(212) 588-1113 FREE Consultation

470 Park Ave, Suite 5A, New York, NY



Offer in Compromise Rejections can be Appealed

The IRS Internal Revenue Manual (IRM) has special rules for appeals of an Offer in Compromise (OIC). The Appeal procedures are intended to be consistent with the procedures in the regular OIC rules considered by an IRS Offer Specialist who initially gets the Offer when it is received. All of those rules are relevant.

If an OIC is rejected, a taxpayer has 30 days to do the appeal. That is a “drop-dead” deadline. But Appeals will treat the post-make date as the date of receipts.

Appeals must have jurisdiction to hear an appeal, in the following circumstances:

Offers appealed after being rejected by Collection or Examination.

Offers submitted as an alternative to the proposed collection action in a CDP or equivalent hearing (EH) case before the CDP Notice of Determination or EH Decision Letter is issued.

Offers being evaluated by Collection when a Notice of Federal Tax Lien (NFTL) is filed and the taxpayer requests a CDP or equivalent hearing.

Appeals will not accept jurisdiction over an OIC if the IRS does not have the authority to determine the type of tax that is being compromised.

Appeals has no authority to compromise a liability after referral of that tax year to the Department of Justice (DOJ).

The Service will not consider an offer that is solely for a tax period or tax year that has not been assessed.

Absent special circumstances or effective tax administration conditions, an OIC will not be accepted if it is believed that the liability can be paid in full as a lump sum, or by installment payments extending through the remaining statutory period for collection, or other means of collection.

OIC cases are subject to ex parte provisions. .

IRM 5.8 is still the primary resource for OIC procedures.

The IRS Appeal Officer (AO) is requires to exercise independent judgment concerning the disputed valuations and business decisions made by the Offer Specialist. Also, the Appeal Officer must make independent determinations regarding offers based upon Doubt as to Liability OICs.

L:evies must be suspended when an OIC is pending in Appeals. IRC 6331(k) provides that no levy may be made during the period that the offer is pending, for an additional 30 days after the offer is rejected, and during the time any appeal of the rejection is pending. However, a continuous wage levy that attaches prior to the submission of an OIC may remain in place during the consideration of the OIC.

Treasury Regulation 301.7122-1(d)(2) states that an offer becomes “pending” once it is accepted for processing. T

Section 7122 of the Code states there must be an independent administrative review of any rejection of an OIC before such rejection is communicated to the taxpayer, and Treasury Regulation 301.7122-1(f)(1) provides that an offer in compromise has not been rejected until IRS issues a written notice to the taxpayer or his representative advising of: the rejection, the reasons for rejection, and The right to an appeal.

A taxpayer may administratively appeal the rejection of an offer to the IRS Office of Appeals if, within the 30-day period commencing the day after the date on the letter of rejection, the taxpayer requests such an administrative review.

The statute of limitations provides that the period of limitations to collect the tax under IRC 6502 shall be suspended for the period during which levy is prohibited.

The role and mission of Appeals is not different from that of Compliance. The Appeals Officer must employ Appeals' standard conference and settlement practices.

The objectives of an appeal is to provide the taxpayer with an opportunity for the conference.

The Appeals Officer must determine whether Compliance was correct in rejecting the taxpayer's offer by addressing the disputed issues that caused the offer to be rejected.

The Appeals Officer must provide a reasonable opportunity for the taxpayer to submit clarifying information or other documentation that the taxpayer believes is necessary to properly evaluate the offer and/or make the offer acceptable. The taxpayer will have the opportunity to clarify a position that is being advanced by the taxpayer.

Appeals will accept offers improperly rejected by Compliance.

Conduct conferences in an open atmosphere that fosters cooperation in the resolution of disputes.