5.8.9. Actions on Post-Accepted Offers

(1) Section 509 of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) significantly impacted the OIC program. This section provides direction on completing OIC investigations which are fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS. Additionally, procedures for coordinating with other functions are provided. This section provides direction on accepted OICs such as when to rescind, terminate, or revise an existing OIC.

(1) Authorities relating to this section include:

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

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

(3) The Director, Specialty Collection Offer in Compromise (SCOIC) is responsible for the performance of the OIC program and ensuring IRM policies and procedures are followed.

(4) Operations managers (OM)s, department managers (DM)s, territory managers (TM)s, team and group OIC managers are responsible for ensuring the procedures are followed and employee actions are timely and accurate.

(5) OEs, OSs, and other employees investigating OICs are responsible for following the procedures in this IRM.

(1) Data and reports from the Automated Offer in Compromise (AOIC) system, Business Objects, ENTITY Case Management System, and Integrated Collection System (ICS) assist in inventory tracking, case age, and timeliness of case actions. Additional ad hoc reports which provide information on the inventory levels, hours per case, and age of OICs in open or closed inventory are also provided when requested by SCOIC.

(2) Operational and program reviews are conducted on a yearly basis by the Director SCOIC and Collection Policy respectively. Managerial case reviews are also completed as defined in this IRM and IRM 1.4.52, Offer in Compromise Manager's Resource Guide. These reviews are a method to determine if the OIC 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 OICs submitted by taxpayers, for inventory control, and to record case actions and history. Ability to take action on AOIC is limited to specific OIC employees. Additional permissions are provided based on an employee’s duties and responsibilities.

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

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

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

(5) ENTITY is utilized by FOIC managers as a method for inventory control and appropriate time utilization.

(6) Case reviews are conducted by the Office of Chief Counsel on OICs when the total liability(ies) for all related OICs on the same taxpayer is $50,000 or more in accordance with IRC 7122(b)and 26 CFR 301.7122-1, Compromises.

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

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

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

• SERP

• IMD site for Interim Guidance Memorandum (IGM)

• Delegation OrdersIRM 1.2.2.6.1, Delegation Order 5-1 (Rev. 5), To Accept, Reject, Return, Terminate or Acknowledge Withdrawals of Offers in Compromise

(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 Taxpayer Bill of Rights.

(4) The AOIC User Guide (Training 28206-002) may be found on the AOIC system.

(1) Under section 159 of the Restatement 2d of Contracts, false information is a misrepresentation, which is defined as an assertion that is not in accord with the facts. False information does not have to be fraudulent. Misrepresentation should not be automatically defined as fraudulent. Misrepresentation may be due to ignorance or carelessness. A half-truth may be a misrepresentation: a statement may be true with respect to the facts stated, but may fail to include qualifying matter necessary to prevent the implication of an assertion that is false with respect to other facts. A half-truth could also be used to conceal relevant information that would have made a material difference in the determination to accept the OIC. A misrepresentation must relate to something that is a fact at the time that it is made; a fact does not include a future event.

(2) False information or concealment may allow the IRS to rescind an accepted OIC. To do so, the IRS must be able to show the following below.

1. The misrepresentation was material.

2. The misrepresentation must have induced the IRS to accept the OIC.

3. The IRS was justified in relying on the misrepresentation.

(1) Under section 160 of the Restatement 2d of Contracts, concealment is an affirmative act intended or known to be likely to keep the IRS from learning of a fact that it would otherwise have learned. Concealment is the equivalent of a misrepresentation. Concealment, however, is not the equivalent of non-disclosure. The significance is that 26 CFR 301.7122 -1(e)(5)(ii) provides that an accepted OIC may be reopened where there has been concealment of the ability to pay or the assets of the taxpayer. If you have a case that requires a distinction between concealment and non-disclosure, contact Area Counsel.

(1) Under sections 151 and 152 of the Restatement 2d of Contracts, a mutual mistake of fact is defined as an erroneous belief held by both parties about an existing fact at the time the contract was entered. The law in existence at the time of the making of the contract is part of the total state of facts at the time. The parties’ mutual mistake with respect to the law, as found in statute, regulations, judicial decisions, or elsewhere, may render the compromise subject to rescission. Rescission is only appropriate in situations where a mistake of both parties has such a material effect on the agreed exchange of performances that it upsets the very basis of the agreed OIC.

(1) Prior to rescinding an OIC, send a preliminary letter to the taxpayer advising of the proposed rescission of their OIC. The letter will contain the grounds for the proposed rescission and will give the taxpayer 15 days to respond and provide any additional information related to the proposal.

(2) Rescind the OIC in the following manner:

• Prepare a letter to the taxpayer to include the OIC acceptance date. Advise the IRS is rescinding the OIC and revoking the prior acceptance letter. Contact OIC Collection Policy for assistance in preparing the rescission letter.

• Include in the letter the grounds for rescission in general terms with a demand for payment of the original unpaid tax liability, less any OIC payments.

• The Office of Chief Counsel must review for legal requirements and concur with all rescission determinations before sending the rescission notification to the taxpayer.

  Note: The letter must be signed by the same level of approval that signed the acceptance.

• Document the AOIC case history with the basis for the decision to rescind and any taxpayer contact.

• After receiving approval/concurrence, including Counsel, notify the appropriate MOIC liaison of the rescission.

• Input the appropriate TC 78X or the 48X and reassign to the field for collection action, if appropriate. SeeIRM 5.8.7.10.4, Alternative Collection Assignment - Field Collection. In cases of false information or concealment of assets or ability to pay, use TC 781, TC 482 to indicate death of a taxpayer, and TC 483 to indicate mutual mistake.

  Note: If the IRS erroneously accepted an OIC after the death of a taxpayer, the office responsible for completing the letter will also be responsible for inputting the TC 482. Use the date of death as the date for the TC 482. See IRM 5.8.7.5, Termination of Consideration.

(1) Once a case/liability is referred to the DOJ, the IRS loses its authority to compromise said case/liability. Generally, when the DOJ releases or refers the case back to the IRS for assistance with collection, the DOJ retains its authority over the case, preventing any IRS compromises. In the rare situation where you believe that the DOJ has released its entire jurisdiction over the case/liability and no longer exercises jurisdiction, contact OIC Collection Policy for guidance.

(2) Occasionally the IRS errs and sends an acceptance letter for a Form 656 that included tax periods under DOJ settlement jurisdiction. In these cases, although the OIC was processed as an acceptance, the IRS never actually accepted the OIC because it lacked the legal authority to do so. See IRM 5.8.1.6.1, Tax Cases Controlled by Department of Justice, for additional information.

(3) If all the periods listed on the Form 656 have been referred to DOJ (under their jurisdiction), the IRS does not have the authority to accept the OIC. If the Form 656 contains both periods that have been referred to DOJ (under their jurisdiction) and periods that have not been referred to DOJ, the IRS may keep the offer intact without the DOJ periods as long as the taxpayer concurs.

(1) An OIC may be accepted from 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 include a taxpayer’s civil tax liabilities, not any criminal restitution. Never include restitution and any associated RBAs in an OIC. If an RBA is erroneously included on the Form 656 or approved Form 7249, action needs to be taken to correct the OIC. Follow the same procedures in IRM 5.8.9.3.1.2 to correct AOIC and related transaction codes.

(2) The acceptance of an OIC with a civil tax assessment does not impact the validity of the RBA and the taxpayer is still responsible for any outstanding balance of the RBA. Payments received based on the terms of the OIC will be applied to the civil tax assessments, yet in some circumstances the RBA may stem from the same type of tax and tax periods, so OIC payments may partly satisfy the RBA when duplicate civil and/or codefendant assessments exist.

(3) See IRM 5.1.5, Field Collecting Procedures, Balancing Civil and Criminal Cases, and IRM 5.8.4.24.1, Offers in Compromise Submitted that Include Restitution, for more information on restitution.

(1) The proposal must be in writing and in the form of a letter addressed to the Internal Revenue Service. The taxpayer’s proposal letter should contain the following items listed below.

1. The taxpayer’s original acceptance letter date.

2. The taxpayer's original OIC terms and amount paid to date.

3. The new proposed modification terms.

4. The taxpayer agrees to file and pay all taxes as required by the Internal Revenue Code for five years, including any extensions, from the date of acceptance of the proposed, revised OIC.

5. If the original OIC had a collateral agreement then the modification must include the collateral as well.

6. The taxpayer’s reason for submitting this modification.

(2) MOIC will send the electronic Form 2209 for a modification of an accepted compromise. If you do not acknowledge the Form 2209 within seven days of issuance, MOIC will follow up with the intended recipient.

(3) Upon receipt of the proposal:

• COIC will add a history entry to AOIC Remarks indicating receipt and assignment of a modification of an accepted compromise.

• FOIC will add a history entry in AOIC Remarks as to the assignment and receipt and create an Other Investigation (OI) or Collection Initiative Program (CIP) on ICS to open a control until the taxpayer's proposal has been considered.

(4) If you are rerouting the electronic Form 2209, document AOIC Remarks and update the originating MOIC employee.

(5) The taxpayer must submit a current financial statement(s) and all required supporting documentation.

(6) The courtesy investigation will be given priority by COIC and FOIC. If the investigation is not completed by the original response date (90 calendar days for Appeals and 45 calendar days for COIC/FOIC) on the Form 2209 then send an extension request, Form 2209-A, Status Report, to MOIC. An extension request should be rare or based on extenuating circumstances.

(7) When closing the Form 2209, notate AOIC with the results of the investigation.

(1) Acceptance will depend on:

1. The best interest of the Government; and

2. The same considerations and merits being applied as if it were submitted on a Form 656.

(2) The information required to support the proposal should fit the case, such as:

• Command Code (CC) RTVUE/BRTVU print, or if no data is available, a copy of the taxpayer's most recently filed income tax return.

  Note: A request for a copy of the taxpayer’s tax return should be rare. Generally, this information is secured through internal sources such as Account Management Services (AMS) and Employee User Portal (EUP). Do not request a tax return if it is not legally due, including any extension of time to file.

• Review of CSEDs to make sure no CSEDs have expired or are about to expire.

• Estimate of the remaining liability under the terms of the future income collateral agreement, if applicable.

• Reasons why the request is being made to modify the existing agreement.

• Full compliance check.

  Note: If the taxpayer is not in five-year filing and paying compliance, a modification of an accepted compromise cannot be considered. This does not include the current year estimated tax payments.

• Statement of current financial condition.

• Description of future prospects and any other information that might have a bearing on the acceptability of the OIC.

• Estimated and projected amount of future income over the period covered by the remaining terms of the original agreement.

(1) When you complete the investigation, forward the taxpayer's proposal, investigative report, and memorandum containing a complete statement of the facts in the case, including the recommendation, to the next level of authority for approval/concurrence.

(2) Prepare an acceptance or denial letter for the delegated official. See Letter 6646 , Acceptance of a Modification of an OIC and Letter 6645, Denial of a Modification of an OIC.

(3) If the taxpayer's proposal is acceptable, the procedures for acceptance of the original OIC will be followed including an opinion of Counsel as set forth in IRM 5.8.8.13, Legal Opinion of Counsel. You do not need to secure an addendum.

(4) An attempt must be made by phone to contact the taxpayer prior to the issuance of the proposed acceptance or denial letter of the modification of an accepted compromise. If the OE or OS makes contact with the taxpayer regarding the denial, they should inform the taxpayer of the denial, and that the payment terms of the original OIC must be met or a default letter will be issued.

(5) If the proposal is acceptable and the offer is within one year of the original acceptance date, the IRS must evaluate if it is necessary to correct the PIF record (i.e. generate new Form 7249). Because PIF are generated through AOIC, any correction requires the offer be reopened. Send an e-mail to *SBSE Coll Policy OIC that includes all supporting documents for the offer modification. If Collection Policy determine the PIF requires correction, they will contact you with specific instructions regarding how to update the offer record (AO screen and terms). When the AO recloses the offer, they will record the AO disposition date as the original acceptance date; a modification does not extend the 5-year monitoring timeframe.

(6) Follow the below "If/Then" chart for preparation of the file.

(7) Update the AOIC Remarks and, if it is an FOIC OIC, update the ICS history with the results of the investigation. If the proposal is accepted, include the amount of the accepted proposal and the terms for payment in the AOIC Remarks and ICS history, if appropriate.

(8) Once the decision letter has been signed and mailed, close the OI or CIP notating the final resolution.

(9) Electronically send the closing documents to the appropriate MOIC unit with instruction to either monitor if it is to be accepted, or default if it is not accepted.

(10) The closing documents are as follows:

• Form 2209

• Taxpayer’s proposal

• Acceptance or denial letter with memorandum, as appropriate

• Form 7249, with signatures, if an acceptance

(11) If the OIC file is no longer in MOIC and has already been forwarded to FRC, the OE/OS group should forward the work papers and financial information for the modification of an accepted compromise file to FRC following procedures inIRM 5.8.7.12.1, Shipment of Closed Cases to Federal Records Center (FRC). When the case is boxed, AOIC Remarks should be documented "Modification of an Accepted OIC case file information shipped to FRC as the last case in box number xxx shipped to FRC MM/DD/YYYY."