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TAX TRENDS
Analysis of and reflections on
recent cases and rulings.
Author: After considering Brown’s OIC, the
James A. Beavers, CPA, CGMA, Procedure & Administration IRS sent him a letter stating that it had
J.D., LL.M. closed his file and was “returning your
Offer in compromise not Form 656, Offer in Compromise” because
deemed accepted “[o]ther investigations are pending that
A taxpayer’s offer in compromise (OIC) may affect the liability sought to be
submitted during a Collection Due compromised or the grounds upon which
Process (CDP) proceeding was rejected it was submitted.” The letter further
An offer in when the IRS returned the OIC to stated: “As of the date of this letter, we
the taxpayer, not when the IRS issued are considering your offer closed” and
compromise the notice of determination closing the included with the letter was a copy of
submitted during CDP proceeding. Because the OIC Brown’s original offer packet, which was
was returned to the taxpayer within 24 marked “RETURNED.”
a Collection Due months of the date submitted, it was For about a year and a half after
Process proceeding not deemed accepted by the IRS under receiving the letter from the IRS, in his
Sec. 7122(f).
CDP hearing, Brown maintained that
is not deemed Background the IRS had erred in returning his offer
accepted under Sec. Michael Brown had an outstanding (under the theory that the reason for
rejecting the offer — the pendency of
7122(f) if it is returned federal income tax liability of over $50 other investigations — was “bogus”).
million. In order to collect the portion of In June 2020, however, more than 24
to the taxpayer that balance due from 2009 and 2010 in months after Brown had submitted the
within 24 months November 2017, the IRS issued Brown a OIC, he offered a new argument.
He now argued that “only Appeals
Notice of Federal Tax Lien. In response
of submission; a to that notice, Brown timely requested can make the determination to return
TFRP liability is not a CDP hearing and indicated he would the OIC.” Because “Appeals did not
be filing an OIC. In April 2018, he
return the OIC” within 24 months
eligible for Sec. 6015 submitted an OIC of $320,000 for 2009 of its submission, he claimed that the
and 2010 (and other years). OIC was “deemed accepted” under Sec.
innocent-spouse relief Brown’s case was assigned to a 7122(f). Under this provision, an OIC is
because it is not settlement officer (SO) in the IRS deemed to be accepted by the IRS if it is
Appeals Office. When the SO received not rejected within 24 months after its
a liability related to Brown’s OIC, he forwarded it to the submission date.
The SO assigned to Brown’s case did
a joint return. Centralized Offer in Compromise not agree and told Brown he intended
(COIC) unit. The COIC determined
the OIC met the requirements to be to close the CDP case unless Brown
processable and referred it to a collection wished to propose a different collection
specialist for consideration. alternative. Brown did not do so, and the
42 September 2022 The Tax Adviser
