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Part 5. Collecting Process

Chapter 8. Offer in Compromise

Section 7. Return, Terminate, Withdraw and Reject Processing

5.8.7  Return, Terminate, Withdraw and Reject Processing

5.8.7.1  (09-01-2005)
Overview

  1. Offers that are not recommended for acceptance will be closed by return, rejection, withdrawal, or termination. This chapter defines the types of dispositions other than acceptance and describes the procedures for completing each type of closure.

5.8.7.2  (09-01-2005)
Returns

  1. An offer can be returned as either a "not processable return" or a "processable return" . It is important to note the distinction as the statute is not suspended, nor is the taxpayer required to pay the $150 Application fee, for a "not processable return" .

5.8.7.2.1  (09-01-2005)
Not Processable Returns

  1. Not processable returns are those returns made when upon receipt, an offer meets one or more of the "Not Processable" criteria listed in IRM 5.8.3.4.1, Determining Processability .

5.8.7.2.1.1  (09-01-2005)
Closing an Offer as a Not Processable Return

  1. See IRM 5.8.3.9, Not Processable, for procedures.

5.8.7.2.2  (09-01-2005)
Processable Returns

  1. Processable returns include all returns made after the offer has been determined to be processable.

  2. During the offer investigation there are a number of situations that may result in a processable offer being returned to a taxpayer. A processable return will result in a suspension of the collection statute for the period of time that the offer was considered processable and will result in the Service keeping the $150 application fee. An offer closed as a return does not receive appeal rights, however different levels of approval exist for some return situations.

  3. The following chart lists the reasons a processable offer may be returned and who can authorize the return.

    Reason for Return Who has delegated authority to sign the letter?
    Taxpayer failed to remain in filing or payment compliance, or an in-business taxpayer failed to make required FTD's during investigation. Group Managers, Compliance Services Unit managers (COIC)
    Taxpayer filed bankruptcy during a pending investigation. Investigating Process Examiner, Offer Examiner, Offer Specialist
    Tax is paid, has been abated, or no tax can be identified as owing. Investigating Process Examiner, Offer Examiner, Offer Specialist
    Taxpayer failed to perfect offer forms necessary to process the offer for acceptance. Investigating Process Examiner, Offer Examiner, Offer Specialist
    All other return reasons Group Manager in area office and Unit Manager in COIC

    Note:

    Approval authority is outlined in Delegation Order No. 5-1 (Rev. 1/25/2005)

5.8.7.2.2.1  (09-01-2005)
Return for Inadequate Estimated or Insufficient Withholding Tax Payments

  1. A processable offer may be returned when the investigation reveals the taxpayer does not have sufficient estimated tax paid or income tax withheld to cover the current year estimated tax due.

    Example:

    While investigating an offer in compromise on July 15, 2005 you learn that the taxpayer has an extension until August 15, 2005 to file their 2004 Form 1040. You must determine whether the taxpayer has sufficient income tax withheld or estimated taxes paid for the entire 2004 tax year as well as for the first two quarters of the 2005 tax year.

    The requirement to have adequate estimated tax paid prior to consideration of an offer applies to corporate as well as individual taxpayers.

  2. Prior to returning an offer for this reason the following actions must be taken:

    • A determination must be made if the taxpayer has earned sufficient taxable income to require estimated payments or income tax withholding for the year(s) in question and a calculation must be made of the amount of tax that should have been paid in estimated tax payments to date (or withheld) on the income earned.

    • Contact with the taxpayer or representative must be made explaining the calculated non-compliance. A request for payment of an estimated tax payment must be made to bring the taxpayer current. A reasonable deadline for responding must be given along with a warning that the offer will be returned if the payment is not received by the deadline set.

    • All of the above must be clearly documented in the case history on AOIC.

  3. A return for failing to make required estimated tax payments or insufficient withheld tax requires approval of a Group Manager in the field or a Unit Manager in COIC.

5.8.7.2.2.2  (09-01-2005)
Return for Failure to Provide Information

  1. An offer may be returned at any time during processing if the taxpayer fails to provide information necessary to determine whether it should be accepted.

  2. Prior to returning an offer for this reason the following actions must be taken:

    • A request for the needed information must be made by phone, in person, or by letter. A reasonable deadline for responding must be given along with a warning that the offer will be returned if the information is not received by the deadline.

    • The above information must be clearly documented in the case history.

  3. The return letter must be signed by the Group Manager in the field or a Unit Manager in COIC.

5.8.7.2.2.3  (09-01-2005)
Closing an Offer as a Processable Return

  1. Processable returns do not require preparation of the Form 1271.

  2. The following actions should be taken to close a case as a processable return:

    1. Verify that the AOIC record reflects a "Y" in the Processable status field.

    2. Generate the AOIC "Return Letter" for the signature of the appropriate delegated official, listing the reason(s) the offer is no longer processable.

    3. Generate the Power of Attorney (POA) letter for any authorized representative. If a disclosure issue exists, use the appropriate paragraph to indicate this in the Return Letter, and do not send a copy to the representative.

    4. Stamp the Form 656 "RETURN" in red, or circle in red ink. Cross out the IRS received date(s) with a red "X" .

    5. Document the history indicating the reason(s) the offer is no longer processable and with any other pertinent information regarding the case.

    6. Attach a copy of the offer to the taxpayers letter and submit the letter(s) for approval and required signature.

    7. Keep the original offer, and any amended offers and the closing letter(s), the Collection Information Statement (CIS), all supporting documentation, and all internal documentation secured in connection with the investigation in the case file. Purge the file of any duplicate IDRS prints or other data not related to the offer.

    8. Close the case on AOIC as a "return" once the letter is signed.

    9. Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 483 to reverse the TC 480 fro any Non-Master File (NMF) tax period that is listed on the MFT screen and not on Form 656.

  3. See IRM 5.8.3.6, Dishonored Application Payments , for procedures to return an offer based upon notification of a dishonored OIC application fee check after issuance of a rejection letter.

5.8.7.3  (09-01-2005)
Return Reconsideration

  1. This section does not apply to the return of offers deemed not processable. It also does not apply to processable offers returned for any of the following reason codes:

    • P (filed bankruptcy after offer submission)

    • Q (non-compliance after offer submission)

    • R, V, W ("solely to delay" submissions)

    • S (collection is in jeopardy)

    • X ("other investigations are pending that may effect … " )

    • Y (original assessment fully abated)

      Note:

      Unless the return for any of the above reasons, was determined to have been in error.

  2. Situations may arise when the reconsideration of a returned offer would best serve the interests of both the Service and the taxpayer. In most cases, an additional application fee would not be required. Upon receipt of a return letter taxpayers may telephone to object to the return of an offer. Below are the criteria for possible reconsideration.

5.8.7.3.1  (09-01-2005)
Criteria for Return Reconsideration

  1. Generally, the taxpayer or their representative must contact the Service to raise objections and justify the failure to provide the requested items within 30 calendar days from the date of the return letter (unless the condition that caused the failure to supply the substantiation continued for a prolonged period).

  2. Acceptable criterion for potential return reconsideration are:

    1. The offer was returned in error by either the Field or the Centralized Offer in Compromise (COIC) site.

    2. The information was sent timely but it was not associated with the case.

      Note:

      The determination of "received timely" can be determined by using the postmark date.

    3. Serious illness and/or injury prevented the taxpayer from submitting the information timely.

      Note:

      Serious illness and/or /injury does not apply to the representative, since the taxpayer controlling the information receives a copy of the combo or additional information letter.

    4. There was a death in the taxpayers immediate family that prevented timely mailing of the information.

    5. The taxpayer suffered a disaster, such as a fire or flood, that prevented timely mailing of the information.

    6. The failure to perfect by providing a required additional Form 656 and application fee, when the original Form 656 included both joint and separate liabilities or individual or joint and corporation or partnership liabilities.

    7. The taxpayer submitted a Form 656-A certification instead of paying the $150 fee, and then provides proof that an incorrect conclusion was made.

    8. The failure to make estimated payments and the taxpayer provides proof that estimated or withheld taxes were not due.

5.8.7.3.2  (09-01-2005)
Conditions for Return Reconsiderations

  1. Before reconsidering the closed offer the following conditions must be met:

    1. The total offer amount must be equal to the amount offered on the returned Form(s) 656;

    2. The taxpayer or their representative must be able to provide the missing, required documentation or fees within 30 calendar days of the telephonic communication of the reconsideration approval;

  2. The following would not be acceptable reasons for return reconsideration:

    1. "Unavailable absence" of either the taxpayer or representative, since they control the timing of the filing of the offer;

    2. Representatives’ "filing season" activity, since they control the timing of the filing of the offer.

5.8.7.3.3  (09-01-2005)
Approval Authority for Return Reconsideration

  1. Approval to reconsider a returned, processable offer(s) will be obtained from COIC Department Managers or Area office Group Managers before requesting the taxpayer and/or representative to send any missing documentation or fees. This authority may not be re-delegated. The manager will indicate approval or denial of the request by making a history entry on AOIC (not ICS).

5.8.7.3.4  (09-01-2005)
Reconsideration Procedures

  1. If the employee receiving a telephone request from a taxpayer and/or representative for reconsideration determines the request does not have merit, based upon the acceptable criteria outlined in IRM 5.8.7.3.1 above, the employee will advise the taxpayer or their representative and annotate the closed offer record history on AOIC.

    Note:

    Any request by the taxpayer and/or representative to speak with the employee's manager should be honored.


  2. If the employee receiving a telephone request for reconsideration determines that the request does have merit based upon the acceptable criteria outlined in IRM 5.8.7.3.1 above, the employee will:

    • Contact the taxpayer or their representative and request additional information to support the reconsideration be sent within 10 calendar days.

      Note:

      Fax is the preferred method of receipt.



    • Annotate the closed offer record history on AOIC (not ICS).

  3. If the taxpayer and/or their representative does not provide the requested information, annotate the closed offer AOIC history that there will be no reconsideration.

  4. If the taxpayer and/or their representative provides the requested information, the recommending employee will:

    • Annotate the closed offer history on AOIC and request the reconsideration by making a history entry on the closed offer record AOIC (not ICS), describing the taxpayers claim and/or supporting verification and why the reconsideration request is justified.

    • Submit the closed offer case file, along with any verification submitted by the taxpayer to support the reconsideration request, through the appropriate management channels to the approving official.

  5. Denial of the Reconsideration— If the approving official denies the reconsideration request, the employee assigned the case should clearly communicate via telephone to the taxpayer or their representative that the request for reconsideration was denied and that the matter is closed. The employee will then document the AOIC history of the closed offer regarding that communication.

  6. Approval of the Reconsideration— If the approving official agrees that a returned offer should be reconsidered, the employee assigned the case will telephone the taxpayer or their representative and advise that we are going to reconsider the offer. The taxpayer or their representative will be advised that they must be able to provide the missing or required information and/or substantiation, Forms 656, and/or applicable fees within 30 calendar days of that telephonic communication of the reconsideration approval.
    Field offices should fax a copy of the front page of the original Form 656, including the offer number and received date of the requested information and/or substantiation to the respective COIC sites. This will enable the COIC sites to create the new offer record.

    The offer information will not be reloaded to AOIC and worked until receipt of any required information and/or substantiation, Forms 656, and/or applicable fees. If the taxpayer fails to submit the promised items, document the AOIC history of the closed offer to that effect and take no further action.

  7. Reloading the Reconsideration Offer — For purposes of an approved "return reconsideration" do not reopen the closed offer record on AOIC. Instead, create a new AOIC offer record by reloading the same AOIC data as the returned offer, except for "IRS Rcvd Dt" , "AO Rcvd Dt" and "Pend Dt" fields which will contain the date that we receive any missing information and/or substantiation, Forms 656 and/or applicable fees.Associate the documents from the closed offer with the new, reloaded offer folder. Enter an AOIC history notation in the closed offer record to indicate that those documents were refiled with the reloaded offer. Place a hard copy of the AOIC history in the closed offer folder.

    • Reloading Offers With a Previously Submitted Application Fee

      If the taxpayer paid the application fee with the original returned offer, for the new AOIC offer record enter:

      • "N" in the "Fee Due" field

      • "ME" in the "Waiver Criteria" field

      • the number of the original, returned offer in the "Master Offer #" field of AOIC Application Fee screen

    • Reloading Offers With a Previously Submitted Form 656-A, Income Certification

      If the taxpayer previously submitted a Form 656-A, Income Certification, with the returned offer, enter the following for the new AOIC offer record:

      • "N" in the "Fee Due" field

      • "LI" in the "Waiver Criteria" field of AOIC Application Fee screen

      .

    • Additional Form(s) 656 and Application Fee(s) Received as Condition for Reconsideration

      Some reconsideration situations may involve an original offer that included either joint and individual tax liabilities, or joint or individual and corporation or partnership liabilities on one Form 656. The offer may have been returned because the taxpayers failed to perfect the offer by submitting additional Forms 656 and the applicable application fee for each. Since the taxpayers met the fee requirement for the original, returned Form 656, they must submit and meet the fee requirement for each additional Form 656 before the original offer can be reloaded under return reconsideration procedures. Therefore, both the "Amended/Revised" and " Related to" offers that were previously provided with the Combo letter, must be loaded to AOIC, but not until the application fee is received for the "Related to" offer along with any additional substantiation that was required.

  8. Retain the original Form(s) 656 in the case file and take the following actions: On the original Form 656 retained in the case file:

    • Sign and insert the employees title in the " Item 11" area for the authorized Service official. This information is to be inserted alongside the entries on the original offer.

    • Enter on the date line the AOIC " Pending Dt" used for the new offer record.


    Note:

    A copy of the Form 656 will be returned to the taxpayer and/or their representative. Originals will be retained in the case files.

5.8.7.4  (09-01-2005)
Withdrawal

  1. Taxpayers may withdraw their offers at any time after the offers have been submitted. A withdrawal must never be solicited merely to avoid a complete investigation or deny taxpayers access to Appeals.

  2. When an offer cannot be recommended for acceptance the offer investigator should give the taxpayer an opportunity to withdraw the offer and at the same time inform the taxpayer that withdrawing the offer forfeits their appeal rights.

    Note:

    The case history or correspondence must document that the taxpayer was informed of these rights.

  3. A withdrawal request may be made orally, by fax, or in writing. The Letter 3504(SC/CG) is available for taxpayers to request a withdrawal. Service employees should encourage taxpayers to provide the withdrawal in writing, but if a taxpayer or authorized representative provides a clear statement, either in writing or orally, indicating a wish to withdraw the offer, the offer may be closed as a withdrawal.

    Note:

    The request for withdrawal may be either in writing or orally. Receipt of a withdrawal request must be clearly documented in the case file indicating how the request was received.

  4. If a request for a withdrawal is made by a Service employee, and a deposit has been received, the taxpayer should be asked to:

    • Provide a request in writing clearly indicating a desire to withdraw the offer.

    • Include a statement indicating that it is understood that rights to appeal are forfeited by a withdrawal.

    • Include a statement indicating how any deposit made (if any) should be disposed of (i.e. should it be refunded or applied to the tax debt).

    • Sign and date the request.

5.8.7.4.1  (09-01-2005)
Closing an Offer as a Withdrawal

  1. Offers closed as a withdrawal do not require preparation of Form 1271, Rejection or Withdrawal Memorandum.

  2. The effective date of the withdrawal will depend on the method of receipt of the request to withdraw. The following chart shows the correct date to use as the withdrawal date:

    If taxpayer withdraws an offer in compromise by… Then the offer will be considered withdrawn …
    personal delivery when notification of the withdrawal is received by the Service.
    mailing written notification of the withdrawal via U.S. certified mail on the date the Service receives the certified mail.
    non-certified mail, fax, or phone on the date the Service mails, or personally delivers, a written letter to the taxpayer acknowledging the withdrawal.

  3. The following actions should be taken to close an offer as a withdrawal:

    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.

      Note:

      This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer or if combo letter paragraph COMB-E4 was used after 2-2005.

    2. Generate the AOIC "Withdrawal Letter" for the signature of the authorized delegated employee. Use the chart above to determine the correct date to use as the effective date of the withdrawal.

    3. Generate the Power of Attorney (POA) letter for any authorized representative.

    4. Document the history indicating the date and method of receipt of the withdrawal request.

    5. Submit the file for approval and signature of the letter(s).

    6. Close the case on AOIC as "withdrawn" after approval. If there is a deposit and the taxpayer has requested that the deposit be applied to the tax, input "A" and mail a copy of the taxpayers written request for application of the funds to the appropriate MOIC Unit. If there is a deposit and the taxpayer has asked for a refund or provided no instructions for disposition input "R" to refund the deposit.

    7. Keep a copy of the letter(s) with the closed offer file.

5.8.7.5  (09-01-2005)
Termination of Consideration

  1. Consideration of an offer must be terminated upon the death of a single proponent. See IRM 5.8.10.4, Death of a Taxpayer, for instructions on actions to take prior to termination when advised that one party to a joint offer has died.

5.8.7.5.1  (09-01-2005)
Closing an Offer as a Termination

  1. Offers closed as terminations do not require preparation of the Form 1271.

  2. The following actions should be taken to close an offer as a Termination:

    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.

      Note:

      This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer or if combo letter paragraph COMB-E4 was used after 2-2005.

    2. Generate the AOIC Termination Letter for the signature of the authorized delegated employee.

    3. Generate a copy of the letter for any authorized representative.

    4. Document the history indicating the date of death and how notification was received.

    5. Request input of TC 540 to IDRS if the exact date of death is confirmed.

    6. Submit the package for approval and signature of the letter(s).

    7. Close the case on AOIC as a "Termination" after approval.

    8. Keep a copy of the letter(s) with the closed offer file.

    9. Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 483 to reverse the TC 480 fro any Non-Master File (NMF) tax period that is listed on the MFT screen and not on Form 656.

5.8.7.6  (09-01-2005)
Rejection

  1. When the facts of the case do not support acceptance and the taxpayer will not agree to an alternative resolution of the delinquency and withdraw the offer, the taxpayer should be informed that the offer will be recommended for rejection.

  2. When the offer is rejected the taxpayer will be notified in writing and the letter will explain how to exercise their appeal rights. Information received from the taxpayer in response to a conversation or letter must be considered before proceeding with the rejection.

  3. Offers based on Doubt as to Liability (DATL) are generally rejected because the tax is believed to be correct as assessed.

  4. Offers based on Doubt as to Collectibility (DATC) are most commonly rejected on the basis that more can be collected than was offered. In all cases, other than those processed under "Screen for Obvious Full Pay" , the taxpayer should be informed prior to the issuance of the rejection letter that an acceptance cannot be recommended. The computation of reasonable collection potential (RCP) should be explained, a copy of the financial analysis provided, and the taxpayer should be given an opportunity to submit any additional financial information (except for those cases rejected under "public policy" or not in the "best interest of the government" ). If no conversation is held with the taxpayer to convey this information, Letters 3498 (SC/CG) and 3499 (SC/CG) may be used for this purpose.

  5. An offer rejection may also be based on a determination that acceptance of the specific offer at hand is not in the "best interest of the government" per policy statement P-5-100. Rejections under this provision should not be routine and should be fully supported by the facts outlined in the rejection narrative. Offers rejected under this section require the review and approval of the second level manager; that is, Territory Manager for the field or Department Manager for COIC. Examples of situations that may warrant rejection as not being in the "best interest of the government" include:

    • Recent compliance satisfies offer processability criteria; however, the taxpayer has an egregious history of past noncompliance and our analysis of his current finances reveals that it will be highly unlikely the taxpayer will be able to remain in compliance during the offer period.

    • An in-business taxpayer compromising employment taxes, where financial analysis indicates the business does not have the ability to fund the offer, remain current with future tax obligations, and meet the business' normal operating expenses.

    • Any offer involving deferred payment where financial analysis indicates the taxpayer cannot fund the offer.

    • The taxpayer is the primary responsible party on a related entity, i.e. corporation, partnership, etc., that is not in compliance with its filing and paying requirements.

    • The offer is from an ongoing business that appears to be insolvent, and it appears that the government's position would be better protected through a formal insolvency proceeding.

5.8.7.6.1  (09-01-2005)
Public Policy Rejection

  1. Policy Statement P-5-89 establishes that offers may be rejected on the basis of public policy if acceptance might in any way be detrimental to the interests of fair tax administration, even though it is shown conclusively that the amount offered is greater than could be collected by any other means, provided no Effective Tax Administration (ETA) issues exist.

    Note:

    This section should not be confused with IRM 5.8.11.2.2 under Effective Tax Administration (ETA) offers.

  2. A decision to reject an offer for public policy reason(s) should be based on the fact that public reaction to the acceptance of the offer could be so negative as to diminish future voluntary compliance by the general public. Decisions to reject offers for this reason should be rare.

    Example:

    Below are some examples of situations that may warrant rejection based on a public policy decision.

    • The taxpayer has openly encouraged others to refuse to comply with the tax laws.

    • Suspicion that the financial benefits of a criminal activity are concealed or the criminal activity is continuing.

  3. An offer will not be rejected for public policy grounds solely because:

    1. It would generate considerable public interest, some of it critical.

    2. A taxpayer was criminally prosecuted for a tax or non-tax violation.

  4. The rejection narrative should discuss the specific public policy issues.

  5. Rejections of this type require the approval of the SB/SE Compliance Area Director in the field or SB/SE Compliance Services Field Director for COIC.

5.8.7.6.2  (09-01-2005)
Closing an Offer as a Rejection

  1. The following actions should be taken to close an offer as a rejection:

    1. Update the balance for all modules on the MFT screen by pressing "I" . Enter the proposed disposition code"2" .

    2. Generate the AOIC "Rejection Letter" using the appropriate optional paragraph(s) for the signature of the authorized delegated official. Attach the IET and AET (or the "Screen for Obvious Full Pay " Worksheet) to the letter when the offer is based on Doubt as to Collectibility (DATC).

    3. Generate the Power of Attorney (POA) letter, if applicable.

    4. Generate the Form 1271 for signature of the appropriate delegated officials. The Reviewer on Form 1271 must be the Independent Administrative Reviewer (IAR).

    5. Document the history regarding the decision. Include the following:
      1. Amount of the reasonable collection potential (RCP).
      2. Attempts to negotiate an alternate resolution.
      3. Key issues in the disagreement.
      4. Discussion of any special circumstances noted.

    6. Print the history and include it in the offer file.

    7. Prepare a supplemental memorandum to report any rare facts of a confidential nature that should not be disclosed through a Freedom of Information Act (FOIA) request and include it in the file clearly identifying it as " Confidential Information– Not to be Disclosed" .

    8. Place Tabs (Document 9600B) in the case file for ease in review or if the decision is appealed.

    9. Submit the package for approval and signature of the Form 1271.

    10. After approval route the file to the Independent Administrative Reviewer (IAR).

    11. After approval of the Independent Administrative Reviewer (IAR), route the offer for signature, dating, and mailing of the letter(s).

    12. Assign the case on AOIC to the designated "30 day hold" assignment number and route the case file to the hold file for monitoring of the appeal period.

    13. Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 483 to reverse the TC 480 fro any Non-Master File (NMF) tax period that is listed on the MFT screen and not on Form 656.

  2. See IRM 5.8.3.6.3, Dishonored Application Payments , IRM for procedures to close the offer as a return based upon notification of a dishonored OIC application fee check after issuance of a rejection letter.

5.8.7.6.3  (09-01-2005)
Rejection Not Appealed

  1. The rejected offer must be suspended for 30 calendar days to allow the taxpayer an opportunity to request an appeal regardless of whether the taxpayer advises the Service that no appeal is desired. These cases should be monitored for receipt of a request for appeal. The time frame allowed by Treasury Regulation 301.7122–1(f)(5) for requesting an appeal is 30 calendar days from the date of the rejection letter. If a letter requesting appeal is postmarked on or before the 30th day it is timely. This date may NOT be extended for any reason.

  2. Rejected offers should be held in the suspense file for 15 calendar days past the 30 day deadline to allow time for an appeal request to be received and associated with the offer file. The request must be postmarked on or before the 30th day to be timely.

  3. If no appeal request is received by the 45th day after the date of the rejection letter the following actions should be taken:

    1. Remove any tax periods listed on the MFT screen that are NOT listed on the Form 656. This reverses the Transaction Code (TC) 480 on these periods and helps to ensure that inaccurate CSEDs for such periods are not reflected.

      Note:

      This step is not required if the offer was submitted on the 2004 revision of Form 656 that includes provision "q" , which states that all liabilities assessed against the taxpayer are covered by the offer or if combo letter paragraph COMB-E4 was used after 2-2005.

    2. Close the offer record as a rejection with no appeal on AOIC.

    3. If warranted, take action to return the accounts to the Field Compliance function for immediate resumption of collection activities.

    4. Prepare the Form 3177, Notice of Action for Entry on Master File, to request input of a Transaction Code (TC) 483 to reverse the TC 480 fro any Non-Master File (NMF) tax period that is listed on the MFT screen and not on Form 656.

    5. Route the offer file to the closed files.

5.8.7.6.4  (09-01-2005)
Fast Track Mediation for Offers in Compromise

  1. A joint memorandum, dated May 8, 2002, from the Commissioner, SB/SE and National Chief, Appeals, implemented the Fast Track Mediation process. The goal of Fast Track Mediation is to help taxpayers resolve disputes arising in examination and collection source work without having to send the case to Appeals.

    Note:

    This program is not available for any work in the Centralized OIC (COIC) sites.

5.8.7.6.4.1  (09-01-2005)
Criteria for Fast Track Mediation

  1. Mediation may only be considered after the Offer Specialist (OS) has fully developed the case facts and made a reasonable attempt to negotiate an acceptable offer.

    Note:

    Mediation is not a substitute for the taxpayers or their representative's right to a conference with the manager.

  2. Taxpayers or their representative that express an interest in mediating must first request a conference with the manager.

  3. The opportunity to mediate should only be granted after the first line manager has reviewed the case and determined that the issues in dispute may be resolved in mediation.

  4. When appropriate, mediation should be offered before the case is forwarded to the Independent Administrative Reviewer (IAR) for approval.

  5. Below are some examples of when it would be appropriate or inappropriate to offer mediation. The examples are not all inclusive.

    Example:

    Appropriate — valuations of ongoing business' goodwill; artwork with collector or sentimental value; valuation of assets including real property.

    Example:

    Inappropriate — taxpayer has ability to full pay based on financial data; taxpayer declines to increase the amount offered and does not disagree with the values; rejection is based on public policy.

5.8.7.6.4.2  (09-01-2005)
Processing Granted Requests for Fast Track Mediation

  1. When the request for mediation is granted, the OS will complete the following actions:

    • Complete the Form 886, Agreement to Mediate

    • Complete the Form 5701, Summary of Issues

    • Within 3 business days of securing the taxpayers or their representatives signature, follow local established procedures to submit the request to Appeals.

    • Provide a copy of the Form 886, Agreement to Mediate , to the taxpayer or their representative.

      Note:

      Collection retains jurisdiction of the offer throughout the mediation process.

    • The OS will represent Collection in the mediation session.

5.8.7.6.4.3  (09-01-2005)
Processing Denied Requests for Fast Track Mediation

  1. If a taxpayer or their representative's request is denied, document the case file with the reason for the denial, including how it was relayed to the taxpayer and/or their representative.

  2. Secure the approval of the first and second level manager.

5.8.7.6.5  (09-01-2005)
Rejection Appealed

  1. If a request for an appeal is received that is postmarked no later than the 30th day following the date of the rejection letter, the case must be forwarded to Appeals function for consideration.