TREASURY INSPEcTOR GENERAL
FOR TAX ADMINISTRATION
REVIEW OF THE OFFERS IN cOMPROMISE PROGRAM
Reference No. 091603
An Offer in compromise (OIc) is a collection tool used in situations where it is unlikely that amounts owed can be collected in full. The OIc can provide a delinquent taxpayer with a fresh start toward compliance.
IRS records show that the number of OIcís received over the years has drastically accelerated, from 9,000 in 1990 to just over 114,000 in 1997. Practitioners and stakeholders have criticized the program for the high number of OIcís that are returned to taxpayers as "unprocessable". Even though IRS introduced a new OIc package in 1997 to help address this problem, the number of "unprocessable" OIcís continues to be a concern.
We initiated this review at the request of management to help address concerns over the adequacy of investigations, high number of OIcís returned to taxpayers as "unprocessable", and timeliness of rejection decisions.
Our review identified the following opportunities for enhancing the effectiveness of the OIc Program and for further promoting fair, consistent taxpayer treatment.
The most fundamental actions needed to reduce the risk of accepting questionable OIcís are to make sure examiners are knowledgeable of IRSí automated data systems and how the information can be used to enhance the investigative and financial analysis processes. This could be accomplished by providing mandatory training for OIc examiners that emphasizes assembling and analyzing data from automated systems.
Steps also need to be taken to strengthen specific OIc controls and procedures. Among others that are described later in the report, these steps include (1) using the collection Quality Measurement System to evaluate samples of accepted and rejected OIcís, (2) standardizing "processability" determinations, and (3) adopting the practice of using OIc specialists.
Management agrees with our findings and is initiating appropriate corrective action. The complete response is included as Attachment II.
1 = Tax return/Return information
3d = Identifying Information - Other Identifying Information of an Individual or Individuals