Collection Due Process and Offers in Compromise
In Part I of this series, we introduced the Appeals Judicial Approach and Culture (AJAC) Project and new guidelines for tax appeals. We also discussed the importance of having an independent IRS appeals process and noted that with limited exceptions, the government is now barred from raising new issues on appeal.
The focus of this post will be on the Collections Due Process and Appeals, and Offers in Compromise appeals in particular.
Offers in Compromise
Significant changes are being implemented with the processing of Offer in Compromise Appeals. For example, there can no longer be any investigation to identify new assets on appeal, and Appeals may not adjust the value of an asset to an amount higher than what was set by Collections unless new information has been provided by the taxpayer concerning that asset. The only corrections that may be made are those that are strictly computation errors.
The role of the appeals process is not to rework an offer rejected by Collections, but rather to consider issues in dispute at the time the rejection was made. If Collections failed to fully develop a case prior to Appeal, Appeals is obligated to make a decision based on the information provided by the government and the taxpayer rather than return the case.
The primary role of Appeals in a case involving an Offer in Compromise is to:
- Provide taxpayers an opportunity for an appeals conference
- Evaluate the government’s decision to reject an Offer by addressing the issues in dispute
- Assess improperly rejected Offers
- Advise taxpayers as to what additional documentation they must submit for the proper evaluation of their Offer and provide a reasonable opportunity for them to do so
- Communicate to taxpayers the reason(s) why their Offer was rejected and discuss alternatives, such as installment agreements and Currently Not Collectible status
Collection Due Process and Appeals
Under IRM Section 18.104.22.168.1, if a case before Appeals contains insufficient information for a determination, Appeals has three options:
- Request additional information from the taxpayer,
- Issue an Appeals Referral Investigation (ARI) in order to verify information, or
- Make its determination based on the information currently available.
Appeals may no longer return these cases to Collections.
The role of Appeals is to evaluate whether administrative procedures have been followed and to review whether the government’s actions and decisions were appropriate considering the facts and circumstances of the case at hand. The AJAC Project directs Appeals to make a final determination of an appeal with 120 days of receipt, whenever possible.
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