5.8.1. Overview

(1) This section provides a general overview and direction for the Offer in Compromise Program.

(1) Authorities that are related to the offer program are:

• IRC 7122– Compromises

• Treasury Regulation 26 CFR 301.7122-1 - grounds for compromise

• IRC 6702(b)– civil penalty for specified frivolous submissions

• Policy Statement P-5-89 - offer may be rejected for public policy reasons

• Policy Statement P-5-97 - stay of collection - offer in compromise cases

• Policy Statement P-5-100 - general information on offer in compromise objectives

• Treasury Regulation 300.3 – offer in compromise fee

• Revenue Procedure 2003-71, 2003-2 CB 517- procedures applicable to the submission and processing of offer tax liabilities

• Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

• Notice 2006-68, additional guidance for offers.

• 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 the all policies and procedures within the offer program.

(2) The national program manager (OIC) is responsible for development and delivery of policies and procedures within the program.

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

(1) Operational and program reviews are conducted on a yearly basis with the use of data and reports on the Automated Offer in Compromise (AOIC) system and Integrated Collection System (ICS). See IRM 1.4.52, Offer in Compromise Manager's Resource Guide.

(2) National quality reviews and consistency reviews are routinely conducted.

(1) The AOIC program 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 also 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) Managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Offer in Compromise Manager's Resource Guide.

(1) For a list of common abbreviations, definitions and acronyms used throughout this IRM, see Exhibit 5.8.1-1, Common Abbreviations Used in IRM 5.8.1.

(2) Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: https://rnet.web.irs.gov/Resources/AcronymSearch.aspx.

(1) Below are recommended resources, for use when processing an offer.

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

• SERP – http://serp.enterprise.irs.gov/

• IMD site for Interim Guidance Memorandums – Search Interim Guidance (irs.gov)

(1) An offer in compromise (OIC) is an agreement between a taxpayer and the government that settles a tax liability for payment of less than the full amount owed.

(1) Policy Statement 5-100 in IRM 1.2.1.6.17 states:

• The Internal Revenue Service (IRS) will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An offer in compromise is a legitimate alternative to declaring a case currently not collectible or granting a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the Government.

• In cases where an offer in compromise appears to be a viable solution to a tax delinquency, the IRS employee assigned the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms. The taxpayer will be responsible for initiating the first specific proposal for compromise.

• The success of the OIC program will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay and the IRS makes prompt and reasonable decisions. Taxpayers are expected to provide reasonable documentation to verify their ability to pay. The ultimate goal is a compromise that is in the best interest of both the taxpayer and the IRS. Acceptance of an adequate offer amount will give the taxpayer a fresh start toward compliance with all future filing and payment requirements (if the taxpayer stays in compliance for five years following the offer acceptance).

(2) A protracted installment agreement is defined as one that extends beyond the Collection Statute Expiration Date (CSED). See IRM 5.14.2.3, Collection Statute Expiration Date (CSED): Law, Policy and Procedures, for additional information.

(3) Unless special circumstances exist, the IRS will not accept an offer if the total tax liability can be paid in full as a lump sum, by installment payments extending through the remaining statutory period for collection, or by other means of collection.

(4) Generally, a doubt as to collectibility (DATC) offer amount must equal or exceed a taxpayer's reasonable collection potential (RCP) in order to be acceptable. However, offers may be accepted for less than the RCP amount in cases that involve special circumstances as defined in IRM 5.8.4.2, Effective Tax Administration (ETA) and Doubt as to Collectibility with Special Circumstances (DATCSC), IRM 5.8.11.3.1, Economic Hardship, and IRM 5.8.11.3.2, Public Policy or Equity Grounds.

(5) Per IRM 5.8.7.7.2, Public Policy Rejections, an offer may be rejected based on public policy considerations if acceptance of the offer may be detrimental to the interests of fair tax administration, even though it is shown conclusively that the amount offered exceeds the reasonable collection potential and is greater than the amount that could be collected by other means.

(1) The IRS may not have the authority to accept an offer when:

1. The Department of Justice is handling a matter concerning the amount of the taxpayer's liability or the collection of the liability for all or some of the tax periods owed.

2. The federal tax liability for all or some of the periods the taxpayer owes has been reduced to a judgment. See IRM 5.8.10, Special Case Processing, for additional information on DOJ and docketed cases.

3. The offer includes tax periods for which restitution was ordered. Refer to IRM 5.1.5.18.6, Offers in Compromise (OIC) and Restitution, and IRM 5.8.4.24.1, Offers in Compromise Submitted that Include Restitution. The IRS cannot accept an offer that in any way modifies the terms of a restitution order.

4. The IRS may consider an offer for the civil tax liability on periods for which restitution was ordered; however, the restitution assessments (MFT 31) should not be included on the Form 656 or on the acceptance recommendation report.

5. If there is a closed Criminal Investigation (CI) indicator on the account, contact should be made with Advisory to verify whether restitution was ordered. If restitution was ordered, the tax period may be under the control of the DOJ. In those cases, request the guidance of Area Counsel before proceeding. These cases may be identified by a TC 971 AC 180 - 189.

6. The IRS has referred the taxpayer's civil or criminal case to the DOJ for prosecution or defense. This applies even if the DOJ referral was made years ago and the DOJ is still holding the case and waiting to file suit.

7. Acceptance of the offer by the IRS is dependent upon the DOJ accepting a related offer or settlement.

(2) In some instances, DOJ may request the case be forwarded to them for inclusion in pending litigation. However, in DATC offers, DOJ generally requests that a field offer specialist conduct the investigation and make a recommendation to accept or reject the offer. In those cases, the OS should coordinate with Area Counsel before working the offer.

(3) If there are any master file transaction codes on tax module(s) or other information that shows DOJ is involved in prior/pending tax assessments or prior/pending litigation, an offer may not be accepted without securing approval from Counsel. Any acceptance recommendation must advise the reviewing Counsel office of the potential for DOJ involvement and ensure Counsel concurs that the IRS has the authority to accept the offer. You may use the OIC IAT tool to identify the DOJ indicator. You may use the OIC IAT tool to assist with identifying the DOJ indicator.

(1) Area Counsel handles Tax Court cases. The IRS has the authority to accept offers where the liability is the subject of a pending Tax Court case. See IRM 5.8.1.11.1, Unassessed Liability When No Other Tax Periods with Liabilities Exist, for information on the consideration of offers relating to unassessed liabilities. Generally, DATC cases will be under the jurisdiction of Collection, unless the case is under Appeals jurisdiction. See IRM 5.8.10, Special Case Processing, for additional information on docketed court cases.

(2) All cases identified as docketed court cases will be immediately forwarded to a field offer (FOIC) group for investigation.

(3) Centralized Offer in Compromise (COIC) will be responsible for determining processability on these cases.

(1) Specialty Collection Offer in Compromise (SCOIC) is responsible for processing and investigating the following offers:

• All offers based on Doubt as to Collectibility (DATC), including proposed liabilities still subject to settlement in Examination or Appeals

• All offers based on Effective Tax Administration (ETA) economic hardship grounds

• All offers based on ETA public policy or equity grounds

• All offers based on Doubt as to Liability (DATL) for either a Trust Fund Recovery Penalty (TFRP) or Personal Liability Excise Tax (PLET) assessment

(1) Examination is responsible for processing and investigating offers submitted based on Doubt as to Liability (excluding offers submitted to compromise a TFRP or PLET). See IRM 4.18.1.2, Exam Offer In Compromise- Understanding an Offer in Compromise (OIC).

(2) Examination employees must also provide SCOIC with a recommendation on offers based on ETA with public policy/equity issues, when requested by SCOIC. See IRM 5.8.11, Effective Tax Administration, for public policy or equity grounds and IRM 4.18.1.2.1, Offer in Compromise - Doubt as to Liability (OIC-DATL). Also, see IRM 5.19.24, Doubt as to Liability Offers in Compromise, for more information.

(1) Offers secured in Appeals offices in conjunction with related casework, such as Collection Due Process (CDP) or Equivalent Hearing (EH), will be forwarded to the COIC sites for processability determination(s), processing of the application fee(s), required TIPRA payment(s), and mailing of processability letters. (Processable offer letters are provided by Appeals.).

(2) COIC is responsible for the input of necessary transaction codes to IDRS. See IRM 5.8.4.15, Investigation of Offers under Appeals Jurisdiction, for guidelines on determining processability for Appeals CDP offers.

(3) COIC will investigate CDP and EH offers that meet their criteria or forward the offers to FOIC for investigation.

(1) Counsel must review offers that are recommended for acceptance when the aggregate tax liability is $50,000 or greater at the time the offer is submitted for approval (including penalty and interest). The aggregate tax liability is the total of all liabilities listed on the Form 7249 and related Form(s) 7249.

(2) Counsel attorneys, when requested, may also provide legal opinions for matters related to investigation and processing of offers.

(1) The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and understands their rights under the Taxpayer Bill of Rights (TBOR).

(2) TAS offers free help to taxpayers, including those who face financial difficulties due to an IRS problem, when they are unable to resolve tax problems on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

(3) The National Taxpayer Advocate and the Commissioner, SB/SE reached an agreement (effective May 30, 2011) outlining the procedures and responsibilities for processing TAS casework when either the statutory or delegated authority to complete a case transaction rests with the SB/SE. The agreement is known as a Service Level Agreement (SLA).

(4) In preparation for a case being referred to a SB/SE function, the TAS employee is responsible for:

1. Preparing Form 12412, Operations Assistance Request (OAR). The form should include a requested completion date. These OARs may refer to matters involving OIC cases.

2. Securing all necessary supporting documentation.

3. Identifying cases that require expedite processing. No case will automatically receive expedite processing; requests for expedite processing will be made on a case-by-case basis, and they must meet the criteria in IRM 5.8.4.27.

4. Forwarding Form 12412 and documentation to the SB/SE business unit liaison. Taxpayer Advocate Service - SLA (irs.gov)

(5) SB/SE must:

1. Assign a liaison in each office or Campus where a Taxpayer Advocate is located.

2. Acknowledge receipt of the case within one workday for cases requiring expedite processing or within three workdays for all other cases.

3. Respond to TAS within three (3) workdays in writing, via facsimile, secure messaging E-mail, or hand delivery of resolution.

4. Provide TAS with the name and telephone number of the SB/SE group manager or employee assigned the case.

5. If the requested completion date cannot be met, refer to the SLA for how to proceed.

6. Complete Section VI of Form 12412, Operations Assistance Request, upon closing the OAR, and return it to the TAS employee assigned the case. The Form 12412 must be returned within three workdays from the date that all actions have been completed and transactions input.

(1) OIC support work that is performed by paraprofessionals (tax examiners, etc.) must be reported under ICS Code 106 — Non-Case Direct.

(2) The TE must report any clerical or administrative duties under ICS Code 611.

(1) Organization Function Program (OFP) time code 790–0000X covers time spent by clerical employees related to time spent in support of COIC including, but not limited to, the following:

• Maintaining filing systems

• Filing documents or cases

• Processing closed files

• Typing or inputting hardcopy or electronic information

• Processing and routing mail

• Conducting research

• Processing remittances

(1) OFP time code 700-60000 covers all actions related to the time spent by Process Examiners (PEs) on telephone contact, including requests received on Form 4442.

(2) OFP time code 810–6603X covers all actions related to the time spent by PEs working on a newly receipted Form 656, Offer in Compromise. This includes the following below:

• Loading offers to AOIC

• Researching to make a processability determination

• Processing application fees

(3) OFP time code 810–66025 covers all actions related to the time spent by PEs correcting input problems that show up on the IDRS transaction error listings.

(4) OFP time code 810–6602X covers the following below:

• Case building for additional financial documentation

• Generating the appropriate correspondence

• Reviewing the taxpayer's response to the request for additional financial verification

• Documenting alternative resolutions

• Requesting liens and credit transfers

(5) OFP time code 810-66040 covers all actions related to the time spent by PEs processing subsequent payments.

(1) OFP time code 810–61970 covers most actions related to the time spent by the tax examiners in the DATL COIC program.

(1) OFP time code 810–6601X covers all actions related to the time spent by OEs working on an assigned OIC submitted on Form 656, Offer in Compromise. This list includes, but is not limited to the following below:

• Receiving and analyzing the Form 656, Offer in Compromise, and all required documentation

• Determining reasonable collection potential (RCP)

• Making disposition recommendations and reviewing requests for Appeals consideration

• Working CDP offers

• Working on modifications of accepted compromises

(1) An OIC is effective for the entire assessed liability of tax, penalties, and interest for all tax periods covered by the offer. All questions of tax liability for the tax periods covered by the agreement are conclusively settled. Neither the taxpayer nor the government can reopen a compromised tax period unless there was falsification of information or documents supplied in conjunction with the offer, concealment of ability to pay and/or assets, or a mutual mistake of a material fact that would be sufficient to cause the agreement to be set aside or reformed, even if the offer is subsequently defaulted.

(2) The liability is not compromised until all terms of the Form 656, Offer in Compromise, including any collateral agreements or addendums, are met. This includes the five-year compliance requirement. See IRM 5.8.6.2, Collateral Agreements, and IRM 5.19.7.2.2, OIC Determinations.

(1) The IRS will systemically notify the U.S. Department of State within 30 days if the previously certified tax debt:

• Is fully satisfied (Status 12)

• Becomes legally unenforceable

• Ceases to be seriously delinquent tax debt

(2) If the certification is found to be erroneous, the IRS will notify the State Department as soon as practical. The IRS will also notify the taxpayer once the certification is reversed.

(3)  The IRS will not reverse certification where a taxpayer requests a collection due process hearing or innocent spouse relief on a debt that is not the basis of the certification.

(1) Taxpayers with seriously delinquent tax debt certified to the DOS will generally not be able to renew a passport or receive a new passport, and they may have their current passport revoked. Debt that is included in a pending OIC is one of the discretionary categories of debt that will be excluded from the determination of seriously delinquent tax debt, and for which a previously certified debt will be decertified (IRM 5.19.25.5, Discretionary Exclusions from Certification).

(2) If a taxpayer with a processable offer requests assistance due to an expedited need to travel, please review IRM 5.19.25.10.1, Expedited Decertification. The DOS receives systemic notification approximately two cycles from the posting of the TC 480. The TC 480 automatically removes the passport restrictions. Form 14794, Expedited Passport Decertification, is only necessary when imminent travel is scheduled and the systemic notification timeframe is not sufficient.

(3)  If the taxpayer meets the criteria, prepare Form 14794, Expedited Passport Decertification and check the SCOIC box. You may refer to IRM 5.19.25.10.1 for more information about expedited passport decertification requests. 

(4) The IRS will generally reverse the certification of seriously delinquent tax debt and notify the U.S. Department of State within 30 days when the taxpayer meets a condition listed in IRM 5.19.25.10, Reversal of Certification. A certified taxpayer may request Expedited Decertification if they identify an imminent need for a passport. Expedited Decertification will generally shorten the 30-day processing time by 14 to 21 days.

(5) Request expedited decertification when you verify that all three of the following conditions exist:

1. The certified taxpayer is eligible for decertification as described in IRM 5.19.25.10, Reversal of Certification.

Note: Confirm taxpayer eligibility in IDRS. For example, if the taxpayer entered into an installment agreement, a TC 971 AC 063 should appear in IDRS.

Exception: If a TC 971 AC 644 appears on the account indicating the taxpayer’s passport was previously revoked, the taxpayer will not qualify for an expedited decertification. See IRM 5.19.25.11.1, Making a Recommendation for Revocation.

2. The taxpayer states their foreign travel is scheduled within 45 days or less and can provide proof of travel, or the taxpayer lives outside the United States.

   Note: Proof of travel can be a flight itinerary, hotel reservation, cruise ticket, international car insurance, or other document showing location and date of travel or time-sensitive need for a passport. If the taxpayer resides outside of the United States, determine the location where the taxpayer applied for and was denied a passport (city, country).

3. The taxpayer has a pending application for a passport or renewal, has received notification that their passport application was denied or revoked by the U.S. Department of State, and provides a copy of the passport denial letter issued by the U.S. Department of State issued within the past 90 days.

   Note: The letter issued by the U.S. Department of State that advised the taxpayer their passport application was denied or revoked is not referring to the CP 508C , which is a notice mailed by the IRS.

   Exception: Taxpayers residing outside of the United States may have an urgent need for a passport without having imminent travel plans. When a taxpayer residing outside of the United States meets conditions in IRM 5.19.25.4, Statutory Exclusions from Certification, or IRM 5.19.25.5, Discretionary Exclusions from Certification, and self-identifies as having an urgent need for decertification, request expedited decertification.

(6) After you complete Form 14794, Expedited Passport Decertification, check the OIC box, and e-mail the form to your manager. The manager should sign with an electronic signature, save the document on their computer and then attach the signed document to an e-mail to: *SBSE Passport Group .

(1) The IRS will not consider an offer that is solely for a tax period or tax year that has not been assessed, unless IDRS indicates a return has been received or an assessment is pending. See paragraph (3) below.

(2) Taxpayers may submit, and the IRS will consider, an offer to compromise taxes due on tax returns that have been filed but have not yet been assessed when unpaid liabilities already exist on IDRS. However, before the offer can be accepted, unassessed taxes should be assessed. See paragraph (3) below.

(3) OE/OS should continue to investigate, and may accept, an offer when the taxpayer has submitted a tax return for which there may be a refund or an assessment. If the offer is accepted, document the AOIC remarks to alert MOIC of the possible assessment or refund.

(4) If IDRS indicates that there are unfiled returns, no assessments are pending, and there are no outstanding liabilities, the offer should be returned to the taxpayer. See IRM 5.8.2.4.1, Determining Processability, for more information.

(1) An offer will not be accepted on any tax liability that has become unenforceable due to the expiration of the statutory period for collecting the debt.

(2) If a taxpayer makes a voluntary payment to a liability barred by statute, and no other liabilities exist, inform the taxpayer that the payment is not required. The taxpayer must be advised that the payment is purely voluntary and it can be refunded.

(3) If the taxpayer’s intentions cannot be determined, and no other liability exists, return the payment to the taxpayer. If other tax liabilities are outstanding, advise the taxpayer that the payment will be applied to the other liabilities.

(4) Document the case history remarks.

(1) IRM 21.4.5.2, Erroneous Refunds Overview, defines an erroneous refund as "the receipt of any money from the IRS to which the recipient is not entitled." Definitions of the categories of an erroneous refund may be found inIRM 21.4.5.5.5, Overview of Category D Erroneous Refunds, and IRM 21.4.5.5, Erroneous Refund Categories and Procedures. These cases may be identified by the following transaction codes:

• Transaction code 844 (generates the –U freeze)

• Transaction code 700 with a document code 58 and blocking series 850-899 or 950 – 999

• Transaction code 470 closing code 93

(2) If an erroneous refund is discovered and there are less than two years remaining on the collection statute, COIC or FOIC should prepare a Form 4844 or Form 4442 to forward to A/ER (Accounting Erroneous Refund Unit) function. Refer to IRM 21.4.5.6.3, Routing Category D Erroneous Refund Packages.

(3) If an offer is submitted and an erroneous refund is discovered, the offer will be returned to the taxpayer and closed as a processable return. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for additional information on closing a case as a processable return.

(4) Category D refunds included as erroneous refunds that do not fall under any other category where the Assessment Statute Expiration Date (ASED) has expired but the Erroneous Refund Statute Expiration Date (ERSED) remains open. See IRM 21.4.5.15.1.1, Statutes of Limitations Category D Erroneous Refunds IRC 6532(b) ERSED, for more information.

(5) The following are examples and causes of Category D erroneous refunds. This list is not all-inclusive:

1. A payment is misapplied to the wrong TIN, overpays the account and generates an erroneous refund.

2. A taxpayer receives both a manual refund (TC 840) and a systemically generated refund (TC 846).

3. A taxpayer files a non-receipt claim on a refund check and receives a replacement check. The taxpayer cashes both checks.

4. A direct deposit is applied to the wrong taxpayer's bank account (unintended recipient) due to IRS error.

5. A refund of court ordered restitution.

6. An AUR or BUR reply is received with a payment, and the payment is processed and refunded before AUR or BUR has input the proposed tax assessment.

(6) These refunds can only be recovered by an erroneous refund lawsuit, refund offset or voluntary repayment. Administrative collection actions such as the issuance of a lien or a levy cannot be taken to recover Category D erroneous refunds.

(7) All fees and payments received should be applied to the liability(s) in accordance to current TIPRA procedures. See IRM 5.8.2.8.1, Processable Offers - Payment Processing, for additional information.

(8) If the erroneous refund was due to identity theft or practitioner fraud or misconduct, refer to IRM 5.8.4.23.5, Identity Theft, and IRM 5.8.4.23.6, Return Preparer Fraud or Misconduct, for additional information.

(1) While the IRS is charged with collecting certain child support obligations, we do not have the authority to compromise non-tax liabilities. Child support obligation accounts are identified on the Non-Master-File with a Master File Tax (MFT) code 59.

(2) IRC 6305 requires the Secretary of the Treasury to assess and collect certain child support obligations certified by the Secretary of Health and Human Services. The Secretary of the Treasury is not authorized to compromise these liabilities. The individual may seek to pursue any available equitable, or administrative action in a state court or before a state agency to determine the correct liability or to recover an amount collected under this section.

(3) If a taxpayer proposes a compromise that includes a child support liability, the IRS employee should request that the offer be amended to remove the child support obligation.

(4) If the offer is to be accepted, the liabilities may be compromised without including the child support debt. If the taxpayer refuses to remove the child support liability, the offer should be returned using the open paragraph stating, "We do not have authority to compromise child support obligations", and close the case as a processable return following procedures defined in IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing.

(1) IRC 7122 and the regulations govern the formation and legal effect of offers. The courts also apply general principles of contract law. Under these principles, a minor child has the power to repudiate or disaffirm most contractual obligations. A minor child would also have the ability to repudiate or disaffirm a compromise signed on behalf of the minor child by a parent or power of attorney.

(2) If designated, a parent or guardian can receive information about the child's return but can’t legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. See Pub 929.

(3) Because a compromise under IRC 7122 may not legally bind a minor, it is recommended that the IRS not enter into compromises with minors or with a parent on behalf of a minor. In these cases, the offer will be returned as a processable return as defined in IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing.

(1) As of April 8, 2003, the IRS has the authority to assess and collect Report of Foreign Bank and Financial Accounts (FBAR) civil penalties under Title 31 C.F.R. 103.56(g). The delegation includes the authority to investigate possible FBAR civil violations, provided in Treasury Directive No. 15-41 (Dec. 1, 1992), and the authority to assess and collect the penalties for violations of the reporting and record keeping requirements. See IRM 4.26.16.5.1, FBAR Penalty Authority, for more information.

(2) FBAR assessments cannot be compromised under IRC 7122 because the assessment is based on Title 31 violations and IRC 7122 allows the IRS to compromise only Title 26 liabilities.

(3) Title 31 penalties do not post to IDRS. If the taxpayer lists any non-IDRS FBAR penalties on Form 656 and refuses to remove them, the offer must be returned without further consideration. See IRM 5.8.10.15, Offers Submitted on Offshore Voluntary Disclosure Program, for additional information.

(4) FBAR penalties are separate from penalties applicable to Form 8938, Statement of Specified Foreign Financial Assets. See IRM 5.21.6.8, Foreign Account Tax Compliance Act (FATCA), for information on the differences between FBAR and Form 8938. See IRM 20.1.9.22, IRC 6038 D – Information with Respect to Specified Foreign Financial Assets, for the obligations to file Form 8938 applicable to individual taxpayers and certain entities and the penalties for non-compliance.

(1) There are unique issues involving IRC 965 liabilities, including the ability of the taxpayer to pay in installments or defer the assessment under certain circumstances, which may affect the processing and investigation of offers. Additionally, consideration of a taxpayer’s ability to repatriate the foreign earnings that are the basis for the IRC 965 liabilities may require the assistance of an Abusive Tax Avoidance Transaction (ATAT) revenue officer (RO) to evaluate financial information and assist in conducting research relative to income and assets.

(2) In general, beginning with the tax year ended 12/31/2017 or 12/31/2018, taxpayers may be liable for taxes under IRC 965. This IRC section provides that certain taxpayers must pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings were repatriated to the United States.

(3) Provisions of IRC 965 allow a taxpayer to elect to pay the net tax liability in installments over eight years (IRC 965(h)) or, if the taxpayer is a shareholder in an S corporation, to elect to defer the assessment until a triggering event occurs under (IRC 965(i)), at which point the taxpayer can elect to pay the net tax liability in installments over eight years.

(4) If Form 656 includes any modules in the liability section that involve IRC 965, follow guidance regarding the processability of the offer and the impact IRC 965 may have on the resolution of the offer investigation. See IRM 5.8.4.23.7, IRC 965 (Transition Tax) Liabilities.

(1) An offer that is received elsewhere by an IRS employee (including a field revenue officer) must be immediately date stamped and forwarded to the appropriate COIC site for processing within 24 hours of receipt. The Form 656, Offer in Compromise, the application fee and any applicable TIPRA payments (20% of offer amount for lump sum cash offers or first proposed payment for periodic payment offers), as well as any documents submitted with the offer, must be included. The information should be sent to the appropriate COIC site using Form 3210, Document Transmittal, and must be sent by traceable methods if an application fee and/or payment is attached. Please refer to SERP - OIC Centralized Service Center Locations - Who/Where (irs.gov).

(2) Unsolicited offers may not be faxed or sent by other electronic methods to the IRS. Offers may be accepted by fax or by other electronic methods only when solicited by SCOIC personnel, usually in conjunction with a related assigned offer. Occasionally, a Form 656 may not contain an original signature because the contract was faxed to a taxpayer’s representative before the Form 656 was printed and mailed to COIC; however, these are clearly original offers being submitted by the taxpayer for processing, with receipt dates that can be verified by the postmarks. In contrast, offers without original signatures submitted to other IRS personnel may be construed as copies of offers already in process. For this reason, offers submitted from internal sources (such as Appeals or Field Collection) must contain original signatures. A Form 656 secured elsewhere in the Service without an original signature will not be considered a valid contract.

(3) The Form 657, Offer in Compromise Revenue Officer Report, must be completed and attached to the offer package for offers from taxpayers whose collection cases are assigned to revenue officers (ROs). This form is to be signed by the RO. Managerial approval and signature is only required if the RO is recommending the offer be returned as solely to delay collection. The RO should retain all information related to the collection case. All additional information related to the OIC should be sent to the appropriate COIC site using Form 3210, Document Transmittal, or sent to COIC via encrypted email with a read receipt, within four days of receipt of the offer.

(4) Types of additional information may include, any information gathered during the field investigation that verifies or refutes amounts claimed on the CIS submitted with the offer.

(1) The Centralized DATL processing unit located at the Brookhaven campus receives all Form 656 -L submitted on the basis of DATL. COIC will receive Trust Fund Recovery Penalty (TFRP) and Personal Liability for Excise Tax (PLET) offers and forward them to field OIC offices for investigation. DATL exam offers should be immediately forwarded using Form 3210, Document Transmittal, to:

Internal Revenue Service - DATL Unit
5000 Corporate Court Stop 681-D
Holtsville, NY 11742

(2) Offers based on DATL for TFRP or PLET should be sent to:

Brookhaven Internal Revenue Service Center
COIC Unit
5000 Corporate Court
Stop 680
Holtsville, NY 11742

(3) Follow procedures in IRM 10.5.1.6.9.3, Shipping, when shipping through a private delivery carrier such as UPS or FedEx.

(1) The full name, address, social security number (SSN), employer identification number (EIN), and/or individual taxpayer identification number (ITIN) of the taxpayer must be entered on Form 656. If the taxpayer(s) uses a mailing address that is different from the street address, the physical home address must be included as well.

(2) A taxpayer not eligible for an SSN must use an ITIN when filing their return. ITIN is governed by rules described in IRC 6109, Identifying Numbers, and the corresponding regulations provide the rules that govern ITINs. ITIN applicants are generally resident aliens (green card or substantial presence test met) or nonresident aliens (not U.S. citizens and green card or substantial presence test not met). While an ITIN does not give the individual the right to work, many employers hire and pay the taxpayer using the ITIN for reporting purposes.

(3) The OE or OS should not question the appropriate use of an ITIN by the employer. Once ITIN information is verified, normal offer procedures should be followed if the information does not rise to the level of fraud and/or identity theft. If fraud and/or identity theft is present and documented, the offer should be closed as a public policy rejection.

(1) When submitting offers in compromise, taxpayers must indicate the basis upon which they propose to compromise: Doubt as to Collectibility (DATC), Doubt as to Liability (DATL) and/or to promote Effective Tax Administration (ETA). See IRM 5.8.8.2.2, Form 14640, Addendum to Form 656, for instruction on securing an Addendum when changing the basis of the offer.

(2) If the taxpayer submits a Form 656 -L, the basis for compromise will be DATL only.

(3) If the taxpayer submits a DATL and a DATC offer at the same time, refer to IRM 5.8.10.14, Taxpayer Files both Doubt as to Liability and Doubt as to Collectibility Offers, for further information.

(1) The total amount of money offered must be indicated and must be more than zero. The amount offered may not include money already paid, expected future refunds, funds attached by levy, or anticipated benefits from capital/net operating losses.

(1) Taxpayers are expected to pay the entire amount offered as soon as reasonably possible. Acceptable offer payment terms should be determined by the OE or OS and should not be limited to the proposal of the taxpayer. The required TIPRA payments may be waived if the taxpayer meets low-income certification guidelines.

(2) The amounts and due dates of payments must be specified.

(3) There are two types of payment terms offered on the Form 656 that the IRS and the taxpayer may agree to:

1. Lump Sum Offer: A lump sum cash offer ( payable in five or fewer installments within five months of offer acceptance) must be accompanied by the payment of 20% of the amount of the offer.

Note: An exception may be allowed to the five month payment requirement In certain instances where flexible payment terms may be warranted. See examples in IRM 5.8.8.2.2.1, Instructions for Completion of Form 14640, Addendum to Form 656. The payment terms may not exceed 24 months. In these cases, while the offers may be submitted and considered as cash offers, the RCP amount should be calculated as a periodic payment offer (24 months).

2. Periodic Payment Offer: A periodic payment offer (payable in six or more installments) must be accompanied by the payment of the amount of the first proposed installment, and additional installments must be paid while the offer is being evaluated by the Internal Revenue Service. The total installments may not exceed 24 months.

   Note: The 24-month time frame for periodic payment offers may be revised to include 24 months from the date of acceptance or by using the original 24-month time frame based on the taxpayer’s circumstances.

(4) A taxpayer may designate TIPRA payments (pre-acceptance) to a specific liability including trust fund. The taxpayer must designate each offer payment at the time of the payment submission. Once the offer has been accepted, the funds are applied in the government’s best interest and the taxpayer no longer has the right to designate payments.

(5) “Accord and satisfaction” does not apply to the IRS, even when written on a TIPRA check. A taxpayer cannot circumvent the section 7122 procedures for compromising a tax liability. The only way to compromise the tax liability is under section 7122, which does not recognize accord and satisfaction.

(6) The application fee may not be designated.

(1) Taxpayers must agree to all the standard conditions of the agreement as they are printed on the Form 656.

(2) If the taxpayer submitted the Form 656 altering any of the provisions of Form 656, Section 7, the offer should be immediately deemed not processable based on an altered Form 656.

(1) Each separate tax period and type of tax must be indicated on the Form 656. TFRP assessments will include an assessment for each quarter. Verification on IDRS will be required to determine that the assessment has been made.

(2) The taxpayer may submit an offer that does not include all outstanding liabilities. Prior to accepting the offer, the OE/OS must include all outstanding liabilities on the Form 656 and make sure they are included on AOIC. No amended Form 656 is required. The exception to this would be if the taxpayer owes any liabilities that may not be compromised. Liabilities that may not be legally compromised will not be included as part of the offer.

(3) An offer submitted on Form 656 -L, under DATL criteria, will be accepted for only the tax periods that are in question.

(1) Taxpayers may use the designated space on the Form 656, Offer in Compromise or attach a separate statement to explain why they are submitting the offer.

(2) If a special circumstance exists, the taxpayer should explain the situation and include all supporting documents to assist in verification of the special circumstance that is being claimed.

(1) Each taxpayer that is party to an offer should personally sign the Form 656. When unusual circumstances prevent this (e.g., the taxpayer is incapacitated), an authorized representative or court appointed representative may sign for the taxpayer.

(2) In the case of joint offers, all parties, or their designated representative as explained above, must sign the Form 656 to ensure the provisions of the agreement bind all parties.

(3) If the TP or POA has not dated the Form 656, use the Form 433 -A (OIC) signature date or IRS received date, whichever is earliest. The date of the offer is needed when sending out letters.

(4) The case file should include a copy of the properly executed Form 2848, Power of Attorney and Declaration of Representative, or verified CFINK print as verification of the representative's authority.

(5) An ink/original signature is required on the Form 656. The only exception is if the Form 656 was faxed or electronically transmitted before it was sent to COIC. Confirmation of the fax sender's identity may be verified after receipt of the offer.

(6) A Form 656 signed with an "X "must also include signature of a witness.

(7) Since the CIS requires certification under penalty of perjury, the taxpayer(s) must personally sign the Form 433 -A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433 -B (OIC), Collection Information Statement for Businesses.

(8) Offers submitted for corporations should reflect the corporate name on the first signature line of the Form 656. The signature name and title of the authorized officer should be reflected on the second signature line of the Form 656.

(9) An offer submitted by the fiduciary of an estate of a deceased taxpayer will be binding on the taxpayer's estate to the extent that it would be binding on a taxpayer who submits an offer on their own behalf. Include a copy of the fiduciary's appointment document in the case file.

(10) If an offer is submitted on behalf of a deceased taxpayer, the individual who signs the offer must have the authority to do so. This authority can be designated by a will appointing that individual as the executor or by written authorization from the probate court. Refer to IRM 5.8.10.4.1, Death of Taxpayer, for further information.

(1) The Disaster Assistance program uses IDRS to ensure that systemic relief is provided to affected taxpayers within identified zip codes in a covered disaster area.

(2) Indicators are posted on IDRS, via IT systemic programming, through the use of computer transaction code (TC) 971. TC 971 AC 087 will post a corresponding -O freeze on the tax account of an affected taxpayer. TC 971 AC 688, will post a corresponding -S freeze on the tax account of an affected taxpayer.

(3) Generally, the -O freeze will be applied only in the most catastrophic disasters and, only to the areas that suffered the most damage within the area designated by FEMA for Individual Assistance programs. When warranted, DPO analysts may limit the application of the -O freeze to selected zip codes in a county when other areas receive a -S freeze. Factors to be considered include:

1. Large numbers of casualties and/or displaced persons

2. Extensive housing damage, or environmental damage, that forces long-term or permanent relocation for a significant portion of the population

3. Severe infrastructure damage on a scale likely to cause major service and economic impacts

4. Severe economic or physical damage to key industries and incapacitated governments

(4) The disaster victim code will post on the entity portion of IDRS. It is a value indicator that is defined as follows:

• 1 = -S freeze active

• 2= -O freeze active

• 3 = both -S and -O freeze are active

• 4 = historical indicator reflecting -S or -O freeze were active at some time in the past but is not currently active