Acceptance Processing

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Acceptance Processing

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5.8.8  Acceptance Processing

5.8.8.1  (11-15-2004)
Overview

  1. The determination to accept an offer in compromise is based on sound decisions relating to an analysis of the individual taxpayer's facts and circumstances and financial situation. Documentation supporting this decision and proper approval levels are required to complete the acceptance. This section describes the process for accepting an offer in compromise.

5.8.8.2  (11-15-2004)
Amending Form 656

  1. When an offer is being recommended for acceptance, the tax periods owing and/or payment terms may need to be adjusted. This will require the taxpayer to submit an amended Form 656 to reflect the new terms.
    1. Mark it "amended" in red on the top margin of page one.
    2. Input "A" (amended) on screen one of the AOIC record to reflect receipt of an amended offer, but do notchange the "offer pending date" .
    3. Add any new tax periods not included on the original Form 656 to the MFT screen. The date the IRS official signed the amended offer should be added to the MFT screen as the waiver date for the new periods only.
    4. Delete any tax periods found on the MFT screen that are no longer owing and/or are not included on the amended offer.
    5. Add the new terms for payment, if any, to the terms screen as the accepted terms.

     

5.8.8.3  (11-15-2004)
Closing a Case as an Acceptance

  1. Prior to preparing an acceptance report, IDRS command code " AMDIS" should be checked to ensure that no additional assessments are pending. If an open audit case is found contact should be made to resolve the issue per instructions in IRM 5.8.4. Tax must not be compromised unless it is assessed and legally due, therefore IDRS should also be checked to ensure that all tax included on the accepted offer has been properly assessed and is still due and owing.
  2. Before closing a case as an acceptance, document the case history on AOIC regarding the decision. Include any special instructions for the Monitoring Offer in Compromise (MOIC) Unit regarding application of funds or requesting a lien re-filing if one will be required during the terms of any deferred payment offer. See IRM 5.12 for more information about when a re-file may be required.
  3. Order a MFTRA-X as close to the acceptance date as possible without delaying acceptance. Sanitize the MFTRA-X to "black out" or redact all tax information that is not to be disclosed to the public as follows:

    Note:

    The AOIC download process may be used to generate and print a sanitized report, which may be used instead of the MFTRA-X.

     

    1. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise.
    2. Number of exemptions.
    3. Filing status.
    4. Adjusted gross income.
    5. Taxable income.
    6. Principal Industry Activity Code.
    7. Transaction Codes with neither debit or credit money amounts. The entire line including the date should be redacted.
    8. Transactions Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.
    9. Power of Attorney/Tax Information Authorization (POA/TIA) on file.

     

  4. Prepare an Acceptance Report. The Offer in Compromise Recommendation Report referenced in IRM 5.8.4 may be used for this purpose. The report should contain at a minimum:
    1. The taxpayer's personal information such as age, health, dependents, education and occupation.
    2. The cause of the delinquency and state of current compliance.
    3. The amount of reasonable collection potential (RCP) and an explanation of how the RCP was calculated. (The AET and IET contained in Section 5.8.4 will generally fulfill this requirement.)
    4. Whether or not special circumstances exist and how they affected the amount agreed upon.
    5. Negotiations resulting in the acceptable offer amount.
    6. A conclusion that summarizes the basis for acceptance.

     

  5. In the rare situation where relevant facts of a confidential nature exist that should not be included in the recommendation report, complete a supplemental memorandum for the record and include it in the case file. Do not include information already discussed in the offer recommendation report.
  6. Update the AOIC record as follows:
    1. Main Screen — Update to reflect the correct basis for compromise and if appropriate to indicate the existence of special circumstances. Update the disposition code to "1" (proposed acceptance).
    2. MFT Screen — Input the assessment date for each module. Press "I" to update interest to the current date using the INTST command.

      Note:

      If any modules have restricted penalty or interest, use IDRS command code COMPAD and/or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.

       

      Note:

      If any modules are Non-Master File and not on IDRS, secure an Automated Non-Master File (ANMF) transcript and update it as necessary using IDRS command code COMPAD and/or COMPAF.

       

    3. K-Data Request Screen — Do a re-request for an IDRS download on all applicable TINS to update the AOIC screens with the accruals to the current date. Once the screens are updated generate and print the Public Offer report to use in lieu of a MFTRA-X.

      Note:

      A MFTRA-X may be requested through IDRS instead of taking this step.

       

    4. Terms screen — Update the terms to those reflected on the offer that is being accepted ensuring that any collateral agreement(s) are referenced as necessary.

     

  7. Generate and print the Form 7249, Offer Acceptance Report, for the required signatures. The accepting official is the official that has delegated responsibility for accepting based on the type and dollar amount of the case. Delegation Order Number 11 provides the level of authority for approving all Offer in Compromise dispositions.
  8. Generate and print the appropriate acceptance letter for the signature of the delegated official. Attach copies of the accepted Form 656 and any applicable collateral agreement(s).
  9. Generate and print the Power of Attorney (POA) letter if there is an authorized representative.
  10. Assemble the file. The use of labeled dividers is required. Use Document 9600B.
  11. Submit the file for approval, routing to Counsel (if applicable), and signing of the letter(s).
  12. Upon approval and signature, date and mail the acceptance letter(s). Ensure that signed and dated copies are retained in the offer file.
  13. Make a copy of the Form 7249 and mail it together with the sanitized transcripts to the appropriate office for placing in the public offer file.
  14. Close the case on AOIC and process it per IRM 5.8.8.7.

5.8.8.4  (11-15-2004)
Acceptance Processing for Specific Types of Offers

  1. When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. Multiple files should be created containing the separate items that pertain to each offer. It is not necessary to duplicate the information that pertains to both files. The files should be clearly marked indicating that there are related offers, for example 1 of 2 and 2 of 2.
  2. When the accepted offer includes TFRP assessments a careful review must be made to ensure all TFRP assessments are included. Generally TFRP assessments made before August, 2000, will lump together all unpaid corporate tax quarters and be assessed under the tax period of the latest quarterly period owed by the corporation. Beginning in August, 2000, TFRP assessments are made for each quarterly period that was owed by the corporation. The Form 656 and the Form 7249 must match and must reflect each individually assessed TFRP tax period.
  3. Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility. The result of this consideration should be documented in the case file. Offer acceptances for employees of the Internal Revenue Service additionally require the approval of the Territory Manager or SB/SE Compliance Operations Manager.

    Note:

    Offers from Federal civil service retirees are to be considered under normal procedures.

     

5.8.8.5  (11-15-2004)
Legal Opinion of Counsel

  1. Counsel is required to review offers when the total liability for all related offers on the same taxpayer is $50,000 or more. The purpose of counsel's review is to determine whether the offer legally meets the standards of Doubt as to Liability (DATL), Doubt as to Collectibility (DATC) or the promotion of Effective Tax Administration (ETA). Counsel reviews the offer to ensure it meets the legal requirements for compromise and conforms to the Service′s policy and procedures.
  2. Counsel’s signature on the Form 7249 constitutes the legal opinion required by IRC 7122(b). By signing the form, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign the form, the case cannot be compromised unless any legal issues are resolved.
  3. Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. In some cases Counsel may determine that the compromise is legally permissible, but may raise concerns of a policy or other issues of a non-legal nature. In such cases, the Form 7249 will be signed and any other issues will be communicated by separate memorandum.
  4. It is not required that Counsel concur in the acceptance decision in order for a compromise to go forward. However, the accepting official will review and consider any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised, it is appropriate to document the case history indicating that the accepting official fully considered the issues before accepting the offer.

5.8.8.6  (11-15-2004)
Public Inspection File

  1. Public inspection of certain information regarding all offers in compromise accepted under Internal Revenue Code (IRC) Section 7122 and is authorized by IRC Section 6103(k)(1).
  2. A separate file of accepted Offer in Compromise records will be maintained for this purpose and made available to the public for a period of one year. The public inspection file will be maintained in a location designated by the Area office.
  3. For each accepted offer the file will only contain the following items:
    • A copy of the Form 7249, Offer Acceptance Report, and
    • The sanitized MFTRA-X or ANMF transcript.

     

  4. The office that has accepted the offer will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the public inspection file.

5.8.8.7  (11-15-2004)
Accepted Offer File Processing

  1. Once an offer has been closed on AOIC it should be held in-house until the following Monday. On Monday or as soon as practical thereafter, the offer should be released on AOIC and the entire file mailed to the proper Monitoring Offer in Compromise (MOIC) Unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC. If two related offers are accepted and one has a Business Operating Division (BOD) code of Small Business (SB) and the other is coded Wage & Investment (WI), change the BOD code on the WI offer on AOIC to match the BOD code of the SB offer before releasing it to the MOIC unit and ship both to the designated SB site.
  2. If the case is chosen for CQMS review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded. The following original documents should be sent to MOIC unit in a file folder clearly indicating that the remaining information mailed to CQMS.
    1. Original and amended Form 656, Offer in Compromise
    2. Form 7249, Offer Acceptance Report
    3. Copy of the Acceptance letter(s)
    4. Any collateral agreements

     

  3. Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact should be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing files.

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