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Part 8. Appeals

Chapter 23. Offers in Compromise

Section 2. Receipt and Control of Non-CDP Offers

8.23.2  Receipt and Control of Non-CDP Offers

8.23.2.1  (10-16-2007)
Receipt

  1. This section provides guidance for the receipt and control of non-CDP offers in compromise. There are a number of TIPRA issues impacting CDP offers that do not affect non-CDP offers, so a separate section containing procedures for CDP offers is in IRM 8.23.5, Collection Due Process OIC Procedures.

  2. Field Collection, Field Examination and the Centralized Offer in Compromise (COIC) sites forward taxpayer appeals of rejected offers. The campus Appeals offices in Brookhaven and Memphis work the bulk of the cases coming out of the COIC sites. Cases worked by field compliance offices, the most complex COIC offers, and cases where the taxpayer wants to meet with Appeals in person are generally assigned to the Appeals office that covers the taxpayer's location. Appeals Management will occasionally assign or re-assign cases to other areas as part of effectively managing inventory levels.

  3. The Appeals Team Manager or their designee will generally issue the Uniform Acknowledgement Letter 4141 to the taxpayer within 30 days from the date of receipt by Appeals. Enclose Publication 4227, Overview of Appeals Process, and Publication 4167, Appeals-Introduction to Alternative Dispute Resolution. The purpose of this acknowledgement letter is to:

    • Advise the taxpayer of receipt of the case in Appeals

    • Explain what the taxpayer can expect during the Appeals process, including their right to meet with an Appeals Officer or Settlement Officer (AO/SO) in person

    • Provide the contact person's name and telephone number

    Note:

    Appeals campus sites in Brookhaven and Memphis should not enclose Publication 4167 with the Letter 4141 because OICs considered at an Appeals campus site are not eligible for alternative dispute resolution processes.

  4. See IRM 8.23.6, OIC Processing and Closing Procedures, for initial case receipt guidance for Appeals Processing Section (APS) personnel.

8.23.2.2  (10-16-2007)
Assignment of OIC Case

  1. As previously indicated, Appeals receives rejected OIC cases from a variety of sources. Assignments should be based upon case complexity and the experience level of the employee. Appeals must also strive to accommodate a taxpayer's reasonable request for an in-person conference. Taxpayers should make clear their desire for an in-person hearing before substantive negotiations begin. If the complexity of a certain case extends beyond the technical skills available in a particular location, the case should be re-assigned.

  2. OICs rejected by a COIC site using "Obvious Full Pay" criteria will generally require less technical expertise. See IRM 8.23.3.9, Centralized Offer in Compromise and "Obvious Full Pay" Offers, for guidance on working these types of cases.

  3. OICs rejected by a COIC site but not based upon "Obvious Full Pay" criteria can generally be resolved through written or telephone contact. The Settlement Officer working these cases must be knowledgeable with this IRM text as well as with IRM 5.8, Offer in Compromise, IRM 5.15, Financial Analysis, IRM 5.14, Installment Agreements, IRM 5.16, Currently Not Collectible, and Collection's July 26, 2007 Replacement TIPRA Interim Guidance .

  4. OICs rejected by Collection Field OIC groups are generally more complex and require more detailed financial analysis skills, familiarity with asset valuation techniques, and sound negotiation and communication skills. Appeals and Settlement Officers working these more complex cases must be well versed in the aforementioned IRM sections and have an in-depth understanding of

    • the impact and priority of the federal tax lien,

    • the impact of state and local statutes on asset ownership, valuation and equities,

    • enforced collection actions such as levy and administrative seizure and sale,

    • judicial actions such as a suit to foreclose a federal tax lien or reduce a tax claim to a judgment, and

    • Trust Fund Recovery Penalty (TFRP) issues.

  5. OICs filed on the basis of Effective Tax Administration (ETA) or Doubt as to Collectibility with Special Circumstances (DCSC) require a level of experience commensurate with the facts of the case as described above.

8.23.2.2.1  (10-16-2007)
Transfer of OIC Cases

  1. If Appeals cannot resolve a case easily and it requires a face-to-face discussion, the case may be transferred to the Appeals office nearest to the taxpayer. To reduce the length of time a case is in Appeals, it's important to initiate the transfer of appropriate cases as quickly in the overall Appeals process as practical.

  2. Situations occur where a taxpayer will request to have a case transferred to the Appeals office closest to the taxpayer after engaging in substantive negotiations with Appeals. This often occurs when the taxpayer believes an adverse decision is likely or imminent. It's important to point out to the taxpayer in both the acknowledgement letter and initial substantive contact letter or during the initial telephone contact that he/she may ask meet with someone from Appeals in person, but that the decision to do so should be made before meaningful negotiations begin and must be made well in advance of an imminent decision. Appeals will not transfer a case simply because the taxpayer disagrees with its determination.

  3. Prior to transferring a case, conduct a preliminary review to avoid unnecessary delays. If the review shows that the taxpayer is not in compliance with filing or payment requirements or the entire liability is clearly collectible and the taxpayer presents no special circumstances, the offer may be rejected without transfer.

  4. If acceptance of the offer is possible and the Appeals office with the case cannot resolve it easily, transfer the case to the Appeals office nearest to the taxpayer.

  5. Upon completion of Appeals' action, return the entire case file to Appeals Processing Section.

8.23.2.3  (10-16-2007)
Initial Case Review

  1. This section provides procedures for preliminary case review to make sure the offer is ready for Appeals' consideration. If the offer was sent to Appeals prematurely, it must be returned to the referring office. Follow the procedures in IRM 8.23.3 after determining the case is ready for Appeals' consideration.

    Note:

    Premature referrals should be returned to the originating Compliance office within 45 days of Appeals' receipt of the case.

  2. Appeals must screen new OIC receipts to make sure the appeal was timely. As indicated in IRM 8.23.1.2(4), a taxpayer has 30 calendar days from the date of the rejection letter to request an administrative Appeals hearing.

  3. IRC 7502 and IRC 7503 apply to OIC appeals.

    1. Per IRC 7502, if the appeal is mailed within 30 calendar days after the date of Compliance's rejection letter, it is a timely appeal. It must be postmarked or mailed via certified or registered mail so that the mailing date can be proven. If the postmark is made by a non-U.S. Postal Service system such as a private postage meter stamp or a non-USPS carrier such as UPS or FedEx, Treasury Regulation 301.7502-1(b) provides that such postmark must be legible and dated on or before the due date and the appeal must be received not later than the time when a letter sent by the same class of mail would ordinarily have been received if it were sent from the same point of origin by the U.S. Post Office on the last day for timely mailing the appeal.

    2. Per IRC 7503, if the 30th day falls on a Saturday, Sunday, or legal holiday, a request for appeal is considered timely if mailed on the next business day.

    Note:

    IRC 7508and 7508A postpone certain time-sensitive acts when a person is serving in the armed forces in a combat zone, or there is a Presidentially declared disaster. Rev. Proc. 2005-27, 2005-20-IRB 1050 includes the 30-day period for appealing a rejection of an OIC as an act that may be postponed.

  4. If the appealed offer is based upon both Doubt as to Collectibility and Doubt as to Liability (a combination offer), the offer must be evaluated and rejected by both functions. If either Collection or Exam has not yet made a determination on the combination offer, it must be returned as a premature referral.

  5. If the case involves unpaid trust fund tax, the assessment statute expiration date(s) (ASED) is not suspended by the offer in compromise. Collection should have taken the necessary steps to protect the ASED(s) prior to sending the case to Appeals. See IRM 5.8.4.13.2 and IRM 5.8.4.13.3. If an ASED was not properly protected by Collection per IRM 5.8.4.13.2 or 5.8.4.13.3 and will expire within 12 months of the Appeals received date, the case should be returned as a premature referral.

  6. Collection often receives additional information as part of the taxpayer's appeal or protest letter. Before sending the case to Appeals, the originating Collection office should review the additional information and document such information's impact, if any, on its determination of reasonable collection potential (RCP). If Collection did not review the information received with the appeal, the offer may be returned to Collection so that the information may be considered. The determination to return the case to Collection to fully address issues raised by the taxpayer in the protest letter should be made within 45 days of Appeals' receipt of the case. If Collection still believes the offer should be rejected after considering the new information, the offer will be returned to Appeals along with documentation of Collection's findings and Appeals will continue to process the appeal.

  7. Initial case review may also show that Collection failed to comply with significant IRM requirements or that substantial additional information is necessary. Unlike the other premature referral issues detailed in this section, the decision to return a case as a premature referral in either of these instances is subjective and Collection may not necessarily agree with Appeals' decision. The feedback transmittal must clearly identify the IRM requirement that Collection failed to follow and/or the case development action needed.

  8. There are other issues that should be screened out before proceeding with case evaluation. These are rare, but if found, the case should be returned to Collection as a premature referral:

    • Taxpayer paid in full before direct or written contact was initiated by Appeals

    • Taxpayer submitted a claim for relief from joint and several liability (innocent spouse claim) as the requesting spouse and the claim was filed before the offer was rejected and the claim is still open. IRM 5.8.4.12.2 states that Collection should have suspended the offer pending disposition of the claim. If the claim was filed before the offer was rejected and is still open, the case may be returned to Collection as a premature referral.

      Note:

      See IRM 8.23.3.3.1.1 if a claim for relief from joint and several liability was filed after the offer was rejected and the taxpayer is either the requesting or the non-requesting spouse.

    • Taxpayer filed bankruptcy before the offer was rejected. Collection should have returned the offer without appeal rights per IRM 5.8.10.2.1. Return the offer to Collection as a premature referral.

    Note:

    The only premature referral issues identified above that cause jurisdictional problems for Appeals are if the taxpayer did not appeal timely or if the taxpayer filed bankruptcy before the offer was rejected. In those instances, Appeals has no jurisdictional basis to consider the offer. As a courtesy, if either of these issues are identified after 45 days has lapsed since the date Appeals received the case, either the AO/SO or the ATM should contact the Collection manager and explain why the case will be returned as a premature referral before sending it back. The other premature referral issues listed above do not cause jurisdictional problems for Appeals, so the cases should not be sent back as premature referrals if more than 45 days has lapsed since the date Appeals received the case.

  9. If it's determined that the case is ready for Appeals' consideration, send Letter 4141 if one was not previously sent and document such in the case activity record.

8.23.2.3.1  (10-16-2007)
Liability Previously Determined by Appeals

  1. When an OIC is based upon doubt as to liability and the liability was previously determined by Appeals, the offer will be assigned directly to Appeals for consideration. Appeals is responsible for:

    • Assembling the information and documents necessary to evaluate the offer

    • Determining the merits of the offer

    • Reaching a conclusion

    • Preparing the closing documents

  2. The taxpayer must offer some amount of consideration. An offer of $0.00 is an abatement request and not an offer. The offer would generally be the amount of the expected corrected liability, penalties and interest. The taxpayer is not required to pay an OIC application fee or make any sort of TIPRA payment if the sole basis of the offer is doubt as to liability.

  3. The Appeals Officer should negotiate a settlement in the same manner as in a proposed deficiency case.

    1. If an agreement is reached, the Appeals Officer will request that the taxpayer withdraw the offer and then process the necessary adjustment by completing Form 3870, Request for Adjustment.

    2. If the prior case disposition involved a Form 870-ADagreement, approval by either the Appeals Director of Field Operations or Appeals Director of Technical Services is required for re-opening. (See Policy Statement P-8-3 (formerly P-8-50), which is also IRM 1.2.17.1.3.)

    3. If an agreement is not reached or the taxpayer will not withdraw the offer, the Appeals Officer will act upon the offer based upon the settlement negotiations and recommend acceptance or rejection of the offer, as appropriate.

  4. Process the offer in accordance with IRM 8.23.6, OIC Processing and Closing Procedures.

8.23.2.4  (10-16-2007)
When Taxpayer Does Not Remain in Compliance

  1. One of the stated goals of the OIC program per Policy Statement P-5-100 (which is found in IRM 1.2.14.1.17) is that acceptance of an offer will create for the taxpayer an expectation of a fresh start toward compliance with all future filing and payment requirements. As additional consideration for an accepted offer based upon doubt as to collectibility, the taxpayer is required to timely file all federal returns and timely pay all tax when due for a period of five years after acceptance or until the offer amount is paid in full, whichever is longer. (See Section V of Form 656.) The prospect of this "fresh start" is eliminated when a taxpayer ceases being compliant with filing and/or payment requirements while the offer is being considered.

  2. If a taxpayer whose rejected offer is being considered by Appeals fails to timely file all required federal tax returns or pay current taxes, including required estimated tax payments and federal tax deposits, Appeals will contact the taxpayer and attempt to verify and remedy the problem.

  3. The noncompliant taxpayer must promptly resolve the issue(s) of noncompliance. Give the taxpayer a short time frame (no more than 21 days) to remedy the issue(s). It's critical in these instances for Appeals to provide the taxpayer with clear and specific instructions as to exactly what is required of the taxpayer, when such is due, and the consequence of Appeals sustaining rejection of the offer if the compliance issue is not promptly resolved. To enable Appeals to continue with consideration of the taxpayer's appeal, the noncompliant taxpayer must do all of the following:

    1. File all past-due returns or provide sufficient documentation to support a claim of having no filing requirement

    2. Pay all tax, penalties and interest due on any return that was filed after the offer was processed and not included by Collection as part of the offer. This includes the past due returns identified in a) above

    3. Make all required estimated tax payments or federal tax deposits by the established deadline or provide sufficient documentation to support claim of having no estimated tax requirement

  4. IRM 5.8.7provides instructions to Collection on when to return an offer based upon a taxpayer's noncompliance. Appeals cannot "return" an offer that's already been rejected by Collection, but the same criteria in IRM 5.8.7 may be used by Appeals as a basis to sustain Collection's rejection of the taxpayer's offer.

    Note:

    It is no longer a requirement for an In-Business Trust Fund (IBTF) taxpayer to be compliant with the prior two quarterly tax returns, or to have made timely deposits prior to submitting the offer. However, it is necessary for the IBTF taxpayer to be current with the quarter that the offer was submitted and remain in compliance with all filing and deposit requirements during the offer evaluation and appeal processes. Per IRM 5.8.4.13.1, an untimely tax deposit during the investigation will result in a return of the offer. To be consistent with Collection's procedures, an untimely tax deposit during the investigation will result in Appeals sustaining rejection of the offer.


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