Friday, August 17, 2012

offer in compromise acceptance or rejection

Part 8. Appeals

Chapter 23. Offer in Compromise

Section 4. Acceptance, Rejection Sustention, and Withdrawal Procedures for non-Collection Due Process (CDP) Offers


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

Manual Transmittal

October 25, 2011

Purpose

(1) This transmits revised IRM 8.23.4, Offers in Compromise, Acceptance, Rejection Sustention, and Withdrawal Procedures for non-Collection Due Process (CDP) offers.

Material Changes

(1) The following significant changes were made to this IRM.
IRM Number Description of Change
8.23.4.1 Changed title to: Procedures for Closing Non-Collection Due Process (CDP) Offers.
8.23.4.1(4) Added that the Appeals OIC web page also has some sample closing letters available for use.
8.23.4.2(1), Note & (5) Added reference to the Form 656 addendum in several locations.
8.23.4.2(2) Deleted example.
8.23.4.2(4) Added a caution to state that, for ex parte purposes, carefully review current published guidance before any contact with another function. Be sure to document the case activity record with the purpose of the contact, what was discussed, and the information that was received. Always seek to limit the scope of communications with other functions.
8.23.4.2.2(2) Added that the requirement for Counsel review is generally based on the liability at the time of submission, not at the time of acceptance. For example, if the application of TIPRA payments reduced the liability(s) below the required $50,000, the offer(s) will still require Counsel review before acceptance.
8.23.4.2(6) Added that MFTRA-X may still be secured, in addition to a Transcript Delivery System (TDS) transcript. Also added that a copy of the Form 7249 should be redacted prior to submitting the case to APS. Included a list of items to be redacted from the Form 7249 and transcripts. Clarified redaction rules.
8.23.4.2(7) Added language to state that an amended Form 656 or addendum secured by Appeals need not be signed by any Service representative as the "Authorized Internal Revenue Service Official" (Section 11 of Form 656). Since each offer only has one TC 480 date, a second signature may confuse APS or COIC, causing input of another TC 480 date. Additional periods may be added to the Form 656 without need of an addendum or amended Form 656.
8.23.4.2.1(1)(m) Deleted the note stating that an offer involving an IRS employee requires Area Director approval. This approval level is still correct, but the Note was removed.
8.23.4.2.1(5) Removed (a) and (b), as it is no longer required to send a copy of an acceptance ACM and Form 5402 to the Appeals OIC analyst for Tax Policy and Procedures for any Doubt as to Collectibility with Special Circumstances (DATC-SC) or Effective Tax Administration (ETA) offers.
8.23.4.2.1(6)(b) Included that a redacted copy of Form 7249 should be attached to redacted copies of MFTRAX or TDS transcripts for each tax period that is included on the Form 656.
8.23.4.2.1(6)(f) Added "addendum"
8.23.4.2.2(6)(4) Included a note that If an offer is rejected after receiving an unfavorable review for legal sufficiency by IRS Counsel, either the ATM or SO should input an entry into CARATS to explain the outcome of the Counsel review, and the general reasons why the offer was rejected.
8.23.4.2.2(6)(4) Included a reminder that when rejection of an offer is sustained by Appeals after receiving an unfavorable review for legal sufficiency by IRS Counsel, upon closure of the case, Counsel's memorandum should be forwarded to the OIC analyst for Appeals Tax Policy & Procedures.
8.23.4.2.2(8) Clarified that the AO/SO will input AC/FR after the case is returned from review by the Area Director or Director of Field Operations.
8.23.4.3(1) Added language to state that, generally, prior to issuance of the rejection letter, an attempt should be made to advise the taxpayer of the decision to reject the offer.
8.23.4.3(3) Clarified that Appeals will sustain Examination's rejection of a Doubt as to Liability 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 OIC.
8.23.4.3(4) Deleted examples.
8.23.4.3(5) Added language to state that if it is apparent that either an IA or CNC are appropriate resolutions, and the taxpayer's ability to pay has been conclusively determined, generally, it is good tax administration for Appeals to grant the IA or declare the tax periods CNC.
8.23.4.3(6) Stated that if the taxpayer qualifies for any in-business trust fund express, streamlined or guaranteed installment agreement, Appeals will process the agreement.
8.23.4.3(10) Added language to state that another written format other than Form 3040 may be used as authorization to apply an offer deposit.
8.23.4.3.1(3) Removed (a) and (b), as it is no longer required to send a copy of the ACM to the Appeals OIC analyst for Tax Policy and Procedures when an ETA or DATC-SC offer considered under public policy/equity is rejected. Also, rejection approval is now at the ATM/ATCL level for these offers.
8.23.4.4(4) Clarified language for when an OIC is considered withdrawn. If the taxpayer verbally withdraws the offer or sends a written withdrawal via regular mail, fax or manner other than certified mail or hand-delivery, the offer is considered withdrawn as of the date Appeals mails the withdrawal letter to the taxpayer.
8.23.4.4(6) Added language to state that if it is apparent that either an IA or CNC are appropriate resolutions, and the taxpayer's ability to pay has been conclusively determined, generally, it is good tax administration for Appeals to grant the IA or declare the tax periods CNC.
8.23.4.4(7) Added that if the taxpayer qualifies for any in-business trust fund express, streamlined or guaranteed installment agreement, Appeals will process the agreement.
8.23.4.4.1(1)a) Added that the date in which an offer is withdrawn (if known) should be included in the ACM.
8.23.4.5(1) Added to use the "DO" feature code.
8.23.4.5(2) and (3) Added to include DM and AC/FR entries when closing a potential default offer case.
8.23.4.5(4) and (6) Added cross references to IRM 8.23.3.14.
8.23.4.5(4) Clarified procedures for potential default offers involving deceased taxpayers.
8.23.4.5(5) Added closing codes for potential default offer cases. These now appear on the Customized Form 5402 for potential default cases.
8.23.4.5(6) Added cross reference for a compromise of a compromise case.
8.23.4.5(7) Added cross reference to IRM 5.8.9 for offer rescission procedures.
8.23.4.6(1) Added language to complete and sign Form 13370, Fast Track Mediator's Report, at the conclusion of a successful mediation.
8.23.4.6(2) Added language regarding closing procedures where a mediation is not successful.
8.23.4.6(3) Added language to state the ATM will initial and date closing documents to be furnished to APS.
8.23.4.6(4) Renumbered from former 8.23.4.6(1).
8.23.4.6(5) Renumbered from 8.23.4.6(2).
8.23.4.6(6) Added language to state that the TPP analyst responsible for OIC and TFRP ADR should be contacted with questions or concerns about the program.
Additional Changes Minor editorial updates were made throughout.
Additional Changes Due to the above changes, some renumbering of this section has occurred. Become familiar with those sections you use most.

Effect on Other Documents

IRM 8.23.4 dated August 28, 2009 is superseded.

Audience

Appeals Employees

Effective Date

(10-25-2011)
Susan L. Latham
Director, Tax Policy and Valuation

8.23.4.1 (10-25-2011)
Procedures for Closing Non-Collection Due Process Offers

  1. When Appeals makes a decision on an Offer in Compromise (OIC) case, the basis of that decision must be adequately documented. The Appeals Officer (AO), Settlement Officer (SO) or Account Resolution Specialist (AARS) / Collection Specialist 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. This section provides procedures for the AO/SO/Collection Specialist to close out accepted, rejected, or withdrawn non-Collection Due Process (CDP) OIC cases. Back-end closing procedures for the Appeals Processing Section (APS) are found in IRM 8.23.6, OIC Processing and Closing Procedures.
  2. The Appeals Case Memorandum (ACM) contains the detailed basis for the AO/SO/AARS/Collection Specialist's recommendation. The approving official relies significantly on the information detailed in the ACM. Also, just as Appeals must provide to the taxpayer an explanation as to why the offer was not acceptable, Appeals must provide to SBSE an explanation as to why their decision to reject the offer was overturned. The ACM may include a brief or long narrative depending on the complexity of the case. The ACM should include all information having a bearing on the overall decision in the case.
  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 the Form 5402 directly from APGolf as opposed to using a saved Word version. Generation of the Form 5402 from within APGolf of 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 and the Appeals OIC Web Page have the appropriate letters that notify the taxpayer of Appeals' decision in the case.

8.23.4.2 (10-25-2011)
Accepted Offers

  1. An OIC accepted under doubt as to collectibility (DATC) or Effective Tax Administration (ETA) must include all unpaid tax liabilities for which the taxpayer is liable. Appeals may consider an offer that incudes 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(s) (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, addendum, and the Form 7249. Even though the tax debt is fully paid, the payment or payments used to satisfy the tax debt are still part of the overall offer amount, so all satisfied periods must remain part of the offer. See IRM 5.8.8.3. 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, addendum or the Form 7249. Before securing an amended Form 656 or addendum 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 assessed liability for tax, penalties, and interest (and lien fees) for the years or periods covered by the offer. An accepted OIC conclusively settles all tax debts listed on the Form 656. Neither the taxpayer nor the government can re-open a compromise tax year or period unless there was a:
    • Falsification of information or documents
    • 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 subsequent liability could cause the offer to default. Matters that will later require the time and attention of the AO/SO 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 underreporter activity

    If an open audit is found, follow the instructions in IRM 8.23.3.3.1.1, Coordination with Other Functions.

    Caution:

    For ex parte purposes, carefully review any published ex parte guidance before any contact with another function. Be sure to document the case activity record with the purpose of the contact, what was discussed, and the information that was received. See also IRM 8.1.6.

    Note:

    Also check to ensure 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 litigation. AIQ advisory should be contacted 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 to DOJ.

  5. If the offer includes TFRP assessments, make sure all assessments are listed on the Form 656. Generally, TFRPs assessed before August 2000 combined all unpaid corporate tax periods and were assessed using the latest quarterly period. TFRP assessments after August 2000 are made for each quarterly period. The Form 7249 and Form 656 and/or addendum must match by reflecting each assessed TFRP period.
  6. IRM 5.8.8 and SBSE Interim Guidance memorandum, SBSE-05-MM-11-042, Redacting Information in the Public Information File, dated July 11, 2011, contain the current guidance pertaining to transcript redaction. Order a MFTRAX or Transcript Delivery System (TDS) transcript as close to the acceptance date as possible without delaying acceptance. Sanitize a copy of the Form 7249 and transcript to redact the taxpayer's street address and identification number (both the primary and secondary SSNs if it is a joint offer) and all other tax information that should not be disclosed to the public. This information includes:
    1. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise
    2. Address (street address only)
    3. Number of exemptions
    4. Filing status
    5. Adjusted gross income
    6. Taxable income
    7. Principal Industry Activity Code
    8. Transaction codes with no dollar amounts. The entire line, including the date, should be redacted.
    9. Transaction codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date or amount of the transaction.
    10. Power of Attorney/Tax Information Authorization (POA/TIA) on file.

  7. An amended Form 656 or addendum secured by Appeals need not be signed by any Service representative as the "Authorized Internal Revenue Service Official" (Section 11 of Form 656). Since each offer only has one TC 480 date, a second signature may confuse APS or COIC, causing input of another TC 480 date. For each offer, additional periods may be added to the Form 656 without need of an addendum or amended Form 656.

    Note:

    For any new offers submitted by related taxpayer entities that are secured subsequent to an initial offer filing by the taxpayer, signature by an IRS official is still necessary. See IRM 8.23.2.3(10) for discussion of related entities.

8.23.4.2.1 (10-25-2011)
Accepted Offer Closing Documents and Appeals Officer (AO) / Settlement Officer (SO) 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 how the amount of the offer that is being recommended for acceptance was computed.

    3. The type of tax and periods (if the report covers individual and joint liabilities, clearly describe 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, including estimated tax payments or federal tax deposits
    5. Collection's reason 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 AO/SO's position is based (e.g. type, location or condition of assets, the taxpayer's age, health, education or 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 simply amends the offer to the RCP amount determined by Collection and the AO/SO agrees that this is the proper amount, there is no need for the financial figure comparison. Simply attach a copy of Collection's financial analysis tables to the ACM.

      Reminder:

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

    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 reasonably reflects 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, document whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility.

  2. The AO, SO or AARS / Collection Specialist is responsible to input the following data on the OIC 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. Review IRM 8.23.3.3.2 to determine whether a Notice of Federal Tax Lien (NFTL) should be filed as part of accepting the offer.
  4. 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 not necessary to duplicate information pertaining to both taxpayers, but the separate files/folders should contain the documents listed below in paragraph (6), except for only one consolidated ACM.
  5. Review the Delegation Orders at IRM 1.2.44.2, to determine the appropriate approving official.
  6. When accepting a non-CDP offer, prepare and assemble the following:
    1. An unredacted Form 7249 , Offer Acceptance Report
    2. A redacted copy of Form 7249, attached to redacted transcripts for each debt listed on the Form 656
    3. Customized Form 5402 generated from APGolf
    4. ACM
    5. OIC Acceptance Letter
    6. Form 656/ Amended Form 656 / Addendum
    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.

  7. Enclose a copy of the Form 656 and any collateral agreements with the taxpayer's (and POA's) copy of the OIC Acceptance Letter.
  8. 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. IRMs 5.1.18.17 and 5.8.8.8 contain additional 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 of prior to the file being sent to APS for closing. Follow these procedures for proper disposal of the credit information:
    If... Then...
    The SO determines the Appeals approving official (Appeals Team Manager (ATM), Area Director (AD) or Director of Field Operations (DFO)) and/or Counsel do not need to review the credit report(s) as part of the case disposition approval The SO will remove and destroy all credit reports
    The SO determines the Appeals approving official and/or Counsel may need to review the credit report(s) as part of the case disposition approval The SO 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 of Field Operations and/or Counsel and the file is returned to the ATM prior to submitting the case to APS for closing Leave the credit reports in the case file pending completion of all reviews. The ATM will remove and destroy all credit reports immediately prior to submitting the case to APS for closing actions

  9. See IRM 8.23.6, OIC Processing and Closing Procedures, for APS OIC case closing procedures.

8.23.4.2.2 (10-25-2011)
Counsel Review of Acceptance Recommendations

  1. IRC 7122(b) requires an opinion from Counsel if the liability, including tax, penalties and interest, is $50,000 or more. Counsel's review of a proposed acceptance 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, and whether the proposed compromise amount is acceptable.

    Note:

    The 24-month TIPRA statute period under IRC 7122(f) includes whatever time a case may be pending in Counsel awaiting 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 generally based on the liability(s) at the time of submission, not at the time of acceptance. For example, if the application of TIPRA payments reduced the liability(s) below the required $50,000, the offer(s) will still require Counsel review before acceptance. However, if a liability of less than $50,000 is owed at the time of offer submission, and that liability is subsequently increased to more than $50,000 by the time the offer is recommended for acceptance, then the opinion of Counsel is required.
  3. Counsel's signature on the Form 7249 indicates that the legal requirements for compromise were met. If Counsel does not sign the Form 7249, the legal issues must be resolved before the case can be closed as an accepted offer.
  4. Per CCDM 33.3.2, Chief Counsel Directives Manual - Legal Advice, Other Legal Advice, Offers in Compromise, a finding by Counsel that a proposed acceptance is not in keeping with Service 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.
  5. As stated above, Counsel's signature on Form 7249 is required for compromise, but their concurrence with the decision to accept the offer is not. However, the approving official for Appeals must review and carefully consider any opinion from Counsel prior to accepting the offer. If Counsel raised substantive policy concerns, it is appropriate to document the case activity record indicating the approving official carefully considered the issues before accepting the offer. See IRM 5.8.8.7.
  6. 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 AO/SO will input CARATS Action Code 'AC' with SubAction Code 'DC' and submit the case to the ATM for approval. The AO/SO should not input the 'AC/FR' at this time because full resolution of the case is subject to Counsel's review.
    2. The ATM will review the case and sign the Form 7249 indicating concurrence with the acceptance recommendation. The ATM will return the case to the AO/SO if the acceptance recommendation is not approved at the ATM level. The ATM will not sign either the Form 5402 or OIC Acceptance Letter until the case comes back from Counsel.
    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 AO/SO. If Counsel signed the Form 7249, APS will forward the case file to either the ATM or the AO/SO, depending on locally established procedures.

      Note:

      Upon closure of a case in which IRS Counsel provided a rejection memorandum for legal sufficiency, either the ATM or SO must input an entry into CARATS to explain the outcome of the Counsel review, and the general reasons why the offer was rejected.

      Reminder:

      Upon closure of a case in which IRS Counsel provided a rejection memorandum for legal sufficiency, the ATM or SO should forward a copy of the memorandum to the OIC analyst in Appeals Tax Policy & Procedures.

    5. If the AO/SO receives the case file from APS after Counsel's review, he/she 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 AO/SO must be notified so the status of the case may be updated to 'AC/FR'. The ATM must remove and destroy all 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 and/or DFO.
    7. If the approving official is the AD/DFO, upon receiving the case back from Counsel, the acceptance letter will not be signed by the ATM. The AO/SO will forward the case to the AD/DFO for the necessary review and approval. Once the signed Form 7249 and OIC Acceptance Letter are received from the AD/DFO, the AO/SO 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 (10-25-2011)
Sustaining Offer Rejection

  1. When the facts of the case do not support acceptance, the taxpayer should be informed that Appeals must sustain rejection of the offer. Generally, prior to issuance of the rejection letter, an attempt should be made to advise the taxpayer of the decision to reject the offer. See IRM 8.23.3.3.2 for additional information.
  2. Appeals will sustain Collection's rejection of a Doubt as to Collectibility offer when Appeals determines that the taxpayer can pay more than the offered amount or that acceptance is not in the best interest of the government (see IRM 5.8.7.7).
  3. Appeals will sustain Examination's rejection of a Doubt as to Liability 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 OIC.
  4. 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.
  5. Since Appeals already has detailed financial information and familiarity with the taxpayer's current circumstances, there may be instances when an offer cannot be accepted but both the taxpayer and Appeals believe that an alternative resolution such as an installment payment agreement (IA) or having the account placed in currently non-collectible (CNC) status is appropriate. If it is apparent that either an IA or CNC are appropriate resolutions, and the taxpayer's ability to pay has been conclusively determined, generally, it is good tax administration for Appeals to grant the IA or declare the tax periods CNC. Document any discussions of alternative resolutions in the case activity record.
  6. If the taxpayer qualifies for any in-business trust fund (IBTF) express, streamlined or guaranteed installment agreement, Appeals will process the agreement.
  7. See IRM 8.23.3.13 for details concerning alternative resolutions in a non-CDP offer case.

    Reminder:

    Appeals is responsible for inputting Transaction Code (TC) 971 with Action Code (AC) 043 upon receipt of an installment payment proposal. Use a Form 4844, Request for Terminal Action, to request input of the TC 971 AC 043 to all tax periods. Appeals does not input the TC 971 AC 063.

  8. APS can process alternative resolutions as part of closing out the OIC case. Prominently indicate the alternative resolution on the Form 5402 so it is noticeable and can be input immediately by APS. A Form 53, Report of Currently Not Collectible Taxes, is not needed to have the account placed in CNC status, unless a mandatory follow-up date is needed. If no mandatory follow-up date is needed, simply request input of the proper TC 530 Closing Code (CC) 24-32 in the "Remarks" section of the Form 5402.
  9. Appeals is responsible for making a lien filing determination as part of the alternative resolution. If a NFTL will be filed per standard administrative procedures, advise the taxpayer. Explain CDP rights under IRC 6320 and document the case activity record. Indicate in the "Brief Remarks" section of the Form 5402 that the IRM calls for a lien to be filed and indicate the tax periods to be listed on the NFTL. The circumstances and reasons for not filing a NFTL must be clearly documented in the case activity record if such filing is generally required. See IRM 8.23.3.13 for more details.
  10. If a deposit was received with the offer, the deposit will be returned unless the taxpayer provides written authorization to apply it to the tax debt. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization may be used for this purpose. The deposit is credited as of the date it was received by the Service.

    Note:

    If the offer at issue is a TIPRA offer, the 20% initial payment for a Lump Sum Cash offer and the proposed periodic installment payments for either a Short-term Periodic Payment offer or a Deferred Periodic Payment offer are not deposits and will not be refunded. Also, 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 8(b).

  11. If the case is a DATL offer involving a TFRP or personal liability for excise tax (PLET) liability, and an adjustment is being made to the liability, the Form 5402 should instruct APS to send the Form 3870 and the complete TFRP administrative file to the local SBSE Collection Advisory unit. The Advisory unit will process the adjustments and send the administrative file on to retention. SBSE's Advisory Units Contacts List is available on the 'Who/Where' tab available on the Servicewide Electronic Research Program (SERP) page.
  12. See IRM 8.23.4.2.1 for instructions on destroying credit reports.

8.23.4.3.1 (10-25-2011)
Closing Documents and AO/SO Procedures for Sustaining Offer Rejection

  1. The ACM for a case in which Appeals is sustaining the rejection of the offer should contain the following:
    1. Sufficient information 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 as to the disposition of any offer deposits.

      Note:

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

    4. Information as to alternative resolution proposals considered by Appeals and/or recommended for approval.

  2. The AO, SO, or AARS / Collection Specialist is responsible for inputting the following data on the OIC Customized 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 Form 5402 generated from APGolf
    2. ACM
    3. An undated Pattern Letter 238 to notify the taxpayer that Appeals sustained rejection of the offer
    4. Form 3040 or other written authorization, as applicable
    5. Form 433-D, Installment Agreement, and a Form 13844, Application for Reduced User Fee for Installment Agreement, if applicable
    6. Form 1271, Rejection and Withdrawal Memorandum, unless the Form 1271 that was prepared by Collection is still in the file.

  5. If the liability at issue is a TFRP or PLET and Appeals has agreed to adjust or abate the amount of the TFRP or PLET, Appeals is responsible for preparing the Form 3870. Be sure the Form 5402 properly instructs APS to forward the Form 3870 and the TFRP/PLET administrative file to the local Collection Advisory unit. The AO or SO is responsible for providing APS with the address of the appropriate Advisory Unit, which is available under the 'Who/Where' tab on SERP.
  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.

8.23.4.4 (10-25-2011)
Withdrawn Offers

  1. IRM 5.8.7.4 contains details for 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 the time the case is in Appeals. A voluntary withdrawal may be made verbally, by fax, or in writing. Written withdrawals are encouraged. Letter 3504 (SC/SG), Offer in Compromise Withdrawal, Letter 3504-A, Offer in Compromise Withdrawal - Joint, may be used for withdrawal purposes. 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 as to the taxpayer's or representative's withdrawal request.
  3. If the taxpayer mails a written withdrawal via certified mail or hand-delivers the withdrawal, the offer is considered withdrawn as of the date the withdrawal is received. Date stamp the withdrawal document with the received date, as that is the date the statutory period to collect the tax begins running.
  4. If the taxpayer verbally withdraws the offer or sends a written withdrawal via 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 (CG), Offer in Compromise Withdrawal Letter, to the taxpayer.
  5. Document the case activity record as to the manner in which the withdrawal was received.
  6. Since Appeals already has detailed financial information and familiarity with the taxpayer's current circumstances, there may be instances when an offer cannot be accepted but both the taxpayer and Appeals believe that an alternative resolution such as an IA or having the account placed in CNC status is appropriate. If it is apparent that either an IA or CNC are appropriate resolutions, and the taxpayer's ability to pay has been conclusively determined, generally, it is good tax administration for Appeals to grant the IA or declare the tax periods CNC. Document any discussions of alternative resolutions in the case activity record. See IRM 8.23.3.13 for details concerning alternative resolutions in a non-CDP offer case.
  7. If the taxpayer qualifies for any IBTF express, streamlined or guaranteed installment agreement, Appeals will process the agreement.

    Reminder:

    Appeals is responsible for inputting Transaction Code (TC) 971 with Action Code (AC) 043 upon receipt of an installment payment proposal. Use a Form 4844, Request for Terminal Action, to request input of the TC 971 AC 043 to all tax periods. Appeals does not input the TC 971 AC 063.

  8. Appeals is responsible for making a lien filing determination as part of the alternative resolution. If a NFTL will be filed per standard administrative procedures, advise the taxpayer accordingly. Explain CDP rights under IRC 6320, and document the case activity record. Indicate in the "Brief Remarks" section of the Form 5402 that the IRM calls for a lien to be filed and indicate the tax periods to be listed on the NFTL. The circumstances and reasons for not filing a NFTL must be clearly documented in the case activity record if such filing is generally required.
  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, taxpayers are not required to continue making proposed periodic installment payments on either a Short-term Periodic Payment or Deferred 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 Short-term Periodic Payment or Deferred Periodic Payment offer. The AO/SO is responsible to secure the TIPRA payment required with the amended offer and to monitor receipt of the proposed periodic installment payments until the case is closed by Appeals. If Appeals 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 (10-25-2011)
Withdrawn Offer Closing Documents and AO/SO 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, mandatory, etc.
    2. The taxpayer's reason for withdrawing the offer, if known.
    3. Information as to alternative resolution proposals considered by Appeals and/or recommended for approval.
    4. Information as to the disposition of any offer deposits.

      Note:

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

  2. The AO, SO or AARS / Collection Specialist is responsible for inputting the following data on the OIC Customized 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.
  4. When closing out 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 in 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, as applicable
    5. Form 433-D, Installment Agreement, and a Form 13844, Application for Reduced User Fee for Installment Agreement, as applicable

      Note:

      A Form 1271 is not needed for a withdrawn offer. See IRM 5.8.7.4.3.

  5. If the liability at issue is a TFRP or PLET assessment, and Appeals has agreed to adjust or abate the amount of the TFRP or PLET, Appeals is responsible for preparing the Form 3870. Be sure the Form 5402 properly instructs APS to forward the Form 3870 and the TFRP/PLET administrative file to the local Collection Advisory unit. The AO or SO is responsible for providing APS with the address of the appropriate Advisory Unit, which is available under the 'Who/Where' tab on SERP.
  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.
  7. See IRM 8.23.4.2.1 for details on destroying credit reports.

8.23.4.5 (10-25-2011)
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.
  2. If the taxpayer was able to remedy the potential default issue and Appeals is not going to default or terminate the offer, document the case activity record, input "DM" and "AC/FR" , and close the case using Closing Code 15. Close the Form 2209 back to the Monitoring Offer in Compromise (MOIC) unit, advising that the offer should not be defaulted.
  3. If the taxpayer was not able to remedy the potential default issue, Appeals must issue the formal default or termination letter. A sample default letter is available in the 'Forms and Correspondence' section of the Appeals OIC Web Page and is in IRM Exhibit 5.8.9-4. The letter notifying the taxpayer of the termination of the offer must be signed by the Appeals official who accepted the offer or his or her 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. Attach a copy of the signed default letter and MOIC will then reinstate the compromised liability.
  4. If the potential default case involves the death of a taxpayer, and following procedures in IRM 8.23.3.14, Appeals determined that no estate exists, then the offer should simply be closed as satisfied following compromise of a compromise procedures. See IRM 8.23.3.15 for compromise of a compromise procedures. 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 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. Follow the same general procedures outlined above for a compromise of a compromise case. See also IRM 8.23.3.14.
  7. Procedures for rescission of a previously accepted offer are found in IRM 5.8.9.

8.23.4.6 (10-25-2011)
Fast Track Mediation (FTM) Cases

  1. At the conclusion of a successful mediation, the FTM Appeals Official will prepare Form 13370, Fast Track Mediator's Report. In agreed cases, the Form 13370 must be signed by:
    • FTM Appeals Official
    • Taxpayer or authorized representative
    • Revenue Officer
    • Collection group manager
      A copy of the signed Form 13370 will be given to both parties. Collection will follow established closing procedures to process the settlement.

  2. If the parties fail to resolve the disputed issue(s), the FTM Appeals Official will prepare Form 13370 and submit a copy to each party. Collection will close the case in accordance with established procedures. If Collection decides to proceed with assessing the TFRP, the taxpayer retains full appeal rights.
  3. The FTM Appeals Official will submit to the ATM the original Form 13370 and a copy of the CAR. The ATM will initial and date the Form 13370 and submit the documents to APs for closing.
  4. APS will use the following to close out the OIC WUNO on ACDS
    1. Closing Code 14 = No agreement reached
    2. Closing Code 15 = Agreement reached
    3. Closing Code 16 = FTM request withdrawn
    4. Closing Code 20 = Compliance function did not have the case fully developed, all issues addressed, or did not reasonably attempt to negotiate an acceptable offer

  5. Customer feedback (external and internal) that details how well a program is working and identifies areas needing improvement is valuable information that can be used to strengthen the program. Analysis of this type of feedback is the key to determining whether the Appeals ADR programs are successfully meeting their goals. The taxpayer and the IRS compliance manager involved in the FTM matter may be asked to participate in separate voluntary surveys.
  6. Contact the Tax Policy and Procedures (TPP) OIC and TFRP ADR program analyst with any questions or concerns.


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Posted by www.irstaxattorney.com at 7:35 PM

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