Offer in Compromise - Collecting Process
Acceptance Processing

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Offer in Compromise 

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Submitting the required documentation

Download form 656

Offer in Compromise Form for Doubt as to Liability cases

Form 656 Read-Only

Information about form 433

Offer in Compromise - Collecting Process

:: Part 5. Collecting Process
Chapter 8. Offer in Compromise
Section 8. Acceptance Processing

5.8   Offer in Compromise

5.8.8  Acceptance Processing  (09-23-2008)

  1. The determination to accept an offer is based on sound decisions relating to an analysis of the taxpayer's facts, circumstances, and financial situation. Documentation supporting this decision and proper approval levels are required to complete the acceptance. This section describes the process for accepting an OIC.  (09-23-2008)
Amending Form 656

  1. When an offer is being recommended for acceptance, the tax periods owing and/or payment terms may need to be adjusted. This will require the taxpayer to submit an amended Form 656 to reflect the new terms.

    1. Mark it "amended" in red on the top margin of page one.

    2. Input "A" (amended) on screen one of the AOIC record to reflect receipt of an amended offer, but do not change the "offer pending date" .

    3. Add any new tax periods not included on the original Form 656 to the MFT screen. The date the IRS official signed the amended offer should be added to the MFT screen as the waiver date for the new periods only.

    4. Delete any tax periods found on the MFT screen that are no longer owed.

    5. Add the new terms for payment, if any, to the terms screen.


    Amended offers will show the total offer amount, not the amount remaining after applied TIPRA payments.

  2. Offers received on or after July 21, 2006, that require the submission of an amended Form 656 will also require submission of either 20% of the revised offer amount (less the amount previously submitted) or the revised periodic payment. See IRM for periodic payment requirements for revised offers.  (09-23-2008)
Closing a Case as an Acceptance

  1. Prior to preparing an acceptance report, IDRS command code "AMDIS" should be checked to ensure that no additional assessments are pending. If an open audit is found contact should be made to resolve the issue per instructions in IRM for additional instructions. The tax must not be compromised unless it is assessed and legally due; therefore, IDRS should also be checked to ensure that all taxes included on the accepted offer have been properly assessed and are still due and owing.

  2. At the time the acceptance report is prepared, update the MFT screens on AOIC using the current K-Data or IDRS command code INTST to reflect the current liability(s). This will ensure the Form 7249, and the MFTRA-X are in close agreement since the Form 7249 requires various levels of approval, and both become public documents.

  3. Before closing a case as an acceptance, document the case history on AOIC regarding the decision. Include any special instructions for the Monitoring Offer in Compromise (MOIC) unit regarding application of funds or requesting a lien re-filing if one will be required during the terms of any deferred payment offer. See IRM 5.12 for more information about when to re-file a lien.

  4. Order a MFTRA-X as close to the acceptance date as possible without delaying acceptance. Sanitize the MFTRA-X or K-Data transcript to "black out" or redact the taxpayer's social security number (both primary and secondary, if a joint offer) and all tax information that is not to be disclosed to the public as follows:


    The AOIC download process may be used to generate and print a sanitized report, which may be used instead of the MFTRA-X.

    1. Name and SSN of a co-obligor spouse if the spouse is not a party to the compromise.

    2. Number of exemptions.

    3. Filing status.

    4. Adjusted gross income.

    5. Taxable income.

    6. Principal Industry Activity Code.

    7. Transaction Codes without dollar amounts. The entire line including the date should be redacted.

    8. Transaction Codes and explanations dealing with fraud, negligence, or criminal investigations, but not the date and amount of the transaction.

    9. Power of Attorney/Tax Information Authorization (POA/TIA) on file.

  5. Prepare an Acceptance Report. The report referenced in IRM Exhibit 5.8.4–3 may be used for this purpose. The report should contain at a minimum:

    1. The taxpayer's personal information such as age, health, dependents, education and occupation.

    2. The cause of the delinquency and status of current compliance.

    3. The amount of RCP and an explanation of how the RCP was calculated.


      The AET and IET shown in IRM Exhibits 5.8.4–1 and 5.8.4–2, respectively, will generally fulfill this requirement.

    4. Whether or not special circumstances exist and how they affected the amount agreed upon.

    5. Negotiations resulting in the acceptable offer amount.

    6. A conclusion that summarizes the basis for acceptance.

  6. In the rare situation where relevant facts of a confidential nature exist that should not be included in the recommendation report, complete a supplemental memorandum for the record and include it in the case file. Do not include information already discussed in the offer recommendation report.

  7. Update the AOIC record as follows:

    1. Main Screen — Update to reflect the correct basis for compromise and, if appropriate, to indicate the existence of special circumstances. Update the disposition code to "1" (proposed acceptance).

      If… Then…
      Any modules have restricted penalty or interest Use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.
      Any modules are Non-Masterfile, and not on IDRS Secure an Automated Non-Masterfile (ANMF) transcript, and update it as necessary using IDRS command code COMPAD and/or COMPAF.
      The module was full paid as a result of a payment action other than TIPRA (such as, refund offset, prior levy payment) Remove the period from the MFT screen on AOIC, and amend the offer to remove the tax period from the Form 656.
      The payment that satisfied the tax period included both a TIPRA payment, and other payment (such as, refund offset, prior levy payment) Do not remove the period from the MFT screen on AOIC.
      The period was full paid The MFT screen will reflect a zero balance due.


      An amended Form 656 is not required to remove periods that were full paid due to TIPRA payments.

    2. MFT Screen — Input the assessment date for each module. Press "I" to update interest to the current date using the INTST command.


      If any modules have restricted penalty or interest, use IDRS command code COMPAD or COMPAF to determine the accrued amounts. Include the accrued amounts in the total liability listed on the MFT screen. The manually accrued amounts must also be added to the paper transcript.


      If any modules are Non-Master File and not on IDRS, secure an ANMF transcript and update it as necessary using IDRS command code COMPAD or COMPAF.

    3. K-Data Request Screen — Do a re-request for an IDRS download on all applicable TINS to update the AOIC screens with the accruals to the current date. Once the screens are updated generate and print the Public Offer report to use in lieu of a MFTRA-X.


      A MFTRA-X may be requested through IDRS instead of taking this step.

    4. Terms screen — Update the terms to those reflected on the offer that is being accepted ensuring that any collateral agreement(s) are referenced as necessary.

  8. Generate and print the Form 7249 for the required signatures. The accepting official is the official that has delegated responsibility for accepting based on the type and dollar amount of the case. Delegation Order No. 5-1 provides the level of authority for approving all Offer in Compromise dispositions.

  9. Generate and print the appropriate acceptance letter for the signature of the delegated official. Attach copies of the accepted Form 656 and any applicable collateral agreement(s).

  10. Generate and print the POA letter if there is an authorized representative.

  11. Assemble the file using Document 9600 B, Tab Dividers for Offer-in-Compromise Case Files Document. The use of labeled dividers is required.

  12. Submit the file for approval, routing to Counsel for review. See IRM, Legal Opinion of Counsel.

  13. Upon approval and signature, date and mail the acceptance letter(s). The acceptance letters should be mailed the same calendar year that the letters are signed. Ensure signed and dated copies are retained in the offer file.

  14. Make a copy of the Form 7249, sanitize to black out or redact the taxpayer's social security number (both primary and secondary, if a joint offer) and mail it together with the sanitized transcripts to the appropriate office for placing in the public offer file.

  15. Close the case on AOIC and process. See IRM below.  (09-23-2008)
Acceptance Processing for Specific Types of Offers

  1. When two or more related offers are being recommended for acceptance, but acceptance is based on one financial analysis, one acceptance narrative may be used. Multiple files should be created containing the separate items that pertain to each offer. It is not necessary to duplicate the information that pertains to both files. The files should be clearly marked indicating that there are related offers, for example "1 of 2" and "2 of 2."

  2. When the accepted offer includes TFRP assessments, a careful review must be made to ensure all TFRP assessments are included. Generally, TFRP assessments made before August, 2000, combine all unpaid corporate tax quarters and were assessed under the tax period of the latest quarterly period owed by the corporation. Since August, 2000, TFRP assessments are made for each quarterly period that is owed by the corporation. The Form 656 and the Form 7249, Offer Acceptance Report, must match and must reflect each individually assessed TFRP tax period.

  3. Offers from Federal employees require a determination of whether public policy implications exist based on the sensitivity of the employee's position or area of responsibility. The result of this consideration should be documented in the case file. Offer acceptances for employees of the IRS also require the approval of the SB/SE Territory Manager (2nd level) or SB/SE Compliance Services Department Manager (COIC).


    Offers from Federal civil service retirees are to be considered under normal procedures.  (09-23-2008)
Legal Opinion of Counsel

  1. Counsel is required to review offers when the total liability for all related offers on the same taxpayer is $50,000 or more. The purpose of Counsel's review is to determine whether the offer legally meets the standards of DATL, DATC or the promotion of ETA. Counsel reviews the offer to ensure it meets the legal requirements for compromise and conforms to the Service's policy and procedures.

  2. If the liability(s) at the time of submission is $50,000 or greater, Counsel opinion is required.

  3. Counsel’s signature on Form 7249 constitutes the legal opinion required by IRC § 7122(b). By signing the form, Counsel is certifying that all of the legal requirements for compromise have been met. If Counsel does not sign the form, the case cannot be compromised until any legal issues are resolved.

  4. Counsel’s signature does not necessarily indicate concurrence with the acceptance decision, but only that there are no legal barriers to compromise. In some cases, Counsel may determine that the compromise is legally permissible, but raise policy concerns or other issues of a nonlegal nature. In such cases, Form 7249 will be signed and any other issues will be communicated by separate memorandum.

  5. It is not required that Counsel concur in the acceptance decision in order for a compromise to go forward. However, the accepting official reviews and considers any opinion from Counsel prior to making the acceptance final. Where major policy concerns have been raised, it is appropriate to document the case history indicating that the accepting official fully considered the issues before accepting the offer.  (09-23-2008)
Public Inspection File

  1. Public inspection of certain information regarding all OIC's accepted under I.R.C. section § 7122 and is authorized by I.R.C. section § 6103(k)(1).

  2. Treas. Reg. 601.702 (d) (8) provides that for one year after the date of execution, a copy of the Form 7249, "Offer Acceptance Report," for each accepted OIC with respect to any liability for a tax imposed by title 26 shall be made available for inspection and copying. A separate file of accepted OIC records will be maintained for this purpose and made available to the public for a period of one year. The public inspection file will be maintained in a location designated by the Area office. The file will be maintained in the Area where the taxpayer resides . The Area office may destroy the Public Inspection file after the year has expired.

  3. For each accepted offer, the file will only contain the following items:

    • A copy of the redacted Form 7249

    • The sanitized MFTRA-X or ANMF transcript.

  4. The office that has accepted the offer will be responsible for providing all required documents as soon as possible after acceptance, for inclusion in the public inspection file.  (09-23-2008)
Accepted Offer File Processing

  1. Once an offer has been closed on AOIC, it should be held in-house until the following Monday. On Monday, or as soon as practical thereafter, the offer should be released on AOIC and the entire file mailed to the proper MOIC unit. Care must be used to ensure that the offer is mailed to the same unit it is released to on AOIC. If two related offers are accepted and one has a Business Operating Division (BOD) code of Small Business (SB) and the other is coded Wage & Investment (WI), change the BOD code on the WI offer on AOIC to match the BOD code of the SB offer before releasing it to the MOIC unit and ship both to the designated SB site.

  2. If the case is chosen for Embedded Quality (EQ) review, copies of the following documents should be made and placed in the file in lieu of the originals before the offer is forwarded for review. The following original documents should be sent to the MOIC unit in a file folder clearly indicating that the remaining information was mailed to EQ.

    1. Original and amended Form 656, Offer in Compromise

    2. Form 7249, Offer Acceptance Report

    3. Copy of the Acceptance letter(s)

    4. Any collateral agreements


      Before forwarding the case to the MOIC unit take the following steps: (1) Verify that the original and any amended Form(s) 656 are in the case file; (2) Check to be sure that the Form(s) 656, Form 7249, IDRS, and AOIC all reflect the same tax liability period(s); (3) Verify that the waiver dates on the Form(s) 656, IDRS, and AOIC are correct and consistent.

  3. Accepted offer files should be mailed with a Form 3210. Shipping offices must ensure that a receipted copy of the Form 3210 is received. If a receipted copy of the Form 3210 is not received within 30 calendar days of mailing, contact should be made with the receiving office and tracing actions taken. Appropriate actions must be taken to recover or replace missing files.


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