This section provides direction for monitoring accepted offers in compromise and other related processing action taken by the MOIC program.

Authorities relating to this section include:

The Director, Collection Policy is responsible for all policies and procedures within the Offer in Compromise program.

The National Program Manager, Offer in Compromise is responsible for development and delivery of policies and procedures within the program.

IRM authors are responsible for writing the policies and procedures and clearing documents through all affected offices.

Employees in MOIC are responsible for the processes and procedures outlined in this IRM.

Operational and program reviews are conducted on a yearly basis with the use of data and reports from the Automated Offer In Compromise (AOIC) system. See IRM 1.4.52, Resource Guide for Managers, Offer in Compromise Manager’s Resource Guide.

National quality reviews and consistency reviews are routinely conducted to ensure case actions are timely and in accordance with the procedures in this IRM.

AOIC is used to track offers submitted by taxpayers and record case actions and history. Ability to take action on AOIC is limited to specific offer employees. Additional permissions are provided based on an employee’s duties and responsibilities. Manually Monitored offers are tracked on IDRS and Accounts Management System (AMS).

Managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Resource Guide for Managers, Offer in Compromise Manager’s Resource Guide.

A list of common abbreviations, definitions, and acronyms used throughout this IRM may be found in the following table:

AOIC Service Center (SC) uses different status codes to the offers as they proceed in the monitoring process. A complete list of the status codes and full definition can be found on the SERP Compliance Part 5 Job Aid in the Monitoring Offer In Compromise (MOIC) - User Guide. The following table is a list of the most commonly used MOIC status codes:

Below is a list of MOIC tax examiner time codes. Time reporting should be recorded in accordance with the appropriate OFP time codes. To determine the appropriate count see the major operations found at: http://ofp.ds.irsnet.gov/index.asp

Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database

Additional resources can be found in:

Employees can find helpful information on these websites:

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights.

Taxpayers are expected to pay the entire amount offered in the shortest time possible based on the terms of their accepted agreement.

The amount and due dates of payments must be specified.

For non-DATL offers there are two (2) types of payment terms that IRS and the taxpayer may agree to:

COIC process examiners are responsible for determining processability and perfecting offers before they are assigned for investigation.

An offer may be returned for various reasons, including failure to provide information and solely to delay. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for additional reasons for returns.

OIC determinations are made by Examination, Appeals, FOIC or COIC. The Department of Justice may settle court cases that are ultimately sent to MOIC for monitoring.

One of the following determinations will be made following the OIC investigation:

COIC loads the offer, the application fee, and TIPRA payment onto the AOIC database. If the offer is determined to be processable, AOIC systemically uploads the following to IDRS:

Taxpayers who wish to be represented submit a properly executed Form 2848, Power of Attorney and Declaration of Representative

When an offer is received with a Form 2848, COIC checks it across CC CFINK and if the POA is not there the original is forwarded to the Centralized Authorization File (CAF) for input on to the CAF system. If the POA sends in a copy of an already recorded Form 2848 then it is not forwarded unless additional tax periods are being added or there is some change to what the current CAF reflects.

The representative's information is loaded onto AOIC and a copy is placed in the paper case file.

When responding to a third party (anyone other than the taxpayer), who indicates they have a third party authorization on file, complete the appropriate search using CC CFINK before providing any tax account information.

If the POA information is on the CAF file but not on AOIC due to an oversight, add the POA information and continue your contact as long as guidelines found in IRM 21.1.3, Operational Guidelines Overview are followed.

The AOIC application tracks and controls offers in compromise. FOIC, MOIC, DATL and Appeals Area Office share a common database that contains relevant offer information. AOIC allows the user to process, view, and track the status of each offer. The program also generates forms, letters, and managerial reports.

AOIC consists of four parts:

Generally, all offers investigated by Collection are on the AOIC application. However, Department of Justice (DOJ) Settlement cases are not loaded on AOIC.

Cases not on AOIC must be manually monitored. See IRM 5.19.7.5, Accepted OICs Requiring Manual Monitoring.

Taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay, or ability to provide information timely.

Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. For additional information on the Taxpayer Bill of Rights, visit https://www.taxpayeradvocate.irs.gov/get-help/taxpayer-rights/

Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order),is attached and steps cannot be taken to resolve the taxpayer's issue the same day.

"Same day " includes cases that can be resolved in 24 hours, as well as cases where steps can be taken within 24 hours to begin resolving the issue. See also IRM 13.1.7.5, Same Day Resolution by Operations.

When making a TAS referral, use Form 911, and forward to TAS in accordance with your local procedures.

The National Taxpayer Advocate has reached agreements with the Commissioners of the various IRS Divisions, including the Small Business & Self Employed (SB/SE) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).The SLAs can be found on the TAS SharePoint site under: Service Level Agreements.

When appropriate, TAS employees may issue Form 12412, Operations Assistance Request (OAR). Upon receipt of an OAR, MOIC management will:

As part of the Identity Theft Program, the AM IPSU Team will begin assisting taxpayers whose situations meet TAS criteria 5–7 and involve identity theft. Applicable cases will now be considered IPSU criteria.

The Collection Statute Expiration Date (CSED) is the length of time established by law that IRS can collect any unpaid liabilities.

The CSED is normally ten years from the date of assessment.

Each assessment on a module has a separate CSED. Assessments include but are not limited to:

Generally, the CSED is suspended when the taxpayer files for or submits a request for a specific case action. See IRM 5.1.19.3, Case Actions That Can Suspend and/or Extend a CSED and IRM 5.8.10.7, Effect of Previous Offers on Collection Statute.

When an offer is deemed processable, a TC 480 is systemically uploaded via AOIC on each tax module included on the offer. If the offer is not on the AOIC system, then TC 480 is manually input. TC 480 suspends the CSED until a TC 481, TC 482, or TC 780 posts. The CSED is extended by the amount of time between the posting of TC 480 and the reversing or accepted transaction code.

Several legislative changes have provided or revoked IRS' ability to suspend the statutory period of collection for Offers in Compromise.

Computing the CSED using the Julian date:

When a payment is received on an accepted OIC, determine which module has the earliest CSED. Use the table below as a guide to determine the CSED suspension periods:

COIC and FOIC are responsible for calculating the CSED and ensuring all statute issues are addressed.

While an offer is under consideration, taxpayers may make changes to the original offer. Changes to the amount, terms, tax class, or tax periods, are considered amendments. The taxpayer can submit a new Form 656 or make changes to the original Form 656. The form is marked "Amended" in red on the top margin of page one. Refer to IRM 5.8.8.2, Amendment or Addendum to Form 656.

IAT provides tools that simplify research, reduce keystrokes, eliminate repetitive typing, and increase the accuracy of regular work processes.

The use of IAT is mandatory, if applicable, during the work process. For User Guides, see IAT website.

If an IAT tool is not available, or an employee has a problem with the IAT Task Manager, the case should be processed through IDRS, following established procedures. See the IAT Website for how to report/fix problems with IAT tools.

Additional IAT tools will be added to the following list when one is deemed beneficial and seen as adding quality to MOIC work processes.

IAT tool users can visit the IAT Website to become a subscriber to the IAT newsletter. The iNews details all ongoing IAT activity with tool retirements and rollouts.

Various IAT tools are available for MOIC employees, the list below is not all inclusive.

An offer may be transferred from one campus's jurisdiction to another's if a related offer is being worked at the other campus.

A transfer option has been programmed on AOIC in the Headquarters module. Before a case may be transferred it must be accepted into the SC inventory. If a case is in NW the transfer will not be completed. Once the case is in the Service Center (SC) inventory an e-mail may be sent to the Headquarter's analyst requesting the case be transferred to the other MOIC site. Be sure to explain in the e-mail why the transfer is necessary.

If contact was made with the taxpayer prior to the transfer, you must contact the taxpayer by telephone or letter to advise of the transfer to the new location and provide the campus hotline number found in SERP Who/Where, OIC Campus Locations for the Monitoring of an Offer.

Review and compare Form 656 /(Amended) Form 656 and AOIC to ensure all tax modules are included.

Refer to the AOIC User Guide, Chapter 5, Receipt of Accepted Offers and Chapter 6, Processing Accepted Offers for instructions on acceptance and control of OICs.

When the campus accepts transfer of an offer on AOIC, the system creates a TSIGN 8500 for each unique TIN in the MFT Screen, then systemically uploads to IDRS. Tax Examiners must review IDRS tax modules and ENMOD when an offer is initially assigned to them to ensure the TSIGN 8500 is updated successfully. If not posted within 3 weeks, input manually. Follow- up to monitor for unpostables.

Review the case file and AOIC to ensure that the correct date has been entered in the waiver and acceptance date field on the Service Center Main Screen. TC 780 uploads to IDRS systemically using this acceptance date when the AOIC record changes to a monitoring status. Therefore, the correction(s) are made prior to moving the offer to a monitoring status on AOIC. If TC 780 are manually input, remove from the transaction screen when accepting offer into inventory. Set a 3 week follow up to confirm systemic posting was successful and if not, input TC 780 manually to each applicable tax period.

If the error is identified after the systemic upload, then the TC 780 must be reversed and manually re-input on IDRS. Be sure to correct the AOIC waiver date and document the case history with your actions. In order to correct the waiver date, forward the request with all information to HQ Policy.

Update NMF (MFT 20) period(s) by requesting input of TC 780, TC 550 with the new CSED date, and accrued penalty and interest up to offer acceptance date via Form 3177, Notice of Action for Entry on Master File. Send Form 3177 to the Kansas City Submission Processing Campus (KCSPC) NMF unit. A copy of the Form 656 and acceptance letter must be submitted when requesting an adjustment to the NMF periods. The TE should create a dummy file to include these documents. When it is time to place the module in 5M status the documents will be available.

The following procedures apply to accepted offers that have been sent directly to FRC or offers missing from a shipment.

Perfection of case files sent directly to the FRC is the responsibility of the originator.

If the file is missing from a shipment (manually monitored cases) for less than one year, attempt to secure a copy of the Form 7249, Offer Acceptance Report, from the Public Inspection File.

Research IDRS to verify that all balance due modules assessed at the time the offer was accepted are included on the AOIC MFT screen. If any module is missing, refer to IRM 5.19.7.3.4, Overlooked Periods.

Ensure that TC 480 has posted to each tax period shown on the MFT Screen:

Review the terms screen; research IDRS to determine if the taxpayer is in compliance.

Update the AOIC remarks and status.

Occasionally additional periods or years are discovered subsequent to the acceptance of an offer. Missing liabilities assessed before the acceptance are considered only a defect of the offer. When such liabilities are discovered, the offer agreement should be modified to include the additional period(s).

When overlooked period(s) are discovered by MOIC (after acceptance), update AOIC to add a history narrative referencing the overlooked periods. This includes tax years listed on the Form 656 or amended Form 656 not on AOIC.

Return the case file to the originator for a determination via Form 3210, Document Transmittal, and follow-up for receipt of the acknowledgement copy.

If the file has been sent to Federal Record Center (FRC), update AOIC history and request the file be returned to MOIC. Send the file to the originator for a determination and any necessary pen and ink changes to the appropriate forms as well as for the required signatures.

If the overlooked period(s) are discovered by FOIC or COIC, they will add the periods to AOIC and make pen and ink changes to the Form 7249 and Form 656 to include the additional period(s). The appropriate official must initial the recommended change on the Form 7249.

Upon receipt of pen & ink changes, add modules to the MFT screen as applicable.

Initial case review and documentation are required as each case is received into the Tax Examiner inventory and/or re-assigned to another Tax Examiner's inventory. The case remarks should be clear, concise and easy for another employee, lead, manager, etc. to follow and determine the actions taken.

Accepted offers processed under TIPRA guidelines will have payments applied to the liability while the offer is under consideration and after the liability has been established on AOIC. Refer to IRM 5.8.1.13, The Tax Increase Prevention and Reconciliation Act of 2005. Take the following actions on all accepted TIPRA offers:

When MOIC receives an accepted offer and the remarks on AOIC indicate the account is being merged, MOIC is to monitor the merge until completed and ensure all TINs are listed on the MFT screen for the balances owed. The offer must remain in MP/ML if the offer hasn't been full paid. In the event the merge isn't completed after the offer is full paid and there is no collateral agreement, update the offer to MO status with a follow up for the remaining time necessary for the Form 4442, Inquiry Referral, to be worked. The TE is responsible for updating the MFT screen once the merge has been completed. If over 150 days from submission of the Form 4442, Inquiry Referral the TE will request their manager contact the PE manager to inquire about the status of the merge.

All initial case actions on all offers, AOIC and manually monitored, must be documented in the history with the appropriate OFP codes from count actions taken.

All subsequent case actions, (e.g., journaling of payments, recoupment completed or not applicable and why, checked for NFTL, lien released, 3439 verified, collateral to exam or returned from exam, letter sent to taxpayer/POA, received response and state the nature of the response, etc.) must be documented. If taking actions using an IAT/GII tool and multiple transactions are completed due to the tool use, not all actions need to be stated.

All contacts, written or verbal, with the taxpayer/POA or internal contacts (e.g., collateral package sent or received, phone calls received or made) or any other contacts relevant to the offer must be documented.

AOIC remarks must be documented with the date a letter is issued if it is not the date it was generated.

When reviewing the taxpayer’s entity and a discrepancy exists between the AOIC address and the IDRS address, review CC ENMOD for the address cycle to determine which is more recent and update AOIC entity, if appropriate. If unable to determine or confirm, contact should be initiated with the taxpayer. Refer to IRM 3.13.5.29, Oral Statement/Telephone Contact Address Change Requirements.

Incoming OICs must be accepted and updated on AOIC within twenty-five days of MOIC receipt (NW status) when NFTLs are present to ensure timely release of liens on all full paid offers. On offers where no NFTLs are present, the OIC should be accepted and updated on AOIC within 30 days.

Appropriate AOIC screens must be updated to an "MX" status or Form 6314 Deferred Payment Offer Payment Record, prepared for incoming accepted cases.

TSIGN 8500 systemically uploads when the AOIC status is changed from "NW" (new work unassigned) to "OA" (open assigned).

When the AOIC status is updated to a "MX" (monitoring) status TC 780 uploads.

If incoming accepted offers have not been updated on AOIC within thirty days of receipt, campuses should have the clerical staff make INTST prints and manually input TC 780 to ensure specific restrictions are in place and accounts with recent payments are identified to ensure timely release of the federal tax lien when appropriate. When the case is eventually accepted on the system, delete the systemic upload of TC 780 from the MFT summary screen.

These procedures are only to be applied on offers accepted on the basis of Effective Tax Administration (ETA) public policy or economic hardship, or if the offer is accepted on the basis of Doubt as to Collectibility with Special Circumstances (DATC-SC) economic hardship. Refer to IRM 5.19.7.7.2, Disposition of OIC Deposits when processing payments that were applied to the 4710 account as a deposit.

The AOIC system will generate a Form 2424, Account Adjustment Voucher, and journal the fee through the Journal and Balance screens. The Form 2424 must be mailed or remotely printed to the Accounting function affiliated with the COIC site where the offer was initially loaded. Form 2424 will show the designated application fee fund account.

If the taxpayer requests a refund of the fee, prepare a manual refund, using Form 5792. See IRM 21.4.4.5.1, Preparation of Form 5792, IDRS Generated Refund. The Accounting function requires a signature from someone authorized to sign the manual refund request form. After the form has been signed by someone authorized, it should be sent to Ogden Accounting for refunding. All requests for manual refunds must be controlled and monitored on the Integrated Data Retrieval System (IDRS) by the initiator (or other management designated employee) to prevent duplicate, erroneous refunds. See IRM 21.4.4.6.1, Monitoring Manual Refunds, for more information.

Instances of identity theft can either be alleged by the taxpayer or can be identified by an IRS employee. The taxpayer can self identify by providing any of the following:

Below are procedures for inputting the identity theft transaction codes and preparing a referral to report the identity theft case. Prior to inputting an identity theft TC 971 Action Code, review IDRS CC ENMOD to prevent inputting a duplicate TC 971 Action.

The tax examiner will be responsible for:

In other instances, a tax return may be delayed in processing if identified by the Return Integrity Verification Operation (RIVO). RIVO works to detect, evaluate and prevent the issuance of improper refunds. While monitoring compliance, MOIC employees periodically encounter returns being worked by the Taxpayer Protection Program (TPP). See IRM 25.25.6.1.7 Taxpayer Protection Program Overview for more information on how to identify these cases. Taxpayers should be encouraged to follow the instructions in the letter they received in order to resolve the delay.

Although MOIC may not be working the identity theft issue, it is crucial to know the impact the theft has on the monitoring of the offer. If another program is working the identity theft, contact should be made with that program to find out the impact. In some cases, such as a Criminal Investigation (CI) case, the program may request you do not notify the taxpayer of the pending investigation.

OICs may be accepted on federal employees, including IRS employees. Monitoring of accepted IRS employees' offers should be coordinated with the MOIC Tax Examiner designated to work FERDI cases. See IRM 5.19.1.5.6, Federal Employee/Retiree Delinquency Initiative (FERDI).

The TFRP is a penalty imposed by IRC 6672 against any person required to collect, account for and pay over taxes held in trust by an employer and who willfully fails to perform any of these activities. Taxpayers are assessed the penalty on the IMF equal to the unpaid trust fund amount (TC 240 Reference Number 618) under MFT 55. See IRM 5.19.14, Trust Fund Recovery Penalty (TFRP).

There are four different possible types of offers related to the TFRP assessment:

IRS will continue to collect any remaining trust fund portion of the Form 941, Employer’s Quarterly Federal Tax Return, balance due via TFRP (MFT 55) assessments after the offer amount has been full paid by the employer.

When the TFRP is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

After all offer payments have been received (BMF accounts containing a TC 971 AC 093, or an MFT 55 account that contains a TC 240/RN 618) take the following actions before the accounts are written off:

The Personal Liability Excise Tax (PLET) under IRC 4103 is a collection tool used to collect certain unpaid excise taxes from responsible person(s) affiliated with a business reported on Form 720, Quarterly Federal Excise Tax Return.

Excise taxes reported on Form 720 are identified on the return as "IRS Numbers" . The abstract IRS numbers listed below are for fuel taxes subject to PLET assessment:

Separate documents must be prepared for each tax period and separate assessments for each type of excise tax if the Form 720 contains multiple types of excise tax. It is also possible to make the assessment against more than one responsible person.

Unlike the TFRP which is an assessment of a civil penalty under MFT 55, the PLET is an assessment of the actual unpaid tax and is assessed under TC 150 or TC 290 on NMF. The NMF assessment is made under the individual's SSN on MFT 45 using tax class 6, blocking series 600-619, and Doc Code 30. The literal "Section 4103" appears on the face of the balance due.

When the PLET is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

Taxpayers may file for bankruptcy relief after an offer has been accepted. The offer should not be defaulted and payment should not be solicited while the taxpayer is in bankruptcy. Defaulting the offer or soliciting payments could violate the bankruptcy automatic stay.

The Insolvency Interface Program searches for Status 71 upon receipt of bankruptcy notification from the courts. When the application identifies Status 71, Insolvency should contact and work cooperatively with the local OIC specialist group or the campus sites to maintain close coordination.

A tax liability is either discharged in bankruptcy or excepted from discharge (non-dischargeable). If the taxpayer receives a discharge of a tax liability, any request for payment by IRS would be a violation of the discharge injunction.

If the tax liability is excepted from discharge, IRS is able to take collection action on any remaining unpaid balance. However, the decision to request payment of unpaid offer balances after the bankruptcy depends on the particular facts of each case and direction provided by Insolvency.

You may learn that the taxpayer filed bankruptcy by:

A posted TC 520 with closing codes in the range of 60-67, 81, 83-89 indicates that the taxpayer's account is in bankruptcy, See IRM 5.9, Bankruptcy and Other Insolvencies, for additional information.

The freeze indicators used for bankruptcy (-V and -W) affect notices, offsets and refunds depending on the closing code used.

Contact Centralized Insolvency Operation (CIO) at ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. If the case is not assigned to CIO, the CIO caseworker will refer the caller to the Field Insolvency caseworker assigned to the case and provide the caller with the caseworker’s telephone number. Depending on the bankruptcy chapter and status of the OIC, Insolvency will provide the appropriate instruction. The following questions must be asked:

Immediately following your contact with the Insolvency:

Contact Insolvency with questions regarding overpayments, including refund recoupment, prior to resolving the credit. Document AOIC remarks with the response received.

The taxpayer's account should be monitored for discharge:

A full discharge of debt in bankruptcy enjoins the collection of the debt of a personal liability of the debtor. Tax liabilities unpaid at the close of the bankruptcy proceedings must be adjusted, reactivated or reported currently not collectible. However, a partial or excepted discharge allows the remaining liability to be collected according to terms of an accepted OIC. For example, after the 5th payment of a 24 month Periodic Payment offer, taxpayer filed bankruptcy and has a non-dischargeable liability, the taxpayer wants to continue with the monthly offer payments (after bankruptcy), thus when the IRS continues the OIC contract after bankruptcy, the taxpayer would submit their 6th payment and continue making payments based on the terms of the accepted offer.

IRC 7508 postpones the time for performing various tax acts for individuals serving in the Armed Forces of the United States, or serving in support of such Armed Forces, in a designated combat zone, or when deployed outside the United States away from the individual's permanent duty station while participating in a contingency operation (as defined in 10 U.S.C. Section 101(a)(13)). See IRM 5.19.10.6.3, Combat Zone Freeze Code.

The postponement lasts for the period of time the individual serves in, or in support of, the combat zone or contingency operation, plus the period of continuous qualified hospitalization attributable to an injury received while serving in, or in support of, such combat zone or contingency operation, plus another 180 days.

The acts postponed include filing any return of income, estate, gift, employment, or excise tax; payment of any income, estate, gift, employment, or excise tax or any installment thereof; filing certain petitions with the Tax Court; filing a refund claim; and bringing a refund suit. The time for performing certain acts performed by IRS are also postponed, including giving or making a notice or demand for payment of tax, collecting by levy or otherwise, assessing any tax, charging any penalty or interest, or taking enforcement activities against individuals during the postponement period. This includes attempts to collect offer payments or instituting potential default actions against individuals with an accepted offer.

Because Section 7508 only applies to individuals, the relief does not apply to partnerships or personal service corporations (e.g., doctor, dentist, CPA, etc.) where the key individual is/was serving in the combat zone. Thus, while IRS can make an administrative determination to allow additional time to make a payment or to not default the partnership or personal service corporation, interest and penalties will continue to accrue (unless reasonable cause for penalty abatement exists - interest cannot be abated for reasonable cause) while such key individual is/was serving in a combat zone or contingency operation. Section 7508 does, however, apply to sole proprietorships because the individual in the sole proprietorship is serving in the combat zone or contingency operation, while the partnership or personal service corporation itself is not serving in the combat zone or contingency operation. Thus, no penalties and interest will accrue against an income tax liability of a sole proprietorship during the postponement period. For purposes of employment and excise liabilities, however, penalties and interest will accrue for payments due before August 25, 2005. Section 403(a) of the Katrina Emergency Tax Relief Act of 2005.

Those serving in support of the Armed Forces in a combat zone include any support personnel on official duty in the combat zone such as Merchant Marines, Department of Defense contractors, Red Cross workers, and accredited news correspondents. See IRM 5.19.10.6.2, Combat Zone Qualified Individuals and Areas.

Determining whether a taxpayer is entitled to section 7508 relief can be based on correspondence, case history entries or telephone contact.

The following provides instructions for handling taxpayers identified as being entitled to section 7508 relief:

When IRS receives notification or identifies that an OIC taxpayer has died while monitoring an offer, MOIC will follow the below procedures in working the offer.

Record or note the taxpayer's date of death on Form 6314 or on the AOIC history, if available.

If a copy of the death certificate is submitted and there is a physical file, place the copy in the file and return the original to the submitter. If no case file, annotate the AOIC history and return the original to the submitter.

Terminate the offer as directed above unless the offer was accepted by DOJ. If the offer originated with or was accepted by DOJ, take the following actions:

If DOJ requests the case file, send the case file via Form 3210. Place Form 2275, Records Request, Charge and Recharge, in the suspense file. Request the case file if it was previously sent to FRC. See IRM 1.15.4, Retiring and Requesting Records, for guidance on how to return the case files to the FRC.

Upon receipt of Form 2209, Courtesy Investigation response, with or without the case file, follow the directed disposition.

Section 7508A provides the IRS with authority to postpone the time for performing various acts for a taxpayer affected by a federally declared disaster. These acts include, but are not limited to: the filing of certain tax returns; the payment of certain taxes (including any installment of these taxes); the filing of a Tax Court petition; the filing of a claim for credit or refund of tax; and the bringing of a refund suit.

Taxpayers identified by the IRS as "affected taxpayers" are eligible for the relief stated in (1) above. These affected taxpayers include any individual whose principal residence, and any business entity whose principal place of business, is located in county, or parish identified as being part of a "covered disaster area" by the IRS.

Tax accounts with a -S freeze will continue with normal MOIC processing, there is no restriction on sending letters. Employees should exercise good judgement and sensitivity.

OIC taxpayers may contact the Taxpayer Advocate Service (TAS) or MOIC stating that they have suffered a disaster, such as a fire, or flood that prevents timely mailing of a payment, return, or other information. Taxpayers should be allowed a reasonable amount of time to adhere to the offer terms. No relief from interest is available unless the disaster is a federally declared disaster, and then only for current year taxes. Refer to IRM 21.5.6.4.30, -O Freeze, or IRM 21.5.6.4.37, -S Freeze, for additional information.

Tax accounts identified with the -O freeze will be moved to MD status with the remarks indicating the date the -O freeze expires, and establish the appropriate follow-up. Offers in ML status will continue in this status and with their normal follow-up time frame. The journal due date is not changed.

Non-Master File (NMF) was centralized on November 5, 2018, in Kansas City Submission Processing Campus (KCSPC). All new assessments and/or documents to establish accounts on NMF must be sent to KCSPC.

The following NMF account types are established at the KCSP Campus:

To find the contact go to SERP, Who/Where, Accounts Management and Accounting Point of Contact, see the Accounting and KCSPC contact listed.

The IRS CAWR (Combined Annual Wage Reporting) program ensures that employers have paid the proper amount of taxes, withholding, and advanced earned income credit. This is done by comparing the Form W-3, Transmittal of Wage and Tax Statement, Form W-2, Wage and Tax Statement, Form W-2 C, Statement of Corrected Income and Tax Amount, Form W-3 C, Transmittal of Corrected Wage and Tax Statements, totals and the Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form W-2 G, Certain Gambling Winnings withholding amounts to the amounts reported on the employment tax returns.

The SSA-CAWR program addresses apparent "missing" Form W-2. These cases are referred to IRS by SSA (Social Security Administration) for follow-up and, if necessary, to make penalty assessments for failure to file.

Cases that are determined to have discrepancies or that are referred by SSA, are loaded onto the CAP (CAWR Automated Program) Tier II SUN at TCC. CAP is a stand alone computer (inventory) application that houses the CAWR programs. All master file actions that affect the taxpayer's account for the years being worked will result in an update to the CAP system. This includes Entity changes, IDRS adjustments and additional Form W-3, Transmittal of Wage and Tax Statement, and Form W-2, Wage and Tax Statement, processing by the SSA.

BMF taxpayers identified during processing CAWR may have pending or accepted offers on file with IRS. Additional assessments can be made while the offer is pending but, not after the offer is accepted.

If a TC 780 or TC 788 is on the BMF tax modules, CAWR examiners will forward CAWR CAP documents (Money Screen and Entity Screen) to be associated with the OIC case file.

Make a note in the history on AOIC or manually monitored file that the CAWR assessments documents have been placed in the case file or a dummy file has been created.

In accordance with IRC 6721, a penalty for "intentional disregard" systemically generates for CAWR assessed tax periods. Because the CAP system does not recognize Status 71 on an OIC entity, the penalty assessment will generate and is established under MFT 13.

When this penalty generates following acceptance of an offer:

The Automated Underreporter Program identifies taxpayers who have not reported all of the income on a filed income tax return. The program compares the total amount from all income reporting documents such as Form W-2, Form 1099, etc. to the amount shown on the filed income tax return.

When an accepted OIC is transferred into MOIC's inventory by updating to a MX status on AOIC, a TC 780 (-Y freeze) is generated on IDRS. Input of the TC 780 freezes the tax module and causes attempts to input subsequent underreporter adjustments to unpost.

The Offer Examiner or Offer Specialist must review IDRS before inputting TC 780 because AUR issues must be resolved before transferring an accepted OIC into MOIC's inventory.

TC 922 with process code 03 or 06 indicates that AUR has selected the taxpayer's return for processing.

If a TC 922 is present followed by one of the following closure process codes (process codes are shown to the right of TC 922), TC 780 can be input without contacting AUR.

A DATL offer is filed on Form 656-L and will only be accepted for the tax period (s) in question.

No TIPRA payment or application fee is required for a doubt as to liability offer.

Accepted DATL offers are not monitored for the 5 year payment and filing compliance nor is the refund recoupment part of the terms.

A DATL offer is closed to CF status after the payment terms are completed.

Taxpayers may attempt to amend a return for a tax period(s) included on the offer, however, once the IRS has accepted the offer, the tax liability is conclusively settled and changes cannot be made to the amount assessed.

If an amended return is received for an offer period return the original form, and remittances (if submitted with the amended return), to the taxpayer with a letter advising that we cannot process an amended return on a tax period included in an accepted offer.

If the offer is being monitored with a physical case file make a copy for the file.

Update the AOIC or case file history.

During the 5-year compliance monitoring period of an accepted offer, a determination to rescind an existing compromise agreement may need to be made.

An offer is an agreement which is binding and conclusive on both the taxpayer and the government, and prohibits further action on periods related to the offer unless

Requests regarding rescission of accepted offers are routed to the MOIC area from COIC, FOIC, Appeals, or Counsel. MOIC will take the following action to return the original offer file to the originator as required:

As part of the IRS Restructuring and Reform Act of 1998 (RRA 98), Congress added section 7122(c) to the Internal Revenue Code. That section provides that IRS shall set forth guidelines for determining when an offer in compromise (OIC) should be accepted and 26 CFR 301.7122-1, Compromises, authorizes IRS to consider OICs raising the issues below. These offers are called Effective Tax Administration (ETA) offers. Congress explained that these guidelines should allow IRS to consider:

Offers listed as Effective Tax Administration (ETA) will show as an offer type “A” on AOIC. These offers pertain to accepted offers only and should be resolved by MOIC within 45 days of acceptance. An offer accepted Doubt as to Collectibility with Special Circumstances (DCSC)is the basis for acceptance of an offer where there is doubt that the tax can be paid in full and special circumstances exist that warrants accepting the offer for less than the reasonable collection potential (RCP).

Most offers require an application fee when submitted, however, the fee may become refundable on Offers accepted under Effective Tax Administration (ETA) or certain offer accepted under Doubt as to Collectibility with Special Circumstances (DCSC).

The Acceptance Letter for ETA or DCSC offers will include a paragraph asking the taxpayer if they want the fee applied or refunded. The taxpayer decides whether the application fee will be refunded or applied.

Offers accepted under ETA or DCSC in Appeals may not be easily identified on AOIC. Upon receipt of the case file, clerical should forward copies of the Appeals Acceptance Letter and Form 5402, Appeals Transmittal and Case Memo to the assigned Tax Examiner for review and proper handling of the application fee.

The taxpayer is given 30 days from the date of the letter to notify us in writing. The paragraph reads: "Your offer was accepted based on effective tax administration or doubt as to collectibility with special circumstances. The application fee you paid when you submitted your offer will therefore be applied against the amount of the offer. If you would like the application fee refunded to you rather than applied against the amount of the offer, you must notify us in writing at the address below within 30 days of the date of this letter. If you request a refund, any amount due under the offer will not be reduced by the amount of the fee."

The application fee will be applied to the offer amount and tax liability if the taxpayer does not respond or replies late. Allow an additional 15 days following the 30 days from the date of the letter (total 45 days) before applying the fee. Refer to IRM 5.19.7.3.7, Applying or Refunding the Application Fee.

The Department of Justice (DOJ) settles certain tax litigation cases by accepting a Settlement. DOJ sends accepted Settlement cases to the Collection Advisory office responsible for that geographic area. See Pub 4235 for a list of Collection Advisory offices by state.

The Advisory office retains the original accepted case file. If the compromised liability has a deferred payment or collateral agreement, the campus monitors the case to ensure that the taxpayer complies with the terms of the settlement agreement.

Maintain a file of Forms 6313, Collateral Agreement Payment Records, for all manually processed offers. It is not necessary to maintain a file for any account loaded on AOIC.

Maintain the file in alphabetical order.

Maintain forms in the file until the collateral is closed.

Closing actions for offers not controlled on AOIC must be input manually.

Input the following on each open period via IDRS:

Make a photocopy of Form 6314 (showing the zero offer amount balance due) and write or stamp "Notice to Release Lien" .

Notify the Centralized Lien Operation (CLO) to release the Federal Tax Lien(s). Follow guidelines in IRM 5.19.7.8.9, Releasing the Federal Tax Lien.

If the offer is submitted by one party of a joint assessment, special rules apply. See IRM 5.19.7.11, Separate OICs on Joint Liabilities.

Note all actions on the case history sheet or AOIC (per campus policy).

Write or Stamp "Closed" and the date on the case folder and file the case in the closed file.

For information on the retention and disposition of the case file that contains original records, see Document 12990, IRS Records Control Schedules.

The AOIC Transaction Listing is a report of error listings for each individual tax examiner and shows all transactions that did not automatically post to IDRS. The report will not give examiners an individual listing, but a listing of all errors for the Campus that is selected. Identify the error by the assigned IDRS number. If there are no employee numbers listed, look up the offer number to determine assignment.

The Daily Transaction Listing on AOIC should be printed daily. Review the information from the report and determine the actions needed on each offer, if any. Some offers may indicate a pending transaction due to another AOIC download. No required action is needed on these. The listing has three parts.

To resolve the errors, view TXMOD on IDRS. The unpostable will be notated by a transaction "UPC" code. Refer to the 6209 for the explanation of the unpostable and what code will correct it. Refer to the error listing to see if the transaction is being sent out again. Check on IDRS to see if the unpostable is closed. If it hasn't been closed then you can use CC UPDIS to request how to close or correct with the appropriate transaction. If the control has already been closed, you need to contact the Unpostable Unit (SERP, Who/Where, Campus Directory, Unpostable unit for SC) that issued the transaction. These can be either phoned or faxed. The first two digits of the DLN of the unpostable transaction will show where the code originated. The If/Then table listed below has the required action based upon the error received.

Please see the table below to resolve errors on TC 780/788 errors.

Please see the table below to resolve TSIGN errors:

Please see the table below to resolve errors on TC 130/131:

Please see the table below to resolve errors on TC 971:

MF and NMF transaction error corrections must be input on the same day as the listing is generated.

Update AOIC with the deposit information from the Form 2515, Form 656, or other documentation. Follow procedures in the AOIC Service Center User Guide, Chapter 3.

After the deposit information has been input, generate the Form 3244, Payment Posting Voucher, from AOIC.

Route a copy of the Form 2515 and generated AOIC forms to the RACS Unit through Receipt & Control (R&C), R &C will forward Form 2515 to RACS in Accounting. The remittance will be deposited by R&C.

Maintain a file of Form 2515 prepared on all offers which have deposits on RACS. Maintain the forms in the suspense file for 18 months following refund of the deposit to ensure there are no undeliverable issues.

Open offer deposits are to be reconciled monthly when the RACS 136 Inventory Report is received.

For offers on AOIC, the Form 2515 can be destroyed once the 4710 account is clear of the related funds and the AOIC history is documented as to the disposition of the deposit. Form 2515 for all manually monitored offers can be placed in the case file once the deposit has been cleared from the 4710 account listing and the case file documented

For information on the retention and disposition of the case file that contains original records, see Document 12990, IRS Records Control Schedules.

When the offer investigation is completed and a determination has been made, deposits in the 4710 Account must be refunded to the taxpayer or applied to the tax liability.

Deposits on accepted offers will be applied to the taxpayer's liability.

Deposits on withdrawn, rejected or returned offers will be refunded to the taxpayer by completing Form 3753, Manual Refund Posting Voucher, unless the taxpayer has provided written consent to apply the funds. In most cases, taxpayers authorize the application of their deposit by checking the box and entering their initials in the Deposit section of the Form 656 revised March 2017 through April 2021. Written authorization can be secured at anytime during or following the investigation. AOIC will be documented regarding the authorization and MOIC employees should confirm the written consent was secured and clearly documented in AOIC Remarks prior to applying a deposit to the tax liability. If the AOIC remarks are not clear or lack required remarks, contact the accepting official or secure the case file to ensure the correct action is taken.

Although IRM 21.4.4-2, Manual Refund Checklists, instructs employees requesting manual refunds to contact the Financial Management System (FMS), it is not necessary for refunds from the 4710 RACS Account.

Take the following actions to process deposits through AOIC. (Refer to the AOIC User's Guide, Chapter 3.)

Print the AOIC Closed Offer Deposit Disposition listing monthly after the RACS 136 Inventory report has been imported to the 4710 Database. This listing identifies withdrawn, rejected and returned offers and also indicates the type of disposition. (A= Applied/R= Refund.)

Conduct thorough research when the deposit disposition is “AS” (Apply-Special Instruction) or “RS” (Refund-Special Instruction) as this usually indicates the funds in the 4710 account need to be partially applied and then refunded. Follow the specific instruction in the AOIC remarks.

All monitoring units must apply or refund deposits controlled by their sites.

Although OIC deposits may be physically located in the 4710 accounts at the other campus, each campus is responsible for the deposit disposition for the states serviced by their site.

When disposing of AOIC offers with deposits residing in the 4710 account of the other campus per the state mapping, send an email to the campus’s Deposit e-fax mailbox and document AOIC remarks with the appropriate information.

When a request to refund a deposit is made and it is not on the deposit disposition list, verify that this is what the taxpayer wants by reviewing the AOIC remarks before contacting the requestor (FOIC, COIC, etc.). Remarks must be entered on AOIC. Provide Accounting with a print of the 4710 deposit as indicated in (2) table.

Rejected Form 2424 and rejected Form 3753 should be documented in AOIC remarks upon receipt in MOIC. Rejections should be worked timely as in most cases are received on offers that are not open on AOIC and a follow up cannot be established.

Deposits may have been recorded on Form 2515 and Form 6313 for manually monitored cases. When the manual control card, Form 2515 or Form 656 indicates the taxpayer made a deposit(s), follow the steps below.

Process the deposit as follows:

For applying deposits to ANMF tax periods:

After month-end reconciliation with Accounting, Form 2515 will remain with the open file until the deposit is either refunded or applied to the taxpayer's liability.

Rejected Form 2424 and rejected Form 3753 should be documented in AMS upon receipt in MOIC. Rejections should be worked timely since these offers that are not open in MOIC and a follow up cannot be established.

On the 3rd workday of each month the RACS Accounting function closes the 4710 Account activity for the month and forwards the Offers in Compromise Inventory Detail Report (Also known as the RACS Report 136) showing all OIC deposits in the 4710 Account and the General Ledger Account Details showing the credits and debits in and out of the account to Brookhaven and Memphis. The OIC unit at each site must reconcile the OIC deposits with the General Ledger balance.

Upon receipt of the RACS reports from the RACS 4710 Account Coordinator, an MOIC tax examiner generates a Deposits (RACS) Open Balance Report (selection A on the AOIC Reports menu) to reconcile balance amounts.

The "manual" RACS Report Control File must also be pulled to verify that all credits and debits for the month have been recorded for manually monitored offers.

The MOIC tax examiner must compare the two reports and research all deposits that do not match. All differences between the AOIC Deposit screen and the 4710 Database (or RACS Report 136) must be investigated and resolved prior to considering the reconciliation complete.

Copies of the following documents that will impact the 4710 account should be routed, on a daily basis, to the designated MOIC employee responsible for reconciling the account:

If a payment does not appear on both Accounting's report and AOIC/Manual RACS report, take the following actions:

If the deposit is on AOIC but not listed on the 4710 Account Report:

Research IDRS to see if the payment was applied to the tax liability.

If the deposit is not on AOIC but is on the 4710 Account Report:

All research and attempts made to process or resolve a deposit issue should be reflected in the 4710 Database. AOIC remarks must clearly document actions taken but if the case cannot be found on AOIC, use AMS to document the history.

As of April 1, 2005, COIC payments may be processed through the Paper Check Conversion System (PCC) at Brookhaven and Memphis. PCC is a process for converting checks into electronic fund transfers. There will not be a paper check if it is processed through PCC.

Refunds issued to the taxpayer may be redeposited into the 4710 Account for various reasons. The most common reasons are:

If the offer was considered on a Form 656 revision prior to March 2019 continue research as outlined below. For revisions dated March 2019, April 2020 and April 2021 the Form 656 terms state if the IRS attempts to return a deposit once and it comes back as undeliverable then the IRS will apply the funds to the taxpayer’s liability. Upon the funds being credited back into the 4710 account for any of the above reasons, review to identify any obvious errors regarding the taxpayer’s entity information on the original Form 3753 , Manual Refund Posting Voucher. If the entity appears correctly, prepare a Form 2424 to apply the payment(s) in the government’s best interest as of the original IRS received date.

If the refund check was undelivered, research for a new address. Research should include, but not be limited to:

Document AOIC and AMS to indicate MOIC is attempting to validate the taxpayer’s current address and telephone number to discuss a deposit that was made on a returned, rejected, or withdrawn offer. If sending a letter or leaving a voice mail, document AMS and AOIC with detailed information as to the phone number(s) attempted and what information was left on the voice mail as well as the address any letters were sent.

If the Letter 6324-C, Offer in Compromise - Deposit Disposition is returned as undeliverable, check if the USPS yellow sticker provided a new address. If the address on the USPS yellow address sticker is not an address used to correspond with the taxpayer:

Ensure all addresses used to refund or correspond with the taxpayer are documented in AOIC remarks and AMS.

Accounting will notify the OIC Unit when a deposit made by check was returned due to insufficient funds.

A correction should be made to the Deposit screen.

If the deposit is located at your campus and the account is controlled by another campus, notify the other site that the deposit on their records must be reversed due to insufficient funds.

Document AOIC remarks with the actions taken and if the notice was referred to the other campus.

By signing Form 656, taxpayers agree to Section 3.03(2) of Revenue Procedure 2002-26 which calls for payment application to periods in the order of priority that IRS determines will serve its best interest. The payment will be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed.

If the following corporate liabilities are included in the offer, apply OIC payments in the following descending order:

Check the AOIC Balance (Liability) screen to determine if the payment will full pay the period with the oldest CSED date. If it will, update the balance.

Go to the Journal (payments) screen to generate and print Form 3244, Payment Posting Voucher. AOIC applies the payment posting rule systemically.

Refer to Chapter 6 of the AOIC User's Guide.

Payments should be applied to these and all other offers based on the balance due amount shown on the INTST prints and updated when the offer was first received into inventory.

Prior to revision in April 2016, Form 656 provided that excess offer payments of $1.00 or more must be refunded to the taxpayer. The 2016 through 2020 versions of the Form 656 state if the taxpayer overpaid the offer by any amount under $50 the funds were applied to the liability. Any amount $50 and over will be refunded. Beginning April 26, 2021 refunds will not be issued on offers accepted on a Form 656 with a revision date of April 2021, or later. Apply the amount that full pays the offer on the journal screen and document AOIC remarks stating the excess payment amount that will be applied to the liability and not refunded.

Analyze tax periods being monitored to determine to which period the payment should be applied. This may have been done when the case was initially processed.

Prepare Form 3244 to process the payment. Along with taxpayer entity information Form 3244 should include:

Record the payment on Form 6314, Deferred Payment Offer Payment Record.

Payments erroneously applied to IDRS must be moved to NMF with Form 2424.

If the 5 year compliance terms have been met when the final deferred payment is received, use procedures outlined in IRM 5.19.7.13, 5-Year Monitoring Status.

If the tax period(s) is on NMF, the centralized ANMF databases should be accessed.

ANMF was previously centralized in Cincinnati on September 26, 2006. As of November 5, 2018, all NMF processing is now completed in Kansas City Submission Processing Campus.

On AOIC or Form 6314, record payments and calculate the remaining balance.

When the final deferred payment is applied to an NMF account:

A continuous levy must be released when an offer is being accepted. See IRM 5.8.8.14 Continuous Wage Levy or Federal Payment Levy Program (FPLP) Levy for more information. Research AOIC remarks to determine when the release was sent and if it was mailed or faxed to the levy source. Check the payment history on IDRS to ensure levy payments have discontinued. Allow up to 30 days from the issuance of the levy release for payments to stop. Any levy proceeds received after 30 days from levy release are to be manually refunded to the taxpayer.

Occasionally the investigating individual overlooks the release of a continuous levy. This should be identified during OA processing and quickly elevated for resolution. Refer the case via email to the site Revenue Officer mailbox corresponding to your site for review. If no response is received within 7 days and the levy remains active, forward the unanswered e-mail to *SBSE Coll Policy OIC for assistance and copy your manager. Use RTR to identify any levy payments dated on or after the acceptance date. Manually refund levy proceeds remitted on or after the date of acceptance when the levy was not released timely.

For information for other levy programs see IRM 5.19.9.4, Federal Payment Levy Program, and IRM 5.19.9.3, State Income Tax Levy Program (SITLP) General and IRM 5.19.9.5, Alaska Permanent Fund Dividend Levy Program. Releasing levies issued through these Automated Levy Programs (ALP) require special handling.

The investigating function should guarantee that all TFRP payments made prior to acceptance have been cross-referenced, thus the offer taxpayer's TFRP assessment will show the correct balance due.

Accepting an offer from the employer, or one or more of the responsible officers, does not change the policy that the tax is to be collected only once. All payments should be cross-referenced as they normally would be as if there were no OIC. The TFRP Units will cross-reference OIC payments to the related TFRP accounts. TFRP transcripts will not be forwarded to MOIC.

For one offer filed jointly by husband and wife with identical TFRP assessments, apply OIC payments to the primary taxpayer. A TFRP transcript will issue so the payment will be cross referenced by the TFRP Units to the secondary and related accounts. When all terms are met, both TFRP assessment accounts will be compromised. See IRM 5.19.7.8.7, Interest, for IRS policy regarding computation of accruals.

Upon identification of cross-referenced payments, update the liability screen to ensure the balance matches IDRS.

When the offer is full paid, see IRM 5.19.7.4.3, Trust Fund Recovery Penalty (TFRP) Cases, for detailed closing requirements.

The input of the TC 780, Offer Acceptance, will prevent computer generated interest. Tax Examiners in MOIC will calculate interest to the acceptance date on the tax modules offer payments will be applied to. If the taxpayer breaches their offer contract and the IRS chooses to end the OIC contract, an accounting entry will be reversed and update accrued penalty and interest.

Compute interest using CC COMPA or the InterestNet (ACT/DMI).

A dishonored check is a check received and processed as a payment by the IRS, but the bank does not accept the check as valid.

A dishonored check penalty should not be assessed on offer payments.

If the notice of dishonored payment is received after the offer is accepted for an Application Fee or TIPRA payment then the OE/OS is to be notified to address the dishonored payment with the taxpayer. IRM 5.8.8, Acceptance Processing and IRM 5.8.8.17, Notification of Dishonored Application Fee and/or TIPRA Payment.

If a taxpayer’s check is dishonored, the IRS could choose to continue the OIC-contract or immediately end it. There is no legal requirement that the IRS send the taxpayer a potential default letter however, the TE is to issue a potential default letter using Letter 274-C , Offer in Compromise; Installment Payment Due, and follow guidance in IRM 5.19.7.14.1, Failure to Remit an OIC Payment, if payment is not received.

IRC 6321 allows IRS to file a Notice of Federal Tax Lien (NFTL) to protect the interest of the government and provides other creditors, judgment lien holders, and the public with notice of the government's lien on the taxpayer's assets.

When tax, penalty, and interest for all tax periods listed on the NFTL are fully satisfied, the Government issues a Certificate of Release of Federal Tax Lien. As a contract provision, the IRS agrees to release the federal tax lien as provided for in Form 656, even though the federal tax liability had not been fully satisfied.

Under the terms of the OIC contract (Form 656), the lien will generally be released within 45 days of when the offer payment terms have been satisfied and the payment has been verified. If there are delays in posting payments or transferring credits that may impact the timely release of the lien, contact the Centralized Lien Processing Operation. Contact number(s) for the centralized lien unit can be found on SERP under the "Who/Where" tab, Lien - Centralized Lien Processing, Centralized Case Processing.

If a taxpayer has not finished paying the OIC amount for an accepted offer, the lien has not yet been released, and the taxpayer sells property subject to the lien, the IRS may be entitled to all net sale proceeds that would normally be paid for the taxpayer to obtain a discharge of property from the lien. This will apply even if the total amount of the sale proceeds is greater than the total accepted OIC amount. This provision does not apply to accepted offers based on doubt as to liability. For offers accepted on the basis of NEH-ETA, this issue will be considered on a case by case basis. See IRM 5.8.10.6 Discharge and Subordination Requests. The taxpayer may contact Advisory to discuss the potential for a discharge or subordination.

Self-released liens occur when the statutory period for refiling for each module on the NFTL has expired and the lien was not refiled. Self-released liens do not have a release document issued systemically nor do they require one unless the taxpayer specifically requests it. MOIC is not required to request a release of these liens. Any request involving a self released lien should be referred to Centralized Lien Operation (CLO).

How the final payment is provided by the taxpayer determines the waiting period for making the release requests. Refer to IRM 5.12.3.3.1.1, Liability Satisfied by Payment, and IRM 5.12.3.3.1.1.1, Electronic and Credit Card Payments, for the appropriate time frame required to release a federal tax lien. The method of payment can also be identified in the second digit in the EFT Trace number, refer to IRM 3.17.277.5.3, EFT Number. A credit/debit card payment is identified when the second digit in the EFT Trace number is a 6 .

A lien release may be immediately issued when the final offer payment is made by one of the following forms of payment below. This includes payments made through the EFTPS system, Direct Pay or Online Account (OLA). For EFT number explanations, refer to the subsections in IRM 3.17.277.2.4 EFTPS Payment Methods.

When the final offer payment is made by personal check, the release period begins after fifteen (15) calendar days from receipt. This permits sufficient time for the check to clear.

DO NOT issue an immediate release when credit or debit cards are used to full pay the amount offered. See IRM 5.12.3.3.1.1.1, Electronic and Credit Card Payments.

After the offer is full paid, determine if there are account conditions that will significantly delay updating the case to 5M/5B status. In most cases, a systemic IDRS lien release is appropriate and will be prompted by the posting of TC 604. If there’s a situation causing substantial delay beyond 45 days to the systemic lien release, use ALS to manually process the lien release per IRM 5.19.7.8.9.1. Some examples of situations that warrant a manual release include the need to mirror modules or the presence of an income collateral. Every effort should be made to allow for systemic lien releases.

If a potential default letter has been issued due to the taxpayer being out of filing and payment compliance a lien release must be delayed until the taxpayer is in filing and payment compliance.

Document AOIC Remarks to indicate the method of payment and schedule a follow-up to update to 5M/5B status based on payment type.

OIC Acceptance Letters are generated from AOIC or local systems by Collection and Appeals.

Occasionally, the refund recoupment year(s) may be incorrectly stated. This usually occurs when an offer is accepted at the beginning of the tax year.

Regardless of the year(s) stated on the acceptance letter, monitoring units are required to monitor for the refund recoupment as stated in the terms of the OIC contract and required by law.

If contacted by the taxpayer or representative regarding recoupment of a refund for a year other than what is stated on the acceptance letter, apologize for the error and advise that we are entitled to the refund as a term of the OIC contract. This includes the year of filing (TC 480) through the year of acceptance (TC 780).

When overpayments are mistakenly refunded to the taxpayer, contact the taxpayer and request the refund be returned or the offer will be defaulted.

Returned refunds are applied to the tax period from which they generated and then applied to the oldest CSED period on the offer. For more information follow procedures in IRM 5.19.7.14.3, Failure to Return Refunds (Refund Recoupments).

Taxpayers may request the IRS apply a refund for a non recoupment tax year to the offer amount.

Generally this situation may arise when a taxpayer is unable to meet payment terms of an OIC. In such situations take the following steps:

When the credit becomes available apply the amount to the outstanding offer amount and oldest CSED period.

If the credit becomes available and we have not received written authorization from the taxpayer:

Document all actions in the AOIC remarks or note the manually monitored history file.

The Chief Financial Officer set policy on October 21, 2002, that changed processing of a joint account when one spouse requests tax relief.

The policy states that IRS will split the joint return into two separate modules, one for the primary taxpayer and one for the secondary taxpayer, both mirroring the original return. The policy statement also called for a linkage for transaction codes between the modules and systemic intervention to accommodate payment and credit cross-referencing. The mirror functionality became operational January 2005.

Each taxpayer has an MFT 31 (MFT 65 if the module is a result of mirroring an MFT 35 liability) module created under their SSN that accurately mirrors the tax liability, transaction history and correct CSED/ASED to the point of creation.

If the offer has a CSED Imminent Module (CSED has 12 months or less remaining on the statute), do not mirror that tax module. Update AOIC remarks to indicate which tax module(s) was not mirrored due to an imminent CSED.

Exercise caution when mirroring is needed on a module with freeze codes other than the -Y freeze. Contact Exam to remove a -L freeze prior to initiating mirroring procedures.

If MOIC receives related offers and both have the same TC 480 and TC 780 dates on IDRS, mirroring is not required unless one of the offers is defaulted.

Mirror assessments must be established on master file when:

For COIC, FOIC, and Appeals, this also includes offers submitted separately and are closed as other than an acceptance. COIC or FOIC investigating offices will be responsible for mirroring rejected, returned, or withdrawn offers.

The majority of accepted offers are controlled on AOIC. If the AOIC MFT screen displays a CSED indicator of P for primary or S for secondary then research IDRS to identify the joint periods that must be mirrored.

For manually monitored offers review the acceptance letter or the Form 656; if only one name appears and IDRS research of each tax period (CC TXMOD) shows a joint filing status (FS 2) then the MFT 30 period(s) must be mirrored to MFT 31 and MFT 35 must be mirrored to MFT 65.

Review the MFT 30 module(s) before beginning the transfer process to ensure all appropriate actions have been completed.

For accepted offers controlled on AOIC:

For accepted offers manually monitored:

The secondary spouse's SSN must be validated. See IRM 5.19.7.11.4 below.

When mirroring a module after the liability was previously written off by the offer:

Before beginning the mirror/transfer process the secondary spouse's SSN must be validated. Master file will not create an MFT 31/65 if the secondary SSN is not valid.

To verify the secondary spouse's SSN use CC IMFOLE to review the entity information:

Correct the SSN or Name Line using CC ENMOD/ENREQ and monitor until the SSN moves into a valid segment (in about 3 weeks) then continue with the mirroring process.

If you determine that an invalid name control is due to the secondary spouse not notifying the Social Security Administration of a change in surname due to divorce or marriage, then validate the SSN using CC IRCHG. The validation (correction) must be made for each tax period.

Use CC ENMOD to monitor for TC 017 to post (about 3 weeks) then continue the mirroring process.

If unable to validate the secondary SSN, the MFT 30/35 modules cannot be mirrored. They must be transferred to NMF by completing Form 12810, Account Transfer Request Checklist, and routing to the appropriate consolidated NMF site as indicated on SERP.

Establish a control on the account being moved to NMF.

Set appropriate follow up dates for all actions taken and update the case history.

When all preliminary actions and validations have been completed then the joint liability periods are ready to be mirrored. Follow the steps below using CC REQ77:

Begin Step 1: Initiating the triggering event.

Monitor for MFT 31/65 modules and posting of TC 400 on MFT 30/35. At the 4 week follow up, verify there are 3 modules present: one joint MFT 30/35 module, one MFT 31/65 for the primary, one MFT 31/65 for the secondary.

Step 2: After both MFT 31 modules are established and TC 400 has posted to the MFT 30/35 and MFT 31/65 modules, input TC 972-AC 145 on MFT 30/35 and both MFT 31/65 modules:

Monitor for the posting of the TCs on MFT 30/35 and both MFT 31/65 modules.

Step 3: Closing the OIC on non-offer accounts.

As a part of establishing the two MFT 31/65 modules a TC 370 is systemically generated with one DLN identifying the primary SSN from the copy and both will carry a complete mirror of the MFT 30/35 module.

If the offer taxpayer is the secondary taxpayer and TC 400 posts, the TSIGN should be reversed back to 0000 and the OIC indicator shut off on primary taxpayer's SSN. (This can be done at the same time of TC 972 - AC 145 input.)

MFT 31/65 mirrored modules will generally reflect the collection status immediately prior to Status 29. TC 470 is input on the MFT 31/65 of the offer taxpayer in order to suppress collection notices that are systemically generated when the mirrored accounts are established on IDRS.

Update the AOIC MFT Screen to reflect the MFT 31/65 modules.

Update the liability on the MFT screen on AOIC from MFT 30/35 to MFT 31/65.

Due to the fact that the MFT screen is locked after one update and won’t allow additional edits, submit a request to the *SBSE Coll Policy OIC mailbox to update the AOIC Entity screen, if needed, to ensure the Offer TIN and IDRS TIN are correctly reflected. The request should include the exact changes that need to be made.

Offer payments received on the offer MFT 31/65 after mirroring will systemically cross reference to the MFT 31/65 module of the non offer spouse.

Because the CSED on the mirrored accounts differ, periodically check to see if the offer payment will cross reference to a period of the non offer spouse with an expired CSED.

OIC payments received after the initial mirroring process has begun may post to the MFT 30 account. Payments that posted to the MFT 30/35 prior to the posting of the TC 400 will be posted to the MFT 31/65 module(s). If a payment is identified on the MFT 30/35 module after the TC 400 then a credit transfer will be required as it will not be reflected on the 31/65 module. If needed, complete credit transfer from the MFT 30/35 to the applicable module per IRM 5.19.7.8, Applying payment on Accepted OICs.

Cross referenced payments reduce the unpaid balance of the co-obligor but are nonrefundable.

When an offer with mirrored modules is being placed in monitoring status of 5M, a TC 972 AC 110 must be input on both MFT 31/65 modules for the offer to prevent the cross-referencing of any future payments made by the spouse.

Both taxpayers on a joint tax liability must remain compliant with filing and paying subsequent returns following acceptance of an offer in compromise. The taxpayers must be compliant for the 5-year period following acceptance of the offer or during an extended offer payment period, whichever is longer. Extended offers were accepted prior to the 2012 revision of the Form 656.

If one taxpayer is noncompliant during the compliance period and the other compliant, only the noncompliant spouse will be in default. The account is split and the offer will remain in effect for the compliant taxpayer.

Tax examiners should first follow Default Procedures in IRM 5.19.7.14, OIC Potential Defaults, and correspond only with the noncompliant spouse.

When the noncompliance occurs during the 5-year monitoring (5M), all previously written off tax periods must be reversed and established as a separate MFT 31/65 account.

Before inputting any transactions to MFT 31 research IMFOL to ensure that the MFT 31/65 module(s) have posted with the correct entity.

When noncompliance occurs while extended offer payments are being made (usually beyond the 5-year compliance period).

A taxpayer who files a joint return with a spouse is generally jointly and severally liable for all tax due in that tax year. If a taxpayer believes they should not be required to pay the tax (including penalties and interest) for a tax year in which they filed a joint return, the taxpayer may be eligible for relief from joint and several liability.

Taxpayers generally request Innocent Spouse Relief via Form 8857. The taxpayer filing the Form 8857 is referred to as the requesting spouse or requesting taxpayer. The Form 8857 claim is referred to as an Innocent Spouse claim. Innocent Spouse will indicate on the account with a TC 971 AC 065 when request has been received.

When the spouse filing the Innocent Spouse claim is granted relief IRS may still collect the entire liability from the other spouse. Innocent spouse examiners generally set up an assessment on the other spouse separately via MFT 31. Related Examination paper work will be forwarded to the OIC monitoring unit.

Exam will forward Innocent Spouse determination letters to the back end OIC Unit when there is an unreversed TC 780 on the module. This determination letter should be held in the case file pending closure of the OIC case.

For information on the retention and disposition of the case file that contains original records, see Document 12990, IRS Records Control Schedules.

For instances where the OIC has been closed on MFT 30 (TC 788) prior to processing the innocent spouse claim, Innocent Spouse will issue the letter to the requesting spouse. A copy of the letter will not be sent to the OIC unit because the OIC taxpayer has complied with all terms of the offer and the liabilities have been compromised.

A master file account must be established for the co-obligor using current MFT 31/65 procedures. There may be special circumstances i.e. invalid TIN, requiring an NMF account be established.

If establishment of the co-obligor's account is pending on master file or NMF, prepare a Form 3244 to apply payments on a deferred NMF account.

TC 788 goes unpostable on MFT 31 accounts established from January 2001 through January 2005. The -Y freeze does not release and subsequent refunds due the taxpayer may be frozen.

Although TC 780 displays on IDRS TXMOD, it did not set on master file when the MFT 31 account was created. Without an established TC 780 on the account input of TC 788 goes unpostable.

To correct this condition re-input the OIC transactions using REQ77.

Verify that the module should be reversed. To reverse a mirrored module you must input the transactions on MFT 30 and wait until all transactions post before inputting transactions to MFT 31. When reversing any of these TC 971s, the TC 972 transaction date must be the same as the transaction date of the TC 971s being reversed. This includes any reversals for cross referenced TINS that might be required for the input. Verify all payments are applied and establish follow-ups to confirm the reversal posted to IDRS.

On the MFT 30 module input:

After verifying all required transactions listed above posted to the MFT 30 module, input the following transactions on the MFT 31 modules:

One or more of the following collateral agreements may be part of the OIC.

If the taxpayer has met 5-year compliance requirements and the only remaining terms being monitored are related to the collateral, a potential default will only occur if the collateral agreement is not adhered to.

Managers are required once a year to review all collateral offers that are over 5 years old to determine if all collateral terms have been met or are correctly listed as an open collateral.

The collateral agreement file is a part of the open offer file. Except for manually monitored offers, the original offer and collateral agreement file will be sent to FRC after a dummy file has been created.

Set up a collateral agreement dummy file with a copy of the collateral agreement, and the Form 2515, Record of Offer in Compromise.

For offers on AOIC take the following action:

Collateral dummy files are to be maintained at the campus until the offer is closed. When the offer is closed the file will be sent to FRC with a new accession number.

Future income collateral agreements for an individual or a business run for a specified period, beginning the year following the year the offer is accepted.

For each year of the collateral agreement, forty-five (45) days prior to the due date of the taxpayer’s annual income tax return, prepare and send a "collateral" package to the taxpayer. Include the following items in the package:

After compiling the collateral package take the following steps:

Form 2261-B, Collateral Agreement - Adjusted basis of Specific Assets, will be sent to Exam between ten and twelve weeks after the due date of the return, and the original case file if requested.

MOIC tax examiners should review the tax returns included on the Form 2261-C, Collateral Agreement - Waiver of Net Operating Losses, Capital Losses, and Unused Investment Credits, Unused AMT credit, and/or any "unexplained" credits to evaluate if the package should be sent to Exam for review. This review should occur no later than 10-12 weeks after the due date of the tax return or valid extended due date of the tax return. Command codes (CC) RTVUE will show the tax return information.

If the Form 1040 taxpayer does not claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / or an "unexplained" credit, accept as filed.

If the Form 1040 taxpayer does claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / "unexplained" credit, or an income tax return other than a Form 1040, forward the case to Exam for review, along with Form 2261-C, Collateral Agreement, and the original case file if requested.

If Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs them of potential default, and suspend case for 45 days from the date of letter.

MOIC processes basis and other collaterals per the terms and the years included on the collateral as indicated in the chart below:

The Campus Examination Function reviews the Collateral Agreements to determine if the terms of the agreement have been met. If during this review, Exam determines that an audit is warranted, they will request the original return from files, attach an explanation and forward the package to the Area Office.

Campus Exam will provide a response to all IMF referrals within 30 days and to all BMF within 45 days. If no response from Exam within the allotted time frame, send a reminder and wait an additional 5 days. If no response, elevate to MOIC manager for action.

If the terms of the Collateral Agreement are beyond Campus Exam's ability to validate, (e.g. sale of property, proceeds from a business) prepare a Form 2209 and route to appropriate FOIC office with copies of the acceptance letter, Form 656, and Form 2261. Suspend case for 60 days. If no response within the allotted time frame, send a reminder and wait an additional 15 days. If no response, elevate to MOIC Manager for action.

When the taxpayer dies during the monitoring of the terms of a collateral agreement, follow the procedures in IRM 5.19.7.4.7, Death of the Taxpayer While Monitoring the OIC.

Update AOIC history or Form 6313, as appropriate, showing the date of death.

When the above conditions have been met, update the AOIC status to 5M or 5B. AOIC will initiate several systemic uploads to IDRS:

Once the TC 604 posts, the module will update to Status 12 and prompt a systemic lien release if a lien is present.

Place a 45 day follow up on the offer. Tax Examiners are to verify that the systemic transactions took place. If in 45 days the systemic transactions cannot be found on IDRS, input manually and establish new follow ups to monitor for posting. Once the above transactions post, all AOIC and IDRS follow ups should be deleted if the offer is in 5M status.

If a lien release is required, it should systemically process within 45 days of updating the offer to 5M/5B status. If the lien has not been released by the expiration of the 45 day follow up, follow procedures in IRM 5.19.7.8.9.1 Automated Lien System (ALS) to manually release the lien.

Tax examiners will generate and send Letter 2908 using the appropriate paragraphs, if applicable, advising taxpayers that they have paid the offer amount of the OIC.

The 5-year monitoring period ends 5 years from the offer acceptance date. At the conclusion of the 5-year monitoring period, tax examiners must review the account for offers not closed by the RPA Aged 5M tool to confirm all offer compliance criteria were met prior to closing to “Closed” (CF) status. This includes all payments, verify 4710 deposit, and updating to the closing assignment number.

For NMF accounts on IDRS, prepare a separate Form 1331-B, Notice of Adjustment (Doc Code 54, for each tax period, to adjust tax, penalty and interest.

Include in Form 1331-B :

Request TC 291 and related TCs (271, 341, etc.) to remove the liability from NMF.

If the NMF account is in Status 53, prepare Form 3177 to reactivate the account; request input of TC 531.

Send Form 1331-B to the centralized NMF sites. Routing information can be found on SERP under Non-Masterfile Contacts.

Review your inventory weekly for missing or overdue OIC payments. Offers in ML and MP should be monitored by the RPA Payment Process tool and employees will address missing or overdue payments on these cases from the RPA reports. For payments due on offers in other statuses, generate the Journal Payment Due Date report through AOIC.

When you determine a payment is more than 30 days past due, research IDRS to look for the missing payment.

Process responses as follows:

If the taxpayer contacts MOIC during any suspense period and states they cannot pay, proceed with default actions. MOIC can accept a verbal statement and does not need to burden the taxpayer in providing a written statement. The TE must document the conversation and tell the taxpayer that due to their inability to pay the offer will be defaulted. In their conversation, they should also state that they are sending a default letter and if in the next 15 days their situation changes and they are able to pay they must call so that the default proceeding can be stopped.

A taxpayer may be granted one extension of time to make an offer payment, if the CSED will not expire before the payment is received. The extension can be no longer than 120 days. All regular offer payments must be made timely during this extended period. The extension to pay an offer payment can only be granted once within a 24 month period.

Offers with an extension to remit a missed offer payment must be monitored closely. If the terms of the extension are not met or another regular required offer payment is not received, follow procedures in IRM 5.19.7.15, Processing Defaulted OICs, or if applicable, send Form 2209 for DOJ offers.

If the missed payment is not received within 30 days of the extended payment date or a subsequent payment is more than 30 days late, take the following actions:

Do not grant an extension to pay a missed offer payment more than one time during a 24-month period.

Do not grant an extension on a BMF offer if the taxpayer hasn’t made sufficient Federal Tax Deposits (FTDs), refer to IRM 5.19.7.14.4.4, Failure to Adhere to Compliance Terms - BMF Federal Tax Deposit (FTD).

IRS is entitled to any overpayment of tax or other liability for the tax periods extending through the calendar year the offer is accepted for offers accepted prior to November 1, 2021. Certain exceptions apply to DATL, DOJ and ETA offers.

If an overpayment is mistakenly refunded, contact the taxpayer.

Process responses as follows:

Taxpayers agree, as a term of the offer, to comply with all provisions of the internal revenue laws, including requirements to timely file returns and timely pay taxes for the five year period beginning with the date of acceptance of this offer and ending through the fifth year, failure to do so is a breach of contract. This applies to both IMF and BMF tax accounts.

If the taxpayer has filed an extension or made an estimated tax payment without filing a return this demonstrates intent and for OIC purposes a return must be secured.

Non-compliance should be addressed timely and upon identification.