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

Manual Transmittal

December 13, 2016

Purpose

(1) This transmits revised IRM 8.23.4, Offer in Compromise, Acceptance, Rejection, Withdrawal and Default Procedures for Non-Collection Due Process (CDP) Offers, and is revised to include Interim Guidance memorandum AP-08-0116-0001, Interim Guidance on Automated Offer in Compromise (AOIC) Transcript Access, and the other editorial changes noted in the table below.

Material Changes

(1) Revised to include the following editorial changes:

IRM Section Description of Change
8.23.4.2(6) Revised to incorporate Interim Guidance memorandum AP-08-0116-0001.
8.23.4.3.2 Added new section 8.23.4.3.2, Reconsidering a Previously Rejected Offer.
8.23.4.6 Added new section 8.23.4.6, Compromise of a Compromise.
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IRM 8.23.4 dated October 15, 2014, is superseded. Incorporates Interim Guidance memorandum AP-08-0116-0001, Interim Guidance on Automated Offer in Compromise (AOIC) Transcript Access, as it pertains to the OIC program.

Audience

Appeals Employees

Effective Date

(12-13-2016)


Anita M. Hill
Director, Case and Operations Support

8.23.4.1  (12-13-2016)
Procedures for Closing Non-Collection Due Process (CDP) Offers

  1. When an Appeals hearing officer makes a decision on an Offer in Compromise (OIC) case, the basis of that decision must be adequately documented. The hearing officer 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 hearing officer 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 8.20.7.45, Offer in Compromise (OIC) Non-CDP Cases.

  2. The Appeals Case Memorandum (ACM) contains the detailed basis of the hearing officer’s recommendation. The approving official relies significantly on the information in the ACM. In addition, just as the hearing officer must provide to the taxpayer an explanation of why the offer was not acceptable if recommending to sustain the rejection, the hearing officer must also provide an explanation to Compliance of why their 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 hearing officer considered in making the case decision. If the offer was originally rejected as not in the Government’s best interest and the hearing officer’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 them 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 hearing officer’s decision in the case. The Appeals OIC Web Page contains other letters.

8.23.4.2  (12-13-2016)
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 hearing officer 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 1.2.44.2.

  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 Appeals hearing officer 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 hearing officer 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. If the offer includes Trust Fund Recovery Penalty (TFRP) assessments, confirm that all assessments are listed on the Form 656. Before August 2000, TFRP assessments were made by combining all unpaid corporate tax periods into one assessment using the latest quarterly period. After August 2000, TFRP assessments are made for each quarterly period. The Form 7249, Form 656 and/or Form 14640, Addendum to Form 656, must match by reflecting each assessed TFRP period.

  6. IRM 5.8.8.7(6) contains current guidance on transcript redaction for purposes of public inspection files (PIF). The hearing officer will submit a request for an Automated Offer in Compromise (AOIC) transcript via the established AOIC Transcript SharePoint library as close to the offer acceptance date as possible without delaying acceptance. The hearing officer will attach the AOIC transcript to a redacted copy of the Form 7249 and ensure that both Form 7249 and the AOIC transcript have redactions of the taxpayer’s street address, taxpayer identification numbers (both primary and secondary numbers), and all other information that must not be disclosed to the public under IRM 5.8.8.7(6).

    Step Chart for Securing Automated Offer in Compromise (AOIC) Transcripts

    Step Number Action
    1 The hearing officer determines to recommend acceptance of an OIC.
    2. Using one of the links below, the hearing officer completes and submits a transcript request form to the AOIC Transcript SharePoint Library by clicking on “Add Document”:
    • AOIC Transcript Request Form

    • AOIC Transcript - All Documents

    3. The Appeals employee who fulfills the request will:
    • Access the SharePoint Library on a daily basis or when an alert (if activated) is received.

    • Access the AOIC database, take steps to add any additional periods to the database (if applicable) and generate redacted and unredacted transcripts, which AOIC provides in PDF format for each request.

    • Attach all transcripts to a secure e-mail and send them to the hearing officer within five business days of the request.

    • Notate the transcript request form in the Library with the date it was fulfilled by selecting “Edit Properties” next to the form name and filling in the date.

    4. The hearing officer must review the transcripts to verify all required information has been redacted and prepare the PIF, which is comprised of the redacted transcripts and the redacted Form 7249. The hearing officer will close the case following procedures found in IRM 8.23.4.2.1 and IRM 8.23.4.2.2.
  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 8.23.2.3(10) for a discussion of related entities.

8.23.4.2.1  (12-13-2016)
Accepted Offer Closing Documents and Appeals Hearing Officer 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 8.23.2.5, Taxpayer Compliance Issues, and its related subsections and IRM 8.23.2.6, 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 hearing officer’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 Appeals hearing officer 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 hearing officer 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 hearing officer 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 1.2.44.2 to determine the appropriate approving official.

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

    1. An unredacted Form 7249, Offer Acceptance Report, with a complete unredacted transcript for each tax liability listed.

    2. A redacted copy of Form 7249 attached to redacted transcripts for each tax liability listed.

      Note:

      Instructions for completing redactions are located in IRM 5.8.8.6, Required Actions Prior to Closing an OIC as an Acceptance.

    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

    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 5.1.18.20, 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 hearing officer 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 hearing officer will remove and destroy all credit reports
    The hearing officer 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 hearing officer 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 hearing officer 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 8.20.7.45, for APS OIC case closing procedures.

8.23.4.2.2  (12-13-2016)
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 8.23.2.3 for additional information on statute responsibilities.

  2. The requirement for Counsel review is not based solely on the liability as of the date of submission. Counsel’s review is required if:

    1. The liability at the time of submission was less than $50,000 but additional assessments made during the offer process increased the liability to more than $50,000.

    2. The liability at the time of submission was more than $50,000 but application of TIPRA payments or refund offsets reduced the liability below the $50,000 threshold.

  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 hearing officer 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, the hearing officer 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 hearing officer will not deviate from Appeals’ guidance and dispute resolution role. If the offer is otherwise acceptable, the hearing officer should accept the offer.

    Note:

    If Counsel identifies errors made solely by Appeals, it is not appropriate for the hearing officer 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 hearing officer 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 review, proceed as follows:

    Note:

    Due to the number of variables involved in managing different-sized offices and employees in remote offices, the following guidance is general in nature. Each office must establish its own processes within the following framework to most effectively manage and control the flow of the case and input of the required data at the appropriate time.

    1. The hearing officer will input CARATS Action Code "AC" with SubAction Code "DC" and submit the case to the ATM for approval. The hearing officer should not input the "AC/FR" at this time because the case will be forwarded to Counsel for review.

    2. The ATM will review the case and sign the Form 7249 to indicate concurrence with the acceptance recommendation. The ATM will not sign either the Form 5402 or OIC Acceptance Letter until Counsel completes their review and returns the case. The ATM will return the case to the hearing officer if the acceptance recommendation is not approved at the ATM level.

    3. If approved, the ATM will forward the case to APS who will update ACDS to reflect ’DCOTHER’ indicating the case was sent to Counsel for approval. APS will send the case to Counsel.

    4. The case will be returned to APS after Counsel has completed its review. If Counsel does not sign the Form 7249, APS will return the case file to the Appeals hearing officer. If Counsel signed the Form 7249, APS will return the case file to either the ATM or the Appeals hearing officer, depending on locally established procedures.

    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 hearing officer must input an entry into CARATS to explain Counsel’s decision and the general reason(s) why the offer was rejected.

    5. If the hearing officer receives the case file from APS after Counsel’s review, the hearing officer will input CARATS Action Code "AC" with SubAction Code "FR" to reflect the case’s "final resolution" and submit the case to the ATM for final approval. If the ATM receives the case file from APS after Counsel’s review, the ATM must notify the hearing officer so the status of the case may be updated to "AC/FR" . Either the ATM or the hearing officer must remove and destroy any credit reports in the file before submitting the case to APS for closing. See IRM 8.23.4.2.1 for information on the removal and destruction of credit reports.

    6. After the "AC/FR" action and SubAction codes are input, the ATM will sign the OIC Acceptance Letter and input the ACAPDATE on ACDS. See (7) immediately below if the approval requires the signature of the AD, Director Collection Appeals or Director Examination Appeals.

    7. If the ATM is not the approving official, the ATM will not sign the acceptance letter after receiving the case back from Counsel. Instead, the ATM will forward the case to the Area Director, Director Collection Appeals or Director Examination Appeals for review and required approval. Once the hearing officer receives the signed Form 7249 and OIC Acceptance Letter from the approving official, the hearing officer will input the "AC/FR" action and SubAction codes, and the ATM will input the ACAPDATE, and close the case through APS after removing and destroying all credit reports in the file and forward the case file to APS for closing.

8.23.4.3  (12-13-2016)
Sustaining Offer Rejection

  1. When the facts of the case do not support acceptance, the hearing officer 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 hearing officer 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 hearing officer does not sustain the rejection on those grounds, the hearing officer may sustain the rejection based on the collectibility determination documented by Collection.

    2. In the rare situation where the hearing officer determines that a collateral agreement should be included in the acceptance recommendation and the taxpayer does not agree to its terms, the hearing officer may reject the offer. This is true even if the hearing officer 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 hearing officer may sustain rejection for a tax compliance issue as discussed in IRM 8.23.2.5, Tax Compliance Issues, its related subsections and IRM 8.23.2.6, When a Taxpayer Does Not Remain in Compliance.

    4. When a taxpayer does not propose agreeable payment terms, the hearing officer 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 hearing officer 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 hearing officer 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 5.8.1.3.1, 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 hearing officer’s analysis concludes otherwise, the hearing officer 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(7).

  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 hearing officer 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 hearing officer 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 8.23.3.10, 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 1.2.44.2.

  7. If sustaining the rejection of an offer, the hearing officer 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 hearing officer should close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, and/or IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

  8. The hearing officer will not make any Notice of Federal Tax Lien (NFTL) filing determinations. The hearing officer 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 5.8.2.3.1, 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 hearing officer recommends making an adjustment to the liability, the hearing officer 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 8.23.3.10.9, Doubt as to Liability (DATL) - Resolution Options.

  11. See IRM 8.23.4.2.1(7) for instructions on destroying credit reports.

8.23.4.3.1  (12-13-2016)
Closing Documents and Appeals Hearing Officer 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 hearing officer 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 1.2.44.2 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 Pattern 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 hearing officer agrees to adjust or abate the amount of the TFRP or PLET, the hearing officer 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 hearing officer 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.

8.23.4.3.2  (12-13-2016)
Reconsidering a Previously Rejected Offer

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

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

    • The hearing officer 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 hearing officer 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 hearing officer made a significant computational error in determining RCP.

    • The taxpayer failed to respond to the hearing officer 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 reopen the offer only if the issue(s) to be reconsidered are likely to lead to acceptance of the offer.

  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, Offers, Liens and Advisory

  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 of Offers, Liens and Advisory.

  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.

8.23.4.4  (12-13-2016)
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. Document the case activity record as to how the taxpayer made the withdrawal.

  6. If an offer is withdrawn, either voluntarily or as a mandatory withdrawal, the hearing officer 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, and/or IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

  7. 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.

  8. The hearing officer will not make any NFTL filing determinations. The hearing officer 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.

  9. 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 hearing officer 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 hearing officer 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 8.23.3.4.1 regarding mandatory withdrawal.

8.23.4.4.1  (12-13-2016)
Withdrawn Offer Closing Documents and Appeals Hearing Officer 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 hearing officer 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 hearing officer. 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 hearing officer recommends an adjustment to the liability, the hearing officer 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 hearing officer 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 8.23.4.2.1 for instructions on destroying credit reports.

8.23.4.5  (12-13-2016)
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 8.23.3.13, Potential Default Offers, for general procedures on potential default cases.

  2. Delegation Order 5-1 (Rev 4) found in IRM 1.2.44.2.4, 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 hearing officer 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 8.23.3.14, Compromise of a Compromise.. If the hearing officer decides to default the offer, the hearing officer 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 1.2.44.2. 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 8.23.3.14 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 8.23.3.13, Potential Default Offers, it is determined that no estate exists, then the hearing officer should simply close the offer as satisfied following compromise of a compromise procedures in IRM 8.23.3.14, Compromise of a Compromise, and IRM 8.23.4.6, below. The hearing officer 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 8.23.3.15, Offer Rescission Considerations.

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

8.23.4.6  (12-13-2016)
Compromise of a Compromise

  1. After following procedures in IRM 8.23.3.14, Compromise of a Compromise, the hearing officer 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 hearing officer 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 redacted and unredacted newly generated Form 7249.

      Note:

      To properly record the changes in the terms of the offer acceptance, the newly generated redacted Form 7249 must be forwarded to the appropriate Public Inspection File to be associated with the original acceptance following current procedures.


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