5.19.7. Monitoring Offer In Compromise

(1) This section provides direction for monitoring accepted offers in compromise and other related processing action taken by the MOIC program.

(1) Authorities relating to this section include:

• IRC 7122 Compromise

• Code of Federal Regulations (CFR) 301.7122-1 - Compromise

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

• Delegation Order 5-1 (Rev. 5) To Accept, Reject, Return, Terminate, or Acknowledge Withdrawals of Offers in Compromise

• IRC 7809- Deposit of Collections

(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) Employees in MOIC are responsible for the processes and procedures outlined in this IRM.

(1) Operational and program reviews are conducted on a yearly basis with the use of data and reports from the Automated Offer In Compromise (AOIC) system. See IRM 1.4.52, Resource Guide for Managers, Offer in Compromise Manager’s Resource Guide.

(2) 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. Manually Monitored offers are tracked on IDRS and Accounts Management System (AMS).

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

(1) A list of common abbreviations, definitions, and acronyms used throughout this IRM may be found in the following table:

(2) AOIC Service Center (SC) uses different status codes to the offers as they proceed in the monitoring process. A complete list of the status codes and full definition can be found on the SERP Compliance Part 5 Job Aid at: http://serp.enterprise.irs.gov/databases/job-aids/cs/part-5/aoic/aoic.html. The following table is a list of the most commonly used MOIC status codes:

(3) Below is a list of MOIC tax examiner time codes. Time reporting should be recorded in accordance with the appropriate OFP time codes. To determine the appropriate count see the major operations found at: http://ofp.ds.irsnet.gov/index.asp

(4) Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: http://rnet.web.irs.gov/Resources/Acronymdb.asp

(1) Additional resources can be found in:

(2) Employees can find helpful information on these websites: SERP: http://serp.enterprise.irs.gov/, AOIC Job Aid at: http://serp.enterprise.irs.gov/databases/job-aids/cs/part-5/aoic/aoic.html. For information and listings for the Offer in Compromise Program, see the SBSE website at: http://mysbse.web.irs.gov/collection/toolsprocesses/CaseRes/oic/default.aspx.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see: https://irssource.web.irs.gov/Lists/General%20News/DispItemForm.aspx?ID=126.

(1) Taxpayers are expected to pay the entire amount offered in the shortest time possible based on the terms of their accepted agreement.

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

(3) For non-DATL offers there are two (2) types of payment terms that the Service and the taxpayer may agree to:

• Lump sum cash - payable in five or fewer offer payments within 5 or fewer months of the date of the notice of acceptance; Form 656must be accompanied by a payment of 20% of the amount offered.

Note: An exception may be allowed to the five month payment requirement when more flexible payment terms are warranted. Also, in these cases, while they may be submitted and considered as cash offers, the RCP should be calculated as a periodic offer (24 months). See IRM 5.8.4.

• Periodic payment - offer payments payable in 6 - 24 months. Form 656 must be accompanied by the first proposed offer payment, and additional offer payments must be paid in accordance with the taxpayer's proposed offer terms while the Service evaluates the offer.

(1) COIC process examiners are responsible for determining processability and perfecting offers before they are assigned for investigation.

(2) An offer may be returned for various reasons, including failure to provide information and solely to delay. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for additional reasons for returns.

(3) OIC determinations are made by the Collection Area Office, Examination, Appeals, or COIC. The Department of Justice may settle court cases that are ultimately sent to MOIC for monitoring.

(4) One of the following determinations will be made following the OIC investigation:

1. Rejection: A determination is made that more can be collected than is being offered or acceptance will not be in the best interest of the government. All reject determinations must be reviewed and agreed to by an independent reviewer. The taxpayer will be given appeal rights with the rejection letter, unless the offer was submitted as a collection alternative in Collection Due Process.

2. Withdrawn: The taxpayer requests or agrees to withdraw the offer. The taxpayer is asked to provide the withdrawal in writing in the form of a letter.

3. Accepted: The offer is accepted and forwarded to MOIC for monitoring through the completion of the mandatory 5-year compliance period.

4. Return: An offer can be returned as either a "not processable return" or a "processable return." It is important to note the distinction because when there is a not processable return, the collection statute is not suspended. The application fee is returned to the taxpayer in all cases involving a not processable return; however, the IRS keeps the application fee when it is a processable return.

Note: DATL accepted offers are not monitored for 5-year payment and filing compliance.

(5) COIC loads the offer, the application fee, and TIPRA payment onto the AOIC database. If the offer is determined to be processable, AOIC systemically uploads the following to IDRS:

1. Transaction code (TC) 480 With the appropriate jurisdiction code (1= Collection, FOIC or COIC, 2= Examination, 3= Appeals, 9= SC Collection DATL). Jurisdiction codes 2 and 3 are manual inputs.

2. CSED indicator P= Primary taxpayer, S= Secondary taxpayer, B= Both taxpayers.

3. Status 71 Creates a "-Y" freeze, suppresses balance due notices and suspends collection and levy action.

(1) Taxpayers who wish to be represented submit a properly executed Form 2848, Power of Attorney and Declaration of Representative

(2) When an offer is received with a Form 2848, COIC checks it across CC CFINK and if the POA is not there the original is forwarded to the Centralized Authorization File (CAF) for input on to the CAF system. If the POA sends in a copy of an already recorded Form 2848 then it is not forwarded unless additional tax periods are being added or there is some change to what the current CAF reflects.

(3) The representative's information is loaded onto AOIC and a copy is placed in the paper case file.

(4) When responding to a third party (anyone other than the taxpayer), who indicates they have a third party authorization on file, complete the appropriate search using CC CFINK before providing any tax account information.

(5) If the POA information is on the CAF file but not on AOIC due to an oversight, add the POA information and continue your contact as long as guidelines found in IRM 21.1.3, Operational Guidelines Overview are followed.

(1) The AOIC application tracks and controls offers in compromise. FOIC, MOIC, DATL and Appeals Area Office share a common database that contains relevant offer information. AOIC allows the user to process, view, and track the status of each offer. The program also generates forms, letters, and managerial reports.

(2) AOIC consists of four parts:

1. The Area Office segment is designed to assist COIC staff, FOIC specialists, and other Area Office personnel manage offers up to the point the offer is returned, rejected, withdrawn, or accepted.

2. The Service Center segment is designed to assist MOIC control inventories; post and journalize payments, deposits, refund recoupments; prepare and generate forms, letters reports; and monitor collateral agreements and taxpayer compliance for offers that are accepted.

3. The Appeals segment is designed for Appeals to view offer data and status up to the point the offer is rejected, withdrawn, or accepted.

4. The DATL segment is also designed to assist the DATL staff up to the point the offer is rejected, withdrawn, return, or accepted.

(3) Generally, all offers investigated by Collection are on the AOIC application. However, Department of Justice (DOJ) Settlement cases are not loaded on AOIC.

(4) Cases not on AOIC must be manually monitored. See IRM 5.19.7.5, Accepted OICs Requiring Manual Monitoring.

(1) Taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay, or ability to provide information timely.

(2) Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels. For additional information on the Taxpayer Bill of Rights, visit https://www.taxpayeradvocate.irs.gov/get-help/taxpayer-rights/

(3) Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order),is attached and steps cannot be taken to resolve the taxpayer's issue the same day.

(4) "Same day "includes cases that can be resolved in 24 hours, as well as cases where steps can be taken within 24 hours to begin resolving the issue. See also IRM 13.1.7.6, Same Day Resolution by Operations.

(5) When making a TAS referral, use Form 911, and forward to TAS in accordance with your local procedures.

(6) The National Taxpayer Advocate has reached agreements with the Commissioners of the various IRS Divisions, including the Small Business & Self Employed (SB/SE) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).The SLAs are located at https://irssource.web.irs.gov/TAS/SitePages/SLA.aspx.

(7) When appropriate, TAS employees may issue Form 12412, Operations Assistance Request (OAR). Upon receipt of an OAR, MOIC management will:

1. Control the request and ensure a response is provided to the TAS office within the requested time frames.

2. Research AOIC or pull the case file (manually monitored) to review the case history.

3. Discuss actions taken with the assigned tax examiner.

4. Contact the TAS office and discuss the OAR issue with the TAS employee.

5. Contact the TAS office and negotiate additional time if it is determined that the time frame cannot be met.

6. Respond to the OAR indicating how the issue is being addressed or resolved within the requested or extended time frame.

(8) As part of the Identity Theft Program, the AM IPSU Team will begin assisting taxpayers whose situations meet TAS criteria 5–7 and involve identity theft. Applicable cases will now be considered IPSU criteria.

(1) The Collection Statute Expiration Date (CSED) is the length of time established by law that the Service can collect any unpaid liabilities.

(2) The CSED is normally ten years from the date of assessment.

(3) Each assessment on a module has a separate CSED. Assessments include but are not limited to:

• TC 150, Entity Created by Posting of a Return

• TC 290, Additional Tax Assessment

• TC 300, Additional Tax or Deficiency Assessment by Examination or Collection Division

(4) Generally, the CSED is suspended when the taxpayer files for or submits a request for a specific case action. See IRM 5.1.19.3, Case Actions That Can Suspend and/or Extend a CSED and IRM 5.8.10.7, Effect of Previous Offers on Collection Statute.

(5) When an offer is deemed processable, a TC 480 is systemically uploaded via AOIC on each tax module included on the offer. If the offer is not on the AOIC system, then TC 480 is manually input. TC 480 suspends the CSED until a TC 481, TC 482, or TC 780 posts. The CSED is extended by the amount of time between the posting of TC 480 and the reversing or accepted transaction code.

• TC 481 = Rejected or Returned (Processable)

• TC 482 = Withdrawn or Terminated

• TC 780 = Accepted

(6) Several legislative changes have provided or revoked the Service's ability to suspend the statutory period of collection for Offers in Compromise.

(7) Computing the CSED using the Julian date:

(8) When a payment is received on an accepted OIC, determine which module has the earliest CSED. Use the table below as a guide to determine the CSED suspension periods:

(9) COIC and Area Offices are responsible for calculating the CSED and ensuring all statute issues are addressed.

(1) While an offer is under consideration, taxpayers may make changes to the original offer. Changes to the amount, terms, tax class, or tax periods, are considered amendments. The taxpayer can submit a new Form 656 or make changes to the original Form 656. The form is marked "Amended" in red on the top margin of page one. Refer to IRM 5.8.8.2, Amendment or Addendum to Form 656.

(1) IAT provides tools that simplify research, reduce keystrokes, eliminate repetitive typing, and increase the accuracy of regular work processes.

(2) The use of IAT is mandatory, if applicable, during the work process. For User Guides, see the IAT web site at https://organization.ds.irsnet.gov/sites/WiMttIat/IATJobAids/default.aspx.

(3) If an IAT tool is not available, or an employee has a problem with the IAT Task Manager, the case should be processed through IDRS, following established procedures. See the IAT Website for how to report/fix problems with IAT tools.

(4) Additional IAT tools will be added to the following list when one is deemed beneficial and seen as adding quality to MOIC work processes.

(5) IAT tool users can visit the IAT Website to become a subscriber to the IAT newsletter. The iNews details all ongoing IAT activity with tool retirements and rollouts.

(6) Various IAT tools are available for MOIC employees, the list below is not all inclusive:

• Address

• Compliance Suite

• Credit Transfer

• Disclosure (Phone Calls Only)

• Erroneous Manual Refund Tool (EMT)

• Fill Forms

• FRM49

• Letter Tool

• Manager Security Tool (MST)

• Manual Refund

• Payment Tracer

• Quick CCREQ54

• REQ77

• TC Tracer

• UP Histories

(1) An offer may be transferred from one campus's jurisdiction to another's if a related offer is being worked at the other campus.

(2) A transfer option has been programmed on AOIC in the Headquarters module. Before a case may be transferred it must be accepted into the SC inventory. If a case is in NW the transfer will not be completed. Once the case is in the Service Center (SC) inventory an e-mail may be sent to the Headquarter's analyst requesting the case be transferred to the other MOIC site. Be sure to explain in the e-mail why the transfer is necessary.

(3) If contact was made with the taxpayer prior to the transfer, you must contact the taxpayer by telephone or letter to advise of the transfer to the new location and provide the campus hotline number found in SERP Who/Where http://serp.enterprise.irs.gov/databases/who-where.dr/oic-backend.html.

(1) Review and compare Form 656/(Amended) Form 656 and AOIC to ensure all tax modules are included.

(2) Refer to the AOIC User Guide, Chapter 5, Receipt of Accepted Offers and Chapter 6, Processing Accepted Offers for instructions on acceptance and control of OICs.

1. Update the campus Main Screen and assign the offer to a tax examiner.

2. Update the Balance (Liabilities) Screen.

   Note: Ensure that the liability screen matches IDRS, this will prevent TC971/032 errors.

3. Set up the Journal to post and schedule payments.

4. Process deposits and payments.

(3) When the campus accepts transfer of an offer on AOIC, the system creates a TSIGN 8500 and TC 130 transaction for each unique TIN in the MFT Screen, then systemically uploads both to IDRS. Tax Examiners must review IDRS Tax modules and ENMOD when an offer is initially assigned to them to ensure the TSIGN 8500 and TC 130 are on each period included in the offer. If not posted within 3 weeks, input manually. Follow- up to monitor for unpostables.

(4) Review the case file and AOIC to ensure that the correct date has been entered in the waiver and acceptance date field on the Service Center Main Screen. TC 780 uploads to IDRS systemically using this acceptance date when the AOIC record changes to a monitoring status. Therefore, the correction(s) are made prior to moving the offer to a monitoring status on AOIC. If TC 780 are manually input, remove from the transaction screen when accepting offer into inventory.

(5) If the error is identified after the systemic upload, then the TC 780 must be reversed and manually re-input on IDRS. Be sure to correct the AOIC waiver date and document the case history with your actions. In order to correct the waiver date, forward the request with all information to HQ Policy.

(6) Update NMF (MFT 20) period(s) by requesting input of TC 780, TC 550 with the new CSED date, and accrued penalty and interest up to offer acceptance date via Form 3177. Send Form 3177 to the Kansas City Submission Processing Campus (KCSPC) NMF unit. A copy of the Form 656 and acceptance letter must be submitted when requesting an adjustment to the NMF periods. The TE should create a dummy file to include these documents. When it is time to place the module in 5M status the documents will be available.

(1) The following procedures apply to accepted offers that have been sent directly to FRC or offers missing from a shipment.

(2) Perfection of case files sent directly to the FRC is the responsibility of the originator.

(3) If the file is missing from a shipment (manually monitored cases) for less than one year, attempt to secure a copy of the Form 7249, Offer Acceptance Report, from the Public Inspection File.

(4) Research IDRS to verify that all balance due modules assessed at the time the offer was accepted are included on the AOIC MFT screen. If any module is missing, refer to IRM 5.19.7.3.4, Overlooked Periods.

(5) Ensure that TC 480 has posted to each tax period shown on the MFT Screen:

(6) Review the terms screen; research IDRS to determine if the taxpayer is in compliance.

(7) Update the AOIC remarks and status.

(1) Occasionally additional periods or years are discovered subsequent to the acceptance of an offer. Missing liabilities assessed before the acceptance are considered only a defect of the offer. When such liabilities are discovered, the offer agreement should be modified to include the additional period(s).

(2) When overlooked period(s) are discovered by MOIC (after acceptance), update AOIC to add a history narrative referencing the overlooked periods. This includes tax years listed on the Form 656 or amended Form 656 not on AOIC.

(3) Return the case file to the originator for a determination via Form 3210 and follow-up for receipt of the acknowledgement copy.

(4) If the file has been sent to Federal Record Center (FRC), update AOIC history and request the file be returned to MOIC. Send the file to the originator for a determination and any necessary pen and ink changes to the appropriate forms as well as for the required signatures.

(5) If the overlooked period(s) are discovered by FOIC or COIC, they will add the periods to AOIC and make pen and ink changes to the Form 7249 and Form 656 to include the additional period(s). The appropriate official must initial the recommended change on the Form 7249.

(1) Initial case review and documentation are required as each case is received into the Tax Examiner inventory and/or re-assigned to another Tax Examiner's inventory. Required documentation includes the following:

• Case type (IMF, BMF, NMF, Corporate, TFRP)

• TC 130 (state whether reversal is required or not required).

• Related offers (include offer number in history)

• Collateral agreement (type)

• Offer type (lump-sum cash, or periodic payment )

• NFTL (document filed or not filed and also document whether a release is required when the offer is received in MOIC inventory)

• Offer amount

• Accepted CDP offer

• POA indicated

• Payments received before acceptance and remaining balance on amount offered

• Follow-up action and the date required (enter a history narrative and the appropriate date on the AOIC follow-up screen). Any offer in a status other than MP, 5M, or MR requires a follow-up established to timely work the actions on the account.

Note: If the offer has not been paid in full, a follow-up is required on all cases where NFTLs are on the accounts. The follow-up may not be longer than 25 calendar days.

• Offers in ML status which have the follow up adjusted due to not finding a payment on IDRS require no additional remark in AOIC since the Follow up will flow to the case remark section. This is only when no action was taken due to a payment not being found.

• Assigned SC status

(2) Accepted offers processed under TIPRA guidelines will have payments applied to the liability while the offer is under consideration and after the liability has been established on AOIC. Refer to IRM 5.8.1.13, The Tax Increase Prevention and Reconciliation Act of 2005. Take the following actions on all accepted TIPRA offers:

1. Review pre-acceptance history entries and verify all payments using IDRS.

2. If the lump-sum or periodic payment offer has been paid in full, take the necessary actions and follow normal processing procedures for full paid offers, including release of the federal tax lien, if appropriate.

3. If the lump-sum or periodic payment offer has remaining payments due, follow normal processing for each offer type and schedule appropriate follow-ups based on the terms of the offer. If there is a NFTL on the account, the maximum number of days for the follow-up can not exceed 25 days in order to meet the requirement for timely lien release within 30 days of the final payment. If the lien was self-released on ALS, it does not require a lien check follow-up.

   Note: There should be a prior history entry to indicate how any payments received before acceptance were applied. Both the tax period and the amount applied should be evident in the history and verified using IDRS. MOIC is not responsible for the movement of pre-acceptance payments as long as they are on the correct taxpayers account and were posted to an offer period.

(3) All initial case actions on all offers, AOIC and manually monitored, must be documented in the history with the appropriate OFP codes from count actions taken.

(4) All subsequent case actions, (e.g., journaling of payments, recoupment completed or not applicable and why, checked for NFTL, lien released, 3439 verified, collateral to exam or returned from exam, letter sent to taxpayer/POA, received response and state the nature of the response, etc.) must be documented. If taking actions using an IAT/GII tool and multiple transactions are completed due to the tool use, not all actions need to be stated.

(5) All contacts, written or verbal, with the taxpayer/POA or internal contacts (e.g., collateral package sent or received, phone calls received or made) or any other contacts relevant to the offer must be documented.

(6) AOIC remarks must be documented with the date a letter is issued if it is not the date it was generated.

(7) When reviewing the taxpayer’s entity and a discrepancy exists between the AOIC address and the IDRS address, review CC ENMOD for the address cycle to determine which is more recent and update AOIC entity, if appropriate. If unable to determine or confirm, contact should be initiated with the taxpayer. Refer to IRM 3.13.5.29, Oral Statement/Telephone Contact Address Change Requirements.

(1) Incoming OICs must be accepted and updated on AOIC within twenty-five days of MOIC receipt (NW status) when NFTLs are present to ensure timely release of liens on all full paid offers. On offers where no NFTLs are present, the OIC should be accepted and updated on AOIC within 30 days.

(2) Appropriate AOIC screens must be updated to an "MX" status or Form 6314 Deferred Payment Offer Payment Record, prepared for incoming accepted cases.

(3) TSIGN 8500 and TC 130 systemically upload when the AOIC status is changed from "NW" (new work unassigned) to "OA" (open assigned).

(4) When the AOIC status is updated to a "MX" (monitoring) status TC 780 uploads.

(5) If incoming accepted offers have not been updated on AOIC within thirty days of receipt, campuses should have the clerical staff make INTST prints and manually input TC 780 to ensure specific restrictions are in place and accounts with recent payments are identified to ensure timely release of the federal tax lien when appropriate. When the case is eventually accepted on the system, delete the systemic upload of TC 780 from the MFT summary screen.

(1) The AOIC system will generate a Form 2424 and journal the fee through the Journal and Balance screens. The Form 2424 must be mailed or remotely printed to the Accounting function affiliated with the COIC site where the offer was initially loaded. Form 2424 will show the designated application fee fund account.

(2) If the taxpayer requests a refund of the fee, prepare a manual refund, using Form 5792. See IRM 21.4.4.5.1, Preparation of Form 5792, IDRS Generated Refund. The Accounting function requires a signature from someone authorized to sign the manual refund request form. After the form has been signed by someone authorized, it should be sent to Ogden Accounting for refunding. All requests for manual refunds must be controlled and monitored on the Integrated Data Retrieval System (IDRS) by the initiator (or other management designated employee) to prevent duplicate, erroneous refunds. See IRM 21.4.4.6.1, Monitoring Manual Refunds, for more information.

(1) Instances of identity theft can either be alleged by the taxpayer or can be identified by a Service employee. The taxpayer can self identify by providing any of the following:

• Form 14039, Identity Theft Affidavit

• Police report

• A statement claiming they are a victim

(2) Below are procedures for inputting the identity theft transaction codes and preparing a referral to report the identity theft case. Prior to inputting an identity theft TC 971 Action Code, review IDRS CC ENMOD to prevent inputting a duplicate TC971 Action.

(3) The tax examiner will be responsible for:

1. Identifying the identity theft by an TC 971 cc 522 on an offer or recoupment year or if the claim is received from the taxpayer in response to a potential default letter.

2. Working offers involving identity theft on a first in first out basis and should take priority over other assignments.

3. Input TC 971 code. See IRM 25.23.2.4.4, Initial Allegation or Suspicion of Tax-Related Identity Theft - IMF Identity Theft Indicators, Use Tax Administration Source Code "IRSID" for IRS identified suspected identity theft cases.

   Note: Reviewing CC ENMOD is necessary to help prevent duplicative (identical) TC 971 AC 5XX entries. Prior to marking an account with TC 971 AC 522 PNDCLM or IRSID, research CC ENMOD/CC IMFOLE to ensure the account has not already been marked.

   Note: When the identity theft victim is the secondary SSN on a joint account, the identity theft indicator is input on the secondary SSN. Identity theft indicators are not input on the primary SSN in these instances. If both primary and secondary taxpayers are victims, place the indicator on both SSN's

4. In situations where the taxpayer initially asserts identity theft and provides supporting documents at the same time, follow the procedures in IRM 25.23.2.3.6, When to Request Additional Information to Support an Allegation of Identity Theft.

5. Request supporting documentation, when appropriate. Generally, taxpayers alleging identity theft will be required to provide supporting documentation. However, there are situations where the taxpayer will not be required to submit documentation.

6. Set a follow up on AOIC for 45 days for receipt of taxpayer response.

7. If the taxpayer does not provide substantiation documentation when requested, proceed assuming the taxpayer is not an identity theft victim. Follow procedures in IRM 25.23.2.6.6, Reversing Unsupported Allegations of Identity Theft.

8. If the liability was assessed in ASFR, AUR or EXAM, determine the source of the identity theft liability (ASFR, AUR, EXAM, etc.) and forward as appropriate with any applicable documentation.

   Note: Forward a Form 4442 referral and route based on SERP ID Theft Liaison Listing on the Who Where tab http://serp.enterprise.irs.gov/databases/who-where.dr/idt-liaison-listing.html

9. The liability was not assessed in ASFR, AUR or EXAM. Complete and Forward a Form 4442 referral and route to the site Revenue Officer. They will determine the validity of the taxpayer's claim and forward to the DITA group if necessary.

(4) In other instances, a tax return may be delayed in processing if identified by the Return Integrity Verification Operation (RIVO). RIVO works to detect, evaluate and prevent the issuance of improper refunds. While monitoring compliance, MOIC employees periodically encounter returns being worked by the Taxpayer Protection Program (TPP). See IRM 25.25.6.1.7 Taxpayer Protection Program Overview for more information on how to identify these cases. Taxpayers should be encouraged to follow the instructions in the letter they received in order to resolve the delay.

(5) Although MOIC may not be working the identity theft issue, it is crucial to know the impact the theft has on the monitoring of the offer. If another program is working the identity theft, contact should be made with that program to find out the impact. In some cases, such as a Criminal Investigation (CI) case, the program may request you do not notify the taxpayer of the pending investigation.

(1) OICs may be accepted on federal employees, including IRS employees. Monitoring of accepted IRS employees' offers should be coordinated with the MOIC Tax Examiner designated to work FERDI cases. See IRM 5.19.1.5.6, Federal Employee/Retiree Delinquency Initiative (FERDI).

(1) The TFRP is a penalty imposed by IRC 6672 against any person required to collect, account for and pay over taxes held in trust by an employer and who willfully fails to perform any of these activities. Taxpayers are assessed the penalty on the IMF equal to the unpaid trust fund amount (TC 240 Reference Number 618) under MFT 55. See IRM 5.19.14, Trust Fund Recovery Penalty.

(2) There are four different possible types of offers related to the TFRP assessment:

• An offer filed by an employer before the TFRP is assessed against responsible parties

• An offer filed by an employer after the TFRP is assessed against responsible parties

• An offer filed by one or more responsible parties before the TFRP is assessed.

• An offer filed by one or more responsible parties assessed the TFRP

(3) The Service will continue to collect any remaining trust fund portion of the Form 941, Employer’s Quarterly Federal Tax Return, balance due via TFRP (MFT 55) assessments after the offer amount has been full paid by the employer.

(4) When the TFRP is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

(5) Therefore, if the tax has been assessed at the time of acceptance, the area office will not request abatement when the offer terms have been met.

(6) After all offer payments have been received (BMF accounts containing a TC 971 AC 093, or an MFT 55 account that contains a TC 240/RN 618) take the following actions before the accounts are written off:

1. MOIC must contact the TFRP liaison. Brookhaven MOIC will contact Brookhaven TFRP, and Memphis MOIC will contact Ogden TFRP. These contacts can be found on SERP under Who/Where.

2. The TFRP liaison will determine if there is an open TFRP case in current inventory. If so, TFRP will expedite those case actions and close the case. If there is no open case in TFRP inventory, no case actions are required. Then, the TFRP Liaison will inform MOIC that they can proceed with necessary actions to close the offer.

3. Initiate closing actions on the account per IRM 5.19.7.13, 5-Year Monitoring Status.

(1) The Personal Liability Excise Tax (PLET) under IRC 4103 is a collection tool used to collect certain unpaid excise taxes from responsible person(s) affiliated with a business reported on Form 720, Quarterly Federal Excise Tax Return.

(2) Excise taxes reported on Form 720 are identified on the return as "IRS Numbers". The abstract IRS numbers listed below are for fuel taxes subject to PLET assessment:

• 60 (a) - Diesel, tax on removal at terminal rack.

• 60 (b) - Diesel, tax on taxable events other than removal at terminal rack.

• 60 (c) - Diesel, tax on sale or removal of biodiesel mixture (not at terminal rack).

• 104 - Diesel-water fuel emulsion.

• 105 - Dyed diesel, LUST tax.

• 107 - Dyed Kerosene, LUST tax.

• 119 LUST tax, other exempt removals.

• 35 (a) - Kerosene, tax on removal at terminal rack.

• 35 (b) - Kerosene, tax on taxable events other than removal at terminal rack.

• 69 - Kerosene for use in aviation.

• 77 - Kerosene for use in commercial aviation (other than foreign trade).

• 111 - Kerosene for use in aviation, LUST tax on nontaxable uses.

• 79 - Other fuels.

• 62 (a) - Gasoline, tax on removal at terminal rack.

• 62 (b) Gasoline, tax on taxable events other than removal at terminal rack.

• 13 - Any liquid fuel used in a fractional ownership program aircraft.

• 14 - Aviation gasoline.

(3) Separate documents must be prepared for each tax period and separate assessments for each type of excise tax if the Form 720 contains multiple types of excise tax. It is also possible to make the assessment against more than one responsible person.

(4) Unlike the TFRP which is an assessment of a civil penalty under MFT 55, the PLET is an assessment of the actual unpaid tax and is assessed under TC 150 or TC 290 on NMF. The NMF assessment is made under the individual's SSN on MFT 45 using tax class 6, blocking series 600-619, and Doc Code 30. The literal "Section 4103" appears on the face of the balance due.

(5) When the PLET is assessed at the time we accept an offer from a business, we may still collect from the responsible person(s) any amount not paid by the business.

(6) Therefore, if the tax has been assessed at the time of acceptance, the area office will not request abatement when the offer terms have been met.

(1) Taxpayers may file for bankruptcy relief after an offer has been accepted. The offer should not be defaulted and payment should not be solicited while the taxpayer is in bankruptcy. Defaulting the offer or soliciting payments could violate the bankruptcy automatic stay.

(2) The Insolvency Interface Program searches for Status 71 upon receipt of bankruptcy notification from the courts. When the application identifies Status 71, Insolvency should contact and work cooperatively with the local OIC specialist group or the campus sites to maintain close coordination.

(3) A tax liability is either discharged in bankruptcy or excepted from discharge (non-dischargeable). If the taxpayer receives a discharge of a tax liability, any request for payment by the Service would be a violation of the discharge injunction.

(4) If the tax liability is excepted from discharge, the Service is able to take collection action on any remaining unpaid balance. However, the decision to request payment of unpaid offer balances after the bankruptcy depends on the particular facts of each case and direction provided by Insolvency.

(5) You may learn that the taxpayer filed bankruptcy by:

1. Notification from the taxpayer or the taxpayer's representative.

2. Notification from the Insolvency Unit.

3. Discovery of a posted TC 520.

(6) A posted TC 520 with closing codes in the range of 60-67, 81, 83-89 indicates that the taxpayer's account is in bankruptcy, See IRM 5.9, Bankruptcy and Other Insolvencies, for additional information.

(7) The freeze indicators used for bankruptcy (-V and -W) affect notices, offsets and refunds depending on the closing code used.

(8) Contact Centralized Insolvency Operation (CIO) at ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. If the case is not assigned to CIO, the CIO caseworker will refer the caller to the Field Insolvency caseworker assigned to the case and provide the caller with the caseworker’s telephone number. Depending on the bankruptcy chapter and status of the OIC, Insolvency will provide the appropriate instruction. The following questions must be asked:

1. What is the docket number?

2. What is the bankruptcy chapter the taxpayer has filed under? If Chapter 7, ask if assets are involved. See note in item 9 below.

3. Is there a bankruptcy plan involved? If so, how long is the taxpayer expected to make payments under the plan?

4. Are the offer periods included in the proof of claim? (Only applies to Chapter 13 otherwise N/A.)

5. Should we suspend OIC monitoring or should we continue?

6. When can we resume monitoring?

7. Will MOIC be notified of the discharge order and provided with appropriate instructions regarding the offer?

(9) Immediately following your contact with the Insolvency:

1. Document in the AOIC or manual history file including all information secured.

   Note: If the taxpayer has already paid the offer amount and the bankruptcy is a Chapter 7 with no assets, the Tax Examiner may continue monitoring as usual. The offer will only be impacted if the taxpayer has a tax liability assessed while the TC 520 is still on the account or fails to comply with any other terms of the offer. Insolvency will then need to be notified to see if collection actions may be taken.

2. Set a six month follow up for the bankruptcy issue.

   Note: A 25-day follow-up to check for full payment is still required if there is a NFTL on the account.

   Note: At the 6 month follow up check IDRS for a TC 520 reversal. If the Insolvency contact states that payments are involved and it will be several years of payments then consider a follow up with Insolvency when the last payment is near. The taxpayer could default the bankruptcy.

3. Update the AOIC status to MB.

(10) Contact Insolvency with questions regarding overpayments, including refund recoupment, prior to resolving the credit. Document AOIC remarks with the response received.

(11) The taxpayer's account should be monitored for discharge:

(12) A full discharge of debt in bankruptcy enjoins the collection of the debt of a personal liability of the debtor. Tax liabilities unpaid at the close of the bankruptcy proceedings must be adjusted, reactivated or reported currently not collectible. However, a partial or excepted discharge allows the remaining liability to be collected according to terms of an accepted OIC. For example, after the 5th payment of a 24 month Periodic Payment offer, taxpayer filed bankruptcy and has a non-dischargeable liability, the taxpayer wants to continue with the monthly offer payments (after bankruptcy), thus when the IRS continues the OIC contract after bankruptcy, the taxpayer would submit his 6th payment and continue making payments based on the terms of the accepted offer.

(1) IRC 7508 postpones the time for performing various tax acts for individuals serving in the Armed Forces of the United States, or serving in support of such Armed Forces, in a designated combat zone, or when deployed outside the United States away from the individual's permanent duty station while participating in a contingency operation (as defined in 10 U.S.C. Section 101(a)(13)). See IRM 5.19.10.6.3, Combat Zone Freeze Code.

(2) The postponement lasts for the period of time the individual serves in, or in support of, the combat zone or contingency operation, plus the period of continuous qualified hospitalization attributable to an injury received while serving in, or in support of, such combat zone or contingency operation, plus another 180 days.

(3) The acts postponed include filing any return of income, estate, gift, employment, or excise tax; payment of any income, estate, gift, employment, or excise tax or any installment thereof; filing certain petitions with the Tax Court; filing a refund claim; and bringing a refund suit. The time for performing certain acts performed by the Service are also postponed, including giving or making a notice or demand for payment of tax, collecting by levy or otherwise, assessing any tax, charging any penalty or interest, or taking enforcement activities against individuals during the postponement period. This includes attempts to collect offer payments or instituting potential default actions against individuals with an accepted offer.

(4) Because Section 7508 only applies to individuals, the relief does not apply to partnerships or personal service corporations (e.g., doctor, dentist, CPA, etc.) where the key individual is/was serving in the combat zone. Thus, while the Service can make an administrative determination to allow additional time to make a payment or to not default the partnership or personal service corporation, interest and penalties will continue to accrue (unless reasonable cause for penalty abatement exists - interest cannot be abated for reasonable cause) while such key individual is/was serving in a combat zone or contingency operation. Section 7508 does, however, apply to sole proprietorships because the individual in the sole proprietorship is serving in the combat zone or contingency operation, while the partnership or personal service corporation itself is not serving in the combat zone or contingency operation. Thus, no penalties and interest will accrue against an income tax liability of a sole proprietorship during the postponement period. For purposes of employment and excise liabilities, however, penalties and interest will accrue for payments due before August 25, 2005. Section 403(a) of the Katrina Emergency Tax Relief Act of 2005.

(5) Those serving in support of the Armed Forces in a combat zone include any support personnel on official duty in the combat zone such as Merchant Marines, Department of Defense contractors, Red Cross workers, and accredited news correspondents. See IRM 5.19.10.6.2, Combat Zone Qualified Individuals and Areas.

(6) Determining whether a taxpayer is entitled to section 7508 relief can be based on correspondence, case history entries or telephone contact.

(7) The following provides instructions for handling taxpayers identified as being entitled to section 7508 relief:

1. Input TC 500 with the appropriate closing code (CC) for the following combat zones:

Input TC 500 CC 52 (entry date) or closing code 53 (exit date) - Desert Storm

Input TC 500 CC 54 (entry date) or closing code 55 (exit date) - Bosnia

Input TC 500 CC 56 (entry date) or closing code 57 (exit date) - Enduring Iraqi Freedom

Note: See IRM 5.19.10.6.3, Combat Zone Freeze Code in evaluating -C Freeze accounts.

2. Use the current date for an incoming telephone call or the IRS received date for correspondence when a service member advises of impending deployment to a combat zone.

3. The case should be suspended for 180 calendar days without taking any further action. Cases can be placed in MO status and a follow-up date entered on AOIC (or IDRS if manually monitored).

4. Management should use the AOIC Follow up Screen to monitor the progress of the case until the TC 500 is reversed.

5. If there is a joint offer and the spouse is willing to maintain terms, monitoring may continue.

6. The Service established an email site that military personnel, support personnel and their families may use to contact the IRS. It is combatzone@irs.gov.

(1) When the Service receives notification or identifies that an OIC taxpayer has died while monitoring an offer, MOIC will follow the below procedures in working the offer.

(2) Record or note the taxpayer's date of death on Form 6314 or on the AOIC history, if available.

(3) If a copy of the death certificate is submitted and there is a physical file, place the copy in the file and return the original to the submitter. If no case file, annotate the AOIC history and return the original to the submitter.

(4) Terminate the offer as directed above unless the offer was accepted by DOJ. If the offer originated with or was accepted by DOJ, take the following actions:

1. Record the Date of Death (DOD) on Form 6314 or on AOIC.

2. Prepare a Form 2209, Courtesy Investigation, to request a determination to either keep the offer open or to close the offer without reinstating the liability.

3. Provide your information source in the "Remarks" section.

4. Send Form 2209 to the to the appropriate Advisory function..

5. Update IDRS control to reflect Form 2209 issued to DOJ, if the account is not on AOIC.

(5) If DOJ requests the case file, send the case file via Form 3210. Place Form 2275, Records Request, Charge and Recharge, in the suspense file. Request the case file if it was previously sent to FRC. See IRM 1.15.4, Retiring and Requesting Records, for guidance on how to return the case files to the FRC.

(6) Upon receipt of Form 2209 response, with or without the case file, follow the directed disposition.

(1) Section 7508A provides the IRS with authority to postpone the time for performing various acts for a taxpayer affected by a federally declared disaster. These acts include, but are not limited to: the filing of certain tax returns; the payment of certain taxes (including any installment of these taxes); the filing of a Tax Court petition; the filing of a claim for credit or refund of tax; and the bringing of a refund suit.

(2) Taxpayers identified by the IRS as "affected taxpayers" are eligible for the relief stated in (1) above. These affected taxpayers include any individual whose principal residence, and any business entity whose principal place of business, is located in county, or parish identified as being part of a "covered disaster area" by the IRS.

(3) OIC taxpayers may contact the Taxpayer Advocate Service (TAS) or MOIC stating that they have suffered a disaster, such as a fire, or flood that prevents timely mailing of a payment, return, or other information. Taxpayers should be allowed a reasonable amount of time to adhere to the offer terms. No relief from interest is available unless the disaster is a federally declared disaster, and then only for current year taxes. Refer to IRM 21.5.6.4.30, -O Freeze, or IRM 21.5.6.4.37, -S Freeze, for additional information.

(4) Tax accounts with a -S freeze will continue with normal MOIC processing, there is no restriction on sending letters. Employees should exercise good judgement and sensitivity.

(5) Tax accounts identified with the -O freeze will be moved to MD status with the remarks indicating the date the -O freeze expires, and establish the appropriate follow-up. Offers in ML status will continue in this status and with their normal follow-up time frame. The journal due date is not changed.

(1) Non-Master File (NMF) was centralized on November 5, 2018, in Kansas City Submission Processing Campus (KCSPC). All new assessments and/or documents to establish accounts on NMF must be sent to KCSPC.

(2) The following NMF account types are established at the KCSP Campus:

• Business Master File (BMF)

• Internal Revenue Service Closing Agreements

• Form 1120 DISC and 1120 IC-DISC

• Full Collection Child Support

• Form CT-2, Employee representative Quarterly Railroad Retirement Tax Returns

• Individual Master File (IMF)

• International Returns BMF

• IRC 6702, Frivolous Income Tax Return Penalty

(3) To find the contact go to SERP, Who/Where, Accounts Management and Accounting Point of Contact, see the Accounting and KCSPC contact listed.

(1) The IRS CAWR (Combined Annual Wage Reporting) program ensures that employers have paid the proper amount of taxes, withholding, and advanced earned income credit. This is done by comparing the Forms W-3, Transmittal of Wage and Tax Statement, Form W-2, Wage and Tax Statement, Form W-2C, Statement of Corrected Income and Tax Amount, Form W-3C, Transmittal of Corrected Wage and Tax Statements, totals and the Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form W-2G, Certain Gambling Winnings withholding amounts to the amounts reported on the employment tax returns.

(2) The SSA-CAWR program addresses apparent "missing" Form W-2. These cases are referred to IRS by SSA (Social Security Administration) for follow-up and, if necessary, to make penalty assessments for failure to file.

(3) Cases that are determined to have discrepancies or that are referred by SSA, are loaded onto the CAP (CAWR Automated Program) Tier II SUN at TCC. CAP is a stand alone computer (inventory) application that houses the CAWR programs. All master file actions that affect the taxpayer's account for the years being worked will result in an update to the CAP system. This includes Entity changes, IDRS adjustments and additional Forms W-3, Transmittal of Wage and Tax Statement, and Forms W-2, Wage and Tax Statement, processing by the SSA.

(4) BMF taxpayers identified during processing CAWR may have pending or accepted offers on file with IRS. Additional assessments can be made while the offer is pending but, not after the offer is accepted.

(5) If a TC 780 or TC 788 is on the BMF tax modules, CAWR examiners will forward CAWR CAP documents (Money Screen and Entity Screen) to be associated with the OIC case file.

(6) Make a note in the history on AOIC or manually monitored file that the CAWR assessments documents have been placed in the case file or a dummy file has been created.

(7) In accordance with IRC 6721, a penalty for "intentional disregard" systemically generates for CAWR assessed tax periods. Because the CAP system does not recognize Status 71 on an OIC entity, the penalty assessment will generate and is established under MFT 13.

(8) When this penalty generates following acceptance of an offer:

(1) The Automated Underreporter Program identifies taxpayers who have not reported all of the income on a filed income tax return. The program compares the total amount from all income reporting documents such as Form W-2,Form 1099, etc. to the amount shown on the filed income tax return.

(2) When an accepted OIC is transferred into MOIC's inventory by updating to a MX status on AOIC, a TC 780 (-Y freeze) is generated on IDRS. Input of the TC 780 freezes the tax module and causes attempts to input subsequent underreporter adjustments to unpost.

(3) The Offer Examiner or Offer Specialist must review IDRS before inputting TC780 because AUR issues must be resolved before transferring an accepted OIC into MOIC's inventory.

(4) TC 922 with process code 03 or 06 indicates that AUR has selected the taxpayer's return for processing.

(5) If a TC 922 is present followed by one of the following closure process codes (process codes are shown to the right of TC 922), TC 780 can be input without contacting AUR.

(1) A DATL offer is filed on Form 656-L and will only be accepted for the tax period (s) in question.

(2) No TIPRA payment or application fee is required for a doubt as to liability offer.

(3) Accepted DATL offers are not monitored for the 5 year payment and filing compliance nor is the refund recoupment part of the terms.

(4) A DATL offer is closed to CF status after the payment terms are completed.

(1) Taxpayers may attempt to amend a return for a tax period(s) included on the offer, however, once the tax period has been compromised, changes cannot be made to the amount assessed.

(2) If an amended return is received for an offer period return the original form, and remittances (if submitted with the amended return), to the taxpayer with a letter advising that we can not process an amended return on a tax period included in an accepted offer.

(3) If the offer is being monitored with a physical case file make a copy for the file.

(4) Update the AOIC or case file history.

(1) During the 5-year compliance monitoring period of an accepted offer, a determination to rescind an existing compromise agreement may need to be made.

(2) An offer is an agreement which is binding and conclusive on both the taxpayer and the government, and prohibits further action on periods related to the offer unless

• the taxpayer supplied false information or documents in connection with the offer; or

• the taxpayer concealed his ability to pay or assets; or

• a mutual mistake of a material fact is discovered.

(3) Requests regarding rescission of accepted offers are routed to the MOIC area from COIC, the Area offices, Appeals, or Counsel. MOIC will take the following action to return the original offer file to the originator as required:

1. Use AOIC to determine who the originator of the accepted offer was and advise them of the call/contact.

2. If the offer file is immediately available, MOIC will forward it to the originator on Form 3210and annotate AOIC or the case file if the offer is manually monitored.

3. If the offer has been shipped to FRC, MOIC will request the file, forward it to the originator on Form 3210 when received and annotate AOIC or the case file.

4. The originator will prepare the appropriate letter(s), secure required approval and place a copy of the letter(s) in the case file. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

5. The originator will return the accepted offer file to MOIC via Form 3210 and provide guidance regarding any necessary changes to AOIC and/or IDRS as a result of the rescission. The guidance will be either to have the offer returned to the accepting official on AOIC so that a final determination can be made or MOIC will be instructed to close the offer. If MOIC closes the offer they will place the offer in CX status. Refer to IRM 5.8.9.2, Rescission of Accepted Offers.

6. MOIC will take the required actions, document AOIC as appropriate and return the case file to the FRC. See IRM 1.15.4 for guidance on how to return the case files to the FRC.

(1) As part of the IRS Restructuring and Reform Act of 1998 (RRA 98), Congress added section 7122(c) to the Internal Revenue Code. That section provides that the Service shall set forth guidelines for determining when an offer in compromise (OIC) should be accepted. Congress explained that these guidelines should allow the Service to consider:

• Hardship

• Public Policy, and

• Equity

(2) Offers listed as Effective Tax Administration (ETA) will show as an offer type “A” on AOIC. These offers pertain to accepted offers only and should be resolved by MOIC within 45 days of acceptance. An offer accepted Doubt as to Collectibility with Special Circumstances (DCSC)is the basis for acceptance of an offer where there is doubt that the tax can be paid in full and special circumstances exist that warrants accepting the offer for less than the reasonable collection potential (RCP).

(3) Most offers require an application fee when submitted, however, the fee may become refundable on Offers accepted under Effective Tax Administration (ETA) or certain offer accepted under Doubt as to Collectibility with Special Circumstances (DCSC).

(4) The Acceptance Letter for ETA or DCSC offers will include a paragraph asking the taxpayer if they want the fee applied or refunded. The taxpayer decides whether the application fee will be refunded or applied.

(5) Offers accepted under ETA or DCSC in Appeals may not be easily identified on AOIC. Upon receipt of the case file, clerical should forward copies of the Appeals Acceptance Letter and Form 5402, Appeals Transmittal and Case Memo to the assigned Tax Examiner for review and proper handling of the application fee.

(6) The taxpayer is given 30 days from the date of the letter to notify us in writing. The paragraph reads: "Your offer was accepted based on effective tax administration or doubt as to collectibility with special circumstances. The application fee you paid when you submitted your offer will therefore be applied against the amount of the offer. If you would like the application fee refunded to you rather than applied against the amount of the offer, you must notify us in writing at the address below within 30 days of the date of this letter. If you request a refund, any amount due under the offer will not be reduced by the amount of the fee."

(7) The application fee will be applied to the offer amount and tax liability if the taxpayer does not respond or replies late. Allow an additional 15 days following the 30 days from the date of the letter (total 45 days) before applying the fee. Refer to IRM 5.19.7.3.7, Applying or Refunding the Application Fee.

(1) The Department of Justice (DOJ) settles certain tax litigation cases by accepting a Settlement. DOJ sends accepted Settlement cases to the Collection Advisory office responsible for that geographic area. See Pub 4235 for a list of Collection Advisory offices by state.

(2) The Advisory office retains the original accepted case file. If the compromised liability has a deferred payment or collateral agreement, the campus monitors the case to ensure that the taxpayer complies with the terms of the settlement agreement.

(1) Maintain a file of Forms 6313, Collateral Agreement Payment Records, for all manually processed offers. It is not necessary to maintain a file for any account loaded on AOIC.

(2) Maintain the file in alphabetical order.

(3) Maintain forms in the file until the collateral is closed.

(1) Closing actions for offers not controlled on AOIC must be input manually.

(2) Input the following on each open period via IDRS:

1. Input TC 131 using CC REQ77, if not previously input.

   Note: Any related TIN that had a TC 130 input must also have a TC 131.

2. Input TC 971 with AC 032 using CC REQ77.

   Note: TC 971 will generate a TC 604 which will zero balance and remove all remaining liabilities.

3. Wait for the TC 604 to post.

4. TSIGN each TIN to 0000, or as requested by the territory office.

5. Input TC 788 using CC REQ77 with Delay Code 2 to allow TC 971/032 to post. Set a follow-up for 2 cycles to ensure TC 788 input on Masterfile.

(3) Make a photocopy of Form 6314 (showing the zero offer amount balance due) and write or stamp "Notice to Release Lien".

(4) Notify the Centralized Lien Operation (CLO) to release the Federal Tax Lien(s). Follow guidelines in IRM 5.19.7.8.9, Releasing the Federal Tax Lien.

(5) If the offer is submitted by one party of a joint assessment, special rules apply. See IRM 5.19.7.11, Separate OICs on Joint Liabilities.

(6) Note all actions on the case history sheet or AOIC (per campus policy).

(7) Write or Stamp "Closed" and the date on the case folder and file the case in the closed file.

(8) For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

(1) The AOIC Transaction Listing is a report of error listings for each individual tax examiner and shows all transactions that did not automatically post to IDRS. The report will not give examiners an individual listing, but a listing of all errors for the Campus that is selected. Identify the error by the assigned IDRS number. If there are no employee numbers listed, look up the offer number to determine assignment.

(2) The Daily Transaction Listing on AOIC should be printed daily. Review the information from the report and determine the actions needed on each offer, if any. Some offers may indicate a pending transaction due to another AOIC download. No required action is needed on these. The listing has three parts.

1. Part one shows the transactions that have been sent for processing.

2. Part two shows the errors, which must be input manually on IDRS.

3. Part three shows Non-Master File transactions which must be input manually on IDRS.

(3) To resolve the errors, view TXMOD on IDRS. The unpostable will be notated by a transaction "UPC" code. Refer to the 6209 for the explanation of the unpostable and what code will correct it. Refer to the error listing to see if the transaction is being sent out again. Check on IDRS to see if the unpostable is closed. If it hasn't been closed then you can use CC UPDIS to request how to close or correct with the appropriate transaction. If the control has already been closed, you need to contact the Unpostable Unit (SERP, Who/Where, Campus Directory, Unpostable unit for SC) that issued the transaction. These can be either phoned or faxed. The first two digits of the DLN of the unpostable transaction will show where the code originated. The If/Then table listed below has the required action based upon the error received.

(4) Please see the table below to resolve errors on TC 780/788 errors.TC 780/788 Errors

(5) Please see the table below to resolve TSIGN errors:TSIGN Errors

(6) Please see the table below to resolve errors on TC 130/131:TC 130/131 Errors

(7) Please see the table below to resolve errors on TC 971:TC 971 Errors

(8) MF and NMF transaction error corrections must be input on the same day as the listing is generated.

(1) Update AOIC with the deposit information from the Form 2515, Form 656, or other documentation. Follow procedures in the AOIC Service Center User Guide, Chapter 3.

(2) After the deposit information has been input, generate the Form 3244 CG from AOIC.

(3) Route a copy of the Form 2515 and generated AOIC forms to the RACs Unit through Receipt & Control (R&C), R &C will forward Form 2515 to RACS in Accounting. The remittance will be deposited by R &C.

(1) Maintain a file of Forms 2515 prepared on all manually processed offers which have deposits on RACS. Maintain the forms in the suspense file for 6 months following refund of the deposit to ensure there are no undeliverable issues.

1. Maintain the file in alphabetical order.

2. Update Form 2515 as necessary.

(1) Maintain a control of all offer deposits based on the Revenue Accounting Control System (RACS) number posted at the top of the Form 2515.

(2) Open offer deposits are to be reconciled monthly when the RACS Inventory Report is received.

(3) For offers on AOIC, the Form 2515 can be destroyed once the 4710 account is clear of the related funds and the AOIC history is documented as to the disposition of the deposit. Form 2515 for all manually monitored offers can be placed in the case file once the deposit has been cleared from the 4710 account listing and the case file documented.

(1) Maintain a Form 2515 closed file on all manually processed Offer in Compromise cases with deposits that were closed as Rejected or Withdrawn. These files can be purged one year after the deposit account has been reconciled and the deposit either applied or refunded.

(2) Retain all Forms 2515 for deposits that post back into RACS until the funds are either refunded or applied.

(3) Maintain the file in alphabetical order.

(4) For information on the retention and disposition the case file that contains original records see the Records Control Schedule, Document 12990.

(1) Deposits made on offers not controlled by the AOIC program must be processed manually.

(2) Manually processed deposits must be assigned an 8 or 10-digit RACS control number. This number may be created by RACS or the OIC Unit.

1. Assign one RACS number per offer. If multiple deposits are received on an offer, all deposits will use the same RACS number.

2. Maintain a log of manually assigned RACS numbers.

(3) Research the RACS Report Control File and determine if a previous remittance was recorded as a deposit for the OIC taxpayer.

(4) For both initial and subsequent deposits, route the copy of Form 2515 and Form 3244 to the RACS Unit in Ogden Accounting. The remittance will be deposited through R & C.

(5) Form 3244 will be returned by Accounting with a journal number and date.

(6) Associate and attach the Form 3244 to the Form 2515 in the 4710 Account File.

(7) Maintain the Form 2515 until the remittance has been either applied or refunded and the 4710 account cleared of the funds.

(1) When the offer investigation is completed and a determination has been made, deposits in the 4710 Account must be refunded to the taxpayer or applied to the tax liability.

(2) Deposits on accepted offers will be applied to the taxpayer's liability.

(3) Deposits on withdrawn, rejected or returned offers will be refunded to the taxpayer by completing Form 3753, Manual Refund Posting Voucher, unless the taxpayer has provided written consent to apply the funds. , , In most cases, taxpayers authorize the application of their deposit by checking the box and entering their initials in the Deposit section of the Form 656 revised March 2017 through April 2021. Written authorization can be secured at anytime during or following the investigation. AOIC will be documented regarding the authorization and MOIC employees should confirm the written consent was secured and clearly documented in AOIC Remarks prior to applying a deposit to the tax liability.

(4) Although IRM Exhibit 21.4.4-2, Manual Refund Checklists, instructs employees requesting manual refunds to contact the Financial Management System (FMS), it is not necessary for refunds from the 4710 RACS Account.

(1) Take the following actions to process deposits through AOIC. (Refer to the AOIC User's Guide, Chapter 3.)

(2) Print the AOIC Offer Deposit Disposition Listing monthly. This listing identifies withdrawn, rejected and returned offers and also indicates the type of disposition. (A= Applied/R= Refund.)

(3) All monitoring units must apply or refund deposits controlled by their sites.

(4) Although OIC deposits submitted with incoming offers may be physically located in the 4710 accounts at the other campus, each campus is responsible for the deposit disposition for the states serviced by their site.

(5) When disposing of AOIC offers with deposits residing in the 4710 account of the other campus per the state mapping, send an email to the campus’s Deposit e-fax mailbox and document AOIC remarks with the appropriate information.

(6) When a request to refund a deposit is made and it is not on the deposit disposition list, verify that this is what the taxpayer wants by reviewing the AOIC remarks before contacting the requestor (Area, COIC, etc.). Remarks must be entered on AOIC. Provide Accounting with a print of the 4710 deposit as indicated in (2) table.

(1) Deposits are recorded on Form 2515 and Form 6313 for manually monitored cases. When the manual control card, Form 2515 or Form 656 indicates the taxpayer made a deposit(s):

1. Check the 4710 Account file and/or the 4710 Monthly report to be sure a credit is available.

2. Add any additional deposit amounts to Form 2515.

3. Record transfer of the deposit on Form 2515 (enter the amount and periods where the deposit was applied) to zero out the credit.

4. Once RACS deposits post, secure an INTST print to the date of acceptance to compute the amount(s) to be applied on each period affected by the deposit.

5. Annotate the 4710 Account list indicating the date, amount and tax examiner making the transfer of the funds to master file.

6. Re-file Form 2515 in 4710 Account file.

7. After reconciliation, file Form 2515 in the case file.

(2) Apply the deposit as follows:

(3) For applying deposits to ANMF tax periods:

1. Research the ANMF account via AMS or ANMF, if available.

2. Attach an ANMF print for each applicable period to the Form 2424.

3. Apply amounts to the oldest CSED on the NMF 1300 Account first.

4. Mail the form with attachments to the appropriate NMF site.

(4) After month-end reconciliation with Accounting, Form 2515 will remain with the open file until the deposit is either refunded or applied to the taxpayer's liability.

(1) On the 3rd workday of each month the RACS Accounting function closes the 4710 Account activity for the month and forwards the Offers in Compromise Inventory Detail Report showing all OIC deposits in the 4710 Account to Brookhaven and Memphis. The OIC unit at each site must reconcile the OIC deposits with the general ledger balance.

(2) Upon receipt of the RACS report from the RACS 4710 Account Coordinator, an MOIC tax examiner generates a Deposits (RACS) Open Balance Report (selection A on the AOIC Reports menu) to reconcile balance amounts.

(3) The "manual" RACS Report Control File must also be pulled to verify that all credits and debits for the month have been recorded for manually monitored offers.

(4) The MOIC tax examiner must compare the two reports and research all deposits that do not match.

(5) Copies of the following documents that will impact the 4710 account should be routed, on a daily basis, to the designated MOIC employee responsible for reconciling the account:

• Form 3753

• Form 2424

• Bad Check notification

• Form 2515

(6) If a payment does not appear on both Accounting's report and AOIC/Manual RACS report, take the following actions:

1. Research to determine where the deposit was applied and the appropriate application.

2. Determine if the deposit was placed in the 4710 account using an incorrect RACs number, refunded to the taxpayer or applied to a tax liability.

3. Contact Accounting and take the appropriate actions to reconcile accounts (submit Form 2424 or Form 3753, etc.).

(7) If the deposit is on AOIC but not listed on the 4710 Account Report:

(8) Research IDRS to see if the payment was applied to the tax liability.

(9) If the deposit is not on AOIC but is on the 4710 Account Report:

(10) As of April 1, 2005, COIC payments may be processed through the Paper Check Conversion System (PCC) at Brookhaven and Memphis. PCC is a process for converting checks into electronic fund transfers. There will not be a paper check if it is processed through PCC.

(1) Refunds issued to the taxpayer may be redeposited into the 4710 Account for two reasons:

• The refund check was returned as undelivered mail.

• The refund check was not cashed within one year of the issue date.

(2) If the refund check was undelivered, research for a new address. Research should include, but not limited to:

1. Check IDRS for last return filed, current address, and a telephone number

2. Contact taxpayer by telephone, if a number is available. Follow IRM 10.5.1.6.7.2, Answering Machine or Voicemail

3. BMF accounts check IDRS to see if there is a cross-reference TIN

4. Check AMS for comments or correspondence

5. Review income information reported on CC IRPTR

6. Send a Quick Note with a Form 8822, Change of Address. In the open paragraph inform the taxpayer: " We have attempted to contact you regarding an Offer in Compromise you filed with the IRS in (MONTH/YEAR).  We have tried returning your deposit to you, but the check was returned to us. We need updated information to return your money. Please contact us to discuss your account within 15 days of this letter. If your address has changed, please complete, sign, and return the enclosed Form 8822, Change of Address." In the letter, provide your desk phone number or the MOIC Hotline number and the IRS toll free number. If the letter is returned as undeliverable, did post office provide a new address? Refer to IRM 3.13.5.67.1, Processing Undeliverable Mail Procedures.

7. See also IRM 5.1.18.3, Performing Research on the Internet/Intranet

(3) Document AOIC and AMS to indicate MOIC is attempting to validate the taxpayer’s current address and telephone number to discuss a deposit that was made on a returned, rejected, or withdrawn offer. If sending a letter or leaving a voice mail, document AMS and AOIC with detailed information as to the address letter(s) was sent to and what information was on the voice mail.

(1) Accounting will notify the OIC Unit when a deposit made by check was returned due to insufficient funds.

(2) A correction should be made to the Deposit screen.

(3) If the deposit is located at your campus and the account is controlled by another campus, notify the other site that the deposit on their records must be reversed due to insufficient funds.

(1) By signing Form 656, taxpayers agree to Section 3.03(2) of Revenue Procedure 2002-26 which calls for payment application to periods in the order of priority that the Service determines will serve its best interest. The payment will be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed.

(2) If the following corporate liabilities are included in the offer, apply OIC payments in the following descending order:

1. to all Forms 1120 (regardless of CSED).

2. to all Forms 940 (regardless of CSED).

3. to the unpaid portions of all Forms 941 periods in earliest CSED order as follows:

1. Non-trust fund portion of tax (employer’s share of FICA)

2. Trust fund portion of tax (withholding and employee’s share of FICA)

3. Assessed fees and collection costs

4. Assessed penalty

5. Assessed interest

6. Accrued penalty to date of payment

7. Accrued interest to date of payment

(1) Check the AOIC Balance (Liability) screen to determine if the payment will full pay the period with the oldest CSED date. If it will, update the balance.

(2) Go to the Journal (payments) screen to generate and print Form 3244CG (AOIC). AOIC applies the payment posting rule systemically.

(3) Refer to Chapter 6 of the AOIC User's Guide.

(4) Payments should be applied to these and all other offers based on the balance due amount shown on the INTST prints and updated when the offer was first received into inventory.

(5) Prior to revision in April 2016, Form 656 provided that excess offer payments of $1.00 or more must be refunded to the taxpayer. The 2016 through 2020 versions of the Form 656 state if the taxpayer overpaid the offer by any amount under $50 the funds were applied to the liability. Any amount $50 and over will be refunded. Beginning April 26, 2021 refunds will not be issued on offers accepted on a Form 656 with a revision date of April 2021, or later. Apply the amount that full pays the offer on the journal screen and document AOIC remarks stating the excess payment amount that will be applied to the liability and not refunded.

(1) Analyze tax periods being monitored to determine to which period the payment should be applied. This may have been done when the case was initially processed.

(2) Prepare Form 3244 to process the payment. Along with taxpayer entity information Form 3244 should include:

1. TC 670 with DPC 09 to indicate OIC.

2. The date of the payment for the transaction date.

3. TC 570 with 00 as a secondary code for zero balance periods.

(3) Record the payment on Form 6314, Deferred Payment Offer Payment Record.

(4) Payments erroneously applied to IDRS must be moved to NMF with Form 2424.

(5) If the 5 year compliance terms have been met when the final deferred payment is received, use procedures outlined in IRM 5.19.7.13, 5-Year Monitoring Status.

(1) If the tax period(s) is on NMF, the centralized ANMF databases should be accessed.

1. Use DI or ANMF to verify the payment has been posted and the NMF account and the balance is correct.

2. Notate on Form 6314, OIC Deferred Payment Record, "Verified with NMF".

(2) ANMF was previously centralized in Cincinnati on September 26, 2006. As of November 5, 2018, all NMF processing is now completed in Kansas City Submission Processing Campus.

(3) On AOIC or Form 6314, record payments and calculate the remaining balance.

(4) When the final deferred payment is applied to an NMF account:

1. Review the NMF account.

2. Attach an ANMF print for the applicable period to the Form 2424.

3. Apply the final amount to the oldest CSED on the NMF 1300 Account first. Apply payments in the following order; first to tax, second to penalties, interest last.

4. Zero balance and remove all remaining liability by reversing the individual transactions and posting a TC 788 on each NMF account covered by the offer.

5. Mail the form with attachments to the KCSPC NMF site.

Copy of Form 656 Copy of Form 7249 or Listing of NMF modules Copy of Acceptance Letter

(1) Occasionally the investigating individual overlooks the release of a continuous wage levy. Contact the person who recommended acceptance to determine if the release is appropriate under section 6343(a). If no response is received within 14 days, forward the unanswered e-mail to *SBSE Coll Policy OIC for assistance and copy your manager.

(2) If advised to release:

1. Research for the levy source.

2. Prepare a levy release, Form 668-D.

3. Obtain authorizing signature i.e, campus revenue officer or follow local procedures.

4. Fax the release to employer if fax information is available, otherwise mail the release.

5. Send a letter to the taxpayer regarding the levy release. Insert the text in the note below in an open paragraph of AOIC Letter 2908.

   Note: Our records show that there is a levy on your account. This levy needs to be released; a copy of the Form 668–D, Release of Levy/Release of Property from Levy, is attached for your records. We are processing your levy release and it should be effective within 30 days.

6. Keep a copy of the letters in a file until the offer is closed.

   Note: Levy payments are to remain as levy payments and be applied to the liability as posted on IDRS. As noted above, section 6343(a) controls regarding the release of levy. Determining whether it is appropriate to return proceeds to the taxpayer requires consideration of section 6343(d). If a taxpayer requests the return of levy proceeds, elevate the request to OIC Policy to determine if return would meet the IRS discretionary authority to return the property.

(3) For information for other levy programs see IRM 5.19.9.3, Federal Payment Levy Program, and IRM 5.19.9.2, State Income Tax Levy Program (SITLP) General and IRM 5.19.9.4, Alaska Permanent Fund Dividend Levy Program. Releasing levies issued through these Automated Levy Programs (ALP) require special handling.

(1) The investigating function should guarantee that all TFRP payments made prior to acceptance have been cross-referenced, thus the offer taxpayer's TFRP assessment will show the correct balance due.

(2) Accepting an offer from the employer, or one or more of the responsible officers, does not change the policy that the tax is to be collected only once. All payments should be cross-referenced as they normally would be as if there were no OIC. The TFRP Units will cross-reference OIC payments to the related TFRP accounts. TFRP transcripts will not be forwarded to MOIC.

(3) For one offer filed jointly by husband and wife with identical TFRP assessments, apply OIC payments to the primary taxpayer. A TFRP transcript will issue so the payment will be cross referenced by the TFRP Units to the secondary and related accounts. When all terms are met, both TFRP assessment accounts will be compromised. See IRM 5.19.7.8.7, Interest, for IRS policy regarding computation of accruals.

(4) When the offer is full paid, see IRM 5.19.7.4.3, Trust Fund Recovery Penalty (TFRP) Cases, for detailed closing requirements.

(1) The input of the TC 780, Offer Acceptance, will prevent computer generated interest. Tax Examiners in MOIC will calculate interest to the acceptance date on the tax modules offer payments will be applied to. If the taxpayer breaches their offer contract and the IRS chooses to end the OIC contract, an accounting entry will be reversed and update accrued penalty and interest.

(2) Compute interest using CC COMPA or the InterestNet (ACT/DMI).

(1) A dishonored check is a check received and processed as a payment by the IRS, but the bank does not accept the check as valid.

(2) A dishonored check penalty should not be assessed on offer payments.

(3) If the notice of dishonored payment is received after the offer is accepted for an Application Fee or TIPRA payment then the OE/OS is to be notified to address the dishonored payment with the taxpayer. IRM 5.8.8, Required Actions Prior to Closing an Offer as an Acceptance.

(4) If a taxpayer’s check is dishonored, the IRS could choose to continue the OIC-contract or immediately end it. There is no legal requirement that the IRS send the taxpayer a potential default letter however, per Collection Policy guidance the TE is to issue a potential default letter using the 274, Installment Payment Due, and follow guidance in IRM 5.19.7.14.1, Failure to Remit an OIC Payment, if payment is not received.

(1) IRC 6321 allows the Service to file a Notice of Federal Tax Lien (NFTL) to protect the interest of the government and provides other creditors, judgment lien holders, and the public with notice of the government's lien on the taxpayer's assets.

(2) When tax, penalty, and interest for all tax periods listed on the NFTL are fully satisfied, the Government issues a Certificate of Release of Federal Tax Lien. As a contract provision, the IRS agrees to release the federal tax lien as provided for in Form 656, even though the federal tax liability had not been fully satisfied.

(3) Under the terms of the OIC contract (Form 656), the lien will be released within 30 days of when the offer payment terms have been satisfied and the payment has been verified. If there are delays in posting payments or transferring credits that may impact the timely release of the lien, contact the Centralized Lien Processing Operation. Contact number(s) for the centralized lien unit can be found on SERP under the "Who/Where" tab, Lien - Centralized Lien Processing, Centralized Case Processing.

(4) If a taxpayer has not finished paying the OIC amount for an accepted offer, the lien has not yet been released, and the taxpayer sells property subject to the lien, the IRS may be entitled to all net sale proceeds that would normally be paid for the taxpayer to obtain a discharge of property from the lien. This will apply even if the total amount of the sale proceeds is greater than the total accepted OIC amount. This provision does not apply to accepted offers based on doubt as to liability. For offers accepted on the basis of NEH-ETA, this issue will be considered on a case by case basis. See IRM 5.8.10.6 Discharge and Subordination Requests

(5) Self-released liens occur when the statutory period for refiling for each module on the NFTL has expired and the lien was not refiled. Self-released liens do not have a release document issued systemically nor do they require one unless the taxpayer specifically requests it. MOIC is not required to request a release of these liens. Any request involving a self released lien should be referred to Centralized Lien Operation (CLO).

(6) How the final payment is provided by the taxpayer determines the waiting period for making the release requests. Refer to IRM 5.12.3.3.1.1, Liability Satisfied by Payment, and IRM 5.12.3.3.1.1.1, Electronic and Credit Card Payments, for the appropriate time frame required to release a federal tax lien. The method of payment can also be identified in the second digit in the EFT Trace number, refer to IRM 3.17.277.5.3, EFT Number. A credit card payment is identified when the second digit in the EFT Trace number is a 6 and a debit payment is a 2.

(7) DO NOT issue an immediate release when credit or debit cards are used to full pay the amount offered. See IRM 5.12.3.3.1.1.1, Electronic and Credit Card Payments.

(8) If a potential default letter has been issued due to the taxpayer being out of filing and payment compliance a lien release may be delayed until the taxpayer is in filing and payment compliance.

(9) Document case history to indicate the method of payment and schedule a follow-up to release the lien based on payment type.

(1) OIC Acceptance Letters are generated from AOIC or local systems by Collection and Appeals.

(2) Occasionally, the refund recoupment year(s) may be incorrectly stated. This usually occurs when an offer is accepted at the beginning of the tax year.

(3) Regardless of the year(s) stated on the acceptance letter, monitoring units are required to monitor for the refund recoupment as stated in the terms of the OIC contract and required by law.

(4) If contacted by the taxpayer or representative regarding recoupment of a refund for a year other than what is stated on the acceptance letter, apologize for the error and advise that we are entitled to the refund as a term of the OIC contract. This includes the year of filing (TC 480) through the year of acceptance (TC 780).

(1) When overpayments are mistakenly refunded to the taxpayer the Service will contact the taxpayer and request the refund be returned or the offer will be defaulted.

(2) Returned refunds are applied to the tax period from which they generated and then applied to the oldest CSED period on the offer. For more information follow procedures in IRM 5.19.7.14.3, Failure to Return Refunds (Refund Recoupments).

(1) Taxpayers may request the IRS apply a refund for a non recoupment tax year to the offer amount.

(2) Generally this situation may arise when a taxpayer is unable to meet payment terms of an OIC. In such situations take the following steps:

1. Request the taxpayer send in written authorization.

   Note: The credit cannot be applied without the written authorization.

2. Maintain this correspondence in the OIC case file, if available.

3. Input TC 130 immediately to hold the pending credit and TC 570 (on TXMOD) to stop the credit from offsetting.

4. .Document AOIC Remarks.

(3) When the credit becomes available apply the amount to the outstanding offer amount and oldest CSED period.

(4) If the credit becomes available and we have not received written authorization from the taxpayer:

1. Contact the taxpayer making a second request for written authorization.

2. Give the taxpayer 15 days to respond.

3. If the written authorization is not received, release the TC 130 freeze.

(5) Document all actions in the AOIC remarks or note the manually monitored history file.

(1) The Chief Financial Officer set policy on October 21, 2002, that changed processing of a joint account when one spouse requests tax relief.

(2) The policy states that the Service will split the joint return into two separate modules, one for the primary taxpayer and one for the secondary taxpayer, both mirroring the original return. The policy statement also called for a linkage for transaction codes between the modules and systemic intervention to accommodate payment and credit cross-referencing. The mirror functionality became operational January 2005.

(3) Each taxpayer has an MFT 31 (MFT 65 if the module is a result of mirroring an MFT 35 liability) module created under their SSN that accurately mirrors the tax liability, transaction history and correct CSED/ASED to the point of creation.

(4) If the offer has a CSED Imminent Module (CSED has 12 months or less remaining on the statute), do not mirror that tax module. Update AOIC remarks to indicate which tax module(s) was not mirrored due to an imminent CSED.

(5) If MOIC receives related offers and both have the same TC 480 and TC 780 dates on IDRS, mirroring is not required unless one of the offers is defaulted.

(6) Mirror assessments must be established on master file when:

• An offer is accepted by one taxpayer on a joint IMF liability.

  Note: If one side of the account does not have a filing requirement, e.g. a deceased taxpayer, the filing requirements must be activated for the MFT 31 to be established. Refer to IRM 3.13.5.122, Re-opening a Master File Account (TC 012). Establish a follow-up to deactivate the filing requirements after the account has been mirrored.

• Separate offers are accepted for both liable taxpayers and the offers have different TC 480 dates or TC 780 dates.

• One spouse on a jointly accepted OIC becomes noncompliant during the 5 year or longer compliance period.

Note: The Mirroring process should begin as soon as it is feasible. Modules that are paid in full by the offer amount are not mirrored.

(7) For COIC, FOIC, and Appeals, this also includes offers submitted separately and are closed as other than an acceptance. COIC or FOIC investigating offices will be responsible for mirroring rejected, returned, or withdrawn offers.

(1) The majority of accepted offers are controlled on AOIC. If the AOIC MFT screen displays a CSED indicator of P for primary or S for secondary then research IDRS to identify the joint periods that must be mirrored.

(2) For manually monitored offers review the acceptance letter or the Form 656; if only one name appears and IDRS research of each tax period (CC TXMOD) shows a joint filing status (FS 2) then the MFT 30 period(s) must be mirrored to MFT 31 and MFT 35 must be mirrored to MFT 65.

(1) Review the MFT 30 module(s) before beginning the transfer process to ensure all appropriate actions have been completed.

(2) For accepted offers controlled on AOIC:

1. Make INTST prints for each tax period to the date of the offer acceptance. See IRM 5.19.7.3.6, Timely Acceptance of Incoming OICs.

2. Update the AOIC Balance Screen.

3. Set up the AOIC Journal Screen to post and schedule payments.

4. Apply 4710 Account deposits. If the deposit full pays a period on the offer, do not mirror the module.

5. Update the AOIC status to "MS", Monitor Split.

(3) For accepted offers manually monitored:

1. Make INTST prints for each tax period to the date of the offer acceptance. See IRM 5.19.7.3.6, Timely Acceptance of Incoming OICs.

2. Prepare Form 2515, Record of Offer in Compromise.

3. Verify Form 2515, Form 656 and Form 7249 have the same tax class and periods. (If the tax class or periods do not agree, notify the originating office.)

4. Prepare Form 6314, Deferred Payment Offer Payment Record, if necessary.

5. Apply 4710 Account deposits. If the deposit full pays a period on the offer, do not mirror the module.

6. Ensure TC 480 has been input on each period, if not, input TC 480 onto the MFT 30 account.

(4) The secondary spouse's SSN must be validated. See IRM 5.19.7.11.4 below.

(5) When mirroring a module after the liability was previously written off by the offer:

1. Input TC 972 AC 32 which will generate the TC 605 to reverse the TC 604 write off.

2. Input TC 480.

3. Input TC 780 with a posting delay 1.

4. Set a follow up for two weeks to ensure the above transactions post successfully before beginning the mirroring process.

(1) Before beginning the mirror/transfer process the secondary spouse's SSN must be validated. Master file will not create an MFT 31/65 if the secondary SSN is not valid.

(2) To verify the secondary spouse's SSN use CC IMFOLE to review the entity information:

(3) Correct the SSN or Name Line using CC ENMOD/ENREQ and monitor until the SSN moves into a valid segment (in about 3 weeks) then continue with the mirroring process.

(4) If you determine that an invalid name control is due to the secondary spouse not notifying the Social Security Administration of a change in surname due to divorce or marriage, then validate the SSN using CC IRCHG. The validation (correction) must be made for each tax period.

(5) Use CC ENMOD to monitor for TC 017 to post (about 3 weeks) then continue the mirroring process.

(6) If unable to validate the secondary SSN, the MFT 30/35 modules can not be mirrored. They must be transferred to NMF by completing Form 12810, Account Transfer Request Checklist, and routing to the appropriate consolidated NMF site as indicated on SERP.

(7) Establish a control on the account being moved to NMF.

(8) Set appropriate follow up dates for all actions taken and update the case history.

(1) When all preliminary actions and validations have been completed then the joint liability periods are ready to be mirrored. Follow the steps below using CC REQ77:

1. Input TC 971 - AC 101, MFT 30/35 x-ref Primary TIN, Input TC 971 - AC 101, MFT 30/35 x-ref Secondary TIN. Also input TC 971 - AC 145 on the MFT 30/35 at the same time with a delay of 2.

   Note: Approximately two weeks after input, of the TC 971 -AC 101 "mirror modules" on MFT 31/65 will generate under each spouse's SSN. Input of TC 971 - AC 145 on the MFT 30 module establishes TC 400 and creates both MFT 31/65 modules. MFT 31/65 modules will post in the next cycle. IMF will mirror all transaction from MFT 30 to MFT 31 including the TC 400.

2. Monitor for MFT 31/65 modules and posting of TC 400 on MFT 30/35. For AOIC: Input a 4 week follow up date with an action note: "Check with Mirror MFT 31/65 posting." For Manually Monitored: Establish a control base on IDRS using CC ACTON. Activity Code "MFT31/65sXXXX" where XXXX is date to check for posting of MFT 31/65 (4 weeks from day TC 971 AC 101 and TC 971 AC 145 input.)

Category Code SPC4 Status M

Note: Verify there are 3 modules present: one joint MFT 30/35 module, one MFT 31/65 for the primary, one MFT 31/65 for the secondary

3. After both MFT 31 modules are established and TC 400 has posted to the MFT 30/35 and MFT 31/65 modules, input TC 972-AC 145 on MFT 30/35 and MFT 31/65 modules:

• Input TC 972-AC 145 on MFT 30/35

• Input TC 972-AC 145 on MFT 31/65 Primary SSN

• Input TC 972-AC 145 on MFT 31/65 Secondary SSN

• Input TC 470 posting delay 2 (no closing code) to the offer taxpayer's MFT 31/65 module

Note: TC 972 AC 145 generates a TC 402 to bring the module balance back on all 3 MFTs. A TC 971 AC 132 will systemically generate on the MFT 30/35 module after the TC 402 posts. TC 971 AC 132 will generate TC 604 to close out the balance due on MFT 30/35. This will leave a balance due on the MFT 31/65 modules

4. Monitor for the posting of the TCs on MFT 30/35 and both MFT 31/65 modules.

AOIC: Input a follow up date for 4 weeks from the date of input with action Monitor TC 402 on MFT 31/65. Manually Monitored: 1. Update the IDRS control base using CC ACTON: Activity Code Monitor 402 Category Code SPC4 Status M

5. Input TC 782 and 483 with posting delay of 1 on the MFT 30/35 module after the TC 604 posts.

6. Input TC 782 and 483 with posting delay of 1 on the MFT 31/65 module of the non-offer spouse.

   Note: If there were two separate offers that were accepted leave TC 780 on each MFT 31/65 module.

7. Input TC 472 to non-offer spouse once all TC's have posted.

(2) As a part of establishing the two MFT 31/65 modules a TC 370 is systemically generated with one DLN identifying the primary SSN from the copy and both will carry a complete mirror of the MFT 30/35 module.

(3) If the offer taxpayer is the secondary taxpayer and TC 400 posts, the TSIGN should be reversed back to 0000 and the OIC indicator shut off on primary taxpayer's SSN. (This can be done at the same time of TC 972 - AC145 input.)

(4) MFT 31/65 mirrored modules will generally reflect the collection status immediately prior to Status 29. TC 470 is input on the MFT 31/65 of the offer taxpayer in order to suppress collection notices that are systemically generated when the mirrored accounts are established on IDRS.

(5) Update the AOIC MFT Screen to reflect the MFT 31/65 modules.

(6) Update the liability on the MFT screen on AOIC from MFT 30/35 to MFT 31/65.

(7) Offer payments received on the offer MFT 31/65 after mirroring will systemically cross reference to the MFT 31/65 module of the non offer spouse.

(8) Because the CSED on the mirrored accounts differ, periodically check to see if the offer payment will cross reference to a period of the non offer spouse with an expired CSED.

(9) OIC payments received after the initial mirroring process has begun may post to the MFT 30 account. Payments that posted to the MFT 30/35 prior to the posting of the TC 400 will be posted to the MFT 31/65 module(s). If a payment is identified on the MFT 30/35 module after the TC 400 then a credit transfer will be required as it will not be reflected on the 31/65 module. If needed, complete credit transfer from the MFT 30/35 to the applicable module per IRM 5.19.7.8, Applying payment on Accepted OICs.

(10) Cross referenced payments reduce the unpaid balance of the co-obligor but are nonrefundable.

(11) When an offer with mirrored modules is being placed in monitoring status of 5M, a TC 972 AC 110 must be input on both MFT 31/65 modules for the offer to prevent the cross-referencing of any future payments made by the spouse.

(1) Both taxpayers on a joint tax liability must remain compliant with filing and paying subsequent returns following acceptance of an offer in compromise. The taxpayers must be compliant for the 5-year period following acceptance of the offer or during an extended offer payment period, whichever is longer. Extended offers were accepted prior to the 2012 revision of the Form 656.

(2) If one taxpayer is noncompliant during the compliance period and the other compliant, only the noncompliant spouse will be in default. The account is split and the offer will remain in effect for the compliant taxpayer.

(3) Tax examiners should first follow Default Procedures in IRM 5.19.7.14, OIC Potential Defaults, and correspond only with the noncompliant spouse.

(4) When the noncompliance occurs during the 5-year monitoring (5M), all previously written off tax periods must be reversed and established as a separate MFT 31/65 account.

1. Input TC 972 AC 32 to reverse all TC 604 write-offs.

2. Input TC 480, 780 because after input of TC 788 IDRS no longer reads prior transactions.

3. Input TC 971 AC 101 to create the MFT 31/65 account cross referencing the non compliant spouse's SSN. Also input TC 971 AC 101 to create the MFT 31/65 account for the compliant spouse. The transaction date is the action date.

4. Input 971/145 with a posting delay.

5. Monitor for the TC 400 to post.

6. Input TC 972 AC 145 to the MFT 30/35 and both MFT 31/65 mods.

7. Monitor for the TC 402 to post.

8. Input 781 to non-compliant taxpayer's MFT 31/65.

9. Turn off OIC indicator on the Non-complaint Taxpayer, input ENMOD - ENREQ and enter "1966" for the OIC indicator.

(5) Before inputting any transactions to MFT 31 research IMFOL to ensure that the MFT 31/65 module(s) have posted with the correct entity.

(6) When noncompliance occurs while extended offer payments are being made (usually beyond the 5-year compliance period).

1. Input TC 971 AC 101 on the MFT 30/35 account, cross-reference the noncompliant spouses' SSN. The transaction date is the action date.

2. Remove the Y freeze using CC REQ77 on IDRS:

3. Input TC 483, TC 782 or TC 788, whichever is appropriate.

4. Input TC 470 (no closing code) to prevent notices from issuing.

5. Input TC 016 (1966) on ENMOD on the primary SSN (with a one cycle delay) to turn off the OIC indicator, if the default is for the secondary taxpayer.

(1) A taxpayer who files a joint return with a spouse is generally jointly and severally liable for all tax due in that tax year. If a taxpayer believes they should not be required to pay the tax (including penalties and interest) for a tax year in which they filed a joint return, the taxpayer may be eligible for relief from joint and several liability.

(2) Taxpayers generally request Innocent Spouse Relief via Form 8857. The taxpayer filing the Form 8857 is referred to as the requesting spouse or requesting taxpayer. The Form 8857 claim is referred to as an Innocent Spouse claim. Innocent Spouse will indicate on the account with a TC 971 AC 065 when request has been received.

(3) When the spouse filing the Innocent Spouse claim is granted relief the Service may still collect the entire liability from the other spouse. Innocent spouse examiners generally set up an assessment on the other spouse separately via MFT 31. Related Examination paper work will be forwarded to the OIC monitoring unit.

(4) Exam will forward Innocent Spouse determination letters to the back end OIC Unit when there is an unreversed TC 780 on the module. This determination letter should be held in the case file pending closure of the OIC case.

(5) For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

(6) For instances where the OIC has been closed on MFT 30 (TC 788) prior to processing the innocent spouse claim, Innocent Spouse will issue the letter to the requesting spouse. A copy of the letter will not be sent to the OIC unit because the OIC taxpayer has complied with all terms of the offer and the liabilities have been compromised.

(1) A master file account must be established for the co-obligor using current MFT 31/65 procedures. There may be special circumstances i.e. invalid TIN, requiring an NMF account be established.

(2) If establishment of the co-obligor's account is pending on master file or NMF, prepare a Form 3244 to apply payments on a deferred NMF account.

(1) TC 788 goes unpostable on MFT 31 accounts established from January 2001 through January 2005. The -Y freeze does not release and subsequent refunds due the taxpayer may be frozen.

(2) Although TC 780 displays on IDRS TXMOD, it did not set on master file when the MFT 31 account was created. Without an established TC 780 on the account input of TC 788 goes unpostable.

(3) To correct this condition re-input the OIC transactions using REQ77.

1. Re-input TC 480, TC 780 and TC 971 (if applicable).

2. Input TC 788 with appropriate posting delays.

3. The -Y freeze should then drop off and allow taxpayers to receive refunds due.

(1) Verify that the module should be reversed. To reverse a mirrored module you must input the transactions on MFT 30 and wait until all transactions post before inputting transactions to MFT 31. When reversing any of these TC 971s, the TC 972 transaction date must be the same as the transaction date of the TC 971s being reversed. This includes any reversals for cross referenced TINS that might be required for the input. Verify all payments are applied and establish follow-ups to confirm the reversal posted to IDRS.

(2) On the MFT 30 module input:

1. TC 972 AC 101 with the XREF TIN of the primary taxpayer.

2. TC 972 AC 101 with the XREF TIN of the secondary taxpayer.

3. TC 972 AC 132 using a Posting Delay Code (PDC) of 1 cycle. This will generate a TC 605 (debit). This reopens the module balance on MFT 30.

(3) After verifying all required transactions listed above posted to the MFT 30 module, input the following transactions on the MFT 31 modules,

(1) One or more of the following collateral agreements may be part of the OIC.

(2) Managers are required once a year to review all collateral offers that are over 5 years old to determine if all collateral terms have been met or are correctly listed as an open collateral.

(1) The collateral agreement file is a part of the open offer file. Except for manually monitored offers, the original offer and collateral agreement file will be sent to FRC after a dummy file has been created.

(2) Set up a collateral agreement dummy file with a copy of the collateral agreement, and the Form 2515, Record of Offer in Compromise.

(3) For offers on AOIC take the following action:

1. Indicate type of collateral agreement, e.g., Form 2261, Form 2261-B, and years involved on Form 2515.

2. Update the AOIC collateral screen with information from the collateral agreement.

(4) Collateral dummy files are to be maintained at the campus until the offer is closed. When the offer is closed the file will be sent to FRC with a new accession number.

(1) Future income collateral agreements for an individual or a business run for a specified period, beginning the year following the year the offer is accepted.

(2) For each year of the collateral agreement, forty-five (45) days prior to the due date of the taxpayer’s annual income tax return, prepare and send a "collateral" package to the taxpayer. Include the following items in the package:

1. Letter 294C or AOIC Letter 279 SC/CG.

2. Two Forms 3439, Statement of Annual Income, for IMF or two Forms 3439 -A, Statement of Annual Income (Corporate), for BMF accounts.

3. An addressed return envelope.

4. A cover sheet is suggested to avoid having copies of returns misdirected through the pipeline.

5. Copy of Collateral Agreement.

(3) After compiling the collateral package take the following steps:

1. Record on Form 6313 the tax year and date the package is mailed to the taxpayer.

2. Mail the package to the taxpayer.

3. Update AOIC recording the information in (a).

(1) Form 2261-B, Collateral Agreement - Adjusted basis of Specific Assets, will be sent to Exam between ten and twelve weeks after the due date of the return, and the original case file if requested.

1. Examination determines compliance with terms of the collateral agreement and forwards the file back to the offer unit.

2. Based on Exam's guidance, the tax Examiner will take the next appropriate action (i.e. file case, start potential default actions).

(2) MOIC tax examiners should review the tax returns included on the Form 2261-C, Collateral Agreement - Waiver of Net Operating Losses, Capital Losses, and Unused Investment Credits, Unused AMT credit, and/or any "unexplained" credits to evaluate if the package should be sent to Exam for review. This review should occur no later than 10-12 weeks after the due date of the tax return or valid extended due date of the tax return. Command codes (CC) RTVUE will show the tax return information.

1. If the taxpayer files a Form 1040and the Collateral agreement prohibits a capital loss, review Form 1040 for a negative dollar amount. If present, forward to Exam for review, along with Form 2261-C, Collateral Agreement, IDRS RTVUE print, and the original case file if requested.

2. If the taxpayer's Form 1040 and the Collateral agreement prohibits a net operating loss (NOL), review Form 1040 for a negative entry or a NOL identified by a negative entry on Form 1040 (other than Schedule E Part I). If present, forward to Exam for review, along with Form 2261-C Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, and the original case file, if requested.

3. If the taxpayer's Form 1040 and the Collateral agreement prohibits an Unused Investment Credit, review Form 1040 for a negative entry. If present, forward to Exam for review, along with Form 2261-C, Collateral Agreement - Waiver of New Operating Losses, Capital Losses, and Unused Investment Credits, and the original case file if requested.

(3) If the Form 1040 taxpayer does not claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / or an "unexplained" credit, accept as filed.

(4) If the Form 1040 taxpayer does claim a capital loss and / or a net operating loss as outlined above, or an unused investment / AMT / "unexplained" credit, or an income tax return other than a Form 1040, forward the case to Exam for review, along with Form 2261-C, Collateral Agreement, and the original case file if requested.

(5) If Exam review advises the request of an amended return, send Letter 279 to the taxpayer which informs him of potential default, and suspend case for 45 days from the date of letter.

1. If no response, default the offer.

2. If you receive the amended return, route to Exam for review along with a copy of the letter that was sent to the taxpayer.

3. Route amended return for processing, retain a copy in the offer file. Monitor for posting of the adjustment to IDRS.

(6) MOIC processes basis and other collaterals per the terms and the years included on the collateral as indicated in the chart below:

(1) The Campus Examination Function reviews the Collateral Agreements to determine if the terms of the agreement have been met. If during this review, Exam determines that an audit is warranted, they will request the original return from files, attach an explanation and forward the package to the Area Office.

(2) Campus Exam will provide a response to all IMF referrals within 30 days and to all BMF within 45 days. If no response from Exam within the allotted time frame, send a reminder and wait an additional 5 days. If no response, elevate to MOIC manager for action.

(3) If the terms of the Collateral Agreement are beyond Campus Exam's ability to validate, (e.g. sale of property, proceeds from a business) prepare a Form 2209 and route to appropriate FOIC office with copies of the acceptance letter, Form 656, and Form 2261. Suspend case for 60 days. If no response within the allotted time frame, send a reminder and wait an additional 15 days. If no response, elevate to MOIC Manager for action.

(1) When the taxpayer dies during the monitoring of the terms of a collateral agreement, follow the procedures in IRM 5.19.7.4.7, Death of the Taxpayer While Monitoring the OIC.

(2) Update AOIC history or Form 6313, as appropriate, showing the date of death.

(1) When the above conditions have been met, update the AOIC status to 5M or 5B. AOIC will initiate several systemic uploads to IDRS:

1. Input TC 131 to reverse the V- freeze on the account, if not already done.

   Note: Until AOIC programming can be changed, tax examiners should release the V- freeze manually after the recoupment year to avoid future refunds from offsetting. Delete from the transaction screen or the TC 131 uploading via AOIC will unpost. IRM 5.19.7.10.1, Recoupment Year Incorrect in an Acceptance Letters.

2. Input TC 971 with Action Code (AC) 032 to generate TC 604, TC 604 will zero balance and remove all remaining liabilities.

3. The account for each unique TIN in the MFT Screen is TSIGN 0000.

4. TC 788 will generate the release of the Y freeze for each tax period in MFT Screen.

   Note: The TC 788 input is delayed by 16 days to allow the TC 604 to post to zero balance and remove the remaining liabilities.

(2) Place a 6 week follow up on the offer. Tax Examiners are to verify that the systemic transactions took place. If in 6 weeks they cannot be found on IDRS, input manually and establish new follow ups to monitor for posting. Once the above transactions post, all AOIC and IDRS follow ups should be deleted.

(3) Research the Automated Lien System (ALS) to determine where all NFTLs have been filed on the offer taxpayer. Follow guidelines in IRM 5.19.7.8.9, Releasing the Federal Tax Lien.

(4) Tax examiners will generate and send Letter 2908 using the appropriate paragraphs, if applicable, advising taxpayers that they have paid the offer amount of the OIC.

(5) The 5-year monitoring period ends 5 years from the offer acceptance date. At the conclusion of the 5-year monitoring period, tax examiners must review the account to confirm all offer compliance criteria were met prior to closing to “Closed” (CF) status. This includes all payments, verify 4710 deposit, and updating to the closing assignment number.

(1) For NMF accounts on IDRS, prepare a separate Form 1331-B, Notice of Adjustment (Doc Code 54, for each tax period, to adjust tax, penalty and interest.

(2) Include in Form 1331-B:

• Taxpayers name and address

• Amount compromised

• Total liability

• Taxpayers SSN or EIN

• Type of tax and period(s) ending

• DLN of the transcript

(3) Request TC 291 and related TCs (271, 341, etc.) to remove the liability from NMF.

(4) If the NMF account is in Status 53, prepare Form 3177 to reactivate the account; request input of TC 531.

(5) Send Form 1331-B to the centralized NMF sites:

Kansas City Submission Processing Campus

333 W Pershing Rd NMF Team, Mail stop 6263 P-6 Kansas City, MO 64108.

(1) Review your inventory weekly for missing or overdue OIC payments.

1. AOIC Cases: Generate Journal Payment Due Report showing payments due.

2. Manually Monitored Cases: Review OIC Deferred Offer Payment Record File.

(2) When you determine a payment is more than 30 days past due, research IDRS to look for the missing payment.

1. If the overdue payment is located, update AOIC or Form 6314 by recording the payment using the TC 670 amount and date.

2. If the payment is not located, review AOIC to determine if the taxpayer has received the one time extension to pay within the last 24 months. If the taxpayer has been provided an extension to pay a missing offer payment within the last 24 months, send a potential default letter but do not offer the 120 day extension. If an extension to pay was not previously granted within 24 months, include the opportunity to request an extension to pay as outlined in the table below.

   Note: Contact must be initiated before the payment is 45 days over due.

3. If the taxpayer submitted two consecutive offer payments late, advise the taxpayer in the second potential default letter that late submission of offer payments is a breach of the contract but as a matter of Policy we have elected to continue the contract and recover the prior, missed payments. If the taxpayer breaches the contract again by failing to make another timely payment or the IRS decides to shift its prior election to continue the OIC contract, the offer will be terminated by following If procedures in IRM 5.19.7.15, Processing Defaulted OICs.

   Note: A third potential default letter is not required when the taxpayer fails to submit timely payments.

If	Then
The offer is controlled on AOIC,	1. Send Letter 274 with the appropriate paragraphs. In the open paragraph inform the TP, if eligible: “You may request a one- time extension to pay the missed offer payment, however future payments must be paid timely. If there has been a major change in your financial situation, please contact us to discuss your options.” 2. On AOIC: Enter follow-up date (date letter generated plus 45 days) on the AOIC Follow up screen and update status to "IP". 3. Suspense the case for 45 days. Note: The Journal Screen should not be changed to reflect a new payment due date.
The offer is being manually monitored,	1. Send Letter 274C. 2. Update the IDRS control. 3. Suspense the case for 45 days. 4. Input a history on AMS.

(3) Process responses as follows:

(4) If the taxpayer contacts the Service during any suspense period and states they can not pay, proceed with default actions. MOIC can accept a verbal statement and does not need to burden the taxpayer in providing a written statement. The TE must document the conversation and tell the taxpayer that due to their inability to pay the offer will be defaulted.  In their conversation, they should also state that they are sending a default letter and if in the next 15 days their situation changes and they are able to pay they must call so that the default proceeding can be stopped. 

(1) A taxpayer may be granted one extension of time to make an offer payment, if the CSED will not expire before the payment is received. The extension can be no longer than 120 days. All regular offer payments must be made timely during this extended period. The extension to pay an offer payment can only be granted once within a 24 month period.

(2) Offers with an extension to remit a missed offer payment must be monitored closely. If the terms of the extension are not met or another regular required offer payment is not received, follow procedures in IRM 5.19.7.15, Processing Defaulted OICs, or if applicable, send Form 2209 for DOJ offers.

(3) If the missed payment is not received within 30 days of the extended payment date or a subsequent payment is more than 30 days late, take the following actions:

(4) Do not grant an extension to pay a missed offer payment more than one time during a 24-month period.

(1) The Service is entitled to any overpayment of tax or other liability for the tax periods extending through the calendar year the offer is accepted for offers accepted prior to November 1, 2021. Certain exceptions apply to DATL, DOJ and ETA offers.

(2) If an overpayment is mistakenly refunded, contact the taxpayer.

(3) Process responses as follows:

(1) Taxpayers agree, as a term of the offer, to comply with all provisions of the internal revenue laws, including requirements to timely file returns and timely pay taxes for the five year period beginning with the date of acceptance of this offer and ending through the fifth year, failure to do so is a breach of contract. This applies to both IMF and BMF tax accounts.

(2) If the taxpayer has filed an extension or made an estimated tax payment without filing a return this demonstrates intent and for OIC purposes a return must be secured.

(1) When one of the parties to the compromise fails to remain compliant with filing and payment terms, the offer is only defaulted on the noncompliant spouse.

(2) The several liability provision applies while payments are being made on a deferred payment offer or during the remaining compliance period following full payment of the offered amount.

(3) The several liability provision applies to all terms of the OIC including:

• Filing all returns timely,

• Paying all current taxes timely, and

• Complying with collateral agreements.

(4) Do not contact the compliant spouse. Use the potential default Letter 2909 SC/CG and address it to the noncompliant spouse. The offer will be placed in I5 status pending the response from the non-compliant spouse.

(5) If only one spouse on a joint liability is not compliant, update the status to MS and separate accounts will need to be established using MFT 31. After the mirroring is completed, the non-compliant taxpayer’s name will be removed from the AOIC entity and AOIC remarks must be documented to state why the name was removed. The compliant spouse’s offer will be updated to the respective monitoring status, prior to the non-compliance issue. Create a dummy file for the non-compliant spouse and send to FRC.

(1) When a potential default letter is returned as "undeliverable" the tax examiner must follow specific procedures.

(2) The tax examiner must research for a new address using appropriate guidelines outlined in IRM 21.3.3.4.12.1, Undelivered Mail Received From Campus Mail Operation, IRM 3.13.62-53, Undeliverable CP Notice and C-Letter Distribution and Mailing Guides, and IRM 3.13.12.21.2, Undelivered Correspondence, and/or available locator services. Then:

(1) After allowing 15 days from issuance of the default letter, tax, penalty and interest previously written-off may be reinstated as appropriate per the chart below.

(2) Each previously written off tax period should be analyzed to determine if the CSED has expired.

(3) If the offer is controlled on AOIC:

1. Follow default procedures provided in the AOIC User Guide to close cases controlled on AOIC.

2. The action date is the date of the default letter.

   Note: The stamped date on the signed default letter (TC 781/action date) should coincide with the date the offer is placed in OD status. If there is a variance, the history must be updated with the correct TC 781 date for a complete audit trail.

3. Update the AOIC remarks indicating the recommended closing status (C5, CP, etc.) and take any appropriate IDRS actions listed in (4) below.

4. Close the offer using the applicable status (C5, CP, etc.)

(4) If the offer is a manually monitored OIC:

1. Pull the separately maintained control cards, Form 2515, 6313, 6314, etc.

2. Associate the forms with the offer case file.

3. Stamp "Defaulted" and the action date on Forms 656, 2515, 6313, 6314, and on the outside of the case folder.

4. Determine the amount of the reassessment to be reinstated using a current transcript.

5. Compute and determine if the CSED has expired on any period. If the CSED has expired, do not reinstate the tax liability.

6. Input TC 781 and action date using REQ77.

7. Update the status using CC STAUP.

8. Change the TSIGN to 0000 or a TSIGN requested by the territory office.

9. Input TC 972 AC 32 for accounts previously written off with TC 971 AC 32. This will generate a TC 605 to reverse the TC 604 write off.

10. Input TC 131 (if necessary) with a delay code of one (1) to release TC 130 (credit offset). TC 130 will need to be re-input with the correct DLN indicator if the liability is on NMF.

11. Use REQ54 to input TC 342/272 with priority code 5 to reverse penalty and interest restrictions and allow the systemic computation to resume. This will provide an accurate payoff including penalty and interest accruals to a current Date of Notice and Demand (23C date).

    Caution: When re-establishing joint accounts on MF, notices must be suppressed.

    Caution: Do not use TC 340, TC 341, TC 270, or TC 271 unless the account had restrictions before input of TC 780, which need to be restored.

(5) Accounting takes the necessary actions for reinstating non-master file accounts. MOIC actions follow:

1. Prepare Form 3177 for TC 480 / TC 780 input.

2. Attach a copy of the default letter and a NMF transcript to each Form 3177.

3. Prepare Form 3465 indicating TC 860 with the full amount to be reinstated, 23C date highlighted, and specific transaction codes that were previously written off. Enter in the remarks section to reinstate abated NMF module, for the defaulted offer.

4. Prepare a statutory period worksheet and compute the new statute expiration date.

5. Prepare Form 3177 for input of TC 550 to indicate the new statute expiration date. Attach a current NMF transcript to the Form 3177.

6. Prepare two Form 3177 for input of TC 781 and TC 483 (using the date of the default letter for the transaction date). Attach current NMF transcripts to both Form 3177.

7. Wait for these transactions to post.

(6) Before closing the defaulted/terminated offer:

1. Verify all TCs have posted to IDRS or NMF.

2. Staple Forms 2515, 6313 and/or 6314 together and place in the case file. For information on the retention and disposition of the case file that contains original records see the Records Control Schedule, Document 12990.

(7) ) If the offer being defaulted contains mirrored modules that have previously had a TC 972/110 posted to prevent cross-referencing of subsequent payments, complete the following:

(1) MOIC requests release of the federal tax lien(s) following full payment of the amount offered and accepted on an offer in compromise. However, if the taxpayer defaults on the offer after the release of a federal tax lien, and the IRS defaults the offer, MOIC must request that Advisory Unit revoke the lien release. Refer to IRM 5.12.3.14.1, Requesting Revocation of Lien Release.

(2) The first step MOIC should take is to view the periods covered on each released lien. The paid offer amount may have full paid the liability for the periods shown on the Notice of Federal Tax lien (NFTL).

1. Use the ALS system to identify all NFTLs filed on the offer taxpayer.

2. Research IDRS to determine if the tax periods shown on the NFTLs were full paid by any funds received as payments on the offer or by offsets from other periods.

3. Prepare Form 14466, Request for Revocation of Erroneous Release of Federal Tax Lien, to request the revocation of the release of lien for tax periods being reinstated due to the default. Follow procedures in IRM 5.12.3.14.1, Requesting Revocation of Lien Release.. Do not include any periods on the request that have been full paid. Prepare a separate form for each NFTL.

4. Use the original data on ALS to prepare the Form 14466to reestablish the lien, if appropriate and the aggregate account balance meets the criteria to file, prepare Form 12636 to request a new NFTL. (See IRM 5.19.4.5.3.2, Filing Criteria).

5. Email or fax both forms to an Advisory Group in the appropriate Territory Office.

6. Document the AOIC history.

   Example: The IRS accepted a cash offer from Jerry and Margaret Taxpayer on July 8, 2014 for $5,000 that included the following tax periods:

   200412 for $1,200 200512 for $1,000 200612 for $3,500 200712 for $4,000 200812 for $1,300 There were (3) three separate NFTLs that covered all (5) five tax periods; one lien for 200412, another for 200512, and the last for 200612, 200712 and 200812. The offer amount full paid the 200412 and 200512. The offer amount also partially paid the liability for 200612. In December 2016, their offer was defaulted for failure to full pay their liability on their 201512 return of $3,000. The assigned tax examiner, researched the ALS system to determine which liens had previously been released and determined that because the offer amount full paid the liability for 200412 and 200512, that a request to revoke the release of the liens for these tax periods was not necessary for these tax periods. Form 14466 was prepared to request the revocation of the lien release on the applicable tax years. All forms were sent to Advisory and the AOIC history documented.

(3) When a NFTL is filed after the revocation, lien releases are processed following standard procedures. Occasionally, a taxpayer might request a release of lien after a revocation even though a new NFTL was not filed. The request to release the lien in this instance must be sent to Advisory since this is also a manual process and cannot be accomplished on ALS. Release of refiled NFTL must also be processed through Advisory.

(4) Advisory contacts can be found on the SERP Who/Where Advisory web page: http://serp.enterprise.irs.gov/databases/who-where.dr/advisory.html.

(1) A situation may arise where an offer in compromise is defaulted and we later discover that the termination was an IRS error.

(2) In rare situations, the IRS may shift its election of remedy based upon a taxpayer's exceptional circumstance.

(3) Generally, the taxpayer or the representative must contact the Service to raise objections and provide an explanation for failure to provide the required payment(s) and/or tax return subsequent to the default.

(4) Acceptable criteria for potential situations where default reconsideration may be applicable based on IRS error are listed below. These are not all inclusive:

1. The offer was closed as a default in error by MOIC.

2. The payment(s) and/or tax return was sent timely, but it was not associated with the case.

3. The taxpayer was affected by a federally declared disaster as defined in IRC § 7508A.

4. The taxpayer is in a combat zone as defined in IRC § 7508.

5. The taxpayer provided proof that the required payment or filing of a tax return were made prior to the offer default.

(5) Acceptable criteria for potential situations where default reconsideration may be applicable based on specific taxpayer issues are listed below. These are not all inclusive:

1. Serious illness or injury prevented the taxpayer from submitting the payment(s) and/or tax return timely.

2. The taxpayer submitted funds within the required time-frame to replace previously dishonored check(s). See also IRM 5.8.7.2.2.5, Return for Dishonored Payments.

(6) All requests to reinstate a defaulted offer must be reviewed and approved by a manager and reviewed by MOIC Department Manager prior to any action taken by the Tax Examiner. Requests to re-open an offer will be forwarded via email to the SBSE Headquarters MOIC analysts.

(7) If the offer is controlled on AOIC, provide the following information to SBSE Headquarters:

1. Provide the offer number.

2. Briefly state why the offer was defaulted.

3. Include the specific dates of the default actions.

4. State the reason for the reopening.

5. Indicate the SC status code for the offer after reopening.

(8) The analysts will decide whether the reinstatement is appropriate and let MOIC know if the request is approved.

(9) If approved:

1. Re-input TC 480, TC 780, etc. using the original transaction dates.

2. Re-compute the CSED if necessary.

3. Send the taxpayer correspondence advising of the reinstatement.

4. Update the case or AOIC history stating the reason for the reversal.

(1) Transcripts generated on OIC Accounts are:

• Unreversed TC 470 Transcript/AMO6 W Transcript

• Diagnostic-Q Transcript/DIAG-Q Transcript

• Non-Master File Transcript/NMF Transcript

• MIRRORFAIL Transcripts

• OIC Default FSC

(1) Input of TC 480 generates a Y freeze on the tax module. The freeze generates reason code 33 to Master File. When the reason code remains on the module for over one year, a Diagnostic (DIAG Q) transcript will generate annually to identify potential problem modules on the taxpayer Information File (TIF). The reason code is removed by the reversal of the TC 480.

(2) Although not all DIAG-Q's require action, these transcripts provide a means to identify and remove unnecessary modules/accounts from the TIF.

(3) Reverse the Y freeze by the following transactions:

• TC 481, OIC Rejected or Returned

• TC 482, OIC Terminated or Withdrawn

• TC 483, Correction of Erroneous Posting of TC480

• TC 781, Defaulted Account Compromise

• TC 782, Correction of 780 Processed in Error

• TC 788, All Collateral Conditions of the Offer Completed

(4) Upon receipt of the DIAG-Q transcript, review the tax module(s):

(5) Document receipt and any action taken as a result of the transcript in the case history.

(6) Destroy all transcripts after resolution.

(1) AM O6W transcripts issue when TC 470 is not reversed on a defaulted offer tax module (TC 781).

(2) Research and reverse all TC 470 on each module.

(1) NMF transcripts generate when:

1. A second credit posts to a module after issuance of a CP44 Notice and a V freeze created by the TC 130 remains on the taxpayers account.

2. A TC 740 posts to the transcript module and creates a credit balance.

(2) If the NMF transcript cannot be resolved within 14 days from the computer notice date:

1. Control the transcript using Category Code CP44 and

2. Input in the history section of the control base "NMF."

(3) If the OIC has been paid in full and the credit is not subject to recoupment, refund the credit to the taxpayer.

(4) Release the V freeze, if necessary, by inputting TC 131.

(5) Document receipt and any action taken as a result of the transcript in the case history.