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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 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 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 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 and, and IRM 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 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 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 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 Frequently Asked Questions under OIC. You can also refer to the Internal Revenue Manual IRM 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 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 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 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, 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 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, then please include your suggestions in the comment section of the survey. Click the survey button on the screen to begin. If it doesn't come up, check to make sure you disabled your popup blockers.

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.