Roy Chaney: Good afternoon. Welcome to our Follow-Up Q&A for the World of Offer in Compromise
webinar that was held May 26, 2022. If you're returning, we welcome you back. We received some
excellent feedback and questions from the last webinar and wanted an opportunity to provide some
answers to your questions. Today, we have representatives from the Offer in Compromise
organization of the Internal Revenue Service. These professionals represent Centralized Offer in
Compromise, Field Offer in Compromise, as well as policy Offer in Compromise. So, before we start
the Q&A session, I want to thank everyone for attending today's presentation and introduce you to
our speakers. Representing the field offer function are Francine Stewart, Francine is a
Territory Manager in Field Offer in Compromise. She has 4 years of experience in the Offer
Program, and 13 years within the IRS. We also have representing Field, Linda Harrison. Linda
Harrison is an offer specialist who has 12 years experience within the Offer Program and 13 years
with the IRS. Unfortunately, Supervisory Offer Examiner, Carol Mankin, will not be able to
attend today's session. Representing the Centralized Offer in Compromise function is Jenifer
Baes, Jen. Jen is a Supervisory Offer Examiner in the centralized offers function in Brookhaven,
New York. Jen brings 11 years of experience to the Offer Program and 27 years with the IRS. Also
representing centralized Offer in Compromise, there is Theresa Buckley. Theresa is a Supervisory
Offer Examiner with 17 years within the Offer Program and 23 years within the IRS. Representing
Offer in Compromise policy is Catrina Dugger. Catrina has worked with the Offer Program for 12
years and has 28 years of service with the IRS. One thing before we start, we may not have time
to answer all the questions submitted, but we'll answer as many as time allows. Let's get
started so we can get to as many questions as possible. So, before we do that, let's recap, we
just want to take a moment to recap some of the highlights from the May 26 webinar. As a
reminder, the success of the compromise program will be assured only if taxpayers make adequate
compromise proposals consistent with their ability to pay and the IRS makes prompt and reasonable
decisions. Taxpayers are expected to provide reasonable documentation to verify their ability to
pay. The goal is a compromise which is in the best interest of both the taxpayer and the IRS.
Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of
and a fresh start towards compliance with all future filing and payment requirements. The overall
goals of the offer program are: to achieve a resolution that is in the best interest of both the
taxpayer and the government; to collect what can reasonably be expected at the earliest possible
time and at the least cost to the government; and to secure revenue that may not be collected
through other means. During the last webinar, we also discussed that there are types of offers
taxpayers can submit. One is the Doubt as to Collectability or DATC. Doubt as to Collectability
is when taxpayers are unable through financial analysis to pay their liability in full. This is
the most common type of offer. Generally, a Doubt as to Collectability offer amount must equal
or exceed a taxpayer's reasonable collection potential (RCP) in order to be acceptable. In most
cases when the offered amount exceeds the RCP the acceptance should be for the amount offered.
The second is Doubt as to Liability (DATL). This type of offer is when taxpayers doubt the
accuracy of their tax liability. These offers are often routed to examinations after receipt.
Offers based on DATL should only include the tax years or periods in question. Liabilities for
other tax periods should not be included in the offer. This is submitted on Form 656-L. And
finally, there's Effective Tax Administration or ETA. This offer is when taxpayers owe this
amount and have enough in assets and income to pay this liability in full, but due to special
circumstances, requiring full payment would cause an economic hardship or be inequitable. So now
that we've recapped, let's get to our questions. Q1: Question 1. What are dissipated assets?
Francine, can you take this question for me? A1: Yes. Thanks, Roy. Dissipated assets are sold,
transferred and otherwise encumbered to avoid the payment of taxes. And that's generally
within the last three years. Q2: Thank you. Question 2. Which assets are included in calculating the
collection potential? Linda, can you take this question for me? A2: Sure thing, Roy. Assets that
are included in calculating RCP include, but are not limited to cash, bank accounts, real
property, vehicles, 401(k) or IRA, cyber or cryptocurrency, the cash value of a whole life
policy, and generally assets that were disposed of within the last 3 years. Please note, if the
401(k) is used to pay the offer, the 10% penalty will apply, so we allow a 20% reduction on the
value of the asset. We also consider and include all foreign assets and income. Q3: Thank you.
Question 3. What is the CSED or Collection Statute Expiration Date? Ms. Francine, can you help
me? A3: Great question. The Collection Statute Expiration Date is known as a CSED represents the
amount of time that the Internal Revenue Service can collect on the liability. This timeframe is
usually 10-years, if there are no extensions on tax assessments. For the purpose of an offer the
CSED is extended from the date the offer is pending, or processing within the IRS. When an offer
is rejected, it is extended 30 days immediately following the rejection for the taxpayer to
appeal the rejection. If an appeal is requested within the 30 days, it is also extended during
the time that any rejection of the offer is being considered by the Appeals Office. Q4: Thank
you. Question 4. Are taxpayers who only have ITINs eligible to file an Offer in Compromise?
Theresa, can you take that one for me? A4: Yes, right. Thank you. The answer is yes. As long as
the taxpayer's ITIN is active. If it has been deactivated though, they will have to ensure they
reactivate the ITIN before submitting an offer by submitting the Form W-7. Q5: Okay. Question 5.
Are offers submitted with ITINs treated the same way as offers with Social Security Number?
Theresa, back to you. A5: That's a great follow-up question. Yes, the lifecycle for an offer
with an ITIN is the same as the ones with SSNs. Taxpayers with ITINs must follow the same
compliance requirements as those with SSNs. The financial analysis part of the investigation is
the same as to securing, verifying and the valuation of assets, income and expenses. Q6: Thank
you. Question 6. For the pre-qualifier, does "tax debt" entered not include any interest or
penalty also due? Can you describe the pre-qualifier tool in general discussing, what is
considered income, et cetera., and does the pre-qualifier tool populate the 656? Catrina, please?
A6: Thank you, Roy. And, yes, this was a very common question from the previous webinar. The OIC
pre-qualifier tool which is found on our IRS.gov website, it requests that the taxpayer enter
their total liability which should include the penalties and interest. The tool asks for the
total IRS tax debt in whole dollars. The pre-qualifier tool utilizes all data provided to
determine a proposed eligibility for the offer program. So, while the tool doesn't guarantee
acceptance, it provides a snapshot of the potential offer eligibility and potential payment
options, which include a lump sum cash offer, or periodic payment offers. The tool may also show
that a taxpayer can full pay the amounts, but we don't want to discourage taxpayers from
submitting an offer as we make our final decision based on a completed Offer in Compromise
application and financial investigation. And just as a reminder, the OIC pre-qualifier tool is
only used for individual taxpayers and it doesn't populate the Form 656. The Form 656 booklet
can be downloaded from IRS.gov. Q7: Thank you. And as just a reminder, all of this has been
uploaded, so you may need to refresh your screen in order to download the segment. Question 7. My
client submitted an offer, when will the lien be released? Catrina, can you answer that one for
me? A7: Definitely, Roy. So, in general, the federal tax lien is released in a couple of
situations, the liability has been satisfied, the liability becomes legally unenforceable, or a
bond is accepted. And to be more specific to the Offer in Compromise process, the federal tax
lien is released within 35 days following the full payment of the accepted offer amount. Per the
terms on the Form 656, the Notice to File Tax Liens (NFTL) will be released within 35 days after
the final payment has been received and verified. If the final payment is done by credit or
debit card though, the Notice of Federal Tax Lien will not be released up to 120 days from the
date of the credit/debit payment. And one more important thing to note, if the taxpayer later
defaults on the offer after the release of a tax lien, a request to possibly revoke the lien release will be filed by our monitoring Offer in Compromise function. Q8: Thank you. Question #8.
What circumstances are considered under Doubt as to Collectability with special circumstance or
economic hardship, i.e. ETA? Catrina, can you answer that one for us, again, please? A8: Yes,
definitely. And this was a very common and important question. So, to begin Doubt as to
Collectability with special circumstances is when taxpayers may qualify for Doubt as to
Collectability with special circumstances offer when they cannot fully pay the tax due but have
special circumstances that warrant acceptance for less than the reasonable collection potential or the RCP. Some factors establishing special circumstances under Doubt as to Collectability are
the same as those considered under ETA. You can also refer to the IRM, that is the Internal
Revenue Manual 5.8.4.2 Effective Tax Administration (ETA) and Doubt as to Collectability with
special circumstances (DATCSC). This discusses issues to consider when evaluating an offer under
Effective Tax Administration or Doubt as to Collectability with Special Circumstances. Some factors we want you to consider that support an economic hardship determination may include that
the taxpayer is incapable of earning a living because of a long-term illness, medical condition
or disability, and it is reasonably foreseeable that the financial resources will be exhausted
providing for care and support during the course of the condition. Another factor is a taxpayer
may have a set monthly income and no other means of support, and their income is exhausted each
month in providing for the care of dependents. Another one is the taxpayer has assets but is
unable to borrow against the equity in those assets and liquidation to pay the outstanding tax
liabilities would render the taxpayer unable to meet basic living expenses. So, here's an example
that illustrates the types of cases that may be compromised under the economic hardship
standard. The taxpayer has retired and the only income is from a pension which does not meet his
necessary living expenses. The only asset is a retirement account and the funds in the account
are sufficient to satisfy the liability. However, liquidation of the retirement account would
leave the taxpayer without adequate means to provide for basic living expenses. The taxpayer's
overall compliance history does not weigh against compromise though. Just note that these factors
are representative of situations that we regularly encounter when working with taxpayers to
resolve delinquent accounts. These are not intended to provide an exhaustive list of the types of
cases that can be compromised based on economic hardship. For a Doubt as to Collectability, ETA
or effective tax administration, this can only be considered when the service has determined that
taxpayers do not qualify for consideration under the other statuses, Doubt as to Liability or
Doubt as to Collectability. The economic hardship standard is referred to in our CFR Section
301.6343-1, which specifically only applies to individuals. The economic hardship standard
authorizes compromise regardless of the cause of the liability provided a compromise does not
undermine compliance by other taxpayers. So, here's an example. The taxpayer was diagnosed with
an illness that eventually will hinder any ability to work. Although currently employed, the
taxpayer will soon be forced to quit their job and use their personal funds for basic living
expenses. In this situation the taxpayer owes for $100,000 and has a reasonable collection
potential of $150,000. They submitted an offer for $35,000. Through the offer investigation, it
is determined that collecting more than $50,000 would cause an economic hardship for that
taxpayer. A determination on economic hardship was made due to the fact that taxpayer's
reasonable living expenses, including their ongoing medical costs will exceed their income once
the taxpayer is unemployed. The taxpayer is advised to raise the offer to $50,000 since it is
the amount the service can collect without creating that economic hardship discussed. In economic
hardships, an acceptable offer amount is determined by analyzing the financial information
accompanied with supporting documentation and the hardship that would be created if certain
assets or a portion of certain assets were used to pay that liability. And just to end, the
existence of economic hardship criteria does not dictate that an Offer in Compromise must be
accepted. An acceptable offer must still be determined based on a full financial analysis and
negotiation with the taxpayer. When hardship criteria are identified but the taxpayer does not
offer an acceptable amount, the OIC may not be recommended for acceptance. More information can
be found in our Internal Revenue Manual 5.8.11. Q9: Thank you, Ms. Catrina. That was a long
answer. Let's take a look at Question #9. Is there a timeframe for the IRS to make a decision on
an offer? Ms. Theresa, can you answer that for us? A9: Sure. Timeframes are very important.
Although, there are timeframes for employees to follow on every step of the offer process from
receipt to closure, the Internal Revenue Service has 24 months from receipt of an offer to make a determination. However, each case is different and is investigated on its own merits. You can
assist in expeditiously processing by ensuring the taxpayers are in compliance, both with return
filing and paying such as ES payments or FTD payments, including all the assets and income from
the Form 433-A or B, ensuring all verification of these assets and income are included with the
submission of the offer and responding for any requests for additional information completely and
timely. Q10: Thank you. Question 10. Does my divorced client who is liable on a prior joint
return with ex-husband have to be granted mirroring before submitting her own separate offer?
That's a great question. Jen, can you take this one? A10: Thank you, Roy. Yes, most definitely.
That is a great question. And to answer that, I would like to discuss for those who are not
familiar with the term mirroring, just address it a little bit. This is a process where a jointly
filed tax period is split into two separate accounts by the Internal Revenue Service by the IRS,
one for each spouse. Each account is a mirror of the originally jointly filed tax period
including the assessment of the tax, any adjustments, credits and/or payments, et cetera.
Example of when the IRS may split an account is when only one of the spouses on a jointly filed
tax return files bankruptcy. The account is split regardless of the outcome of the bankruptcy
proceedings as the filing of bankruptcy affects the collection statute but only for the spouse
who actually filed for bankruptcy. Now to answer the question, the taxpayer can always request to
be treated separately from their spouse if they want to have their own for example installment
agreement and/or be put in a currently not collectible status. But for the purpose of filing an
offer, the taxpayer is not required to request this prior to submitting an offer. If the jointly
filed tax return has not been split or mirrored, the taxpayer can still file an offer for him or
herself. The offer will be worked and investigated based only on his or her own information if
they are divorced. The Offer in Compromise operation will request the split or the mirroring of
the jointly filed periods upon closure. I hope that answers that question back to you, Roy. Q11:
Thank you. Question #11. What is the Monitoring Offer in Compromise payment process? Catrina, can
you answer that for us? A11: Definitely, Roy. This was a very good question from the previous
webinar, and payments on an offer should correspond to the accepted terms on the Form 656 and/or
the Form 14640, which is the addendum to the Form 656. The monetary Offer in Compromise group
monitors all accepted offers, the compliance with the offer terms including making those required
payment. If the taxpayer has a question about their payment schedule or the request of an
extension of time to make a payment, and a reminder, only one extension will be granted over the
course of the offer terms, they'll get a Letter 274C that will be sent to confirm what had been
requested. If a payment is missed, the taxpayer will receive a Letter number 2909C, which will
explain what is needed and give them the opportunity to get caught up. If the taxpayer cannot
make up the missing payments, the offer is defaulted and the original balance due plus any penalties and interest that have accrued from the date of the acceptance, of course, less any
payments made on that offer, will be reinstated and the taxpayer will again start to receive
collection notices. You can also refer again to our Internal Revenue Manual 5.19.7.2.1 and
5.19.7.14.1, and IRM 5.19.17.14.2. Q12: Thank you. Moving right along Question 12. Is there a
minimum amount to offer? Francine, can you take this one? A12: Thank you, Roy. We recommend that
you use the pre-qualifier tool that we spoke about earlier to get an idea of what the offer
amount should be. Offer amounts must be greater than zero. There is no minimum amount that you
must owe to file an offer. The Form 433-A OIC and 433-B OIC allows taxpayer to compute the offer
amount. Q13: Thank you. Question 13. What is a Trust Fund Recovery Penalty? Ms. Linda, can you
take this one, please? A13: Yes, Roy. This is a great question. These penalties are assessed
under parties responsible for remitting these taxes to the IRS and are separate for the taxes
that a business owes. Therefore, a separate offer will be required for the Trust Fund Assessment
against the responsible party as well as an offer for the business. These are two separate
liabilities and collection is pursued separately. We are recommending if a business owes Trust
Fund taxes, if the Trust Fund Recovery Penalty must be investigated and completed prior to
submitting an offer, as it must be completed before an offer investigation can completed. Q14:
Thank you. Question 14. If a taxpayer cannot make the OIC payments on EFTPS, then where do they
mail the payments? Ms. Theresa? A14: If the taxpayer is unable to make payments on EFTPS, they
can mail their payments to Brookhaven campus or Memphis campus based on the State the taxpayer
resides in. The full address can be found in the Form 656 booklet and at IRS.gov. Q15: All right.
Question 15. Then how are offer payments applied? Ms. Jen, can you answer that for us? A15: Yes,
Roy. Thank you so much for that. And thank you for that question. Offer payments are applied as
follows. The application fee is always applied to the oldest liability. That required initial
payment is also applied to the oldest liability unless it is designated by the taxpayer to a
specific tax period. Any payments in excess of the required initial payment is applied towards
the oldest liability. Just a reminder that effective April 25 of this year (2022), deposits are
no longer being accepted with an offer submission. Q16: Thank you. Question 16. My client's offer
was returned and I think that was an error. Can I have it reopened? Ms. Catrina, can you answer
that one? A16: Yes, Roy. And we do often receive requests for possible reconsideration of
returned offer. If stipulated, the return letter allows you to submit a reconsideration request
within 30 days of the date of that letter. Depending on the reason for the return, your client
may qualify for reconsideration. For example, the IRS returned the offer because the taxpayer
didn't make the required payments as requested. If they can substantiate that the taxpayer sent
those payments in timely, meaning before that due date given, then you can submit a
reconsideration request. Another example of what may qualify for a reconsideration of the return
is a taxpayer or the representative had a serious illness or injury that prevented a timely
response, and that illness or injury can be substantiated. Lack of availability of either the
taxpayer or the representative, absent circumstances identified, is not an acceptable
reconsideration criterion. For more information you can refer to, again to the Internal Revenue
Manual 5.8.7.3.1. Q17: Thank you. Question 17. My client has an offer, and he is affected by a
disaster. What does my client have to do? Ms. Catrina? A17: Yes, and we definitely want to
provide guidance when there's a disaster in your client's area. So, when the President
authorizes disaster assistance through the Robert T. Stafford Disaster Relief Act, and the
Federal Emergency Management or FEMA identifies counties as qualifying for individual assistance,
the Disaster program office will prepare an IRS Declaration Relief memo and this memo will
suspend all enforcement actions in the identified counties. The Offer Examiners or Offer
Specialists will contact the taxpayer or their representative living in an identified county to
verify the effect of that disaster on that taxpayer or representative. Q18: Thank you. Question
18. How often is the National Standards updated? Ms. Catrina, back to you again? A18: Definitely,
Roy. So, our standards are updated once per year. And these limits can be viewed on the IRS.gov
website. And taxpayers should follow the instructions on the Form 433-A OIC regarding when to
input their actual expenses and when to use the National Standards. Just search for the
Collection Financial Standards. When completing the financial documents, you should - they
should list accurately what they pay. Q19: Thank you. Question 19. Can an offer be filed while my
client is being levied? Ms. Francine, can you take this one? A19: Yes, Roy. An Offer in Compromise
can be filed at any time, however, if an account is under the Federal Levy Payment Program,
FPLP. The FPLP will be stopped while the offer is being evaluated. For all other levies, the
prohibition on levy while an OIC is being evaluated does not require release of a levy that was
served prior to the offer submission. The taxpayers' circumstances may be considered when making
a determination to release a levy or keep it in place while their offer is being evaluated.
Taxpayer hardships can be considered in the request for levy release. Q20: Thank you. Question
20. Is it true that taxpayers in installment agreements prior to submitting an offer do not have
to continue making payments on their installment agreements once they file an offer? What happens
if the offer is not accepted? Ms. Theresa, can you answer that one for us, please? A20: Sure,
Roy. The answer is yes. The taxpayer does not have to make their installment agreement payments
once the offer is received by OIC. If the offer is not accepted, OIC will reinstate the
taxpayer's installment agreement without payment of the user fee granting there are no factors
that would have eventually defaulted the installment agreement such as incurring another
liability or not staying in compliance. The taxpayers can continue to submit payments if they
wish as the penalties and interest continued to accrue. They can also designate any payments to
a specific tax period of their choosing. Q21: Thank you. Question 21. I have clients who own
businesses and are looking to file offers, what do they need to do before submitting the offer?
Ms. Catrina, again? A21: Thanks, Roy. And we had quite a few questions regarding businesses. So,
the businesses must be first in filing and payment compliance. Filing compliance means filing all
required tax returns for the past 6 years including the current tax year. Payment compliance
means that the taxpayer must be current with any required estimated tax payments and Federal Tax
Deposits, FTDs for the current quarter that the offer is submitted as well as the previous 2
quarters prior to the offer submission. Compliance must be maintained throughout the offer
investigation. Just a reminder, business entities, except for sole proprietorship, do not qualify
for our low income waiver and must submit the application fee and all applicable offer payments.
Again, about the pre-qualifier tool, businesses cannot use the Pre-Qualifier Tool. The tool is
only for individuals. I want you to review the Form 656 booklet and complete the Form 656 (Offer
in compromise), and the 433-B OIC, which is the collection information statement for businesses.
And one that last thing to note, the Form 656 Booklet has a section on Trust Fund Taxes, which
was described earlier which is important to review. Q22: Thank you. Question 22. How many Forms
656 are needed? Linda, can you take this on for us, please? A22: Yes, Roy. This is a great
question. The answer depends on the type of taxpayer and the types of liabilities. In short,
there should only be as many Forms 656, as there are entities. An entity is the individual or
business that is assessed the liability. In conjunction with an acceptance letter, the Form 656
constitutes a binding agreement between the government and the taxpayer. Here are a couple of
examples. Example one, Two taxpayers who jointly owe the same liability, including spouses living
separately or divorced, may submit a joint OIC on one Form 656 showing each name, address and
taxpayer identification number. However, separate offers, one for each person, may be submitted
if the individuals deem it to be appropriate for their particular situation. Example two,
Taxpayers who owe both joint liabilities and Trust Fund Recovery penalties or TFRP liabilities
for the same quarters and the same amount, must submit two offers, because they are separate
entities. A good thing to note is when determining the number of offers required for taxpayers
with identical assessments, such as mirroring or trust fund recovery penalty. If the original
assessments are established against the individual taxpayer, separate offers are required. For
more examples and scenarios, please visit IRS.gov Frequently Asked Questions under OIC. You can
also refer to the Internal Revenue Manual IRM 5.8.3.5(5) where it contains a great if/then chart
to assist you. Q23: Thank you. Question 23. Where do you mail International Offers? Ms. Catrina,
can you help us out? A23: Yes, Roy. So International Offers, which are a specialty are mailed to
the Brookhaven Service Center. These offers are investigated the same way non-International
Offers are investigated. The address to the Brookhaven Service Center can also be found on the
Form 656 booklet. Q24: Thank you. Question 24. What happens if the offer is terminated due to the
death of the taxpayer? Who can submit an offer for the deceased taxpayer? Great question. Ms.
Jen, can you take that for us? A24: Yes, Roy. Thank you. Thank you for that question. It's a
great question, an offer can be submitted by any party authorized to act on behalf of the
taxpayer's estate. To notify the IRS of and establish the fiduciary relationship, Form 56, which
is the Notice Concerning Fiduciary Relationship, needs to be submitted. A letter of testamentary
and/or court certifications may need to be submitted with the Form 56. See Internal Revenue
Manual 3.13.5.32(1) for more information on the Form 56. Once the Form 56 has been submitted, the
fiduciary does not need to submit a Form 2848, which is your Power of Attorney and Declaration
of Representative form. The fiduciary stands in the position of the taxpayer and acts as the
taxpayer. The fiduciary may also authorize an individual to represent or perform certain acts on
behalf of the person or the entity by filing a Form 2848. The fiduciary should sign the Power of
Attorney form in the fiduciary's own name and indicate his or her title, as per Form 56, in the
appropriate place on the Form 2848. It is important to note that a third-party authorization on
Form 2848 or a Form 8821, which is the Tax Information Authorization, expires with a death of
the taxpayer. Also, important to note, the surviving spouse does not automatically become the
executor or executrix for the deceased spouse. Q25: Thank you. Question 25. What is considered
not processable? Ms. Theresa, can you take this please? A25: Sure, that's a great question. There
are multiple reasons why offers are returned as not processable. One, is if the taxpayer is
currently in bankruptcy, we cannot consider an offer when the taxpayers are part of bankruptcy
proceedings. Two, the taxpayer did not submit the application fee and the required initial
payment with the offer, and they did not check the low income certification on the Form 656, they
have to either submit the payments or check the low income certification. Three, if all of the
taxpayer's liabilities have been referred to the Department of Justice for prosecution or
defense. Four, any offers submitted solely to compromise an unassessed liability and there is no
indication that the taxpayer's return for that tax period has been received. Five, there are no
liabilities on the taxpayer's account and there is no indication of any examination or
underreporting issues. Six, when the offer is submitted solely for tax periods where the
collection statute has expired. Seven, offers submitted solely for unfiled tax returns. And
eight, offers received to compromise liabilities included in an open OIC. Q26: Thank you. We
received some great information today. Let's move along Question 26. On a business OIC offer,
does the business have to make payments while awaiting the offer? Ms. Catrina, can you take this
on for us? A26: Yes, I can. And so definitely this is a follow-up to the previous business
question. So, if a business requests a periodic payment offer, then yes. The offer payments must
be submitted each month while the offer is being evaluated. If the business requests a lump sum
cash offer, then only the 20% initial payment is due with that Form 656. Of course, there's also
the one-time application fee of $205 when submitting an offer. Please don't forget a business,
except for a sole proprietorship, does not qualify for that low income waiver and must always
submit the offer payments and application fee. In addition, a business must remain in compliance
throughout the entire process with all tax returns filings, FTDs - federal tax deposits, and
estimated tax payments, if applicable. For businesses on a current installment agreement, when
the offer is submitted, these are the only payments that will stop while the offer is being
evaluated. One last item is a policy change with the new revision of the Form 656 that was in
April of this year. A business must be current with all Federal Tax Deposits for the two
quarters prior to the offer submission in addition to the current quarter that the offer is
submitted. Q27: Thank you. Thank you. Question 27. What happens when the taxpayer has actual
expenses that exceed the standard amounts and the system calculates they can make payments, but
don't have the disposable income in reality? Ms. Catrina? A27: Yes. So, thank you. The Internal
Revenue Service, we can deviate from the allowable living expenses if the taxpayer provides
documentation to substantiate and justify the additional expense. These expenses must be
reasonable in amount for the size of the family and the geographic location, as well as any
unique individual circumstances surrounding it. Q28: Thank you. We're coming right back to you
Ms. Catrina. Question number 28. What does OIC consider as income? A28: Definitely. Thank you,
from various sources which include the gross wages, social security, pensions, and even Roy. So, income that is used for the basis of determining acceptability of an offer, it can come
unemployment. We also consider interest in dividends, net business income and even net rental
income. The offer program can also consider income received from alimony and child support to
assist in developing a true financial picture to determine basic eligibility for the offer
program. It's also interesting to know that income from the gig economy and income from things
like Airbnb rentals, social media income, such as YouTube can also be considered. Q29: Thank you.
Thank you. Thank you. Question 29. If an offer is rejected, is there an option for
reconsideration? Ms. Theresa, can you take this one? A29: So that's a very important question.
Reconsiderations are only for returned offers. The taxpayer though, can file a request to Appeal
the rejection of the offer within 30 days from the rejection date, and it will be forwarded to
appeal. Q30: Thank you. Question 30. How do we determine if a client qualifies as low income? Ms.
Jen, can you take this question for us? A30: Yes. Thank you, Roy. Well, first of all, as Catrina
had mentioned a few times previously, low income certification only applies to individuals. It
doesn't apply to corporations, partnerships, estates, trusts, and all LLCs or Limited Liability
Companies. There are two methods to verify if a taxpayer qualifies for low income certification to waive the submission of the application fee and the required initial payment with the offer.
First one is the taxpayer may qualify based on their adjusted gross income on their most recently
filed individual income tax return. There is a chart on Page 2 of the April 2022 revision of the
Form 656 showing the threshold amount based on the size of the family unit. The second method is
the taxpayer may qualify if the household's monthly gross income from the completed Form 433-A
OIC multiplied by 12 is equal to or less than the same chart based on this family size. Q31:
Thank you. Question 31. Can the taxpayer submit an OIC if they were in an installment agreement
but defaulted and now is under levy? Jen, can you take this on, please? A31: Yes. Thank you, Roy.
Great question. And the answer is yes. The taxpayer can submit an offer at any time. But let's
remember that the submission of an offer does not guarantee acceptance. Even if the taxpayer is
currently in an installment agreement, they can submit an offer. The question is, why did they default on that installment agreement? If they defaulted because of compliance issues, those
issues must be addressed prior to submitting an offer. If there was a levy already in place prior
to the submission of the offer, the levy will stay in place unless special circumstances are
identified, as Francine had mentioned earlier. The taxpayer will have to submit all required
offer payments including the application fee, initial payment and the periodic payments if they
chose the periodic payment option. Just a note, if the taxpayer qualifies for a low income
certification, then no offer payments are required with the submission and during the
investigation of the offer. Now, if the taxpayer submits an offer, which is not materially
different from a previously submitted offer that was rejected as the taxpayer has the ability to
full pay the liability via an installment agreement, and Appeals sustained that rejection, the
new offer may be considered and returned by the Internal Revenue Service as having been
submitted to solely delay the collection of that liability. You can refer to Internal Revenue
Manual 5.8.4.20.1(1) Example 5. Q32: Thank you. Question 32. Where can taxpayers mail the offer
payments? Ms. Catrina? A32: Thank you, Roy. So, to submit offer periodic payments while that
offer is being investigated, the payments must be mailed to either the Brookhaven or Memphis
campuses depending on the state where the taxpayer resides. And again, the Form 656 booklet has
the address to both of those locations. Now, if your client has an accepted offer, all payments
are mailed to the Internal Revenue Service, Attention: OIC, which is in PO box 219982, which is
in Kansas City, Missouri. So, these are very different address. Q33: Thank you. Question 33. How
do I ensure I receive all communication on behalf of my client? A33: If you are qualified to
represent the taxpayer per the Declaration of Representative on part two of the Form 2848, Power
of Attorney and Declaration of Representative, the taxpayer can authorize you to receive copies
of any correspondence by checking the box on the same form, Part 1, directly below your name and
address before signing the form. Q34: Thank you. Question 34. If the OIC is determined not
processable, is the deposit returned to the taxpayer? Ms. Theresa, can you take that one, please?
A34: Sure. Yes, if the payment received with a revision of the Form 656 prior to April of 2022,
is designated as a deposit. The IRS no longer accepts deposits with the publishing of the April
2022 revision of the Form 656. Q35: Thank you. Question 35. If the taxpayer is not in compliance
but is submitting the 6 years of returns, can the offer be submitted with the returns or how long
should the taxpayer wait to submit the offer? Ms. Jen, can you take this question? Ms. Jen?
Well, we seem to be having, A35: I apologize. I was on mute. I admit I was on mute, Roy. I
apologize. Thank you for that question. Let me just clarify what the 6 years of returns mean. The
IRS reviews, as part of compliance, if the last 6 years of returns including the current tax
year, are all filed. Now to answer the question, it is recommended to ensure the taxpayer is in
compliance with filing and paying before submitting the offer to avoid possibly having the offer
returned. Returns beyond the 6-year look back period will need to be filed if a taxpayer receives
a letter from the Internal Revenue Service requesting for a specific tax year to be filed.
Please also note that the taxpayer should wait for a notice of balance due before submitting the Offer in Compromise. Q36: Thank you. Question 36. I submitted a Form 656 for a husband and wife.
Why is the IRS now asking for additional forms 656? Great question. Ms. Catrina, can you take
that one, please? A36: Definitely, Roy. This was a common question from the previous webinar. And
this is all based on whom is legally responsible for the tax liabilities. If the liabilities are
all joint assessments from the Form 1040 tax returns that are married filing joint, only one
offer will be needed. The only time we require an additional Form 656 is when there are also
separate assessments involved. For example, this may include the husband and wife having joint
assessments, but the husband also owes Form 941 tax liabilities from a sole proprietorship. The
wife is not liable for these 941 taxes, and that means two separate offers are required by law.
One offer will include the husband's 1040 and 941 taxes, and the second offer will include the
wife's 1040 taxes. So, if all the liabilities are from returns that were filed as married filing
separately, than two separate offers will be required even if the couple is still married and
living together. Another example like we discussed before is the Trust Fund Recovery Penalty
assessments. This is a civil penalty assessed to individuals for unpaid employment taxes from a
business. Even if the husband and wife are both assessed identical TFRP, two offers are
required. This is because the TFRP or Trust Fund Recovery Penalty is a legally separate
assessment under the IRC 6672. So just keep in mind, there should be as many forms 656 as there
are entities. An entity is the individual or business that is assessed the liability. And for
more information you can consult Internal Revenue Manual 5.8.3.5 for complete details. Q37: Thank
you. Thank you. Question 37. Why are the exemptions for vehicles and bank accounts not applied on
all the offers? Ms. Catrina, back to you? A37: Thank you, Roy. So good question. If the
outstanding balance due can be full paid by the equity in available assets, future income
potential or a combination of both of those, the exemptions will not be applied. The $1,000 bank
account exemption will only apply to individuals, whether they're joint or separate liabilities,
including sole proprietorships, and it cannot be used for a business offer. Q38: All right. We're
down to our last question. Question 38. Are virtual currencies, crypto, considered assets for
financial analysis? Ms. Catrina, can you take that one? A38: Definitely. And this is an up and
coming question that we get asked. For the purposes of the financial analysis, virtual
currencies, including Bitcoin can be treated as an exchange of property for tax purposes. The
financial analysis will consider the interest in the currency to develop a reasonable collection
potential. Roy Chaney: Thank you. Thank you, Ms. Catrina. Audience, that's all the time we have
for questions. I want to thank our panel of presenters for sharing their knowledge and expertise
and for answering your questions. Before we close this Q&A session, Catrina and team, what final
thoughts and key points do you want the attendees to remember from today's webinar? Catrina
Dugger: Well, Roy, thank you, and thank you to our attendees. So here on the screen are some
interesting facts about the OIC and some recent statistics. So, there's a lot on this slide. So,
I'll just give you a minute to take it in. So, we have the total dispositions, and this is from
our FY, Fiscal Year 2021, which was 46,485 total dispositions. We also had not processable, as
we discussed that earlier on some of the questions, and those were a total of 22%, or 10,089. The
amount of acceptances were 32%, or 14,944. Rejections were 17% of the total dispositions, or
7,740. And the returns were 19% with 8,747; and of those withdrawal or termination were 11%, or
4,965. So, let's just talk a little bit about the figures that we see. Just one thing to note
that these percentages are our national program totals, which exclude Appeal and the figures are
rounded, so you'll notice they don't represent 100%. So, let's talk about the not processable
offers, which accounted for a big 22% of the total inventory for FY 2021. So, there are four main
reasons that the offer is determined to be non-processable: and that was that the applicant is
in an open bankruptcy; the required fee was not paid with that application; the taxpayer was not
compliant with filing tax returns; and none of the initial payment was included with that
application. Another area to note is the number of rejections, 17%. Rejections are when the
service cannot accept the taxpayers offer amount, and we offer them an opportunity to appeal a recommendation. And some common reasons for those rejections are that the reasonable collection
potential can't or won't be paid by the taxpayer. The taxpayer can obviously full pay. And there
is missing or incorrect information which results in an inaccurate determination of the
reasonable collection potential or the appropriate offer amount. This is why it's so, so very important we receive updated information for our financial investigations. So, returns of an
offer accounted for 19% of the FY 2021 inventory. And the main reason those offers are returned
is the taxpayer doesn't stay in compliance or doesn't respond timely to requests for
information. It's interesting to note that taxpayers may withdraw their offers at any time during
the offer process. The special Offer in Compromise function like any other business unit within
the Internal Revenue Service, we continue to recover from the COVID evacuations and overcoming
challenges, but we want to continue to ensure we provide top quality service. We also want to
remind you of some helpful hints when you advise and assist your clients, advise the taxpayers to
stay current with all the filing and payment requirements. That includes estimated tax payments
and the federal tax deposit during the evaluation of that offer. Ensure the taxpayer is aware of
the requirement to remain current for a minimum of 5 years after that offer is accepted,
including any extensions to file. You also want to advise that unless the taxpayer qualifies for
that low income waiver, be sure to include all required fees and the initial offer payments and
continue to make any required payments as they become due during the course of the offer
evaluation. Reminder that failure to make any payments during the offer evaluation may result in
what we call a mandatory withdrawal and that means the offer is returned without any appeal
rights. You can advise your taxpayers that they can make their offer payments and application
fee through our Electronic Federal Tax Payment System, which we talked about earlier the EFTPS
system. You can advise a taxpayer to ensure they respond timely, if and when the IRS requests
information. We encourage you to use our checklists included in the 656-B booklet, which should
reduce or eliminate the need for IRS to request additional information. Please advise taxpayers to ensure they list all property, assets and business interest on the applicable financial
statements. And any substantiation they are required to send with the application should be
current. And advise taxpayers to explore all other payment options before submitting an
application for an offer and compromise. We encourage the use of the OIC pre-qualifier tool to
file an offer and ensure the Form 656 and the Form 433-A and B if applicable, are accurately
completed and have original signatures. The IRS does not accept electronic signatures for originally filed 656s. The financial forms 433-A and B have checklists at the end, so we
recommend the use of this checklist. And just to serve as a reminder, here are the addresses to
submit an Offer in Compromise. And the program currently does not have the ability again to
receive electronically submitted offers. All offer applications must be submitted by mail and
must contain the taxpayers' original signature as I mentioned before, and submit the offers
based on the state of residence. For example, if the taxpayer resides in Alaska, Alabama, or
Arkansas to name a few, they're going to mail their application to the Brookhaven IRS center in
Holtsville, New York. And likewise, if they live in example, Arizona, California, Colorado, or
Hawaii, those will be mailed to the Memphis IRS service center. Now we have a lot of outreach
videos that we're trying to put out to assist you in the offer process. And some of the videos
will help you assist and educate the taxpayers as well in determining and completing the offer
application. It's a great visual resource and we encourage their use. So today, we've attempted
to answer some of the questions that were presented from the prior webinar. We hope that it
provides some more insight into the offer program and helps you assist your client. Thank you.
Roy, back to you. Roy Chaney: Thank you, Ms. Catrina. I appreciate it. Audience we're planning
additional webinars throughout the year. To register for all upcoming webinars, please visit
IRS.gov, keyword search, Webinars and select the Webinars for Tax Practitioners or Webinars for
Small Businesses. When appropriate, we will be offering certificates and CE credit for upcoming
webinars. We invite you to visit our video portal at www.irsvideos.gov. There you can view
archived versions of our webinars. Please note continuing education, credit or certificates of
completion are not offered if you view any version of our webinars after the live broadcast.
Another big thank you to our speakers, Francine Stewart, Jennifer (Jen) Baes, Catrina Dugger,
Linda Harrison and Theresa Buckley for a great webinar; for sharing their expertise and for
answering your questions. I also want to thank you our attendees for attending today's webinar,
World of Offer in Compromise: Follow-Up Q&A for Tax Professionals. We would appreciate it if you
would take a few minutes to complete a short survey before you exit. If you'd like to have more
sessions like this one, let us know. If you have thoughts on how we can make them better, please
let us know that as well. If you have requests for future webinar topics, or if you have
pertinent information you would like to see in IRS Factsheet, Tax Tip or FAQ on IRS.gov, then
please include your suggestions in the comment section of the survey. Click the survey button on
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It has been a pleasure to be here with you and on behalf of the Internal Revenue Service and our
presenters. We would like to thank you for attending today's Q&A. It's important for the IRS to
stay connected with the tax professional community, individual taxpayers, industry associations
along with federal, state and local government organizations. You make our job a lot easier by
sharing the information that allows for proper tax reporting. Thanks again for taking time out of
your day to attend today's Q&A follow-up to the May 26 webinar. We hope you found the
information helpful. You may exit the webinar at this time. Thank you.