Purpose. This IRM section explains the closing procedures for acceptance, rejection, withdrawal, and default of non-Collection Due Process (CDP) Offer in Compromise (OIC) cases worked by Appeals. Closing procedures for OICs that are worked by Appeals in CDP are discussed in IRM 8.22.9, Closing and Post Closing Actions.

Audience. The primary users of this IRM section are Appeals Technical Employees (ATEs) who work OIC cases.

Policy Owner. Policy, Planning, Quality & Analysis is under the Director of Case and Operations Support.

Program Owner. Appeals Policy is the program office responsible for providing technical and procedural guidance to the Appeals Organization and is under the Director of Policy, Planning, Quality and Analysis.

Contact Information. Appeals employees should follow established procedures on How to Contact an Analyst. All other employees should contact the Product Content Owner provided on the Product Catalog Information page for this IRM.

When an ATE makes a decision on an OIC case, the basis of that decision must be adequately documented. The ATE must also prepare the appropriate closing documents in order to obtain the necessary approvals, meet statutory requirements, and produce an accurate and professional closing package. For non-CDP OIC cases, this section provides procedures for the ATE to close cases in acceptance, rejection, withdrawal and default situations. Back-end closing procedures for the Account and Processing Support (APS) are found in IRM 8.20.7.49, Offer in Compromise (OIC) Non-CDP Cases.

The Appeals Case Memorandum (ACM) contains the detailed basis of the ATE’s recommendation. The approving official relies significantly on the information in the ACM. In addition, just as the ATE must provide to the taxpayer an explanation of why the offer was not acceptable if recommending to sustain the rejection, the ATE must also provide an explanation to Compliance of why the decision to reject the offer was overturned or sustained. The ACM’s narrative may be brief or long, depending on the complexity of the case. The ACM should include all of the information that the ATE considered in making the case decision. If the offer was originally rejected as not in the best interest of the Government and the ATE’s determination is to overturn that decision, the ACM should include the specific reason for that determination.

The customized Form 5402, Appeals Case Transmittal and Case Memorandum, contains essential taxpayer identification information, resolution reason codes, case closing codes and case routing information.

APGolf generally contains the appropriate letters that notify the taxpayer of the ATE’s decision in the case. The Appeals Offer in Compromise Web Page contains other letters.

The Secretary has delegated to Appeals the independent authority to accept an OIC. See Delegation Order 5-1, which is found in IRM 1.2.2.6.1.1, Acceptance Authority.

A compromise is effective for the entire liability for tax, penalties, and interest (and lien fees) for the years or periods covered by the offer. An accepted OIC will conclusively settle all tax liabilities listed on the Form 656. Neither the taxpayer nor the government can re-open a compromised tax year or period unless there was a:

The IRS cannot compromise a tax liability listed in Form 656 after that tax liability has been referred to the Department of Justice (DOJ). Similarly, the IRS cannot compromise a DOJ settlement. The IRS, however, may compromise non-referral years. Acceptance of the offer may include a collateral agreement signed by the taxpayer acknowledging the offer will default due to failure of the taxpayer to comply with DOJ’s settlement terms for the periods not included in the offer.

An OIC accepted under Doubt as to Collectibility (DATC) or Effective Tax Administration (ETA) provisions must include all unpaid assessed tax liabilities for which the taxpayer is liable. The ATE may consider an offer that includes an unassessed liability, but the liability must be assessed before the offer can be accepted.

When the facts of the case do not support acceptance, the ATE should attempt to inform the taxpayer, prior to issuance of the rejection letter, of the decision to sustain the rejection of the offer. See IRM 8.23.3.2, Rejected Offers, for additional information.

Generally, the ATE will sustain a rejection only under the same basis for which the offer was rejected. Note the following exceptions:

If Collection rejected an offer submitted under Doubt as to Collectibility provisions on the basis that the taxpayer could pay more than the amount offered, and information provided by the taxpayer or the ATE’s analysis concludes otherwise, the ATE will not independently sustain the rejection or otherwise dispose of the case under any other basis such as Public Policy, Not in the Best Interest of the Government, or a finding that the submission of the offer was solely to delay collection.

If Collection rejected an offer submitted under Doubt as to Collectibility provisions on the basis that acceptance was not in the Best Interest of the Government, the ATE will sustain Collection's rejection when Appeals concurs that acceptance is not in the Best Interest of the Government or determines that the taxpayer can pay more than the offered amount. See IRM 5.8.7.7.1, Not in the Best Interest of the Government Rejection.

The ATE will sustain rejection of a Doubt as to Liability (DATL) offer when Appeals determines that the tax is correct as assessed or when Appeals agrees to make an adjustment to the tax but the taxpayer will not withdraw the offer. See IRM 8.23.3.9, Consideration of Doubt as to Liability (DATL) Offers, and its related subsections.

The Secretary has delegated to Appeals the independent authority to reject an OIC. See Delegation Order 5-1, which is found in IRM 1.2.2.6.1.2, Rejection Authority.

If sustaining the rejection of an offer, the ATE will communicate the reason(s) for the decision and discuss alternatives (such as installment agreements and Currently Not Collectible status, as applicable) that the taxpayer may pursue with Collection. Do not refer the taxpayer to COIC or field offices. The ATE should close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses), and www.irs.gov for Online Payment Agreement or other payment option.

The ATE will not make any Notice of Federal Tax Lien (NFTL) filing determinations. The ATE should inform the taxpayer verbally or in writing that Collection may file an NFTL after the case is closed. If the taxpayer indicates intent to file a Collection Appeal Request, refer them to the Collection employee who worked the initial case, and close the OIC case following normal procedures.

If the taxpayer submitted a deposit with the OIC, the deposit must be returned unless the taxpayer gave written authorization to apply it to the tax liability. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization may be used for this purpose. If applied to a tax liability, the deposit is credited as of the date it was received by the IRS.

If the case is a DATL offer involving a TFRP or personal liability for excise tax (PLET) liability and the ATE recommends making an adjustment to the liability, the ATE will prepare a Form 3870. APS will forward the Form 3870, along with any TFRP or PLET administrative files, to the appropriate Collection Advisory Unit. See IRM 8.23.3.9.10, Doubt as to Liability (DATL) - Resolution Options.

See IRM 8.23.4.3.2, Accepted Offer Closing Documents and Appeals Technical Employee Procedures, for instructions on destroying credit reports.

IRM 5.8.7.4, Withdrawal, contains information on withdrawn offers. There are two kinds of withdrawals:

A taxpayer may voluntarily withdraw an offer at any time after it is submitted, including while the case is in Appeals. A voluntary withdrawal may be made verbally or in writing, including by fax. Written withdrawals are encouraged. Form 14773, or Form 14773-A (for joint), Offer in Compromise Withdrawal, may be used to withdraw an offer. The letters must be modified with respect to the taxpayer waiving appeal rights. However, if a taxpayer or authorized representative provides a clear oral statement requesting withdrawal of the offer, the offer may be closed as withdrawn. Be sure to adequately document the case activity record of the taxpayer's or representative's withdrawal request.

If the taxpayer sends a written withdrawal by certified mail or hand-delivers the withdrawal, the offer is considered withdrawn as of the date Appeals received the withdrawal. Date stamp the withdrawal document with the received date, as that is the date on which the statutory period to collect the tax begins to run.

If the taxpayer verbally withdraws the offer or sends a written withdrawal by regular mail, fax or any method other than certified mail or hand-delivery, the offer will be considered withdrawn as of the date Appeals mails the Letter 241, Offer in Compromise Withdrawal, to the taxpayer.

When a joint offer is withdrawn, verify both spouses concur with the withdrawal. Refer to IRM 5.8.7.4.1.1, Voluntary Withdrawal of a Joint Offer.

Document the case activity record as to how the taxpayer made the withdrawal.

If an offer is withdrawn, either voluntarily or as an involuntary withdrawal, the ATE documents the reason(s) why and discuss alternatives (such as an installment agreement and Currently Not Collectible status, as applicable) that the taxpayer may pursue with Collection. Do not refer the taxpayer to COIC or field offices. Close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses), and www.irs.gov for Online Payment Agreement or other payment option.

If the taxpayer submitted a deposit with the offer, secure a Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization, to apply the deposit to a tax liability. If the taxpayer does not provide such written authorization, the deposit must be refunded.

The ATE will not make any NFTL filing determinations. The ATE should inform the taxpayer verbally or in writing that Collection may file an NFTL after the case is closed. If the taxpayer indicates intent to file a Collection Appeal Request, refer them to the Collection employee who worked the initial case, and close the OIC following normal procedures.

The offer may also be considered withdrawn under IRC 7122(c)(1)(B)(ii) if the taxpayer fails to make a proposed periodic installment payment. However, the taxpayer is not required to continue making proposed periodic installment payments on a Periodic Payment offer after such offer is rejected by Collection. For this reason, instances of involuntary withdrawal of a non-CDP offer should be uncommon.

Form 5402 for premature referral cases should be completed as follows:

Form 5402 should be uploaded to ACDS.

An attachment to 5402 or ACM is not necessary.

A potential default offer is loaded onto ACDS as an OIC case, using feature code “DO”. This includes potential default offers that are being considered as a modification of a compromise (previously referred to as “compromise of a compromise”), and the formal rescission of accepted offers. See IRM 8.23.3.12, Potential Default Offers, for general procedures on potential default cases.

Delegation Order 5-1 (Rev 4) found in IRM 1.2.2.6.1.4, Termination Authority, grants MOIC the authority to terminate an offer where the taxpayer defaults on the terms of the offer and fails to offer an alternative to the default.

If the taxpayer remains in filing and payment compliance but was unable to remedy the potential default issue (e.g., missed offer payments, non-compliance with a collateral agreement), the ATE may default the offer and recover the full liability, less any payments made, or accept the offer for amounts already paid under “modification of a compromise” procedures as discussed in IRM 8.23.3.13, Compromise of a Compromise. If the ATE decides to default the offer, the ATE will use Letter 5412, Appeals Offer in Compromise Default Letter. The letter must be signed by the Appeals official who accepted the offer or their successor. See the Delegation Orders at IRM 1.2.2.6.1.4, Termination Authority. Document the case activity record, input "DM" and "AC/FR" , and close the case using Closing Code 14. Close the Form 2209 back to MOIC advising that the offer was defaulted and attach a copy of the signed default letter. MOIC will then reinstate the compromised liability. Follow procedures in IRM 8.23.3.13, Compromise of a Compromise, if recommending acceptance of a modification of a compromise.

If the potential default case involves the death of a taxpayer, and following procedures in IRM 8.23.3.12, Potential Default Offers, it is determined that no estate exists, then the ATE should simply close the offer as satisfied following modification of a compromise procedures in IRM 8.23.3.13, Modification of a Compromise, and IRM 8.23.4.8, Modification of a Compromise, below. The ATE should document the case activity record, input DM and AC/FR, and use Closing Code 15. Send the Form 2209 back to MOIC advising that the offer should not be terminated.

When generating the Customized OIC Form 5402 for a potential default case, use the closing codes below. Also, use the most appropriate resolution reason code when generating the Form 5402.

Procedures for rescission of a previously accepted offer are found in IRM 5.8.9, Actions on Post-Accepted Offers, and IRM 8.23.3.14, Offer Rescission Considerations.

After making a decision on the potential default offer case, the ATE will return the Form 2209 and any closing documents to the appropriate MOIC site.

After following procedures in IRM 8.23.3.13, Modification of a Compromise, the ATE will close the case and send it back to MOIC using the process in this IRM and IRM 5.8.9.5.3, Processing Completed Investigations.

If the taxpayer is deceased, the ATE will verify the TC 540 was input to IDRS or request APS to manually input the TC 540 to IDRS.

If the ATE requests APS to manually input the TC540, the request should specify:

Return Form 2209 and all closing documents to the appropriate MOIC site, including:

If it has been more than one year since offer acceptance, the PIF of the modified offer is not uploaded to the SharePoint PIF. The ATE will document Form 5402 under Remarks instructing APS not to upload the SharePoint PIF of the modified offer.