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5.8.3.5.1 (11-15-2004)
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Abate Tax is not a Law Firm| If Processable, and… | Then… |
| An Application Fee was submitted | Enter $150 in the "Application Fee Amt." column. |
| An offer deposit was submitted | Enter the amount of the deposit in the "Deposit 4710/3244 Amt" column and prepare the Form 2515. |
| A tax payment (e.g., installment agreement (IA) payment, estimated tax (ES) payment) was submitted | Prepare the Form 3244 for the amount and application of the payment and enter the amount in the "Deposit 4710/3244 Amt." column. |
| If Not Processable, and… | Prepare the offer package to be returned and… |
| There is an application fee or deposit to be returned to the taxpayer with the Not Processable return letter |
|
| A separate tax payment (e.g., IA, ES payment) was submitted |
|
| One remittance was submitted that combined any tax payment (e.g., IA or ES payment) with an application fee or deposit amount |
|
5.8.3.6 (11-15-2004)
Dishonored Application Fee Payments
- Accounting Branch will hand carry or fax copies of dishonored application fee checks to the COIC site that originated the Form 13479. Upon notification of a dishonored application fee 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 Collection Due Process offers - see IRM 5.8.3.6.1(3)). AOIC is programmed to allow only the assigned office access to the "Action Cd" field of the " Application Fee" screen to input the dishonored check status.
5.8.3.6.1 (11-15-2004)
COIC Procedures
- If the offer is still assigned to a COIC site, COIC will immediately cease processing the associated offer, update the 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 was transferred 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 update the AOIC history 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 case file.
Note:
Appeals Collection due Process (CDP) cases can be identified by the application fee number annotated on the upper left corner of the check.
5.8.3.6.2 (11-15-2004)
Area Office Procedures
- Upon notification by
COIC 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" .
5.8.3.7
(11-15-2004)
Forms 656 Application Fee Requirements and
Perfection
- Treasury Regulations
§300.3 require taxpayers to submit one fee for each
Form 656 received. The following scenarios assume
all processability criteria, other than for the
application fee, are met. 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 and application fee (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 there
should only be as many Forms 656 as there are
entities seeking to compromise.
Scenario Procedures 1) Two TPs have joint liabilities only. The TPs jointly submit one Form 656 and one $150 application fee. One offer was submitted therefore one fee is required. 2) Two TPs have joint liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Two offers were submitted therefore two fees are required. Note:
The Process Examiner (PE) must secure a copy of the remittance to make the appropriate determination.
- 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 processing fee.
- If each TP contributed a portion of the $150 fee (e.g., each submitted a personal check for $75), then neither TP has paid the appropriate fee and both offers should be returned as not processable.
- If it cannot be determined which TP paid the application fee treat it as though half were submitted by each individual. Return both offers as not processable, enclose the fee payment with the not processable return letter addressing it to the party with the primary SSN on the liability.
3) Two TPs have separate liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Same as Scenario 2 4) Two TPs have joint liabilities and one or both of the TPs also have separate liabilities. The TPs submit one Form 656 listing both the joint and separate liabilities and only one $150 application fee without a signed Form 656-A. Although it is the policy of the Service to require separate offers when TPs have both joint and separate liabilities, the offer submitted in this scenario is processable. However, the Service can require the TP to perfect the original offer by submitting a new offer to separate the liabilities. In this instance, the new offer will require a second fee. When requesting the perfection of an offer that requires the submission of a second offer, send the TPs two Forms 656: If the TPs refuse to perfect the offer, the Service will return the offer without any further consideration.- Prepare an "amended/revised" Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual with the primary SSN on the joint liability. Include both joint and separate liabilities, if any, in item 5. Note 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 with the
secondary SSN on the joint
liability. Include both
joint and separate
liabilities, if any, in item
5. Annotate the top of this
Form 656 in red "Related to
Offer Number____________" ,
inserting the number of the
original offer. This will
help identify that the offer
submitted is 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 Form 656-A and a photocopy of the original Form 656 with the combo letter
5) One Form 656 is submitted that includes both corporation or partnership and individual liabilities, but only one $150 application fee without a signed Form 656-A for the individual. Follow the procedures outlined in Scenario 4 above.
5.8.3.8
(11-15-2004)
Centralized Offers in Compromise (COIC)
Processability Determinations
- 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 SSNs and EINs 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. 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 current revision of Form 656 and 433-A and/or 433-B.
- Verify that the taxpayer has submitted the application fee (or signed Form 656-A certification) for each offer submitted.
- Review 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.
5.8.3.9
(11-15-2004)
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 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. If appropriate, also address the issue of the combined joint and separate liabilities; such as, the individual and corporate or partnership liabilities on one Form 656. In those cases, include Option "Y" in the return letter.
- Complete the Form 13479, if applicable.
- Update the history specifying the reason(s) for the not processable determination. Do not sign the From 656 as pending. Update AOIC "Proc Cd" field to "N" (not processable).
- 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 and is not processable, the COIC site will also send 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 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. It is important in these cases to ensure the "N" (not processable) is input on AOIC to reverse the 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
(11-15-2004)
Processable
- An offer is considered pending when a delegated IRS official signs and dates the Form 656 in the appropriate section. This date is the official offer pending date. The pending date entered on AOIC must match the date the delegated official signed the Form 656 and will be 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. If tax periods are in status 60, 61, or 53 remove the "Y" on each tax period on the MFT screen. DO NOT change the status of those accounts.
- On all IMF cases enter "P" if the offer is for the primary taxpayer (controlling TIN on the entity), enter "S" if the offer is for the secondary taxpayer , enter "B" if both husband and wife are making a joint offer. 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 71 Status.
- Communication with the
taxpayer and/or authorized representative may be
necessary to perfect the offer while it is pending.
Communication with the taxpayer may be completed by
letter or personal contact.
If processable and… Then… The offer requires perfection due to an insufficient number of Forms 656 and application fees Except for examples in IRM 5.8.3.7, send the combo letter to request: - Correct number of Forms 656 and fees (Option "Y" perfection),
- Any required financial substantiation,
- Any additional Form 656 perfection.
- Assign to "5100"
The offer doesnot need Option " Y" perfection and falls into the category for direct field transfer (see IRM 5.8.2.2). Reassign on AOIC to appropriate area office. The offer does not need Option " Y" perfection and qualifies under the "Screen For Obvious Full Pay" procedures. Process under "Screen For Obvious Full Pay" Procedures. The offer does notneed Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures, but all required financial substantiation is not attached or needs Form 656 perfection before beginning the investigation. - Send the combo letter to address all perfection issues and request the required substantiation.
- Assign to "5100"
The offer does not need Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures and has attached all required substantiation except for proof of payment of certain expenses, current real estate, or motor vehicle loan balances. - Send the combo letter to request substantiation and Form 656 perfection, if any,
- Check internal verification sources,
- Assign to:• "5300" if the offer will be investigated in COIC.
- "5350" if offer will be investigated in the field.
The offer does not need Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures and is a total submission. - Send the combo letter, Option "A."
- Check internal verification sources.
- Assign to "6000" , if offer is to be investigated in COIC, or
- Assign to the appropriate Area office if the case is to be worked by the field after case building (see IRM 5.8.2.2)
- If an offer was submitted by an Revenue Officer (RO) and it is processable, but the RO has determined that the offer was submitted to " solely 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 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 cases, imminent statute, etc.). In those cases, the field Offer Specialist may request input of the TC 470 with Closing Code 90 to suspend collection activity.
5.8.3.11
(11-15-2004)
Types of Perfection
- Certain critical
perfection errors must be corrected before beginning
the offer investigation. The combo letter on AOIC is
designed to communicate with the taxpayer and their
representative to request the necessary corrective
action. If there is no response to the request
letter, return the offer to the taxpayer as not
perfected. A return for failure to perfect an offer
does not require a Form 1271. 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 taxpayer's 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.
- The offered amount is blank or zero.
- No tax liability has been assessed or pending and the amount(s) can not be determined.
- Insufficient number of Forms 656 and application fees submitted.
- When sending a combo
letter to perfect the errors listed in (1) above or
to request financial substantiation, include a
request to correct the following errors.
Note:
If acceptance of the offer is considered and 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 Form 656 is not a verbatim duplicate. Such as, preprinted terms of the Form 656 are altered, deleted or missing.
- An amount of money is offered, but the payment terms are not specified.
- The taxpayer(s) or the taxpayer representative signature is missing on Form 656.
- Form 433–A or 433–B is incomplete.
- Preprinted terms of the Form 656 have been altered, deleted or are missing.
- The taxpayer has included a period(s) for which no amount is due.
- If a period with an amount
due is missing from the Form 656, but all periods
due can be determine from IDRS or other documents
submitted with the offer, add the missing period(s)
to the AOIC MFT screen. Do not add the missing
period(s) to the Form 656 unless contact is made
with the taxpayer.
When a taxpayer has included a period(s) for which there is no apparent amount due, do not add the period(s) to the Form 656. 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 inclusion of the missing period(s) or the deletion of the no tax due period(s) on the amended Form 656. If the taxpayer agrees to the addition of the missing period(s) or the deletion of the no tax due period(s), the history must document the method of agreement by the taxpayer.
- If the taxpayer's name, physical address or TIN is missing or incorrect and the correct information can be located on IDRS or other documents submitted with the offer, input the correct information on AOIC.
- If the basis for compromise is not indicated, but it can be determined by reviewing the package, begin the investigation.
- The offer cannot be accepted unless an amended Form 656 is signed, correcting all errors listed in (1) and (2) above.
5.8.3.12
(11-15-2004)
Screen For Obvious Full Pay Processing
- Taxpayers may submit an offer to compromise the liabilities based on Doubt as to Collectibility, 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. The taxpayer will be directed toward the appropriate resolution for the delinquency. The rejection letter will be the first communication with the taxpayer. A decision to reject with appeals rights is adequately justified by the taxpayer's self-disclosed ability to pay in full.
- 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 on all processable offers
to make that determination.
- 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 reflect that the taxpayer can fully pay the tax due via either liquidation of assets or on installment agreement, assign the offer to AOIC designation "6900."
5.8.3.13
(11-15-2004)
Centralized Offer in Compromise (COIC) Case
Building and Perfection Procedures
- For all processable offers
not directly transferred to an Area office or for
those qualifying under the "Screen for Obvious Full
Pay " procedures, the Collection Information
Statement (CIS) should be reviewed to verify the
taxpayer has submitted all supporting documents.
- Prepare the combo letter using the paragraphs that address the missing substantiation or incomplete documents as well as any Form 656 perfection issues. Include Publications 1 and 594. Document the AOIC history to summarize the required substantiation submitted with the offer as well as all perfection issues.
- A copy of the signed letter must be retained in the file.
- 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 to the representative.
- Envelopes containing combo letters including Options B, C or D must be stamped or otherwise marked "URGENT - TIME SENSITIVE" and include Notice 1326.
- Document the mailing date of the letter and a follow up date on AOIC.
- Assign the offer to AOIC designation 5100, 5300 or 5350, as identified in IRM 5.8.3.10(3).
Note:
All combo letters will be postdated 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 following up.
- Analysis of the
information provided on the CIS should be made prior
to issuing a document request or combo letter. The
letter(s) should only request information necessary
to make a reasonable collection decision.
- If claimed on the CIS and substantiation was not included, supporting documentation will be requested for:
• Income statements for the last three months (a current year-to-date statement is acceptable as long as it represents at least three months). Also request substantiation for three months of income statements for any not liable person in order to determine taxpayers share of living expenses, if applicable. See IRM 5.8.5.5.3 for additional information on the treatment of shared expenses.
• Bank statements for the last three months.
• The current available cash value or loan value of 401(k), profit sharing or other retirement plans and the current balance due on any existing loans.
• Current balance due on motor vehicle loans.
• Current balance due on real estate mortgages.
• Health insurance and out of pocket cost for the last three months (refer to LEM 5.3)
• Court orders and proof of payment for the last three months.
• Child and dependent care for the last three months.
• Other secured debt statements for the last three months.
• Life insurance premiums for the last three months.
5.8.3.14
(11-15-2004)
Centralized Offer in Compromise (COIC) Internal
Verification Research
- Prior to assigning the offer for investigation internal sources must be searched.
- Conduct research using IDRS, the electronic locator source, state motor vehicle records and inhouse real property valuation sources, to verify claimed amounts and to identify undisclosed assets or sources of income.
- Only secure motor vehicle valuations from a trade association guide on vehicle(s) that are three years old or newer and have no lien (e.g. When considering an offer in the year 2004, a 2001 model year is three years old or newer).
5.8.3.15
(11-15-2004)
Processing Taxpayer Responses to Combo Letters
- Update the AOIC history to annotate the information/documents received and sign any amended/revised Forms 656 with the current date.
- If the determination is
made to return the offer for failure to provide
information in the combo letter, use the appropriate
paragraph(s) in the AOIC return letter.
- Retain a copy of the original and any amended Forms 656 and the return letter in the file.
- Cross out all IRS received dates with a red "X" . Stamp the Form 656 with "RETURN" and add the current date.
- Update the case history on AOIC including the reason for return and enclose a copy of the history in the file and give the file to the manager for approval.
If… Then… The offer is assigned to "5100" , no taxpayer response and follow-up date passes Invoke the "No Reply" procedures. The offer is assigned to "5100" and taxpayer responds Associate mail and assign to "5500" . The offer is assigned to "5300" and follow-up date passes Assign to "6000" . The offer is assigned to "5350" and follow-up date passes Assign to the appropriate Area office. - Action(s) on cases with taxpayer responses are required within 10 calendar days from the date the offer is assigned to the PE.
5.8.3.16
(11-15-2004)
Analyzing Taxpayer Responses to Combo Letter
- The failure to provide proof of payment of any Collection Information Statement (CIS) claimed monthly expense amounts for health care expenses, court ordered payments, child/dependent care, life insurance, other secured debt, other expenses, or the failure to submit current loan balance statements for real estate mortgages or current loan balance statements for motor vehicles will by itself not be sufficient reason to return an offer.
- Process Examiner's (PE)
will determine if the taxpayers response
addressed all requested
items even when it may not have
specifically included what the combo letter sought.
The failure to provide the desired
information/documents will
by itself not
be sufficient reason to return an offer, as long as
the taxpayer addressed the particular
information/document requested.
Examples of when a taxpayer may address, while not actually providing the requested substantiation, may include but are not limited to the following:- Bank statements are provided for three months, but not all pages 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)
- The taxpayers 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.
- Offers for which Process
Examiner's (PE) determined the taxpayers adequately
addressed the requested information/documents (even
if they did not specifically include them in the
response), or where they failed to substantiate
certain claimed monthly expenses or loan balances,
will be assigned to AOIC designation "6100" .
Offers with designation code "6100 " will be assigned to and reviewed by Offer Examiners (OEs) charged with evaluating whether any response omission is material enough to prevent a reasonable collection potential (RCP) calculation. - If the Offer Examiner (OE) determines that the RCP calculation can be completed despite the missing information/documents, the offer will either be assigned to the appropriate Area office or to an OE if COIC is to complete the investigation.
- If the Offer Examiner (OE) determines that the RCP calculation cannot be completed because of the missing information/documents, the OE will attempt to telephone the taxpayer (or representative, if applicable) to secure any needed substantiation, explaining the information is needed in order to conduct the offer investigation. If unable to contact the taxpayer by telephone after one attempt or if the taxpayer/representative is unable to provide the substantiation to the OE within 5 calendar days (fax transmission is preferable), document the AOIC history and return the offer for failure to provide necessary information.
- If any of the critical
Form 656 perfection errors identified in IRM
5.8.3.11(1) were not corrected, the offer will be
returned. The following conditions assume that the
response corrected any critical Form 656 perfection
errors.
If offer is assigned to "5500" and… Then… The response included all required financial substantiation. - Check internal verification sources.
- Assign to "6000" if COIC investigates the offer; or
- Assign to the appropriate Area office.
The response included all requested financial information/substantiation except proof of payment of mortgage/motor vehicle loan balance. - Check internal verification sources.
- Assign to "6000" if COIC investigates the offer; or
- Assign to the appropriate Area office.
The response addressed any items which were not provided, even if it did not specifically include them. Assign to "6100" . The response neither included nor addressed requested income or bank statements, non-liable person, 401(k) or court order information. Return offer.
5.8.3.17
(11-15-2004)
"No Reply" Procedures
- 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. If after the designated time period has passed and the COIC site has not received a response, an automated return process will be completed. The AOIC system will generate all the necessary letters and documents to close the case. Before closing the offer the employee must check AOIC to verify that no response was received.
5.8.3.18
(11-15-2004)
Withholding Collection
- Installment agreements remain in effect while the offer is pending.
- For offers submitted after December 31, 1999, collection by levy on property owned by the offer taxpayer is prohibited while the offer is pending unless collection is in jeopardy.
- The term "jeopardy" has the same definition described in IRM 5.11.3 and Policy Statement P-4-88. Collection is not considered to be in jeopardy because an undisclosed asset was discovered during the investigation.
- Upon receiving information that a jeopardy levy has been approved, contact the employee issuing the levy and if it is agreed that the offer was filed to hinder or delay collection follow procedures in IRM 5.8.3.19 to return the offer.
- The prohibition on levy does not require release of a levy that was served prior to the offer submission. However, the taxpayer's circumstances should be considered when making a determination to release a levy or keep it in place while the offer is pending.
- The prohibition on levy while an offer is pending does not extend to filing notices of federal tax lien. See IRM 5.8.4.7 for a discussion of filing notice of federal tax lien while an offer is pending.
5.8.3.19
(11-15-2004)
Offers Submitted Solely to Delay Collection
- 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 " means an offer that was submitted for the sole purpose of avoiding or delaying collection activity. See IRM 5.8.3.19.1.
- The Field OIC group manager has delegated authority to approve returns based on "solely to delay" collection. The Unit Manager at the COIC sites has delegated authority to approve returns based on "solely to delay" collection.
- An offer is not considered submitted solely to delay collection just because there is an imminent CSED issue or if an offer has been investigated and rejected and the taxpayer exercises appeal rights.
5.8.3.19.1 (11-15-2004)
Solely to Delay Collection Determinations
- When a taxpayer
resubmits an offer that is not "materially "
different from a previous offer that was
considered and either rejected with appeal
rights or returned, the offer may be returned as
" solely to delay" collection.
Example:
The taxpayer fails to address the issues or defects of the previously submitted offer.
- The offer may be
considered as "materially" different when:
- The amount
reflected on the re-submission is
substantially similar to, less than the
prior offer or the same
and
the following exists:
1) The taxpayer's financial situation has changed.Note:
A change in the taxpayer's financial situation may include:
•A change in employment and/or income,
•A change in marital status effecting future ability to pay or ownership of assets,
•The loss of an asset that was included in the original offer investigation,
•A change in circumstances that would effect allowable expenses and future ability to pay.
2) The taxpayer has raised special circumstances that were not considered during the prior offer investigation.
- The amount
reflected on the re-submission is
substantially similar to, less than the
prior offer or the same
and
the following exists:
- When the Service has
accepted an offer in compromise and the taxpayer
subsequently defaults on the offer agreement and
then files a new offer within one year of the
default, the offer may be returned as "solely to
delay" collection unless the new offer indicates
any of the following:
- The current offer submission reflects special circumstances
- The re-submission is materially different from the prior accepted and defaulted offer.
- Although no provisions are provided for any formal appeal of a decision to return an offer submitted solely to delay collection, all employees must honor any taxpayer's request to review this decision with their immediate manager.
- In some situations it may be determined that an offer is submitted as "solely to delay" collection when no prior offer has been submitted. When a collection employee has determined that the next action necessary is to enforce collection through levy or seizure, but the taxpayer files an offer to delay this enforcement action the offer may be returned as " solely to delay" collection.
5.8.3.19.2 (11-15-2004)
Examples and Discussion
- The following are
examples of offers considered submitted " solely
to delay" collection based on re-submission
after a prior rejection or return:
Example:
During initial processing of an offer, it is discovered on AOIC that the taxpayer had a previous offer returned. This offer was closed six months ago as part of the "No Reply " program. The AOIC case history indicates that the taxpayer did not provide any bank statements with the first offer and did not respond to the combo letter sent. There are no bank statements provided with the new offer submission.
Example:
A taxpayer resubmits an offer that was rejected because the amount offered was $10,000 below the reasonable collection potential. The original amount offered was $10,000. The current amount offered is $10,100. There is no change in financial condition, nor are special circumstances evident.
Example:
A taxpayer submits an offer for $3,000 to be paid within 90 days of acceptance. A prior offer was submitted for $10,000 to be paid within 90 days. The investigation of the initial offer submission resulted in the offer being rejected with appeal rights. During that offer investigation it was determined that a piece of property was transferred to a non-liable spouse for no consideration and that a clear transferee issue exists. The value placed on the transferee was $30,000, and was included in reasonable collection potential. The taxpayer failed to request a timely appeal on the rejected offer. The investigation has failed to surface any additional information to support special circumstances.
Example:
During initial processing of an offer in compromise, AOIC indicates there have been three offers submitted by the taxpayer over the past 18 months. All three were returned for failure to provide requested CIS information. The closed return file indicates the taxpayer was asked to provide a financial statement for a closely held corporation, which the taxpayer is president of and owns 75% of the interest in. A Form 433-B for this corporation was requested during the offer investigation. The offer specialist clearly documented in the file the taxpayer's position and interest in this corporation. The request was clear and specific and the taxpayer refused to provide this information claiming the IRS has no right to place a value on his corporation when determining his ability to pay on personal tax liabilities. The newly submitted offer package does not include a Form 433-B for the corporation and the Form 433-A indicates the same corporation is the taxpayer's current employer.
Example:
An offer is submitted for $30,000 payable within 90 days of acceptance. Research on AOIC indicates this is a second submission. A prior offer was submitted for $20,000 payable within 90 days of acceptance. The original offer was rejected with appeal rights, the taxpayer filed a timely appeal, and Appeals sustained the rejection. A review of the prior offer file indicates the taxpayer has the ability to full pay the outstanding liability through an installment agreement. The total liability is for $40,000. A review of the financial information indicates the taxpayer still has the ability to full pay the liability, based on monthly payment ability, within the remaining CSED period. The original offer was received 18 months ago and there have been no monthly payments made towards the liability during this period. There is no change indicated on the financial statement, except the taxpayer has a new employer. The taxpayer's income has remained the same. There are no special circumstances indicated.
Example:
A taxpayer filed an offer in January 2004. The offer was returned after the Offer Examiner requested that the taxpayer make estimated tax payments for the tax year 2003. The taxpayer failed to comply and therefore the offer was returned for noncompliance. In June 2004 the taxpayer submitted a second offer, which included the 2003 tax year balance due. Because the taxpayer failed to make the required estimated payments for 2003 and did not correct the defect by paying the full liability with the filing of the return, the offer should be returned.
- The following are
examples of offers considered "solely to delay"
collection based on re-submission after a prior
default within the past year:
Example:
The taxpayer had an offer accepted 18 months ago for $20,000 to be paid within 90 days of acceptance. The taxpayer paid $5,000 within 120 days of acceptance and has failed to pay the balance of offer funds. The offer was defaulted for failure to meet the terms of the offer. A new offer is now submitted for $10,000 to be paid within 90 days of acceptance. Financial statements submitted with the new offer show no decrease in ability to pay and special circumstances were not cited and/or evident.
Example:
The taxpayer had an offer accepted for $10,000 paid within 90 days of acceptance. Subsequent to the acceptance the taxpayer incurred 2 additional years of income tax liabilities. The offer was defaulted because the taxpayer did not resolve the two additional liabilities. A new offer has been submitted for $5,000, that includes the prior offer periods and the two new periods. There are no special circumstances.
- The following are
examples of offers considered "solely to delay"
collection based on a prior collection analysis
and determination of ability to pay:
Example:
Taxpayer owes $500,000. An offer is submitted for $15,000. The CIS, as submitted by the taxpayer, indicates the taxpayer has recently been fired from his job where he had been earning $200,000 a year. The Collection Information Statement (CIS) also reflects a personal residence with a FMV of $1.5 million and outstanding mortgage of $750,000 leaving equity of $750,000; and a piece of property owned free and clear valued at $60,000 and a large boat with a value of $140,000 which is unencumbered. Final demand has been made and a collection employee has indicated to the taxpayer that a Notice of Federal Tax Lien (NFTL) will be filed and possible enforcement action if the taxpayer does not full pay the liability. The investigation has shown that there are no special circumstances to be considered.
Example:
Taxpayers owe a joint 1040 liability for 1997 of $139,854 and submitted an offer for $250. Both taxpayers are self-employed: The husband is a painter and the wife is a real estate sales person. They have no future income potential. They own a vacant lot valued at $14,700, a personal residence valued at $177,500, six automobiles and two horse trailers valued at $20,775. Their total reasonable collection potential (RCP) is $127,191 based on equity in the assets listed above. The balance due period has been in active collection inventory prior to the offer submission. The collection employee has advised the taxpayer to secure a loan on their equity or levy action would be initiated. The taxpayer refused to pay more than the proposed $250 and has submitted the offer instead of making any payment to their tax liability. The investigation has shown that there are no special circumstances to be considered.
Example:
Taxpayer owes $32,000 and submits an offer for $100. The reasonable collection potential (RCP) is based on an ability to pay $400 per month. The earliest CSED's will expire within 5 months of the receipt of the offer , which is where the majority of the liability is assessed. The taxpayer has been advised of the CIS analysis and monthly ability to pay, but submitted an offer for $100. The reason given was that he wanted the tax liability "forgiven" and all he wants to pay is the $100 offer amount. The investigation has shown that there are no special circumstances to be considered.
5.8.3.19.3 (11-15-2004)
Procedures for Return of Offers Submitted
Solely to Delay Collection
- The determination that an offer was submitted "solely to delay" collection may be made immediately after the offer is deemed processable or at any time during the offer investigation when the facts support the decision.
- The determination that
an offer was submitted after a prior reject or
default can be supported by reviewing records on
AOIC and IDRS transactions:
If… Then… AOIC indicates that prior offer records exist Determine the type of disposition used to close the prior offer submissions.