IRS and AICPA collaborate on OIC program.

• Author: Michnay, Ruth Ann
• Position: Offer in Compromise

Since implementation of 1992 IRS Policy Statement P-5-100, describing the Service's commitment to the Offer in Compromise (OIC) program, the AICPA has been a strong supporter. When the program was expanded by the Internal Revenue Service Restructuring and Reform Act of 1998, the AICPA again showed support. To obtain feedback on the program, it distributed a survey in June 2003 to state CPA societies, and received 80 responses. The results were summarized in a letter to Dale Hart, Commissioner, IRS Small Business/Self-Employed Division; see AICPA Letter to Commissioner Hart (10/14/03), available at www.cpa2biz.com/ResourceCenter s/Tax/Tax+Practice/AICPA+Urges +Changes+to+the+Offer+in+Com promise+Program.htm. The letter discussed several concerns, made suggestions and contained a plea for the IRS "to make the Offer program a legitimate opportunity to bring a segment of taxpayers back into compliance." It also noted, "a well functioning Offer in Compromise program has the potential of increasing the actual amount of tax collections while at the same time reinforcing taxpayers' obligations to maintain future compliance."

This item discusses some of the IRS's OIC reforms.

Form 656

November 2003 saw the beginning of the $150 user fee for filing Form 656, Offer in Compromise. However, at the same time, the IRS reached out to stakeholders, by requesting suggestions for its revision of Form 656. The AICPA Tax Division's IRS Practice and Procedures Committee submitted ideas, responded to a draft of Form 656 in January 2004 and conducted a telephone conference with IRS Director of OIC, Michael McDermitt, in February 2004. In July 2004, it revised Form 656 in a number of ways; some of the changes are as follows (items 12, 13 and 14 below are new):

* Item 8: By submitting this offer, I/we have read, understand and agree to the following conditions:

1. If the IRS rejects or returns the offer, the application fee will be kept by the IRS (8(c));

2. The statute of limitations for collection will be suspended during the period an offer is considered pending by the IRS ("pending" is defined in 8(m));

3. The IRS may file a Notice of Federal Tax Lien during the offer investigation (8(0)); and

4. The IRS is authorized to amend Item 5, "tax type and periods," to include any assessed liabilities failed to be listed (8(q)).

* Item 11: Although a signature(s) is still required, Form 656 now reads "Mandatory Signature(s)," instead of the note at the bottom of each page...