:: Part 5. Collecting Process
Chapter 8. Offer in Compromise
Section 1. Overview
5.8.1 Overview
5.8.1.1 Introduction
5.8.1.2 Functional Responsibilities
5.8.1.3 Examination Function
5.8.1.4 Appeals
5.8.1.5 Counsel
5.8.1.6 Taxpayer Advocate Service
5.8.1.7 Liabilities to be Compromised
5.8.1.8 Application Fee
5.8.1.9 Form 656, Offer in Compromise
5.8.1.10 Interest on the Compromise Amount
5.8.1.11 Effect of Previous Offers on Collection Statute
Exhibit 5.8.1-1 Common Abbreviations Used in the IRM
5.8.2 Offer Receipts
5.8.2.1 Overview
5.8.2.2 Initial Receipt of Offers
5.8.2.3 Form 656, Offer in Compromise
5.8.2.4 Signatures
5.8.2.5 Initial Processing of Offers in Centralized Offers in Compromise Sites
5.8.2.6 Emergency Processing
5.8.2.7 Processing Deposits Received With Offers
5.8.2.8 Processing Offers to be Assigned to Area Offices From Centralized Offers in Compromise Sites
5.8.2.9 Interoffice Transfers
5.8.2.10 Powers of Attorney
5.8.2.11 Processing of Forms 4442’s From Automated Collection Services, Toll Free, or Other Service Divisions
5.8.3 Processability
5.8.3.1 Overview
5.8.3.2 Routing Cases Based on Jurisdictional Responsibility
5.8.3.3 Combined Application Fee Payment Processing
5.8.3.4 Processability
5.8.3.5 Processing Application Fees
5.8.3.6 Dishonored Application Fee Payments
5.8.3.7 Forms 656 Application Fee Requirements and Perfection
5.8.3.8 Centralized Offers in Compromise Processability Determinations
5.8.3.9 Not Processable
5.8.3.10 Processable
5.8.3.11 Types of Perfection
5.8.3.12 Screen For Obvious Full Pay Processing
5.8.3.13 Centralized Offer in Compromise Case Building and Perfection Procedures
5.8.3.14 Centralized Offer in Compromise Internal Verification Research
5.8.3.15 Processing Taxpayer Responses to Combo Letters
5.8.3.16 Analyzing Taxpayer Responses to Combo Letter
5.8.3.17 “No Reply” Procedures
5.8.3.18 Withholding Collection
5.8.3.19 Offers Submitted Solely to Delay Collection
5.8.4 Investigation
5.8.4.1 Overview
5.8.4.2 Doubt as to Liability
5.8.4.3 Effective Tax Administration and Doubt as to Collectibility with Special Circumstances
5.8.4.4 Doubt as to Collectibility
5.8.4.5 Screen for Obvious Full Pay
5.8.4.6 Actions Based on Reasonable Collection Potential
5.8.4.7 Initial Action, Follow-Up, and Closing Action Time Frames
5.8.4.8 Documentation
5.8.4.9 Notice of Federal Tax Lien Filing
5.8.4.10 Combination Offers
5.8.4.11 Responsibility of Offer Specialist and Field Revenue Officers
5.8.4.12 Coordination with Other Functions
5.8.4.13 Procedures for Certain Types of Taxpayers and Liabilities
5.8.4.14 Concluding the Offer Investigation
5.8.5 Financial Analysis
5.8.5.1 Overview
5.8.5.2 Verification
5.8.5.3 Equity in Assets
5.8.5.4 Dissipation of Assets
5.8.5.5 Future Income
5.8.5.6 Payment Terms
Exhibit 5.8.5-1 Deferred Payments Limited by Short Statute
Exhibit 5.8.5-2 Deferred Payments Limited by Small Amount Due
Exhibit 5.8.5-3 Deferred Payments Limited by Application of Payment From Equity in Assets
5.8.6 Collateral Agreements
5.8.6.1 Overview
5.8.6.2 Co-obligor Agreements
5.8.6.3 Other Collateral Agreements
5.8.6.4 Multiple Agreements
5.8.6.5 Waiver of Refunds
Exhibit 5.8.6-1 Co-obligor Agreement Common Law States Pattern Letter P–229 (Rev. 6-90)
Exhibit 5.8.6-2 Co-obligor Agreement Other States Pattern Letter P–230 (Rev. 6-90)
Exhibit 5.8.6-3 Collateral Agreement – Modification of Waiver Provisions of Compromise Agreement
Exhibit 5.8.6-4 Form 2261-C, Collateral Agreement Waiver of Net Operating Losses, Capital Losses and Unused Investment Credits
5.8.7 Return, Terminate, Withdraw and Reject Processing
5.8.7.1 Overview
5.8.7.2 Returns
5.8.7.3 Return Reconsideration
5.8.7.4 Withdrawal
5.8.7.5 Termination of Consideration
5.8.7.6 Rejection
5.8.7.7 Authorization to Apply Deposit
5.8.7.8 Alternative Resolutions
5.8.7.9 Closed File Retention
5.8.8 Acceptance Processing
5.8.8.1 Overview
5.8.8.2 Amending Form 656
5.8.8.3 Closing a Case as an Acceptance
5.8.8.4 Acceptance Processing for Specific Types of Offers
5.8.8.5 Legal Opinion of Counsel
5.8.8.6 Public Inspection File
5.8.8.7 Accepted Offer File Processing
5.8.9 Possible Actions on Accepted Offers
5.8.9.1 Overview
5.8.9.2 Rescission of Accepted Offers
5.8.9.3 Potential Default Cases
5.8.9.4 Compromise of a Compromise
5.8.9.5 Overlooked Periods
Exhibit 5.8.9-1 Pattern Letter 1603(P)
Exhibit 5.8.9-2 Pattern Letter 1604(P)
Exhibit 5.8.9-3 Pattern Letter 1607(P)
Exhibit 5.8.9-4 Default Letter
5.8.10 Special Case Processing
5.8.10.1 Overview
5.8.10.2 Bankruptcy
5.8.10.3 Other Insolvency Cases
5.8.10.4 Death of Taxpayer
5.8.10.5 Transferee
5.8.10.6 Discharge and Subordination Requests
5.8.10.7 Effect of Previous Offers on Collection Statute
5.8.10.8 Indicators of Practitioner Fraud
5.8.10.9 Indicators of Taxpayer Fraud
5.8.11 Effective Tax Administration
5.8.11.1 Overview
5.8.11.2 Legal Basis for Effective Tax Administration Offer
5.8.11.3 Initial Processing of Effective Tax Administration Offers
5.8.11.4 Evaluation of Offers
5.8.11.5 Documentation and Verification
5.8.11.6 Final Processing
Exhibit 5.8.11-1 Non-Hardship Effective Tax Administration (ETA) Offer in Compromise (OIC) Check Sheet
5.8.12 Independent Administrative Review
5.8.12.1 Overview
5.8.12.2 Role of the Independent Administrative Reviewer
5.8.12.3 Rejections
5.8.12.4 Independent Review Process
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