5.8.12. Independent Administrative Review

(1) The IRM establishes process and procedures to ensure that rejection of an offer in compromise protects the taxpayer’s rights and was performed within the scope of IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing.

(1) The Secretary of the Treasury is granted broad authority to compromise tax liabilities in IRC Section §7122 (e)(1).

(2) IRM 1.2.2.6.1– Delegation Order 5-1 (Rev. 5), delegates the Commissioner's authority to accept, reject, return, terminate, or acknowledge withdrawals of offers.

(1) The Director, Collection Policy is responsible for all policies and procedures within the Offer in Compromise program.

(2) The National Program Manager, Offer in Compromise is responsible for development and delivery of policies and procedures within the program.

(3) IRM authors are responsible for writing the policies and procedures and clearing documents through all affected offices.

(4) OEs, OSs, TEs, and IARs are responsible for adhering to processes and procedures in this IRM.

(1) Operational and program reviews of the Specialty Collection Offer in Compromise (SCOIC) program are conducted on a yearly basis by the Director, SCOIC and Collection Policy with the use of data and reports from the Automated Offer in Compromise (AOIC) system and ENTITY case management system. In addition, ad hoc reports, which provide information on the inventory levels, hours per case, and age of offers in inventory or at time of closure, are also provided. See IRM 1.4.52, Offer in Compromise Manager’s Resource Guide.

(2) Managerial case reviews are also completed as defined in IRM 1.4.52, Offer in Compromise Manager’s Resource Guide.

(3) CEASO managers will conduct reviews of IAR decisions in conjunction with the guidance in this IRM.

(4) National quality reviews and consistency reviews are routinely conducted to ensure case actions are timely and in accordance with the procedures in this IRM.

(1) AOIC is used to track offers submitted by taxpayers and record case actions and history. Ability to take action on AOIC is limited to specific offer employees. Additional permissions are provided based on an employee’s duties and responsibilities.

(2) ICS is used by field employees as a method for inventory control and history documentation.

(3) SCOIC Managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Offer in Compromise Manager’s Resource Guide.

(4) Managerial Requirements for case approval are defined in Del. Order 5-1.(Rev. 5)

(5) IARs will review AOIC, ICS, and supporting case documents to ensure that a rejection disposition is correct.

(1) Common abbreviations, definitions and acronyms used throughout this IRM.

(1) Additional resources can be found in IRM 5.8, Offer in Compromise.

(2) IRM 5.8.1.4, Fairness and Integrity in Enforcement Selection, and IRM 5.8.1.5, Protecting Taxpayer Rights.

(3) Employees can find helpful information on these websites:

• Servicewide Electronic Research Project (SERP) - https://serp.enterprise.irs.gov

• Internal Management Document site for Interim Guidance Memorandums: https://imdtrack.web.irs.gov/search.aspx

(1) The IAR must review the employee’s analysis of the taxpayer’s OIC to determine if the basis for the rejection determination was appropriate.

(2) The IAR should consider if the taxpayer's rights have been observed during the offer investigation, in communications, and/or discussions with the taxpayer or Power of Attorney (POA). These considerations should be based on issues that would impact the recommended rejection.

(3) The IAR must consider if the taxpayer has been given reasonable time frames to comply with requests.

(4) The IAR must check to be sure that the taxpayer is in filing and payment compliance.

(5) When reviewing a doubt as to collectability offer, the IAR must compare the offered amount with the RCP in order to determine if the decision to reject is reasonable. Review the Asset/Equity Table, the Income/Expense Table (AET/IET), and the taxpayer’s financial information to determine if the reasonable collection potential (RCP) determination is fully supported by the documented facts and circumstances in the case file; including making sure the OE/OS has fully developed the RCP and discussed all issues with the taxpayer before recommending the rejection.

(6) If the scanned consolidated PDF indicates any circumstances that could impact either future earning potential or allowable expenses, the documentation must support the decision to exclude or include assets, expenses and/or income relating to the taxpayer's circumstances.

(7) If information contained in the scanned consolidated PDF indicates issues were raised that meet either Effective Tax Administration (ETA) or Doubt as to Collectibility Special Circumstance (DCSC) criteria, as defined in IRM 5.8.11, Effective Tax Administration, the case history must address these issues as well as support the rejection decision.

(8) The IAR must verify that the rejection letter being sent to the taxpayer has the correct address, name, and TIN.

(9) The IAR must ensure that all of the facts and circumstances of the case were considered during the investigation and that the decision to reject the offer is reasonable, based on the case analysis.

(10) The AOIC/ICS remarks must indicate an attempt to communicate the results of the OIC investigation with the taxpayer or POA, prior to recommending the rejection. The IAR must determine whether the communications were reasonable based on the facts of the case.

(11) When circumstances dictate, the OE/OS/TE should use problem solving and professional judgment, and in so doing, consider the taxpayer’s perspective when working toward case resolution.

(1) If the proposed rejection of the offer is sustained by the IAR, the reviewer will:

1. Update the IAR "Main Screen" on AOIC indicating the appropriate disposition.

2. Review Form 1271 to be sure that all offer periods are reflected, the taxpayer’s name, address, and TIN are correct. The IAR will then sign and date as the reviewer, indicating concurrence with the proposed disposition.

3. Update AOIC to reflect the results of the completed review. The Field IAR must document the results of the review on ICS and complete the disposition of the assigned Other Investigation.

(2) If the case is closed using EOIC, follow procedures in IRM 5.8.12.4, Independent Administrative Review for EOIC (Field Only), above.

(3) Once the signed, approved Form 1271 is received from the IAR, the OE/SE or OS must include a copy in the case file.

(4) Cases reviewed electronically will be updated to the correct electronic storage location.

(1) If the proposed rejection is not sustained by the IAR, the reviewer will:

1. Update the IAR "Main Screen" on AOIC indicating the appropriate IAR disposition.

2. Prepare Form 5942, providing an explanation of why the determination was not sustained and providing instruction on additional actions required by the investigating employee. Field IARs will complete an ICS history entry noting that rejection was not sustained and the specifics of the review are noted on Form 5942 and close the Other Investigation assignment on ICS.

3. The IAR manager is required to electronically sign Form 5942.

(2) After the IAR manager approves the Form 5942, the case will be routed as follows:

1. The electronic Form 5942 and the scanned consolidated PDF will be returned to the OE/OS manager via the 5492 folder on the share drive.

2. A copy of the electronic Form 5942 will be sent to the OE/SE/OS second level manager.

3. A copy of the electronic Form 5942 will be retained by the IAR group manager for two years after the year prepared.

(3) The following procedures describe necessary actions once the offer file is received by the OE or OS:

(4) The electronicForm 5942 and any other documentation regarding second level management involvement and decisions must be attached to the scanned consolidated PDF as a record of actions taken during the IAR process.