Anika Pompey: So I see now that it is the top of the hour. So for those of you just joining, I want to welcome you to today's webinar World of Offer in Compromise - Follow-Up Q&A Session. So we're glad you're joining us today. My name is Anika Pompey, and I am a Senior Stakeholder Liaison with the Internal Revenue Service, and I will be your moderator for today's webinar, which is slated for 60 minutes. So before we begin, if there's anyone in the audience that is with the media, please send an email to the address on the slide and be sure to include your contact information and the news publication you're with. Now, our Media Relations and Stakeholder Liaison staff will assist you and answer any questions that you may have. And as a reminder, this webinar will be recorded and posted to the IRS Video Portal in a few weeks. So this portal is located at www.irsvideos.gov. And please note, when available, continuing education, credit or certificates of completion are not offered if any version of our webinars are viewed after the live broadcast. So now we hope that you won't experience any technology issues, but if you do, this slide shows helpful tips and reminders. Now we've posted a technical help document that you can download from the material section on the left side of your screen. It provides the minimum system requirements for viewing this webinar, along with some best practices and quick solutions. Due to compatibility issues, we encourage you to use a browser other than the Internet Explorer. So you may have experienced frozen screens and other technology issues if you use Internet Explorer. And if you're using anything other than Internet Explorer and you're still having problems try one of the following: Close the screen when you're viewing the webinar and relaunch it or simply click on your browser viewing screen and select HLS. Now, you should have received today's PowerPoint in a reminder email, but if not, no worries, you can download it by clicking on the materials drop down arrow on the left side of your screen as shown in this slide. And closed captioning is available for today's presentation. If you're having trouble hearing the audio through your computer speakers, please click the closed captioning drop down arrow located on the left side of your screen. This feature will be available throughout the webinar. Now, if you have topic specific questions today, please submit it by clicking the Ask Question drop down arrow to reveal the text box. Type your question in the text box and click send. And very important, please do not enter any sensitive or taxpayer specific information. Again, we want to welcome you and we're glad that you joined us for today's webinar. Before we move along with our session, let's make sure that you're in the right place. So today's webinar is World of Offer in Compromise - Follow-up Q&A Session. This webinar is scheduled for approximately 60 minutes. And before we get started with the Q&A session, I do want to thank every one of you for attending today's presentation. And I would like to introduce you to our speakers. So, representing the Field Offer Function are Michelle Perrone, Michelle has worked with the Internal Revenue Service for 24.5 years, and she has worked with the Offer in Compromise Program for 18 years as an Offer Examiner, Lead Offer Examiner, Offer Manager, and she is currently an Offer Revenue Officer. Next, we have Judith Brennan. Judith has worked with the Internal Revenue Service for 24 years. She's worked with the Offer in Compromise Program for 14 years as an Offer Examiner, Offer Manager and Lead, and is currently an Offer Revenue Officer. Then there is Catrina Dugger. Catrina has worked with the Internal Revenue Service for 28 years. She has worked with the Offer Program for 12 years as an Offer Manager and Department Manager. And she currently works for Collection Policy for the Offer Program. And we have Gail Martin. Gail has worked with the Internal Revenue Service for 28 years. She's worked with the Offer Program for 22 years as a Process Examiner, Offer Examiner, Lead and Manager - Offer Examiner, and she has worked as an Offer Revenue Officer for seven years.

And then finally we have Tracy Davis. Tracy is a Supervisory Offer Examiner in the Memphis Campus, and she's worked for the Internal Revenue Service for 32 years. She has worked with the Offer Program for 6 years and she has also worked as an Offer Examiner and Lead Examiner. So, as you see, all of our speakers here today have a great amount of experience. So let's go ahead and get started, so we can get to as many questions as possible. Catrina, the floor is yours. Catrina Dugger: Thank you, Anika. And welcome everybody to today's question-and-answer. And today is a piggyback of our last webinar that occurred in May 26 of 2022. So just to remind you, the success of the offer in compromise program will simply be assured only if taxpayers make adequate compromise proposals that are consistent with their ability to pay and the IRS' prompt and reasonable decisions. Taxpayers are expected to provide reasonable documentation to verify their ability to pay. The ultimate goal of a compromise, which is in the best interest of both the taxpayer and the Internal Revenue Service. Acceptance of an adequate offer will also result in creating for the taxpayer that an expectation of a fresh start towards compliance with all future filing and payment requirements. Again, the overall program goal is to achieve a resolution that is in the best interest of both the taxpayer and the government. We want to make sure that we collect what can reasonably be expected at the earliest possible time and at the least cost to the government. And also we want to secure revenue that may not be collected through any other means. So during our last webinar, we also discussed that there is three different type of offers that a taxpayer can submit. They are what's called the Doubt as to Collectibility. The Doubt as to Collectibility offer is when the taxpayers are financially unable to pay their tax liability in full. This is usually the most common type of offer. Generally, a Doubt as to Collectibility offer amount must equal or exceed a taxpayer's reasonable collection potential or RCP in order to be acceptable. In most cases, when the taxpayer offered amount exceeds the reasonable collection potential or the RCP, the acceptance should be for the amount that the taxpayer offered. The second is what we call the doubt as to liability or what we call DATL. This is a type of offers when the taxpayers doubt the accuracy of their whole tax liability. These offers are often routed to our examination's functions after receipt. Offers based on doubt as to liability should only include the tax years or periods in question. Liabilities for other tax periods where there is not a doubt as to liability should not be included on these offers. These offers are submitted on Form 656-L for the doubt as to liability offers. And finally, there's what we call the Effective Tax Administration or the ETA offers. This offer is when the Taxpayer they owe this amount and have enough in assets and income to pay this liability in full, but due to some special circumstances regarding full payment, would cause an economic hardship or could be considered inequitable, there's also what we call non-economic hardship ETA offers. So now let's discuss whether or not an offer is the right collection alternative. We want to make sure that we know that an offer is not the first option.

First, can the taxpayer full pay? The first option is recommended if it is evident that the taxpayer has the ability to full pay unless the taxpayer indicates special circumstances or effective tax administration criteria applies. Another option is to borrow. We suggest borrowing if the taxpayer has the ability to borrow the funds to full pay the taxes owed, including any penalties and interest. There's another option of liquidation of assets. This should be considered if the taxpayer has tangible assets that can be used to full pay the taxes owed include and including any penalties and interest. And then finally, we have what's called installment agreements. And these are the arrangements by which the IRS allows taxpayers to pay liabilities over time. If full payment cannot be achieved by the collection statute expiration date and taxpayers have the ability to pay, partial payment installment agreements may be granted. During the course of these agreements, though, penalty and interests continue to accrue. It is important to note again that an offer in compromise is an option, but not the first taxpayer should consider. So let's talk about how does the tax, how do we calculate the ability to pay or the RCP.

So the short answer of this is that we calculate the ability to pay using one that Net Realizable Equity in the Assets. Net Realizable Equity is defined as quick sale value, less the amounts owed to secured lienholders with priority over the federal tax lien and applicable exemption amounts.

The next is we consider Future Income and this is defined as an estimate of the taxpayer's ability to pay based on an analysis of gross income minus necessary expenses for specific number of months into the future. Then we also have what's called Allowable Expenses. Allowable expenses include those expenses that meet the necessary expense test. The necessary expense test is defined as expenses that are necessary to provide for taxpayers and his or her family's health and welfare and/or the production of income. Now, there are two types of allowable expenses we can talk about.

The first is Allowable Living Expenses, these are based on the national and local standards and they only apply to individuals for their particular family size. Now, the National Standards are established standards for food, clothing, and other items and out of pocket health care expenses. Again Local Standards, which include housing and utilities and transportation. The other type of expenses are those Other Necessary Expenses, are expenses that meet the necessary expense test and are normally allowed. Examples are health insurance expense and childcare. Now, there are other expenses that may considered, that may be considered. These expenses which may not meet the necessary expense test may be allowable based on the circumstances of each individual case. Examples are current year taxes, student loans, delinquent state taxes, and local taxes. Now, I want to give you a good insight of some of the offer program results from prior fiscal year '22. Now, there's a lot to capture on this slide, so I want to give you a moment to kind of take it in. So again, this is from fiscal year 2022 where the dispositions were higher than the total receipts during that year.

Our total dispositions were 45,897 for that year. Now, there are four main reasons, if you see on the screen the amount of returns, there are four main reasons that offers are not to be made processable. And the first one is that an applicant is in an open bankruptcy, the required fee is not paid with the application, the taxpayer is not in compliance with filing tax returns and none of the initial payment is included with the application. All of our processability determinations are made at the Centralized Offer in Compromise sites. Now, another part of this is regarding rejections. Common reasons for rejection of an offer may include 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. Now, the main reasons, again the offers are returned to the taxpayer is that they don't stay in compliance and this means payment and filing compliance or doesn't respond to requests for information. Now, taxpayers can withdraw their offers at any time during the offer process. And unfortunately, a termination. A termination is if a taxpayer dies, while the Internal Revenue Service is in the process of evaluating their offer. Unfortunately, the Service can no longer consider this offer. The offer is considered terminated at this time. Now, later in the presentation, we'll provide some helpful hints about how to avoid some common offer mistakes. Now, let just take a brief look at the overall Offer in Compromise application lifecycle. There are seven steps in this cycle. And the first step, step one, the Offer is Received, the taxpayer will mail their offer in compromise package to the applicable OIC site. The addresses for each of these locations are in the Form 656 booklet. The second is Processability Determination. Now, once an offer is received, a Process Examiner will make a Processability Determination. The third is Case Building. And during this case building phase, a process examiner will identify if an offer should be transferred to the field or remain at the site to be worked. They will perfect the offer by requesting any required documents and verifying that the taxpayer is filing compliant with payments and returns. The next is offers in Centralized Offer in Compromise, COIC, our centralized offer in compromise functions. Now, these offers are investigated in our Offer in Compromise functions, and they include wage taxpayers, self-employed taxpayers and certain business offers. Now we also have our offer in Field Offer in Compromise and the Field Offer in Compromise, they investigate our business offers, our ETA or Effective Tax Administration noneconomic hardship offers, our doubt as to liability with trust fund recovery penalties, estates and trusts and our large dollar liabilities.

These also include taxpayers who reside abroad, may have a docketed tax court case and anywhere there's implications of involvement of Department of Justice. Now the Step 6 is our OIC investigation. Now, during the OIC investigation, an Offer Examiner or Offer Specialist will again verify the compliance. They will conduct a complete financial analysis and make a preliminary recommendation on that offer. And the final is the Offer in Compromise Closure. OIC's closures are conducted by Offer in Compromise Managers. They're going to review that financial analysis for appropriateness.

They're going to concur or not concur with the recommendation and they're going to sign any closing letters that go out to the taxpayer as well. So now that we've had this quick overview, we want to get to some of your questions from our prior webinars. Anika Pompey: All right, hello, it's me, Anika. I am going to moderate the Q&A session for you all today. But before we get started with our first question, we did have a few questions come in regarding CE credits. And I just want to remind you all that we will not be offering CE credits for this particular webinar. This is a follow-up to a prior webinar on OIC. And Catrina was just providing us with a quick recap of the previous webinar. So with that taken care of, I do want to move on and get started with Question 1. So, first question and Catrina, I think I'm going to direct this question to you. I submitted a Form 656 for a husband and wife. Why is the IRS now asking for additional Form 656? Catrina Dugger: Thank you, Anika, and this is a great question to kick off this topic. So the answer is that it is all based on whom is legally responsible for the tax liabilities. If the liabilities are all joint assessments, which means the 1040 tax returns that are married filing jointly, only one offer will be needed. The only time we require an additional Form 656 is when there is also a separate assessment involved. For example, this may include the husband and wife having joint assessments, but the husband also owing Form 941 tax liabilities from a sole proprietorship. The wife is not liable for these 941 taxes and thus 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. If all the liabilities are from returns that were filed as married filing separately, then two separate offers will be required even if the couple is still married and living together.

Another example is the Trust Fund Recovery Penalties or what we call the TFRP 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 the identical TFRP, two offers are required. This is because the TFRP is legally a separate assessment under the IRC 6672. Now, keep in mind there should be as many Form 656 as there are entities. An entity is the individual or business that is assessed the liability. Now you can refer to IRM 5.8.3.5 for complete details on the number of offers to submit. Anika Pompey: Catrina, thank you for that very detailed response. We're going to go ahead and move on to the next question. My offer was accepted. The Offer Examiner or Specialist is not returning my calls or faxes. Whom can I contact? Judy, I think I'm going to direct this question to you. Judith Brennan: Okay. Thank you. Anika. This is a great question. So once the offer is officially accepted, the taxpayer will receive an acceptance letter and so will the representative if they have the authority to receive notices. At the top right hand corner, we will show the contact person and phone number to call with any acceptance issues they may have. This is the Monitoring of Offer in Compromise Department. When you call that number, they will inform you of whom the monitoring examiner is, along with their phone number and hours they work. Anika Pompey: Thank you, Judy. We're going to go ahead and move on to Question 3. All tax returns have been filed. How do I find out how much money is owed to submit an Offer in Compromise? Judy, I'll direct that one to you as well. Judith Brennan: Thank you, Anika. There are a couple of ways you can do this. So the first one is you can call the customer service and ask for the balance due to date on all tax years. Or number two, you can also create an online account and request the transcripts on the website at www.irs.gov. Anika Pompey: Thanks Judy. And just a quick comment for the audience. We do want to let you know that, you will receive copies of all of these questions and answers at the conclusion of today's webinar. So, on to Question 4. When submitting an offer from a business owing employment tax liabilities, can the Trust Fund Recovery Penalty assessed against the individual officer be combined with the business liabilities on the same offer? And Judy, I'll direct that one to you. Judith Brennan: Okay, another great question. Okay, so these penalties are assessed under parties responsible for remitting those taxes to the IRS and are separate from the taxes that a business owes. So therefore, a separate offer will be required for the Trust Fund assessment against the responsible party, as well as one for the business. These are two separate liabilities and collection is pursued separately. Now, this is very important. So if a business owes trust fund taxes, the Trust Fund Recovery Penalty must be investigated and completed prior to submitting an offer. It must be completed before an Offer Investigation can be completed. Anika Pompey: Okay, audience. So on to Question 5. Why are the exemptions for vehicles and bank accounts not applied on all offers? Judy, can you take that one for me as well?

Judith Brennan: Sure. Thanks. If the outstanding balance due can be full paid by equity in available assets, future income potential, or a combination of both, the exemptions will not be applied. In addition, the $1,000 bank account exemption will only apply to individuals, whether joint or separate liabilities, including sole proprietors, and cannot be used for a business offer. Anika Pompey: All right, thank you for that answer. Okay, so on to Question 6, What is the difference between rejecting an offer and returning an offer? That's a great question. Judy, can you answer that one for me? Judith Brennan: I agree with you, Anika. That is a great question. We get this quite often. So when an offer is rejected, the taxpayer has 30 days from the date of the official rejection letter to appeal the decision. When an offer is returned, there are no appeal rights with the decision. Anika Pompey: Thank you for that response. So on to Question 7. The taxpayer lost employment in March of 2023, he owes more than $400,000 and he would like to submit an offer for $250,000. He has equity in the home but does not want to sell it due to the market situation. Can he make an offer and will the offer be accepted? Judy, I'm going to toss that one at you. Judith Brennan: Okay, Anika. Thanks again. So with this question, the bottom line is anyone can make an offer with the IRS, but you want to know if the offer will be accepted. Each case is accepted or rejected based on their own merit. If we look at just the small facts in this question, we would not be able to make that determination because we don't know how much equity the taxpayer has in their home. Do they have any health issues that we should be aware of? If it is more than the liability and you can borrow from the equity in the home, we would not accept the offer. However special like circumstances are always taken into consideration with this issue.

Anika Pompey: Thank you again, Judy. All right, so audience, we will ask Question 8. Can an offer based on effective tax administration be considered if the taxpayer has sufficient equity in assets but is unable to borrow against the equity or otherwise, use it to satisfy the tax liability? Catrina, I'm going to direct this question to you. Catrina Dugger: Thank you, Anika.

So, yes. Economic hardship occurs usually when a taxpayer is unable to pay reasonable basic living expenses. The determination of a reasonable amount for basic living expenses, it can vary according to unique circumstances of the individual taxpayer. Unique circumstances, however, do not include the maintenance of an affluent or luxurious standard of living. So factors 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 one is the taxpayer may have set monthly income and no other means of support, and the income is exhausted each month and providing for the care of elderly dependents.

Another one is taxpayers have assets but are unable to borrow against the equity in those assets and liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet those basic living expenses. Anika Pompey: Thank you, Catrina. That was a very detailed response.

I'm sure the audience does appreciate that. So, on to Question 9. A taxpayer dies before tax returns are able to be filed. The estate does not have enough money to full pay the tax liability.

Will an OIC help? Gail, I'm going to direct this question to you. Gail Martin: Great. Thank you, Anika. Great question. Yes, an offer can be submitted on behalf of a deceased taxpayer. However, the offer must be submitted by a party authorized to act on behalf of the estate. For example, the executor or executrix, a personal representative or administrator. If the offer is submitted by someone who was not authorized to act on behalf of the estate, the offer will be returned under processability return criteria. Anika Pompey: Thanks for that response, Gail. So we're going to move on to Question 10. Seems pretty simple. When can a lien be released? Gail, can you answer that for us? Gail Martin: I can. Under the terms of the OIC Contract known as our Form 656, the lien will be released within 35 days of when the offer payment terms have been satisfied and the payment has been verified. How the final payment is provided by the taxpayer determines the waiting period for making the release request. You can refer to the IRM known as our Internal Revenue Manual at 5.12.3.3.1.1 which is Liability Satisfied by Payment or 5.12.3.3.1.1.1 which is our Electronic and Credit Card Payments for the appropriate time frame required to release a federal tax lien. Anika Pompey: Thank you for that response. So our next question, Question 11 is what is the current delay in processing OICs? Gail, can you help me out with that one? Gail Martin: I can, Anika, and that's a great question. We work offers on a first in, first out basis. One of the biggest reasons for delays in investigating an OIC is recently filed tax returns that have not yet received a notice of balance due. The taxpayers must be in full compliance when submitting an offer. All required returns should be filed. Any balance due notice received before submitting an OIC to prevent further delay. Anika Pompey: Thanks, Gail. All right, so Question 12 audience is, Can a deceased person or estate submit an offer? Gail, I'm going to direct this one to you as well. Gail Martin: Great. Yes. Offers may be submitted for debts involving a deceased taxpayer or estate. The offer must be submitted by a party authorized to act on behalf of the taxpayer or estate as stated in the previous question or is subject to return of the OIC. If the offer is submitted by someone who is not authorized to act on behalf of the estate, the offer will be returned under processability criteria, return criteria. Anika Pompey: Thank you, Gail. All right, audience, so we're on to Question 13, Can a nonresident alien file an Offer in Compromise? Michelle, I'm going to direct this question to you. Michelle Perrone: Thanks, Anika.

That's a really good question. The answer is yes. While an ITIN does not give an individual the right to work, many employers hire and pay taxpayers using the ITIN for reporting purposes. ITIN's must be active at the time of the offer submission. Non-resident aliens apply for an Individual Taxpayer Identification Number, which is the ITIN that I'm referring to with a Form W-7. Note that all applications for an ITIN must include a United States federal tax return. Be advised that an ITIN does not authorize work in the United States, does not provide eligibility for social security benefits, or qualify a dependent for Earned Income Tax Credit purposes. Taxpayers with an ITIN can file an Offer in Compromise. However, if the taxpayer has received a Social Security Number, they must inform the IRS of the new number so the accounts can be updated prior to submitting the offer in order to avoid delays in processing. Anika Pompey: Thank you for that detailed response, Michelle. So we're going to move on to Question 14. If a deceased spouse has not filed taxes in the last seven years and the surviving spouse has been filing Married Filing Separate for the last seven years. Is the surviving spouse liable for the taxes of the deceased spouse? If so, can the surviving spouse file an OIC based on the insolvency of the deceased spouse's estate? Michelle, I'm going to direct that one to you. Michelle Perrone: Great. That's another good question about offers where there is a decedent. In this situation, the spouse is not liable for the taxes of the deceased spouse as a spouse. If he or she becomes the executor or the administrator of the estate, then he or she is responsible for compliance. As the administrator or executor, he/she can file an Offer on behalf of the estate. But if the taxpayer is not in filing and payment compliance, the offer will be returned. For more information on this topic you can refer to Tax Topic 356, which is on the IRS.gov website. Anika Pompey: Thank you so much Michelle. All right. So audience, moving onto Question 15. If the taxpayer has income from trusts, do I need to attach the bank statements from the trusts? Michelle, can you take that question for me? Michelle Perrone: Sure, Anika. So this is an interesting type of question, because it could go both ways. So this depends on several scenarios. If the taxpayer created the trust and retains control over the trust such as putting assets into the trust, then yes. However, if he or she is only receiving income from the trust then it's possibly no, they may not have access to the trust bank statements. However, during the financial investigation you may be asked. Anika Pompey: Thank you, Michelle, that was a great response. On to Question 16. Can you use Direct Pay online at IRS.gov to make OIC payments?

Michelle, I'm going to direct that to you. Michelle Perrone: Okay, sure. Thank you. So unfortunately, payments specifically for OIC are not listed under the Direct Pay option, which you can find on IRS.gov. Offer payments can be made using the Electronic Federal Tax Payment System or EFTPS. Under this option you can select the Application Fee, 20% initial payment, Accepted Offer Payments and Subsequent Payments for periodic offers. Anika Pompey: Thanks, Michelle. I hope that provides some clarification for the audience. All right, so we're going to move on to Question 17. How could the OIC process be accelerated to assist taxpayers in urgent need? I'm going to direct this question to you, Tracy. Tracy Davis: Thank you, Anika. There are timeframes for employees to follow-on every step of the offer process from receipt to closure, and the Internal Revenue Service has 24 months from receipt of an offer to decide. However, each case is different and is investigated on its own merits. You can assist in expeditious processing by ensuring the taxpayers are in compliance both with return filing and paying such as estimated tax payments and federal tax deposit payments, including all the assets and income on the Form 433-A or B OIC and ensuring all the verification of these assets and incomes are included with the submission of the offer. Also responding for any request for additional information completely and timely. The IRS also has expedited procedures outlined in the Internal Revenue Manual 5.8.3.18.1.

For example, there may be occasions where a taxpayer or Power of Attorney requests expedited processing of their OIC due to an emergency or a perceived emergency. Situations that may warrant expedited case processing include, but are not limited to a contract or business agreement requiring the taxpayer, as a condition of the contract or agreement to resolve the tax liability by a specific date. Availability of the money to fund the offer is limited to a certain time, and a terminal illness may affect the ability to complete the payment terms. Anika Pompey: Thank you so much, Tracy. That was a very detailed response. We're going to go ahead and move on to Question 18. I have a taxpayer who has continuously made monthly payments for the past five years. Can they obtain a lien release upon request? Tracy, I'm going to direct that to you. Tracy Davis: That's a very good question. Generally, the federal tax lien is released when the liability is satisfied, the liability becomes legally unenforceable, or a bond is accepted. And more specific to Offer in Compromise, the federal tax lien is released within 35 days following full payment of the accepted offer amount. Per the 656 terms, the liens will be released within 35 days after the final payment has been received and verified. If the final payment is by credit or debit card, the notice of federal tax lien will not be released for up to 120 days from the date of the credit or debit card payment. One important thing to note. If the taxpayer later defaults on the offer after the release of the lien, a request to revoke the lien release will be filed by our Monitoring Offer in Compromise Function. Anika Pompey: Thank you so much for that response, Tracy. So audience, we're going to move on to Question 19. So, due to COVID, I've had many clients that are behind on their tax obligations but would like to settle prior years with the IRS. What paperwork must be completed to begin the procedure? Tracy, I'm going to direct that one to you as well. Tracy Davis: Thank you, Anika. That's another really good question. The taxpayer must first be in filing and payment compliance. Filing compliance means filing all required tax returns for the past six years, including the current year. Payment compliance means the taxpayer must be current with any required estimated tax payments and/or federal tax deposits, if applicable, for the current quarter that the offer is submitted as well as the previous two quarters prior to offer submission. Compliance must be maintained throughout the offer investigation. Just a reminder, business entities except for sole proprietorships, do not qualify for the Low Income Waiver and must submit the application fee and applicable offer payments. Businesses are also unable to utilize the Pre-Qualifier Tool on IRS.gov as this tool is for individuals only. Review the Form 656 booklet and complete the Form 656 Offer in Compromise and the Form 433-OIC Collection Information Statement for wage earners and self-employed individuals. One last note. The Form 656 booklet has a section on Trust Fund taxes, which is extremely important to review. Anika Pompey: Tracy, thank you for that information. A lot of great information there. So, audience, we're on Question 20.

Is there a limit to how far back a delinquent tax year can be compromised? Tracy, I'll let you take care of that one as well. Tracy Davis: Good question. The IRS reviews as a part of compliance, if the last six years of returns including the current tax year are all filed, it is recommended to ensure that the taxpayer is compliant with filing and paying before submitting the offer to avoid possibly having the offer returned. Returns beyond the six year look back period will need to be filed if the taxpayer receives a letter from the IRS requesting for specific tax years to be filed. Please also note that a taxpayer should wait for a notice of balance due before submitting the OIC. Make sure the taxpayer has their current address on file with the Service.

Anika Pompey: Thank you again, Tracy. So, audience, on to Question 21. Which version of the Form 433 is used for Offer in Compromise? That's a good question, Tracy. I'm going to direct that one to you. Tracy Davis: Thank you, Anika. That is a great question. For the purposes of the Offer in Compromise program, Form 433A OIC, is used for individuals, and Form 433B OIC is used for businesses. Please remember to submit all required documentation as specified on the forms and to complete all required sections. This will help ensure the offer is not unnecessarily delayed.

Anika Pompey: Thank you again, Tracy. So, moving on to Question 22. When can a taxpayer make a payment of less than 20% of the offer amount? That's a good question, Tracy. I'll direct that one to you as well. Tracy Davis: Thanks, Anika, for that question. The initial payment varies based on the offer and the payment option chosen. For a lump sum cash offer, an initial payment of 20% of the total offer amount is required with the application. For the periodic payment option, the amount of the initial payment is chosen by the taxpayer, and the remaining balance is paid in monthly installments, while the IRS considers the offer. One exception if the taxpayer qualifies for the low income waiver, neither the 20% payment nor the initial payment is required.

Additionally, the application fee is not required. This applies to individual offers only, not applicable to business offers. Anika Pompey: All right. Thank you again, Tracy. So we're going to move on to Question 23. What is the Collection Statute Expiration Date known as the CSED? Catrina, I am going to direct that one to you. Catrina Dugger: Thank you, Anika. And the Collection Statue Expiration Date is a critical date known as the CSED, which represents the amount of time that the Internal Revenue Service can typically collect on a liability. This time frame is usually 10 years if there are no extensions on tax assessments. So for purposes of an offer in compromise. The CSED is suspended during the time the offer is pending with the Internal Revenue Service, for 30 days after any rejection of the offer by the IRS and during the time that any rejection of the offer is being considered by the Office of Appeals. Anika Pompey: Thanks, Catrina, for that response. On to Question 24. For the Pre-Qualifier, does tax debt entered not include any interest or penalty also due? And can you describe the Pre-Qualifier Tool in general discussing what is considered income, et cetera? And does the Pre-Qualifier Tool populate the Form 656? Catrina, I'll let you respond to that question. Catrina Dugger: Thank you again, Anika. So we really want and encourage the use of the Pre-Qualifier Tool. The OIC Pre-Qualifier Tool is found on the IRS.gov website and requests that the taxpayer enter their total liability, which should include the penalties and interest.

The tool asks for the total IRS tax debt and whole dollars. The tool utilizes all data provided to determine a proposed eligibility for the offer program. Now, while the tool does not guarantee acceptance, it does provide a snapshot of the potential offer eligibility and payment options, which include a lump sum cash offer or periodic payment offer. The tool may show that a taxpayer can full pay when you're entering the tool, but we don't want to discourage taxpayers from submitting an offer as we make our final decision based on a completed OIC application and a full financial investigation. And just as a reminder, the OIC Pre-Qualifier tool is used only for individual taxpayers and it does not populate the Form 656. So it doesn't do that yet, it doesn't complete the form. The Form 656 booklet can be downloaded from the IRS.gov website. Anika Pompey: Catrina, thank you for that response. I'm going to also direct this next question to you. So, audience, we're on question 25. What circumstances are considered using under the DATC with special circumstances or economic hardship? Catrina Dugger: Thank you. Thank you so much, Anika and this is a detailed answer, but we're going to be giving these answers at the end. So to begin the Doubt as to Collectibility with special circumstances is when the taxpayer qualifies for this offer, when they can't fully pay the tax due, but they have a proven special circumstance that warrants acceptance for less than the Reasonable Collection Potential. Now, factors that establish special circumstances under the Doubt as to Collectibility are the same as those that are considered under the Effective Tax Administration. Now, you can also refer to the Internal Revenue Manual, the 5.8.4.2 titled Effective Tax Administration and Doubt as to Collectibility with those special circumstances. Now, this discusses issues to consider when evaluating an offer under ETA or our Doubt as to Collectibility with special circumstances. Now, some of the factors that support an economic hardship determination, these are some is 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 that condition. And also the taxpayer may have a set monthly income and no other means of support and their income is exhausted each month providing for the care of dependents. Or the taxpayer has assets but are unable to borrow against the equity in those assets and even liquidation to pay the outstanding tax liabilities would render the taxpayer unable to meet those basic living expenses. Now, here's one example it is that the taxpayer is retired and the only income is from a pension who does not meet this necessary living expenses. The only asset is a retirement account and the funds in that account are sufficient to satisfy the liability. Now, 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 the compromise. Now, also note that the factors are representative of situations the taxpayer or the Service encounters regularly. So these are not all inclusive and it's not intended to provide an exhaustive list of the types of cases that can be compromised under this hardship. Now, in economic hardships, an acceptable offer amount is determined by analyzing the financial situation or information. And the hardship would be created, if certain assets or a portion of certain assets were used to pay the liability. Now, finally the existence of an economic hardship by itself does not dictate that an OIC must be accepted. An acceptable offer amount must still be determined based on a full financial analysis and picture and negotiation with the taxpayer. When the hardship criteria are identified but the taxpayer does not offer an acceptable offer amount, the OIC should not be recommended for acceptance. Now, for further information, you can also consult Internal Revenue Manual, the 5.8.11. Anika Pompey: Catrina, thank you for such a detailed response. And just another reminder audience, you will receive copies of these questions and responses. So on to question 26, What is the Monitoring Offer in Compromise payment process? Catrina, I'm going to direct that one to you as well. Catrina Dugger: Thank you, Anika and so the Monitoring Offer in Compromise is considered our backend processing. So payments on an accepted offer should correspond to the accepted terms on that Form 656 and or the addendum, which is the 14640, the monitoring offer in compromise group monitors all accepted offers. They monitor compliance with offer terms, including making any required payments. If the taxpayer has a question about their payment schedule or request an extension of time to make a payment, only one extension will be granted over the course of the offer terms. A 274C letter will be sent to confirm that they had been requested. If a taxpayer payment is missed, the taxpayer will receive a letter 2909C that will explain what is needed and give the taxpayer the opportunity to get caught up. If the taxpayer cannot make up the missing payments, the offer is considered defaulted and the original balance due, plus any penalties and interest accrued from the date of that acceptance, minus any payments received will be reinstated and the taxpayer will again start to receive collection due notices. Now, references to this can also be found in the following Internal Revenue Manuals, the 5.19.7.2.1, the 5.19.7.14.1, and the Internal Revenue Manual 5.19.17.14.2. Anika Pompey: Catrina, thank you again for that response. You're really knocking these out of the park. So audience, we're going to move on to question 27. This is a pretty simple one. Is there a minimum amount to offer? Catrina, I'll direct that one to you. Catrina Dugger: Thank you again. So we recommend that the use of the OIC pre-qualifier tool for your clients to get an idea of what offer amount should be. Of course, the offer amount should be greater than zero. There is no offer amount, though. There's no minimum offer amount that you must owe to file an offer. The Form 433A OIC and the Form 433B OIC will allow the taxpayer to compute that offer amount. Anika Pompey: Okay, on to question 28. How are offer payments applied? Catrina, I'll direct that one to you. Catrina Dugger: Thank you. So, offer payments are applied in the following order. The application fee is always applied to what's considered the oldest liability. The required initial payment is also applied to that oldest liability unless it's designated by the taxpayer to a specific tax period. Any payment in excess of the required initial payment is applied towards the oldest liability. And just a reminder that effective April 25 of 2022, that deposits are no longer being accepted with an offer submission. Anika Pompey: Thank you again for that response, Catrina. So, on to question 29. My client has an offer and he is affected by a disaster. So what does my client have to do? That's a really great question. Catrina, I'm going to direct that one to you. Catrina Dugger: Thank you again. So we definitely want to provide guidance when there is 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 if the taxpayer was affected, they should try to notify the investigating employee. The offer examiners or offer specialists will contact the taxpayer or their representatives living in an identified county to verify the effect of the disaster on the taxpayer or that representative.

Anika Pompey: Thank you, Catrina for providing such a detailed answer. So, audience, it looks like that is the last question for today's follow-up Q&A session. But before we wrap up, Catrina, do you have, you or your team have any parting words or tips for the audience? Catrina Dugger: Thank you, Anika. We do, we definitely want to remind our listeners of some helpful hints when advising their clients on the offer process. So definitely this is kind of a refrain, is that please advise the taxpayer to stay current with all their filing and payment requirements and to stay current with those estimated tax payments and those federal tax deposits during the evaluation of that offer. Also, be sure the taxpayer is aware of the requirement to remain current for a minimum of five years after their offer is accepted, including any extensions to file and pay. You can also advise taxpayers that unless the taxpayer qualifies for 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. Failure to make any payments during the offer evaluation may result in a mandatory withdrawal of the offer and that's returned with no appeal rights. You can advise taxpayers that they can make their offer payments and application fees through the Electronic Federal Tax Payment System or EFTPS. So you can also advise the taxpayer to ensure that they respond timely if and when the IRS requests additional information. We want to encourage, encourage the use of our checklist included in the Form 656-B booklet which should reduce or eliminate the need for the IRS to request additional information. You can also advise taxpayers to ensure that they list all property, assets and business interests on that applicable financial statements, which is that 433-A OIC and B OIC and provide accurate values and this includes virtual currency and any other assets. Also be sure to provide any substantiation they are required to send with the application and it should be current. Include all required fees and payments and be sure to sign that Form 656. We definitely want to thank you for your time today and we hope that you've gotten value. Now the IRS, we have a host of what's outreach videos that on the IRS.gov website and some of these videos are going to help you assist and educate the taxpayer in determining and completing the offer application. They're great, great visual resources and we encourage their use and this includes videos on how to complete the Form 433 OIC on how to complete the Form 433-B OIC and how to complete the Form 656-OIC and the final OIC package checklist.

So today we've given you a brief overview of the World of Offer in Compromise. We've provided you some helpful hints that will help you understand the offer process and assist your clients in submitting a processable offer. We definitely want to thank you for your time and attention today and encourage you to submit questions if you have them. Anika, that's all from us. I want to turn it back over to you. Anika Pompey: Thanks, Catrina. So audience, we are planning additional webinars throughout the year. So to register for all upcoming Webinars, please visit IRS.gov and perform a keyword search for Webinars and select the Webinars for Tax Practitioners or Webinars for Small Businesses. And when appropriate, we will be offering certificates and continuing education credits for upcoming webinars, we invite you to visit our video portal at www.irsvideos.gov. There you can view archived versions of our webinars. But please note, when offered, continuing education credit or certificates of completion are not offered, if you view any version of our webinars after the live broadcast. And I just want to say another big thank you to our speakers, Michelle Perrone, Judith Brennan, Catrina Dugger, Gail Martin and Tracy Davis for a great webinar. Thank you for sharing your expertise and for answering our questions for the audience today. And I also want to thank you, our attendees for attending today's Webinar, World of Offer in Compromise Follow-Up Q&A. So we would appreciate it if you would take a few minutes to complete a short survey before you exit. If you like to have more sessions like this one. Please let us know. If you have thoughts on how we can make them better, please let us know that as well.

If you have any questions for future webinar, requests for future webinars, or if you have pertinent information you'd like to see in an IRS Fact Sheet, Tax Tip or FAQ on IRS.gov, then please include that in your suggestions on the comment section of the survey, click the survey button on the screen to begin. If it doesn't come up, make sure you check or disable your pop-up blockers. We've included several technical documents that describe how you can allow pop-up blockers based on your browser you're using, and we have documents for Chrome, Firefox, Microsoft Edge and Safari for Mac. You can access them by clicking on the Materials drop down arrow on the left side of your screen. It's 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 webinar. It is important for the IRS to stay connected with the tax professional community, individual taxpayers, industry associations, along with federal, state and local organizations. You make our job a lot easier by sharing the information that allows for proper tax reporting. So thank you again for taking time out of your day to attend today's webinar, and we hope you found the information very informative. You may exit the webinar at this time.