Purpose: This chapter pertains to the acceptance of an offer based on sound decisions relating to an analysis of the taxpayer's facts, circumstances and financial situation. Documentation supporting this decision and approval at the proper levels is required to complete the acceptance. This section describes the process for accepting an offer.

Audience: These procedures apply to Internal Revenue Service (IRS) employees who are responsible for investigating offers:

Policy Owner : director, Collection Policy

Program Owner : SBSE Collection Policy, Offer in Compromise (OIC) Program

Primary Stakeholders: The primary stakeholders are COIC and Field offer employees.

Program Goals: Policy Statement 5-100 explains the objective of the offer as a collection tool. This Internal Revenue Manual (IRM) section provides the fundamental knowledge and procedural guidance for the OE and OS engaged in the investigation of the offers. The procedures in the IRM include guidance so employees will be able to effectively and efficiently close their cases as an acceptance, when appropriate.

When an offer is being recommended for acceptance, there may be a need to make changes to the Form 656, Offer in Compromise. Depending on the type of change, the taxpayer may be required to submit either an amended Form 656 or an addendum.

The submission of an amended Form 656 or addendum may also require an additional payment of either 20% of the revised offer amount (less the amount previously submitted) or the revised periodic payment. The taxpayer will be given credit for payments made with the original offer, including any payments made throughout the offer process.

If the taxpayer agreed to the increased amount which was provided when the rejection letter was issued, notify the taxpayer that the amended offer requires managerial approval and if appropriate, counsel review before the offer may be accepted. Ensure the taxpayer understands that the submission of the amended offer does not extend the appeal period. Since the review process may extend past the time frame for submitting an appeal, advise the taxpayer they may wish to consider submitting a signed Form 13711, Request for Appeal of Offer in Compromise, to protect their right to appeal, in the event the approving official does not approve the acceptance recommendation or counsel’s review determines the offer does not meet legal requirements. Advise the taxpayer they only need to include the statement “I wish to appeal” in the “reason for disagreement” section on the Form 13711. No supporting documentation is required, the OE/OS will secure additional documentation if necessary.

When preparing amended contract terms, to address payments received to date that are not in whole dollars, follow the standard rules for rounding. Round down if the cents are $.49 and under, and round up if $.50 or over.

For payment terms which are of unequal amounts, add an attachment to the Form 656 stating the specific payment terms, only if additional space or explanation is needed. Include the total, individual payment amounts and frequency in the attachment.

If you can accept the offer under a different basis from the one selected on Form 656, and the taxpayer verbally approves the change, document the request. Line through the basis requested, check the appropriate box, and initial and date both changes.

Pen and ink changes may be made to correct the below issues. No amended Form 656 or addendum will be required in these instances.

In all instances when a pen and ink change is appropriate, except to add an additional tax period with a balance owed or delete a tax period with no balance owed, the OE, OS, or PE must contact the taxpayer. Conversations and approvals must be well documented in the case history.

When pen and ink changes are made to the Form 656, the OE, OS, or PE must initial and date each change on the Form 656.

Taxpayers who owe joint and separate liabilities are required to file two Forms 656. If one Form 656 was submitted and the PE is unable to perfect it prior to being assigned to an OE/OS, the OE/OS must perfect the offer before acceptance, refer to IRM 5.8.4.7, Initial Offer Actions for additional information. In these cases, an amended Form 656 will be required.

The amended offers should be one Form 656 for the primary taxpayer, which includes joint liabilities of both taxpayers and separate liabilities of the primary taxpayer, and one Form 656 for the secondary taxpayer, which includes joint liabilities of both taxpayers and separate liabilities of the secondary taxpayer. See IRM 5.8.3.6(2), Perfecting Offers, for additional information.

When loading the offer on AOIC, the waiver date will depend on whether the original offer included all periods or if related periods were discovered during the offer investigation and not included on the original offer, refer to IRM 5.8.4.7, Initial Offer Actions, for addition information. This section will include guidance on the appropriate waiver date for any tax liability not included on the original offer.

When employees are not co-located with approving officials, to expedite case closing actions, certain documents have been approved to be signed with electronic signature. In order to secure the approval signature electronically, it must meet the current security and verification standards of the IRS.

The below documents have been approved for electronic signature on accepted offers.

Necessary documents for the approving official to determine the appropriateness of the closing action must be provided with the request.

A printed copy of the electronically executed document, form and/or letter, which includes the approving signature(s), must be included in the case file.

Follow the below procedures to prepare documents for electronic signature:

The letter being provided to the taxpayer should include a graphic signature in the Signature block.

The ICS and/or AOIC history must clearly indicate the documents that are being submitted to the approving official.

The original or amended Form 656 may be accepted by fax (telephonic or electronic), Document Upload Tool (DUT), or secure messaging where contact with the taxpayer has been made and documented, faxed signatures meet legal requirements. Ensure the Form 656 contract is complete with no missing or altered pages, and is signed. See IRM 5.8.1.15.8, Signatures.

If the original Form 656 was processed without a signature, and phone contact has been made with the taxpayer and documented. Request the taxpayer to provide a signed copy, preferably via electronic fax, DUT, or secure messaging. If you are unable to reach the taxpayer by phone, you may send a Letter 2844 option D requesting the taxpayer to call. If the taxpayer does not respond, return the offer. We cannot accept the terms of an unsigned Form 656.

Re-check IDRS Using OIC-IAT — Tax must not be compromised unless it is assessed and legally due. IDRS must be re-checked to ensure there are no audit, AUR, SFR or ASFR assessments pending, and that all taxes included on the accepted offer have been properly assessed and are still due and owed. If an open audit or AUR (TC 922 on TXMODA) is found on a period included as part of the offer, follow procedures in IRM 5.8.4.17, Pending Assessments. If an amended return has been processed, the adjustment must post before acceptance. Document the case history.

Re- Check on IDRS TXMOD/IMFOL/BMFOL to identify 965(h) and 965 (i) election accounts, refer to the following transaction codes which include TC 766 CRN 263 and TC 971 AC 114 or TC 971 AC 115 on the 2017/2018 tax account. An acceptance which includes tax years that have IRC 965 liabilities or potential IRC 965 liabilities must include an IRC 965 addendum.

Analyze accounts on AOIC, IDRS and OIC-IAT and resolve any issues involving misapplied payments or deposits. Correct any DPCs If needed. Do not change IDRS DPCs such as 02 (trust fund), and 53 (discharge), but add to the AOIC payment screen and explain in the remarks to MOIC the payments that count towards the offer amount. review the 4710 Database SharePoint site against the amount on the AOIC Deposit Screen.

Check for Out of Business BMF Entities - Research IDRS using OIC-IAT for any Out of Business BMF entities that have open filing requirements and close with the appropriate TC 59X transaction.

Use OIC-IAT to check for TC 671 Dishonored OIC Application Fee and TIPRA payments. If dishonored, contact should be made immediately, requesting certified payment, to be made within 10 business days or the offer will be returned. Document the AOIC history. If the taxpayer does not replace the dishonored check, see IRM 5.8.7.2.2.5, Return for Dishonored Payments.

Check IDRS for Department of Justice (DOJ) or Docketed Court Controls — Before acceptance, check the following to see if the offer must have DOJ approval before acceptance. Contact Area Counsel to share any potential recommendation for acceptance with DOJ. See IRM 5.8.1.6.1, Tax Cases Controlled by Department of Justice, and IRM 5.8.1.6.2, Docketed Tax Court Cases, for additional information.

Research the DOJ indicators below:

Check IDRS for indication of pending, current, or ongoing litigation actions. See table below:

Ensure the AOIC address and IDRS address match. If not, contact the taxpayer and verify the correct official mailing address. After verifying the correct taxpayer address, update in AOIC if necessary.

The entity that is submitting the offer must be on the first name line in AOIC. The IDRS nameline will usually result in the correct population in AOIC, but for extremely long names, it may be necessary to edit or abbreviate for the full IMF entity and for the maximum BMF entity to fit on name line 1. If necessary, part of the BMF entity name can roll to name line 2. For IMF taxpayers, the second nameline should only be populated when the information is required for mail delivery.

If the OE/OS is submitting an acceptance recommendation subsequent to the OIC-IAT research conducted during the initial analysis, the OE/OS will use OIC-IAT to verify the taxpayer is still compliant with filing, making any required periodic TIPRA payments, and making ES payments and/or FTDs.

Credit Report request— When appropriate, a full credit report may be secured on any case to assist in locating taxpayer assets and verifying financial information. After reviewing the credit report, the case history must be documented with an analysis of the findings as well as the reason(s) for the request. A full credit report must be requested when the current aggregate balance meets the amount as defined in IRM 5.8.5.3.1.2, Securing Credit Reports to Verify Taxpayer Information. All requests for credit reports require managerial approval.

Update AOIC Screens listed below: —

Document the Case History — Before closing a case as an acceptance, document the case history on AOIC regarding the decision.

Generate and print letters and reports — Generate and print letters and reports as follows:

Clear Forms and Letters: AOIC Remarks is systemically populated with the date the form/letter is cleared on AOIC; therefore, it is essential that the OE/OS clear the forms and letters upon issuance. Delays in this action will cause incorrect dates to appear in the AOIC remarks.

Assemble file using Document 9600-B — The file must be assembled using Document 9600-B, Tab Dividers for Offer-in-Compromise Case Files Document.

Submit the file for approval —The OE/OS must assign the offer to the AOIC managerial approval assignment number prior to submitting for approval Submit the file for all required signatures including routing to counsel for review, if required. See IRM 5.8.8.13, Legal Opinion of counsel, below and IRM 1.2.2.6, Delegations of Authority for the Collection Process, for approval levels.

Upon securing all required approval(s) and signature(s), date and mail the acceptance letter(s). Acceptance letters generated at the end of the year should be dated and mailed the same calendar year that the letters are signed. Signed and dated copies must be retained in the offer file.

Ensure Form 7249 has all required signatures and all tax periods, which may be compromised after the 5-year compliance period based on the Form 656, Offer in Compromise, included and any additional name lines such as "in care of" have been redacted.

Close the case on AOIC and process in accordance with procedures defined in IRM 5.8.8.10, Processing the Closed Offer File, below.

When closing the offer on AOIC you will be prompted to answer whether the offer is being accepted under ETA criteria or not, respond based on the basis the offer is accepted.

Public inspection of certain information regarding all offers accepted under IRC 7122 is authorized by IRC 6103(k)(1).

Treasury Reg. 601.702 (d) (8) requires that for one year after the date of execution, a copy of Form 7249, Offer Acceptance Report, for each accepted offer with respect to any liability for a tax imposed by Title 26, shall be made available . Accepted offer records will be maintained for this purpose and made available to the public for a period of one year.

For each accepted offer, a redacted copy of the Form 7249 will be available on the AOIC system.

All requests for OIC PIF must be submitted on Form 15086 by electronic fax or mail per the instructions on www.irs.gov.

Before responding to Form 15086 request, the employee must review Form 7249 and redact any PII, such as secondary namelines containing “in care of” or the name of the single member owner of an LLC.

Memphis COIC will respond to the request with Letter 6456 and include either the Form 7249 or a copy of the taxpayer’s request.

Memphis COIC will record all requests received in the PIF mailbox and archive them in the appropriate folder.

Once an offer has been closed on AOIC, it should be held in-house until National Quality (NQ) has had sufficient time to pull for review. Field Area Office NQ randomly selected cases are identified on the AOIC Quality Review Listing the following Monday after closure. If the case is not selected for review, the offer should be released on AOIC on the following Monday after closure or as soon as practical thereafter, and the entire file mailed to the applicable MOIC unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC.

If the case is chosen for NQ review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded for review. The offer should be validated and released on AOIC on the following Monday after closure or as soon as practical before sending the original documents to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to NQ.

Before forwarding the case to the MOIC unit, take the following steps:

Appeals accepted CDP files are held by Appeals. The acceptance information is sent to MOIC on a Form 3210, refer to IRM 8.20.7.20.19.1.2 (6), Accepted OIC Appeals Considered. APS will update and close AOIC for all Appeals accepted CDP related offers that have been loaded on AOIC. See IRM 8.20.7-17, Automated Offer in Compromise (AOIC) Update Procedures.

Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact must be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing or lost files.

When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. A separate file should be created for each entity containing the separate items that pertain to each offer. It is not necessary to duplicate information that pertains to both or all files. The files must remain together and clearly marked indicating that there are related offers (for example "1 of 2" and "2 of 2" ).

When the accepted offer includes Trust Fund Recovery Penalty (TFRP) assessments, a careful review must be made to ensure all TFRP assessments are included. The Forms 656 and 7249 must match and must reflect each individually assessed TFRP tax period.

Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee’s position or area of responsibility. The result of this consideration should be documented in the case file. See Del. Order 5-1 for approval authorities for offer acceptances for employees of the IRS.

Offers from a Federal Contractor require a determination of whether public policy implications exist. The result of this consideration should be documented in the case file.

An offer will be deemed accepted if the IRS does not make a decision on the offer and/or notify the taxpayer of its determination within two years of the IRS received date, which is stamped on the Form 656 upon receipt. The postmark date is not relevant in determining when an offer is received.

If an IRS received date in AOIC is deemed to be incorrect, your manager must review the case and document the following in the AOIC Remarks: “After review of the facts, I approve the correction of the IRS received date shown in AOIC, xx/xx/xxxx, to the correct date of xx/xx/xxxx. The change is based on _________.”

An OIC will not be deemed to be accepted pursuant to IRC 7122(f), if within the 24-month period, the offer is:

Expedited processing should take place if 18 months or more have expired from the IRS received date. There may be cases where a field Revenue Officer secured the offer several months (or years) before forwarding to COIC for processing. When identified, these cases must be brought to the immediate attention of Headquarters Policy Analyst and worked expeditiously.

To determine if 24 months have expired since the IRS received date, the OE/OS should conduct a thorough review of the offer file to determine if the provisions of IRC 7122(f) apply. Internal information, such as ICS/ACDS histories, or internal routing communications may indicate receipt of a Form 656 without a date stamp present, use the date indicated as the IRS received date. This should include (at a minimum):

If the criteria meets the requirements for counsel review as described in IRM 5.8.8.13, Legal Opinion of counsel, the offer must receive counsel review and approval.

Counsel is required to review offers when the total assessed liability(ies) (including interest, additional amounts, additions to the tax, or assessable penalties) for all related offers on the same taxpayer is $50,000 or more. The purpose of counsel's review is to determine whether the offer legally meets the standards of DATL, DATC or the promotion of Effective Tax Administration (ETA). Counsel also reviews the offer to ensure it conforms to the Internal Revenue Service's policies and procedures.

The requirement for counsel review is based on the aggregate liability including additions and accrued penalty and interest, on Form 7249 for all related offers on the same taxpayer at the time the offer is submitted for approval, if $50,000 or greater.

When preparing the package to send to counsel through SharePoint, provide a copy of the IDRS transcripts for counsel review. Use the manager approval date when assigning to the SharePoint counsel inventory for assignment.

Case history sheets and transcripts should be converted to Adobe PDF before being transmitted electronically to counsel.

A follow-up should be scheduled for 60 days from date of submission for counsel review. If counsel has not responded and did not provide a signed Form 7249 within 60 days, contact counsel to determine the status of the review.

When the taxpayer has a continuous wage levy or FPLP levy, it may be released by the OE/OS prior to forwarding the accepted case to MOIC.

See IRM 5.8.1.1, Withholding Collection, for additional information on levy.

Take the following actions prior to forwarding the accepted offer to MOIC:

If a Transaction Code (TC) 971, Action Code (AC) 060 is present and it is identified as an open FPLP levy, coordinate with Advisory to facilitate the release. See IRM 5.11.7.3.6, Blocking or Releasing FPLP Levy, for additional information concerning the identification of an FPLP levy.

All credit reports must be destroyed on accepted offers after all approving signatures have been obtained.

If a credit report was requested, verify that the case history includes a summary of all relevant information.

After the case has been closed on AOIC, the case should be retired to FRC when it is no longer needed for current business. It should be destroyed 11 years after acceptance of the offer.

See IRM 5.8.7.12.2, Loading FRC Information on AOIC, for instructions on loading the information on AOIC.

If the case has been closed on AOIC and the dishonored check notification posts to IDRS before the case is forwarded to MOIC, it is the responsibility of the OE/OS to resolve. Upon notification of the dishonored check, immediately notify the taxpayer or their power of attorney and request a replacement check.

The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within 10 calendar days.

If the case has been closed on AOIC and forwarded to MOIC, MOIC will contact the OE/OS for taxpayer contact within 5 calendar days.

The OE/OS should immediately contact the taxpayer and request replacement payment in certified funds. Follow the procedures in paragraph (2) above.

If the taxpayer fails to replace the dishonored check, within 10 calendar days, the offer will be reassigned to the OE/OS and the accepted offer will be rejected based on the taxpayer breached the OIC-contract by failing to make the offered payment, in accordance with IRM 5.8.9.2, Rescission of Accepted Offers.

Document the AOIC case history.