5.8.4. Investigation

(1) An offer in compromise (referred to as an offer or OIC) is a way for the IRS to recoup a portion of the monies owed by taxpayers unable to pay their taxes in full. Revenue Procedure 2003-71 explains the procedures applicable to the submission and processing of offers to compromise a tax liability under Section 7122 of the Internal Revenue Code. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) also provided additional requirements for submission of an offer.

(2) Offers are submitted to one of the IRS locations for consideration and evaluated on the basis of its processability, the taxpayer's ability to pay, and the taxpayer's foreseeable future earnings. 26 CFR 300.3, Offer to compromise fee, and Notice 2006-68 also provide information on the submission of payments and fees associated with an offer submission. During the offer investigation, the taxpayer’s individual circumstances are evaluated and the IRS will make a determination for disposition to either Return, Reject, Withdraw, Terminate, or Accept the offer. This IRM section provides guidance on how an offer investigation should be completed and the impact other functions or activities may have on the offer investigation.

(1) Authorities relating to this section include:

• Internal Revenue Code (IRC) 7122 - Compromises

• Treasury Regulations 301.7122-1 - Compromises

• IRC 6702(b) - Civil penalty for specified frivolous submissions

• Policy Statement P-5-100

• Policy Statement P-5-89

• 26 CFR 300.3, Offer to compromise fee

• Revenue Procedure 2003-71

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

• Notice 2006-68

• IRM 1.2.1, Servicewide Policy Statements

• IRM 1.2.2, Servicewide Delegations of Authority

(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) Managers of employees investigating offers are responsible for ensuring these procedures are followed and employee actions are timely and accurate.

(4) Offer examiners, offer specialists, and other employees investigating offers are responsible for following the procedures in this IRM.

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

(2) Managerial case reviews are also completed as defined in IRM 1.4.52, Offer in Compromise Manager’s Resource Guide. These reviews are a method to determine if the offer amount accurately reflects the reasonable collection potential (RCP) as defined in Policy Statement P-5-100.

(3) National quality reviews and consistency reviews are routinely conducted to ensure program consistency and effectiveness in case processing. As a result of these reviews, procedural changes may be required to improve the quality and effectiveness of the program.

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

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

(3) Managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Resource Guide for Managers.

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

(5) The review conducted by the Office of Chief Counsel on certain offers is in accordance with Treasury Regulations 301.7122-1 - Compromises.

(1) The following table is a list of common abbreviations, definitions and acronyms used throughout this IRM.

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

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

• SERP

• Internal Management Document site

(1) The following four components of collectibility will ordinarily be included in calculating the RCP for offer purposes:

(1) Below is a list of potential issues that, when identified during an investigation by COIC, indicate a case might be transferred to the field.

• Entity consists of a municipality and/or educational institution, which requires a more specialized knowledge of tax laws.

• Complexity of issues include, but are not limited to, valuation of on-going businesses; income determination when excessive accumulation of retained earnings is identified; specialized assets.

• The taxpayer's case has been classified as an Abusive Tax Avoidance Transaction (ATAT) case on ICS or ATAT issues have been identified and a determination is made that field investigation of the offer is appropriate.

• OICs filed by individuals and business taxpayers (e.g., partnerships, corporations) involved in complex activities or transactions designed or structured to hide or conceal income, such as offshore activities, or multiple related entities, requiring a thorough knowledge of the different fraud indicators, as well as working knowledge on a wide range of financial and investigative skills.

• Need for comprehensive reviews to determine that other required returns such as excise, or specialty returns, need to be filed.

• Presence of tools used to conceal and/or cloud taxpayer’s true financial condition. Examples, not all inclusive include nominee, alter ego, and transferee situations.

• Comprehensive and complex financial statements requiring knowledge of accounting and business principles in order to determine the taxpayer’s actual income and expense and thereby determine true reasonable collection potential.

• Need to gather, research, inspect, and validate data from a variety of sources through personal contacts. The data may, in some instances, be unique to a particular trade or industry.

• Cases involving high profile taxpayers with potential for media scrutiny.

• Docketed Tax Court Cases IRM 5.8.10.12, Docketed Tax Court Cases.

• International Taxpayers.

• Offers in which there is Department of Justice involvement IRM 5.8.2, Centralized Offer in Compromise Initial Processing and Processability.

• Offers in which any assessments were involved in the Offshore Voluntary Disclosure Program (OVDP) or Domestic Voluntary Disclosure Program (DVDP).

(2) When such issues are identified, consult the site RO to determine if the transfer is appropriate.

(3) Managers should refer to IRM 1.4.52.6.4, COIC Responsibility for Cases Transferred to Field OIC, relative to appropriate actions prior to transfer.

(1) Taxpayers who owe joint and separate liabilities are required to file two Forms 656. If one Form 656 was submitted including joint and separate liabilities or separate liabilities are identified during initial offer screening, the OE/OS must perfect the offer before continuing with case processing. In these cases, an amended Form 656 and a related Form 656 will be required. An additional application fee and initial TIPRA payment must be secured for the related offer, unless the taxpayer qualifies for the low-income certification.

(2) There should be one amended Form 656 for one taxpayer, which includes his or her joint and separate liabilities and one related Form 656 for the remaining taxpayer, which includes his or her joint and separate liabilities. See IRM 5.8.3.7, Case Building Offers, for additional information.

1. In circumstances where the balance of the separate liability is less than the total RCP, the OE/OS should discuss with the taxpayer/representative the option of securing full payment of the separate liability and reducing the offer amount to potentially compromise the remaining joint liabilities. If the separate liability will be full paid, an additional Form 656, related application fee and TIPRA payment will not be required. The scenario may also be present if the joint liability is less than the total RCP and only one taxpayer owes separate liabilities. The original waiver and original IRS received date applies to periods that were on the original offer.

2. When preparing a related offer, refer to the chart below:

If	Then
The modules are the same as the original Form 656 For example: Original submission is for joint periods and Mr. Taxpayer has CDP and Mrs. Taxpayer does not have a CDP and all balance due modules are the same	The OE/OS will annotate the top of the related offer (Form 656) “Related to OIC # 1001XXXXXX original received date MM/DD/YYYY” . (The Related form 656 on OIC SharePoint has a date field for this purpose).
None of the modules on the related offer were on the original offer	The related offer will use the IRS received date stamped on the related Form 656. There should be no handwritten IRS received date on the top of the related form 656.
There are modules on the Related offer that were contained on the original offer and additional modules that were not.	The related offer will maintain the original IRS received date. The OE/OS will annotate the top of the related offer ( Form 656) “Related to OIC # 1001XXXXXX original received date MM/DD/YYYY” with the original IRS received date. (The Related Form 656 on OIC SharePoint has a date field for this purpose).

(3) In order to avoid disclosure issues when the taxpayers are not represented by a POA, requests for amended and revised Forms 656 must be made by phone.

• Make two phone attempts to contact the taxpayers. If phone contact is made, discussion should be held with both taxpayers. When discussing the requirement for two separate offers, a discussion should be held regarding how the taxpayers want to treat the initial TIPRA payment; for example, splitting the original payment between the two offers or submitting a new payment.

  Note: Advise the taxpayers that a separate Form 656 is required and two separate Forms 656 will be mailed; one to the primary spouse and one to the secondary spouse. If phone attempts are not successful, use letter 2844 with paragraph "D" to request a call back.

  Note: If contact is made with only one taxpayer advise them of the requirement for two Forms 656 and that you will be mailing separate offer forms addressed to each taxpayer.

• If contact is made with the taxpayer and completed Forms 656 are being sent to the taxpayer, the OE/OS should provide additional information in the open paragraph letter 2844 which includes:

If:	Then include this statement in open paragraph:
Taxpayer is prorating the original offer amount and no additional TIPRA payment is required.	Please review the Forms 656 and if you concur, sign the applicable Form 656. Send the signed Forms 656 and the application fee (currently $205) for the related offer.
If the original terms apply to the first offer and the taxpayer is offering new terms for the related offer.	Please review the Forms 656 and if you concur, sign the applicable Form 656. Send the signed Forms 656 along with the application fee (currently $205) and an initial payment of $ _____ for the related offer.

• If neither taxpayer returns the new offer(s) or fails to respond to the request for a call back, the original offer will be returned with no further consideration. In most instances the use of Return Letter paragraph "AF" is appropriate. If additional documents were requested (i.e. financial information), the return letter may include additional paragraphs to provide the taxpayer with all the reasons for the return.

  Note: If only one taxpayer responds, continue working the single offer and return the original offer to the non-responsive taxpayer without further consideration.

• When amended and related Forms 656 are mailed to the taxpayers after discussing the requirement, two separate mailings will be needed if you are unable to secure permission from each spouse to mail the forms in one envelope.

• When the amended and related offers are received, follow established procedures for loading the cases on AOIC.

(4) Once the offer is loaded on AOIC, verify the waiver dates (TC 480). The waiver dates will be dependent on whether the original offer included all the periods or if related periods were discovered during the offer investigation and not included on the original offer. The table below provides guidance on when AOIC should reflect the original waiver date versus a new waiver date.

(5) For offers including liabilities of a single member owner of an LLC or a single member LLC that reports solely on a Schedule C, since any employment tax liabilities accrued after January 1, 2009 are incurred by the single member LLC business entity and not by the individual, if an offer is submitted by the individual and includes employment tax liabilities of the LLC incurred after January 1, 2009, a related offer will be required from the LLC regardless of how the taxpayer reports his income. You must also request any related TIPRA payment and application fee.

(1) Appeals should suspend the CDP case while the investigation is completed and forward the offer and related documents to the appropriate COIC site for a processability determination. Appeals will generate L3820 and include it with the offer submitted for a processability determination.

(2) If the offer is not processable, COIC will follow procedures in IRM 5.8.2.12, Determining Processability for Appeals Collection Due Process Offers.

(3) If the offer is processable, COIC will:

• Load the case on AOIC with jurisdiction code 1 (the jurisdiction code will not change, even though Appeals will be making the final determination),

• Mail AOIC Combo Letter and L3820 to the taxpayer advising the offer is processable.

  Note: If L3820 is not provided by Appeals, COIC will only mail the AOIC Combo Letter.

• Assign the case for investigation following current procedures in IRM 5.8.3, Offer in Compromise, Centralized Offer in Compromise Transfers, Perfection and Case Building, and

• Investigate the offer on cases meeting COIC criteria in accordance with IRM 5.8.4.15.2, Case Decisions on CDP Offers.

(4) For cases meeting field transfer criteria, upon receipt from COIC, field offer groups will assign cases in accordance with current procedures and investigate the offer in accordance with IRM 5.8.4.15.2, Case Decisions on CDP Offers.

(1) Complete a financial evaluation in accordance with IRM 5.8.5, Financial Analysis and take action in accordance with IRM 5.8.4.9, Actions Based on Reasonable Collection Potential.

(2) If the offer is to be accepted, COIC/FOIC will:

• Follow local assignment procedures, including review by Counsel when appropriate;

• Follow the procedures in IRM 5.8.8, Acceptance Processing

• Close the case as an acceptance on AOIC;

• Forward the case file to the appropriate MOIC function for acceptance monitoring with all required documentation; and

• Forward copies of the acceptance letter and Form 7249 to Appeals. The Form 7249 will include the acceptance terms, applicable tax periods, and approvals, so copies of the Form 656 and/or any addendum are not required.

(3) If the offer is returned, terminated, withdrawn voluntarily, or a mandatory withdrawal is appropriate, COIC/FOIC will:

• Issue the appropriate AOIC return/termination/withdrawal letter to the taxpayer based on the basis for closure;

Note: Generally, an offer submitted during a CDP hearing should not be returned under "solely to delay" criteria, as discussed in IRM 5.8.4.20, Offer Submitted Solely to Delay Collection, unless the OE/OS manager agrees IRM requirements are met and the RO manager verifies enforcement action is anticipated subsequent to the offer return.

• Close the case on AOIC in accordance with closing procedures outlined in IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing; and

• Immediately forward the entire case file with all supporting documentation (including a complete up-to-date history, information on any deposit, and a copy of the return/withdrawal letter) using the transmittal document in Exhibit 5.8.4-2, Notification of Offer Case Decision in CDP Offer Investigations to Appeals using traceable mail, unless the Appeals office is in the same location.

  Note: Since ex parte rules apply, the OE/OS must share or discuss any documents with the taxpayer that will be provided to the Appeals’ employee.

(4) If a determination is made the offer should be rejected, COIC/FOIC will:

• Select OCC 10;

• Update the offer type to P; Collection Due Process

• Issue the CDP preliminary decision letter, signed by the group manager, to the taxpayer (include the Asset/Equity Table and Income/Expense Table, if completed);

  Note: If the offer was submitted as a DATL involving a TFRP assessment, AOIC is unable to generate a CDP preliminary decision letter on these cases. Refer to the OIC Sharepoint site for methods to edit the AOIC CDP preliminary decision letter and appropriate paragraphs.

  Reminder: Offers being recommended for rejection under either Public Policy or Not in the Best Interest of the Government require the approval of the SB/SE Collection, Territory Managers (2nd level) in the field or SB/SE Compliance Services Operations Managers for COIC. If making a recommendation to reject a CDP offer under the jurisdiction of Appeals on this basis, the approval of the second level manager must be clearly evident. Their approval may be shown by their signature on the CDP preliminary decision letter, a notation of approval in the case history or remarks, or a printable e-mail signifying approval of the case decision. If the letter is being signed by the 2nd level manager, refer to the sharepoint site on methods to edit the pre-determination letter.

• Transfer the offer on AOIC to Area 21;

• Immediately forward the entire case file with all supporting documentation (including a complete up-to-date history and a copy of the CDP preliminary decision letter using the transmittal document in Exhibit 5.8.4-2, Notification of Offer Case Decision in CDP Offer Investigations, to Appeals using traceable mail, unless the Appeals office is in the same location. The OE/OS should also update the accruals on the AOIC MFT screen and include a print of the MFT screen with the offer case file.

(1) A CDP hearing request may be received during the investigation of an offer. In these instances, the appropriate CDP codes must be input on IDRS.

(1) In certain instances, Appeals may request a review of additional documents submitted by the taxpayer after a recommendation to reject the offer is made by the COIC OE or FOIC OS.

(2) If additional documents or review is required, Appeals will issue an ARI to the COIC site RO or FOIC group manager based on current procedures. These offers will be transferred to the Area office on AOIC, so appropriate assignment on ICS and AOIC may take place by the group manager. The AOIC OCC code should also be updated to OCC 41 prior to assignment to the OS.

(3) If an ARI is issued, in most circumstances, the ARI should be completed by the employee who conducted the initial investigation, yet the manager may assign based on current workload. Since the request is based on a previous offer evaluation, these investigations should be assigned expeditiously, and if possible, closed within 45 days of receipt. If the ARI is not completed within 45 days of receipt, Appeals should be contacted to request an extension. Upon return to Appeals, the ARI must be noted if there remains less than 180 days on the TIPRA statute.

(4) OS time should be reported under ICS time code 120, CDP RELATED OICs or ICS time code 360 APPEALS , depending on whether the ARI is related to an offer submitted during a CDP hearing request.

(1) Appeals may determine a return or mandatory withdrawal of an offer submitted during the CDP process was not in accordance with IRM requirements. The determination that an offer was closed contrary to guidance provided in the IRM must be made by the Appeals employee within 30 days of receipt of the offer case file.

(2) Upon a determination that the return or withdrawal was processed in error, if additional investigative actions are required by Collection, the Appeals employee will forward the offer case file through their Appeals Manager to the attention of the manager who signed the closing letter for field OIC groups, or the site RO for COIC, who will route the case file appropriately.

(3) Upon receipt of the offer case file the COIC/FOIC manager will reopen the offer on AOIC, (or if the offer cannot be reopened, have a new offer established using the same receipt, waiver, and open dates as the previously closed offer). The offer will then be assigned immediately to an OE/OS for continuation of the offer investigation. The offer will be investigated in accordance with the guidance provided in IRM 5.8.4.15.2, Case Decisions on CDP Offers. If additional investigation is conducted and there are additional documents or information provided to Appeals, it must also be shared with the taxpayer/representative.

(4) If the COIC/FOIC manager disagrees that the closing action by the offer group was in error, contact should be made with the Appeal’s manager to discuss the basis for the reopening. After discussion with the offer manager, if Appeals is unwilling to change the decision to have the offer reopened, Collection will reopen the offer and work in accordance with paragraph 3 of this section. Also advise Collection Policy of the issues involved.

(1) During a Collection Due Process (CDP) or equivalent hearing (EH) assigned to Appeals, an offer may be submitted by the taxpayer. IRM 5.8.4.15, Investigation of Offers under Appeals Jurisdiction. Taxpayers also occasionally submit a DATC offer during an appeal of a proposed audit deficiency. Appeals has jurisdiction of both these types of offers and in certain circumstances may send an Appeals Referral Investigation (ARI) to Collection.

(2) An ARI requesting CIS verification of a complex nature, which may include valuation of assets, lien searches, or asset ownership research should be assigned to a field RO. The results of the investigation will be reported via memorandum to Appeals and Appeals will conclude the investigation. Requests for any expeditious treatment of an ARI will be decided on a case by case basis through a discussion between the two functional managers.

(3) Offers based on Doubt as to Liability (DATL) on Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET) assessments must be reviewed upon receipt to ensure that the case is not pending or was not already heard in Appeals. If a DATL offer involving a TFRP or PLET assessment had previously been determined in Appeals or is found to be currently assigned to an Appeals office, refer to IRM 5.8.4.22.4, Doubt as to Liability (DATL) regarding the issuance of a rejection letter and the transferring of the case file to Appeals.

(4) If an offer based on DATC or ETA hardship criteria is received and there is an open case pending in Appeals, then Appeals will have jurisdiction. The Appeals employee assigned the case in Appeals must be notified of the offer investigation. If the offer is related to a CDP hearing, it should be investigated in accordance with IRM 5.8.4.15, Investigation of Offers under Appeals Jurisdiction.

(1) If a return has been filed with a balance due, the OE/OS should review Master File (MF) to determine when the liability will be assessed.

(2) If a recommendation is being made other than acceptance, the OE/OS should not delay closing actions until the return posts or tax is assessed. If the tax period has no assessed liability when the offer is being recommended for closure, it should be removed from the Form 656 and MFT screen.

(3) Since tax must be assessed to be included on an accepted offer, delays in returns or amended returns posting must be identified as soon as possible to allow for resolution prior to offer closing actions. If it is determined to be in the government’s interest to include the tax year in the offer being recommended for acceptance and the return is not pending on MF, the OE/OS should secure managerial approval to hold the offer until the assessment posts. Based on group procedures the offer should be placed in the appropriate assignment number for monitoring. If the offer is still being monitored with less than 90 days remaining on the TIPRA statute the taxpayer should be requested to withdraw the offer. If the taxpayer refuses to withdraw the offer and the taxpayer does not agree to have the tax period removed from the Form 656, the offer should be closed as a processable return based on the inclusion of a tax year with no liability.

(4) If issues are preventing the return from being processed and the taxpayer wishes to have the tax period included on the offer, it may be necessary to secure a withdrawal and have the taxpayer resubmit the offer after processing issues are resolved.

(1) IDRS should be checked to determine if any open audits, underreporter issues, TEFRA proceedings, or other pending examination issues are present. Pending examination cases and AUR may be identified by:

• TC 922 without a CP 2000 process code or TC 290/291

• TC 976 or 977 without a subsequent tax increase or decrease

• -L Freeze and/or an AMDIS record

• Partnership Investor Control File (PICF) code on AMDIS of 5 indicating an investor with at least one open TEFRA key case linkage

(2) If any potential adjustments are identified, the assigned employee should be contacted to determine the status of the potential assessment and informed that an offer based on DATC or ETA has been received. The decision on how to proceed with the offer should be based on the status and/or issues of the potential adjustment/assessment. The table below provides some examples.

(1) When a TC 910, 914, 916, or 918 identifying an open CI is on IDRS, contact must be made with the assigned Special Agent and procedures in IRM 5.1.5, Field Collecting Procedures, Balancing Civil and Criminal Cases, should be followed. It may be necessary for the group or unit managers to hold a discussion with the CI manager to determine the next appropriate action. A decision will need to be made on the appropriate actions to take and what may or may not be discussed with the taxpayer. The involvement of CI does not change the procedures involving the application of any application fee/TIPRA payment or the refund of any deposit which should be in accordance with current procedures.

(2) Once a taxpayer has been advised of the open criminal investigation, if the assigned Special Agent has no objection, the taxpayer may be asked to withdraw the offer until the criminal matter is resolved. If the taxpayer declines to withdraw the offer, return the offer to the taxpayer under the criterion "other investigations are pending that may affect the liability sought to be compromised or the grounds upon which it was submitted." If the Special Agent objects to asking the taxpayer to withdraw the offer or contacting the taxpayer, remind the Special Agent of the 24-month mandatory acceptance requirement. If the Special Agent continues to request that the taxpayer not be contacted, reassign the case on AOIC to 9999. Monitor the case and contact the Special Agent monthly to determine if and when taxpayer contact can be made. If, after 16 months from the IRS received date CI has not made a decision about what may or may not be discussed with the taxpayer, advise CI the offer is being returned under the criterion "other investigations are pending that may affect the liability sought to be compromised or the grounds upon which it was submitted. "

(1) When a TC 912, identifying a closed criminal investigation is found on the tax module, the OE/OS should contact the assigned Special Agent of the closed case. The OE/OS should determine if information is available that may impact the acceptability of the offer, the calculation of reasonable collection potential, or whether the offer investigation should continue. Issues may also include whether the taxpayer was guilty of a tax crime and is currently paying restitution. Refer to IRM 5.8.4.24.1, Offers in Compromise Submitted that Include Restitution.

(2) The OE/OS should also review IDRS to determine if any tax periods involve Abusive Tax Avoidance Transaction (ATAT) issues. If ATAT issues are present, the OE/OS should also contact the revenue agent or revenue officer to discuss any impact the ATAT investigation may have on the offer investigation.

(1) The following are examples of offers considered submitted solely to delay collection based on re-submission after a prior rejection, return, or default:

(2) The following are examples of offers considered solely to delay collection based on a prior collection analysis and determination of ability to pay:

(1) The determination that an offer was submitted solely to delay collection may be made immediately after the offer is deemed processable or at any time during the offer investigation when the facts support the decision.

(2) The determination that an offer was submitted after a prior reject or default can be supported by reviewing records on AOIC and IDRS transactions:

(3) To determine if the re-submission is materially different from the prior rejected or defaulted offer:

1. Review any AOIC and/or ICS history to establish that an offer is a re-submission solely to delay collection.

2. Compare the information contained in the prior history with the resubmitted offer package to determine if the offer was submitted solely to delay collection.

3. If necessary, the taxpayer/representative should be contacted to discuss if there are any changes to the taxpayer's situation which would justify a new offer submission.

(4) Cases assigned to a field RO – When the field RO receives an offer, or is notified that the taxpayer submitted an offer to COIC, the RO will complete Form 657, Revenue Officer Report, and submit it to the RO group manager for approval. Form 657 must provide detailed reasons supporting any solely to delay collection decision. The RO will fax the Form 657 to either the FOIC group manager or COIC Group Manager, depending on where the offer is assigned at that time.

(5) If there is a determination to issue a notice of levy prior to the offer being returned, the RO must secure approval from the SB/SE Collection Territory Manager in accordance with IRM 1.2.65.3.1.

(1) Before an offer to compromise trust fund tax will be investigated, for entities in which the trust fund recovery penalty is applicable (in business or out of business) all the issues outlined in IRM 5.8.4.21, Responsibility of Offer Examiners, Offer Specialists, and Field Revenue Officers above should be considered. In addition, as a prerequisite, the trust fund portion of the taxes must be paid, the TFRP must be assessed against all responsible/willful persons, a determination made by an RO to not assert due to collectibility or dollar criteria, or the trust fund package forwarded for assessment.

(2) It is the Service's policy that the amount offered to compromise a liability subject to assertion of the TFRP will represent what can be collected from the employer. If the Service enters into a compromise with an employer for a portion of the trust fund tax liability, the remainder of the trust fund taxes may still be collected from a responsible person.

(3) Revenue officers have two options when they negotiate with the entity principals. This applies to trust fund liabilities in Status 26 or other assessments in notice status related to the Status 26 entity, which have any unpaid trust fund amount still within the TFRP Assessment Statute Expiration Date (ASED). They are:

• If the entity wishes to file an offer, generally, all responsible persons must first agree to the assessment of the TFRP. Both responsibility and willfulness must be present to assert the TFRP and/or request signature of Form 2751, Proposed Assessment of Trust Fund Recovery Penalty. Although a Form 2751 is secured, the field RO must also secure basic documentary evidence to support assertion against any responsible person(s) even if they sign the Form 2751. The signing of the Form 2751 does not preclude the responsible person from challenging this assessment by paying a divisible portion of the tax, filing a refund claim and if unsuccessful, a refund suit. The responsible person should be advised of the right to file a refund claim when the Form 2751 is provided to the responsible person.

• Alternatively, the responsible parties can personally full pay the trust fund amount on behalf of the entity. IRM 5.7.4.4, Payments by Responsible Party on Behalf of the Employer, contains instructions when a responsible person chooses to pay on behalf of the entity. Absent a non-assertion determination due to an inability to pay or dollar criteria, failure to pay the trust fund or sign the Form 2751 by a party determined to be both responsible and willful, will result in a solely to delay determination if the entity files an offer. See IRM 5.8.4.20, Offer Submitted Solely to Delay Collection, above. In addition, a formal appeal of the proposed TFRP will result in the offer being returned as solely to delay.

  Note: If extenuating circumstances are present that prevent the assessment of the TFRP against all responsible persons, the RO, after consulting with their manager, may request continued processing of the offer without the assessment of all potential responsible persons. For example, a potential responsible person cannot be located. The RO may request the OIC continue to be investigated if the government’s interests are sufficiently protected and if the other responsible persons have agreed to assessment of the TFRP.

(4) Only the amount that can be collected from the entity (including dissipated assets and any assets fraudulently transferred) will be considered in the RCP calculation of an acceptable offer. The Service will pursue collection of the TFRP assessed against the responsible person(s), unless the trust fund portion has been full paid.

(5) During initial analysis of an offer received from an entity subject to the assertion of the TFRP and involving unpaid trust fund tax, the offer specialist must determine the ASED of each period and take immediate steps to protect it if expiration is imminent.

(6) The following actions should be taken based on the facts of the case:

(7) In the situation where the amount offered by a corporation combined with the payments already made on related TFRP assessments exceeds the total employment tax liability of the corporation for the same tax periods, take the following actions:

1. Request the responsible person(s) sign irrevocable requests to transfer the payments on the TFRP accounts to the related corporation liability.

2. Complete and process Form 3870 to transfer the credit(s).

3. Secure full payment of the balance due from the corporation.

4. Secure a withdrawal of the offer.

(8) When corporate offers are being considered, corporate officers, shareholders, or others determined to be responsible for a TFRP may be required to submit a Form 433-A (OIC). When partnership or LLC offers are being considered, the general partners and the LLC's owners may be required to submit a Form 433-A (OIC) as well. In certain instances, since the RCP for a corporate offer is based on the amount collectible and equity in assets of the corporation, it may be unnecessary to secure a 433-A (OIC) from individual shareholders, corporate officers, or other parties, who hold only a minimal interest in the corporation and/or have no control over the corporation’s activities.

(1) Partnership employment tax liabilities are not joint and several as in the case of joint income tax assessments. The Service's ability to collect from the partners is based on state law.

(2) When a partnership liability is compromised for any individual general partner our ability to collect from all other general partners may be affected. Therefore, the amount offered to compromise a partnership tax liability must include what we can collect from the partnership plus what can be collected from each of the general partners. No offer should be accepted to compromise only one partner’s individual liability for the partnership debt.

(3) When investigating partnership offers, a CIS should be secured from the partnership and from all general partners. The RCP for the partnership must equal what could be collected from the partnership plus what could be collected from all general partners. Generally, an offer based on DATC from a partnership will not be accepted when the RCP of one or more of the general partners cannot be determined. When it is not possible to secure a CIS from one or more of the general partners, because they cannot be located or they refuse to cooperate or join in the offer, the offer may still be accepted if the investigation is able to establish that there is no collection potential from the non-participating partner(s).

(1) Trust fund taxes are taxes withheld or collected from an individual and paid over to the government on that person’s behalf. See IRM 5.7.3, Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty (TFRP), for a list of tax returns used to report trust fund taxes and where assessment of the TFRP based on the liabilities reported on the returns is possible.

(2) When an offer is accepted to compromise trust fund tax owed by an operating business, the taxpayer is relieved of a significant operating expense. The effect is to grant the delinquent taxpayer an economic advantage over competitors who are in tax compliance. The following procedures apply to all In Business Trust Fund (IBTF) taxpayers, including sole proprietorships, partnerships, limited liability companies, as well as corporations.

1. These taxpayers must remain in compliance while the offer is being considered. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing; for required actions prior to returning the offer.

2. For offers involving corporate entities, or any entity in which assertion of the TFRP is applicable: the trust fund portion of the tax liabilities must be paid, the TFRP must be assessed against all responsible persons, a determination made by an RO to not assert due to collectibility or dollar criteria, or the trust fund package forwarded for assessment. See IRM 5.8.4.22.1, Trust Fund Liabilities, above for instructions on processing these investigations in conjunction with open offers, including when the aggregate outstanding trust fund liability is under the criteria established in IRM 5.7.4.2, TFRP Determination, Interviews and Investigations and offers submitted under special circumstances discussed in IRM 5.8.11.3.2.1, Public Policy or Equity Compelling Factors.

(3) The following issues should be carefully reviewed and/or considered:

1. Depreciation – Do not allow depreciation. Instead allow necessary actual monthly obligations paid to secured creditors on depreciable assets (i.e. autos, equipment, or real estate loans).

2. Personal Expenses Paid by the Business – Financial statements must be reviewed to ensure expenses such as car payments, insurance, utilities, etc. are not claimed on both the Form 433-A (OIC) and the Form 433-B (OIC).

3. Refer to IRM 5.8.10.2, Bankruptcy, for a discussion on factors to consider in potential bankruptcy situations.

4. Field Visits to Evaluate Business Assets – When appropriate, a field call should be made to validate the existence and value of business assets and inventory for offers involving an operating business that will be recommended for acceptance. The offer specialist should make the field call, if practical after discussing with their group manager, or initiate an OI to request that a call be made by another RO, if the taxpayer operates outside the offer specialist's commuting area. If a field call has been previously made and assets have been valued and documented, a field call would not be required. The determination of whether a field call should be made will be based on the type of business entity, assets involved, and if appropriate, discussion with the field RO group manager to determine if a field call would be an appropriate use of resources. A field call is a requirement on acceptances which the Territory Manager, Operations Manager, or Director is the delegated approving official.

   Exception: If after discussion with the RO group manager, it is determined a field call cannot be made, due to the taxpayer's geographic location, the AOIC history or ICS history will be documented and the offer acceptance recommendation may be submitted for approval.

   Note: OIs referred per these instructions should be considered high risk cases, code 100, and processed accordingly.

   Exception: If the offer is being recommended for acceptance based on Effective Tax Administration Public policy/Equity (NEH-ETA) factors, a field call may be requested, yet is not a requirement.

(4) See IRM 5.8.5.26, Limited Liability Companies (LLC) Issues, for information on handling LLC entities.

(1) After initial processing, offers based on DATL of a TFRP or PLET are transferred to Area offices for assignment to an OS. All other DATL offers should be forwarded with no initial processing, to the centralized DATL processing unit located at the Brookhaven campus.

(2) For offers based on DATL of a TFRP or PLET, the decision to accept or reject rests primarily on a reconsideration of whether or not the person assessed was responsible for and willfully failed to pay over the subject tax. Offers on assessments of this nature that were determined by Appeals or that received an Appeal hearing should have an OIC rejection letter mailed to provide the taxpayer appeal rights. Collection is not responsible for any initial development of the case or securing the closed administrative file. The rejection letter should state the offer is being rejected since the initial determination was made by Appeals. The offer file should be transferred to Appeals for consideration if a timely appeal is submitted.

(3) The taxpayer must offer a dollar amount. An offer for zero dollars on this basis is not acceptable and is subject to perfection requirements. The amount may be a cash or periodic offer, payable within 90 days of acceptance, unless an alternative payment term is approved at the time the offer is accepted.

(4) The administrative file should be secured and reviewed to examine the evidence that supported the assessment. New information, testimony or documents presented by the taxpayer should be considered. Refer to IRM 5.7, Trust Fund Compliance Handbook, for a discussion of the factors and evidence that support an assessment of a TFRP or PLET.

(5) A DATL offer of a TFRP or PLET liability should be resolved in one of the following ways:

(6) Before considering a DATL offer, first screen the Form 656-L to determine if it can be considered and if all required documentation is attached. DATL offers cannot be considered if any of the following conditions exist:

• It is clearly not the taxpayer’s intention to compromise the tax liability based on the belief that it is incorrect. For example, taxpayers may erroneously submit the Form 656-L when the intent is to request an installment agreement to pay the existing liability or to compromise the liability on the basis that they cannot pay.

• The taxpayer seeks to compromise a tax period for an unassessed liability, pending in Automated Underreporter (AUR), Substitute for Return (SFR/ASFR), Combined Annual Wage Reporting (CAWR), or Federal Unemployment Tax Adjustment (FUTA).

• Still under examination (-L freeze, CC AMDISA area office status codes 10 – 56).

• The 30-day letter reporting the examination changes or statutory notice of deficiency has been issued.

• If a determination is pending before the Tax Court.

• If the IRS referred the taxpayer's case involving such a liability to the Department of Justice (DOJ).

  Note: IRS may assist DOJ with a financial analysis of an offer submitted to DOJ, yet IRS has no authority to accept an offer on any tax liabilities which are under DOJ jurisdiction.

(7) Examples of DATL offers that may be returned as solely to delay collection are:

• Resubmission of offers that are based on offer explanations that have previously been rejected or previously returned offers for which the taxpayer has not provided any new information.

• Claims that the liability stems from the operation of a law that is unfair (e.g., liability based on withdrawing funds from a 401(k) plan).

• Claims based on a divorce decree which stipulates the spouses each owe certain portions of a joint liability (the government is not party to such agreements).

• Those that do not raise a valid liability issue or that give no reason for DATL basis.

• Frivolous or patently groundless offers such as those that assert the types of tax arguments listed in Notice 2010-33, https://www.irs.gov/irb/2010-17_IRB/ar13.html and Notice 2006-31 http://www.irs.gov.pub.irs-drop/n-06-31.pdf. In egregious situations, assertion of the penalty for a frivolous submission may be appropriate. Refer to IRM 5.8.10.13 , Offer in Compromise Submission with Frivolous, Delaying or Impeding Issues.

(8) If an RO determines the offer should be returned in accordance with IRM 5.8.4.20, Offers Submitted Solely to Delay Collection, a Form 657, Offer in Compromise – Revenue Officer Report, with the "Yes" block checked to indicate the offer was submitted "solely to delay collection", should be submitted with the offer with appropriate supporting documentation.

(1) When one spouse files a claim for relief from joint and several liability and the other spouse submits an OIC, the Service employee considering the section 6015 claim should be contacted prior to proceeding to ensure there are no reasons to delay the investigation of the OIC until the section 6015 claim is resolved.

(2) If a taxpayer files a DATC offer but raises relief from joint and several liability issues during the investigation, the issue should be discussed with the taxpayer. Inform the taxpayer that a requesting spouse is not entitled to relief from joint and several liability under section 6015 for any year for which the requesting spouse has entered into an offer in compromise. See Treas. Reg. 1.6015-1(c)(1). If after discussion with the taxpayer it is determined a claim should be filed with the Cincinnati Centralized Innocent Spouse Operations Unit (CCISO) , the taxpayer should be requested to withdraw the offer after being advised withdrawing the offer will not allow the taxpayer any appeal rights, will not result in any payments the taxpayer made with the offer being refunded to him or her, and the claim should be forwarded to the CCISO.

(3) If IDRS indicates the taxpayer has an open claim for relief from a joint and several liability, or if a DATC offer and a claim for joint and several liability are filed simultaneously, ask the taxpayer to withdraw the offer unless CCISO advises that the claim will be closed immediately with no change.

(4) If the taxpayer refuses to withdraw the offer and a claim is submitted or CCISO indicates a claim already pending appears valid and the taxpayer will not withdraw the offer, the offer investigation should be suspended pending disposition of the section 6015 claim.

(1) There may be situations when the taxpayer intentionally claimed a credit in order to receive a larger refund than legally entitled to, e.g. first time homebuyer, EITC, Advance Child Tax Credit (ACTC), etc. During the investigation of an offer involving these types of adjustments, it may be necessary to secure a copy of the audit work papers to determine the cause of the liability, the amount, the frequency, and whether the claimed credit was intentionally fraudulent. Offers where the taxpayer intentionally and knowingly claimed a credit for which they were not entitled may be rejected as not in the best interest of the government.

(1) Situations involving refund schemes, i.e. unsubstantiated withholding on forms W-2 and 1099 OID, and erroneous refundable credits, in which the taxpayer received fraudulent refunds, may be rejected as “not in the best interest of the government”.

(1) The Examination function puts considerable time and effort into assessing these civil penalties, which are intended to increase voluntary compliance. The penalties are quite serious in nature. Collection of the assessed penalties is essential to preserving their compliance impact.

(2) These civil penalty modules are identified by Master File Tax (MFT) 13 for Business Master File (BMF) or MFT 55 for Individual Master File (IMF), with specific penalty reference numbers depending on the code section of the penalty. Refer to IRM 25.24.4, Return Preparer Misconduct Field Collection.

(3) Absent unique special circumstances any offer submitted which includes these type of penalties should be rejected as “not in the best interest of the government”. See also IRM 5.8.7.7.1, Not in the Best Interest of the Government Rejection.

(1) An offer in compromise may be submitted for consideration which includes tax periods having Identity Theft (IDT) issues. Guidance in IRM 25.23.2.4, IDT Indicators - Tax Related, provides information on the identification of tax periods involved in IDT and appropriate actions.

(2) The identification of an IDT issue does not prohibit investigation of the offer. Each case will need to be considered on its own merit since there may be unique issues impacting the case decision.

(3) Identification of IDT situations may be determined by internal research or information secured from the taxpayer or their representative. Tax periods involving open IDT cases are identified by TC 971 AC 522 on the tax module. Also review for a TC 971 AC 501/506 on the tax year involved which indicates all identity theft tax administration issues have been resolved from the taxpayer’s perspective.

(4) The OE/OS should send the completed Form 14039 with a Form 4442, Inquiry Referral to *W&I IDT:Fresno:SPEC-CSCO and highlight the fact the taxpayer has an open offer in compromise.

(5) IDTVA Specialities (formally IDTVA Compliance) will take the appropriate actions including input of TC 971/522 and work the case under Priority Code 2. Upon case closure, the Headquarters Compliance Liaison will be contacted so notification can be provided to the offer program.

(6) The OE/OS should set a follow-up for 30 days to allow time for the initial processing of the IDT form and input of TC 971/522.

(7) COIC OE will update the AOIC Case Category Code to 15, Identity Theft, and report time under 810–66012. Document the AOIC case history.

(8) Field OS will update the AOIC Case Category Code to 15, Identity Theft, and report time on ICS. Document ICS/AOIC case history.

(9) The OE/OS should complete the financial analysis to determine an RCP.

(10) If the tax period(s) involved in the IDT issue are not included in the offer and there is no expectation an additional tax liability will be assessed against the taxpayer, the OE/OS should take the following actions:

• If the offer amount is equal to or exceeds the taxpayer’s RCP, proceed with offer acceptance.

  Note: Information on the IDT period(s) must be provided to MOIC with the acceptance file and documented in the AOIC remarks to avoid default of the offer. In addition, it will not be necessary to input or request input of the TC 470 CC 90, since the case will be in Status 71.

• If offer amount is less than RCP and taxpayer unwilling or unable to increase the offer, proceed with rejection.

(11) If the tax period(s) involved in the IDT issue are included in the offer or there is an expectation an additional tax liability will be assessed against the taxpayer, the OE/OS should take the following actions:

• If the offer amount is equal to or exceeds the taxpayer’s RCP, monitor the IDT actions and proceed with acceptance once all IDT issues are resolved. Once the TC 971/522 is input and a determination is made to recommend acceptance of the offer, the OE/OS should discuss with their manager appropriate assignment for monitoring of the offer. If there remains less than six months on the TIPRA 24 month mandatory acceptance timeframe and there is no resolution to the IDT issue, the taxpayer should be requested to withdraw the offer. If the taxpayer is unwilling or does not respond to requests for contact, the offer may be returned as other investigations pending.

• If the offer amount is less than RCP and the taxpayer is unwilling or unable to increase the offer, proceed with rejection.

(1) A taxpayer becomes a victim of return preparer fraud when the tax return preparer (paid or otherwise) completes a tax return for a taxpayer and without the taxpayer’s knowledge makes changes to that return resulting in a benefit to the preparer or third party. Taxpayers may be unaware there is an issue until contact by the IRS, well after all refunds have been issued.

(2) There are many variations on the scenarios involving a preparer who has committed fraud or misconduct on the taxpayer’s return. Here are some of the common scenarios:

(3) Be careful to distinguish between return preparer fraud and identity theft that was committed by a return preparer.

(4) Modules identified with preparer fraud or misconduct should not prohibit investigation of the offer. Each case will need to be considered on its own merit since there may be unique issues impacting the case decision. Be sensitive to the adverse impact that being a victim of Return Preparer Fraud may have upon a taxpayer and his/her ability to pay.

(5) If misconduct is detected, in addition to the actions required under (6) of this section, refer to IRM 5.8.10.9.3, Referring Tax Practitioner Misconduct to the Office of Professional Responsibility, and IRM 5.8.10.9.4, Preparation of Form 8484, Report of Suspected Practitioner Misconduct and Report of Appraiser Penalty to the Office of Professional Responsibility (OPR).

(6) COIC OE Reporting Procedures:

• Update the AOIC Case Category Code to 16, Return Preparer Fraud or Misconduct.

• Report time under 810-66013.

  Note: Time reported is for completion of the 4442 referral only

• Document the AOIC case history.

(7) Field OS Reporting Procedures:

• Update the AOIC Case Category Code to 16, Return Preparer Fraud or Misconduct.

• Document ICS/AOIC case history .

  Note: Unlike Identity Theft (IDT) procedures, at this time Field OS have no time reporting requirements for cases identified as Return Preparer Fraud or Misconduct.

(8) If a Notice of Federal Tax Lien (NFTL) has been filed and the entire balance due covered by the NFTL is due to return preparer misconduct or fraud, request a certificate of release under IRC 6326 erroneous NFTL provisions pursuant to IRM 5.12.3.9, Erroneously Filed Notice of Federal Tax Lien. These releases contain a statement that the filing was erroneous and are requested through Specialty Collection - Advisory. Advisory also issues the Letter 544, Letter of Apology Erroneous Filing of Notice of Federal Tax Lien. At the taxpayer’s written request, a copy of the release and letter of apology may be furnished to creditors or credit bureaus. Instruct the taxpayer to provide names, mailing addresses, and permission to disclose the information, see IRM 5.12.3.10.1, Return Preparer Misconduct Situation, for further direction.

(1) IRC 965 provides that certain taxpayers must pay transition tax on untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States. Provisions of IRC 965 allow a taxpayer to elect to pay its IRC 965(h) net tax liability in installments over eight years (IRC 965(h)) or, if the taxpayer is a shareholder in an S corporation which is a United States shareholder of a deferred foreign income corporation, to elect to defer the assessment of its IRC 965(i) net tax liability until a triggering event occurs (IRC 965(i)).

(2) IRC 965 assessments and potential assessments may be identified by the following transaction codes:

• TC 971 AC 114 - the total IRC 965 tax that is included in the TC 150 amount. If the TC 971, AC 114 is $0.00, the deferral may be under IRC 965(i), meaning the assessment of the tax liability is deferred until a triggering event.

• TC 971 AC 115 - the IRC 965(h) deferred tax amount as reported by the taxpayer. There should only be a TC 971 AC 115 if an IRC 965(h) election was made, otherwise there will only be a TC 971, AC 114 on the module.

• TC 766 CRN 263 - The amount of the IRC 965(h) net tax liability under IRC 965 payment of which the taxpayer is deferring. Taxpayers who make an IRC 965 (h) election may make installment payments for up to 8 years. For the first year, this credit amount could be up to 92% of the net IRC 965(h) tax liability under IRC 965 that is included in the TC 150.

(3) If an offer which includes IRC 965 net tax liability is deemed processable, compliance screening and other initial offer actions should be completed in accordance with IRM 5.8.4.6, Initial Compliance Screening and IRM 5.8.4.7, Initial Offer Actions. If a tax year is included on the offer which only has tax deferred under IRC 965(i) or payment deferred under IRC 965(h), which has not been accelerated, the taxpayer should be requested to remove the tax year from the offer. If the taxpayer refuses to remove such tax year, the offer should be closed as a processable return.

(4) If an IRC 965 liability has been assessed and no election was made under IRC 965(h), the tax may be included in the offer. The verification of the taxpayer’s financial information in these situations may include assistance from an ATAT RO to determine if the taxpayer is retaining any foreign assets and the valuing of those foreign assets. Foreign Account Tax Compliance Act research should also be completed if the offer is being recommended for acceptance.

(5) If the taxpayer made an IRC 965(h) election and the offer is going to be recommended for acceptance, the tax liability may be included in the offer, if acceleration has taken place under IRC 965(h)(3) such that the entire amount of the IRC 965(h) net tax liability is currently due and if the taxpayer had not previously entered into a transfer agreement and assumed another taxpayer’s IRC 965(h) net tax liability which is now included in the offer.

(6) Income tax assessments, other than IRC 965 liabilities, on tax years which also include deferred assessment per IRC 965(i) may be compromised, yet the taxpayer must be specifically advised of the language on Form 656 which states IRC 965(i) net tax liabilities are not included in the compromise proposal. The offer case file must be clearly documented relative to this discussion with the taxpayer or their representative.

(7) The unique nature of these assessments requires a thorough review of any tax periods in which the taxpayer has reported or may be required to report Transition taxes under IRC 965. The reviewer must determine if the potential exists for a tax liability based on a qualifying event or deferral of payments due. Any compromise determination must document this review and include information on the elections the taxpayer has made to ensure proper resolution to the taxpayer’s account. In certain circumstances, based on the dollar amount of the IRC 965 assessment or other factors, assistance may be requested from Examination in evaluating whether the IRC 965 tax has been reported in accordance with the regulations.

(1) An offer may be submitted by a taxpayer who also has been ordered to pay restitution. Although the IRS is authorized to pursue collection of a restitution-based assessment (RBA), an OIC may only address a taxpayer's civil tax liabilities, not any criminal restitution. Since the IRS does not have the authority to compromise restitution, any restitution or associated RBAs should not be included in any OIC.

(2) If an OIC is submitted by a taxpayer who also owes criminal restitution to the IRS, the offer may be considered for all civil tax liabilities other than restitution based assessments (RBA). The offer must still include all tax periods with a civil tax liability other than RBA. Inform the taxpayer that the offer has no effect on any court-ordered restitution or RBA. The taxpayer is still required to make payments in compliance with any restitution order, and the IRS may separately pursue collection on any RBA. Any issues regarding restitution payments should be directed to the Advisory probation liaison. If the taxpayer is unwilling to remove the RBA from the terms of the offer, the appropriate resolution would be a processable return of the taxpayer’s offer.

(3) Questions relating to the terms of a restitution order (e.g., amount awarded, tax periods covered) should be directed to the special agent assigned to the case or the Advisory probation liaison. Defendants seeking to modify a restitution order should be directed to contact their probation officer. See IRM 5.1.5.15, Restitution, for more information.

(4) If an offer is accepted and the taxpayer has RBA and/or restitution outstanding, AOIC remarks must be documented clearly so MOIC is aware coordination will be required with advisory relative to the application of payments. Additionally, due to the potential for payment cross referencing, abatement of the liabilities compromised should be coordinated with the unit that completes the RBA cross references. In some instances, it may be appropriate to wait until the CSED has expired, although a release of the NFTL would be appropriate when the terms are met.

(1) An offer may be submitted which includes FBAR assessments or a taxpayer who submitted an offer to compromise their tax liabilities also has assessments based on FBAR. Since, the IRS does not have authority to compromise assessments based on FBAR, the taxpayer should be requested to submit an amended offer to remove FBAR liabilities which are included on the Form 656.

(2) If the taxpayer has a liability for assessments under FBAR, an offer for tax liabilities other than the FBAR may be investigated. During the review of the taxpayer’s financial information, the OE/OS should conduct additional investigation actions to determine if the taxpayer continues to have assets outside the United States. Review the ICS history to determine what research may have been conducted by a field revenue officer. The OE/OS may also issue an other investigation (OI) to an ATAT or International RO group to research FinCEN and/or CBRS to assist in identifying current foreign assets in which they retain an interest.

(3) If the taxpayer is unable or unwilling to submit an amended offer removing the FBAR liabilities, the offer should be closed as a processable return.

(1) Courts recognize that transferee liability may arise under applicable state law transferee liability theories. IRC 6901(a)(1)(A)(i) authorizes the assessment of transferee liability, at law or in equity, in the same manner as the liability for income taxes. This provision, however, does not create any separate liability; it merely provides a secondary method for enforcing the existing liability of the transferor. Since the substantive question of whether a transferee is liable for the transferor's obligation depends upon state law, transferee liabilities arising under state law that the IRS collects under section 6901 should not be included in any offer.

(1) It is the responsibility of the OE/OS assigned the case to ensure that taxpayers make the proposed installments during the offer investigation. In addition, the OE/OS must also ensure that required additional amounts are paid if the taxpayer submits a revised OIC reflecting a larger proposed offer amount and/or changes the offer from a periodic payment to a lump sum cash offer.

(2) If a subsequent payment is received by an OE/OS with a Form 656-PPV, forward the payment with the Form 656-PPV to the appropriate COIC address shown on the form. An OS may process payments on Form 795 using ICS, yet if processed through ICS, the AOIC payment screen should also be annotated.

(3) Upon receipt of a subsequent payment received by the COIC site while the offer is assigned to an OE/OS, COIC must annotate the AOIC payment screen or if unable to access the payment screen, annotate AOIC history with the following information:

• Date(s) of receipt

• Amount of the payment(s)

• Location (MFT and period) applied

(4) It is the responsibility of the OE/OS to check the AOIC payment screen, AOIC history and/or IDRS for verification of posted or pending payments that may have been received in the COIC site.

(5) If a subsequent payment is received by the OE/OS, the OE/OS will use Form 3244 to apply the payment(s) directly to the tax liability in accordance with the taxpayer’s written payment designation, if any, submitted with the payment.

(6) If no written payment designation was submitted, apply the payment(s) directly to a tax liability to the best interest of the Government.

(7) For offers submitted from entities other than corporations, apply the payment(s) to the tax liability(ies) with the earliest unexpired CSED(s).

(8) For offers submitted from corporations or other entities subject to the trust fund recovery penalty, apply payment(s) in the following descending order:

• To all Forms 1120, 940, and any other non-trust fund liabilities (in earliest unexpired CSED order), if any; and

• To the following unpaid portions of all Form 941 periods (in earliest unexpired CSED order):

• (1) Non-trust fund portion of tax (employer's share of FICA)

• (2) Assessed lien fees and collection costs

• (3) Assessed penalty

• (4) Assessed interest

• (5) Accrued penalty to the date of payment

• (6) Accrued interest to date of payment

• (7) Trust fund portion of the Form 941 (employee's and withholding share of FICA)

(9) Annotate the AOIC payment screen or if unable to access the AOIC payment screen, then annotate the AOIC history with the amount(s) and date(s) of receipt.

(10) If the taxpayer fails to make a proposed installment for a periodic payment offer, the OE/OS will allow one opportunity to pay the missing amount(s). Attempt to contact the taxpayer by telephone, and allow 15 calendar days for the taxpayer to submit the payment(s). If the taxpayer or the representative cannot be reached by telephone, issue an additional information letter to notify of the need to make the payment(s) and allow 15 calendar days from the date of the letter to submit the payment(s).

1. If the taxpayer submits the payment(s) within 30 calendar days from the date of the letter (allowing 15 calendar days for mail), continue the offer investigation. In some cases, it may be necessary to allow additional time for the taxpayer to submit the payments. Document the ICS or AOIC history with the reason for the delay.

2. If the taxpayer fails to submit the payment or request an extension of time within 30 calendar days from the date of the letter, close the offer as a mandatory withdrawal, using the appropriate withdrawal letter. Document the ICS or AOIC history.

Note: Taxpayers will be afforded one opportunity to make up the missed payment(s) for a periodic payment offer, including any amended offers, unless special circumstances exist.

(11) The proposed offer amounts and terms submitted by a taxpayer dictate the required partial offer payments. The Service is not bound by those same terms in determining an acceptable offer. Therefore, OE/OS’s may negotiate different offer terms, when appropriate.

(12) During evaluation of an offer, the OE/OS may determine that the proposed offer is too low or the payment terms too protracted to recommend acceptance. In this situation, the OE/OS will advise the taxpayer that a larger amount or different terms would likely be recommended for acceptance. If the taxpayer submits a revised offer reflecting a larger proposed offer amount or changing the terms, one or more additional payments may be required, unless the taxpayer qualified for the waiver. The taxpayer will be given credit for partial payments already made with respect to the original offer.

(13) If the taxpayer submitting a revised or amended offer does not make the additional required payment(s), the OE/OS will return the offer as a processable return using the appropriate AOIC generated letter.

(14) If the taxpayer fails to submit the revised offer, prepare the rejection letter.

(15) The OE/OS is responsible for ensuring TIPRA payments are made during the investigation. Once the final determination letter has been issued, the OE/OS is no longer required to monitor for payments.

(1) Once an OIC is determined processable, the taxpayer will only be required to make the TIPRA payments. The case status will be changed to Status 71.

(2) If the offer is rejected, returned, withdrawn, or terminated, return the account back to Status 60. Step-by-step instructions to take a taxpayer’s account from Status 60 to Status 71 are provided on the OIC SharePoint site https://program.ds.irsnet.gov/sites/SbseEcsCp/OIC/SitePages/Home.aspx.

(3) If the taxpayer’s account is being returned to Status 60 based on a previous installment agreement, a notice of federal tax lien should not be filed unless the criteria in IRM 5.8.4.13, Notice of Federal Tax Lien, involving situations in which the government’s interest is in jeopardy as discussed in paragraph (2) is met. Prior to the NFTL being requested, the taxpayer must be advised of the proposed NFTL filing and CAP rights.