Process Examiners (PE) are responsible for making a processability determination on all offer receipts, other than those based solely upon Doubt as to Liability (DATL). Processable offers are then perfected and built (i.e., internal and external information is secured to verify financial information) before being assigned for investigation. This chapter explains the procedures to be followed for determining jurisdictional responsibility, transferring cases, perfecting offers, and case building for offers in compromise.

If an offer is received with payment(s), processability must be determined within 24 hours of IRS received date and case building completed within 16 days of Area Office, AO, received date.

If no payment(s) is submitted, processability and case building must be completed within 16 days of the AO received date.

Except for CDP offers meeting COIC criteria, for all cases cited in the table below, generate and send the transfer letter to the taxpayer and/or POA, if applicable. Ensure all TC 480 or STAUPs have been input, as appropriate.

The following table provides guidance when it has been determined that Collection does not have jurisdictional responsibility:

Once the COIC sites have loaded the offer to AOIC and completed initial processing and perfection, pending offers in the following categories will be immediately transferred to the appropriate Area Office to be worked in a field group:

Prior to transfer to the field, COIC will generate the AOIC transfer letter or Combo A letter and send to the taxpayer. When preparing the letter, the PE must use 120 days as the time frame for taxpayer contact.

All offers forwarded to Area offices for investigation will be sent to a central point designated by the Area office.

Taxpayers are required to include one application fee and TIPRA payment or check the Low Income Certification box in Section 4 of the Form 656 for each Form 656, Offer in Compromise, submitted, other than those based solely on DATL.

There should only be as many Forms 656 as there are entities. In conjunction with an acceptance letter, the Form 656 constitutes a binding agreement between the government and the taxpayer.

There may be instances when a taxpayer sends in three offers when only two are required. In those cases you should:

The table below is intended to assist in identifying a processable offer for application fee purposes and provide guidance on advising the taxpayer when more than one Form 656, application fee, and/or TIPRA payment is required.

Individuals or self-employed taxpayers filing a DATC or ETA offer should complete and attach Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals.

All other forms of business entities (partnerships, corporations, limited liability companies, etc.) should submit Form 433-B(OIC), Collection Information Statement for Businesses.

Taxpayers who submit an offer to compromise individually owed tax and also have a substantial interest in an ongoing business may be required to submit a Form 433-B(OIC) for that business.

Certain critical errors in an offer must be corrected in order to perfect the offer and enable the Service to begin the offer investigation. For field cases, the only issues that will be perfected are the following:

Document the AOIC history to summarize any perfection issues.

These cases must be flagged while in the hold file waiting for the taxpayer's response.

Upon receipt of the response, the case must be immediately pulled and shipped to the receiving field office.

If the taxpayer fails to perfect the offer, return the offer without further contact.

Prior to beginning an OIC investigation, certain critical errors must be corrected to perfect the offer. The combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to request the necessary corrective action. If there is no response to the request letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection or Withdrawal Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. The following errors must be corrected before beginning the investigation:

When sending a combo letter to perfect the errors listed above , also request the information shown below, if necessary.

If a tax period with an amount due is missing from the Form 656, but all tax periods due can be determined from IDRS or other documents submitted with the offer, add the missing periods to the AOIC MFT screen and include them on the Form 656.

When a taxpayer has included a tax period(s) for which there is no apparent amount due, do not add the tax period(s) to AOIC. Contact the taxpayer to determine if any issues are pending that may result in additional tax.

If the basis for compromise is not indicated but it can be determined by reviewing the package, begin the investigation.

An offer can be investigated but cannot be accepted until all errors are corrected and/or an amended Form 656 is signed. Therefore, offers will not be returned by the PE if the taxpayer fails to respond to any perfection issue listed in paragraph 2 above.

PEs will request delinquent estimated tax (ES) payments as part of their case building actions for all self-employed taxpayers.

Determine if the taxpayer is currently self-employed. If research indicates the taxpayer is no longer self-employed, and has not been self-employed for the entire calendar year, no ES payments are required.

In order to be considered for an OIC, the self-employed taxpayer must be current with filing and payment requirements in the year in which the offer was submitted. ES payments are generally due quarterly; April 15th, June 15th, September 15th and January 15th of the following year.

Self employed taxpayers are required to pay an amount equal to their current year self employment tax liability or the self employment tax owed in the prior year, whichever is less.

To determine whether ES payments are required:

If there are no payments, or missing payments, take the following actions

If an ES payment is the only corrective action requested in the Combo letter, the offer should be assigned to 60XX. PEs will not return the offer if the taxpayer fails to respond.

The combo letter on the AOIC system is designed to communicate with the taxpayer and/or their representative to advise the taxpayer that their offer has been received or to request the necessary corrective action(s).

If no perfection is required, issue the AOIC Combo Letter, Paragraph A. The date of possible taxpayer contact must reflect 120 days from the date of the Combo letter. Document the AOIC remarks with this information.

If perfection is required, prepare the combo letter using the paragraphs that address all deficiencies. Include Pub 1, Your Rights as a Taxpayer, and Pub 594, The IRS Collection Process.

Before mailing the AOIC Combo Letter to the taxpayer and representative, if appropriate, you must ensure the representative is authorized to receive correspondence. If a disclosure issue exists, use the applicable paragraph to indicate this in the AOIC Combo Letter, and do not send a copy of the letter to the representative. Instead, send the representative a letter notifying him or her that correspondence has been sent to his or her client and he or she must contact his or her client for the information.

Post-date all AOIC Combo Letters five (5) calendar days. Schedule follow-up for the 45th day from the date of the letter. This means that at least 50 calendar days (5 postdate plus 45 calendar days from the date of the letter) will have elapsed before an established follow-up date.

Envelopes containing the AOIC Combo Letter, which require a response (Options B, C, or D), must be stamped or otherwise marked "URGENT-TIME SENSITIVE" .

Document the AOIC remarks to summarize all applicable perfection issues and the mailing date of the letter.

Input the appropriate follow-up date.

Retain a copy of the signed and dated AOIC Combo Letter in the file.

Assign the offer to the applicable AOIC assignment number.

If there is no response to the Combo letter, the OIC may be returned with no further contact. A return for failure to perfect an offer does not require a Form 1271, Rejection or Withdrawal Memorandum. The taxpayer has no appeal rights when the offer is closed as a return. For additional information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

If the combo letter requested critical perfection information, but the taxpayer fails to respond, the offer may be returned with no further contact.

If the offer is assigned to 51XX and the taxpayer responds, incorporate the response into the file and assign to 5500 or 5558, as appropriate.

Responses received on cases assigned to 5150 (field) must be reviewed immediately, assigned to a PE for expedite processing, and transferred to the appropriate field drop point.

All other responses must be reviewed within 10 calendar days of assignment to the PE.

Upon reviewing the response, take the next appropriate action; assign to 60XX or return.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or the representative fails to meet the additional deadline, return the offer with no further contact.

If the request included unfiled or delinquent returns and the taxpayer failed to file the requested returns, provide copies, or provide a valid reason for not filing and internal sources do not reflect that the return(s) have been filed, the offer may be returned with no further contact.

If the request included:

and the taxpayer failed to provide or address the missing payments or forms, internal research does not reflect the payment(s) have been received, and no special circumstances were identified, the offer may be returned with no further contact. For additional information on return reconsideration procedures see IRM 5.8.7.3, Return Reconsideration.

Update the AOIC remarks summarizing the documents or payments received.

Sign any amended or revised Forms 656 with the current date. Retain the original and any amended Forms 656 in the file.

PEs are required to initiate the next appropriate action on cases where taxpayers have responded to the combo letter within 10 calendar days from the date the offer is assigned to the PE.

An interim letter, advising 90 days for the next taxpayer contact, must be sent after the PE reviews the response, prior to assignment to an OE holding inventory. Document the AOIC Remarks that the interim letter was issued.

PEs are responsible for answering incoming calls from taxpayers, tax representatives and internal customers on the COIC toll-free telephone line.

Generally these calls involve taxpayer inquiries regarding the status of pending offers or questions about a letter they received.

For the majority of the calls, the PE should access the offer on AOIC and, by reviewing the remarks screen, satisfactorily answer the taxpayer's questions.

There will be times when it will be necessary for the PE to take additional follow-up actions to address the taxpayer's concerns.

The table below illustrates when follow-up actions must be taken.

Any additional discussions with the taxpayer or tax representative that may require follow-up actions should be discussed with the manager.

All phone calls must be well documented in the AOIC Remarks Screen.

After the offer is determined processable and a combo letter has been sent, the offer should be held until the follow up date expires to allow the taxpayer to provide the requested information.

If the taxpayer or their representative requests an extension of time to comply with the request for information, a reasonable amount of time should be granted. Document the AOIC history indicating the new deadline for the response. If the taxpayer and/or the representative fail to meet the additional deadline, return the offer with no additional contact.

After the designated time period has passed and no response has been received, the "No Reply" return process will be initiated by the COIC site designated manager. The AOIC system will generate all the necessary letters and documents to allow for the closing of the case off of AOIC.

Before closing the offer, check AOIC to verify that no response was received. Check IDRS to ensure there is no Combat Zone, -C Freeze, on the account. For additional information see IRM 5.19.10.6 , Combat Zone Freeze Codes.

When returning the offer:

All OICs forwarded with a Form 657, Offer in Compromise/Revenue Officer Report, will be processed following expedite handling. See IRM 5.8.3.18, Expedite Handling, below for additional instructions on expedite handling.

If an offer was sent in by an Revenue Officer (RO) with a Form 657 attached and the RO has determined that the OIC was submitted solely to delay collection, the COIC site will contact the originating RO to advise when the return letter has been issued. Unless a jeopardy situation exists, the RO must wait for COIC notification that the return letter has been issued before taking any collection enforcement action. See IRM 5.8.4.20, Offer Submitted Solely to Delay Collection, for solely to delay procedures.

If the offer account is in Status 26 and the Form 657 was not received, the COIC site will contact the RO to request Form 657 and continue processing the offer.

If a taxpayer or POA contacts the COIC site concerning an offer returned as solely to delay based on an RO recommendation, the call should be referred to the field Collection RO group manager.

The PE must verify that the TC 480 has posted to each tax period shown on the Form 656.

If the TC 480 has not posted, it must be manually input. If a manual input is required, document the AOIC history indicating that the TC 480 must be manually reversed at closing.

The table below provides instruction for inputting the TC 480.

For payments processed through Paper Check Conversion (PCC) Cincinnati Accounting receives the initial notification of a dishonored OIC payment from the Federal Reserve Bank through the Electronic Verification and Image Services (ELVIS) automated system.

The Cincinnati Dishonored Check Unit will notify the taxpayer by mailing them a copy of the dishonored check and Form 12993-A, Check for Offer in Compromise Payment Not Accepted by Bank.

Cincinnati Accounting will fax copies of the dishonored payments to the COIC site that originated Form 3210, Document Transmittal .

Notification of dishonored payments that are processed through Remittance Strategy-Paper Check Conversion ( RS-PCC) will originate from Ogden Accounting.

Upon notification of a dishonored application fee and/or TIPRA payment, the site will determine the current AOIC offer assignment.

If the payment has been moved from the 4710 Account to the Master File, the Dishonored Check Unit will reverse the payment with a TC 671. If no notification of the dishonored payment is received, the dishonored check can also be identified by the TC 671 posted on IDRS.

Upon notification of a dishonored application fee and/or TIPRA payment, the offer will be immediately returned to the taxpayer with the appropriate AOIC letter for a dishonored check. Document the AOIC history with the following information:

There may be no notification of dishonored checks processed through RS-PCC. Check IDRS for the posting of a TC 671 that may also include a secondary TC 280 or TC 286, dishonored check penalty.

If the payment was dishonored while still in the 4710 account, Accounting will annotate their copy of the Form 3210 as appropriate.

If the taxpayer or an authorized representative offers to replace the dishonored check and requests reconsideration of their offer, contact by the taxpayer or their representative must be made within 30 days of the date of the initial AOIC return letter. The replacement payment must be in the form of certified funds (money order, cashier check, etc.) and received within a reasonable amount of time. See IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing, for reconsideration procedures.

When contacted:

Inform the taxpayer or the authorized representative that the certified funds must be mailed to either of the following addresses:

To ensure proper handling, advise the taxpayer to include a letter requesting reconsideration of the offer.

If the payment was dishonored while still residing in the 4710 Account, the payment should be processed through established deposit procedures. A copy of Form 3210 must be forwarded to the appropriate MOIC function. Clearly indicate on the copy of Form 3210 that the payment is a replacement for a dishonored check. MOIC will load the payment on the AOIC deposit screen once the AOIC record is reloaded. MOIC is responsible for ensuring the payment is applied to the Master File as originally intended.

If the payment was dishonored with a TC 671 on the Master File, prepare a Form 3244, Payment Posting Voucher, to post the payment as a replacement for the dishonored payment.

Upon receipt of the replacement payment, the employee that processes the payment must also:

If the payment is not received by the specified due date, the payment will be processed in accordance with TIPRA payment requirements, and the case will not be opened as a reconsideration. See IRM 5.8.7.3, Return Reconsideration, for reconsideration procedures.

When an erroneous processability determination is corrected after forwarding the related application fee remittance for deposit, the COIC sites will need to determine whether the remittance has been deposited and credited to the taxpayer’s liability. An application Fee Refund/Apply Listing should be generated from AOIC to identify application fees that were initially determined to be processable, but later determined to be not processable. Generation of this listing is required in order for the COIC site to verify and authorize a manual refund.

The COIC sites should request MOIC to generate the Application Fee Refund/Apply Listing on a monthly basis.

Generally, when an offer is deemed not processable, the Service includes the taxpayer's application fee, and in some cases the initial TIPRA payment, see IRM 5.8.2.3, Processability, with the return disposition letter. However, depending on the elapsed time between inputting a processability change on AOIC from "Y" to an "N" , the Service may have already deposited the related application fee and applied the payment to the taxpayer's liability on Master File.

To determine whether or not a manual refund of the application fee should be issued, research the completed Form 3210, Document Transmittal, to determine whether the application fee was deposited by the Service or returned to the taxpayer via manual refund procedures.

Thorough research and care is required when determining which offers on the application Fee Refund/Apply Listing should receive manual refunds.

To request the MOIC function to issue manual refunds, prepare a memorandum that includes:

Records that support the COIC sites decision to either remove the offer record from the Refund/Apply Listing or to issue a manual refund must be retained for one year. At a minimum, the file should consist of:

TIPRA does not allow refunds of periodic payments. However, it does allow refunds of the application fee, the initial TIPRA payment in limited circumstances, see IRM 5.8.2.3 , Processability, and any deposits the taxpayer may have made.

All IDRS manual refunds must be monitored to ensure they are issued to the taxpayer and to avoid duplicate refunds.

When a manual refund is generated:

There may be occasions where a taxpayer or Power of Attorney requests expedited processing of their OIC due to an emergency or perceived emergency situation. Situations that may warrant expedited case processing include (but are not limited to):

Processing Forms 656, Offer in Compromise, must be given priority consideration and handled expeditiously due to pending collection action.

Offers received with a request for expedited processing should be referred to management for a decision on whether or not expedited 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. Form 656 should be clearly labeled at the top "Emergency Processing Requested." Immediate processability 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.

Taxpayers who wish to be represented must submit a properly executed Form 2848, 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 if the taxpayer has checked the box in Part 2 of Form 2848.

Individuals who are not authorized to practice before the IRS with respect to a collection matter (such as unenrolled return preparers and registered tax return preparers) may accompany taxpayers to meetings with a completed Form 8821, Taxpayer Information Authorization, or other proper authorization, and receive and provide information that relates to the offer investigation. They are not authorized to represent the taxpayers or sign documents relating to offers in compromise. See IRM 5.1.10.6.2, Right to Representation.

If the offer contains liabilities for tax years or periods that are not also included on Form 2848, 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 or a Form 2848 to cover the missing periods.

If, during the investigation, it is discovered that the POA no longer represents the taxpayer, secure a letter revoking the POA and document the case history. Remove the POA information from AOIC.

Where a recognized representative has unreasonably delayed or hindered an examination, collection, or investigation by failing to furnish, after repeated requests, non-privileged information necessary to the examination, collection or investigation, the IRS employee conducting the examination, collection, or investigation may be given permission to bypass the representative and contact the taxpayer directly for such information [26 C.F.R. § 601.506 (b) (Statement of Procedural Rules)]. Prior to contacting the taxpayer directly, the IRS employee must first initiate bypass procedures. See IRM 5.1.23.5, By-Passing a Taxpayer's Representative, for procedures to bypass a POA.

Form 4844, Request for Terminal Action, will be prepared by Automated Collection System (ACS), Toll Free, and 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 taxpayer has yet to be contacted or notified of the status of the offer within 45 calendar days of the offer being submitted for processing.

Form 4844 will be faxed to the appropriate 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.