- 188.8.131.52 Overview
- 184.108.40.206 Amending Form 656
- 220.127.116.11 Closing a Case as an Acceptance
- 18.104.22.168 Accepted Offer File Processing
- 22.214.171.124 Acceptance Processing for Specific Types of Offers
- 126.96.36.199 24-Month Mandatory Acceptance under I.R.C. § 7122(f)
- 188.8.131.52 Legal Opinion of Counsel
- 184.108.40.206 Destruction of Credit Reports
- 220.127.116.11 Public Inspection File
- 18.104.22.168 Notification of Dishonored Application Fee and/or TIPRA Payment after Notification of Acceptance
- Exhibit 5.8.8-1 Offer in Compromise Recommendation Report
- Exhibit 5.8.8-2 Addendum to Form 656
- Exhibit 5.8.8-3 Letter for Addendum to Form 656
- Exhibit 5.8.8-4 24-Month Acceptance Letter
- The determination to accept an OIC is based on sound decisions relating to an analysis of the taxpayer's facts, circumstances, and financial situation. Documentation supporting this decision and approval at the proper levels are required to complete the acceptance. This section describes the process for accepting an OIC.
- When an offer is being recommended for acceptance, there may be adjustments to the offer. Depending on the adjustments at issue, the taxpayer may be required to submit an amended Form 656. The payment amount and payment terms may be changed by attaching an Addendum to the Form 656. See IRM 22.214.171.124.1 below. Changes requiring an amended Form 656 include:
- Changes to the entity,
- TIN changes, and
- Signature changes
Note:Amended offers will show the total offer amount, not the amount remaining after applied TIPRA payments.
- Mark the amended Form 656 with "amended" on the top margin of page one of the Form 656.
- The Form 656 allows the Service to amend the liabilities portion to include any assessed liabilities that were not listed on the Form 656. Therefore, an amended Form 656 is not required to add or delete periods only.
- When amending the Form 656, the following actions will need to be taken on AOIC:
- Update AOIC by inputting "A" (amended) on the summary screen of the AOIC record to reflect receipt of an amended offer. Do not change the offer pending date.
- Add any new tax periods not included on the original Form 656 to the MFT screen on AOIC.
- Delete any tax periods found on the MFT screen on AOIC that are no longer owed, unless the liabilities were paid as a result of TIPRA.
- Add the new terms for payment, if any, to the terms screen on AOIC.
- Update the offer amount on AOIC.
- The submission of an amended Form 656 may also require submission of either 20% of the revised offer amount (less the amount previously submitted) or the revised periodic payment. The taxpayer will be given credit for partial payments already made with respect to the original offer. See IRM 126.96.36.199, Periodic Payments Required with Offer in Compromise Submissions, for additional information.
- The Form 656 Addendum should be obtained in lieu of securing an amended Form 656 when the payment terms and/or the amount of the offer are the only changes. It must be attached to the original Form 656 and will function as an amended Form 656.
- The use of the Addendum to Form 656 does not reset the 24-month mandatory acceptance period.
- Only one addendum is necessary for joint OICs.
- The addendum is designed to be completed by the OE/OS and sent to the taxpayer to sign and return. Prior to sending the addendum to the taxpayer, inform the taxpayer of the purpose of the addendum and the importance of promptly reviewing, signing, dating, and returning the addendum to the OE/OS. The addendum may be mailed or faxed.
- The addendum to Form 656 will be sent to the taxpayer(s) with the AOIC Addendum Letter. See Exhibit 5.8.8-3.
- Do not cross out or update the original Form 656. Instead, after the taxpayer(s) has signed and dated the addendum, write the following on the original Form 656 Section IV: "Attached is an addendum dated (insert date) setting forth the amended offer amount and payment terms."
- The acceptance letter should reflect the date of the original Form 656.
- Below are the instructions to complete the addendum. The Form 656 Addendum should be attached to the original Form 656 and function as an amended offer in compromise.
- Section 1 — (1) Enter the offer number and the taxpayer identification number(s). (2) Enter the original offer information: date submitted, amount of original offer and tax periods included on the offer.
- Section 2 — (1) Enter the revised offer amount. (2) Line A — Enter the amount paid with the original offer. (3) Line B — Enter the amount of any TIPRA payment that must be submitted with the addendum. Enter any designation of payment that the taxpayer wishes to make and complete deposit information, if applicable. (4) Line C — Enter the total amount of periodic payments received subsequent to any payments received with the original offer.
- Section 3 — (1) Check the "Lump Sum Cash Offer" box, if applicable. (2) Lines D - H — Enter the amounts to be paid and the number of months after acceptance the amount is to be paid. (3) Section 3, lines D - H must equal the amended offer amount minus any payments entered in Section 1, lines A - C.
- Section 4 — (1) Check the "Periodic Payment Offer: Short Term or Deferred" box, if applicable. (2) Complete the periodic payment terms. Note: A Short Term Deferred Periodic payment offer cannot exceed 24 months. (3) Section 4 must equal the amended offer amount minus any payments entered in Section 1, lines A-C.
- Section 5 — Signature(s) — The taxpayer(s) or the Power of Attorney, if appropriate, must sign and date the addendum. The signed and dated addendum may be mailed or faxed by the taxpayer or Power of Attorney.
- The appropriate IRS employee must sign and date the Addendum to Form 656 upon receipt from the taxpayer(s) or the Power of Attorney.
- The following actions should be taken prior to preparing an acceptance recommendation:
- IDRS command codes AMDIS/TXMODA should be checked again to ensure that no additional assessments are pending. If an open audit/AUR is found contact should be made to resolve the issue per instructions in IRM 188.8.131.52, Coordination of Offer Investigations.
Note:The tax must not be compromised unless it is assessed and legally due; therefore, IDRS must be checked to ensure that all taxes included on the accepted offer have been properly assessed and are still due and owing.
- Verify that a full credit report has been requested prior to accepting an offer when the current balance due exceeds $100,000.
Note:Based the discretion and judgment of the OE/OS, a full credit report may be secured to assist in locating taxpayer assets and verifying financial information, for cases with liabilities $50,000 or less. The case history must be documented with the reason(s) for the request.
- Update the AOIC record as follows:
- Main Screen — Update to reflect the correct basis for compromise and, if appropriate, to indicate the existence of special circumstances. Update the disposition code to 1 (proposed acceptance).
If... Then... Any modules have restricted penalty or interest Use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript. Any modules are Non-Masterfile, and not on IDRS Secure an Automated Non-Masterfile (ANMF) transcript and update it as necessary using IDRS command code COMPAD and/or COMPAF. The module was full paid as a result of a payment action other than TIPRA (such as, refund offset or prior levy payment) Remove the period from the MFT screen on AOIC, and update the offer to remove the tax period from the Form 656.
Note:An amended Form 656 is not required to remove periods with no liability.
The payment that satisfied the tax period included both a TIPRA payment, and other payment (such as, refund offset or prior levy payment) Do not remove the period from the MFT screen on AOIC. Do not update the Form 656 to remove the periods that were full paid.
Note:An amended Form 656 is not required to remove periods with no liability.
The tax period was full paid The MFT screen will reflect a zero balance due.
Note:An amended Form 656 is not required to remove periods with no liability.
- MFT Screen — (1) Verify the correct assessment date for each module. Update the affected module(s), if changes are needed. (2) Go to the MFT screen, select the "Update Accrued Date" tab, input the date the interest is to be computed to. (3) Go to the "Request Interest" tab and input the date for the accrual of interest again. (4) When all the data is correct, press "Submit" to populate the information into AOIC.
Note:If any modules have restricted penalty or interest, use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.
- Terms Screen — Update the terms to those reflected on the accepted offer ensuring that any collateral agreement(s) are referenced, as necessary.
- Query the offer. Go to the MFT screen select "Refresh Masterfile Data." This action should be completed prior to generating the Form 7249,Offer Acceptance Report, to ensure the Form 7249 and the MFTRA-X/Transcripts are in close agreement since the Form 7249 requires various levels of approval, and both become public documents.
- Generate Form 7249 to reflect the current liability(s).
- Request a transcript using AOIC or order a MFTRA-X as close to the acceptance date as possible without delaying acceptance. A complete copy should be retained with the case file. Prepare a sanitized MFTRA-X or AOIC transcript for the public inspection file by redacting (blacking out) the taxpayer's social security number (both primary and secondary, if a joint offer) and all tax information that is not to be disclosed to the public; such as:
- Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise
- Number of exemptions
- Filing status
- Adjusted gross income
- Taxable income
- Principal Industry Activity Code
- Transaction Codes with no dollar amounts. The entire line including the date should be redacted.
- Transaction Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.
- Power of Attorney/Tax Information Authorization (POA/TIA) on file
- The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed.
Note:The AOIC transcript process may be used instead of the MFTRA-X to generate a partially sanitized report; however, the taxpayer’s SSN must still be redacted.
- An Acceptance Recommendation Report should only be prepared on those cases meeting Counsel criteria and included as part of the case file being forwarded for Counsel approval. Ensure that the Acceptance Recommendation Report clearly explains the rationale for the acceptance of the amount offered, particularly in the case of Effective Tax Administration (ETA) and Doubt as to Collectibility with Special Circumstances (DCSC) cases. See Exhibit 5.8.8-1 below. The report should contain at a minimum:
- The taxpayer's personal information such as age, health, dependents, education and occupation.
- The cause of the delinquency and status of current compliance.
- The amount of the RCP and an explanation of how the RCP was calculated.
Note:The AET and IET shown in IRM Exhibits 5.8.4-1 and 5.8.4-2, respectively, will generally fulfill this requirement.
- Whether or not special circumstances exist and how they affected the amount agreed upon.
- Negotiations resulting in the acceptable offer amount.
- A conclusion that summarizes the basis for acceptance.
- In the rare situation where relevant facts of a confidential nature exist that should not be included in the Acceptance Recommendation Report, complete a supplemental memorandum and include it in the case file. Do not include information already discussed in the offer acceptance recommendation report.
- Before closing a case as an acceptance, document the case history on AOIC regarding the decision. For field employees using ICS, include a statement on AOIC indicating the complete history is on ICS. Include any special instructions for the Monitoring Offer in Compromise (MOIC) Unit regarding application of funds, the total offer payments received during the pendency of the offer, whether a Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, was secured, and/or requesting a lien re-filing if one will be required during the terms of any deferred payment offer. See IRM 5.12, Federal Tax Liens, for more information about when to re-file a lien.
- Generate and print the appropriate acceptance letter and POA letter, if appropriate, for the signature of the delegated official. Attach copies of the accepted Form 656 and any applicable collateral agreement(s).
- Print Form 7249 for the required signatures. The accepting official is the official that has delegated authority for acceptance based on the type and dollar amount of the case. Delegation Order No. 5-1 provides the level of authority for approving all OIC dispositions.
- Assemble the file using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document. The use of labeled dividers is required.
Note:The Document 9600 B must remain in the packaged order. IMFOLI and SUMRY should be the top pages under the "Account Transcript" tab, followed by the balance of current transcripts. Credit Report, Power of Attorney, and Form 3040 should be the first 3 pages under the "Miscellaneous" tab, followed by current additional miscellaneous information.
- Submit the file for approval, routing to Counsel for review (if required). See IRM 184.108.40.206, Legal Opinion of Counsel.
- Upon approval and signature, date and mail the acceptance letter(s). End of year acceptance letters should be mailed the same calendar year that the letters are signed. Ensure signed and dated copies are retained in the offer file.
- Make a copy of Form 7249, sanitize to redact (black out) the taxpayer's social security number (both primary and secondary, if a joint offer) and address. Mail it together with the sanitized transcripts to the appropriate office for placing in the public offer file.
- Close the case on AOIC and process. See IRM 220.127.116.11, Accepted Offer File Processing, below.
- Once an offer has been closed on AOIC, it should be held in-house until Embedded Quality (EQ) has had sufficient time to pull for review. Field Area Office EQ randomly selected cases are identified on the AOIC Quality Review Listing the following Monday after closure. If the case is not selected for review (on the following Monday after closure or as soon as practical thereafter) the offer should be released on AOIC and the entire file mailed to the applicable MOIC unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC.
- If the case is chosen for EQ review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded for review. The original documents should be sent to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to EQ.
- Original and amended Form 656, Offer in Compromise
- Form 7249, Offer Acceptance Report
- Copy of the Acceptance letter(s)
- Any collateral agreements
Note:Before forwarding the case to the MOIC unit take the following steps: (1) Verify that the original and any amended Form(s) 656 are in the case file; (2) Check to be sure the Form(s) 656, Form 7249, IDRS, and AOIC all reflect the same tax liability period(s); (3) Verify that the waiver dates on the Form(s) 656, IDRS, and AOIC are correct and consistent.
- Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact must be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing files.
- When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. A separate file should be created for each entity containing the separate items that pertain to each offer. It is not necessary to duplicate information that pertains to both or all files. The files should be maintained together and clearly marked indicating that there are related offers (for example "1 of 2" and "2 of 2." ).
- When the accepted offer includes Trust Fund Recovery Penalty (TFRP) assessments, a careful review must be made to ensure all TFRP assessments are included. Generally, TFRP assessments made before August, 2000, combine all unpaid corporate tax quarters and were assessed under the tax period of the latest quarterly period owed by the corporation. Since August, 2000, TFRP assessments are made for each quarterly period that is owed by the corporation. The Forms 656 and 7249 must match and must reflect each individually assessed TFRP tax period.
- Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility. The result of this consideration should be documented in the case file. Offer acceptances for employees of the IRS also require the approval of the SB/SE Territory Manager (2nd level) or SB/SE Compliance Services Department Manager (COIC).
Note:Offers from Federal civil service retirees are to be considered under normal procedures.
- An offer will be deemed accepted if the IRS does not make a determination regarding whether to accept the offer and notify the taxpayer of its determination within two years of the date the IRS receives the offer (IRS received date). The postmark date is irrelevant in determining when an offer is received. The IRS received date should be stated on the taxpayer's Form 656, Offer in Compromise. Any period during which any tax liability that is the subject of such [OIC] is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period.
- An OIC will not be deemed to be accepted pursuant to section § 7122(f), if within the 24-month period, the OIC is:
- rejected by the IRS,
- returned by the IRS to the taxpayer as not-processable or no longer processable,
- withdrawn by the taxpayer, or
- treated as withdrawn under section § 7122(c)(1)(B)(ii) because the taxpayer failed to make the second or later installment due on a periodic payment OIC.
- Expedited processing should take place if the offer was received subsequent to July 16, 2006, and over 18 months have expired from the IRS received date.
- To determine if 24 months have expired since the IRS received date, the OE/OS should conduct a thorough review of the offer file to determine if the provisions of I.R.C. § 7122(f) apply. This should include (at a minimum):
- A review of the Form 656 to determine the IRS received date. If the IRS received date is prior to July 16, 2006, the offer is pre-TIPRA and the 24-month mandatory acceptance period does not apply.
- If the offer is a TIPRA offer, review to determine if 24 months have elapsed since the IRS received date. If 24 months have not elapsed, then the offer is not a mandatory acceptance.
- A review to determine if a decision letter has been issued to the taxpayer within 24 months of the IRS received date. Decision letters include rejection, return, withdrawal and/or acceptance letters. If a decision letter was issued within 24 months of the IRS received date, then the OIC is not an automatic acceptance.
- Determine if any tax liability listed in the OIC was disputed in a judicial proceeding during the 24-month period following the IRS received date. The length of time that any tax liability which is the subject of the OIC was disputed in a judicial proceeding should not be included in the calculation of the 24 month TIPRA determination. If, after the revised calculation, 24 months have not elapsed, then the OIC is not a mandatory acceptance. If a total of 24 months have expired after subtracting the length of time any tax liability which is the subject of the OIC was disputed in a judicial proceeding, the OIC will be deemed an automatic acceptance.
Note:If there is any question about whether the 24-month period has expired, refer the case through your local IRS Counsel for review.
- If the 24-month period has expired, the following actions are required:
- The OE/OS currently assigned the OIC, or group manager if the OIC is not assigned, will enter a statement in the AOIC history and ICS history, if applicable, addressing the reason(s) the 24-month period expired. If the OIC is not on AOIC, a history statement will be entered in the system of record, i.e., ICS, AMS, etc. The statement should include any unusual or mitigating circumstances.
- The group manager or department manager will review the AOIC history, summary statement, and the ICS history as well as any other relevant information to determine if further administrative action is warranted and if disciplinary action is appropriate.
- The group or department manager will prepare a memorandum to the territory manager or operations manager detailing the reason(s) the 24-month period expired without the IRS making a decision on the OIC, why further administrative action is or is not warranted, and include any proposed disciplinary actions, if appropriate. The memorandum will also include the following information: (1) IRS received date; (2) COIC site of original receipt; (3) Date assigned to and received by the field area (if applicable); (4) Date received by OE/OS who is currently assigned the OIC investigation; (5) Date and type of any proposed recommendations made by an OE/OS; (6) Dates of discussion between manager and employee relative to the 24-month TIPRA issue beginning 18 months after the OIC was received by the IRS; (7) Any mitigating circumstances.
- The territory or operations manager will review the memorandum and forward a copy of the memorandum to the area or service center director along with a cover memorandum outlining any recommended disciplinary action.
- After confirming that the IRS did not make a determination with regard to the OIC within 24 months of receipt, the taxpayer must be issued an acceptance letter (Exhibit IRM 5.8.8-4). The letter will be signed by the current level of authority delegated permission to sign an OIC acceptance letter and sent to the taxpayer. See IRM 18.104.22.168, Servicewide Policies and Authorities - Delegations of Authorities for the Collecting Process, for Delegation Order 5-1, which provides the level of authority for approving all OIC dispositions.
- A copy of the memorandum detailing why the 24-month period expired and a copy of the acceptance letter will be mailed to the National OIC Program Manager.
- The OIC file will be processed in accordance with procedures defined in this IRM. Since the acceptance is not under Doubt as to Collectibility or Doubt as to Liability, AOIC will be updated to classify the basis of compromise as "A" Alternative Basis for compromise. Use the date the 24-month period expired as the acceptance date on AOIC and the date of the acceptance letter.
- Counsel is required to review offers when the total liability for all related offers on 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 Liability (DATL), Doubt as to Collectibility (DATC) or the promotion of Effective Tax Administration (ETA). Counsel also reviews the offer to ensure it conforms to the Service's policies and procedures. In all cases, the acceptance cannot go forward without the signature of Counsel.
- The requirement for Counsel review is 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.
- Counsel’s signature on Form 7249 constitutes the legal opinion required by I.R.C. § 7122(b). By signing the form, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign the form, the case cannot be compromised until all legal issues are resolved.
- Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. In some cases, Counsel may determine that the compromise is legally permissible, but it may raise policy concerns or other issues of a nonlegal nature. In such cases, Form 7249 will be signed and any other issues will be communicated by separate memorandum.
- It is not required that Counsel concur in the acceptance decision in order for a compromise to go forward. However, the accepting official reviews and considers any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised, it is appropriate to document the case history indicating that the accepting official fully considered the issues before accepting the offer. In all cases, the acceptance cannot go forward without the signature of Counsel.
- All credit reports must be destroyed on accepted OICs after all approving signatures have been obtained.
- If a credit report was secured, the case history must be documented, summarizing all relevant information.
- Public inspection of certain information regarding all OIC's accepted under I.R.C. § 7122 and is authorized by I.R.C. § 6103(k)(1).
- Treas. Reg. § 601.702 (d) (8) provides that, for one year after the date of execution, a copy of Form 7249, Offer Acceptance Report, for each accepted OIC with respect to any liability for a tax imposed by Title 26 shall be made available for inspection and copying. A separate file of accepted OIC records will be maintained for this purpose and made available to the public for a period of one year. The public inspection file will be maintained in a location designated by the Area office. The file will be maintained in the Area where the taxpayer resides . The Area office may destroy the Public Inspection file after the one year period has expired.
- For each accepted offer, the file will only contain the following items:
- A copy of the redacted Form 7249
Note:Redacted information must include the taxpayer's address. See IRM 22.214.171.124(5) above for a list of redacted information.
- The sanitized MFTRA-X or ANMF transcript.
Note:COIC should only use the MFTRA-X transcript if the AOIC module transcript is unavailable.
- The office that has accepted the offer will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the public inspection file.
- If the case has not been closed on AOIC, upon notification of the dishonored check immediately notify the taxpayer or their power of attorney and request a replacement check.
- The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time.
- Inform the taxpayer or the authorized representative that the accepted offer will be rescinded if the payment is not received within a reasonable time and is not made with certified funds.
- Provide a due date for receipt of the payment to the taxpayer or the authorized representative.
- Advise the taxpayer or their representative to submit the payment by overnight mail.
- Document the case history.
- If the case has been closed on AOIC and forwarded to MOIC, the case will be returned to the OE/OS for taxpayer contact.
- Upon receipt of the case from MOIC, the OE/OS should immediately contact the taxpayer and request replacement payment in certified funds. Follow the procedures paragraphs (1) and (2) above.
- If the taxpayer fails to replace the dishonored check, the accepted offer will be rescinded based on a mutual mistake of fact in accordance with IRM 126.96.36.199, Rescission of Accepted Offers.
- Document the AOIC case history.
www.irstaxattorney.com (212) 588-1113 firstname.lastname@example.org