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IRS OFFER IN
COMPROMISE PROCESSABILITY - IRM
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IRS Offer in Compromise - WHEN YOU HAVE
DECIDED TO RESOLVE YOUR TAX CASE, CONTACT TaxSOS.com
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Toll Free 1-866-482-9707 |
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5.8.3.1
(09-01-2005)
Overview
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All offer receipts other than those based solely upon
Doubt as to Liability (DATL) are reviewed to determine if
they are processable. No fee is due on Doubt as to
Liability (DATL) offers, including Trust Fund Recovery
Penalty (TFRP). Processable offers are then
"built" (i.e. internal and external information
is secured to verify financial information), and
perfected, if necessary, before being assigned for
investigation. Not processable offers are returned to
taxpayers. This chapter defines the procedures to be
followed for determining jurisdictional responsibility,
processability, and case building.
5.8.3.2
(09-01-2005)
Routing Cases Based on Jurisdictional Responsibility
-
The following table provides guidance when it has been
determined that Collection does not have jurisdictional
responsibility:
5.8.3.3
(09-01-2005)
Combined Application Fee Payment Processing
-
Multiple offers submitted with one remittance intended
as the application fees for all will not be processed. Do
not load the cases to the Automated Offers in Compromise
(AOIC) system. Return the offers to the submitter (i.e.-
Power of Attorney not the individuals) with the Letter
3796.
5.8.3.4
(09-01-2005)
Processability
-
Centralized Offers in Compromise (COIC) Process
Examiners (PE) are responsible for determining
processability of all offers received and worked by the
Service, except those based solely on Doubt as to
Liability (DATL) issues. This determination must be made
within 14 calendar days of receipt of an offer in
compromise in the appropriate COIC site.
Each new receipt will fall into one of the following
categories:
5.8.3.4.1
(09-01-2005)
Determining Processability
-
An offer in compromise will be deemed not processable
if one or more of the following criteria are present:
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Taxpayer Not in
Compliance — All tax returns for
which the taxpayer has a filing requirement must
be filed. This rule applies even if a Service
employee previously decided not to pursue the
filing of the return under the provisions of
Policy Statement P-5-133, because it was believed
to have "little or no tax due" .
In-business taxpayers must have timely deposited,
filed, and paid all required employment tax
returns for the two (2) preceding quarters prior
to filing the offer and must be current with
federal tax deposits for the quarter in which the
offer was submitted. An individual taxpayer should
not be considered an in-business taxpayer because
he owns or controls a corporation that is not in
compliance. IRM 5.8.7.6(5), Rejection, discusses
the criteria for possible rejection of an offer
from such an individual if a related entity is not
in compliance.
Note:
Generally speaking, IRM 5.1.11.1.3(2),
Delinquent Return Program, only requires
employees to conduct a compliance check to
confirm and document all IMF tax returns were
filed for the preceding 6-year period. The only
exception would be if fraud were discovered
during the course of the investigation. Even
then it should be extremely rare to go beyond 6
years.
IRM 5.1.11.4, Cases Requiring Special Handling,
discusses enforcement criteria, which states
that if the taxpayer refuses to file, neglects
to file, or indicates an inability to file, then
the employees should determine to what extent
enforcement should be used (e.g. summons,
6020(b), referral to Exam, or field, etc.).
Filing requirements will normally be enforced
for a 6-year period, which is calculated by
starting with the tax year that is currently due
and going back 6 years.
-
Taxpayer in Bankruptcy
— An offer will not be considered during a
bankruptcy proceeding. See IRM 5.8.10.2,
Bankruptcy.
Note:
IRM 25.17.4.7, Offers-in-Compromise and
Bankruptcy (09–01–2004) , states that
"administrative and legal problems would be
created if a tax liability was simultaneously
the subject of a court-supervised bankruptcy
case and the administrative offer-in-compromise
process." Therefore, it is the policy of
IRS that an offer will not be considered if a
taxpayer is in bankruptcy. Offer
materials including financial information should
be forwarded to the Insolvency unit assigned to
the bankruptcy.
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Taxpayer did not submit
the application fee with the offer —
The application fee of $150 or the signed Form
656-A, Income Certification for Offer in
Compromise Application Fee, must be submitted with
each Form 656. No application fee is required for
offers filed solely on the basis of Doubt as to
Liability (DATL).
Note:
The Form 656-A applies only to individual
taxpayers.
-
No deviations from or additions to processability
criteria may be made without written authorization from
the Headquarters Office.
-
An offer cannot be returned for the sole reason that
the cost of an investigation may exceed the amount
offered.
5.8.3.4.2
(09-01-2005)
Determining Processability for Appeals Collection Due
Process Offers
-
Apply the same processability criteria as outlined in
IRM 5.8.3.4.1, Determining Processablity, but do not
load these offers on the Automated Offer in Compromise
(AOIC).
Note:
If Collection files a lien while an offer is being
investigated, and the taxpayer files a Collection Due
Process (CDP) request because of that lien and the CDP
remains open, the offer will become the jurisdiction
of Appeals. Collection cannot work any offer that has
an open CDP case. Appeals may require the assistance
to complete the investigation on complex cases. In
those cases, an Appeal Referral Investigation (ARI)
may be issued to the field.
-
Appeals will provide Centralized Offer in Compromise
(COIC) with both processable and not processable
determination letters containing all necessary
information, including the Appeals contact information.
It is the responsibility of COIC to sign, date, and mail
the applicable letter based on the processability
determination.
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Offers submitted directly to the Compliance employee,
are occasionally identified as having an open Collection
Due Process (CDP) control. When this occurs, the
Centralized Offer in Compromise (COIC) site CDP
coordinator will research the Appeals Centralized
database System (ACDS) to determine:
If ACDS research indicates that there is an open CDP,
contact the assigned Appeals/Settlement Officer (AO/SO)
to determine the status of the CDP hearing.
Note:
If the CDP determination letter has not been issued
or a withdrawal has not been signed and dated, the
offer is considered to still be open and under the
jurisdiction of Appeals.
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When an offer is received in conjunction with a CDP
and is deemed to be processable, the COIC site will
input the Transaction Code (TC) 480 on all tax periods
relating to the offer submission. This includes the
input of a TC 480 on all balance due periods not
specifically listed on the Form 656. It will be the
responsibility of Appeals to perfect the offer document.
COIC will advise the Appeals/Settlement Officer (AO/SO)
when it is necessary for the Appeals employee to secure
additional Form(s) 656 and/or application fee(s) prior
to investigation by generating the letter identifying
" Option Y" criteria. See IRM 5.8.3.7, Forms
656 Application Fee Requirements and Perfection, for
examples of these situations. The COIC site will prepare
the Form 3210, Document Transmittal, for transmittal of
the processable offer back to Appeals. The Form 3210
will include the following information:
Note:
It will be the responsibility of Appeals to resolve
each TC 480 (e.g., input of TC 481, 482, 483) after
Appeals concludes the offer investigation.
5.8.3.4.3
(09-01-2005)
Exception Processing for Offers in Compromise
Investigations Involving Taxpayers in Combat Zones
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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. Relief provisions for extensions
of deadlines are provided to taxpayers located in the
designated CZ areas; such as, a contingency operation
designated by the Department of Defense (DOD), a
qualified hazardous duty area as defined by Congress, or
direct support of military operations in a combat zone
certified by the DOD. The relief provisions are also
applicable to any support personnel on official duty in
the CZ; such as, Merchant Marines serving aboard vessels
under the operational control of the DOD, Red Cross
personnel, accredited corespondents, and civilian
personnel acting under the direction of the U.S. Armed
Forces in support of those forces.
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Offers that are received and deemed not processable
should be worked following standard procedures. If any
of the following situations exist, exception processing
should be followed:
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Offers that are received and deemed processable;
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Offers in which a Combo Letter was issued and
Combat Zone notification is received after the
letter was issued;
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Offers in which a determination was made to
accept, return, or reject the offer; or
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Offers in which a Return or Rejection Letter
was issued prior to the CZ notification.
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In all of the situations identified in IRM
5.8.3.4.3(2) above, the following actions should be
taken:
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Prepare the Form 3244, Payment Posting Voucher
, or Form 4844, Request for Terminal Action ,
requesting input of Transaction Code (TC) 500
Closing Code (CC) 56 on the taxpayers 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 the Automated Offers in Compromise (AOIC)
system 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 a Power of Attorney or in the case of a joint
offer, the spouse is able and willing to provide
all substantiation.
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The Service established an E-mail site at combatzone@irs.gov
, which can be used by military personnel,
support personnel, and their families to contact the
IRS.
5.8.3.5
(09-01-2005)
Processing Application Fees
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The following situations assume that the taxpayer has
met the processability criteria for compliance and the
Form 656, Offer in Compromise, and Form 433-A, Collection
Information Statement for Wage Earners and Self-Employed
Individuals, and/or Form 433-B, Collection Information
Statement for Business , as appropriate, were submitted:
5.8.3.5.1
(09-01-2005)
Completing the Form 13479, COIC Application Fee Tracking
Report
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Offers with remittances will be batched with the Form
13479, COIC Application Fee Tracking Report, for
processability determinations. Each separate remittance
will appear on its own line of the Form 13479. Offers
submitted with separate remittances for the application
fee and a deposit will have entries on two lines, while
an offer submitted with a single remittance that
combines the application fee and deposit will have only
one entry. Batch integrity must be maintained throughout
the processability determination.
-
Cases with deposits
and/or tax payments must have a
processability determination made and the
remittance deposited within 48 hours of the IRS
receipt date (unless "misdirected" ).
-
Those offers received with application
fees only must have a processability
determination made within 14 calendar days of the
IRS receipt date.
Upon assignment to the Process Examiner (PE), the
manager will ensure that the "PE Received
Date" and " PE COIC #" fields on the Form
13479 are accurately completed.
-
The last four (4) columns of the Form 13479 are used
to document the decision to process or return the
remittance. They are:
-
"Deposit 4710/3244 Amt."
-
"Application Fee Amt."
-
"Return Non-Negotiable"
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"Return Negotiable"
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Form 13479 should be completed as follows:
-
If the offer has one remittance for any combination
of the above three payments enter the appropriate
amounts in the respective columns and ensure the amounts
entered equal the "Check Amount" column.
-
If the offer is not processable take one of the
following actions based on the type of remittance
received:
-
Processability determinations must be made for all
offers listed on the Form 13479 before returning it to
Receipt and Control for processing of the remittances.
When all of the determinations have been made and the
Form 13479 is complete, send the original with all Forms
2515, 3244, letters, and envelopes to Receipt &
Control for processing of the checks. Acknowledgement of
the receipt of the Form 13479 must be secured from the
Receipt and Control/mail team employee by having them
place their initials in the upper right hand corner of
the Form 13479.
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Personal checks will be stamped non-negotiable
and enclosed in the return offer package to the
taxpayer.
-
It is the responsibility of Receipt and Control
to return all " negotiable" remittances
back to the taxpayer in accordance with Receipt
and Control procedures.
5.8.3.6
(09-01-2005)
Dishonored Application Fee Payments
-
Accounting Branch will hand carry or fax copies of
dishonored application fee checks to the Centralized Offer
in Compromise (COIC) site that originated the Form 13479,
COIC Application Fee Tracking Report . Upon notification
of a dishonored application fee payment, the site will
determine the current Automated Offer in Compromise (AOIC)
offer assignment by querying the offer number annotated on
the upper left hand corner of the check. For Appeals
Collection Due Process offers, see IRM 5.8.3.6.1(3),
below.
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.
5.8.3.6.1
(09-01-2005)
Centralized Offer in Compromise Procedures
-
If the offer is still assigned to a Centralized Offer
in Compromise (COIC) site, COIC will immediately cease
processing the associated offer, update the Automated
Offer in Compromise (AOIC) "Application Fee"
screen by entering "I" in the " Action Cd"
field and return it to the taxpayer, utilizing letter
option "RET-AA" .
-
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 office
employee or manager, COIC will fax a copy of the
dishonored check to include in the case file and
document AOIC to indicate the information was
communicated and to whom.
-
If the case was processed as an Appeals Collection
Due Process (CDP) offer, COIC should query the Appeals
Centralized Database System (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 "Appeals
Fee Screen" application of AOIC by entering
"I" in the "Action Cd" field.
Note:
Appeals Collection due Process (CDP) cases can be
identified by the application fee number annotated on
the upper left corner of the check.
-
If notification of the dishonored check occurs after
the offer was closed on Automated Offer in Compromise
(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.
5.8.3.6.2
(09-01-2005)
Area Office Procedures
-
Upon notification by the Centralized Offer in
Compromise (COIC) site of a dishonored fee payment, the
Offer Specialist (OS) (or manager of the assignment
function, if the offer is not assigned to an individual)
will immediately:
-
Cease processing of the associated offer.
-
Update the AOIC Application Fee screen by
entering "I" in the "Action Cd"
field
-
Return the offer to the taxpayer utilizing
letter option " RET-AA" .
5.8.3.6.3
(09-01-2005)
Notification of Dishonored Application Fee Check After
Issuance of the Rejection Letter
-
If notification of the dishonored OIC application fee
check occurred after issuance of a rejection letter, in
addition to procedures in IRM 5.8.3.6.1 and 5.8.3.6.2
above, the employee should:
-
Date the return letter 31 days from the date of
the rejection letter.
-
Include the open paragraph "RET-M"
with the following language: "As a result,
your request for appeal has been dismissed. "
Note:
This should only be used in those cases where
a request for an Appeal was received within the
30-day appeal period.
-
Close the case on AOIC as a return using the
mail date of the return letter and AOIC final
disposition code "10."
5.8.3.7
(09-01-2005)
Forms 656 Application Fee Requirements and Perfection
-
Treasury Regulations §300.3 requires taxpayers to
submit one fee for each Form 656, Offer in Compromise,
received, if no Form 656–A, Income Certification for
Offer in Compromise Application Fee, was submitted.
The table below is intended to assist in identifying a
processable offer for application fee purposes and provide
guidance to advise the taxpayer when more than one Form
656, application fee, and/or Form 656-A should be
submitted. In the following scenarios the status of the
taxpayer is not relevant (e.g. married, separated or
divorced). The general rule is that there should only be
as many Forms 656 as there are entities seeking to
compromise. The following scenarios assume all
processability criteria (other than for the application
fee) are met.
5.8.3.8
(09-01-2005)
Centralized Offers in Compromise Processability
Determinations
-
Centralized Offer in Compromise (COIC) sites determine
offer processability. To accomplish this Process Examiners
(PE) must take the following actions:
-
Check IDRS to determine if the taxpayer is
currently in compliance or is in bankruptcy.
• This includes checking all Social Security
Numbers (SSN), Employer Identification Numbers (EIN),
and Individual Taxpayer Identification Numbers (ITINs)
known or found for the taxpayer. At a minimum check
the following IDRS command codes: ENMOD, INOLES,
CFINK, BMFOLI, SUMRY, IMFOLI. If any data is found,
print and include it in the file. Also, research
IDRS command codes TXMOD and FFINQ for additional
data, but it is not necessary to include printed
copies in the file.
• Research the Master File to determine if the
taxpayer has any unfiled tax returns. Review the
offer package to determine if documentation
submitted by the taxpayer or another Service
employee indicates that the taxpayer has recently
filed or was not required to file any delinquent
returns. A delinquency check notification or
taxpayer delinquency investigation (TDI) does not
have to exist to determine if a taxpayer has unfiled
delinquent returns.
Note:
If a delinquent return was recently filed and
has not yet posted to IDRS, a copy of the return
is sufficient verification of compliance.
-
Check for any freeze codes such as: -Y, -W, -Z,
-A, -V, -L that may require special action. Refer to
local guidelines.
-
Verify that the taxpayer has submitted the
appropriate Form 656, Offer in Compromise, Form
433–A, Collection Information Statement for Wage
Earners and Self-Employed Individuals , and/or Form
433-B, Collection Information for Businesses.
-
Verify that the taxpayer has submitted the
application fee (or signed Form 656-A, Income
Certification for Offer in Compromise Application
Fee) for each offer submitted.
-
During the internal analysis, AOIC should be
documented of any findings.
-
Review Automated Offer in Compromise (AOIC) and the
history for any previous offers to determine if the offer
was submitted "solely to delay collection." See
IRM 5.8.3.19, Offers Submitted Solely to Delay Collection.
5.8.3.9
(09-01-2005)
Not Processable
-
When returning the offer as not processable, the return
letter will specify all reasons for the determination.
-
If the offer is not processable:
-
Stamp the Form 656 "RETURN" in red
(or circle the date in red if a red ink
stamp is not available) and write the date that the
offer was determined to be not processable.
-
Cross out all IRS received dates with a red"X."
-
Prepare the return letter with all applicable
reason code paragraphs.
-
In addition to identifying all of the reasons for
the determination, also address the issue of the
combined joint and separate liabilities, if
appropriate. For example, individual and corporate
or partnership liabilities on one Form 656. In those
cases, include Option "Y" in the return
letter.
-
Complete the Form 13479, COIC Application Fee
Tracking Report, if applicable.
-
Update the history specifying the reason(s) for
the not processable determination.
-
Do not sign the Form 656 as pending.
-
Update AOIC "Proc Cd" field to
"N" (not processable).
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Managers and journey level Process Examiners (PE)
may sign and date the letter and close the case on
AOIC.
-
Send the Form 656, the Return letter, Publication
1 and Publication 594 to the taxpayer along with all
other documents originally sent. If a Power of
Attorney (POA) is present, send the representative a
copy of the letter. If disclosure issues exist, use
the appropriate paragraph to indicate this in the
return letter, and do not send a copy to the
representative.
-
If a Form 656 was forwarded by a Revenue Officer
(RO) and is not processable, the COIC site should
also forward the Form 657 and a copy of the "
not processable" letter to the approving
official of the Form 657.
-
Caution should be exercised to ensure that no IDRS
prints or other internally generated documents are sent to
either the taxpayer or the Power of Attorney (POA). All
internal documents should be destroyed. Nothing is
required to be maintained in local closed files on these
cases.
-
If the offer was originally determined processable and
the application fee was deposited, but it was later
concluded that this determination was made in error,
processing should stop. The case should be closed using
not processable procedures defined above. In these cases,
it is important to ensure the "N" (not
processable) is input on AOIC to reverse the Transaction
Code (TC) 480(s). This will result in the generation of a
TC 483 posting to the appropriate modules, and a refund of
the $150 application fee.
5.8.3.10
(09-01-2005)
Processable
-
An offer is considered pending when a delegated IRS
official signs and dates the Form 656, Offer in
Compromise, in the appropriate section. This date is the
official offer pending date.
Note:
The pending date entered on AOIC must match the date
the delegated official signed the Form 656. This date
must also match the Transaction Code (TC) 480 date when
it posts to IDRS.
-
If the offer is processable:
-
Sign and date the waiver on Form 656 (item 11).
-
Change the "Proc Cd" to a "Y"
(processable).
-
Complete the AOIC Application Fee Screen.
-
Complete the MFT and "Terms" screen on
AOIC.
Note:
If tax periods are in status 60, 61, or 53
(except for those status 53 modules with Closing
Code "03" [unable to locate] or Closing
Code "12" [unable to contact]) remove
the "Y" on each tax period on the MFT
screen. DO
NOT change the status of
those accounts, unless the taxpayer has defaulted
the installment agreement.
-
On all IMF cases enter "P" if the offer
is for the primary taxpayer or the controlling
taxpayer identification number (TIN) on the entity,
enter"S" if the offer is for the secondary
taxpayer , or enter "B" if both husband
and wife are making a joint offer.
Note:
If only one party of a joint liability is
submitting the offer, remove the "Y"
from the MFT screen. This will take the case out
of Status 71.
-
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
letter or personal contact.
-
If an offer was submitted by an Revenue Officer (RO)
and it is processable, but the RO has determined that the
offer was submitted "solely to delay collection"
, the COIC site will contact the originating RO to advise
that 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 5.8.3.19, Offers
Submitted Solely to Delay Collection, for delegated
approval authority.
-
COIC will request Transaction Code (TC) 480 and Status
71 through the AOIC system. However, there may be
situations when the Status 71 will not generate (e.g. MFT
31 modules created prior to January 2005, imminent
statute, etc.). In those cases, the field Offer Specialist
may request input of the TC 470 with Closing Code (CC) 90
to suspend collection activity.
5.8.3.10.1
(09-01-2005)
Erroneous Processability Determinations
-
The Service only collects the application fee for
processable offers; therefore, fees associated with
offers that are initially deemed processable but
subsequently determined to be not processable must be
returned to the taxpayer.
-
When an erroneous processability determination is
corrected prior to forwarding the related application
fee for deposit and it is still in the custody of
Receipt and Control or the mail team, the COIC sites
should follow campus procedures designed to include the
remittance in the not processable return letter and to
correct the AOIC fee screen record.
5.8.3.10.2
(09-01-2005)
"Application Fee Refund/Apply Listing"
Validation
-
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. 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.
Note:
The COIC sites should request the Monitoring Offer
in Compromise (MOIC) function to generate the
"Application Fee Refund/Apply Listing" on a
monthly basis.
-
Generally, when an offer is deemed "not
processable" , the Service includes the taxpayers
remittance with the return disposition letter. However,
depending on the elapsed time between inputting a
processability change on AOIC from a "YES"
to a "NO" ,
the Service may have already deposited the related
application fee.
-
To determine whether or not manual refunds of the
application fee should be issued, research the completed
Form 13479, COIC Application Fee Tracking Report, for
those offers to determine whether the application fee
was deposited by the Service or returned to the
taxpayer.
Caution:
Thorough research and care is required when
determining which offers on the "Application Fee
Refund/Apply Listing" should receive manual
refunds.
-
To request the Monitoring OIC (MOIC) function to
issue manual refunds, the COIC sites must prepare a
memorandum that includes:
-
Records that support the COIC sites decision to
either remove the offer record from the
"Refund/Apply Listing" or to issue a manua | | |
