Purpose - This IRM section provides instruction for determining jurisdictional responsibility, perfecting and case building, and transferring offers in compromise.

Audience - The primary users of this IRM are offer in compromise employees who are responsible for initial case processing of offer in compromise receipts. It also provides information to other collection employees when considering an offer in compromise a collection alternative.

Policy Owner - Director, Collection Policy, SB/SE.

Program Owner - Collection Policy, SBSE, Offer in Compromise (OIC) Program.

Primary Stakeholders - The primary stakeholders are OIC process examiners.

Program Goal - Policy Statement P-5-100 explains the objectives of the OIC as a collection tool. By following the processes and procedures in this IRM, employees will be able to accurately and timely complete initial processing and case building of OIC receipts.

If an offer is received with payment(s), processability and payment processing must be determined within 24 hours of IRS received date and case building completed within 20 days of Area Office( AO) received date.

If no payment(s) is submitted, processability and case building must be completed within 20 days of the AO received date.

Except for CDP offers meeting COIC criteria, for all cases cited in the table below, generate and send the transfer letter to the taxpayer and/or POA, if applicable. Ensure all TC 480 or STAUPs have been input, as appropriate. If manual STAUP is needed follow IRM 2.4.28, IDRS Terminal Input, Command Codes STAUP, STATI and STATB.

The following table provides guidance on jurisdictional responsibility:

Once the COIC sites have loaded the offer to AOIC and completed initial processing and perfection, pending offers in certain categories will be immediately transferred to the appropriate FOIC group. See OIC Share Point for a list of the categories at: Offer in Compromise SharePoint Site

Some categories may require additional research to determine the correct routing. To determine where to assign the offer, use the reference guide found on OIC SharePoint as well as the 433-A(OIC) section 2, 433-B(OIC) and IDRS.

If the taxpayer checks the box in section 2 on the Form 433-A (OIC) indicating they have ownership interest in a business a Form 433-B is required and should be requested in the Combo letter.

Prior to transfer, , COIC will generate the AOIC transfer letter or Combo A letter and send to the taxpayer. When preparing the transfer letter, use 120 days as the time frame for taxpayer contact.

All field transfer criteria (4101) must go to the manager to review and transfer.

Taxpayers are required to include separate checks for the application fee and TIPRA payment unless they check the Low-Income Certification box and qualify for the waiver on Form 656 for each offer submitted. No payment is required for DATL OIC submissions.

There should only be as many Forms 656 as there are entities. An entity is the individual or business that is assessed the liability(ies). In conjunction with an acceptance letter, the Form 656 constitutes a binding agreement between the government and the taxpayer.

When determining the number of offers required for taxpayers with identical assessments (e.g. MFT 55, MFT 31), if the original assessments are established against the individual taxpayer, separate offers are required. Annotate AOIC remarks informing the OE/OS an additional offer is needed. The chart in paragraph 5 below provides examples.

There may be instances when a taxpayer sends in three offers when only two are required. In those cases you should:

The table below is intended to assist in identifying and loading a processable offer and provides guidance on advising the taxpayer when more than one Form 656, application fee, and/or TIPRA payment may be required.

Individuals or self-employed taxpayers filing a DATC or ETA offer should complete and attach Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals.

All other forms of business entities (partnerships, corporations, limited liability companies, etc.) should submit Form 433-B(OIC), Collection Information Statement for Businesses.

Taxpayers who submit an offer to compromise individually owed tax and also have a substantial interest in an ongoing business may be required to submit a Form 433-B for that business.

Prior to beginning an OIC investigation, certain critical errors must be corrected to perfect the offer. The Combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to request the necessary corrective action. If there is no response to the request letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. The following errors are considered critical and must be corrected before beginning the investigation:

If you receive two offers, one for joint liabilities and one for separate liabilities and both offers were submitted with either the applicable payments or low-income certification, load both offers and perfect as follows:

If you receive an offer on behalf of a deceased taxpayer:

When sending a Combo letter to perfect the errors listed above, also request correction of the information shown below, if necessary.

If the taxpayer did not include a tax period with an outstanding liability on the original Form 656 and the entity is the same (such as a Sole Prop), the PE will add the periods to the AOIC MFT screen. If the taxpayer has a separate entity (Corp. LLC (after 1/1/2009), Partnership) that was not included on the original Form 656, the PE will no longer be responsible for loading periods of a separate entity to the MFT screen on AOIC until such time the OE/OS secures the amended and associated Form(s) 656. This includes any liability under MFT 35, assessed under the Affordable Care (ACA) Provision 1501, Individual Shared Responsibility Payment (SRP) IRS 5000A. All PE’s are required to make pen and Ink changes to ensure the Form 656 matches the MFT screen on AOIC see IRM 5.8.8.3 Pen and Ink changes See IRM 5.8.2.9 , Sorts and Payment Processing, for when to load certain entities.

When a taxpayer has included a tax period(s) for which there is no apparent amount due, do not add the tax period(s) to AOIC. Contact the taxpayer to determine if any issues are pending that may result in additional tax.

If the basis for compromise is not indicated but it can be determined by reviewing the package, continue processing the offer.

Document the AOIC history to summarize any perfection issues.

An offer can be investigated but cannot be accepted until all errors are corrected and/or an amended Form 656 is signed. Therefore, offers will not be returned by the PE if the taxpayer fails to respond to any perfection issue listed in paragraph 4 above.(physical address, TIN missing/incorrect, offer amount but no terms, ).

Case building for field and COIC cases should include the following in each case file:

PE will generate the TC 480 and Status 71 through the AOIC system. However, there may be situations when the TC 480 and Status 71 cannot be systemically generated (e.g., imminent statute). In those cases where AOIC does not systemically generate the appropriate TC 480 and/or Status 71, COIC must manually input the appropriate codes.

When the need for mirroring is identified, place a prominent red "M" directly after the OIC number on the case file. This could be caused by one spouse submitting an offer separately; one spouse appealing an offer rejection; or submission of separate offers by the spouses with different waiver dates for joint period(s).

PE will determine if estimated tax (ES) payments are required and request any delinquent payments as part of their case perfection actions. . Taxpayers who may be responsible for ES payments include self-employed individuals, retirees, investors, corporations or wage earners with inadequate withholding.

To determine if the taxpayer owes ES payments, review the last filed return. If the liability (TC 150) was $1000.00 or more than the existing credits (TC 806 or 766 for example) then the taxpayer has an estimated tax requirement.

In order to be considered for an OIC, taxpayers must be current with filing and payment requirements for the year in which the offer was submitted. ES payments are generally due quarterly; April 15th, June 15th, September 15th and January 15th of the following year.

Taxpayers with ES requirements must pay an amount equal to 90% of their current year tax liability or 100% of the tax owed in the prior year, whichever is less.

To determine whether ES payments are required, use Compliance Suite on the IAT tool..

If Estimated Payments are Required:

If there are no ES payments, or missing ES payments, the PE is required to request the correct amount of ES payments owed in the combo letter by following the steps below:

The Combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to advise the taxpayer that their offer has been received or to request the necessary corrective action(s).

If there is a Z freeze on the account, do not send a letter, refer to in-house RO for additional research. See IRM 5.19.1.3.5, for Other Account Issue Requiring Referrals or Redirect or AM Research Portal

If no perfection is required, issue the AOIC Combo letter, Paragraph A. The date of possible taxpayer contact must reflect 120 days from the date of the Combo letter. Document the AOIC remarks with this information. Include Pub 1, Your Rights as a Taxpayer, and Pub 594, The IRS Collection Process.

If perfection is required, prepare the Combo letter using the paragraphs that address all deficiencies. Include Pub 1 and , Pub 594.

Before mailing the AOIC Combo letter to the taxpayer and representative, if appropriate, you must ensure the representative is authorized to receive correspondence. If a disclosure issue exists, use the applicable paragraph to indicate this in the AOIC Combo letter, and do not send a copy of the letter to the representative. Instead, send the representative a letter notifying them that correspondence has been sent to their client and they must contact their client for the information.

Post-date all AOIC Combo letters five (5) calendar days. Schedule follow-up for the 45th day from the date of the letter. This means that at least 50 calendar days (5 post-date plus 45 calendar days from the date of the letter) will have elapsed before an established follow-up date.

Envelopes containing the AOIC Combo letter, which require a response (paragraph options B, C, or D), must be stamped or otherwise marked "URGENT-TIME SENSITIVE" .

Document the AOIC remarks to summarize all applicable perfection issues and the mailing date of the letter.

Input the appropriate follow-up date.

Retain a copy of the signed and dated AOIC Combo letter in the file.

Assign the offer to the applicable AOIC assignment number.

If there is no response to the Combo letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. For additional information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

If the Combo letter requested critical perfection information but the taxpayer fails to respond, the offer may be returned with no further contact.

If the offer is assigned to 51XX and the taxpayer responds, incorporate the response into the file and assign to 5500 Response Received or 5558 SE Response Received , as appropriate.

Responses received on cases assigned to 5150 (field) must be reviewed immediately, assigned to a PE for expedite processing, and transferred to the appropriate FOIC group.

All other responses must be reviewed within 10 calendar days of assignment to the PE.

Upon reviewing the response, take the next appropriate action: assign to 60XX OE hold file or return.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response and return offer to 51XX with new follow up date. If the taxpayer and/or the representative fails to meet the additional deadline, return the offer with no further contact.

If the request included:

Update AOIC remarks summarizing the documents or payments received.

Sign any related Form 656 with the current date. Retain the original and any amended Form 656 in the case file. Amended Form 656 no longer need to be signed as long as the original Form 656 in the case file is signed. See IRM 5.8.1.15.8(4), Signatures.

The PE is required to initiate the next appropriate action on cases where taxpayers have responded to the Combo letter within 10 calendar days from the date the offer is assigned to the PE.

An interim letter, advising 90 days for the next taxpayer contact, must be sent after the PE reviews the response, prior to assignment to an OE holding inventory. Document the AOIC Remarks that the interim letter was issued. If interim letter was done manually (not through GII) then clearly annotate AOIC remarks the date the letter was mailed and set a follow up for 90 days.

The PE is responsible for answering incoming calls from taxpayers, tax representatives and internal customers on the COIC toll-free telephone line.

Generally these calls involve taxpayer inquiries regarding the status of pending offers or questions about a letter they received.

For the majority of the calls, the PE should access the offer on AOIC and, by reviewing the remarks screen, satisfactorily answer the taxpayer's questions. If there is no offer on AOIC, research AMS and cc ENMOD to see if a 656B was sent to the taxpayer due to incomplete offer submission via the mail room.

There will be times when it will be necessary for the PE to take additional follow-up actions to address the taxpayer's concerns.

The table below illustrates when follow-up actions must be taken:

If the taxpayer calls and their offer is assigned to a hold file, and they are requesting a lower TIPRA periodic payment because they can no longer afford the payments, advise the taxpayer they must be current with the payment terms they originally proposed. If they are not, they can choose to withdraw their offer and resubmit a new offer with a lower periodic payment. If the taxpayer is current, they can submit an amended offer with the new payment amount and the OE/OS will determine if they qualify for the new amount. They cannot submit an amended offer to avoid TIPRA that is already due per IRM 5.8.3.6, Perfecting Offers.

Any additional discussions with the taxpayer or tax representative that may require follow-up actions should be discussed with the manager.

All phone calls must be well documented in the AOIC Remarks Screen. Document AMS if there is no offer on AOIC.

If the taxpayer submits an original tax return(s) with the offer submission and it is not signed, follow IRM 5.8.3.6(1) procedures. If the taxpayer fails to respond, the offer will be returned without further consideration.

If the tax return is properly signed:

After the offer is deemed processable and a Combo letter has been sent, the offer should be held until the follow-up date expires to allow the taxpayer to provide the requested information.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response and update the follow-up date. If the taxpayer and/or the representative fail to meet the additional deadline, return the offer with no additional contact.

After the designated time period has passed and no response has been received, the "No Reply" return process will be initiated by the COIC site designated manager. The AOIC system will generate all the necessary letters and documents to allow for the closing of the case off of AOIC.

Before closing the offer, check AOIC to verify that no response was received. Check IDRS to ensure there is no Combat Zone, -C Freeze, on the account. For additional information see IRM 5.19.10.6, Combat Zone Freeze Codes.

When returning the offer:

Form 657, Offer in Compromise/Revenue Officer Report, serves to establish coordination between the field Collection RO group, the field OIC group and the COIC sites.

All OICs forwarded with a Form 657, will be processed following normal procedures.

If the offer account is in Status 26 and the Form 657 was not received, the COIC site will contact the RO by E-mail and copy their manager to request Form 657 and continue processing the offer. Update the account(s) to Status 71. Copy the E-mail request into the AOIC Remarks

If there is not sufficient information to support the field RO solely to delay recommendation, case build and assign to the field for additional evaluation following expedite procedures.

The PE must verify that the TC 480 has posted to each tax period shown on the Form 656.

If the TC 480 has not posted, it must be manually input. If a manual input is required, input the TC 480, place the letters TC in red directly after the offer number on the outside of the case file and, notate the AOIC history to identify the need for a manual reversal when the case is closed.

If the request is from FOIC and the PE received a DCI requesting the manual input of the TC 480, document AOIC that a manual reversal is required. Forward the completed DCI with a print of the Query screen to be associated with the case file,

The table below provides instruction for inputting the TC 480.

If a tax return is submitted with the offer and has a balance due: Manually upload the balance on the Form 1040 and TC 480 and ST. 71 on the MFT module. If there is no balance due, DO NOT load.

For payments processed through Paper Check Conversion (PCC) Ogden Accounting receives the initial notification of a dishonored OIC payment from the Federal Reserve Bank through the Electronic Verification and Image Services (ELVIS) automated system.

The Ogden Dishonored Check Unit will notify the taxpayer by mailing them a copy of the dishonored check and Form 12993-A, Check for Offer in Compromise Payment Not Accepted by Bank.

Ogden Accounting will E-fax copies of the dishonored payments to the COIC site that originated the Form 3210, Document Transmittal .

Notification of dishonored payments that are processed through Remittance Strategy-Paper Check Conversion ( RS-PCC) will originate from Ogden Accounting and E-faxed to the originating site.

Upon notification of a dishonored application fee and/or TIPRA payment, the site will determine the current AOIC offer assignment.

If the payment has been moved from the 4710 Account to the Master File, the Dishonored Check Unit will reverse the payment with a TC 671. If no notification of the dishonored payment is received, the dishonored check can also be identified by the TC 671 posted on IDRS.

The PE will select the bad check option on the AOIC payment screen for the dishonored payment to ensure an accurate balance is shown. See table below.

Upon notification of a dishonored application fee and/or TIPRA payment, the offer will be immediately pulled and returned to the taxpayer with the appropriate AOIC letter for a dishonored check. The PE will be responsible for selecting the bad checking option on the payment screen on AOIC and updating the remarks with the following information::

If you receive notification of a dishonored payment and the taxpayer qualified for the low-income waiver, and submitted a payment with their offer, continue processing the offer and select the bad check option on the payment screen and clearly annotate the remarks on AOIC of your actions.

There may be no notification of dishonored checks. Check IDRS for the posting of a TC 671 that may also include a secondary TC 280 or TC 286, dishonored check penalty. Annotate which check was dishonored, for example, application fee, TIPRA or subsequent. Enter as much information as you have available, for example, bank name, check number, amount etc.

If the payment was dishonored while still in the 4710 account, Accounting will annotate their copy of the Form 3210 as appropriate. See IRM 5.8.8.17, Notification of Dishonored Application Fee and/or TIPRA Payment for guidance.

If the taxpayer or an authorized representative offers to replace the dishonored check and requests reconsideration of their offer, contact by the taxpayer or their representative must be made within 30 days of the date of the initial AOIC return letter. The replacement payment must be in the form of certified funds (bank or postal money order, cashier check, etc.) or through EFTPS and received within a reasonable amount of time. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for reconsideration procedures.

When contacted:

Inform the taxpayer or the authorized representative that the certified funds must be mailed to either of the following addresses:

To ensure proper handling, advise the taxpayer to include a letter requesting reconsideration of the offer.

If the payment was dishonored while still residing in the 4710 Account, the payment should be processed through established deposit procedures. A copy of Form 3210 must be forwarded to the appropriate MOIC function. Clearly indicate on the copy of Form 3210 that the payment is a replacement for a dishonored check. MOIC will load the payment on the AOIC deposit screen once the AOIC record is reloaded. MOIC is responsible for ensuring the payment is applied to the Master File as originally intended.

If the payment was dishonored with a TC 671 on the Master File, prepare a Form 3244, Payment Posting Voucher, to post the payment as a replacement for the dishonored payment.

Upon receipt of the replacement payment, the employee that processes the payment must also:

If the payment is not received by the specified due date, the payment will be processed in accordance with TIPRA payment requirements, and the case will not be opened as a reconsideration. See IRM 5.8.7.3, Return Reconsideration, for reconsideration procedures.

When an erroneous processability determination is corrected because the taxpayer was in bankruptcy at the time the offer was filed, if the related application fee remittance was forwarded for deposit, the COIC sites will need to determine whether the remittance has been deposited and credited to the taxpayer’s liability. An application Fee Refund/Apply Listing should be generated from AOIC to identify application fees that were initially determined to be processable, but later determined to be not processable. Generation of this listing is required in order for the COIC site to verify and authorize a manual refund. If a manual refund is needed, see IRM 21.4.4.2, Manual Refunds. For instructions how to prepare a manual refund and IAT Manual Refund Tool Instructions.

The COIC sites must generate the Application Fee Refund/Apply Listing on a monthly basis.

Generally, when an offer is deemed not processable, the Service includes the taxpayer's application fee, and in some cases the initial TIPRA payment, see IRM 5.8.2.4, Processability, with the return disposition letter. However, depending on the elapsed time between inputting a processability change on AOIC from "Y" to an "N" , the Service may have already deposited the related application fee and applied the payment to the taxpayer's liability on Master File.

To determine whether or not a manual refund of the application fee should be issued, research the completed Form 3210 , Document Transmittal, to see whether the application fee was deposited by the Service or returned to the taxpayer via manual refund procedures.

Thorough research and care is required when determining which offers on the application Fee Refund/Apply Listing should receive manual refunds.

To request the MOIC function to issue manual refunds from the 4710 account, prepare a Form 4442 that includes:

Records that support the COIC site's decision to either remove the offer record from the Refund/Apply Listing or to issue a manual refund must be retained for one year. At a minimum, the file should consist of:

Refunds of the applied application fee and TIPRA payment(s) are allowed if the taxpayer was in bankruptcy at the time the offer was received. The taxpayer’s deposit is always refundable in erroneous processability determination situations.

All IDRS manual refunds must be monitored to ensure they are issued to the taxpayer and to avoid duplicate refunds.

When a manual refund is generated:

There may be occasions where a taxpayer or Power of Attorney requests expedited processing of their OIC due to an emergency or perceived emergency situation. Situations that may warrant expedited case processing include (but are not limited to):

Processing Forms 656, Offer in Compromise, must be given priority consideration and handled expeditiously due to pending collection action.

Refer offers received with a request for expedited processing to management for a decision on whether or not expedited treatment is warranted.

If a decision is made to expedite offer processing, document the AOIC history indicating the basis for the decision. Form 656 should be clearly labeled at the top "Emergency Processing Requested." Immediate processability and assignment for investigation should be made.

Every effort should be made to close the offer within 90 calendar days of receipt. In an attempt to bring the case to a prompt and timely resolution and to meet the special needs of the taxpayer, immediate contact should be made with the taxpayer to request any additional information needed.

If a decision is made not to expedite the case, document the basis for the decision on the AOIC history. The manager will contact the taxpayer by telephone or correspondence explaining the basis for the decision. The case should be worked under routine processing.

Taxpayers who wish to be represented must submit a properly executed Form 2848, Power of Attorney and Declaration of Representative. Review the form to ensure it includes required essential elements for validity as listed in IRM 21.3.7.5.1, Essential Elements for Form 2848 and Form 8821. Input the representative's information on AOIC and retain a copy of the form in the paper case file. Forward the original for recording on the Centralized Authorization File (CAF).

Send all original correspondence to the taxpayer and provide a copy to the representative if the box is checked on the Form 2848.

Individuals who are not authorized to practice before the IRS with respect to a collection matter (such as unenrolled return preparer and registered tax return preparer) may accompany taxpayers to meetings with a completed Form 8821, Taxpayer Information Authorization, or other proper authorization, and receive and provide information that relates to the offer investigation. They are not authorized to represent the taxpayers or sign documents relating to offers in compromise. See IRM 5.1.10.7.2, Right to Retain Representation.

If the offer contains liabilities for tax years or periods that are not included on Form 2848, send a combo letter to the taxpayer asking for an updated Form 2848/8821.

If during the investigation, it is discovered that the POA no longer represents the taxpayer, secure a letter revoking the POA and document the case history. Remove the POA information from AOIC.

Where a recognized representative has unreasonably delayed or hindered an examination, collection, or investigation by failing to furnish, after repeated requests, non-privileged information necessary to the examination, collection or investigation, the IRS employee conducting the examination, collection, or investigation may be given permission to bypass the representative and contact the taxpayer directly for such information [26 C.F.R. 601.506 (b) (Statement of Procedural Rules)]. Prior to contacting the taxpayer directly, the IRS employee must first initiate bypass procedures. See IRM 5.1.23.6, By-Passing a Taxpayer's Authorized Representative.

Form 4442, Inquiry Referral, will be prepared by Automated Collection System (ACS), Toll Free, and Walk-in operations to provide information submitted by the taxpayer on a previously filed offer in compromise. Normally, these forms will be prepared if the taxpayer has yet to be contacted or notified of the status of the offer within 45 calendar days of the offer being submitted for processing.

Form 4442 will be faxed to the appropriate COIC sites. The forms should be reviewed within 48 hours of receipt and any necessary action taken on the account based on the information provided.

Taxpayers have a right to receive correspondence about their Offer in Compromise. The Service is required to exercise due diligence to find and use taxpayer’s last known address. It is important that all Undeliverable Mail is worked as a priority to ensure that the correspondence is mailed to the taxpayer’s current address.

IDRS research should be done utilizing the CC ENMOD or IMFOLE to see if there is a new address on file. If there is a new address, then re-mail the undeliverable notice in a new envelope. If no new address is found, telephone the taxpayer or POA for better address.

If the taxpayer is deceased, and there is no secondary taxpayer, POA, or fiduciary on file, do not re-mail the undeliverable notice. Instead, include the undeliverable notice in the case file. If there is a valid fiduciary or POA on file, re-mail the undeliverable letter to their address of record.

If the address on the USPS yellow address sticker is not on AOIC/IDRS, (1) re-mail the undeliverable letter to the address on the yellow sticker, (2) send Form 8822 , Change of Address, to the taxpayer, (3) add 30 days to the suspense date on AOIC and input remarks on AOIC documenting the actions taken.

The IRS may change an address using information received from the USPS, National Change of Address (NCOA) database. Upon receipt of any undeliverable mail piece with an affixed USPS "yellow label" , and IRS office should examine, research, and update the address as follows: