Appeals Offer in compromise closing procedures

Part 8. Appeals
Chapter 23. Offer in Compromise
Section 6. OIC Processing and Closing Procedures

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8.23.6 OIC Processing and Closing Procedures

• 8.23.6.1 Establishing New OIC Receipts
• 8.23.6.2 Offer in Compromise Closing Procedures (non-CDP)
• 8.23.6.3 Examination Originated DATL OIC Cases

8.23.6.1 (01-18-2011)
Establishing New OIC Receipts

1. This section provides instructions for APS personnel in establishing new Offer-in-Compromise (OIC) receipts and controls.
   
2. On the case inventory screen, follow normal procedures except for the following:
   
   1. TYPE - Enter OIC
      

      Note:

      If the offer is based upon Effective Tax Administration (ETA), add a Feature Code of "ET."
      
      
   2. Proposed Offer Amount (WUpropsdOfrAmt) - Enter the amount of offer as shown on the latest Form 656, Offer in Compromise, in the case file. If the original offer has been amended, use the amended offer amount for the WUpropsdOfrAmt.
      

      Note:

      One case folder could have more than one Form 656 all related to the same taxpayer such as an individual Form 656, a joint Form 656, and a sole proprietor Form 656. Be careful to input the proper WUpropsdOfrAmt to the work unit number (WUNO) associated with that particular Form 656.
      
      
   3. Request Appeal Date (REQAPPL) - Enter the date of the postmark of the taxpayer's protest letter.
      

      Note:

      The REQAPPL date for a non-CDP OIC is different than the date that is used for a CDP OIC. The REQAPPL date for a CDP OIC is the date-stamp received date appearing on page 1 of the Form 656.
      

      Note:

      For both non-CDP and CDP offers, if the Form 656 is received via fax or hand delivery, the REQAPPL date is the IRS received date of the request.
      
      

      Note:

      Whether or not an OIC is considered processable is not a factor in determining the REQAPPL date.
   
   
3. On the return information screen, enter the following:
   
   1. AIMS Indicator - Enter E since these cases are not controlled on AIMS
      
   2. Tax Period - Enter all tax periods associated with the case
      
   3. Statute Date - Leave blank
      
   4. Statute Code - Enter SUSP
      
   5. Proposed Def/-OA (Tax) - Enter the total unpaid liability amount on the earliest tax period. This may be found on Form 1271. On all subsequent tax periods, enter $ -0- (zero). If the tax has not been assessed, enter $ -0- (zero) for all tax periods.
      
   6. Duplication - Leave blank
   
   
4. Only one work unit should be created per Form 656, even if the offer involves multiple master-file transaction (MFT) records. Such will generally be the case where an individual owes income tax under the SSN, and employment tax as a sole proprietor under an employee identification number (EIN). In this case, the EIN will be the secondary TIN on the work unit. Use the MFT of the earliest tax period as the key case, enter the amount of the offer in the WUpropsdOfrAmt field, and enter the total of all unpaid liabilities on the first tax period. Enter zero in any remaining tax periods.
   

   Note:

   Refer to IRM 5.8.3.5 for instructions pertaining to the number of Forms 656 needed for any given situation.
   
   
5. Also include the primary business code (PBC) and source code (SC) when carding a case. The PBC is determined by the business unit supplying the case to Appeals. See the ACDS utilities menu for a list of PBCs. The SC is either CO (Collection) or SC (ACS).

8.23.6.1.1 (01-18-2011)
ACDS OIC Feature Codes

1. To more accurately identify OIC cases, the following ACDS feature codes should be used, when applicable:
   
   • CO - COIC investigated collection due process or equivalent hearing OIC
     
   • DO - OIC default
     
   • DP - OIC case resulting from a collection due process or equivalent hearing
     
   • ET - effective tax administration
     
   • LI - doubt as to liability
     
   • SP - OIC with special circumstances
     
   • T1 - economic hardship - TAS
     
   • T5 - systemic hardship - TAS
     
   • TF - transferee/transferor case

8.23.6.1.2 (01-18-2011)
Previously Accepted OIC (Potential Default) Cases Returned to Appeals

1. A taxpayer must agree to the terms set forth in the Form 656. The compromised amount remains a tax liability until the taxpayer meets all the terms and conditions of the offer. See Paragraph (i) of Section V of Form 656 (Rev. 03-2009).
   
2. Generally, if a taxpayer fails to meet any of the terms of an offer, the Service has the right to default the offer and pursue collection action against the taxpayer, for the full remaining liability. If the liability is jointly owed and the offer was submitted jointly, the default provisions apply only to the party failing to comply with the terms of the offer. See Paragraph (d) of Section V of Form 656 (Rev. 03-2009).
   
3. When an offer is proposed for default, the MOIC unit will send Form 2209, Other Investigation, for Appeals to consider defaulting the offer by issuing a formal letter of default.
   
4. Using the procedures below, establish the case on ACDS as a new receipt.
   
   1. Card the case in as an OIC case.
      
   2. For the STATCODE field, input CSED for the earliest statute period.
      
   3. Input only the earliest statute date in the STATDATE field.
      
   4. Identify the case as a potential default case by using ACDS feature code DO.
      
   5. Once the case is added to ACDS, assign it to the campus team with responsibility for working DO coded cases, except as noted in (6) below.
      
   6. The ATM is responsible for assigning the case and presenting the Form 2209 and any attachments to the appropriate Appeals Officer (AO) or Settlement Officer (SO).
   
   
5. When the case decision has been made, return the Form 2209 and any closing documents to the appropriate MOIC site. See IRM 8.23.4.5.
   
6. Occasionally, Appeals also receives a taxpayer's request to consider a "Compromise of a Compromise." See IRM 5.8.9.4. This request should also come from an MOIC unit, and be carded following the procedures in (2) above, with the following exceptions:
   
   1. In the NOTE field, enter "Compromise of a Compromise - Appeals OIC."
      
   2. Compromise of a Compromise proposals received on offers originally accepted by a field Appeals office will be assigned to the same Appeals team that originally accepted the offer.
      
   3. Compromise of a Compromise proposals on field and campus CDP offers that are subject to retained jurisdiction will be assigned to the field or campus team that accepted the CDP offer.
   
   
7. The taxpayer's request for consideration of the potential default or Compromise of a Compromise case should be made to the MOIC unit with responsibility for the taxpayer's case, in which case Appeals will receive a Form 2209. Occasionally, however, the taxpayer's request is made directly to the AO/SO or ATM previously associated with the accepted OIC. In this case, refer the taxpayer to the MOIC unit responsible for initiating the referral.

8.23.6.1.3 (01-18-2011)
Closing Procedures for a Potential Default Case

1. If Appeals determines the offer is in default, the AO/SO will prepare a formal default letter for the ATM's signature. See IRM Exhibit 5.8.9-4. Mail the signed letter to the taxpayer and/or POA and close the case on ACDS using Closing Code 14. Send the Form 2209 back to the originating MOIC unit along with a copy of the signed default letter.
   
2. If the taxpayer remedies the problem that gave rise to the potential default, Appeals will not issue the default letter. Close the case on ACDS using Closing Code 15, and return the Form 2209 back to the originating MOIC unit.
   
3. If the taxpayer and Appeals agree to a Compromise of a Compromise, the AO/SO will prepare a formal letter for the ATM's signature. See IRM 5.8.9.4 and Exhibit 5.8.9-2. Close the case on ACDS using Closing Code 15, and return the Form 2209, closing letter and any other documents to the originating MOIC unit.

8.23.6.1.4 (01-18-2011)
AOIC Closing Procedures for a Potential Default Case

1. When an OIC case is returned to Appeals as a potential default, take the following AOIC closing actions when the case is ready to be closed. To close a case on AOIC, the user must be profiled for the particular geographic region in which the case is assigned on AOIC.
   

   1. Screen	Input Actions
      AO Offers Query	TIN
      AO Offer	Select "Remarks"
      Add Remark to Case History	Select "Add Remark" and state: Defaulted or Not Defaulted. If applicable, state that a compromise of a compromise was accepted. State also that the case was returned to MOIC (Brookhaven or Memphis) Save

   
   
2. Return the Form 2209 and other documents to the appropriate MOIC site following directions in IRM 8.23.6.1.2, above.

8.23.6.1.5 (01-18-2011)
OICs Received with CDP or EH Case

1. A processable OIC received with or initiated during the course of a Collection Due Process (CDP) or Equivalent Hearing (EH) must be added to ACDS as a separate work unit. This includes OIC cases that are submitted before the CDP/EH case is filed, and then later associated with a CDP or EH case.
   
2. A CDP/EH case could result in more than one OIC. For example, related entities such as a joint return and a sole proprietorship will each be carded as a separate OIC work unit, but the case files should remain together.
   
3. No periods should be added to the CDP/EH case merely because they are included on the OIC. Often, a related offer will contain more periods than a CDP or EH case.
   
4. If the OIC and CDP/EH cases are received in Appeals together, and the OIC has already been determined to be processable (signed on page 4 of the Form 656 by an authorized IRS employee), both the CDP/EH case and the OIC case will be carded into ACDS at the same time, as separate work units. If the OIC is not signed on page 4, only the CDP/EH case will be carded in.
   
5. If the OIC is received or determined to be processable after the CDP/EH case has been carded-in, the AO/SO will provide a package to APS requesting that they add the OIC work unit to ACDS. The package will include the following:
   
   1. A copy of the related CDP/EH case summary card noted at the top to "Please Create OIC Work Unit" . Include feature code DP and enter into the NOTES field the following: XREF (work unit number of the related CDP/EH case).
      
   2. A copy of page one of Form(s) 656 identifying all periods included on the OIC, in addition to the received date-stamp. Input TPNAME, ADDRESS, TIN, MFT, Tax Periods, and offer amount as shown on Form 656.
      
   3. IMFOLI or BMFOLI (AO/SO will add the TOTAL ASSESSED BALANCE for all periods). This amount will be entered in the proposed tax (PROPDTAX) field on the earliest period only.
   
   
6. Follow normal carding procedures except for the following:
   
   • Type= OIC
     
   • Feature Code = DP. Also input this feature code on the CDP/EH work unit to indicate there is a related OIC.
     
   • Entries in SOURCE, DO, and PBC for the OIC(s) will be the same as those entries in the related CDP/EH case(s).
     
   • REQAPPL and RECDATE - For both, use the earliest date that is stamped in the upper right-hand corner of the Form 656.
     

     Note:

     The REQAPPL dates for CDP and non-CDP OICs are different. The REQAPPL date for a non-CDP OIC is the postmark date of the taxpayer's request for appeal.
     
     

     Note:

     Where a Form 656 has multiple date-stamps, use the earliest date for the REQAPPL and RECDATE.
   
   
   • STATDATE = RECDATE of OIC plus two years
     
   • STATCODE - "TIPRA" for all periods.
     

     Note:

     TIPRA is the STAT CODE used to monitor the two-year statute period under IRC 7122(f). See IRM 8.23.6.1.6, below.

8.23.6.1.6 (01-18-2011)
TIPRA Statute Considerations

1. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) created IRC 7122(f), which provides that if the IRS does not make a determination regarding whether to accept the OIC within 24 months from the date it is received by the IRS, it will be statutorily accepted. It is effective for all OICs received on or after July 16, 2006.
   
2. In the event the OIC is disputed in court, the 24 month period will not run while the case is in litigation. Likewise, the 24 month period does not run during the period a rejected OIC is being reviewed by Appeals.
   
3. Cases received with an open TIPRA statute are subject to special consideration when in Appeals. See IRM 8.22.2.4.7.1, TIPRA Considerations , and IRM 8.23.2, Receipt and Control of Non-CDP Offers, for discussions of the TIPRA statute.
   
4. Cases with an open TIPRA statute are subject to the same back-end processing time frames as are listed in IRM 8.21.3.1.7 and IRM 8.21.4.2; this means:
   
   1. The written concurrence of the ATM is required to keep the OIC case open beyond 120 days remaining on the 24-month TIPRA statute period; and
      
   2. The Appeals technical employee is responsible for ensuring the OIC case is presented to APS for closing with at least 90 days remaining prior to the expiration of the 24-month TIPRA statute period.
      
   3. If less than 90 days remain on a TIPRA statute, the PTM should be notified via encrypted E-mail when the case is to be presented to APS. To verify receipt of the case, APS should ensure a Form 3210 is received from the ATM or Appeals technical employee.
      
   4. APS should ensure timely closing actions are taken on the case. Responsibility for such statutes is jointly held by the PTM and the ATM.

8.23.6.2 (10-16-2007)
Offer in Compromise Closing Procedures (non-CDP)

1. This section provides procedures for closing out completed OIC cases, except for offers worked as part of a CDP or EH case. CDP/EH offer procedures are in IRM 8.22.3, Back-end Processing for CDP and Equivalent Hearing Cases.
   
2. The following types of offers originate in the Collection function and are controlled on the Automated Offer in Compromise (AOIC) system:
   
   • Doubt as to Collectibility (DATC)
     
   • Effective Tax Administration (ETA) based upon both economic hardship and public policy/equity considerations
     
   • Combination Doubt as to Liability (DATL) and either DATC or ETA
   
   
3. DATL offers involving Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET) assessments are worked by Collection and are controlled on AOIC.
   
4. DATL offers involving liabilities other than TFRP and PLET assessments originate in the Examination function and are not controlled on AOIC.

8.23.6.2.1 (01-18-2011)
Counsel Review of Accepted OIC

1. Counsel is required to review all offers when the total unpaid liability (including all assessed and accrued penalties and interest) for all related offers for the same taxpayer is $50,000 or more. The purpose of Counsel's review is to determine whether the offer legally meets the standards of doubt as to collectibility, doubt as to liability, or the promotion of effective tax administration. This amount is generally shown on the Form 7249, Offer Acceptance Report. However, taxpayers must now make up-front payments when filing an offer and sometimes make additional periodic installment payments while the offer is being considered. These offer payments are applied directly to the tax debts and are not refundable. If the balance owed exceeded $50,000 before the offer payments were applied, Counsel's review is still required, so there may be cases where the Form 7249 shows a total balance owed of less than $50,000, but the case must still be sent to Counsel for review.
   
2. It is the responsibility of the Appeals technical employee who is recommending the OIC for acceptance to prepare the Form 7249 and ensure its accuracy.
   
3. If acceptance of the offer is subject to Counsel's approval, local procedures will dictate how to proceed. Due to the variables involved in managing different sized offices and employees in remote offices, each office may utilize APS differently in order to most effectively manage and control the flow of cases and input the required data at the appropriate time.
   
   1. The ATM will either sign or initial (per local procedures) but not date the Form 5402. This indicates the ATM's preliminary approval of the offer.
      
   2. If the ATM routes the case to Counsel through APS, insure that ACDS is updated with "DCOTHER" , and then forward the file to Counsel using Form 3210.
      
   3. In offices where no APS presence exists, the ATM will forward the file to Counsel and contact the applicable APS team so ACDS can be updated accordingly.
   
   
4. Counsel will sign and date Form 7249 to certify that all of the legal requirements for compromise have been met.
   
   1. If Counsel does not sign the form, the case must be returned to the AO/SO or ATM (per local procedures) as the Offer cannot be compromised until the legal issues are resolved.
      
   2. If Counsel signs the Form 7249, route the case to either the AO/SO or ATM (per local procedures) so the CAR can be updated, closing documents signed and ACAPDATE input.

8.23.6.2.2 (01-18-2011)
Year-End OIC Acceptance Processing

1. If an offer is based upon Doubt as to Collectibility or Effective Tax Administration (Hardship), the Form 656 provides that IRS will keep any refund due the taxpayer for tax periods extending through the calendar year in which the IRS accepts the offer, as well as for prior tax years. These terms are specified on the Acceptance Letter 673 that is issued to the taxpayer, and include the year in which the offer is accepted.
   
2. Appeals may encounter delays in processing an accepted OIC for the following reasons:
   
   • Time spent in review by IRS Counsel
     
   • Approval delays due to remote managers or employees
     
   • Processing or shipping delays
     
   • Other issues
   
   
3. Because of the possibility of delay due to processing or other issues, it is important to verify that the acceptance letter contains the correct year of acceptance and years to which the refund offset provisions apply.
   
4. Appeals staff preparing acceptance letters can generally help ensure they contain the correct tax years by ensuring cases are received by APS, with all approvals, by the second Friday of December. Cases that cannot be received by APS by the second Friday of December should have acceptance letters that reflect the following calendar year as the year in which the offer is accepted.
   
5. If a new calendar year has begun and the acceptance letter contains the wrong years, at local discretion, APS may return the case file to the ATM to have the acceptance letter corrected, or advise the ATM via encrypted E-mail that the letter needs to be corrected, and the ATM's office may sign and mail the corrected letter to APS.

8.23.6.2.3 (01-18-2011)
Collection Originated OIC Acceptance Procedures

1. The work unit will be assigned to the Tax Examiner on the Processing Employees Automated System (PEAS) for closing, with PEAS TYPE "CLS" and the appropriate SubTYPE for the case. Generally, PEAS SubTYPE "ACDS Only" will apply.
   
2. For an accepted OIC, the case will flow as follows:
   
   1. The AO/SO completes the case and submits it to the ATM for approval. See IRM 8.23.6.2.1, if Counsel review is required.
      
   2. The ATM signs the Form 7249 and OIC Acceptance Letter 673, dates and signs the Form 5402, and enters the ACAPDATE on ACDS.
      
   3. The ATM submits the case to APS for final closing.
   
   
3. The Appeals Office will send the case to the appropriate APS Campus location for closing. The next section has information on closing the case on AOIC.
   
4. The OIC case file will contain the following documents:
   
   • Original Form 656, Offer in Compromise
     
   • Original Amended Form 656, if applicable
     
   • Original Form 7249, Offer Acceptance Report
     
   • Redacted copy of Form 7249 attached to redacted copies of TDS or MFTRAX transcripts
     
   • Collection's rejection letter
     
   • Taxpayer's written request for appeal and envelope used for mailing the taxpayer's request for appeal
     
   • Form 5402, Appeals Transmittal and Case Memorandum
     
   • Appeals Case Memorandum, if applicable
     
   • Financial information, including Form 433-A and/or Form 433-B, bank statements, property records, and other information used to make the acceptability determination
     
   • Copy of the OIC acceptance letter
   
   
5. If an offer is received from one spouse on a joint liability, the MOIC site is responsible for creating mirror assessments on the accepted OIC.
   
6. Close the OIC work unit on ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 15 (OIC Accepted)
      
   2. WUaccptOfrAmt = No entry
      
   3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402 or Form 7249, under "Terms of this Offer" ). Enter 0 (zero) for all other tax periods
      
   4. Paycode = 7
      
   5. NOTE - Accepted OIC file to XXXXXXX (Offers worked by Collection Field), or Accepted OIC file closed on AOIC (Offers work by Collection Campus) and sent to XXXXXXXX
   
   
7. The following table provides information on when Appeals can and cannot close the case on AOIC. The next section of this IRM contains information for actually closing applicable cases on AOIC.
   

   If ...	Then ...
   The offer was originally worked by a COIC campus site	Update AOIC with the appropriate closing information. SeeIRM 8.23.6.2.3.1.
   The offer was originally worked by a Collection Field offer group	Print the first page of AOIC and attach it to the front of the case file. Forward the file to the appropriate Area Collection Field Office OIC Coordinator as shown on the list ofCollection Drop Points for Appeals, which is available in the APS section of the Appeals web site on the "Case Routing - Closed Cases" page, under "Guidance" . Collection will then update AOIC with the appropriate closing information.

   
   
8. Date and mail the acceptance letter to the taxpayer and/or POA and include as attachments:
   
   1. A copy of the Form 656 or amended Form 656
      
   2. A copy of the co-obligor agreement, if applicable (generally used only if one individual is compromising a joint tax debt)
      
   3. A copy of the collateral agreement ( Form 2061), if applicable (collateral agreements are not common)
   
   
9. Make copies of the above and the Form 7249 for the office administrative file.
   
10. Send one copy of the redacted Form 7249 attached to copies of the redacted TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the public inspection file. The address list for where to send the OIC public inspection file is in the APS section on the Appeals web site at OIC Public Inspection File Locations.
    
11. Fax a copy of the Form 5402 and ACM to the Collection analyst named on the Form 5402.
    
12. Send the case file to the appropriate campus MOIC unit based on the state where the taxpayer resides. The listing of states associated with both the Brookhaven and Memphis MOIC units (back-end OIC) and their mailing addresses are available on SERP under the "Who/Where" tab.
    
13. Close PEAS using Closing Code 03 with a completion date equal to the date the above actions were completed.
    
14. Process any OIC payments with the appropriate disposal code on Form 3244, Posting Voucher. After the case is closed, the taxpayer should send payments directly to the campus OIC unit.
    
15. Collection also works Doubt as to Liability offers when the tax debt involves a trust fund recovery penalty (TFRP) or personal liability for excise tax (PLET) assessment. These case are also loaded on AOIC.
    
16. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.3.1 (01-18-2011)
AOIC Closing Procedures for Accepted Offer

1. This section provides general information for closing an accepted OIC case on the AOIC system. To close a case on AOIC, the user must be profiled for the particular geographic region to which the case is assigned on AOIC.
   
2. As soon as possible after the Acceptance Letter 673 is issued, the case must be closed, validated and released on AOIC with the case file sent to the appropriate MOIC campus for monitoring. It is critical that the necessary actions are promptly taken to close the case on AOIC and the case immediately sent to MOIC because:
   
   • IRS releases a tax lien once the taxpayer pays the accepted offer amount in full, and
     
   • MOIC is responsible for monitoring the taxpayer's compliance with the terms and conditions of the offer, so the closing information and case file are needed for this purpose, and
     
   • The need to close aged case inventory as soon as possible.
   
   
3. Follow the table below for general input actions related to closing accepted OIC cases on the AOIC system:
   

   Screen	Input Fields
   Query	Enter TIN
   AO Offer Query Results	Select case from list
   AO Offer Update	Select case from list Reassign case to Appeals closures Select "Submit" and move to "Input" screen
   Update AO Offer	Offer amount (if changed) Select Original or Amended Offer Verify "Offer Type" Select Submit and return to "AO Offer" screen
   AO Offer	Select MFT Tab
   MFT Summary	Update "Accrued Date" Update liability amounts Save inputs and return to "AO Offer" screen
   AO Offer	Verify total liability amounts (from Form 7249, Offer Acceptance Report) Select "Terms" Select "Update Terms" Verify "Terms Type" Input payment terms (from Form 7249) Input Collateral Agreement terms, if any. Include the form number of the collateral agreement (Form 2261, 2261-A, 2261–B, etc.) Select "Submit"
   AO Offer	Select Remarks Add remarks to state "Accepted in Appeals - Sending to the MOIC unit" (Brookhaven MOIC or Memphis MOIC) Select "Save"
   Remarks & Case History	Select "Remarks and Case History" Print one copy of Remarks and Case History screen (page 1 only). Include this with the closed office file. Return to "AO Offer" screen
   AO Offer	Select "Update Offer"
   Update AO Offer	Select "Final Disposition"
   Update Final Disposition	Select "2 - Accepted by Appeals" Input the mail date of the rejection with appeal rights letter Input the mail date of the Appeals acceptance letter Was the offer accepted under ETA/DCSC criteria? Select answer from drop-down menu. Select "Submit " and return to "AO Offer" screen
   AO Offer	From this screen, verify the case is closed. Also from this screen, check for related offers. If applicable, take necessary closing actions for related offers. Print three copies of the final AO Offer screen for: The administrative file, closed office file, and for validation by the manager.

   
   
4. As soon as possible after closing the closed accepted offer on AOIC, validate and release it to the appropriate MOIC campus for monitoring. Validation and release on AOIC is required.
   
5. Once the case is validated, control of the offer goes to MOIC, and the file must be sent to them as soon as possible. Use the destination list from the drop down menu to determine where the file must be sent.
   

   Note:

   If there are related cases with different business operating division (BOD) codes (W&I and SBSE), the SB campus will monitor both offers.
   
   
6. Prepare Form 3210 and mail to the appropriate MOIC campus. Be sure the file contains the original copies of:
   
   • Initial Form 656, Offer in Compromise
     
   • Amended Form 656, if applicable
     
   • Signed Acceptance Letter 673 (may be a signed copy)
     
   • Form 7249, Offer Acceptance Report
     
   • Co-obligor agreement, if applicable
     
   • Collateral agreement, if applicable

8.23.6.2.4 (01-18-2011)
Collection Originated Withdrawn OIC Procedures

1. The case file for a withdrawn Offer in Compromise should contain:
   
   • Form 5402
     
   • ACM
     
   • Withdrawal Letter 241 signed by the ATM
     
   • Collection/COIC rejection letter
     
   • Taxpayer's request for appeal and envelope with postmark
     
   • Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, if applicable
     
   • Form 433-D, Installment Agreement, if applicable
   
   
2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or Collection is responsible for mirror assessment actions on a withdrawn or rejected OIC.
   
3. Close ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 16 (OIC withdrawn)
      
   2. Paycode = 7
      
   3. WUaccptOfrAmt = No entry
      
   4. RevsdTax = For the earliest tax period, the entry is the same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0
      
   5. NOTE - Withdrawn offer file to XXXXXXXX (Collection Field) or closed on AOIC (Collection Campus). The notation will inform anyone where the case was shipped or how it was closed.
   
   
4. If an alternative resolution was reached, such as an installment agreement (Form 433-D) or having the account placed in currently non-collectible (CNC) status, process the alternative resolution. If the alternative is to have the account placed in CNC status, the AO/SO should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402.
   
5. The following table provides information on when Appeals can and cannot close the case on AOIC. The next section of this IRM contains information for actually closing applicable cases on AOIC.
   

   If ...	Then ...
   The offer was originally worked by a COIC campus site	Update AOIC with the appropriate closing information. See IRM 8.23.6.2.4.1.
   The offer was originally worked by a Collection Field offer group	Print the first page of AOIC and attach it to the front of the case file. Forward the file to the appropriate Area Collection Field Office OIC Coordinator as shown on the Non-CDP OIC Cases (with CO Source Code) Field Area Drop Points for Closed Cases, which is available in the APS section on the Appeals web site. Collection will then update AOIC with the appropriate closing information.

   
   
6. Date and mail the Withdrawal Letter 241 to the taxpayer and/or POA concurrent with closing the case on ACDS. Keep a copy in the administrative file.
   

   Note:

   The legal withdrawal date is the IRS received date if the taxpayer's withdrawal letter was mailed certified or hand delivered, in which case the date should be indicated by the AO/SO in the body of the Letter 241. If the request to withdraw was received by any other method, the withdrawal date is the date the Letter 241 is mailed to the taxpayer.
   
   
7. If an offer deposit was made and input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.
   

   Note:

   An offer deposit is normally returned to the taxpayer unless the taxpayer provides written authorization allowing IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization signed by the taxpayer should be included in the file and routed to the MOIC campus that processed the payment.
   
   
8. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.
   
9. Collection also works Doubt as to Liability offers when the tax debt involves a TFRP or PLET assessments. These case are also loaded on AOIC.
   
10. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.4.1 (01-18-2011)
AOIC Closing Procedures for a Withdrawn Offer

1. This section provides general information for closing a withdrawn OIC case on the Automated Offer in Compromise (AOIC) system. To close a case on AOIC, the user must be profiled for the particular geographic region to which the case is assigned on AOIC.
   
2. AOIC INPUT (Query Offer Number)
   

   Screen	Input Actions
   Query	Input TIN
   AO Offer Query Results	Select case from list Reassign case to Appeals closures Select "Submit" and return to "AO Offer" screen
   AO Offer	Select "Update Offer"
   Update AO Offer	Select "Update Offer" Select "Final Disposition" Select "9 - Withdrawal" Input the mail date of the rejection letter with appeal rights Input the mail date of the Appeals withdrawal letter Input the legal date of the withdrawal (indicated on the withdrawal letter) If a deposit was made, select the appropriate response from the drop-down menu Select "Submit" and return to AO Offer screen
   AO Offer	Verify the case is closed
   AO Offer	Add remarks - Withdrawn in Appeals and file is being sent to (appropriate address)

   
   

   Note:

   An offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.
   
   
3. Print the first page of AOIC for the case and attach it to the front of the closed file. Route the case file back to the Area Office/COIC Offer Coordinators. They will maintain the closed offer file until time to ship to the FRC. Attaching the first page from AOIC will assist them in routing the case properly.

8.23.6.2.5 (01-18-2011)
Collection Originated Rejected OIC Procedures

1. The file for a case where Appeals sustained Collection's rejection of the offer should contain:
   
   • Form 5402
     
   • ACM
     
   • Appeals rejection letter 238 signed by the ATM
     
   • Form 1271
     

     Note:

     The Form 1271 in the file will most likely be the one that was originally prepared by Collection. Appeals will prepare a Form 1271 if one was not previously prepared by Collection.
     
     
   • Form 3040, if applicable
     
   • Collection/COIC rejection letter
     
   • Taxpayer's written request for appeal and envelope with postmark
     
   • Form 433-D, if applicable
   
   
2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or Collection is responsible for creating mirror assessments on a withdrawn or rejected OIC.
   
3. Close the OIC work unit on ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 14 (OIC rejection sustained)
      
   2. WUaccptOfrAmt = No entry
      
   3. Paycode = 7
      
   4. RevsdTax = For the earliest tax period, the entry is the same as the proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0
      
   5. NOTE - Rejected offer file to XXXXXXXX, or rejected offer closed on AOIC.
   
   
4. If an alternative resolution was reached, such as an installment agreement (Form 433-D) or having the account placed in currently not-collectible (CNC) status, process the collection alternative. If the alternative is to have the account placed in CNC status, the AO/SO should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402.
   
5. The following table provides information on when Appeals can and cannot close the case on AOIC. The next section of this IRM contains information for actually closing applicable cases on AOIC.
   

   If ...	Then ...
   The offer was originally worked by a COIC campus site	Update AOIC with the appropriate closing information. See IRM 8.23.6.2.5.1.
   The offer was originally worked by a Collection Field offer group	Print the first page of AOIC and attach it to the front of the case file. Forward the file to the appropriate Area Collection Field Office OIC Coordinator as shown on the Non-CDP OIC Cases (with CO Source Code) Field Area Drop Points for Closed Cases, which is available in the APS section on the Appeals web site. Collection will then update AOIC with the appropriate closing information.

   
   
6. Date and mail the Appeals OIC rejection letter 238 to the taxpayer and/or POA concurrent with closing the case on ACDS. Retain a copy of the letter in the administrative file.
   
7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.
   

   Note:

   An offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.
   
   
8. Close PEAS using PEAS closing code 03 with a completion date equal to the date the above actions were completed.
   
9. Collection also works Doubt as to Liability offers when the tax debt involves a TFRP or PLET assessments. These case are also loaded on AOIC.
   
10. Closing procedures for OICs that are part of a CDP case are found in IRM 8.22.3.

8.23.6.2.5.1 (01-18-2011)
AOIC Closing Procedures for Rejected Offers

1. This section provides general information for closing a rejected OIC case on the Automated Offer in Compromise (AOIC) system. To close a case on AOIC, the user must be profiled for the particular geographic region to which the case is assigned on AOIC.
   
2. Follow the steps in the table below for general instructions for closing AOIC for rejected OIC cases.
   

   Note:

   Make sure all screens are updated if an amended offer was secured.
   
   

   Screen	Input Actions
   Query	Input TIN
   AO Offer Query Results	Select case from list
   AO Offer	Select case from list Reassign case to Appeals closures Select "Submit" and return to "AO Offer" screen
   AO Offer	Select "Remarks" and indicate the offer was rejected
   Remarks and Case History	Select "Submit" and return to "AO Offer" Screen
   AO Offer	Select "Update Offer"
   Update AO Offer	Final Disposition
   Update Final Disposition	Select "3 - Rejection Sustained" Input the mail date of the rejection letter with appeal rights Input the mail date of the Appeals rejection letter Input the RCP amount (from Form 5402). If "0" or no amount is given on the 5402, use the IMFOLI/BMFOLI "total assessed balance" from IDRS) Select "Submit" and return to AO Offer screen
   AO Offer	Verify the case is closed

3. An offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.
   
4. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

8.23.6.3 (01-18-2011)
Examination Originated DATL OIC Cases

1. Offers originating in Exam are referred to as DATL offers. Exam will also handle Effective Tax Administration (ETA) offers based upon public policy or issues of equity.
   
2. DATL offers originating in Exam are generally not controlled on the Automated Offer in Compromise (AOIC) system. However, ETA offers based upon public policy/equity consideration are controlled on the AOIC system.
   
3. The work unit will be assigned to the Tax Examiner on PEAS for closing, with PEAS TYPE "CLS" and the appropriate SubTYPE for the case.
   
4. These DATL offers will be identified on ACDS by using feature code "LI" .
   
5. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:
   
   1. Manually input TC 481 using the date the case is closed/ Appeals rejection letter date.
      
   2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter.

8.23.6.3.1 (01-18-2011)
Non-Examination Originated DATL OIC Cases

1. Collection handles DATL offers involving TFRP and PLET liabilities. For acceptance closing procedures for TFRP and PLET cases, See IRM 8.23.6.2.3.
   
2. These DATL offers will be identified on ACDS by using feature code "LI" .
   

   Note:

   For DATL offers, TFRP and PLET liabilities are loaded onto AOIC, so follow the AOIC closing procedures for accepted (IRM 8.23.6.2.3), withdrawn (IRM 8.23.6.2.4) and rejected (IRM 8.23.6.2.5) cases.
   
   
3. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:
   
   1. Manually input TC 481 using the date the case is closed/Appeals rejection letter date.
      
   2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter.

8.23.6.3.2 (01-18-2011)
Examination Originated OIC Acceptance Procedures

1. The OIC case file will contain the following documents:
   
   • Original Form 656, Offer in Compromise
     
   • Amended Form 656, if applicable
     
   • Original Form 7249, Offer Acceptance Report
     

     Note:

     Counsel review and signature on Form 7249 is required when the total unpaid liability (including all assessed and accrued penalties and interest) for all related offers on the same taxpayer is $50,000 or more. See IRM 8.23.6.2.1.
     
     
   • Redacted copy of Form 7249, Offer Acceptance Report, attached to redacted TDS or MFTRAX transcripts
     
   • Form 5402, Appeals Transmittal and Case Memorandum
     
   • Appeals Case Memorandum, if applicable
     
   • Examination rejection letter
     
   • Taxpayer's written request for appeal and envelope with postmark (if applicable)
     
   • Acceptance Letter 673 signed by the ATM
   
   
2. The AO/SO will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS. If the case is controlled on AIMS, close the case on AIMS according to standard procedures.
   
3. Close the OIC work unit on ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 15 (OIC Accepted)
      
   2. WUaccptOfrAmt = No entry
      
   3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402 or the "Terms of this Offer" section on Form 7249). For all other tax periods, enter 0 (zero).
      
   4. Paycode = 7
   
   
4. The following closing actions should occur on the date the case is closed on ACDS:
   
   1. Date and mail the acceptance letter to the taxpayer and/or POA and include copies of the Form 656 or amended Form 656 and any collateral agreements as attachments
      
   2. Copy the acceptance letter with attachments for the administrative file
      
   3. Send one copy of the redacted Form 7249 attached to redacted copies of TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the Public Inspection File. The case file should already contain a copy of the redacted Form 7249 and redacted TDS or MFRTAX transcripts. The address list for where to send the OIC Public Inspection Files is in the APS section on the Appeals web site at OIC Public Inspection File Locations.
      
   4. Ensure the OIC file contains the information in (1) above (except TDS or MFTRAX).
      
   5. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.
      
   6. Return the case file to the originating Exam office.
      
   7. Process any OIC payments to the campus OIC unit. After the case is closed, the taxpayer should send payments directly to the campus OIC unit.

8.23.6.3.3 (01-18-2011)
Examination Originated Withdrawn OIC Procedures

1. When the AO and the taxpayer reach an agreement on the correct tax liability, a "compromise" is not required and the taxpayer will generally withdraw the offer in compromise.
   
2. The case file for a withdrawn offer in compromise should contain:
   
   1. Form 5402
      
   2. ACM, if information not already contained in Form 5402
      
   3. Withdrawal Letter 241 signed by the ATM
      
   4. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable
      
   5. Examination rejection letter
      
   6. Taxpayer's written request for appeal and envelope with postmark
      
   7. Form 3870, Request for Adjustment, if applicable
      
   8. Form 433-D, Installment Agreement, if applicable
   
   
3. Close ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 16 (OIC withdrawn)
      
   2. Paycode = 7
      
   3. WUaccptOfrAmt = No entry
      
   4. RevsdTax for earliest tax period = Should be the same as proposed tax. The "total assessed balance" from IMFOLI or BMFOLI may also be used. RevsdTax for other periods = $0
   
   
4. If an alternative resolution was reached, such as an installment agreement (Form 433-D) or having the account placed in currently non-collectible (CNC) status, process the collection alternative. If the alternative is to have the account placed in CNC status, the AO/SO should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402.
   
5. The AO will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.
   
6. For a case that is not on AOIC, manually input TC 482 using the same date as the withdrawal date that is indicated in the closing letter.
   

   Note:

   The legal withdrawal date is the IRS received date if the taxpayer's withdrawal letter was mailed certified or hand delivered, in which case the date should be indicated by the AO/SO in the body of the Letter 241. If the request to withdraw was received by any other method, the withdrawal date is the date the Letter 241 is mailed to the taxpayer.
   
   
7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.
   

   Note:

   An offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.
   
   
8. Date and mail the Withdrawal Letter 241 to the taxpayer and/or POA. Keep a copy in the administrative file.
   
9. Return the case to the originating Exam office.
   
10. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

8.23.6.3.4 (01-18-2011)
Examination Originated Rejected OIC Procedures

1. A case is processed as Appeals sustaining rejection of the offer when the taxpayer does not agree with the conclusion of the AO and does not otherwise withdraw the offer.
   
2. The case file for a rejected Offer in Compromise should contain:
   
   1. Form 5402
      
   2. Appeals rejection letter 238 signed by the ATM
      
   3. ACM
      
   4. Form 1271, Rejection and Withdrawal Memorandum
      

      Note:

      The Form 1271 in the file will most likely be the one that was originally prepared by Exam. Appeals will prepare a Form 1271 if one was not previously prepared by Exam.
      
      
   5. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable
      
   6. Examination rejection letter
      
   7. Taxpayer's written request for appeal and envelope with postmark
      
   8. Form 3870, Request for Adjustment, if applicable
      
   9. Form 433-D, Installment Agreement, if applicable
   
   
3. Close ACDS following general closing instructions. In addition:
   
   1. CLOSINGCD = 14 (OIC rejected)
      
   2. Paycode = 7
      
   3. WUaccptOfrAmt = No entry
      
   4. RevsdTax for earliest tax period = same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = 0
   
   
4. For a case that is not on AOIC, manually input TC 481 using the same date the case is closed/Appeals rejection letter date.
   
5. If an alternative resolution was reached, such as an installment agreement or having the account placed in currently non-collectible (CNC) status, process the collection alternative. If the alternative is to have the account placed in CNC status, the AO/SO should clearly state such a request and indicate the appropriate TC 530 Closing Code (24-32) on the Form 5402.
   
6. The AO will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.
   
7. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.
   

   Note:

   An offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.
   
   
8. Date and mail the Appeals OIC Rejection Letter 238 to the taxpayer and/or POA. Retain a copy in the administrative file.
   
9. Return the case to the originating Exam office.
   
10. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

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