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IRS Change in Policy; from IRS IRM
On January 28, 2008, Collection issued interim guidance for offers involving taxpayers who owe trust fund tax. The new procedures were later incorporated into the 9/2008 revision of IRM 5.8.4.13 and provide the following changes for all offers involving trust fund taxes received on or after February 5, 2008:
Only the amount representing the reasonable collection potential (RCP) of the corporation is needed to compromise a corporate trust fund liability — the RCP of the person(s) responsible for the Trust Fund Recovery Penalty (TFRP) is no longer needed as part of the corporate trust fund offer, and
The trust fund portion of the tax liabilities must be paid or the TFRP either assessed or forwarded (by Collection) for assessment before the corporate offer may be evaluated
This is great news!!!!
The changes to procedures for offers involving trust fund tax received by the Service on or after February 5, 2008 have no separate or distinct impact on how Appeals will handle non-CDP offers because Collection will have already addressed all aspects of the offer affected by such changes before rejection.
The manner in which Appeals processes and evaluates offers involving trust fund tax received as part of a CDP case changed significantly under the revised procedures. See IRM 8.22.2.4.7.10 for procedures for corporate trust fund offers received by Appeals as an alternative to collection in a CDP case.
The procedures in the 9/2005 revision of IRM 5.8.4.13.2 remain in effect for all offers (CDP and non-CDP) received by either Collection or Appeals on or before February 4, 2008. The procedures for pre-February 5, 2008 offers state the amount offered to compromise a corporate liability involving trust fund tax must include the amount that may be collected from the corporate entity and all persons responsible for the TFRP up to the amount of the TFRP, plus interest, if assessed.
Regardless of when the offer was received by the Service, it is important for the Settlement Officer considering an OIC appeal involving trust fund tax to be familiar with the premature referral criteria in IRM 8.23.2.3.1 because such cases often arrive in Appeals with various compliance issues, such as late or missing tax deposits, unfiled returns, and/or new liabilities that accrued after the offer was submitted. If the compliance problem arose before the SBSE offer investigator submitted the offer for rejection, the case should be returned to Collection as a premature referral.
While it may seem easier in some instances for the Settlement Officer (SO) to keep the non-CDP OIC case and try to get the taxpayer current with estimated tax payments or withholding requirements, tax deposits, or missed proposed periodic OIC payments, such omissions by the taxpayer, if they occurred before the offer was submitted for rejection by the SBSE offer investigator, should be left to SBSE. Addressing the estimated tax, under withholding, or missed tax deposits or proposed periodic payments that occurred before the offer was submitted for rejection by SBSE would force Appeals to first resolve a compliance issue that had nothing to do with why the offer was rejected. If the compliance problem could not be resolved, then Appeals would have to sustain rejection of the taxpayer’s offer without ever being able to engage in a dialogue with that taxpayer over the substantive issue(s) of dispute. In a non-CDP offer case, this inherently conflicts with Appeals’ central mission and contributes to a perception by some that Appeals is no different than and therefore not independent of SBSE.
If a compliance problem surfaced after the SBSE offer investigator submitted the offer for rejection and while the case was under consideration by Appeals, follow the procedures in IRM 8.23.2.4 regarding taxpayers who do not remain in compliance.
Basically, the IRS is now in a position to accept Offers in Compromises on on-going business
