I wrote a post almost two years ago about the provision placed into IRC 7122(f) as part of the Tax Increase Prevention and Reconciliation Act of 2005, which deems a doubt as to liability and doubt as to collectability offers received by the IRS on or after July 16, 2006, accepted if the IRS does not act on the offer within two years. The prior post was prompted by a question I received from Scott Schumacher, my fellow clinician and now the associate dean at the University of Washington. Scott’s clinic had a case that appeared to cross the 24-month threshold, but they could find no manual provisions describing what happens when that occurs.
A recent internal guidance memo, SBSE-04-0117-0007, shows that the IRS is now thinking about this issue and developing internal controls to monitor the amount of time an offer is pending. The memo is short and establishes guidance for the IRS employees who process offers as they arrive. It allows practitioners to see what the IRS will do to mark the arrival of a new offer and the beginning of the two year time frame. When I posted on this issue previously, only one commenter mentioned having a case that went past the two year time period. If you have experienced an offer that aged into acceptance, please send in a comment to allow the community to gain a sense of whether this is happening. My research assistant searched the IRM to see if the IRS had published other guidance on this issue since the post two years ago and found a few pieces of information in the IRM. The Appeals OIC discussion does mention the two year rule; the OIC manual has a brief discussion of the rule at 8.23.1.4.1 (04-18-2016) and last April the director of collection policy issued a letter similar to the one linked above.
I had a conversation with an offer examiner recently who said that his group had gotten behind for a bit in completing the offers but was relatively caught up at this moment. Non-business offers seem to take about 4-6 months. Unless an offer slips through the cracks, it seems unlikely that it would reach the two year period. No doubt an occasional offer does slip through the cracks for what could be a nice reward at the end of a very long tunnel.
Think it was July 2016 was in an IRS meeting that the SBSE Commissioner (previous one) spoke on this exact issue. Stated that the IRS had several OICs getting close to the 24 month deadline. She stated that the IRS was moving several employees to the unit to process OICs. She offered no idea number of OICs or how many employees moved. Got the impression there were a lot of OICs.
Keith, I remember clearly the earlier article. While I know LITCs do not (too) often work on state tax matters, I’ll ask anyway: has your clinic run across this issue in a state context? Regards from California! –Orlando
Orlando
I have not encountered this issue at the state level. I am uncertain if the state of Massachusetts has a parallel provision allowing ageing offers into acceptance.
Keith
I don’t recall any of my colleagues mentioning offers that have reached the two-year auto accept. I have not had any. However, there is an interesting case that just recently presented itself in a related scenario. An offer was returned due to unfiled returns when it should not have been; the returns were filed. If the offer is judged from the original receipt date, its past two years. If its looked at from the IRS’ reconsideration date it falls short of two years. The offer return was clearly IRS error. We’ll see…
David. Your situation reminded me that there were actually two different possibilities on the AOIC (automated OIC) system, one in which the case had a new receipt date and one in which the old date was to be retained. I’ve copied in the IRM section on the latter of this, as it appears to fit your situation. Your case may be one in which it can be argued should be accepted on the 2-year rule. Maybe national office needs to review your client’s situation! Best of luck, fd
5.8.7.3.3.3.1 (10-07-2016)
Reopening of Offers (IRS Error)
If the reopening of a previously closed offer is based on IRS Error, since the offer will retain the same AOIC data as the closed offer, the manager/lead may complete the actions to reopen the offer on AOIC without sending a request to create a new offer record.
Note:
AOIC may allow an offer to be reopened, an attempt should be made to reopen on AOIC prior to reloading the offer.
Note:
Manual input of TC 480s/ST71 will be required if the offer is reopened. The date of the TC 480 should be based on the original offer submission. If the transaction codes are manually input, document AOIC that a manual reversal of the TC 480 will be required.
If reconsideration has been approved by the manager, then on the AOIC “Area Office Menu” select “Reopen Closed Offer” . The group manager must document the AOIC remarks with the basis for reopening the offer.
Note:
Since the reopened offer will retain the original “IRS Received Date” for the calculation of the TIPRA 24 month statute, the reopened offer must be resolved in an expeditious manner.
That’s interesting that income offers are going 4-6 months. I have definently been on the end of 6-12 months no matter what for personal income. I have not been able to pin down any sort of pattern over the past three years. Prior to that it was pretty easy to guesstimate a timeline.
Business offers are taking about 13-15 months before getting to denial (if applicable).
I have not seen a two year offer acceptance in my career.
Coincidentally, I had an initial consultation with taxpayers the day this blog came out. They brought transcripts and the transcripts showed a OIC offer made 29 months before the OIC was denied. It was denied, according to the transcripts, 12/2016. They brought in a copy of the offer and the transcripts show the down payment was made at the same time. I can’t find any instruction on how to proceed to have the offer deemed accepted, however. I will start inquiring and see where it goes!
I submitted a doubt as to liability offer for my client. The offer was transferred around the country and landed in the San Francisco Appeals office. After meeting with the appeals officer we heard noting for several more months. The two years in total elapsed. When I called the appeals officer she stated that the offer had been rejected shortly after meeting with her. Neither I nor my client received the rejection letter. I was directed to the Fresno office to verify the rejection. I did a FOIA request instead and received the file. The rejection letter was indeed in the file, but it was undated and unsigned. I am assuming it fell through the cracks. Apparently, the appeals officer was not the person who was required to actually mail the rejection letter.
I am still trying to figure who to talk to about this matter since it is clear that the taxpayer never “received” the rejection notice within the two year period. In 30 years this is the first offer I have seen that came close to the 2-year deadline.