    1. Customized OIC Form 5402 generated from APGolf

    2. ACM, if necessary

    3. An undated Letter 5197 to notify the taxpayer that Appeals sustained rejection of the offer

    4. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization (if applicable)

    5. Form 1271, Rejection and Withdrawal Memorandum. Include this form if it was prepared by Collection. Do not prepare a Form 1271 if there is none in the file.

      Note:

      Consider the use of Form 14561, Income and Expense/Asset Equity Calculation Table, as a means to complete the IET/AET or Form 14559, Appeals Offer in Compromise Memorandum, to include an abbreviated ACM.

  5. If the liability at issue is a TFRP or PLET and the ATE agrees to adjust or abate the amount of the TFRP or PLET, the ATE is responsible for preparing the Form 3870. Ensure that the Form 5402 properly instructs APS to forward the Form 3870 and the TFRP/PLET administrative file to the appropriate Collection Advisory Unit. The ATE is responsible for providing APS with the address of the appropriate Advisory Unit. The Form 5402 contains instructions for determining the appropriate Advisory Unit.

  6. Once all of the above documents are complete and assembled, update the ACDS case status to 'AC/FR' and submit the case file to the ATM for approval.

Reconsidering a Previously Rejected Offer

  1. When a ATE sustains the rejection of a non-CDP offer, Appeals’ jurisdiction of the case is relinquished. Except in the circumstances discussed in this section, the ATE cannot reconsider, for any reason, a previously rejected offer.

  2. The ATE can reconsider a rejected offer case under the following circumstances:

    • The ATE sustained a rejection because the taxpayer failed to timely provide requested information and it is later learned that the information was provided timely but was misrouted or misidentified by Appeals or IRS.

    • The ATE sustained a rejection because the taxpayer was unable to meet an unreasonably short response deadline.

      Note:

      An unreasonably short deadline is defined as less than 14 calendar days from the date of the request.

    • The ATE made a significant computational error in determining RCP.

    • The taxpayer failed to respond to the ATE and it is later learned that this was due to an emergency situation (e.g., medical emergency, natural disaster, etc.).

  3. When presented with a request to reopen a closed offer, consider all factors, including the taxpayer's new information and/or statements, and refer to IRM 5.8.7.3 , Return Reconsideration.

  4. An offer will not be reopened:

    • To reconsider the earlier decision based upon the same facts and circumstances

    • To consider new facts and circumstances that arose after the rejection

    • Because a taxpayer can now fund an offer they were previously unable to fund

  5. In all circumstances appearing in (2) above, the taxpayer’s request to have the case reconsidered must have been received by Appeals no more than 30 days after the date Appeals’ rejection letter was issued. See (6) below for an exception to this.

  6. A previously rejected offer may be reconsidered later than 30 days after the date of the rejection letter only under the following circumstances:

    • At the request of the taxpayer or authorized representative, and

    • With the agreement of an Appeals Director of Operations, and

    • With the agreement of the SBSE Director, Specialty Collection Offer in Compromise

  7. A request to reconsider a previously rejected offer identified in (6) will be forwarded to the Appeals Technical Advisor for the Area in which the taxpayer's case was previously assigned to coordinate the agreement of the Appeals Director of Operations and the SBSE Director, Specialty Collection Offer in Compromise.

  8. When a previously rejected OIC case is reopened, the ATM should request that the ACAPDATE be reversed using the OSGetServices Ticket process. Use the original Appeals WUNO to monitor the case. Another TC 480 should be input including the original TC 480 date of the offer.

Withdrawn Offers

  1. IRM 5.8.7.4, Withdrawal, contains information on withdrawn offers. There are two kinds of withdrawals:

    1. Voluntary withdrawal, and

    2. Mandatory withdrawal

  2. A taxpayer may voluntarily withdraw an offer at any time after it is submitted, including while the case is in Appeals. A voluntary withdrawal may be made verbally or in writing, including by fax. Written withdrawals are encouraged. Letter 3504 (SC/SG), Offer in Compromise Withdrawal, Letter 3504-A, Offer in Compromise Withdrawal - Joint, may be used to withdraw an offer. The letters must be modified with respect to the taxpayer waiving appeal rights. However, if a taxpayer or authorized representative provides a clear oral statement requesting withdrawal of the offer, the offer may be closed as withdrawn. Be sure to adequately document the case activity record of the taxpayer's or representative's withdrawal request.

  3. If the taxpayer sends a written withdrawal by certified mail or hand-delivers the withdrawal, the offer is considered withdrawn as of the date Appeals received the withdrawal. Date stamp the withdrawal document with the received date, as that is the date on which the statutory period to collect the tax begins to run.

  4. If the taxpayer verbally withdraws the offer or sends a written withdrawal by regular mail, fax or any method other than certified mail or hand-delivery, the offer will be considered withdrawn as of the date Appeals mails the Letter 241, Offer in Compromise Withdrawal, to the taxpayer.

  5. When a joint offer is withdrawn, verify both spouses concur with the withdrawal. Refer to IRM 5.8.7.4.1.1, Voluntary Withdrawal of a Joint Offer.

  6. Document the case activity record as to how the taxpayer made the withdrawal.

  7. If an offer is withdrawn, either voluntarily or as a mandatory withdrawal, the ATE documents the reason(s) why and discuss alternatives (such as an installment agreement and Currently Not Collectible status, as applicable) that the taxpayer may pursue with Collection. Do not refer the taxpayer to COIC or field offices. Close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses), and www.irs.gov for Online Payment Agreement or other payment option..

  8. If the taxpayer submitted a deposit with the offer, secure a Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization, to apply the deposit to a tax liability. If the taxpayer does not provide such written authorization, the deposit must be refunded.

  9. The ATE will not make any NFTL filing determinations. The ATE should inform the taxpayer verbally or in writing that Collection may file an NFTL after the case is closed. If the taxpayer indicates intent to file a Collection Appeal Request, refer them to the Collection employee who worked the initial case, and close the OIC following normal procedures.

  10. The offer may also be considered withdrawn under IRC 7122(c)(1)(B)(ii) if the taxpayer fails to make a proposed periodic installment payment. However, the taxpayer is not required to continue making proposed periodic installment payments on a Periodic Payment offer after such offer is rejected by Collection. For this reason, instances of mandatory withdrawal of a non-CDP offer should be uncommon.

    Note:

    Periodic installment payment requirements start again upon receipt of an amended Periodic Payment offer. The ATE is responsible for securing the TIPRA payment required with the amended offer and monitoring receipt of the proposed periodic installment payments until the case is closed in Appeals. If the ATE secures an amended offer well in advance of closing out the non-CDP offer and the taxpayer fails to make a proposed periodic installment payment, follow the procedures in IRM 8.23.3.4.4 regarding mandatory withdrawal.

Withdrawn Offer Closing Documents and Appeals Technical Employee Procedures

  1. The ACM for a withdrawn offer case should contain the following:

    1. Sufficient information indicating the type of withdrawal (voluntary or mandatory) and the date (if known) and manner in which the offer was withdrawn, e.g. verbal, written, certified mail, hand-delivery, etc.

    2. The taxpayer's reason for withdrawing the offer, if known.

    3. Information on the disposition of any deposits submitted with the offer. The deposit will be refunded unless the taxpayer provided written authorization to apply it to a tax liability.

      Note:

      The Customized OIC Form 5402 may be used in place of an ACM if there is sufficient room to reflect the above items.

  2. The ATE is responsible for inputting the following data on the Customized OIC Form 5402:

    • Amount of the outstanding liability

    • Amount of the taxpayer's original offer

    • Amount of RCP determined by Appeals

  3. Prepare Letter 241, Offer in Compromise Withdrawal Letter, to the taxpayer. Letter 241 can be signed by the ATE. In a withdrawal, there is no need to secure an ATM signature on Form 5402.

  4. When closing a non-CDP offer as withdrawn, prepare and assemble the following:

    1. Customized Form 5402 generated from APGolf

    2. ACM, if more details are needed than can fit on the Form 5402

    3. An undated Letter 241(CG) to notify the taxpayer that the offer is withdrawn, the effective date of the withdrawal, and the disposition of any offer deposit

    4. Form 3040 or other written authorization to apply an offer deposit to a tax liability, if applicable

      Note:

      A Form 1271 is not needed for a withdrawn offer. See IRM 5.8.7.4.3, Closing an Offer as a Withdrawal.

  5. If the case is a DATL offer involving a TFRP or PLET liability, and the ATE recommends an adjustment to the liability, the ATE will prepare a Form 3870. APS will forward the Form 3870, along with any TFRP or PLET administrative file, to the appropriate Collection Advisory Unit.

  6. Once all of the above documents are complete and assembled, the ATE will update the ACDS case status to AC/FR and provide a copy of Form 5402 to the ATM for ACAP entry on ACDS.

  7. See IRM 8.23.4.3.1 for instructions on destroying credit reports.

Potential Default Offers

  1. A potential default offer is loaded onto ACDS as an OIC case, using feature code “DO”. This includes potential default offers that are being considered as a “compromise of a compromise”, and the formal rescission of accepted offers. See IRM 8.23.3.12, Potential Default Offers, for general procedures on potential default cases.

  2. Delegation Order 5-1 (Rev 4) found in IRM 1.2.2.6.1.4, Termination Authority, grants the Monitoring Offer in Compromise Unit (MOIC) the authority to terminate an offer where the taxpayer defaults on the terms of the offer and fails to offer an alternative to the default.

    Note:

    An offer defaulted due to the taxpayer’s failure to remain in filing and payment compliance cannot be considered for an alternative such as an offer on an offer or a change in offer payment terms.

  3. If the taxpayer remains in filing and payment compliance but was unable to remedy the potential default issue (e.g., missed offer payments, non-compliance with a collateral agreement), the ATE may default the offer and recover the full liability, less any payments made, or accept the offer for amounts already paid under “compromise of a compromise” procedures as discussed in IRM 8.23.3.13, Compromise of a Compromise. If the ATE decides to default the offer, the ATE will use Letter 5412, Appeals Offer in Compromise Default Letter. The letter must be signed by the Appeals official who accepted the offer or their successor. See the Delegation Orders at IRM 1.2.2.6.1.4. Document the case activity record, input "DM" and "AC/FR" , and close the case using Closing Code 14. Close the Form 2209 back to MOIC advising that the offer was defaulted and attach a copy of the signed default letter. MOIC will then reinstate the compromised liability. Follow procedures in IRM 8.23.3.13 if recommending acceptance of a “compromise of a compromise”.

  4. If the potential default case involves the death of a taxpayer, and following procedures in IRM 8.23.3.12, Potential Default Offers, it is determined that no estate exists, then the ATE should simply close the offer as satisfied following compromise of a compromise procedures in IRM 8.23.3.13, Compromise of a Compromise, and IRM 8.23.4.7 below. The ATE should document the case activity record, input DM and AC/FR, and use Closing Code 15. Send the Form 2209 back to MOIC advising that the offer should not be terminated.

  5. When generating the Customized OIC Form 5402 for a potential default case, use the closing codes below. Also, use the most appropriate resolution reason code when generating the Form 5402.

    1. Closing Code 14 - Offer defaulted or rescinded

    2. Closing Code 15 - Offer not defaulted

    3. Closing Code 16 - Request withdrawn by the taxpayer

    4. Closing Code 20 - MOIC recalled request for default consideration

  6. Procedures for rescission of a previously accepted offer are found in IRM 5.8.9, Actions on Post-Accepted Offers, and IRM 8.23.3.14, Offer Rescission Considerations.

  7. After making a decision on the potential default offer case, the ATE will return the Form 2209 and any closing documents to the appropriate MOIC site.

Compromise of a Compromise

  1. After following procedures in IRM 8.23.3.13, Compromise of a Compromise, the ATE will close the case and send it back to MOIC using the process in this IRM and IRM 5.8.9.5.3, Processing Completed Investigations.

  2. If the taxpayer is deceased, the ATE will verify the TC 540 was input or request APS to manually input the TC 540.

  3. Return Form 2209 and all closing documents to the appropriate MOIC site, including:

    1. The taxpayer’s written proposal for the compromise of a compromise.

    2. A copy of the acceptance letter.

    3. Appeals Case Memorandum (ACM) and documentation supporting the case decision.

    4. A current Form 7249 if it has been under a year since offer acceptance and it is still within the one-year retention period for a PIF.

      Note:

      If it has been more than one year since offer acceptance, no action is required in regards to the PIF.