5.8.7 Scope

[Shane Rouse]

2) The date the PE signs and loads the offer is the waiver date. If documents are required, the received date is the IRS received date. Examples provided. Note added regarding cross-referencing payments from the original offer. Annotate the Remarks of the reloaded offer to identify that TIPRA is closed.

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

Program Goals: Policy Statement 5-100 explains the objective of the OIC as a collection tool. By following the procedures in this IRM, employees will be able to accurately process returns, rejections, withdrawals, and terminations of offers in compromise when appropriate.

Offers in compromise not recommended for acceptance require specific closing actions. This section addresses what must be considered when not accepting an offer, and the closing actions required when closing a case as a return, rejection, withdrawal, or termination.

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.

Approving officials ensure the closing of the offer via return, rejection or withdrawal is appropriate, and all actions required by the IRM are taken. Managerial requirements for case approval are defined in IRM 1.2.2.6, Delegations of Authority for the Collecting Process.

An offer can be returned as either a "not processable return" or a "processable return." It is important to note the distinction because when there is a not processable return, the collection statute is not suspended. The application fee is returned to the taxpayer in all cases involving a not processable return; however, the IRS keeps the application fee when it is a processable return. See IRM 5.8.2.4.1, Determining Processability, for the criteria.

An offer is determined to be not processable if any of the "Not Processable" criteria listed in IRM 5.8.2.4.1, Determining Processability, is present. This decision is the sole responsibility of the Centralized OIC (COIC) sites located in the Brookhaven and Memphis Campuses.

A processable return will result in suspension of the collection statute for the period of time the offer was considered processable and will result in the IRS keeping the application fee and applicable TIPRA payment(s). A taxpayer whose offer is closed as a return does not receive appeal rights; however different levels of approval exist for some return situations. The IRS's return of an offer may be reconsidered in limited situations. Refer to IRM 5.8.7.3 below for reconsideration criteria.

During the offer investigation, there are a number of situations that may result in a processable offer being returned to a taxpayer. During discussion with the taxpayer or if correspondence is sent, the taxpayer should be made aware of all issues which are preventing the offer investigation from proceeding, i.e. the taxpayer may have compliance issues and verification of an expense is required.

A processable offer must be returned when the investigation reveals the taxpayer has not remained in filing compliance. One attempt should be made by telephone to secure the return(s). If the taxpayer or their representative cannot be reached by telephone a letter should be issued. If the taxpayer fails to submit the delinquent returns or provide a reason for not filing and internal research verifies the returns are not posted or pending, return the offer without further contact. Document the case history with attempts to secure the delinquent returns.

If the AOIC remarks indicate an OIC employee made a prior request for delinquent tax return(s) and the taxpayer failed to file the requested return(s) or provide a reason for not filing, and internal research verifies the returns are not posted or pending, the offer may be returned without any additional contact. See IRM 5.8.4.7, Additional Initial Offer Actions, for further instruction. Document the case history.

If you receive a return that cannot be processed due to a defect, such as a missing signature or a missing tax schedule, make one attempt to secure the necessary information. If possible, secure the correction via fax. If the taxpayer does not resolve the defect, the return should be forwarded for routine (not expedited) processing. The Service Center will return the tax return to the taxpayer if they are unable to resolve the defect. The offer should be returned on the basis the taxpayer did not file the return. Use the open paragraph to explain the taxpayer did not provide the necessary information to make the tax return processable.

A processable offer must be returned if the taxpayer does not supply requested verification of sufficient estimated tax paid or income tax withheld to cover the estimated tax of the tax year the offer was submitted, or fails to remain compliant with estimated tax payments or have sufficient withholding in any year after the offer is submitted.

While investigating an OIC on July 16, 2021, which was submitted in January 2021, you should verify the taxpayer has made the required estimated tax payments for the first two quarters of the 2021 tax year.

In June 2021, you conduct an initial compliance screening of an OIC that was submitted in November 15, 2020, and identify an apparent deficiency. The 2020 return is on extension and based on the last filed return, the taxpayer has an estimated tax obligation for 2020 and 2021. Upon initial contact, the taxpayer should be asked to submit payment of the delinquent tax payments for 2020 and to bring current the estimated tax payments for 2021. If the taxpayer fails to meet the deadline, the offer should be returned.

The offer in compromise was submitted on November 15, 2020 and in May 2021 you conduct your initial analysis and RCP calculation. There was no previous contact with the taxpayer to request missed estimated tax payments for 2020. The taxpayer is current on estimated tax payments for 2021 and the offer appears to meet acceptance criteria. If the 2020 tax return has been filed and assessed, you may add the 2020 tax year to the offer and proceed with acceptance. You may also wait for a pending assessment to post, if the delay is in the best interest of the taxpayer and the government.

Estimated tax payments are required when a taxpayer does not pay their tax through withholding, or does not pay enough tax through withholding. This can include income from self-employment, business earnings, interest, rent, dividends and other sources including wages, salaries and pensions.

For individuals, if the taxpayer expects to owe at least $1,000, the amount of the payment will be based on 100% of the prior year's tax or 90% of the current year's tax due at the time of the offer, whichever is less. Current year's tax should be based on current income and all legally allowable expenses. The OE/OS may use the on-line calculator on www.irs.gov to calculate the ES payments due.

If the prior year's tax liability showed no estimated tax payments were due, then the taxpayer would not legally be required to make any payments for the current year. If it appears the taxpayer may have a liability this year, remind the taxpayer that filing a return with a balance due would be a default in the offer terms if the offer is accepted.

The amount of the estimated tax payment is generally based on the net taxable income, including the gross income earned, less allowable deductions. This includes depreciation, home office expenses, automobile expenses, and depletion from carrying on a trade or business.

See Pub 505, Tax Withholding and Estimated Tax, and Pub 334, Tax Guide For Small Business (For Individuals Who Use Schedule C or C-EZ), which provide a more detailed and complete discussion on the matter.

The OE/OS should determine the appropriate amount due during the initial analysis of the case as defined in IRM 5.8.4.6, Initial Compliance Screening, and IRM 5.8.4.7, Additional Initial Offer Actions.

If it is determined that the taxpayer is delinquent in the payment of estimated tax and a previous request for estimated tax payments was not made, calculate the required amount due and give the taxpayer up to 15 calendar days to make the payments. One attempt should be made by telephone to contact the taxpayer to request the necessary tax payment(s). Document the case history with the results of the phone contact attempt.

The OE/OS should provide the taxpayer/representative with the calculated ES payment. Allow the taxpayer/representative the ability to provide information which shows a different amount may be appropriate.

If no telephone contact can be made, a letter must be prepared and mailed to the taxpayer requesting the payment. If you are also requesting required financial information, you may use the Letter 2844 Option D to request contact. This letter should be issued only after the phone attempts referenced in IRM 5.8.4.6(11) are documented. If the taxpayer does not respond, you may return the offer.

If you are requesting only ES, use Letter 2844 with an open paragraph. This letter should be issued only after the phone attempt referenced in IRM 5.8.4.6(11) is documented. Allow 15 calendar days from the date of the letter for the taxpayer to respond (plus mail time as appropriate), before taking the next action. Document the case history.

Research to determine if the payment may have been submitted. Proof of payment may be verified on IDRS or may include a copy of a cancelled check, a receipt issued by the Taxpayer Assistance Center that accepted the payment, certification of mailing to the appropriate Campus for processing, a receipt from the bank that processed the payment, or EFTPS acknowledgement number.

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