IRS RESPONSE TO RECOMMENDATION: A 2018 IRS study found that revenue collection exceeded the amount originally offered in 71 percent of cash offers and 66 percent of deferred offers that were not accepted. Additionally, the FY 2019 offer acceptance rate climbed to 69 percent when removing those cases where the information the taxpayer provided did not allow us to make a collectability determination (acceptances / acceptances + rejections).

When an OIC is rejected, we recognize that we will not collect the RCP or the taxpayer’s offered amount in every case. This is the nature of a settlement program. We believe the current policies and resulting acceptance rates are good not only for revenue but for taxpayer compliance overall.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The 2018 IRS study shows that the IRS’s RCP computation does not represent what the IRS will eventually collect in a little less than one-third of rejected OICs.  This number is too large to be part of the “nature of a settlement program.”   Moreover, there is a financial cost to the IRS for keeping cases in CNC status or the Queue, and an unrealistic RCP formula erodes the taxpayer’s right to finality.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: We will review a sample of rejected OICs where taxpayers later declared bankruptcy and determine whether the existing policy should be revised to consider the effect of a potential bankruptcy on the RCP on OICs other than those where the taxpayer indicates he or she may file for bankruptcy.

CORRECTIVE ACTION: We will review a sample of rejected OICs where taxpayers later declared bankruptcy and determine whether the existing policy should be revised to consider the effect of a potential bankruptcy  on the RCP on OICs other than those where the taxpayer indicates he or she may file for bankruptcy.

TAS RESPONSE: We welcome the implementation of this recommendation and the ability to analyze the review’s results for situations involving rejected OICs where the taxpayers subsequently declared bankruptcy.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: As noted above, we have previously conducted three studies and invested significant resources reaching out to taxpayers to educate them on the OIC process, and all of them resulted in low response rates. It is possible there is little incentive for a taxpayer in a currently not collectible or shelved status to file an OIC, that many taxpayers with liabilities do not open letters from IRS, and that taxpayers may not have funds to make an offer or family or friends who are willing to lend them money for an offer. We include information about the OIC program in various billing notices to provide information on OICs early in the process, and we continue to promote the program through a variety of channels.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We continue to believe that targeted communication will help taxpayers use the OIC program more effectively.  The IRS’s increased OIC program communication on additional taxpayer notices is a benefit to informing taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A