5.8.2  Offer Receipts

5.8.1.1 Introduction
5.8.1.2 Functional Responsibilities
5.8.1.3 Examination Function
5.8.1.4 Appeals
5.8.1.5 Counsel
5.8.1.6 Taxpayer Advocate Service
5.8.1.7 Liabilities to be Compromised
5.8.1.8 Application Fee
5.8.1.9 Form 656, Offer in Compromise
5.8.1.10 Interest on the Compromise Amount
5.8.1.11 Effect of Previous Offers on Collection Statute
Exhibit 5.8.1-1 Common Abbreviations Used in the IRM

5.8.2.1  (09-01-2005)
Overview

• Jurisdictional responsibility must be determined upon receipt of a taxpayers proposal to compromise. This section provides instructions for initial case processing on new offers. It also provides directions for processing payments, powers of attorney, and emergency case processing.

5.8.2.2  (09-01-2005)
Initial Receipt of Offers

• All initial offer receipts that are submitted based on Doubt as to Collectibility (DATC), Effective Tax Administration (ETA), or Doubt as to Liability (DATL) for either Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET) must be processed by the appropriate Centralized Offer In Compromise (COIC) site. Form 656 instructions advise taxpayers to send offers to the appropriate COIC site based on the taxpayers state of residence.
• If the taxpayer resides in Alaska, Alabama, Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Mississippi, Montana, Nevada, New Mexico, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin, or Wyoming the offer will be processed by the Memphis COIC Unit
• If the taxpayer resides in Arkansas, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, West Virginia, or if they have a foreign address the offer will be processed by Brookhaven COIC Unit.
• Doubt as to Liability (DATL) offers other than those mentioned above are to be forwarded to the taxpayers Area office Examination function. Forward the offer to the appropriate Area office using Form 3210, Document Transmittal.
• Offers that are received elsewhere by Service employees must be immediately date stamped and forwarded to their respective Centralized Offer in Compromise (COIC) site for processing within 24 hours of receipt. When an offer is received on an assigned case by a field revenue officer (RO), Form 657, Offer in Compromise Revenue Officer Report, must be completed and attached to the offer package. This form is to be signed by the RO and approved by the manager. The RO should retain all information related to the collection case and forward only the following information to COIC:
• Form 656, Offer in Compromise
• Form 657, Offer in Compromise Revenue Officer Report
• Collection Information Statement (CIS) with attached substantiation
• Current Form 2848, Power of Attorney and Declaration of Representative or Form 8821, Tax Information Authorization
• Any information gathered during the field investigation that verifies or refutes amounts claimed on the CIS submitted with the offer
• Form 656-A, Income Certification for Offer in Compromise Application Fee, if applicable
• Application fee payment, if applicable
• The above information should be transmitted to the appropriate COIC site using Form 3210, Document Transmittal, and must be sent by traceable methods if an application fee and/or deposit is attached.

5.8.2.3  (09-01-2005)
Form 656, Offer in Compromise

• Individuals or self-employed taxpayers filing an offer based on Doubt as to Collectibility (DATC) or Effective Tax Administrations (ETA) should complete and attach the Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and a Form 433-B, Collection Information Statement for Business , if the taxpayer is self-employed.

Note:

A 433-B may not be required if information provided by the taxpayer includes a current Profit and Loss statement and/or sufficient information to make a determination.

• Two or more taxpayers who jointly owe the same liability (including spouses living separately or divorced) may submit a joint offer in compromise on one Form 656 showing each name, address, and taxpayer identification number. However, separate offer forms (one for each person) may be submitted if the individuals deem it to be appropriate for their particular situation.
• Taxpayers who owe both joint and individual liabilities must submit two offers.

Note:

These taxpayers should never be asked to submit three offers, even if they each owe separate and joint liabilities.

• All other forms of business entities (partnerships, corporations, limited liability corporations (LLC), etc.) should submit the Form 433-B, Collection Information Statement for Business.

Note:

A 433-B may not be required if information provided by the taxpayer includes a current Profit and Loss statement and/or sufficient information to make a determination.

• Taxpayers that submit an offer to compromise individually owed tax and also have a substantial interest in an ongoing business may also be required to submit a Form 433-B for that business.
• When corporate offers are being considered, corporate officers, shareholders, or others determined to be responsible for a Trust Fund Recovery Penalty (TFRP) may be required to submit a Form 433-A. 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 as well.
• In conjunction with an acceptance letter, Form 656 constitutes a binding agreement between the government and the taxpayer.

5.8.2.3.1  (09-01-2005)
Total Liability

• Each separate tax period and type of tax must be indicated on the Form 656. Trust Fund Recovery Penalties (TFRP) assessed prior to August 2000 will reflect the last quarter only, while those made after August 2000 will include an assessment for each quarter. Verification on Integrated Data Retrieval System (IDRS) will be required to determine how the assessment was completed. If an offer is accepted that has TFRP assessments, the case file must include information identifying the BMF periods that comprised the TFRP assessment.
• A taxpayer may submit an offer that does not include all outstanding liabilities. Prior to accepting the offer, the Form 656 must be amended to include all outstanding tax liabilities.
• An offer submitted under Doubt as to Liability (DATL) will be accepted for only the tax periods that are in question.

5.8.2.3.2  (09-01-2005)
Explanation of Circumstances

• Taxpayers may use the designated space on the Form 656, Offer in Compromise, or attach a separate statement to explain why they are submitting the offer.
• If special circumstances exist, the taxpayer should explain the situation on the Form 656, Offer in Compromise, Item 9, and attach all supporting documents to assist in verification of the special circumstance that is being claimed.

Note:

A separate statement may be submitted in lieu of completion of Item 9 on the Form 656, Offer in Compromise.

5.8.2.4  (09-01-2005)
Signatures

• Each taxpayer that is party to an offer should personally sign the Form 656. When unusual circumstances prevent this (e.g. the taxpayer is incapacitated), an authorized representative may sign the Form 656, Offer in Compromise, for the taxpayer.

Note:

Geographical distances between the representative and the taxpayer is not an acceptable reason for a representative to sign on the taxpayers behalf.

The case file should include a copy of the properly executed Form 2848, Power of Attorney and Declaration of Representative, Form 8821, Tax Information Authorization, or CFINK print as verification of the representative's authority.

• Since Collection Information Statements (CIS) require certification under penalty of perjury, the taxpayer(s) must personally sign the Form 433-A and/or 433-B.
• In the case of joint offers in compromise, all parties, or their designated representative as indicated in paragraph (1) above, must sign the Form 656 to ensure the provisions of the agreement bind all parties.
• Offers submitted for corporations should reflect the corporate name on the first signature line. The signature name and title of the authorized officer should be reflected on the second line.
• An offer submitted by the fiduciary of an estate of a deceased taxpayer will be binding on the taxpayers estate to the extent that it would be binding on a taxpayer who submits an offer on their own behalf. Include in the case file a copy of the fiduciary's appointment document.
• If an offer is submitted on behalf of a deceased taxpayer, when there is no estate or fiduciary, the individual who signs the offer must have authority. This authority can be designated by a will appointing that individual as the executor or by written authorization from the probate court.

5.8.2.5  (09-01-2005)
Initial Processing of Offers in Centralized Offers in Compromise Sites

• When an offer is received in the Centralized Offer in Compromise (COIC) site, an employee will:
• Date stamp the form upon receipt in the IRS Received Date Stamp block of Form 656, Offer in Compromise, and create separate offer sorts, as follows:
  • Any offer remittances other than $150 per offer

Note:

Multiple offers submitted with one remittance intended as the application fee for all will not be processed. Do not load the offer to the AOIC system. See IRM 5.8.3.3, Combination Application Fee Processing.

• Application fee of $150 only (i.e., the only remittance is $150).
• Offers with no remittance.
• Doubt as to Liability (DATL) only Examination issues
• Appeals Collection Due Process (CDP) offers

Note:

Do not load these to AOIC. See IRM 5.8.3.4.2, Determining Processability for Appeals Collection Due Process Offers.

• Verify the case is the type of offer that is processed by the COIC site and if not route it to the proper jurisdiction.
• If the offer is the responsibility of the Collection function, query the Integrated Data Retrieval System (IDRS) to ensure the receipt is a new offer.
• If the offer is the responsibility of the Collection function, add the offer to the Automated Offer in Compromise (AOIC) data base as a " U" (undetermined) case.

Note:

To add the offer as a " U" (undetermined) case, the following fields should be completed on the AOIC record:

• Screen 1 — complete the IDRS TIN, OFFER TIN, and DATE RECEIVED fields.
• Y-Entity screen — complete at the minimum the name control field or at local discretion the entire name of the taxpayer(s) as reflected on the Form 656, Offer in Compromise.
• Write the AOIC offer number on the top right of Form 656, Offer in Compromise, in "red ink" .

• Upon receipt, COIC will prepare the Form 13479, COIC Application Fee Tracking Report, if applicable.
  
  • Use one line on the report for each remittance. One offer may have more than one line completed on the Form 13479, COIC Application Fee Tracking Report, if accompanied by multiple remittances.

Note:

Do not put more than 5 offers on one Form 13479.

• Enter in the "COIC R&C Received Date" field the IRS received date of the offer and remittance amount. Each Form 13479, COIC Application Fee Tracking Report, must list the offers received on the same date.
• For those offers loaded on AOIC, write the offer number on the upper left hand corner of the remittance(s) and in the "Offer #" column on the Form 13479, COIC Application Fee Tracking Report.
• For all offers received with remittances:

1. Complete the " SSN/EIN" , "Name Control" , "Check Amount " , "Check Type" (e.g., money order, bank check, government check, personal check, etc.) and "Check No." columns.
2. Attach all remittances to the front of the Form 13479, COIC Application Fee Tracking Report. Secure acknowledgement of receipt of the Form 13479 and the checks by Receipt and Control/Payment Perfection Unit (PPU) by obtaining their initials on the Form 13479 in the column marked "R&C Initial" .
3. Secure the remittances with Part 3 of the Form 13479, COIC Application Fee Tracking Report , and release to PPU after they have acknowledged receipt.
4. Retain Parts 1 and 2 of the Form 13479, COIC Application Fee Tracking Report, with the batch of offers and forward for assignment to the Process Examiners (PE).

• Review submitted documents for an emergency processing request (i.e. "Please Rush" , "Urgent Matter" , etc.). See IRM 5.8.2.6, Emergency Processing, for these requests.

5.8.2.6  (09-01-2005)
Emergency Processing

• Taxpayers may request that their offer be expedited due to an emergency or perceived emergency situation. Situations that may warrant expediting case processing include:
• A contract or business agreement requiring the taxpayer, as a condition of the contract or agreement, to resolve the tax liability by a specific date.
• Availability of the money to fund the offer is limited to a certain time.
• A terminal illness may affect the ability to complete the payment terms.
• Offers received with request for expedite processing should be referred to management for a decision on whether or not expedite treatment is warranted.
• If a decision is made to expedite offer processing, the manager should document the AOIC history indicating the basis for the decision. The Form 656 should be clearly labeled at the top "Emergency Processing Requested" , and an immediate processability determination and assignment for investigation should be made. Every effort should be made to close the offer within 90 calendar days of receipt. In an attempt to bring the case to a prompt and timely resolution and to meet the special needs of the taxpayer, immediate contact should be made with the taxpayer to request any additional information needed.
• If a decision is made not to expedite the case, the manager should document the basis for the decision on the AOIC history. Contact the taxpayer by telephone or correspondence explaining the basis for the decision. The case should be worked under routine processing.

5.8.2.7  (09-01-2005)
Processing Deposits Received With Offers

• Deposits are defined as payments of part or all of the offered amount submitted prior to acceptance. Offers do not require deposits, but deposits may be received with new offers or any time while an offer is being considered. A deposit may be required when considering a compromise of an accepted offer as discussed in IRM 5.8.9.3, Potential Default Cases .
• Deposits are held in a special deposit fund commonly referred to as the "4710 Account." The deposit is not reflected on IDRS nor applied to any specific tax period until the offer is accepted. For those offers previously loaded on AOIC, the amount will be annotated on the Deposit Screen of the taxpayers AOIC record by the Monitoring OIC (MOIC) employee processing the remittance.
• COIC sites will establish local procedures with their remittance processing office, for handling remittances and ensuring that deposits are timely processed.
• During the course of an investigation an offer investigator must process any deposit received on a pending offer within 24 hours of receipt. The employee who receives the deposit will:
• Generate the Form 2515, Record of Offer in Compromise , from AOIC. Complete the form and attach the deposit.
• Attach the Form 3210, Document Transmittal, and include the following information:
  
  1. Offer number
  2. Taxpayer's ID number and name
  3. Amount of the deposit
• Transmit the deposit by traceable methods to the appropriate MOIC unit for processing.

5.8.2.8  (09-01-2005)
Processing Offers to be Assigned to Area Offices From Centralized Offers in Compromise Sites

• Once the Centralized Offer in Compromise (COIC) sites have loaded the offer to AOIC and completed initial processing, pending offers in the following categories will be transferred to the appropriate compliance area to be worked in a field group, except for those self-employed taxpayers meeting the criteria listed in paragraph 3 below.
• Corporations
• Partnerships
• Estates and trusts
• Currently incarcerated taxpayers
• Trust Fund Recovery Penalty (TFRP) - Doubt as to Liability (DATL)
• Self-employed taxpayers (Form 1040 Schedule C or F filers)
• Sole proprietorships with or without employees
• Owners of closely held corporations
• Partners in a partnership which serves as a primary source of income (i.e. not investments)
• Prior to the transfer of self-employed cases to an Area office, COIC will:
• Send the taxpayer the Automated Offer in Compromise (AOIC) combination letter using "Option A"
• Include the following in-house research in the case file:
• ChoicePoint
• Local Department of Motor Vehicle (DMV), if Choice Point does not include the taxpayers state of residence.
• Basis 100, if real estate ownership is indicated on the Collection Information Statement (CIS).
• Motor vehicle trade association guide valuation (i.e., Kelly Blue Book), if there is an automobile three years old or newer with no lien listed on the CIS.

Example:

In 2005 a 2003 model year car is considered to be three years old or newer.

• Copy of the Notice of Federal Tax Lien (NFTL), if notice of filing is on the Automated Lien System (ALS).
• Only those self-employed taxpayers meeting the following criteria, will be retained and processed in the COIC sites.
• Offers that meet the criteria for "Screen for Obvious Full Pay" processing.
• Offers requiring issuance of "Option-Y" on the AOIC Combination letter to secure an additional Form 656, Offer in Compromise, and application fee. See IRM 5.8.3.7, Forms 656 Application Fee Requirements and Perfection, for additional information on when it is appropriate to secure an additional Form 656 and/or application fee. COIC sites will also include all applicable case-building and perfection paragraphs in the Combination letter.

Note:

Self-employed taxpayers that satisfactorily respond to the Combination letter will be transferred to the Area offices for investigation.

• Previously self-employed but currently unemployed.
• Currently self-employed with gross receipts less than $100,000 and no employees.
• All offers forwarded to Area offices for investigation will be sent to a central point designated by the Area office. Within five (5) business days of receipt of the offer case file from the COIC site, the Area office will:
• Acknowledge receipt of the offer file(s) by signing and returning the acknowledgement copy of Form 3210, Document Transmittal .
• Accept transfer of the offer record on AOIC.
• Determine the destination of the offer assignment and reassign the offer to the appropriate offer group on AOIC.
• Send the offer file to the appropriate group manager for assignment.
• Send a letter to the taxpayer providing the address of the office that will handle the investigation including a name and phone number of a contact person and an anticipated date of assignment to an offer investigator, if available. The AOIC Transfer Letter may be used for this purpose.

5.8.2.9  (09-01-2005)
Interoffice Transfers

• Offer cases may be transferred from one office or site to another if:
• the taxpayer relocated,
• the case was originally received in the wrong jurisdiction, or
• the work has been realigned.
• Misdirected offers without remittances should be transferred from one Centralized Offer in Compromise (COIC) site to the proper COIC site while in "U" (undetermined) status, before a processability determination is made.
• Misdirected offers with remittances will be reviewed by the COIC sites for processability determinations.
• If the offer is not processable, the receiving site will return the offer and follow procedures outlined in IRM 58.3.4, Processability .
• If processable, the receiving COIC site will make the appropriate AOIC entries and process the remittances in accordance to IRM 5.8.3.5, Processing Application Fees.
• Transfer the offer to the appropriate COIC site based on the location of the taxpayers place of residence. The receiving COIC site will be responsible for completing the "Screen for Obvious Full Pay" , case building, and/or issuance of the Combo letter.
• Misdirected offers received and determined to be under the jurisdiction of Appeals as a result of a Collection Due Process (CDP) hearing, will not be transferred between COIC sites. Follow the procedures outlined in IRM 5.8.3.4.2, Determining Processability for Appeals Collection Due Process Offers.
• Transfers from one office or COIC site to another should be made if the taxpayer relocates and either the investigation has not been started or there is a substantial change in circumstances. Transfer letters should be generated and sent to the taxpayer by the transferring office or COIC site.
• To transfer cases, the transferring office should take the following steps:
• Document the history with the taxpayers new address and the location of the receiving office.
• Correct the address on the Y-Entity screen on AOIC.
• Prepare and mail the AOIC transfer letter.
• Transfer the case on AOIC (press (C)ontrol and (T)ransfer and input the correct area office code).
• Prepare the Form 3210, Document Transmittal, and mail the case by traceable mail to the receiving office.

5.8.2.10  (09-01-2005)
Powers of Attorney

• Taxpayers who wish to be represented must submit a properly executed Form 2484, Power of Attorney and Declaration of Representative . Input the representative's information on AOIC and retain a copy of the form in the paper case file. Forward the original for recording on the Centralized Authorization File (CAF).
• Send all original correspondence to the taxpayer and provide a copy to the representative unless the taxpayer has indicated otherwise by checking any item on line 7 of Form 2848.
• Unenrolled preparers may accompany taxpayers to meetings and receive and provide information that relates to the offer investigation. They are not authorized to represent taxpayers or sign documents relating to offers in compromise.
• If the Form 2848 does not include liabilities that are included on the offer, a letter cannot be sent to the representative covering these periods. Instead send a redacted letter to the representative. The letter sent to the taxpayer can request completion of a Form 8821, Tax Information Authorization or a Form 2848, Power of Attorney and Declaration of Representative, to cover the missing periods.

5.8.2.10.1  (09-01-2005)
Third Party Authorization Requests

• Eligible attorneys, Certified Public Accountants (CPA), enrolled agents, or enrolled actuaries are the only practitioners authorized to represent taxpayers before the IRS on collection matters.

Note:

An "unenrolled " return preparer is an individual other than an attorney, CPA, enrolled agent, or enrolled actuary who prepared and signs a taxpayers return as a preparer, or who prepared a return but is not required to sign the return. An unenrolled return preparer cannot represent a taxpayer before the IRS on any collection matter. An unenrolled return preparer or other non-practitioner, however, may represent a taxpayer before the IRS in certain other situations. See IRM 5.1.10.5.2, Right to Representation.

• During the course of the investigation, a taxpayer may submit a Form 2848, Power of Attorney and Declaration of Representative , designating a third-party as their representative or power of attorney, or the taxpayer may submit a Form 8821, Tax Information Authorization, designating an appointee or may complete item 14 on the Form 656, Offer in Compromise, for a "Third Party Designee" . When properly completed and filed by the taxpayer, each of these documents should be recognized during an investigation, and interaction with the third party should be governed by the parameters allowed within each of these authorization forms.
• Form 2848, Power of Attorney and Declaration of Representative — authorizes an eligible individual (e.g. attorney, CPA, enrolled agent, or enrolled actuary) to represent as well as receive confidential information.
• Form 8821, Tax Information Authorization, and item 14 on the Form 656, Offer in Compromise — only authorize limited disclosure.

The table below provides guidance to assist in distinguishing the differences between the Form 2848, Form 8821, and item 14 on the Form 656.

5.8.2.10.1.1  (09-01-2005)
Form 8821, Tax Information Authorization (Rev. 4/.2004)

• If Form 8821 is missing critical information that can only be provided by the taxpayer (e.g. tax years; type of tax; missing taxpayer signature; date) it will be returned to the taxpayer.
• Information that may be disclosed to the designee is limited to the type of tax, tax form number, years or periods, or a specific tax matter, that is listed on the Form 8821, item 3.
• If the Form 8821, item 5a is checked, the designee is also entitled to receive copies of tax information, notices, and other written communication on an ongoing basis for the type of tax, tax form number, years listed, or the specific tax matter cited on item 3.
• Designee is not entitled to respond to any type of correspondence on behalf of the taxpayer, if the response advocates a position that would indicate a representational role.
• Mail the original Form 8821 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International) depending on the taxpayers state of residence.
• The Form 8821 may also be faxed. Refer to page 2 of the Form 8821 for detailed fax information and location. If the form is faxed, retain the original in the case file. Document the history to indicate the date and campus the form was sent.

5.8.2.10.1.2  (09-01-2005)
Form 656, Offer in Compromise, item 14: Third Party Designee (Rev. 7/2004)

• The information and/or documentation that may be disclosed to the designee is limited only to information and/or documentation necessary to process an offer.
• Information may include tax liabilities omitted on the Form 656, item 5, or unfiled tax returns affecting the acceptance of the offer.

5.8.2.10.1.3  (09-01-2005)
Form 2848, Power of Attorney and Declaration of Representative (Rev. 3/2004)

• As of March 2004, IRS will not honor a Form 2848, Power of Attorney and Declaration of Representative, if it designates a representative who is not authorized to practice. Further, the form will not be treated as a taxpayer information authorization. Form 8821, Tax Information Authorization, is required to allow those individuals who cannot practice before Collection personnel access to tax information beyond what would be allowed if they checked the Form 656, Offer in Compromise, item 14 designation.
• A taxpayer may authorize a student who works in a tax clinic program to represent them under a special order issued by the Office of Professional Responsibility (OPR). A copy of the letter from OPR authorizing practice before the IRS must be attached to the Form 2848. If a lead attorney or Certified Public Accountant (CPA) will be listed as a representative, then their name should be listed on line 2 and the student's name on the following line.
• The power to sign the taxpayers tax returns can be granted only in limited situations. Refer to the Form 2848, Power of Attorney and Declaration of Representative, and Treasury Regulations 1.6012–1(a)(5) and 1.6061-1(a) for additional information.
• If a joint return has been filed and both husband and wife will be represented by the same individual(s), only one spouse is required to sign the Form 2848 to allow the representative access to tax information related to the joint tax return. However, if a joint return has been filed and the husband and wife will be represented by different individuals, each spouse must submit a separate Form 2848 listing their independent representative.
• Mail or fax the Form 2848 to the appropriate Centralized Authorization File (CAF) campus in Memphis, Ogden, or Philadelphia (International) depending on the taxpayers state of residence. Refer to the Instructions on the Form 2848 for address locations and fax numbers. If the Form 2848 is faxed, retain the original in the case file. Document the case to indicate the date and campus the form was sent.

5.8.2.11  (09-01-2005)
Processing of Forms 4442's From Automated Collection Services, Toll Free, or Other Service Divisions

• Form 4442, Inquiry Referral, will be prepared by Automated Collection System (ACS), Toll Free and/or Walk-in operations to provide information submitted by the taxpayer on a previously filed offer in compromise. Normally, these forms will be prepared if the offer was submitted for processing more than 45 calendar days and the taxpayer has yet to be contacted or notified of the status of the offer.
• Form 4442 will be faxed to the appropriate Centralized Offer in Compromise (COIC) sites. The forms should be reviewed within 48 hours of receipt and any necessary action taken on the account based on the information provided.