8.23.3. Evaluation of Offers in Compromise

(1) The purpose of this section is to provide the Appeals hearing officer with the procedures necessary to properly evaluate a taxpayer's appeal of a rejected offer in compromise (OIC). Appeals does not have its own set of rules or procedures for determining reasonable collection potential (RCP) in an OIC case. For this reason, this section largely does not reiterate what is already in IRM 5.8, Offers in Compromise. Rather, it discusses some of the more basic elements of the OIC evaluation process and provides guidance unique to Appeals' role in the OIC process.

(2) Collection, under the Commissioner, Small Business/Self Employed (SBSE), is responsible for processing and analyzing a taxpayer's offer, negotiating with the taxpayer, making an RCP determination and communicating the final determination to the taxpayer. IRM 5.8.4, Offer in Compromise, Investigation, and IRM 5.8.5, Offer in Compromise, Financial Analysis contain OIC guidance concerning:

• Components of collectibility

• Procedures for evaluating specific types of taxpayers and tax debts, including trust fund, excise, partnership, and child support liabilities

• Financial analysis, including determining equity in assets and a taxpayer's future ability to make payments

• Issues involving the dissipation of assets

• Financial information documentation and verification requirements

• Payment terms

(3) If the hearing officer determines that the taxpayer cannot pay in full or there are circumstances that otherwise place collectibility in doubt, there is a legal basis for compromise under IRC 7122, based on doubt as to collectibility. If the taxpayer has the ability to pay in full, there may still be a legal basis for compromise if it is further determined that such compromise would promote effective tax administration. See IRM 8.23.3.8 for guidance on Effective Tax Administration (ETA) offers.

(4) Policy Statement P-5-100 (IRM 1.2.14.1.17) states, in part:

The Service will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An offer in compromise is a legitimate alternative to declaring a case currently not collectible or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the Government.

(5) The hearing officer should research IRM 5.8 and related interim guidance to evaluate Compliance actions, decisions and valuation methods for Offers in Compromise. When evaluating an appealed rejection, consult IRM 5.8 and any related interim guidance as a reference to ensure that Collection properly followed their procedures. The hearing officer’s evaluation of an OIC must be independent of the decision rendered by Collection. Standard Appeals conference practices are found in IRM 8.6.1, Conference and Settlement Practices, Conference and Issue Resolution.

(6) The hearing officer will not request information or evidence (from any party) solely for the purpose of strengthening the government's case.

(7) IRC 7122(d)(2) requires IRS to publish schedules of national and local allowances designed to ensure that taxpayers seeking to compromise their tax debts have an adequate means to provide for basic living expenses. This section further requires that IRS (including Appeals) "shall determine, on the basis of the facts and circumstances of each taxpayer, whether the use of the schedules published under IRC 7122(d)(2)(A) is appropriate and shall not use the schedules to the extent such use would result in the taxpayer not having adequate means to provide for basic living expenses."

1. If national or local standards for determining allowable living expenses are updated after Collection rejects an offer, the hearing officer will use the most current or updated Allowable Living Expense (ALE) standards unless the case has already been submitted for final review and approval by the Appeals Team Manager (ATM) and/or Counsel.

2. A taxpayer must be able to substantiate that limiting the allowance to the national or local standard would not provide for their basic living expenses.

3. Allowances in excess of national or local standards must be documented in the Appeals Case Memorandum (ACM).

(8) If the taxpayer disagrees with the rejection of an offer by Collection, they can request Appeals' consideration and review of the determination. The appeal must be in writing. Form 13711, Request for Appeal of Offer in Compromise, is generally used but is not required.

(9) Hearing officers who evaluate appeals of rejected OICs must be knowledgeable in the procedures detailed in IRM 5.8, other parts of the IRM, and the law and regulations governing OICs and Appeals, such as:

• IRM 8.1.1, Appeals Operating Directives and Guidelines

• IRM 8.2, Pre-90-Day and 90-Day Cases (contains general information for all Appeals cases)

• IRM 8.6.1, Conference and Issue Resolution

• IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form

• IRM 8.7.6, Appeals Bankruptcy Cases

• IRM 8.21, Appeals Statute Responsibility

• IRM 5.1, Field Collecting Procedures

• IRM 5.7, Trust Fund Compliance

• IRM 5.12, Federal Tax Liens

• IRM 5.14, Installment Agreements

• IRM 5.15, Financial Analysis

• IRM 5.16, Currently Not Collectible

• IRM 5.17, Legal Reference Guide for Revenue Officers

• IRC 7122

• Treas. Reg. 301.7122-1, for offers in compromise

• Notice 2006-68, Downpayments for Offers in Compromise

• Revenue Procedure 2012-18, concerning the prohibition of ex parte communications between Appeals and other IRS employees

• Interim guidance issued by Appeals or other IRS functions

• Other legal and administrative guidance, including local law

Note: The links to several IRM sections, IRC 7122, Treas. Reg. 301.7122-1, Notice 2006-68, and local law guides for all states (including community property states) are available on the Appeals OIC Web Page.

Note: The additional resources listed above are not intended, and should not be used, to assist the hearing officer in the further development of issues that either were not identified or were not adequately developed by Collection.

(1) When evaluating offers, Collection contacts the taxpayer via telephone or letter explaining why they are proposing to reject the offer. This contact provides the taxpayer with the rationale and financial analysis for Collection’s preliminary conclusion and an opportunity for the taxpayer to supply additional information or, if applicable, to amend the offer to reflect the RCP determined by Collection.

1. Collection is responsible for reviewing and verifying any information provided by the taxpayer before the offer is rejected and any new information provided by the taxpayer as part of the appeal of the rejection. See IRM 5.8.7. Collection should address each disputed item in its narrative or case history. If the taxpayer provided substantial information with the appeal that was not adequately considered by Collection, the hearing officer will not return the case as a premature referral. The hearing officer will weigh Collection’s development of the issue versus information and testimony provided by the taxpayer and make a decision based upon those factors. Unless it is at the taxpayer's request, information will not be reviewed by Appeals if it was located in the case file at the time of rejection, was available to Collection at the time of rejection, or provided by the taxpayer with the request for appeal and was not developed by Collection, shared with the taxpayer, and included on the Income/Expense Table (IET) or Asset/Equity Table (AET). See IRM 8.23.3.3 for certain exceptions.

(2) If Collection rejects the offer, copies of Collection's IET and AET should be attached to their rejection letter.

(3) As a result of the preliminary determination contact and IET and AET information provided with the rejection letter, a taxpayer should be fully aware of why the offer was rejected. The Form 13711, Request for Appeal of Offer in Compromise, though not mandatory, directs the taxpayer to provide in the appeal:

• the disagreed item(s),

• reason(s) for the disagreement, and

• supporting documentation, as appropriate

Appeals can then try to narrow the focus of consideration to the specific issues for which the offer was rejected.

(4) The hearing officer will sustain rejections only for the reason Collection rejected the offer. For the exceptions to this rule, see IRM 8.23.4.3(2).

(1) As stated in IRM 8.23.3.1, the hearing officer will research IRM 5.8 and related interim guidance to evaluate Collection actions, decisions and valuation methods for OICs. The hearing officer’s evaluation of an OIC must be independent of the decision rendered by Collection. Standard Appeals conference practices are found in IRM 8.6.1, Conference and Settlement Practices, Conference and Issue Resolution.

(2) The hearing officer must be knowledgeable in the procedures detailed in IRM 5.8, IRM 8.23, and other parts of the IRM and administrative policies and procedures such as those listed in IRM 8.23.3.1 above.

(3) The hearing officer will not re-examine agreed RCP issues that were previously addressed during the investigation by Collection. This does not include correcting errors that are strictly computational. A strictly computational error is one that does not involve judgment but involves simple math. Correcting strictly computational errors should be uncommon but may occur in the following general circumstances:

• For the correction of simple mathematical errors anywhere on the Income/Expense Table (IET) or Asset Equity Table (AET) (such as addition or subtraction).

• Where Collection fully developed an income, expense, asset or liability item, but did not record the value in the correct amount on the IET or AET.

• To allow for a statutory tools-of-the-trade exemption that was erroneously excluded by Collection.

• Where an asset value is present on the Form 433-A/B (OIC) that was prepared by the taxpayer, and the value was uncontested by Collection in its development of the case. The taxpayer’s value of the asset should be transferred to the IET/AET if it was not included.

• In Appeals, where the taxpayer’s income is a disputed item that is increased or decreased by the hearing officer. Expenses for taxes related to that income should also be increased or decreased accordingly.

• If the hearing officer made any correction to a strictly computational error, and the change resulted in a calculated full-pay of the liability, the hearing officer will sustain rejection of the offer absent effective tax administration conditions.

(4) Appeals employees will not attempt to identify and value any additional assets. In addition, Appeals employees should not revise the value of an asset to an amount that is higher than previously determined by Collection.

(5) In collection issue cases, the taxpayer may submit new information while the case is in Appeals. Any new information should be considered, particularly if it pertains to an issue disputed at the time of rejection. New information pertaining to an issue that was not in dispute at the time of rejection may also be considered if voluntarily provided by the taxpayer. See IRM 8.23.3.3.1.3 for guidance on information that should generally be referred to Collection for an initial review.

(6) A case will not be returned as a premature referral where Collection did not fully develop certain issues. Weigh Collection’s development of the issue versus information and testimony provided by the taxpayer, and make the decision based upon those factors. See also IRM 8.23.2 for premature referral issues on appealed OIC cases. Unless it is at the taxpayer's request, information will not be reviewed by Appeals if it was located in the case file at the time of rejection, was available to Collection at the time of rejection, or provided by the taxpayer with the request for appeal and was not developed by Collection, shared with the taxpayer and included on the IET or AET.

(7) A financial statement that is less than 12 months old from the date it was received in Appeals will not be updated and will be considered verified since it was provided to Collection and they reviewed or had the opportunity to review it. Use the RECDATE of the OIC work unit to determine when the case was received in Appeals.

(8) The hearing officer will not contact the taxpayer to secure an updated financial statement if the information is less than 12 months old or if the information has become outdated as a result of IRS delay. However, in a situation where Appeals does need updated financial information from the taxpayer, an updated Form 433-A(OIC) and/or 433-B(OIC) is typically not necessary. "Pen-and-ink" changes to the existing Form 433-A/B are sufficient. See IRM 8.23.3.3.1.2, which pertains to review of supplemental information.

(9) The hearing officer is responsible for addressing taxpayer compliance obligations only as stated in IRM 8.23.2.4, Premature Referral Issues, and IRM 8.23.2.5, When the Taxpayer Does not Remain in Compliance.

(10) A taxpayer who had a periodic payment offer rejected by Collection is not required to continue making the periodic installment payments while the case is being considered in Appeals. See IRM 8.23.3.1.1.1. The TIPRA requirement to make periodic installment payments ended when Collection rejected the offer. However, if the hearing officer secures an amended periodic payment offer, then the taxpayer must once again start making the periodic installment payments proposed in the amended offer. See IRM 5.8.4.25 for guidance on TIPRA payment requirements for amended offers.

(11) Document all significant case actions in the case activity record in a timely, accurate and complete manner.

(1) In a non-CDP OIC, the hearing officer will review the taxpayer’s written appeal for the specific items that are in dispute. The specific disputed items present on the IET/AET completed by Collection or the taxpayer’s written request for appeal will be used to identify the disputed items.

(2) If new information requiring further development is provided during consideration of an offer, the hearing officer will issue an ARI to Collection via Form 2209, Courtesy Investigation, to consider the new information. Collection’s response to the ARI will be shared with the taxpayer.

(3) If Collection’s response to an ARI includes a comment that the offer should be accepted, the hearing officer will adopt the recommendation. If Collection’s response is not to accept or no recommendation is made, the hearing officer will review the information that was provided by both the government and the taxpayer and determine whether or not to accept the offer. See IRM 8.23.3.3.1.3 for examples when an ARI may be needed.

(4) In the interests of good tax administration, when rejection of an offer is sustained but the taxpayer is a possible candidate for consideration of acceptance under another basis, the hearing officer will assist the taxpayer by explaining further options as outlined in IRM 8.23.3.4.1, Amended Offers - Change in Offer Basis or Other Circumstances.

(1) While these circumstances are not common, the hearing officer’s recommendation to accept an offer may include a condition that the taxpayer enter into a collateral agreement with respect to future income. This is not considered raising a new issue.

(2) Follow IRM 5.8.6 with regard to collateral agreements. In addition to the terms specifically stated in the offer, collateral agreements enable the government to either collect funds or restrict a taxpayer's ability to claim future losses or credits. Do not use them to allow the taxpayer to submit an offer for a lower amount than the RCP if the case dictates. Usage of collateral agreements should not be routine. The hearing officer should secure a collateral agreement only if significant recovery is expected or the taxpayer has identifiable future losses or credits. It may be appropriate to secure a collateral agreement when a significant increase in income is expected.

(3) Do not secure a future income collateral agreement

• to collect future income that should be included in the offer amount itself

• merely on unfounded speculation about an increase in future income

• to guard against statistically improbable events, such as lottery winnings

• to attempt collection from a potential inheritance

(4) If a future income collateral agreement is secured, the agreement can be approved by same level of approval as that of the offer. See IRM 5.8.6.2.1.1 for additional information.

(5) Use standard collateral agreements whenever possible to aid in the monitoring of the agreements. The standard agreements are listed below:

1. Form 2261, Collateral Agreement-Future Income-Individual, and Form 2261-A, Collateral Agreement-Future Income-Corporation / Limited Liability Company

2. Form 2261-B, Collateral Agreement-Adjusted Basis of Specific Assets

3. Form 2261-C, Collateral Agreement-Waiver of Net Operating Losses, Capital Losses, and Unused Investment Credits

(6) The collateral agreement must be signed by the Appeals official authorized to approve the underlying offer. See IRM 5.8.6.2.1.1(6) . To determine which Appeals official must sign the underlying offer, refer to current Delegation Order 5-1, found at IRM 1.2.44.2.1 , Acceptance Authority, and on the Appeals OIC Web Page.

(1) When an offer is accepted to compromise trust fund tax owed by an operating business, the taxpayer may be relieved of a significant operating expense which could grant the delinquent taxpayer an economic advantage over competitors who are in tax compliance. Recovery of the unpaid trust fund tax amount is a significant issue when considering an offer from a business taxpayer. In the interest of "fairness to all taxpayers" the Service must be cautious to avoid providing financial advantages to those taxpayers through the forgiveness of employment tax debt, as this may be detrimental to competitors who are remaining in compliance with their tax obligations. Procedures in IRM 5.8.4.24, Offers from Operating Businesses, must be followed when considering an appealed offer from all In-Business Trust Fund (IBTF) taxpayers, including sole proprietorships, partnerships, LLCs and corporations.

(2) On February 5, 2008, Collection changed its procedures for evaluating offers involving trust fund taxes. An interim guidance memorandum dated January 28, 2008, was issued by Collection and later incorporated into the September 2008 revision of IRM 5.8.4.13.1 and 5.8.4.13.2.

(3) If the offer under consideration was received by the Service on or after February 5, 2008, to compromise trust fund tax, all issues outlined in the current revision of IRM 5.8.4.22.1, Trust Fund Liabilities, must have been addressed by Collection before sending the non-CDP offer case to Appeals. This includes:

• full payment of the trust fund portion of the unpaid tax,

• assessment of the TFRP(s), or

• the TFRP(s) submitted by Collection for assessment

(4) Per IRM 8.23.2.4, return the case to Collection as a premature referral if the offer was received by the Service on or after February 5, 2008, and the trust fund tax is not fully paid or the TFRP(s) is not assessed or in the process of being assessed, unless Collection has clearly documented either a non-assertion determination or the case being under Law Enforcement Manual (LEM) criteria.

(1) The chart below contains IRM references for offers involving various other issues:

(1) If it is determined that there is no basis to accept an offer under doubt as to collectibility (DATC) or doubt as to liability (DATL), the offer may still be accepted if it is determined that doing so:

1. would promote effective tax administration, and

2. would not undermine other taxpayers' compliance with the tax laws.

(2) IRM 5.8.11, Offer in Compromise, Effective Tax Administration, contains information about ETA offers and DATC offers where the taxpayer presents "special circumstances" (DATC-SC) as a basis to accept the offer and the procedures for evaluating such offers.

(3) Under ETA, the taxpayer does not dispute being financially capable of paying the liability in full. To accept an ETA offer, the taxpayer must establish that:

• Paying the full tax liability would cause an economic hardship (see below), or

• Compelling public policy or equity/fairness considerations exist that would undermine public confidence that the tax laws are being administered in a fair and equitable manner if required to pay in full. These "public policy" or "equity" offers are sometimes referred to as "non-hardship" ETA offers.

(4) Under DATC-SC, the taxpayer does not have the ability to pay in full and does not dispute being financially capable of paying more than the amount being offered. To accept a DATC-SC offer, the taxpayer must establish that:

• Paying the full RCP amount would cause an economic hardship (see below), or

• Compelling public policy or equity/fairness considerations exist that would undermine public confidence that the tax laws are being administered in a fair and equitable manner if required to pay the full RCP amount.

(5) ETA and DATC-SC offers require a more subjective evaluation. Although IRM 5.8.11 is comprehensive, it is simply not practical to try to draft guidance that encompasses every event or situation.

(6) ETA and DATC-SC offers based upon economic hardship are not uncommon. For purposes of ETA and DATC-SC offers, the definition of economic hardship is found in Treas. Reg. 301.6343-1(b)(4)(i). Often a taxpayer presents circumstances reflecting one or more of the factors outlined in IRM 5.8.11 or closely resembling many aspects of an example cited in the IRM or Treas. Reg. 301.7122-1, but the case for ETA or DATC-SC acceptance for the amount proposed by the taxpayer falls apart when actual dollars are factored in. A decision in an ETA or DATC-SC hardship offer requires a three-tiered approach:

1. Does the taxpayer present exceptional circumstances meriting ETA or DATC-SC consideration?

2. Would payment of more than the offered amount cause the taxpayer to be unable to meet future necessary living expenses?

3. Would acceptance of the offer undermine other taxpayers' compliance with the tax laws?

An acceptable offer requires affirmative answers to questions 1 and 2, and a negative answer to question 3.

(7) Offers based upon public policy or equity considerations are more rare.

1. Acceptance of any ETA or DATC-SC offer (either CDP or non-CDP) based in whole or in part on public policy or equity considerations requires review and approval by the Director, Collection Appeals.

2. Rejection of any ETA or DATC-SC offer (either CDP or non-CDP) based in whole or in part on public policy or equity considerations requires review and approval by either an ATM or ATCL.

(8) See Delegation Order 5-1 at IRM 1.2.44.2 and on the Appeals OIC Web Page.

(1) The hearing officer will make an independent determination regarding any offers. A DATL offer will generally be evaluated by the hearing officer in the same manner as an audit reconsideration case. The hearing officer should consider the facts and law as well as the hazards of litigation in determining the degree of doubt as to the liability.

(2) IRC 7122(d)(3) provides that a DATL offer may not be rejected solely because the Service cannot locate the taxpayer’s return or return information. The Service is also prohibited from requesting a financial statement if an offer is based solely on doubt as to liability.

(3) Appeals will consider offers based on DATL where the offer was rejected by Exam, TEGE, a specialty group, or Collection. Assignment of such cases will generally be made to employees having expertise in the particular tax area for the liability in dispute.

(4) Any DATL OIC (CDP or non-CDP) work unit (WUNO) should have ACDS feature code “LI”.

(5) Under IRC 7122(f) and the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), an offer shall be deemed accepted if the IRS does not make a determination regarding whether to accept the offer and notify the taxpayer of its determination. The above action must have taken place before the date which is 24 months after the date of receipt of such offer by the IRS. See also IRM 8.21.5, Collection Statutes.

(6) This 24-month TIPRA period ends when the offer is rejected, so most non-CDP offers received in Appeals will not have open TIPRA statute issues. However, the hearing officer should review IRM 8.23.2.3, Initial Case Review and Statute Controls, to make sure an OIC WUNO contains the proper statute controls.

(7) A DATL offer acceptance must be payable within 90 days unless an alternative payment term is approved at the time the offer is accepted. See Form 656-L.

(8) If the DATL offer came to the hearing officer after being rejected, the case file should be fully developed and documented. If the case file is not fully developed and documented, the hearing officer will not return the case as a premature referral. The hearing officer should weigh the development of the case by the originating function versus information and testimony provided to Appeals by the taxpayer and make a decision based upon those factors.

(9) If the DATL offer case came to the hearing officer because the liability at issue was previously determined by Appeals, then Appeals has jurisdiction over the case and the originating office is not responsible for the initial development of the case or securing the closed administrative file before forwarding the case to Appeals. See IRM 8.23.3.9.2 for guidance pertaining to such cases.

(10) The total amount of money offered must be indicated and must be more than zero. If a DATL offer is received by Appeals that is not for more than $0.00, the offer will be returned. The hearing officer will close a return by sustaining rejection; no separate independent administrative review is necessary.

(11) Non-compliance in filing of required federal tax returns does not preclude Appeals from considering and accepting an appealed DATL offer or from making appropriate adjustments via Form 3870.

(12) A DATL offer is no longer considered when a taxpayer is in bankruptcy. If an open bankruptcy is identified during consideration of the DATL offer, sustain rejection.

(1) Consideration of an OIC submitted by a single taxpayer must be terminated upon the death of that taxpayer. The date of termination and the date for the TC 482 is the date of the taxpayer's death. A sample OIC Termination Letter is available on the Appeals OIC Web Page.

(2) If the offer under consideration was submitted jointly by a husband and wife and only one spouse died, follow the procedures in IRM 5.8.10 to determine whether to continue with consideration of the jointly-submitted offer.

(1) The Appeals hearing officer’s role in a rejected offer is to resolve the disputed issues. Although a taxpayer may express an interest in alternative resolutions when it is apparent that an offer is not a viable option, the hearing officer will not deviate from Appeals’ role when considering the rejection of a non-CDP offer.

(2) If an offer cannot be accepted, the hearing officer must communicate the reason(s) why and discuss alternatives (such as installment agreements and Currently Not Collectible status, as applicable) that the taxpayer may pursue with Collection. Do not refer the taxpayer back to COIC or Field offices. Close the offer and refer the taxpayer to Form 9465, Installment Agreement Request, and/or IRS Telephone Assistance at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). The Form 9465 contains information on user fees for the different methods of making payments under an installment agreement.

(3) NFTL filing determinations are not to be made by the hearing officer. Notify the taxpayer verbally or in writing that Collection may file an NFTL after the case is closed. If the taxpayer indicates intent to file a Collection Appeal Request, refer them to the Collection employee who worked the initial case and close the OIC following normal procedures.

(1) A taxpayer must agree to the terms set forth in the Form 656. The compromised amount remains a tax liability until the taxpayer meets all the terms and conditions of the offer. See Form 656, Section 7.

(2) A taxpayer entering into either a DATC or ETA offer agreement must agree to comply with all filing and payment obligations under the Internal Revenue Code for a period of 5 years after the offer is accepted. See Form 656, Section 7.

(3) If a taxpayer fails to meet any of the terms of the offer, the Service has the right to terminate the offer, reinstate the compromised liability, and pursue collection action against the taxpayer. If the liabilities are jointly owed and the offer was jointly submitted, the default provisions apply only to the party who failed to comply. See Form 656, Section 7.

(4) IRM 1.2.44.2.4(6) grants the Monitoring Offer in Compromise Unit (MOIC) the authority to default any offer where the taxpayer is not proposing an alternative solution to the potential default. If the taxpayer proposes an alternative (such as an offer on an offer) and Appeals initially accepted the offer, Appeals will consider the taxpayer’s potential default.

(5) MOIC refers the potential default to Appeals on Form 2209, Courtesy Investigation, and provides the following additional information:

1. A copy of the "Terms" and" MFT" Screens from AOIC

2. A copy of the AOIC history, reflecting actions already taken by MOIC on the potential default

3. A copy of the AOIC payment screen

4. Taxpayer contact information, including the last known telephone number of the taxpayer and/or representative

5. Fax number of the Form 2209 originator

6. An explanation in the Form 2209 of the cause of the potential default

7. Copies of correspondence between the taxpayer and MOIC, including any proposals by the taxpayer to cure the potential default

(6) Upon receipt of the potential default case in Appeals, the case will be opened as an offer on ACDS in order to place time on the specific case. APS should note it as a pending defaulted offer in compromise by using feature code "DO".

(7) Generally, all potential default offer cases will be worked by the Brookhaven Appeals office. Exceptions to this may be as follows:

1. Proposals received on offers originally accepted by a field Appeals office may be assigned to the same Appeals team that originally accepted the offer.

2. Proposals received on field and campus CDP offers that are subject to retained jurisdiction may be assigned to the field or campus team that accepted the CDP offer.

(8) When working a potential default case and the hearing officer becomes aware of the death of a taxpayer, it must be determined whether there is an estate. If this determination was not made prior to the potential default offer case being assigned to Appeals, an ARI may be needed. The ARI should be issued to Collection Advisory to determine if there is an estate and to request that Collection Advisory file a proof of claim for the balance owed on the offer. The hearing officer will hold the potential default case open until Collection Advisory responds to the ARI. If there is no estate, the hearing officer will simply close out the offer case as satisfied following procedures in this section.

(9) If the offer in default was accepted as part of a CDP hearing, the taxpayer may be entitled to a retained jurisdiction hearing with Appeals. See IRM 8.22 concerning retained jurisdiction. Do not establish a retained jurisdiction case on ACDS. It should be noted on ACDS as a defaulted offer and not a new offer.

(10) If the taxpayer was not able to remedy the potential default issue, the hearing officer may default the offer or accept the offer under the Compromise of a Compromise procedures outlined in IRM 8.23.3.13, Compromise of a Compromise, below.

(11) If the taxpayer is deceased, the hearing officer will verify TC 540 was input, and if it was not, request that APS manually input the TC 540. The potential default case will be closed to MOIC advising them that the taxpayer is deceased, that the TC 540 was requested and the results of any ARI that was issued to Collection Advisory.

(1) In cases where the taxpayer is unable to pay the balance of an accepted offer, the balance of a non-rebate erroneously issued refund, or the balance of the contingent liability under the terms of a collateral agreement, and the investigation reveals that extreme hardship or other circumstances exist which would justify that a default is not in the best interest of the government, then the Service may:

1. Adjust the payment terms of the offer,

2. Formally compromise the existing compromise, or

3. Obtain managerial approval to settle the offer for the amount already paid and not default the offer

(2) A Form 656 is not required to make the proposal, and there is no other standard form for such a proposal. The proposal should be submitted in letter format and addressed to the Commissioner of the Internal Revenue. Generally, IRM Exhibit 5.8.9-2 may be used for this purpose.

(3) If Appeals initially accepted the offer, Appeals will consider the taxpayer’s “compromise of a compromise” proposal.

(4) Further substantive information that is provided to Appeals by the taxpayer should be referred by the hearing officer via an ARI request to the Collection Drop Point manager that originally investigated the offer. It is recommended to send the ARI request by fax or e-mail to the Drop Point Manager.

(5) In Appeals, Compromise of a Compromise cases will generally be assigned to Brookhaven Service Center Appeals for considerations but may also be assigned as follows:

1. Proposals received on offers originally accepted by a field Appeals office may be assigned to the same Appeals team that originally accepted the offer.

2. Proposals received on field and campus CDP offers that are subject to retained jurisdiction may be assigned to the field or campus team that accepted the CDP offer.

(6) For information on CDP hearings on terminated OICs, refer to IRM 8.22.

(7) When working a potential default case and the hearing officer becomes aware of the death of a taxpayer, it must be determined whether there is an estate. If this determination was not made prior to the potential default offer case being assigned to Appeals, an ARI may be needed. The ARI should be issued to Collection Advisory to determine if there is an estate and to request that Collection Advisory file a proof of claim for the balance owed on the offer. The hearing officer will hold the potential default case open until Collection Advisory responds to the ARI. If there is no estate, the hearing officer will simply close out the offer case as satisfied following procedures in this section.

(8) If the taxpayer is deceased, the hearing officer will verify the TC 540 was input, and if it was not, request that APS manually input the TC 540.

(9) When making an acceptance recommendation for a compromise of a compromise proposal, the case must be forwarded to Counsel for a legal sufficiency review if the original offer was subject to that review. The documents to forward to Counsel include:

1. The taxpayer's written proposal for the compromise of a compromise

2. A fully completed Form 7249 that reflects the new terms of acceptance

3. Redacted or sanitized transcripts

4. Other documentation from the compromise of a compromise investigation

   Note: Do not include the administrative file from the initial offer acceptance unless it is readily available.

(10) To properly record the acceptance, prepare a redacted Form 7249 and include redacted transcripts to forward to the appropriate public inspection file office.

(11) See IRM 8.23.4.6, Compromise of a Compromise, for final procedures to close out such cases.

(1) An accepted OIC is an agreement that is binding on both the government and the taxpayer. After acceptance, further inquiry into matters relating to the accepted OIC is precluded, except where one or more of the following is identified:

• False information or documents are supplied in connection with the offer;

• The ability to pay or the assets of the taxpayer are concealed; or

• A mutual mistake of material fact sufficient to cause the offer agreement to be reformed or set aside is discovered.

(2) Although such situations will be very uncommon, it may be necessary to consider a request to rescind or terminate an OIC or revise an accepted OIC. Refer to IRM 5.8.9 for complete guidance in these situations.

(3) Where Appeals accepted the OIC, Appeals is responsible for making the determination to rescind the OIC and will also be responsible for completion of all required actions identified in IRM 5.8.9.

(4) If Appeals receives a referral from Collection to consider rescission due to a potential fraud issue, the fraud issue should be developed to a point no less than having agreement by the Fraud Technical Advisor that the potential for fraud exists. See IRM 5.8.4.18, Potential Fraud Referrals. This refers only to a fraud concern and not to any of the other items identified in (1) above.

(5) For purposes of issue tracking and to review for possible policy implications, rescission recommendations made by Appeals will be forwarded to the Appeals Director of Case and Operations Support with jurisdiction over the OIC program prior to taking any final actions.

(1) The presence of identity theft (IDT) issues does not prohibit consideration of an offer. Each case will need to be considered on its own merits since there may be unique issues impacting the case decision.

(2) If an offer is accepted that involved IDT issues, information on the IDT period(s) must be provided to MOIC with the acceptance file and documented in ACDS and in the "remarks" section of Form 5402. Make the remarks on Form 5402 to be easily seen by APS so that APS can make the appropriate notation in AOIC.