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25.1.8.4
(11-04-2008)
Fraudulent Offers In Compromise
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IRM 5.8.10.8 provides a comprehensive discussion of indications of fraud relating to Offers In Compromise. In addition to
those indications of fraud, employees should be alert to the potential for false statements under penalty of perjury, i.e.,
relating to Form 433-A and Form 433-B. Examples of these include, but are not limited to:
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False or fraudulent valuation statements or appraisals in support of Form 433-A or Form 433-B;
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Sham loans and mortgages;
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Significant omission or asset undervaluation;
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Understated income;
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Overstated expenses;
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Large number of claimed dependents;
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Similar amounts in both checking and savings accounts (e.g. $100 or $1000);
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No available credit;
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Similar listings for monthly income and expenses (e.g. same low wages, same child care expenses), and
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Reclassification of wage income.
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When indicators of potential fraud arise during an offer investigation, the offer specialist (OS) will:
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Work the case to the point where a decision regarding final disposition can be made. All requests for additional documentation
should have been sent to the taxpayer and sufficient time allowed for the taxpayer to respond. Final action with respect to
the determination will be taken if the case does not meet FTA fraud referral criteria
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Discuss the indicators of fraud with the group manager before proceeding:
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Open criminal investigations can be identified on IDRS by an unreversed TC 914, TC 916, or TC 918. Cases with a TC 910 are
being monitored by Criminal Investigation. When these transaction codes are discovered, contact must be made with the assigned
Special Agent and procedures in IRM 5.1.5 followed. It may be necessary for the group or unit managers to contact the Supervisory
Special Agent (SSA) to determine the next appropriate action. A decision will need to be made on the appropriate actions to
take and what may or may not be discussed with the taxpayer.
Note:
CI should be advised of the TIPRA law, which includes a provision for automatic acceptance of the offer if a decision on the
offer has not been reached within 24 months. We can no longer hold offers open indefinitely pending criminal investigation.
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Once a taxpayer has been advised of the open criminal investigation, if the assigned Special Agent has no objection, the taxpayer
may be asked to withdraw the offer until the criminal matter is resolved. If the taxpayer declines to withdraw the offer,
the OS will return the offer to the taxpayer under the criterion "other investigations are pending that may affect the liability
sought to be compromised or the grounds upon which it was submitted."
If the Special Agent objects to asking the taxpayer to withdraw the offer or contacting the taxpayer, remind the Special
Agent of the 24 month mandator acceptance requirement. If the Special Agent continues to request that the taxpayer not be
contacted, reassign the case on AOIC to 9999. Monitor the case and contact the Special Agent monthly to determine if and when
taxpayer contact can be made. If, after 6 months from the IRS received date, CI has not made a decision about taxpayer contact,
return the offer under the criterion "other investigations are pending that may affect the liability sought to be compromised
or the grounds upon which it was submitted."
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If the referral is accepted, CI will inform the taxpayer of the fraud investigation.
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