offer in compromise IRM 5.8.3

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1. All offer receipts, other than those based solely upon DATL, are reviewed to determine if they are processable. Processable offers are then perfected and built (i.e., internal and external information is secured to verify financial information before being assigned for investigation. This chapter explains the procedures to be followed for determining jurisdictional responsibility, transferring cases, perfecting, and case building for offers in compromise.

5.8.3.2  (03-26-2010)
Routing Cases Based on Jurisdictional Responsibility

1. In all cases cited in the table below, before deleting the offer from AOIC generate and send the transfer letter to the taxpayer and/or POA, if applicable. Ensure all TC 480 or Staup's have been input, as appropriate.
2. The following table provides guidance when it has been determined that Collection does not have jurisdictional responsibility:

   If responsibility lies with…	Then…
   Department of Justice (DOJ)	Contact Area Counsel to determine the status of the pending bankruptcy or litigation and whether Collection has jurisdiction to process the offer. If the DOJ requests the offer be sent directly to them, delete the offer from the AOIC system and forward the case to the DOJ.
   Examination	Send the offer directly to the centralized DATL processing unit located at the Brookhaven campus. No fee is required for these offers. If the offer was loaded to AOIC, delete the offer.
   Appeals	Move the payments from the AOIC Payment Screen to the AOIC Appeals Fee Screen. Delete the offer from AOIC and forward the case to Appeals using the Appeals Transmittal Form 3210. See Exhibit 5.8.3-1. Note: These procedures do not apply to OICs received and worked by COIC with a CDP. See IRM 5.8.4 for instructions.

5.8.3.3  (03-26-2010)
Processing Offer Transfers between COIC Sites

1. Offer cases may be transferred from one COIC site to another if:
   • The taxpayer relocated and the investigation is not in progress or
   • The case was originally received in the wrong jurisdiction.
2. If not previously identified as an interoffice transfer, forward the offer to the appropriate COIC site based on the location of the taxpayer's place of residence. The receiving COIC site will be responsible for completing the Screen for Obvious Full Pay, case building, and/or issuance of the Combo letter.
3. Misdirected offers received and determined to be under the jurisdiction of Appeals, as a result of a CDP hearing, will not be transferred between COIC sites. Follow the procedures outlined in IRM 5.8.4.
4. To transfer cases, the transferring office should take the following steps:
   • Document the history with the taxpayer's new address and the location of the receiving office.
   • Correct the address on the Entity Screen on AOIC.
   • Prepare and mail the AOIC transfer letter.
   • Transfer the case on AOIC.
   • Prepare Form 3210, Document Transmittal, and mail the case by traceable mail to the receiving office.
5. To eliminate the potential for misrouted cases, the procedures outlined in IRM 3.13.62, Media Transport and Control, will be followed.
   • If the acknowledgement copy of Form 3210, Document Transmittal, is not received, the originating office responsible for shipment of the offer files will follow-up within 30 days from the shipment date.
   • If all the cases listed on Form 3210 are not included in the shipment, the receiving office is responsible for notifying the originating office within 10 days of receipt of Form 3210.
   • Any and all discrepancies will be resolved within 30 days.

5.8.3.4  (03-26-2010)
Field Cases – Identification and Transfer

1. Once the COIC sites have loaded the offer to AOIC and completed initial processing, pending offers in the following categories will be immediately transferred to the appropriate Area office to be worked in a field group.
   • Corporations
   • Partnerships
   • Estates and trusts
   • Currently incarcerated taxpayers
   • Trust Fund Recovery Penalty (TFRP) – Doubt as to Liability (DATL)
   • Any business with employees
   • Closely held corporations
   • Limited Liability Partnership (LLP) and Limited Liability Company (LLC)
   • IMF taxpayer’s whose primary source of income is from a partnership
   • Sole proprietors with gross receipts over $500,000
   • International taxpayers
2. Prior to transfer to the field, COIC will generate the AOIC transfer letter and send to the taxpayer.
3. All offers forwarded to Area offices for investigation will be sent to a central point designated by the Area office.

5.8.3.4.1  (03-26-2010)
Field Cases – Perfection

1. Certain errors in an offer must be corrected in order to perfect the offer and enable the Service to begin the offer investigation. For field cases, the only issues that will be perfected are the following:
   • Additional Forms 656;
   • Additional application fees;
   • Additional required TIPRA payments;
   • Balance of the required initial 20% payment for a lump sum cash payment; and
   • Unfiled returns (IMF and BMF).

     Note:

     Generally, the look-back period for unfiled returns will not exceed 6 years.
2. Document the AOIC history to summarize any perfection issues.
3. These cases must be flagged while in the hold file waiting for the taxpayer response.
4. Upon receipt of the response, the case must be immediately pulled and shipped to the receiving field office.
5. If the taxpayer fails to provide any of the requested documentation, return the offer without further contact.

5.8.3.4.2  (03-26-2010)
Field Cases – Case Building

1. Case building for field cases should be minimal. Prior to the transfer of cases to an Area office, COIC will include in the case file prints of the following in-house research:
   • Accurint, including DMV;
   • Internal sources to verify the fair market value of real estate, if ownership is indicated on the CIS; and
   • Copy of the NFTL, if notice of filing is on the Automated Lien System (ALS).
2. If no IMFOLT or BMFOLT is in the case file, print the Masterfile Screen from AOIC and include with the case.
3. COIC will generate the TC 480 and Status 71 through the AOIC system. However, there may be situations when the Status 71 can not be systemically generated (e.g., MFT 31 modules created prior to January 2005, imminent statute, etc.). In those cases, the field OS may request suspension of collection activity. COIC should expedite those requests.

   Note:

   If the TC 480 was manually input it must be manually reversed. The AOIC history should be notated to alert the OE/OS that the 480 must be manually reversed at closing.

5.8.3.5  (03-26-2010)
Form 656, Application Fee, and Financial Information

1. Taxpayers are required to include one application fee and TIPRA payment or a Form 656-A for each Form 656 submitted.

   Example:

   (1) Two or more taxpayers who jointly owe the same liability (including spouses living separately or divorced) may submit a joint OIC on one Form 656 showing each name, address, and taxpayer identification number. However, separate OICs (one for each person) may be submitted if the individuals deem it to be appropriate for their particular situation. (2)

   Example:

   Taxpayers who owe both joint and individual liabilities must submit two offers.
2. There should only be as many Forms 656 as there are entities. In conjunction with an acceptance letter, the Form 656 constitutes a binding agreement between the government and the taxpayer. There may be instances when a taxpayer sends in three offers when only two are required. In those cases you should:
   • Add the applicable MFTs from the third offer to each of the remaining two offers.
   • Treat any additional application fee and/or TIPRA payment as a deposit (apply it to the 4710 account).
   • Inform the taxpayer, preferably by telephone, to inform of the actions taken.
3. The table below is intended to assist in identifying a processable offer for application fee purposes and provide guidance on advising the taxpayer when more than one Form 656, application fee, and/or TIPRA payment is required.

   If...	Then the requirement is...
   (1) two TPs owe joint liabilities only (without a signed Form 656-A)	to send in one Form 656 with one application fee and TIPRA payment.
   (2) two TPs owe joint liabilities only but they send in two Forms 656 with one check for the $150 application fee and TIPRA payment (without a signed Form 656-A)	to send in one Form 656, application fee, and TIPRA payment. However, if the TPs send in two separate offers with one check, the PE should follow the guidelines in box (3) below.
   (3) two TPs have separate liabilities only and they send in two Forms 656 but one $150 application fee and TIPRA payment (without a signed Form 656-A).	to send in two separate Forms 656 with two separate application fees and TIPRA payments. However, if only one check was sent with the two separate offers the PE must apply the funds according to TP instructions, if any. If it can be determined which TP paid the application fee (i.e., a personal check drawn on the account of one of the taxpayers), the offer from the TP that paid the fee is processable. The second offer should be returned as not processable because the TP did not submit the required application fee and TIPRA payment. If it can be determined that each TP contributed a portion of the application fee and/or TIPRA payment (e.g., each submitted a personal check for $75, and a portion of the TIPRA payment), then neither TP has paid the appropriate fee or TIPRA payment, and both offers should be returned as not processable. If it cannot be determined which TP paid the application fee and/or TIPRA payment, treat it as though half were submitted by each individual. Return both offers as not processable, addressing it to the party with the primary SSN on the liability.
   (4) two TPs have joint liabilities and one or both of the TPs also have separate liabilities and the TPs submit one Form 656 with both the joint and separate liabilities and only one $150 application fee and TIPRA payment (without a signed Form 656-A).	to send in two separate Forms 656 with two separate application fees and TIPRA payments. The offer submitted in this scenario is processable, but must be perfected prior to the investigation. The PE should contact the TP to secure a second Form 656, application fee, and TIPRA payment for the separate liabilities only. Prepare an amended/revised Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual(s) with the joint liability. Include only the joint liabilities in item 5. Annotate the original offer number on the top of the amended/revised Form 656. Prepare a second Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual(s) with the separate liabilities only in item 5. Annotate the top of the Form 656 in red Related to Offer Number, inserting the number of the original offer. This will help identify that the offer submitted in response to a perfection request. Note: Clerical units should be aware that new offers received in the PO Box designated for response correspondence must keep all correspondence and attachments associated with the offer to assist in the identification of the related offer. Include Option Y in the combo letter. Include the amended/revised Form 656, and the copy of the original Form 656 with the combo letter If the TPs refuse to perfect the offer, return the offer without any further consideration.
   (5) a corporation or partnership is submitting an OIC and one Form 656 is submitted that includes both the corporation or partnership and individual liabilities with one $150 application fee and TIPRA payment (The Form 656-A is for individuals only. In this scenario, no Form 656-A was submitted.)	to send in two separate Form’s 656, one for the corporation or partnership and the other for the individual. Prepare an amended/revised Form 656 by completing items 1 through 5 with the entity and tax liability information for the business (corporation or partnership). Prepare a second Form 656 by completing items 1 through 5 with the entity and tax liability of the individual as noted in (4) above.
   (6) two taxpayers have joint liabilities and either or both of the taxpayers also have separate liabilities and they submit two Forms 656 listing the joint liabilities on one and the separate liabilities on the other, but only one $150 application fee and TIPRA payment (without a signed Form 656-A)	to send in two separate offers with two separate application fees and TIPRA payments. However, if the taxpayers submitted two offers and one check with the application fees and TIPRA payment, the PE should only load the joint Form 656, treating it as processable and include the separate liabilities on the MFT screen. Follow procedures in (3) above.
   (7) an LLC is submitting an OIC and one Form 656 is submitted that includes both the LLC and individual liabilities with one $150 application fee and TIPRA payment for the individual (without a signed Form 656-A)	to send in two separate Forms 656, follow procedures in (5) above, unless the LLC is classified as a disregarded entity and the liabilities are for wages paid prior to 1/1/2009 or excise tax liabilities for periods ending prior to 1/1/2008, which may be included on the same Form 656 as the taxpayers individual or sole proprietorship liabilities. Note: In instances where the liability is owed by an LLC are for employment taxes on wages paid prior to and subsequent to 1/1/2009 or excise tax liabilities prior to and subsequent to 1/1/2008, the taxpayer may be required to submit two Forms 656, application fees, and TIPRA payments, even though the liabilities may have been reported under the same EIN, if the liabilities incurred prior to the dates specified above relate to an LLC classified as a disregarded entity.
4. Individuals or self-employed taxpayers filing a DATC or ETA offer should complete and attach Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, Self-employed taxpayers must also attach a completed Form 433-B, Collection Information Statement for Businesses.
5. All other forms of business entities (partnerships, corporations, limited liability companies, etc.) should submit Form 433-B, Collection Information Statement for Businesses.

   Note:

   Form 433-B may not be required if information provided by the taxpayer includes a current Profit and Loss statement and/or sufficient information to make a determination.
6. Taxpayers who submit an offer to compromise individually owed tax and also have a substantial interest in an ongoing business may be required to submit a Form 433-B for that business.

5.8.3.6  (03-26-2010)
Screen for Obvious Full Pay Processing

1. Taxpayers may submit an OIC based on DATC, yet indicate on their application an ability to pay the account in full. These cases, once determined to be processable, will be screened out. Absent any special circumstances, they will be rejected with no further investigation or verification. A decision to reject with appeal rights is adequately justified by the taxpayer's self-disclosed ability to pay in full. The taxpayer will be directed toward the appropriate resolution for the delinquency.
2. For processable offers, one of the first considerations is to determine if the taxpayer can pay in full. The following initial review should be conducted by the COIC site on all processable offers to make that determination.
   • Determine if the offer requires a related Form 656 (Combo " Y" ). If the OIC requires Combo "Y" processing, do not screen through the full pay process.
   • Complete the Full Pay worksheet using the taxpayer's figures only, as reflected on the CIS.
   • Do not adjust any asset values or apply necessary expense standards.
   • If the amount shown by the taxpayer on the CIS reflects that the taxpayer can pay the tax in full through either liquidation of assets or through an installment agreement, assign the offer to AOIC designation 6900.
3. If special circumstances or Effective Tax Administration (ETA) conditions are presented by the taxpayer, assign the case to an OE for further evaluation and consideration.
4. The following types of OICs should not be screened through the full pay process:
   • ETA;
   • Special circumstances;
   • DATL for TFRP/PLET;
   • CDP criteria exists;
   • Offer requires critical perfection (for example, additional Forms 656, income verification, etc.);
   • Corporations, partnerships, LLC, or other business entity; and
   • Sole proprietor with employees.

5.8.3.7  (03-26-2010)
Perfection of COIC Cases

1. Prior to beginning an OIC investigation, certain errors must be corrected to perfect the offer. The combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to request the necessary corrective action. If there is no response to the request letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection or Withdrawal Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. The following errors must be corrected before beginning the investigation:
   • The taxpayers name, physical address or taxpayer identification number (TIN) is missing or incorrect and cannot be determined from IDRS or other documents submitted with the offer.

     Note:

     If the information can be located on IDRS or other documents submitted with the offer, input the correct information on AOIC and continue processing the offer.
   • The offered amount is blank or zero, unless terms are present.
   • Insufficient number of Forms 656, application fees, and TIPRA payments submitted.
2. When sending a combo letter to perfect the errors listed above or to request financial information, also request the information shown below, if not already provided. If a combo letter was not sent but the errors listed below exist, they must be corrected prior to the recommendation to accept the offer.
   • The offer was submitted on an obsolete Form 656.
   • An amount of money is offered, but the payment terms are not specified.
   • The taxpayer(s) signature is missing on Form 656.
   • Form 433-A and/or 433-B is incomplete.
3. If a period with an amount due is missing from the Form 656, but all periods due can be determined from IDRS or other documents submitted with the offer, add the missing periods to the AOIC MFT screen and amend the Form 656.
4. When a taxpayer has included a period(s) for which there is no apparent amount due, do not add the period(s) to AOIC. Contact the taxpayer to determine if any issues are pending that may result in additional tax. If there is no tax due after contact with the taxpayer, document the history and do not add the period(s).

   Note:

   Contact may be made by telephone or by sending the AOIC combo letter requesting the deletion of the no tax due period(s) on the amended Form 656. If the taxpayer agrees to the deletion of the no tax due period(s), the history must be documented to reflect the method of agreement by the taxpayer.
5. If the basis for compromise is not indicated but it can be determined by reviewing the package, begin the investigation.
6. An offer can be investigated but cannot be accepted until an amended Form 656 is signed correcting all errors.
7. Communication with the taxpayer and/or authorized representative may be necessary to perfect the offer while it is pending. This communication may be completed by telephone, letter, fax, or personal contact.

5.8.3.7.1  (03-26-2010)
Case Building for Cases Investigated by COIC

1. The PE will review the CIS to verify the taxpayer has submitted all supporting documents and to determine if issuance of a combo letter for critical information is necessary.

   Note:

   The letter(s) should only request information necessary to make a reasonable collection decision.
2. Issue the combo letter when the taxpayer has completely omitted critical information and/or there are Form 656 perfection issues. Below is a list of critical, missing information requiring a combo letter:
   • Wage statements;
   • Bank statements;
   • Retirement accounts;
   • Form 433-A/B;
   • Missing or zero offer amount, unless terms are present;
   • Taxpayer’s name, physical address or TIN (if information cannot be located through internal sources or on submitted documents);
   • Additional Forms 656, if required, (including additional application fees and TIPRA payments);
   • Remaining balance of the 20% TIPRA payment;
   • Unfiled tax returns (generally, this will not exceed a 6-year look-back period); and
   • Non-liable income, when applicable (spouses income is critical income).
3. Do not send a Combo for additional information if any of the following exist:

   If...	Then...
   The submission includes all critical information. Note: This includes cases that have missing expense documentation, such as health care, child support, court ordered payments, etc.	Issue the AOIC combo letter using paragraph A Assign the case to 6000 or 6058, as appropriate If the taxpayer is self-employed, do not ask for expenses. Assign to 6058.
   Submission includes partial information on each of the following: wage statements, bank statements, or retirement information	Issue the AOIC combo letter using paragraph A Assign to 6100 or 6058, as appropriate, for OE contact.
4. Prepare the combo letter using the paragraphs that address all deficiencies. Include Publications 1 and 594.

   Note:

   Do not include Publications 1 and 594 with correspondence sent to an authorized representative.
5. Document the AOIC history to summarize the required substantiation submitted with the offer as well as all perfection issues.
6. A copy of the signed and dated letter must be retained in the file.
7. All combo letters will be post-dated five (5) calendar days. Schedule follow up for the 45th day after the date of the letter. Therefore, at least 50 calendar days (5 postdate plus 45 calendar days from the date of the letter) would have elapsed before an established follow-up date.
8. Mail the letter to the taxpayer and representative, if applicable. If a disclosure issue exists, use the appropriate paragraph to indicate this in the combo letter, and do not send a copy of the combo letter to the representative. Instead, send the representative a copy of the AOIC letter notifying them that correspondence has been sent to their client and they must contact their client for the information.
9. Envelopes containing combo letters, including Options B, C, or D, must be stamped or otherwise marked "URGENT-TIME SENSITIVE" .
10. Document the mailing date of the letter on AOIC, which will generate the follow-up date.
11. Assign the offer to the applicable AOIC assignment number.
12. An OIC submitted by a taxpayer with less than the full 20% will be considered a processable offer. But requesting either the remainder of the required 20% or a statement from the taxpayer addressing the balance of the TIPRA payment will be necessary before the offer will be investigated.
13. An OIC submitted by a taxpayer who has unfiled tax returns will be a processable offer. It will be necessary to either secure the unfiled returns or a statement addressing the filing requirements before the offer will be investigated.

    Note:

    If returns were included with the Form 656, research IDRS to verify if the return(s) has posted. If not, forward for processing and write "possible duplicate " on the return. Retain a copy in the case file
14. If a decision to issue a combo letter has been made, the letter should also include a request for other information. Generally, the request for substantiation will be for the current three months; however, if the taxpayer provides fewer than three months the case should be forwarded to an OE for investigation. Some examples are:
    • Any additional critical income and expense items, if necessary
    • Health insurance and out of pocket cost
    • Current balance due on motor vehicle loans
    • Court orders and proof of payment
    • Current balance due on real estate mortgages
    • Child and dependent care
    • Life insurance premiums
    • Other secured debt statements

5.8.3.8  (03-26-2010)
Processing Form 657, Offer in Compromise/Revenue Officer Report

1. All OICs forwarded with a Form 657 will be processed following expedite handling. See IRM 5.8.3.14 for additional instructions on expedite handling.
2. If an offer was sent in by an RO with a Form 657 attached and the RO has determined that the OIC was submitted solely to delay collection, the COIC site will contact the originating RO to advise when the return letter has been issued. Unless a jeopardy situation exists, the RO must wait for COIC notification that the return letter has been issued before taking any collection enforcement action. See IRM 5.8.4 for solely to delay procedures.
3. If the offer account is in Status 26, the COIC site will contact the RO to request Form 657 and continue processing the offer.
4. If a taxpayer or POA contact the COIC site concerning an offer returned as solely to delay based on an RO recommendation, the call should be referred to the RO group manager.

5.8.3.8.1  (03-26-2010)
Offers Submitted Solely to Delay Collection per Forms 657

1. When it is determined that an offer is submitted solely to delay collection, the offer can be returned to the taxpayer without further consideration.

   Note:

   The term solely to delay collection is defined as an offer that was submitted for the sole purpose of avoiding or delaying collection activity. See IRM 5.8.4 for examples of solely to delay.
2. The Field OIC group manager and the COIC Unit Manager have delegated authority to approve returns based on solely to delay collection.
3. An offer is not considered submitted solely to delay collection just because there is an imminent CSED issue or if an offer has been rejected after investigation and the taxpayer exercises appeal rights.

5.8.3.8.2  (03-26-2010)
PE Procedures for Processing Forms 657 Submitted Solely to Delay

1. The COIC site will:
   • Screen out all Forms 657;
   • Make all Forms 657 a priority;
   • Promptly process; and
   • Immediately return the offer as solely to delay collection
2. Form 657 serves to establish coordination between the field RO group, the offer group, and the COIC site to provide case documentation regarding these determinations, and to ensure collection action is not pursued until the offer is closed.
3. If the COIC unit manager agrees with the determination, the COIC manager or employee will contact the originating RO to advise that the return letter has been issued.
4. If the COIC unit manager disagrees with the determination, discussions should be initiated with the field RO manager to reach an agreeable solution.
5. Once the return letter is sent and the case reassigned to the field RO, then the RO assigned the case must initiate appropriate collection action in accordance to IRM 5.1.10.7, Timely Follow Up’s.

5.8.3.9  (03-26-2010)
Processing Taxpayer Responses to Combo Letters

1. If the combo letter requested critical information, but the taxpayer fails to respond, the offer may be returned with no further contact.
2. If the offer is assigned to 51XX and the taxpayer responds, incorporate the response into the file and assign to 5500 or 5558, as appropriate.
3. Responses received on cases assigned to 5150 (field) must be reviewed immediately, assigned to a PE for expedite processing, and transferred to the appropriate field drop point.
4. for all other responses, assign the case to 6000 or 6058.
5. If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or their representative fails to meet the additional deadline, return the offer with no further contact.
6. If the request included unfiled or delinquent returns and the taxpayer failed to file the requested returns, provide copies, or provide a valid reason for not filing and internal sources do not reflect that the return(s) have been filed, the offer may be returned with no further contact.

   Note:

   If the taxpayer gives an explanation supporting special circumstances, the offer should be forwarded to 6100 for further consideration.
7. If the request included missing TIPRA payments or perfection of Form 656 (and applicable payments) and the taxpayer failed to provide or address the missing payments or Form 656, internal research does not reflect the payment(s) have been received, and no special circumstances were identified, the offer may returned with no further contact.

   Note:

   If the taxpayer gives an explanation supporting special circumstances, the offer should be forwarded to 6100 for further consideration.
8. If the taxpayer failed to send or address any wage, bank, retirement information or perfect Form 656, the offer may be returned with no further contact.
9. Update the AOIC history with summarizing the documents received.
10. Sign any amended or revised Forms 656 with the current date. Retain the original and any amended Forms 656 in the file.
11. Determine if the taxpayer's response or original submission statements and documents addressed all requested items. If the taxpayer has substantially replied to the request, but has not provided all the information requested, the case should be assigned to an OE to determine if an RCP can be calculated.
12. Some examples of a substantial response are (not all inclusive):
    • Bank statements are provided, but not all pages were included
    • Wage statements are provided, but not all pages were included
    • The taxpayer indicates an inability to provide a particular requested document (e.g., court order or judgment, annual statement of Social Security annuity amount).
    • Social Security, fixed pension, or retirement statements are not available. The income may be verified through bank statements or internal sources.
    • The taxpayer indicates that they did not understand the request or that all requested documentation is attached.
    • The taxpayer indicates that a non-liable person(s) has no income or refuses to provide the substantiation.
    • The taxpayer provides a letter of explanation for a missed payment or inability to make the entire payment.
13. PEs are required to initiate the next appropriate action on cases where taxpayers have responded to the combo letter within 10 calendar days from the date the offer is assigned to the PE.

5.8.3.10  (03-26-2010)
No Reply Procedures

1. After the offer is determined processable and the combo letter has been sent, the offer should be held for the required number of days to allow the taxpayer to provide the requested information.
2. If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or their representative fail to meet the additional deadline, return the offer with no additional contact.
3. After the designated time period has passed and no response has been received, an automated return process will be completed. The AOIC system will generate all the necessary letters and documents to close the case.
4. Before closing the offer the employee must check AOIC to verify that no response was received.
5. If the PE determined the taxpayer has substantially replied or adequately addressed the requested information or documents (even if they did not specifically include them in the response), or if the taxpayer failed to substantiate certain claimed monthly expenses or loan balances, then the offer will be assigned to an OE for further consideration. The PE will not implement the No Reply procedures.
6. If the determination is made to return the offer for failure to provide the requested information, generate the appropriate paragraph(s) in the AOIC return letter.
   • Retain the original Form 656, any amended Forms 656, and a copy of the return letter in the file.
   • Cross out all IRS received dates with a red X.
   • Stamp the Form 656 with RETURN (in red) and add the current date.
   • Update the case history on AOIC, including the reason for the return.
   • Include a copy of the history in the file and give the file to the manager for approval.

5.8.3.11  (03-26-2010)
Exception Processing for Offers in Compromise Involving Taxpayers in Combat Zones

1. The following procedures are instructions on handling those taxpayers identified as being located in a Combat Zone (CZ) area. This determination should be based on correspondence, case history entries, or telephone contact.
2. Section 7508 postpones the time for performance of certain time-sensitive acts for the period of time that an individual serves in one of the three situations described below, plus the period of continuous qualified hospitalization attributable to an injury received while serving in one of these situations, plus the next 180 days:
   • Individuals serving in the Armed Forces in an area designated by the President of the United States as a CZ for purposes of section 112, or serving in support of such forces, including individuals serving in an area certified by the Department of Defense as being in direct support of military operations in a CZ, for which the person receives special pay for duty subject to hostile fire or imminent danger;
   • Individuals deployed outside the U.S. away from the individual’s permanent duty station while participating in an operation designated by the Secretary of Defense as a contingency operation (as defined in 10 U.S.C. § 101 (a) (13); or
   • Individuals serving in the Armed Forces in a qualified hazardous duty area.
3. Offers that are received and deemed not processable due to the application of section 7508 relief should be worked following standard procedures. If any of the following situations exist, exception processing should be followed:
   • Offers that are received and deemed processable
   • Offers in which a Combo Letter was issued and CZ notification for section 7508 relief due to one of the above-described situations is received after the letter was issued
   • Offers in which a determination was made to accept, return, or reject the offer
   • Offers in which a return or rejection letter was issued prior to notification for section 7508 relief due to one of the above-described situations
4. For all offer situations identified in paragraph (3) above, the following actions should be taken.
   • Prepare Form 3244 or 4844 requesting input of TC 500 CC 56 on the taxpayer's account. Use the current date for the incoming call or the IRS received date for the correspondence. The case should be suspended for 120 calendar days without taking any further action and should be reassigned on AOIC to a designated or locally designated assignment number. Management should utilize the AOIC Follow-up Screen to monitor the progress on the case until the TC 500 is reversed.
   • The offer investigation may continue if there is an authorized representative or, in the case of a joint offer, if the spouse is able and willing to provide all substantiation.
5. If a taxpayer has been identified as being located in a CZ area, no liens should be filed unless extenuating circumstances exist.

5.8.3.12  (09-23-2008)
Dishonored Payments

1. For payments processed through PCC, Cincinnati Accounting receives the initial notification of a dishonored OIC payment from the Federal Reserve Bank through the Electronic Verification and Image Services (ELVIS) automated system.
2. The Cincinnati Dishonored Check Unit will notify the taxpayer by mailing them a copy of the dishonored check and Form 12993-A, Check for Offer in Compromise Payment Not Accepted by Bank.
3. Cincinnati Accounting will fax copies of the dishonored payments to the COIC site that originated Form 3210.
4. Upon notification of a dishonored application fee and/or TIPRA payment, the site will determine the current AOIC offer assignment by querying the offer number annotated on the upper left hand corner of the check. For Appeals CDP offers, see IRM 5.8.2.

   Note:

   Due to AOIC programming, only the assigned office can gain access to the Action CD field of the Application Fee screen to input the dishonored check status.
5. If the payment has been moved from the 4710 Account to the Master File, the Dishonored Check Unit will reverse the payment with a TC 671. If no notification of the dishonored payment is received, the dishonored check can also be identified by the TC 671 posted on IDRS.
6. Upon notification of a dishonored application fee and/or TIPRA payment, the offer will be immediately returned to the taxpayer with the appropriate AOIC letter for a dishonored check. Document the AOIC history with the following information:
   • Which check(s) (application fee, TIPRA payment, or both) was returned;
   • The check number; and
   • Date the check was dishonored
7. There may be no notification of dishonored checks processed through RS-PCC. Check IDRS for the posting of a TC 671 that may also include a secondary TC 280 or TC 286, dishonored check penalty.
8. If the payment was dishonored while still in the 4710 account, Accounting will annotate their copy of the Form 3210 as appropriate.

   If...	Then...
   The dishonored check was a deposit	Notify MOIC and continue investigation of the case.
   The dishonored check was for either the application fee or TIPRA payments	Notify MOIC and stop investigation of the case.
9. If the taxpayer or an authorized representative offers to replace the dishonored check and requests reconsideration of their offer, contact by the taxpayer or their representative must be made within 30 days of the date of the initial AOIC return letter. The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time. See IRM 5.8.7 for reconsideration procedures.
   • Inform the taxpayer or the authorized representative that the offer will not be reconsidered if the payment is not made with certified funds.
   • Provide a due date for receipt of the payment must be provided to the taxpayer or the authorized representative.
   • Advise the taxpayer or their representative to submit the payment by overnight mail.
   • Document the case history.
10. Inform the taxpayer or the authorized representative that the certified funds must be mailed to either of the following addresses:

    Brookhaven: Mail Stop 681, PO Box 9011, Holtsville, NY 11742

    Memphis: AMC-Stop 880, PO Box 30834, Memphis, TN 38130-0834
11. To ensure proper handling, advise the taxpayer to include a letter requesting reconsideration of the offer.
12. If the payment was dishonored while still residing in the 4710 Account, the payment should be processed through established deposit procedures. A copy of Form 3210 must be forwarded to the appropriate MOIC function. Clearly indicate on the copy of Form 3210 that the payment is a replacement for a dishonored check. MOIC will load the payment on the AOIC deposit screen once the AOIC record is reloaded. MOIC is responsible for ensuring the payment is applied to the Master File as originally intended.

    Note:

    The offer will be reloaded, and a new offer number will generate. The new Form 3210 will reflect the new offer number. Cross reference the original offer number in the AOIC history, and in the remarks section of Form 3210 to ensure Accounting is aware there may be two Forms 3210 with different offer numbers for the same taxpayer.
13. If the payment was dishonored with a TC 671 on the Master File, prepare a Form 3244 to post the payment as a replacement for the dishonored payment.
14. Upon receipt of the replacement payment, the employee that processed the payment must reload the offer on AOIC, if appropriate. The employee will also verify if the payment was received within the established deadline as annotated in the AOIC history. If the payment was received within the established timeframe, continue working the offer. If the payment is not received by the specified due date, the payment will be processed in accordance with TIPRA payment requirements, and the case will not be opened as a reconsideration. See IRM 5.8.7 for reconsideration procedures.

5.8.3.12.1  (03-26-2010)
Procedures for Dishonored Payments when the Case is still Assigned to COIC

1. If the offer is still assigned to a COIC site, COIC will immediately cease processing the associated offer, update AOIC and return it to the taxpayer, utilizing letter option RET-AA.
2. If the offer is assigned to an Area office, COIC will telephone the employee assigned the offer (or the manager of the assigned function, if no individual is specified on AOIC) to advise of the dishonored payment. Once contact is made with the assigned area employee or manager, COIC will fax a copy of the dishonored check to include in the case file and document AOIC to indicate to whom the information was communicated.
3. If the case was processed as an Appeals CDP offer, COIC should query ACDS to determine which Appeals employee is assigned the case. COIC will telephone the Appeals employee to advise of the dishonored check and fax a copy to include in the Appeals case file. COIC will update the AOIC.
4. If notification of the dishonored check occurs after the offer was closed on AOIC, the designated AOIC liaison within the COIC site will contact the Headquarters AOIC analyst to correct the application fee record of the closed offer.

5.8.3.13  (03-26-2010)
"Application Fee Refund/Apply Listing " Validation

1. When an erroneous processability determination is corrected after forwarding the related application fee remittance for deposit, the COIC sites will need to determine whether the remittance has been deposited and credited to the taxpayer’s liability. An Application Fee Refund/Apply Listing should be generated from AOIC to identify application fees that were initially determined to be processable, but later determined to be not processable. Generation of this listing is required in order for the COIC site to verify and authorize a manual refund.
2. The COIC sites should request MOIC to generate the Application Fee Refund/Apply Listing on a monthly basis.
3. Generally, when an offer is deemed not processable, the Service includes the taxpayer's remittance with the return disposition letter. However, depending on the elapsed time between inputting a processability change on AOIC from "Y" to an "N" , the Service may have already deposited the related application fee and applied the payment to the taxpayer's liability on Master File.

   If...	Then...
   the payment has been deposited and still resides in the 4710 Account at the time the offer is deemed not processable	prepare a Form 3753, Manual Refund Posting Voucher, to manually refund.
   the payment has been applied	prepare the Form 5792, Request for IDRS Generated Refund, to manually refund.

   Note:

   The comments recorded on the Form 5792 must specifically state that the offer was deemed not processable and the taxpayer is entitled to the refund of the application fee. Include a contact name and number on the Form 5792 to provide Accounting a contact if questions should arise.
4. To determine whether or not a manual refund of the application fee should be issued, research the completed Form 3210 to determine whether the application fee was deposited by the Service or returned to the taxpayer via manual refund procedures.
5. Thorough research and care is required when determining which offers on the Application Fee Refund/Apply Listing should receive manual refunds.

   If...	Then...
   Research indicated that the application fee was returned to the taxpayer(s)	The designated COIC site AOIC liaison should contact the Headquarters AOIC analyst to make the necessary adjustment to the application fee information to remove it from the Refund/Apply Listing. This action will eliminate the potential for the taxpayer to receive an erroneous refund.
   Research indicated that the application fee was deposited and still resides in the 4710 Account	Contact the MOIC function co-located with the COIC site and request a manual refund be generated to the taxpayer(s) using Form 3753.
   Research indicated that the application fee was deposited and has been applied to the Master File	Prepare Form 5792 to manually refund the application fee payment. The designated COIC site AOIC liaison should contact the Headquarter AOIC analyst to make the necessary adjustment to the application fee information to remove the payment from the Refund/Apply Listing.
6. To request the MOIC function to issue manual refunds, prepare a memorandum that includes:
   • The offer number;
   • The taxpayer(s) name; and
   • The taxpayer(s) identification number (TIN).
7. Records that support the COIC sites decision to either remove the offer record from the Refund/Apply Listing or to issue a manual refund must be retained for one year. At a minimum, the file should consist of:
   • Copies of the Refund/Apply Listing or a memorandum detailing the requested information;
   • Copies of the Form 3210; and
   • Any other supporting documentation necessary to support the decision, including, but not limited to, the Remittance Processing System daily remittance registers.
8. TIPRA does not allow refunds of periodic payments or required initial TIPRA payments. However, it does allow refunds of the application fee and any deposits the taxpayer may have made.

5.8.3.14  (03-26-2010)
Expedite Handling

1. There may occasions where a taxpayer or Power of Attorney may request expedited processing of their OIC due to an emergency or perceived emergency situation. Situations that may warrant expedited case processing include (but are not limited to):
   • A contract or business agreement requiring the taxpayer, as a condition of the contract or agreement, to resolve the tax liability by a specific date;
   • Availability of the money to fund the offer is limited to a certain time; and
   • A terminal illness may affect the ability to complete the payment terms.

   Note:

   Contact by phone, fax, or mail may identify an emergency situation not initiated by the taxpayer. Once identified, expedite processing may become necessary. Follow the procedures in paragraphs (3) and (4) below and discuss with your manager.
2. Processing Forms 656 must be given priority consideration and handled expeditiously due to pending collection action.
3. Offers received with a request for expedited processing should be referred to management for a decision on whether or not expedited treatment is warranted.
4. If a decision is made to expedite offer processing, the manager should document the AOIC history indicating the basis for the decision. Form 656 should be clearly labeled at the top "Emergency Processing Requested. " . Immediate processability and assignment for investigation should be made.
5. Every effort should be made to close the offer within 90 calendar days of receipt. In an attempt to bring the case to a prompt and timely resolution and to meet the special needs of the taxpayer, immediate contact should be made with the taxpayer to request any additional information needed.
6. If a decision is made not to expedite the case, the manager should document the basis for the decision on the AOIC history. Contact the taxpayer by telephone or correspondence explaining the basis for the decision. The case should be worked under routine processing.

5.8.3.15  (03-26-2010)
Third Party Authorizations

1. Taxpayers who wish to be represented must submit a properly executed Form 2848, Power of Attorney and Declaration of Representative. Input the representative's information on AOIC and retain a copy of the form in the paper case file. Forward the original for recording on the Centralized Authorization File (CAF).
2. Send all original correspondence to the taxpayer and provide a copy to the representative unless the taxpayer has indicated otherwise by checking item b on line 7 of Form 2848.
3. Individuals who are not entitled to practice before the IRS with respect to a collection matter (such as unenrolled return preparers) may accompany taxpayers to meetings with a completed Form 8821, Taxpayer Information Authorization, or other proper authorization, and receive and provide information that relates to the offer investigation. They are not authorized to represent the taxpayers or sign documents relating to offers in compromise.
4. If the offer contains liabilities for tax years or periods that are not also included on Form 2848, a letter cannot be sent to the representative covering these periods. Instead, send a redacted letter to the representative. The letter sent to the taxpayer can request completion of a Form 8821 or a Form 2848 to cover the missing periods.
5. If, during the investigation, it is discovered that the POA no longer represents the taxpayer, secure a letter revoking the POA and document the case history. Remove the POA information from AOIC.
6. Where a recognized representative has unreasonably delayed or hindered an examination, collection, or investigation by failing to furnish, after repeated request, non-privileged information necessary to the examination, collection or investigation, the IRS employee conducting the examination, collection, or investigation may be given permission to bypass the representative and contact the taxpayer directly for such information [26 C.F.R. § 601.506 (b) (Statement of Procedural Rules)]. Prior to contacting the taxpayer directly, the IRS employee must first initiate bypass procedures. See IRM 5.1.1.7.7.1 for procedures to bypass a POA.

5.8.3.15.1  (03-26-2010)
Third Party Authorization Requests

1. Attorneys, Certified Public Accountants (CPA), enrolled agents, or enrolled actuaries are generally the only practitioners authorized to represent taxpayers before the IRS on collection matters.

   Note:

   An unenrolled return preparer is an individual, other than an attorney, CPA, enrolled agent, or enrolled actuary, who prepares and signs a taxpayer's return as a preparer, or who prepared a return but is not required to sign the return. An unenrolled return preparer cannot represent a taxpayer before the IRS on any collection matter. An unenrolled return preparer, however, may represent a taxpayer before the IRS in certain other limited situations. See IRM 5.1.10.5.2, Right to Representation.
2. During the course of the investigation, a taxpayer may submit a Form 2848 designating a third-party as their representative or power of attorney, or the taxpayer may submit a Form 8821 designating an appointee or may complete Section XI of Form 656, Offer in Compromise, for a Third Party Designee. When properly completed and filed by the taxpayer, each of these documents should be recognized during an investigation, and interaction with the third party should be governed by the parameters allowed within each of these authorization forms.
   • Form 2848 - authorizes an eligible individual (e.g., attorney, CPA, enrolled agent, or enrolled actuary) to represent a taxpayer before the IRS and allows the individual to receive confidential information.
   • Form 8821 authorizes any individual, corporation, or partnership to inspect and/or receive a taxpayer's confidential information for the type of tax and the years listed on Form 8821, Item 3.
   • Section XI of Form 656 allows a third party designee to discuss the offer with the IRS and allows the IRS to discuss with the designee any additional information needed to process the offer.
3. The table below provides guidance to assist in distinguishing the differences between the Form 2848, Form 8821, and item 14 on the Form 656.

   Type of Form	Designee may be individual or entity	Designee can inspect limited tax info	Designee may receive limited written info	Designee can represent TP on collection matters	Designee can execute waivers, consents, etc	TP can designate more than one individual/ entity on the form	Designee may redelegate to another individual or entity	Unenrolled return preparer can be designated
   Form 8821	Either	Yes	Yes	No	No	Yes	No	Yes
   Form 656 item 14	Individual Only	Yes	No	No	No	No	No	Yes
   Form 2848	Individual Only	Yes	Yes	Yes	Yes	Yes	Yes (Individuals Only)	Yes (but only for non-collection matters)

5.8.3.15.2  (03-26-2010)
Form 8821, Tax Information Authorization (Rev. 8/2008)

1. If Form 8821 is missing critical information that can only be provided by the taxpayer (e.g., tax years, type of tax, missing taxpayer signature, date) it will be returned to the taxpayer.
2. Information that may be disclosed to the designee is limited to the type of tax, tax form number, tax years or periods, or specific tax matter that is listed on the Form 8821, item 3.
3. If Form 8821, item 5a is checked, the designee is also entitled to receive copies of tax information, notices, and other written communication on an ongoing basis for the type of tax, tax form number, tax years, or specific tax matter listed under item 3.
4. The designee is not authorized to respond to any type of correspondence on behalf of the taxpayer if the response advocates a position that would indicate that the designee is taking on a representational role.
5. Mail the original Form 8821 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International), depending on the taxpayer’s state of residence. Page 2 of Form 8821 provides mailing addresses to be used.
6. Form 8821 may also be faxed. Refer to page 2 of Form 8821 for detailed fax information. If the form is faxed, retain the original in the case file. Document the history to indicate the date and campus to which the form was sent.

5.8.3.15.3  (03-26-2010)
Form 656, Offer in Compromise, Section XI: Third Party Designee (Rev. 3/2009)

1. The information and/or documentation that may be disclosed to the designee is limited only to information and/or documentation necessary to process an offer.
2. Information may include tax liabilities omitted on the Form 656 or unfiled tax returns affecting the acceptance of the offer.

5.8.3.15.4  (03-26-2010)
Form 2848, Power of Attorney and Declaration of Representative (Rev. 6/2008)

1. As of March 2004, the IRS will not honor a Form 2848 if it designates a representative who is not authorized to practice before the IRS. Further, the form will not be treated as a Taxpayer Information Authorization. Form 8821 is required to allow those individuals, who cannot practice before Collection personnel to access tax information beyond what would be allowed if they completed Section XI of Form 656.
2. Taxpayers may authorize a student who works in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) to represent them under a special order issued by the Office of Professional Responsibility (OPR). A copy of the letter from OPR authorizing practice before the IRS must be attached to Form 2848. Students who have been authorized to practice by a special order may, subject to any limitations set forth in the letter from OPR, represent taxpayers before any IRS office and should be treated the same as any other taxpayer representative designated on Form 2848.
3. The power to sign the taxpayer's tax returns can be granted only in limited situations. Refer to Form 2848 and Treasury Regulations 1.6012-1(a)(5) and 1.6061-1(a) for additional information.
4. If a joint return has been filed, one or both spouses may choose to be represented by a POA. If both spouses choose to be represented by the same individual(s), both the husband and wife are required to sign Form 2848. If, however, the spouses choose different individuals to represent them, each spouse must submit a separate Form 2848 listing their independent representative. If only one spouse is to be represented, only the one that will be represented is required to sign the Form 2848. Regardless, any authorized representative of either spouse is allowed access to tax information related to the joint tax return.
5. Mail or fax Form 2848 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International) depending on the taxpayer's state of residence. Refer to the Instructions on the Form 2848 for mailing addresses and fax numbers. If the Form 2848 is faxed, retain the original in the case file. Document the case to indicate the date and campus to which the form was sent.

5.8.3.16  (03-26-2010)
Processing Forms 4844 from Automated Collection Services, Toll Free, or Other Service Divisions

1. Form 4844, Request for Terminal Action, will be prepared by Automated Collection System (ACS), Toll Free, and Walk-in operations to provide information submitted by the taxpayer on a previously filed offer in compromise. Normally, these forms will be prepared if the taxpayer has yet to be contacted or notified of the status of the offer within 45 calendar days of the offer being submitted for processing.
2. Form 4844 will be faxed to the appropriate COIC sites. The forms should be reviewed within 48 hours of receipt and any necessary action taken on the account based on the information provided.

Exhibit 5.8.3-1  (03-26-2010)
Form 3210 – To Appeals with Open TIPRA Statute

Appeals Transmittal used for transmitting OICs worked in conjunction with a CDP.

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