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5.8.7  Return, Terminate, Withdraw and Reject Processing

5.8.7.1  (11-15-2004)
Overview

  1. Offers that are not recommended for acceptance will be closed by return, rejection, withdrawal or termination. This chapter defines the types of dispositions other than acceptance and describes the procedures for completing each type of closure.

5.8.7.2  (11-15-2004)
Returns

  1. An offer can be returned as either a Not Processable Return or a Processable Return. It is important to note the distinction as the statute is not suspended, nor is the taxpayer required to pay the $150 Application fee, for a Not Processable Return.

5.8.7.2.1  (11-15-2004)
Not Processable Returns

  1. Not processable returns are those returns made when upon receipt, an offer meets one or more of the "Not Processable" criteria listed in IRM 5.8.3.4.1.

5.8.7.2.1.1  (11-15-2004)
Closing an Offer as a Not Processable Return

  1. See IRM 5.8.3.9 for procedures.

5.8.7.2.2  (11-15-2004)
Processable Returns

  1. Processable returns include all returns made after the offer has been determined to be processable.
  2. During the offer investigation there are a number of situations that may result in a processable offer being returned to a taxpayer. A processable return will result in a suspension of the collection statute for the period of time that the offer was considered processable and will result in the Service keeping the $150 application fee. An offer closed as a return does not receive appeal rights, however different levels of approval exist for some return situations.
  3. The following chart lists the reasons a processable offer may be returned and who can authorize the return.
    Reason for Return Who has delegated authority to sign the letter?
    Taxpayer failed to remain in filing or payment compliance, or an in-business taxpayer failed to make required FTD's during investigation. Investigating Process Examiner, Offer Examiner, Offer Specialist.
    Taxpayer filed bankruptcy during a pending investigation. Investigating Process Examiner, Offer Examiner, Offer Specialist
    Tax is paid, has been abated, or no tax can be identified as owing. Investigating Process Examiner, Offer Examiner, Offer Specialist
    Taxpayer failed to perfect offer forms necessary to process the offer for acceptance. Investigating Process Examiner, Offer Examiner, Offer Specialist
    All other return reasons Group Manager in area office and Unit Manager in COIC

     

5.8.7.2.2.1  (11-15-2004)
Return for Inadequate Estimated or Insufficient Withholding Tax Payments

  1. A processable offer may be returned when the investigation reveals the taxpayer does not have sufficient estimated tax paid or income tax withheld to cover the current year estimated tax due.

     

    Example:

    While investigating an offer in compromise on July 15, 2004 you learn that the taxpayer has an extension until August 15, 2004 to file their 2003 Form 1040. You must determine whether the taxpayer has sufficient income tax withheld or estimated taxes paid for the entire 2003 tax year as well as for the first two quarters of the 2004 tax year.

     

    The requirement to have adequate estimated tax paid prior to consideration of an offer applies to corporate as well as individual taxpayers.

  2. Prior to returning an offer for this reason the following actions must be taken:
    • A determination must be made if the taxpayer has earned sufficient taxable income to require estimated payments or income tax withholding for the year(s) in question and a calculation must be made of the amount of tax that should have been paid in estimated tax payments to date (or withheld) on the income earned.
    • Contact with the taxpayer or representative must be made explaining the calculated non-compliance. A request for payment of an estimated tax payment must be made to bring the taxpayer current. A reasonable deadline for responding must be given along with a warning that the offer will be returned if the payment is not received by the deadline set.
    • All of the above must be clearly documented in the case history on AOIC.

     

  3. A return for failing to make required estimated tax payments or insufficient withheld tax requires approval of a Group Manager in the field or a Unit Manager in COIC.

5.8.7.2.2.2  (11-15-2004)
Return for Failure to Provide Information

  1. An offer may be returned at any time during processing if the taxpayer fails to provide information necessary to determine whether it should be accepted.
  2. Prior to returning an offer for this reason the following actions must be taken:
    • A request for the needed information must be made by phone, in person or by letter. A reasonable deadline for responding must be given along with a warning that the offer will be returned if the information is not received by the deadline.
    • The above information must be clearly documented in the case history.

     

  3. The return letter must be signed by the Group Manager in the field or a Unit Manager in COIC.

5.8.7.2.2.3  (11-15-2004)
Closing an Offer as a Processable Return

  1. Processable returns do not require preparation of the Form 1271.
  2. The following actions should be taken to close a case as a processable return:
    1. Verify that the AOIC record reflects a "Y" in the Processable status field.
    2. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.

      Note:

      This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" which states that all liabilities assessed against the taxpayer are covered by the offer.

       

    3. Generate the AOIC Return Letter for the signature of the appropriate delegated official, listing the reason(s) the offer is no longer processable.
    4. Generate the Power of Attorney (POA) letter for any authorized representative. If a disclosure issue exists, use the appropriate paragraph to indicate this in the Return Letter, and do not send a copy to the representative.
    5. Stamp the Form 656 "RETURN" in red. Cross out the IRS received date(s) with a red "X" .
    6. Document the history indicating the reason(s) the offer is no longer processable and with any other pertinent information regarding the case.
    7. Attach the offer to the taxpayer's letter and submit the letter(s) for approval and required signature.
    8. Keep a copy of the offer and the closing letter(s), the Collection Information Statement (CIS), all supporting documentation, and all internal documentation secured in connection with the investigation in the case file. Purge the file of any duplicate IDRS prints or other data not related to the offer.
    9. Close the case on AOIC as a "return" once the letter is signed.

     

5.8.7.3  (11-15-2004)
Return Reconsideration

  1. This section does not apply to the return of offers deemed not processable. It also does not apply to processable offers returned for any of the following reason codes:
    • P (filed bankruptcy after offer submission)
    • Q (non-compliance after offer submission)
    • R, V, W (solely to delay submissions)
    • S (collection is in jeopardy)
    • X (other investigations are pending that may effect …)
    • Y (original assessment fully abated)

     

  2. Situations may arise when the reconsideration of a returned offer would best serve the interests of both the Service and the taxpayer. In most cases, an additional application fee would not be required. Upon receipt of a return letter taxpayers may telephone to object to the return of an offer. Below are the criteria for possible reconsideration.

5.8.7.3.1  (11-15-2004)
Criteria

  1. Generally, the taxpayer or their representative must contact the Service to raise objections and justify the failure to provide the requested items within 30 calendar days from the date of the return letter (unless the condition that caused the failure to supply the substantiation continued for a prolonged period).
  2. Acceptable criterion for potential return reconsideration are:
    1. The information was sent timely but it was not associated with the case.
    2. Serious illness/injury prevented the taxpayer from submitting the information timely.

      Note:

      Serious illness/injury does not apply to the representative, since the taxpayer controlling the information receives a copy of the combo/additional information letter.

       

    3. There was a death in the taxpayer's immediate family that prevented timely mailing of the information.
    4. The taxpayer suffered a disaster, such as a fire or flood, that prevented timely mailing of the information.

      Note:

      Disasters effecting the representative would not apply since the taxpayer controlling the information receives a copy of the combo/additional information letter.

       

    5. The failure to perfect by providing a required additional Form 656 and application fee, when the original Form 656 included both joint and separate liabilities or individual/joint and corporation or partnership liabilities.
    6. The taxpayer submitted a Form 656-A certification instead of paying the $150 fee, and then provides proof that an incorrect conclusion was made.
    7. The failure to make estimated payments and then the taxpayer provides proof that estimated or withheld taxes were not due.

     

5.8.7.3.2  (11-15-2004)
Conditions

  1. Before reconsidering the closed offer the following conditions must be met:
    1. The total offer amount must be equal to the amount offered on the returned Form(s) 656;
    2. The taxpayer or their representative must be able to provide the missing, required documentation or fees within 30 calendar days of the telephonic communication of the reconsideration approval;

     

  2. The following would not be acceptable reasons for return reconsideration:
    1. "Unavailable absence" of either the taxpayer or representative, since they control the timing of the filing of the offer;
    2. Representatives’ "filing season" activity, since they control the timing of the filing of the offer.

     

5.8.7.3.3  (11-15-2004)
Approval Authority for Return Reconsideration

  1. Approval to reconsider a returned, processable offer(s) will be obtained from COIC Department Managers or Area office Group Managers before requesting the taxpayer/representative to send any missing documentation or fees. This authority may not be re-delegated. The manager will indicate approval or denial of the request by making a history entry on AOIC (not ICS).

5.8.7.3.4  (11-15-2004)
Reconsideration Procedures

  1. If the employee receiving a telephone request from a taxpayer/representative for reconsideration determines the request does not have merit, based upon the acceptable criteria outlined in IRM 5.8.7.3.1, the employee will advise the taxpayer or their representative and annotate the closed offer record history on AOIC.

    Note:

    Any request by the taxpayer or representative to speak with the employee's manager should be honored.

     

  2. If the employee receiving a telephone request for reconsideration determines that the request does have merit based upon the acceptable criteria outlined in IRM 5.8.7.3.1, the employee will:
    • Contact the taxpayer or their representative and request additional information to support the reconsideration be sent within 10 calendar days.

      Note:

      Fax is the preferred method of receipt.

       

    • Annotate the closed offer record history on AOIC.

     

  3. If the taxpayer/representative does not provide the requested information, annotate the closed offer AOIC history that there will be no reconsideration.
  4. If the taxpayer/representative provides the requested information, the recommending employee will:
    • Annotate the closed offer history on AOIC and request the reconsideration by making a history entry on the closed offer record AOIC (not ICS), describing the taxpayer's claim and/or supporting verification and why the reconsideration request is justified.
    • Submit the closed offer case file, along with any verification submitted by the taxpayer to support the reconsideration request, through management channels to the approving official.

     

  5. Denial of the Reconsideration— If the approving official denies the reconsideration request, the employee assigned the case should clearly communicate via telephone to the taxpayer (representative, if applicable) that the request for reconsideration was denied and that the matter is closed. The employee will then document the AOIC history of the closed offer regarding that communication.
  6. Approval of the Reconsideration— If the approving official agrees that a returned offer should be reconsidered, the employee assigned the case will telephone the taxpayer (representative, if applicable) and advise that we will reconsider the offer. The taxpayer will be advised that he/she must be able to provide us any missing, required information/substantiation/ Forms 656/fees within 30 calendar days of that telephonic communication of the reconsideration approval.
    Field offices should fax a copy of the front page of the original Form 656, including the offer number and received date of the requested information/substantiation to the respective COIC sites. This will enable the COIC sites to create the new offer record.

    The offer information will not be reloaded to AOIC and worked until receipt of any required information/substantiation/Forms 656/fees. If the taxpayer fails to submit the promised items, document the AOIC history of the closed offer to that effect and take no further action.
  7. Reloading the Reconsideration Offer — For purposes of an approved return reconsideration do not reopen the closed offer record on AOIC. Instead, create a new AOIC offer record by reloading the same AOIC data as the returned offer, except for "IRS Rcvd Dt" , "AO Rcvd Dt" and "Pend Dt" fields which will contain the date that we receive any missing information/ substantiation/Forms 656/fees, as applicable.Associate the documents from the closed offer with the new, reloaded offer folder. Enter an AOIC history notation in the closed offer record to indicate that those documents were refiled with the reloaded offer. Place a hard copy of the AOIC history in the closed offer folder.
    • Reloading Offers With a Previously Submitted Application Fee

     

    If the taxpayer already paid the application fee with the original returned offer, for the new AOIC offer record enter "N" in the "Fee Due" field, "ME" in the "Waiver Criteria" field and the number of the original, returned offer in the "Master Offer #" field of AOIC Application Fee screen.

     

    • Reloading Offers With a Corrected Form 656-A, Income Certification

     

    If the taxpayer submitted a corrected Form 656-A, income certification with the returned offer, enter the following for the new AOIC offer record "N" in the "Fee Due" field and " LI" in the "Waiver Criteria" field of AOIC Application Fee screen.

     

    • Additional Form(s) 656/Application Fee(s) Received as Condition for Reconsideration

     

    Some reconsideration situations may involve an original offer that included either joint and individual tax liabilities, or joint/individual and corporation or partnership liabilities on one Form 656. The offer may have been returned because the taxpayers failed to perfect it by submitting additional Form(s) 656 and the applicable application fee for each. Since the taxpayers met the fee requirement for the original returned Form 656, they must submit and meet the fee requirement for each additional Form 656 before the original offer will be reloaded under return reconsideration procedures. Therefore, both the "Amended/Revised" and " Related to" offers that were previously provided with the Combo letter, must be loaded to AOIC, but not until the application fee is paid for the "Related to" offer along with any additional substantiation that was required.

     

5.8.7.4  (11-15-2004)
Withdrawal

  1. Taxpayers may withdraw their offers at any time after the offers have been submitted. A withdrawal must never be solicited merely to avoid a complete investigation or deny taxpayers access to Appeals.
  2. When an offer cannot be recommended for acceptance the offer investigator should give the taxpayer an opportunity to withdraw the offer and at the same time inform the taxpayer that withdrawing the offer forfeits their appeal rights. The case history or correspondence must document that the taxpayer was informed of these rights.
  3. A withdrawal request may be made orally, by fax or in writing. The Letter 3504(SC/CG) is available for taxpayers to request a withdrawal. Service employees should encourage taxpayers to provide the withdrawal in writing, but if a taxpayer or authorized representative provides a clear statement, either in writing or orally, indicating a wish to withdraw the offer, the offer may be closed as a withdrawal. Receipt of a withdrawal request must be clearly documented in the case file indicating how the request was received.
  4. If a request for a withdrawal is made by a Service employee the taxpayer should be asked to:
    • Provide a request in writing clearly indicating a desire to withdraw the offer.
    • Include a statement indicating that it is understood that rights to appeal are forfeited by a withdrawal.
    • Include a statement indicating how any deposit made (if any) should be disposed of (i.e. should it be refunded or applied to the tax debt).
    • Sign and date the request.

     

5.8.7.4.1  (11-15-2004)
Closing an Offer as a Withdrawal

  1. Offers closed as a withdrawal do not require preparation of Form 1271.
  2. The effective date of the withdrawal will depend on the method of receipt of the request to withdraw. The following chart shows the correct date to use as the withdrawal date:
    If taxpayer withdraws an offer in compromise by… Then the offer will be considered withdrawn …
    personal delivery when notification of the withdrawal is received by the Service.
    mailing written notification of the withdrawal via U.S. certified mail on the date the Service receives the certified mail.
    non-certified mail, fax, or phone on the date the Service mails, or personally delivers, a written letter to the taxpayer acknowledging the withdrawal.
  3. The following actions should be taken to close an offer as a withdrawal:
    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.
    2. Generate the AOIC Withdrawal Letter for the signature of the authorized delegated employee. Use the chart above to determine the correct date to use as the effective date of the withdrawal.
    3. Generate the Power of Attorney (POA) letter for any authorized representative.
    4. Document the history indicating the date and method of receipt of the withdrawal request.
    5. Submit the file for approval and signature of the letter(s).
    6. Close the case on AOIC as "withdrawn" after approval. If there is a deposit and the taxpayer has requested that the deposit be applied to the tax, input "A" and mail a copy of the taxpayer's written request for application of the funds to the appropriate MOIC Unit. If there is a deposit and the taxpayer has asked for a refund or provided no instructions for disposition input "R" to refund the deposit.
    7. Keep a copy of the letter(s) with the closed offer file.

     

    Note:

    This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer

     

5.8.7.5  (11-15-2004)
Termination of Consideration

  1. Consideration of an offer must be terminated upon the death of a single proponent. See IRM 5.8.10.4 for instructions on actions to take prior to termination when advised that one party to a joint offer has died.

5.8.7.5.1  (11-15-2004)
Closing an Offer as a Termination

  1. Offers closed as terminations do not require preparation of the Form 1271.
  2. The following actions should be taken to close an offer as a Termination:
    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.
    2. Generate the AOIC Termination Letter for the signature of the authorized delegated employee.
    3. Generate a copy of the letter for any authorized representative.
    4. Document the history indicating the date of death and how notification was received.
    5. Request input of TC 540 to IDRS if the exact date of death is confirmed.
    6. Submit the package for approval and signature of the letter(s).
    7. Close the case on AOIC as a "Termination" after approval.
    8. Keep a copy of the letter(s) with the closed offer file.

     

    Note:

    This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer

     

5.8.7.6  (11-15-2004)
Rejection

  1. When the facts of the case do not support acceptance and the taxpayer will not agree to an alternative resolution of the delinquency and withdraw the offer, the taxpayer should be informed that the offer will be recommended for rejection.
  2. When the offer is rejected the taxpayer will be notified in writing and the letter will explain how to exercise their appeal rights. Information received from the taxpayer in response to a conversation or letter must be considered before proceeding with the rejection.
  3. Offers based on Doubt as to Liability (DATL) are generally rejected because the tax is believed to be correct as assessed.
  4. Offers based on Doubt as to Collectibility (DATC) are most commonly rejected on the basis that more can be collected than was offered. In all cases, other than those processed under "Screen for Obvious Full Pay" , the taxpayer should be informed prior to the issuance of the rejection letter that an acceptance cannot be recommended. The computation of reasonable collection potential (RCP) should be explained, a copy of the financial analysis provided, and the taxpayer should be given an opportunity to submit any additional financial information. If no conversation is held with the taxpayer to convey this information, Letters 3498 (SC/CG) and 3499 SC/CG) may be used for this purpose.
  5. An offer rejection may also be based on a determination that acceptance of the specific offer at hand is not in the "best interest of the government" , per policy statement P-5-100. Rejections under this provision should not be routine and should be fully supported by the facts outlined in the rejection narrative. Offers rejected under this section require the review and approval of the second level manager; that is, Territory Manager for the field or Department Manager for COIC. Examples of situations that may warrant rejection as not being in the "best interest of the government" include:
    • Recent compliance satisfies offer processability criteria, however the taxpayer has an egregious history of past non-compliance and our analysis of his current finances reveals that it will be highly unlikely the taxpayer will be able to remain in compliance during the offer terms.
    • An in-business taxpayer compromising employment taxes, where financial analysis indicates the business does not have the ability to fund the offer, remain current with future tax obligations, and meet the business' normal operating expenses.
    • Any offer involving deferred payment where financial analysis indicates the taxpayer cannot fund the offer.
    • The taxpayer is the primary responsible party on a related entity, i.e. corporation, partnership, etc., that is not in compliance with its filing and paying requirements.
    • The offer is from an ongoing business that appears to be insolvent, and it appears that the government's position would be better protected through a formal insolvency proceeding.

     

5.8.7.6.1  (11-15-2004)
Public Policy Rejection

  1. Policy Statement P-5-89 establishes that offers may be rejected on the basis of public policy if acceptance might in any way be detrimental to the interests of fair tax administration, even though it is shown conclusively that the amount offered is greater than could be collected by any other means, if no Effective Tax Administration (ETA) issues exist.

    Note:

    This section should not be confused with IRM 5.8.11.2.2 under Effective Tax Administration (ETA) offers.

     

  2. A decision to reject an offer for public policy reason(s) should be based on the fact that public reaction to the acceptance of the offer could be so negative as to diminish future voluntary compliance by the general public. Decisions to reject offers for this reason should be rare.

    Example:

    Below are some examples of situations that may warrant rejection based on a public policy decision.

     

    • The taxpayer has openly encouraged others to refuse to comply with the tax laws.
    • Suspicion that the financial benefits of a criminal activity are concealed or the criminal activity is continuing.

     

  3. An offer will not be rejected for public policy grounds solely because:
    1. It would generate considerable public interest, some of it critical.
    2. A taxpayer was criminally prosecuted for tax or non-tax violation.

     

  4. The rejection narrative should discuss the specific public policy issues.
  5. Rejections of this type require the approval of the SB/SE Compliance Area Director in the field or SB/SE Compliance Services Field Director for COIC.

5.8.7.6.2  (11-15-2004)
Closing an Offer as a Rejection

  1. The following actions should be taken to close an offer as a rejection:
    1. Update the balance for all modules on the MFT screen by pressing "I" . Enter the proposed disposition code "2" .
    2. Generate the AOIC Rejection Letter using the appropriate optional paragraph(s) for the signature of the authorized delegated official. Attach the IET and AET (or the "Screen for Obvious Full Pay" Worksheet) to the letter when based on Doubt as to Collectibility (DATC).
    3. Generate the Power of Attorney (POA) letter when there is an authorized representative.
    4. Generate the Form 1271 for signature of the appropriate delegated officials. The Reviewer on Form 1271 must be the Independent Administrative Reviewer (IAR).
    5. Document the history regarding the decision. Include the following:
      1. Amount of the reasonable collection potential (RCP).
      2. Attempts to negotiate an alternate resolution.
      3. Key issues in the disagreement.
      4. Discussion of any special circumstances noted.
    6. Print the history and include it in the offer file.
    7. Prepare a supplemental memorandum to report any rare facts of a confidential nature that should not be disclosed through a Freedom of Information Act (FOIA) request and include it in the file clearly identifying it as " Confidential Information - Not to be Disclosed" .
    8. Place Tabs (Document 9600B) in the case file for ease in review or if the decision is appealed.
    9. Submit the package for approval and signature of the Form 1271.
    10. After approval route the file to the Independent Administrative Reviewer (IAR).
    11. After approval of the Independent Administrative Reviewer (IAR), route the offer for signature, dating and mailing of the letter(s).
    12. Assign the case on AOIC to the designated "30 day hold" assignment number and route the case file to the hold file for monitoring of the appeal period.

     

5.8.7.6.3  (11-15-2004)
Rejection Not Appealed

  1. The rejected offer must be suspended for 30 calendar days to allow the taxpayer an opportunity to request an appeal regardless of whether the taxpayer advises the Service that no appeal is desired. These cases should be monitored for receipt of a request for appeal. The timeframe allowed by law for requesting an appeal is 30 calendar days from the date of the rejection letter. If a letter requesting appeal is postmarked on or before the 30th day it is timely. This date may NOT be extended for any reason.
  2. Rejected offers should be held in the suspense file for 15 calendar days past the 30 day deadline to allow time for an appeal request to be received and associated with the offer file. The request must be postmarked on or before the 30th day to be timely.
  3. If no appeal request is received by the 45th day after the date of the rejection letter the following actions should be taken:
    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.
    2. Close the offer record as a rejection with no appeal on AOIC.
    3. If warranted, take action to return the accounts to the Field Compliance function for immediate resumption of collection activities.
    4. Route the offer file to the closed files.

     

    Note:

    This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer

     

5.8.7.6.4  (11-15-2004)
Rejection Appealed

  1. If a request for an appeal is received that is postmarked no later than the 30th day following the date of the rejection letter, the case must be forwarded to Appeals function for consideration.
  2. The taxpayer is requested to provide specific information with the appeal letter, including a list of items of disagreement and evidence to support any of those items. If the letter provides new information not previously considered, the case should be reassigned to an Offer Examiner or Offer Specialist for reconsideration.

    Note:

    Caution must be exercised when reviewing a case where new information was received and considered following issuance of a rejection letter. If the taxpayer's letter requested an appeal, the offer must still be forwarded to the Appeals function if this reconsideration results in no change to the initial decision to reject. No new rejection letter should be sent.

     

  3. The taxpayer is entitled to Appeals consideration even if items of disagreement are not provided or argued. If it can reasonably be determined that the letter is a request for an appeal, the taxpayer should be afforded that right.
  4. If an appeal is received that includes additional information to reconsider but it does not change the rejection determination:
    1. Attempt to reach the taxpayer by phone to advise the taxpayer that we have received and considered the information provided, however the conclusion did not change, so the offer will be forwarded to Appeals for consideration as requested.
    2. Document any rebuttal to arguments the taxpayer raised in the rejection letter. Print the additional case history and include it in the offer file.
    3. Transfer the case to 90XX on AOIC
    4. Mail the case to the appropriate Appeals Area office based on the taxpayer's zip code.

     

  5. If Appeals sustains the rejection determination or the taxpayer withdraws the offer in Appeals:
    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.
    2. Close the offer record on AOIC as
      • Closing code " 9" if withdrawn in Appeals.
      • Closing code "3 " if Appeals sustained the rejection.
    3. If warranted, take action to return the offer to the Field Compliance function for immediate resumption of collection activities.
    4. Route the offer file to the closed files.

     

    Note:

    This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer

     

5.8.7.7  (11-15-2004)
Authorization to Apply Deposit

  1. When a deposit is made with an offer, Service employees should ask taxpayers if they wish to have the funds applied to the delinquent tax debt whenever a withdrawal is solicited or when advising taxpayers that acceptance cannot be recommended.
  2. If a taxpayer agrees to the application of the deposit, a written authorization or Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, should be completed, signed and submitted to the MOIC unit when the case is closed.

    Note:

    When closing the AOIC record input "A" in the pop up screen to alert MOIC that the funds are to be applied and immediately mail the written authorization to that unit. The Accounting Branch requires written authorization from the taxpayer before the funds can be applied to any tax period.

     

  3. If a taxpayer does not authorize application of the deposit it will be refunded.
  4. .
  5. Occasionally requests for a discharge or subordination are received while an offer is pending. See IRM 5.8.10 for instructions on processing the Form 3040 received in conjunction with issuance of the lien certificates.

5.8.7.8  (11-15-2004)
Alternative Resolutions

  1. Whenever an offer cannot be recommended for acceptance Offer Specialists should discuss alternative resolutions with the taxpayer. All actions necessary to complete the agreed resolution should be taken prior to closing the case.

    Note:

    In cases where the taxpayer does not agree with the proposed alternative resolution, such as an installment agreement, refer the case to the appropriate Collection function for the next appropriate action.

     

  2. Alternative resolutions that may be appropriate include:
    • Negotiating and processing the Form 433-D, Installment Agreement, to fully pay the tax due.
    • Preparing the Form 53 to report the account uncollectible when requesting current payment would create an undue hardship, the taxpayer is deceased and there is no probate, or is now unable to locate.
    • Preparing and processing the Form 3870, Request for Adjustment, when a reasonable cause abatement or other adjustment to a liability should be made.
    • Assigning the case to the Automated Collection Function (ACS) or a Field Compliance Revenue Officer (RO) when prompt enforcement action is warranted.

     

  3. The above actions cannot be processed on IDRS until the TC 48X posts from AOIC. If the OIC group is able to input actions to IDRS, the actions should be suspended in the group until the offer closing transactions post. If the actions are to be processed by another Service function, the request should be mailed immediately to that office with a cover memo explaining the TC 48X transactions have been initiated and the requested actions should be processed once the offer closing transactions post.
  4. The appropriate IRM Part V Chapter should be followed to process an installment agreement, report an account uncollectible or process a request for adjustment.
  5. To assign a case to ACS or an RO follow locally established guidelines.

5.8.7.9  (11-15-2004)
Closed File Retention

  1. Closed cases (other than acceptances) are to be retained in closed files in Area or COIC offices. IRM 1.15.2.21-1 Records Control Schedule for the Service Wide Collection Function, directs that the Area and COIC offices may retire the closed files to the Federal Records Center when it is determined they are no longer needed for current business.
  2. As space dictates in the offices, the files should be prepared to be retired to the Federal Record Center. Instructions for shipping files should be secured from the appropriate AWSS area Records Manager. A record of the cases shipped, including taxpayer's name, TIN, and year closed, with a cross reference to the FRC box number and location, should be maintained in the Area or COIC office so the closed case file can be retrieved if necessary for litigation or other necessary action.
  3. Prior to shipping these cases they should be purged so that only the following documents are shipped:
    If… Then ship…
    Returned, Terminated or Withdrawn Return, Termination or Withdrawal letter to the taxpayer (and POA letter if applicable)
    All Forms 656 received
    Form 2848, if applicable
    CIS
    Case history sheets
    Other significant correspondence/ documents
    Rejected Rejection letter to taxpayer (and POA letter if applicable)
    All Forms 656 received
    Form 2848, if applicable
    Form 1271
    Narrative report
    CIS with supporting verification/documentation
    Case history sheets
    Other significant correspondence/documents
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