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Offer in Compromise Additional Information:
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Processability | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| If responsibility lies with… | Then… |
| Department of Justice (DOJ) | Contact Area Counsel to determine the status of the pending bankruptcy or litigation and whether Collection has jurisdiction to process the offer. If the Department of Justice requests the offer be sent directly to them, delete the offer from the Automated Offer in Compromise (AOIC) system and forward the case to the DOJ. |
| Examination | Send the offer directly to the OIC Coordinator in Technical Support. No fee is required for these offers. Do not open a record on the Automated Offer in Compromise (AOIC) system. If the record was loaded to AOIC then delete the record. |
| Appeals | Determine processability, complete the Automated Offers in Compromise (AOIC) Appeals Fee Screen and follow current Appeals application fee procedures. |
5.8.3.3
(11-15-2004)
Combined Application Fee Payment Processing
- Multiple offers submitted with one remittance intended as the application fees for all will not be processed. Do not load the cases to the Automated Offers in Compromise (AOIC) system. Return the offers to the submitter (i.e.- Power of Attorney not the individuals) with the Letter 3796.
5.8.3.4
(11-15-2004)
Processability
-
Centralized Offers in
Compromise (COIC) Process Examiners (PE) are
responsible for determining processability of all
offers received and worked by the Service, except
those based solely on Doubt as to Liability (DATL)
issues. This determination must be made within 14
calendar days of receipt of an offer in compromise.
Each new receipt will fall into one of the following categories:- Not processable – the taxpayer does not meet one or more of the minimum established criteria for offer consideration.
- Processable– The taxpayer meets the minimum criteria for offer consideration.
5.8.3.4.1 (11-15-2004)
Determining Processability
-
An offer in compromise
will be deemed not processable if one or more of
the following criteria are present:
-
Taxpayer Not in
Compliance — All tax returns
for which the taxpayer has a filing
requirement must be filed. This rule
applies even if a Service employee
previously decided not to pursue the
filing of the return under the
provisions of Policy Statement P-5-133,
because it was believed to have "little
or no tax due" . In-business taxpayers
must have timely deposited, filed and
paid all required employment tax returns
for the two (2) preceding quarters prior
to filing the offer, and must be current
with federal tax deposits for the
quarter in which the offer was
submitted.
Note:
Generally speaking, IRM 5.1.11.1.3(2) only requires employees to conduct a compliance check, confirm and document all tax periods were filed for the preceding 6 year period. The only exception would be if fraud were discovered during the course of the investigation. Even then it should be extremely rare to go beyond 6 years.
IRM 5.1.11.4 discusses enforcement criteria, which states that if the taxpayer refuses to file, neglects to file, or indicates an inability to file, then the employees should determine to what extent enforcement should be used (e.g. summons, 6020(b), referral to Exam, or field, etc.). Filing requirements will normally be enforced for a 6 year period, which is calculated by starting with the tax year that is currently due, and going back 6 years. -
Taxpayer in
Bankruptcy — An offer will
not be considered during a bankruptcy
proceeding. See IRM 5.8.10.2.
Note:
IRM 25.17.4.7, Offers-in-Compromise and Bankruptcy (07-01-2002), states that "[t]oo many administrative and legal problems would be created if a tax liability was simultaneously the subject of a court-supervised bankruptcy case and the administrative offer-in-compromise process." Therefore, it is the policy of IRS that an offer will not be considered if a taxpayer is in bankruptcy.
- Taxpayer did not submit the offer on the current revision of Form 656 — The offer must be submitted on the most current revision of the Offer in Compromise Form 656. (See IRM 5.8.1.9)
- Taxpayer did not submit the most current revision of Forms 433-A and/or 433-B — The most current revision of the Collection Information Statement Forms 433-A and/or 433-B must be submitted with the offer.
- Taxpayer did not submit the application fee with the offer — The application fee of $150 or the signed Form 656-A, Income Certification for Offer in Compromise Application Fee, must be submitted with each Form 656 (Form 656-A applies to individual taxpayers only).
Note:
The application fee is not required if the offer is filed solely on the basis of Doubt as to Liability.
-
Taxpayer Not in
Compliance — All tax returns
for which the taxpayer has a filing
requirement must be filed. This rule
applies even if a Service employee
previously decided not to pursue the
filing of the return under the
provisions of Policy Statement P-5-133,
because it was believed to have "little
or no tax due" . In-business taxpayers
must have timely deposited, filed and
paid all required employment tax returns
for the two (2) preceding quarters prior
to filing the offer, and must be current
with federal tax deposits for the
quarter in which the offer was
submitted.
- No deviations from or additions to processability criteria may be made without written authorization from the Headquarters Office.
- An offer cannot be returned for the sole reason that the cost of an investigation may exceed the amount offered.
5.8.3.4.2 (11-15-2004)
Determining Processability for Appeals
Collection Due Process Offers
- Apply the same processability criteria as outlined in IRM 5.8.3.4.1 but do not load these offers on AOIC.
-
Appeals will provide
COIC with both processable and not processable
determination letter containing all necessary
information, including the Appeals contact
information. It is the responsibility of COIC to
sign, date and mail the applicable letter, based
on the processability determination.
If… Then… The offer is not processable and a remittance was attached Prepare the original letter and the Form 656 for mailing to the taxpayer in accordance with procedures in IRM 5.8.3.5.1(5). Fax a copy of the non-processable letter to the Appeals employee. The offer is not processable and no remittance was attached Prepare the original letter and the Form 656 for mailing to the taxpayer in accordance with procedures in IRM 5.8.3.5.1(5). If the offer is processable and a remittance is attached - Access the Appeals Fee Screen application of AOIC and input the fee data.
- Write the application fee serial number on the upper left corner of the remittance.
- Prepare the Form 13479 in accordance with IRM 5.8.3.5.1(3).
- Mail the original letter to the taxpayer.
- Send a copy of the letter and the offer package to the designated Appeals employee on a Form 3210.
If the offer is processable and no remittance is attached - Mail the original letter to the taxpayer.
- Send a copy of the letter and the offer package to the designated Appeals employee on Form 3210.
5.8.3.4.3 (11-15-2004)
Exception Processing for Offers in
Compromise Investigations Involving
Taxpayers in Combat Zones
- The following procedures are instructions on handling those taxpayers identified as being located in a "Combat Zone" (CZ) area. This determination should be based on correspondence, case history entries, or telephone contact. Relief provisions for extensions of deadlines are provided to taxpayers located in the designated CZ areas. The relief provisions are also applicable to any support personnel on official duty in the CZ, such as Merchant Marines, Department of Defense contractors, Red Cross, etc.
-
Offers that are
received and deemed not processable should be
worked following standard procedures. If any of
the following situations exist, exception
processing should be followed:
- Offers that are received and deemed processable;
- Offers in which a Combo Letter was issued and CZ notification is received after the letter was issued;
- Offers in which a determination has been made to accept, return, or reject the offer; or
- Offers in which a Return Letter or Rejection Letter was been issued prior to the CZ notification.
-
In all of the
situations identified in IRM 5.8.3.4.3(2) above,
the following actions should be taken:
- Prepare Form 3244 or Form 4844 requesting input of Transaction Code (TC) 500 Closing Code (cc) 56 on the taxpayer's account. Use the current date for the incoming call or the IRS received date for the correspondence. The case should be suspended for 120 calendar days without taking any further action and should be reassigned on the Automated Offers in Compromise (AOIC) system to a designated or locally designated assignment number. Management should utilize the AOIC Follow-up Screen to monitor the progress on the case until the TC 500 is reversed.
- The offer investigation may continue if there is a Power of Attorney or in the case of a joint offer, the spouse is able and willing to provide all substantiation.
- The Service established an E-mail site for military personnel, support personnel and their families may use to contact the IRS. It is combatzone@irs.gov.
5.8.3.5
(11-15-2004)
Processing Application Fees
-
The following situations
assume that the taxpayer has met the processability
criteria for compliance and the current revisions of
Form 656 and 433-A and/or B were submitted:
If you receive a… Then… Processable Form 656 and the $150 application fee Complete the AOIC Application Fee screen and Form 13479. Processable Form 656 with a signed Form 656-A certification (instead of the $150 fee) Complete the AOIC Application Fee screen and input " LI" in the "Waiver Criteria" field. Processable Form 656 from an individual taxpayer with both a $150 application fee and a signed Form 656-A certification Complete the AOIC "Application Fee" screen and the Form 13479 to treat the $150 as the application fee. DATL only offer for a TFRP only liability with a separate application fee Return the $150 fee using combo letter "A" and optional combo letter paragraph "AM" that was created to address this situation. DATL only offer for a TFRP only liability with a single remittance that represents both an application fee and a deposit Apply the entire amount as a deposit to the offer. Processable offer and one undesignated remittance greater than the $150 and there was no indication how to apply the funds. (i.e., TP did not specify where the money was to be applied). Treat $150 of the remittance as the application fee and apply the balance as a deposit to the offer.
5.8.3.5.1 (11-15-2004)
Completing the Form 13479
- Offers with remittances will be batched with the Form 13479 for processability determinations. Each separate remittance will appear on its own line of the Form 13479. Offers submitted with separate remittances for the application fee and a deposit will have entries on two lines while an offer submitted with a single remittance that combines the application fee and deposit will have only one entry. Batch integrity must be maintained throughout the processability determination. Those with deposits and/or tax payments must have a processability determinations made and the remittance deposited within 48 hours of the IRS receipt date (unless "misdirected" ). Those offers received with application fees only must be determined and, if processable, the deposit must be made within 14 calendar days of the IRS receipt date. Upon assignment to the Process Examiner (PE), the manager will ensure that the " PE Received Date" and "PE COIC #" fields on the Form 13479 are completed.
- The last 4 columns ( "Deposit 4710/3244 Amt." , "Application Fee Amt." , "Return Negotiable" , "Return Non-Negotiable" ) of the Form 13479 are used to document the decision to process or return the remittance.
-
Form 13479 should be
completed as follows (see Exhibit 5.8.3-4):
If Processable, and… Then… An Application Fee was submitted Enter $150 in the "Application Fee Amt." column. An offer deposit was submitted Enter the amount of the deposit in the "Deposit 4710/3244 Amt" column and prepare the Form 2515. A tax payment (e.g., installment agreement (IA) payment, estimated tax (ES) payment) was submitted Prepare the Form 3244 for the amount and application of the payment and enter the amount in the "Deposit 4710/3244 Amt." column. - If the offer has one combined remittance for any combination of the above three payments put the appropriate amounts in the respective columns and ensure the amounts entered equal the "Check Amount" column.
-
If the offer is not
processable take one of the following actions
based on the type of remittance received:
If Not Processable, and… Prepare the offer package to be returned and… There is an application fee or deposit to be returned to the taxpayer with the Not Processable return letter - Date and sign the return letter,
- Put the offer package and the letter in an addressed envelope to be returned to taxpayer. Do not seal the envelope.
-
Close the offer with a
disposition code "10" on
AOIC.
Note:
This procedure does not apply to Appeals Collection Due Process (CDP) offers.
- Annotate the amount of the remittance under the "Return Negotiable " or "Return Non-Negotiable" column, as appropriate, to indicate that the remittance is to be sent back to the taxpayer.
A separate tax payment (e.g., IA, ES payment) was submitted - Prepare the Form 3244 for the amount and application of the payment,
- Enter the amount of the payment in the "Deposit 4710/3244 Amt." column.
One remittance was submitted that combined any tax payment (e.g., IA or ES payment) with an application fee or deposit amount - Apply the entire remittance as the tax payment by preparing a Form 3244 and enter that amount in the "Deposit 4710/3244 Amt." column.
- The processability determination of all offers listed on the Form 13479 must be completed before it can be returned to Receipt and Control for processing of remittances. When all the determinations have been made and the Form 13479 is complete, send the original with all Forms 2515, 3244, letters and envelopes to Receipt & Control for processing of the checks. Receipt and Control will be responsible for returning all "negotiable" remittances back to the taxpayer in accordance with Receipt and Control procedures. Personal checks will be stamped non-negotiable and enclosed in the return offer package to the taxpayer.
5.8.3.6 (11-15-2004)
Dishonored Application Fee Payments
- Accounting Branch will hand carry or fax copies of dishonored application fee checks to the COIC site that originated the Form 13479. Upon notification of a dishonored application fee payment the site will determine the current AOIC offer assignment by querying the offer number annotated on the upper left hand corner of the check (for Appeals Collection Due Process offers - see IRM 5.8.3.6.1(3)). AOIC is programmed to allow only the assigned office access to the "Action Cd" field of the " Application Fee" screen to input the dishonored check status.
5.8.3.6.1 (11-15-2004)
COIC Procedures
- If the offer is still assigned to a COIC site, COIC will immediately cease processing the associated offer, update the AOIC "Application Fee" screen by entering "I" in the " Action Cd" field and return it to the taxpayer, utilizing letter option "RET-AA" .
- If the offer was transferred to an area office, COIC will telephone the employee assigned the offer (or the manager of the assigned function, if no individual is specified on AOIC) to advise of the dishonored payment. Once contact is made with the assigned area office employee or manager, COIC will fax a copy of the dishonored check to include in the case file and update the AOIC history to indicate the information was communicated and to whom.
-
If the case was
processed as an Appeals Collection Due Process (CDP)
offer COIC should query the Appeals Centralized
Database System (ACDS) to determine which
Appeals employee is assigned the case. COIC will
telephone the Appeals employee to advise of the
dishonored check and fax a copy to include in
the case file.
Note:
Appeals Collection due Process (CDP) cases can be identified by the application fee number annotated on the upper left corner of the check.
5.8.3.6.2 (11-15-2004)
Area Office Procedures
-
Upon notification by
COIC of a dishonored fee payment, the Offer
Specialist (OS) (or manager of the assignment
function, if the offer is not assigned to an
individual) will immediately:
- Cease processing of the associated offer.
- Update the AOIC Application Fee screen by entering "I" in the "Action Cd" field
- Return the offer to the taxpayer utilizing letter option " RET-AA" .
5.8.3.7
(11-15-2004)
Forms 656 Application Fee Requirements and
Perfection
-
Treasury Regulations
§300.3 require taxpayers to submit one fee for each
Form 656 received. The following scenarios assume
all processability criteria, other than for the
application fee, are met. The table below is
intended to assist in identifying a processable
offer for application fee purposes and provide
guidance to advise the taxpayer when more than one
Form 656 and application fee (or Form 656-A) should
be submitted. In the following scenarios the status
of the taxpayer is not relevant (e.g. married,
separated or divorced), the general rule is there
should only be as many Forms 656 as there are
entities seeking to compromise.
Scenario Procedures 1) Two TPs have joint liabilities only. The TPs jointly submit one Form 656 and one $150 application fee. One offer was submitted therefore one fee is required. 2) Two TPs have joint liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Two offers were submitted therefore two fees are required. Note:
The Process Examiner (PE) must secure a copy of the remittance to make the appropriate determination.
- If it can be determined which TP paid the application fee (i.e., a personal check drawn on the account of one of the taxpayers), the offer from the TP that paid the fee is processable. The second offer should be returned as not processable because the TP did not submit the required processing fee.
- If each TP contributed a portion of the $150 fee (e.g., each submitted a personal check for $75), then neither TP has paid the appropriate fee and both offers should be returned as not processable.
- If it cannot be determined which TP paid the application fee treat it as though half were submitted by each individual. Return both offers as not processable, enclose the fee payment with the not processable return letter addressing it to the party with the primary SSN on the liability.
3) Two TPs have separate liabilities only. The TPs submit two Forms 656 but only one $150 application fee without a signed Form 656-A. Same as Scenario 2 4) Two TPs have joint liabilities and one or both of the TPs also have separate liabilities. The TPs submit one Form 656 listing both the joint and separate liabilities and only one $150 application fee without a signed Form 656-A. Although it is the policy of the Service to require separate offers when TPs have both joint and separate liabilities, the offer submitted in this scenario is processable. However, the Service can require the TP to perfect the original offer by submitting a new offer to separate the liabilities. In this instance, the new offer will require a second fee. When requesting the perfection of an offer that requires the submission of a second offer, send the TPs two Forms 656: If the TPs refuse to perfect the offer, the Service will return the offer without any further consideration.- Prepare an "amended/revised" Form 656 by completing items 1 through 5 with the entity and tax liability information of the individual with the primary SSN on the joint liability. Include both joint and separate liabilities, if any, in item 5. Note the original offer number on the top of the "Amended/Revised" Form 656.
-
Prepare a second Form 656 by
completing items 1 through 5
with the entity and tax
liability information of the
individual with the
secondary SSN on the joint
liability. Include both
joint and separate
liabilities, if any, in item
5. Annotate the top of this
Form 656 in red "Related to
Offer Number____________" ,
inserting the number of the
original offer. This will
help identify that the offer
submitted is in response to
a perfection request.
Note:
Clerical units should be aware that new offers received in the PO Box designated for response correspondence must keep all correspondence and attachments associated with the offer to assist in the identification of the related offer.
- Include Option "Y" in the combo letter:
- Include Form 656-A and a photocopy of the original Form 656 with the combo letter
5) One Form 656 is submitted that includes both corporation or partnership and individual liabilities, but only one $150 application fee without a signed Form 656-A for the individual. Follow the procedures outlined in Scenario 4 above.
5.8.3.8
(11-15-2004)
Centralized Offers in Compromise (COIC)
Processability Determinations
-
COIC sites determine offer
processability. To accomplish this Process Examiners
(PE) must take the following actions:
- Check IDRS to determine if the taxpayer is currently in compliance or is in bankruptcy.• This includes checking all SSNs and EINs known or found for the taxpayer. At a minimum check the following IDRS command codes: ENMOD, INOLES, CFINK, BMFOLI, SUMRY, IMFOLI. If any data is found, print and include it in the file. Also, research IDRS command codes TXMOD and FFINQ for additional data, but it is not necessary to include printed copies in the file.• Research the Master File to determine if the taxpayer has any unfiled tax returns. Review the offer package to determine if documentation submitted by the taxpayer or another Service employee indicates that the taxpayer has recently filed or was not required to file any delinquent returns. A delinquency check notification or taxpayer delinquency investigation (TDI) does not have to exist to determine if a taxpayer has unfiled delinquent returns. If a delinquent return was recently filed and has not yet posted to IDRS, a copy of the return is sufficient verification of compliance
- Check for any freeze codes such as: -Y, -W, -Z, -A, -V, -L that may require special action. Refer to local guidelines.
- Verify that the taxpayer has submitted the current revision of Form 656 and 433-A and/or 433-B.
- Verify that the taxpayer has submitted the application fee (or signed Form 656-A certification) for each offer submitted.
- Review AOIC and the history for any previous offers to determine if the offer was submitted "solely to delay collection." See IRM 5.8.3.19.
5.8.3.9
(11-15-2004)
Not Processable
- When returning the offer as not processable, the return letter will specify all reasons for the determination.
-
If the offer is not
processable:
- Stamp the Form 656 "RETURN" in red and write the date that the offer was determined to be not processable.
- Cross out all IRS received dates with a red "X."
- Prepare the return letter with all applicable reason code paragraphs.
- In addition to identifying all of the reasons for the determination. If appropriate, also address the issue of the combined joint and separate liabilities; such as, the individual and corporate or partnership liabilities on one Form 656. In those cases, include Option "Y" in the return letter.
- Complete the Form 13479, if applicable.
- Update the history specifying the reason(s) for the not processable determination. Do not sign the From 656 as pending. Update AOIC "Proc Cd" field to "N" (not processable).
- Managers and journey level Process Examiners (PE) may sign and date the letter and close the case on AOIC.
- Send the Form 656, the Return letter, Publication 1 and Publication 594 to the taxpayer along with all other documents originally sent. If a Power of Attorney (POA) is present send the representative a copy of the letter. If disclosure issues exist, use the appropriate paragraph to indicate this in the return letter, and do not send a copy to the representative.
- If a Form 656 was forwarded by a Revenue Officer and is not processable, the COIC site will also send the Form 657 and a copy of the " not processable" letter to the approving official of the Form 657.
- Caution should be exercised to ensure that no IDRS prints or other internally generated documents are sent to either the taxpayer or the POA. All internal documents should be destroyed. Nothing is required to be maintained in local closed files on these cases.
- If the offer was originally determined processable and the application fee was deposited, but it was later concluded that this determination was made in error, processing should stop. The case should be closed using not processable procedures defined above. It is important in these cases to ensure the "N" (not processable) is input on AOIC to reverse the TC 480(s). This will result in the generation of a TC 483 posting to the appropriate modules, and a refund of the $150 application fee.
5.8.3.10
(11-15-2004)
Processable
- An offer is considered pending when a delegated IRS official signs and dates the Form 656 in the appropriate section. This date is the official offer pending date. The pending date entered on AOIC must match the date the delegated official signed the Form 656 and will be the transaction code (TC) 480 date when it posts to IDRS.
-
If the offer is
processable:
- Sign and date the waiver on Form 656 (item 11).
- Change the "Proc Cd" to a "Y" (processable).
- Complete the AOIC Application Fee Screen.
- Complete the MFT and "Terms" screen on AOIC. If tax periods are in status 60, 61, or 53 remove the "Y" on each tax period on the MFT screen. DO NOT change the status of those accounts.
- On all IMF cases enter "P" if the offer is for the primary taxpayer (controlling TIN on the entity), enter "S" if the offer is for the secondary taxpayer , enter "B" if both husband and wife are making a joint offer. If only one party of a joint liability is submitting the offer, remove the "Y" from the MFT screen. This will take the case out of 71 Status.
-
Communication with the
taxpayer and/or authorized representative may be
necessary to perfect the offer while it is pending.
Communication with the taxpayer may be completed by
letter or personal contact.
If processable and… Then… The offer requires perfection due to an insufficient number of Forms 656 and application fees Except for examples in IRM 5.8.3.7, send the combo letter to request: - Correct number of Forms 656 and fees (Option "Y" perfection),
- Any required financial substantiation,
- Any additional Form 656 perfection.
- Assign to "5100"
The offer doesnot need Option " Y" perfection and falls into the category for direct field transfer (see IRM 5.8.2.2). Reassign on AOIC to appropriate area office. The offer does not need Option " Y" perfection and qualifies under the "Screen For Obvious Full Pay" procedures. Process under "Screen For Obvious Full Pay" Procedures. The offer does notneed Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures, but all required financial substantiation is not attached or needs Form 656 perfection before beginning the investigation. - Send the combo letter to address all perfection issues and request the required substantiation.
- Assign to "5100"
The offer does not need Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures and has attached all required substantiation except for proof of payment of certain expenses, current real estate, or motor vehicle loan balances. - Send the combo letter to request substantiation and Form 656 perfection, if any,
- Check internal verification sources,
- Assign to:• "5300" if the offer will be investigated in COIC.
- "5350" if offer will be investigated in the field.
The offer does not need Option " Y" perfection and does not qualify under "Screen For Obvious Full Pay" procedures and is a total submission. - Send the combo letter, Option "A."
- Check internal verification sources.
- Assign to "6000" , if offer is to be investigated in COIC, or
- Assign to the appropriate Area office if the case is to be worked by the field after case building (see IRM 5.8.2.2)
- If an offer was submitted by an Revenue Officer (RO) and it is processable, but the RO has determined that the offer was submitted to " solely delay collection" , the COIC site will contact the originating RO to advise that the return letter has been issued. Unless a jeopardy situation exists, the RO must wait for COIC notification that the "return " letter has been issued before taking any collection enforcement action. See IRM 5.8.3.19 for delegated approval authority.
- COIC will request Transaction Code (TC) 480 and Status 71 through the AOIC system. However, there may be situations when the Status 71 will not generate (e.g. MFT 31 cases, imminent statute, etc.). In those cases, the field Offer Specialist may request input of the TC 470 with Closing Code 90 to suspend collection activity.
5.8.3.11
(11-15-2004)
Types of Perfection
-
Certain critical
perfection errors must be corrected before beginning
the offer investigation. The combo letter on AOIC is
designed to communicate with the taxpayer and their
representative to request the necessary corrective
action. If there is no response to the request
letter, return the offer to the taxpayer as not
perfected. A return for failure to perfect an offer
does not require a Form 1271. The taxpayer has no
appeal rights when the offer is closed as a return.
The following errors must be corrected before
beginning the investigation:
- The taxpayer's name, physical address or taxpayer identification number (TIN) is missing or incorrect and cannot be determined from IDRS or other documents submitted with the offer.
- The offered amount is blank or zero.
- No tax liability has been assessed or pending and the amount(s) can not be determined.
- Insufficient number of Forms 656 and application fees submitted.
-
When sending a combo
letter to perfect the errors listed in (1) above or
to request financial substantiation, include a
request to correct the following errors.
Note:
If acceptance of the offer is considered and a combo letter was not sent but the errors listed below exist, they must be corrected prior to the recommendation to accept the offer.
- The Form 656 is not a verbatim duplicate. Such as, preprinted terms of the Form 656 are altered, deleted or missing.
- An amount of money is offered, but the payment terms are not specified.
- The taxpayer(s) or the taxpayer representative signature is missing on Form 656.
- Form 433–A or 433–B is incomplete.
- Preprinted terms of the Form 656 have been altered, deleted or are missing.
- The taxpayer has included a period(s) for which no amount is due.
-
If a period with an amount
due is missing from the Form 656, but all periods
due can be determine from IDRS or other documents
submitted with the offer, add the missing period(s)
to the AOIC MFT screen. Do not add the missing
period(s) to the Form 656 unless contact is made
with the taxpayer.
When a taxpayer has included a period(s) for which there is no apparent amount due, do not add the period(s) to the Form 656. Contact the taxpayer to determine if any issues are pending that may result in additional tax. If there is no tax due after contact with the taxpayer, document the history and do not add the period(s).Note:
Contact may be made by telephone or by sending the AOIC combo letter requesting the inclusion of the missing period(s) or the deletion of the no tax due period(s) on the amended Form 656. If the taxpayer agrees to the addition of the missing period(s) or the deletion of the no tax due period(s), the history must document the method of agreement by the taxpayer.
- If the taxpayer's name, physical address or TIN is missing or incorrect and the correct information can be located on IDRS or other documents submitted with the offer, input the correct information on AOIC.
- If the basis for compromise is not indicated, but it can be determined by reviewing the package, begin the investigation.
- The offer cannot be accepted unless an amended Form 656 is signed, correcting all errors listed in (1) and (2) above.
5.8.3.12
(11-15-2004)
Screen For Obvious Full Pay Processing
- Taxpayers may submit an offer to compromise the liabilities based on Doubt as to Collectibility, yet indicate on their application an ability to pay the account in full. These cases, once determined to be processable, will be screened out. Absent any special circumstances they will be rejected with no further investigation or verification. The taxpayer will be directed toward the appropriate resolution for the delinquency. The rejection letter will be the first communication with the taxpayer. A decision to reject with appeals rights is adequately justified by the taxpayer's self-disclosed ability to pay in full.
-
For processable offers one
of the first considerations is to determine if the
taxpayer can pay in full. The following initial
review should be conducted on all processable offers
to make that determination.
- Complete the Full Pay worksheet using the taxpayer's figures only, as reflected on the CIS.
- Do not adjust any asset values or apply necessary expense standards.
- If the amount shown by the taxpayer on the CIS reflect that the taxpayer can fully pay the tax due via either liquidation of assets or on installment agreement, assign the offer to AOIC designation "6900."
5.8.3.13
(11-15-2004)
Centralized Offer in Compromise (COIC) Case
Building and Perfection Procedures
-
For all processable offers
not directly transferred to an Area office or for
those qualifying under the "Screen for Obvious Full
Pay " procedures, the Collection Information
Statement (CIS) should be reviewed to verify the
taxpayer has submitted all supporting documents.
- Prepare the combo letter using the paragraphs that address the missing substantiation or incomplete documents as well as any Form 656 perfection issues. Include Publications 1 and 594. Document the AOIC history to summarize the required substantiation submitted with the offer as well as all perfection issues.
- A copy of the signed letter must be retained in the file.
- Mail the letter to the taxpayer and representative, if applicable. If a disclosure issue exists, use the appropriate paragraph to indicate this in the combo letter, and do not send a copy to the representative.
- Envelopes containing combo letters including Options B, C or D must be stamped or otherwise marked "URGENT - TIME SENSITIVE" and include Notice 1326.
- Document the mailing date of the letter and a follow up date on AOIC.
- Assign the offer to AOIC designation 5100, 5300 or 5350, as identified in IRM 5.8.3.10(3).
Note:
All combo letters will be postdated 5 calendar days. Schedule follow up for the 45th day after the date of the letter. Therefore, at least 50 calendar days (5 postdate plus 45 calendar days from the date of the letter) would have elapsed before following up.
-
Analysis of the
information provided on the CIS should be made prior
to issuing a document request or combo letter. The
letter(s) should only request information necessary
to make a reasonable collection decision.
- If claimed on the CIS and substantiation was not included, supporting documentation will be requested for:
• Income statements for the last three months (a current year-to-date statement is acceptable as long as it represents at least three months). Also request substantiation for three months of income statements for any not liable person in order to determine taxpayers share of living expenses, if applicable. See IRM 5.8.5.5.3 for additional information on the treatment of shared expenses.
• Bank statements for the last three months.
• The current available cash value or loan value of 401(k), profit sharing or other retirement plans and the current balance due on any existing loans.
• Current balance due on motor vehicle loans.
• Current balance due on real estate mortgages.
• Health insurance and out of pocket cost for the last three months (refer to LEM 5.3)
• Court orders and proof of payment for the last three months.
• Child and dependent care for the last three months.
• Other secured debt statements for the last three months.
• Life insurance premiums for the last three months.
5.8.3.14
(11-15-2004)
Centralized Offer in Compromise (COIC) Internal
Verification Research
- Prior to assigning the offer for investigation internal sources must be searched.
- Conduct research using IDRS, the electronic locator source, state motor vehicle records and inhouse real property valuation sources, to verify claimed amounts and to identify undisclosed assets or sources of income.
- Only secure motor vehicle valuations from a trade association guide on vehicle(s) that are three years old or newer and have no lien (e.g. When considering an offer in the year 2004, a 2001 model year is three years old or newer).
5.8.3.15
(11-15-2004)
Processing Taxpayer Responses to Combo Letters
- Update the AOIC history to annotate the information/documents received and sign any amended/revised Forms 656 with the current date.
-
If the determination is
made to return the offer for failure to provide
information in the combo letter, use the appropriate
paragraph(s) in the AOIC return letter.
- Retain a copy of the original and any amended Forms 656 and the return letter in the file.
- Cross out all IRS received dates with a red "X" . Stamp the Form 656 with "RETURN" and add the current date.
- Update the case history on AOIC including the reason for return and enclose a copy of the history in the file and give the file to the manager for approval.
If… Then… The offer is assigned to "5100" , no taxpayer response and follow-up date passes Invoke the "No Reply" procedures. The offer is assigned to "5100" and taxpayer responds