Levy
Prohibited
 
The
Internal Revenue Code provides that the IRS cannot
levy assets or income when an Offer in Compromise is
"pending" before the IRS.
The word "pending" means - after
the Offer in Compromise (Form 656) has been accepted
by the IRS for "processing."
6331(k) NO LEVY
WHILE CERTAIN OFFERS PENDING OR INSTALLMENT
AGREEMENT PENDING OR IN EFFECT. --
6331(k)(1)
OFFER-IN-COMPROMISE PENDING. --No
levy may be made under subsection (a) on the
property or rights to property of any person with
respect to any unpaid tax --
SECTION
5. (Revenue Procedure 2003-71) WHEN AN OFFER BECOMES
PENDING AND RETURN OF OFFERS
.01
Section 6331(k)(1) generally prohibits the Service
from making a levy on a taxpayer's property or
rights to property while an offer to compromise a
liability is pending with the Service, for 30 days
after the rejection of an offer to compromise, or
while an appeal of a rejection is pending. The
statute of limitations on collection is suspended
while levy is prohibited. An offer to compromise
becomes pending when it is accepted for processing.
The Service accepts an offer to compromise for
processing when it determines that: the offer is
submitted on the proper version of Form 656 and Form
433-A or B, as appropriate; the taxpayer is not in
bankruptcy; the taxpayer has complied with all
filing and payment requirements listed in the
instructions to Form 656; the taxpayer has enclosed
the application fee, if required; and the offer
meets any other minimum requirements established by
the Service. A determination that the offer meets
these minimum requirements means that the offer is
processable.
.02
A determination is made to accept an offer to
compromise for processing when a Service official
with delegated authority to accept an offer for
processing signs the Form 656. The date the Service
official signs the Form 656 is recorded on the
Service's computers. As of this date, levy is
prohibited unless the Service determines that
collection of the liability is in jeopardy.
.03
If the Service determines that an offer to
compromise a liability does not meet the minimum
requirements the Service has established for a
processable offer, the offer to compromise is not
processable and may be returned to the taxpayer.
Because the offer to compromise was never accepted
for processing, it was never pending and levy was
never prohibited.
.04
If an offer to compromise accepted for processing
does not contain sufficient information to permit
the Service to evaluate whether the offer should be
accepted, the Service will request that the taxpayer
provide the needed additional information. These
requests for information are described in Section 6
below. If the taxpayer does not submit the
additional information that the Service has
requested within a reasonable time period after such
a request, the Service may return the offer to the
taxpayer. The Service also may return the offer
after it has been accepted for processing if:
(1)
The Service determines that the offer was submitted
solely to delay collection;
(2)
The taxpayer fails to file a return or pay a
liability;
(3)
The taxpayer files for bankruptcy;
(4)
The offer is no longer processable; or
(5)
The offer was accepted for processing in error.
When
an offer is returned under this Section 5.04, the
Service will not refund the application fee
submitted with the offer unless the offer was
accepted for processing in error.
.05
If a determination is made to return the offer to
compromise as described in Sections 5.03 and 5.04,
the return of the offer does not constitute a
rejection. The taxpayer is not entitled to appeal
the matter to Appeals under the provisions of §
301.7122-1(f)(5). If the Service initiates
collection action following a return of an offer to
compromise, the taxpayer may be able to appeal the
collection action under section 6320, section
6330, or under the Collection Appeals Program.
.06 An offer to compromise is considered to be returned
on the day the Service mails, or personally
delivers, a written letter to the taxpayer informing
the taxpayer of the decision to return the offer. An
offer returned following acceptance for processing
is deemed pending only for the period between the
date the offer is accepted for processing and the
date the offer is returned. The Service may levy to
collect the liability that was the subject of the
offer anytime after it returns the offer to the
taxpayer. |
