Internal Revenue Manual
IRM 5.8.12 — Independent Administrative Review
Part 5. Collecting Process
Chapter 8. Offer in CompromiseSection 12. Independent Administrative Review 5.8.12 Independent Administrative Review Manual Transmittal June 09, 2026 Purpose (1) This transmits revised IRM 5.8.12, Offer in Compromise, Independent Administrative Review. Material Changes (1) This IRM was updated to reflect various editorial changes, and the following substantive changes: IRM Reference Change 5.8.12.1(1) Removed IRM reference 5.8.12.7 from second bullet and changed reference to IRC 7122(e)(1) 5.8.12.1(5) Updated Primary Stakeholders 5.8.12.1.2(1) Changed reference to IRC 7122(a) 5.8.12.1.3 Added (3) CEASO management is responsible for monitoring the actions and activities of IARs 5.8.12.1.4(3) Added "IAR" after "CEASO" for clarification 5.8.12.1.5(2) Changed from "field" employees to "IAR" employees 5.8.12.1.6 Removed "SE" and added "SCOIC" acronym for Specialty Offer in Compromise 5.8.12.1.7 Updated links 5.8.12.2 Removed (Field Only) from subsection title 5.8.12.2(1) Included "OE" . Updated procedure to use digital platform to transmit documents. Removed Note. Added link for SCOIC Inventory Portal 5.8.12.2.(2) Removed email procedure 5.8.12.2(3) Removed email transmittal procedures and removed Note 5.8.12.3(1) Updated to add that employees will scan/convert documents. Updated alpha list and added Note 5.8.12.3(2) Updated to remove encrypted email and remove Note 5.8.12.4 Removed (Field Only) from subsection title 5.8.12.4(1) Updated the IAR rejection retrieval process from email to digital platform 5.8.12.4(2) Updated to clarify the IAR rejection review case assignment process 5.8.12.4(3) IRM reference changed to 5.8.12.6.3. Note was removed from second bullet in bullet list 5.8.12.4(4) Added paragraph (4) that managers will electronically review cases 5.8.12.5 Removed paragraph (4) 5.8.12.5(1) Removed "SE" from Note 5.8.12.5(4) Removed paragraph (4) 5.8.12.6 Renamed subsection IAR Initial Process 5.8.12.6.1 Renamed subsection IAR Review 5.8.12.6.1(8) Added that IAR also reviews signatures on rejection letter and Form 1271 5.8.12.7 Removed subsection The Decision 5.8.12.6.2 The subsection has been renumbered from 5.8.12.7.1 and renamed IAR Decision Sustained 5.8.12.6.3 This subsection has been renumbered from 5.8.12.7.2 and renamed IAR Decision Not Sustained 5.8.12.6.3(3) Added "Specialty Collection Offer in Compromise Portal" to Table in "Then" column (2) This revision contains various grammatical changes, editorial changes, and updates throughout. (3) This revision incorporates the procedures in Interim Guidance Memorandum SBSE-05-0724-0045, Interim Guidance on SCOIC Electronic Case Approval. Effect on Other DocumentsThis material supersedes IRM 5.8.12, dated May 17, 2024 and incorporates the procedures from Interim Guidance Memorandum SBSE-05-0724-0045, Interim Guidance on SCOIC Electronic Case Approval, dated 07-29-2024. AudienceSB/SE Compliance and Appeals employees Effective Date(06-09-2026)Thomas D. KramerDirector, Collection PolicySmall Business/Self Employed Division
Program Scope and Objectives
5.8.12.1 (06-09-2026) Program Scope and Objectives Purpose: This chapter explains the procedures to be followed by an Independent Administrative Reviewer (IAR) on rejected Offer in Compromise and the process to be followed for electronically sending documents to the IAR: This IRM provides instruction to conduct an independent administrative review of a proposal to reject an Offer In Compromise in accordance to IRC 7122(e)(1). The review must be conducted prior to the final determination of the rejection being communicated to the taxpayer. The purpose of the review is to evaluate the case and determine if rejection was the correct decision. The Independent Administrative Reviewer (IAR) is responsible for conducting this review. Audience: IARs, site Revenue Officers (ROs), Offer Examiners (OEs), Offer Specialists (OSs), and Appeals are the primary users of this IRM. Policy Owner: Director, Collection Policy, SB/SE is the owner of the policies in this IRM. Program Owner: Collection Policy – Offer In Compromise, an organization within SB/SE, is responsible for the administration, procedures, and updates related to the program. Primary Stakeholders: Civil Enforcement Advice and Support Operations (CEASO) managers and Independent Administrative Reviewers (IAR) are the primary stakeholders. Centralized OEs/Tax Examiners(TEs), Field Offer Specialists (OS) are also stakeholders. Program Goals: When the determination is made to reject an Offer In Compromise application, the proposed rejection must first be reviewed by the Independent Administrative Reviewer (IAR). By following the procedures in this IRM, IARs will be able to accurately determine whether the proposed rejection is reasonable, the taxpayer's rights have been protected, the government's interest has been protected, and process the proposed rejection appropriately.
Background
5.8.12.1.1 (05-17-2024) Background The IRM establishes process and procedures to ensure that rejection of an offer in compromise protects the taxpayer's rights and was performed within the scope of IRM 5.8.7, Return, Terminate, Withdraw, and Reject Processing.
Authority
5.8.12.1.2 (06-09-2026) Authority The Secretary of the Treasury is granted broad authority to compromise tax liabilities in IRC 7122(a). IRM 1.2.2.6.1, Delegation Order 5-1 (Rev. 5), delegates the Commissioner's authority to accept, reject, return, terminate, or acknowledge withdrawals of offers.
Roles and Responsibilities
5.8.12.1.3 (06-09-2026) Roles and Responsibilities The Director, Collection Policy is responsible for all policies and procedures within the Offer in Compromise program. The National Program Manager, Offer in Compromise is responsible for development and delivery of policies and procedures within the program. CEASO management is responsible for monitoring the actions and activities of IARs. IRM authors are responsible for writing the policies and procedures and clearing documents through all affected offices. OEs, OSs, TEs, and IARs are responsible for adhering to processes and procedures in this IRM.
Program Management and Review
5.8.12.1.4 (06-09-2026) Program Management and Review Operational and program reviews of the Specialty Collection Offer in Compromise (SCOIC) program are conducted on a yearly basis by the Director, SCOIC and Collection Policy with the use of data and reports from the Automated Offer in Compromise (AOIC) system and ENTITY case management system. In addition, ad hoc reports, which provide information on the inventory levels, hours per case, and age of offers in inventory or at time of closure, are also provided. See IRM 1.4.52, Offer in Compromise Manager's Resource Guide. Managerial case reviews are also completed as defined in IRM 1.4.52, Offer in Compromise Manager's Resource Guide. CEASO IAR managers will conduct reviews of IAR decisions in conjunction with the guidance in this IRM. National quality reviews and consistency reviews are routinely conducted to ensure case actions are timely and in accordance with the procedures in this IRM.
Program Controls
5.8.12.1.5 (05-17-2024) Program Controls AOIC is used to track offers submitted by taxpayers and record case actions and history. Ability to take action on AOIC is limited to specific offer employees. Additional permissions are provided based on an employee's duties and responsibilities. ICS is used by IAR employees as a method for inventory control and history documentation. SCOIC managers are required to follow program management procedures and controls addressed in IRM 1.4.52, Offer in Compromise Manager's Resource Guide. Managerial Requirements for case approval are defined in Del. Order 5-1 (Rev. 5). IARs will review AOIC, ICS, and supporting case documents to ensure that a rejection disposition is correct.
Terms and Acronyms
5.8.12.1.6 (06-09-2026) Terms and Acronyms Common abbreviations, definitions and acronyms used throughout this IRM. Acronym Description AET Asset Equity Table – A table listing all the taxpayers assets, encumbrances, and exemptions. It then calculates the equity which is included in the reasonable collection potential (RCP) calculation. AOIC Automated Offer in Compromise – Computer application where offers in compromise are recorded and monitored from receipt to closure. History of the offer investigations conducted by COIC employees and of actions taken by Monitoring OIC (MOIC) units are also maintained on this system. CIS Collection Information Statement – A financial statement listing assets, income, liabilities, and expenses submitted by the taxpayer. This financial statement can be submitted on Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B (OIC), Collection Information Statement for Businesses. COIC Centralized Offer in Compromise – Units located in Brookhaven and Memphis campus that complete initial processing and work offers to completion. Do not confuse this with MOIC; COIC units do not monitor or default accepted offers. DCSC Doubt as to Collectibility with Special Circumstance – Basis for acceptance of an offer where there is doubt that the tax can be paid in full and special circumstances exist that warrants accepting the offer for less than the reasonable collection potential (RCP). ETA Effective Tax Administration – Basis for acceptance of an offer where this is no doubt that the liability is correct or can be paid in full. However, requiring the taxpayer to fully pay the tax would either create an economic hardship or be a public policy/equity issue. IAR Independent Administrative Reviewer – An independent third party who reviews a decision to reject an offer prior to that decision being conveyed to a taxpayer. This person is not in the chain of command of the employees responsible for the rejection of the offer. ICS Integrated Collection System – Computer application used by Compliance employees to monitor inventory. Histories of OIC investigations conducted by area office employees are maintained on this system. IET Income/Expense Table – A table that lists the income and expenses both claimed and allowed for purposes of calculating reasonable collection potential (RCP). MOIC Monitoring Offer in Compromise Unit – Units located in Brookhaven and Memphis campus that monitor accepted offers for payments and compliance for 5 years. OE Offer Examiner – A tax examiner appointed as an offer investigator and located in COIC. OI Other Investigation – Form 2209, Courtesy Investigation, is used for field investigations in locating taxpayers or to gather information in collecting on assigned cases. OS Offer Specialist – A revenue officer appointed as an offer investigator, generally located in an area office. RCP Reasonable Collection Potential – The amount that could reasonably be collected from the taxpayer. RO Revenue Officer SCOIC Specialty Collection Offer in Compromise
Related Resources
5.8.12.1.7 (06-09-2026) Related Resources Additional resources can be found in IRM 5.8, Offer in Compromise. IRM 5.8.1.4, Fairness and Integrity in Enforcement Selection and IRM 5.8.1.5, Protecting Taxpayer Rights. Employees can find helpful information on these websites: Servicewide Electronic Research Project (SERP) SERP and the Internal Management Document site for Interim Guidance Search Interim Guidance.
Transmission of Documents Using the Electronic Offer in Compromise (EOIC) Process
5.8.12.2 (06-09-2026) Transmission of Documents Using the Electronic Offer in Compromise (EOIC) Process The OE/OS must use the Specialty Collection Offer in Compromise (SCOIC) Inventory Portal (or other future platform) to transmit documents. Supporting documents should be included with the Form 1271, Rejection Memorandum. The scanned documents must be converted to a PDF file for transmittal to the IAR.
Documents Required for Review
5.8.12.3 (06-09-2026) Documents Required for Review Employees will scan/convert to PDF and upload the documents in the order below (if applicable) for each case subject to independent review to their manager for concurrence. Form 1271, Rejection Memorandum Rejection letter Form 656, Offer in Compromise Asset/Equity Table (AET) Income/Expense Table (IET) Form 433-A (OIC)/Form 433-A, Collection Information Statement for Wages Earners and Self-Employed Individuals Form 433-B (OIC)/Form 433-B, Collection Information Statement for Businesses Note: For cases that are being returned to the IAR after corrections, include Form 5942, Advisory Reviewer's Report. Note: Centralized Offer In Compromise (COIC) — The IAR has the capability to review the current history on AOIC, the COIC OE/ no longer needs to include a complete printout of the latest AOIC Remarks. Note: Field Offer In Compromise — The IAR has the capability to review the current history on ICS; therefore, it is no longer necessary for Field OS to include a copy of the ICS history with the case submission. Special Circumstance supporting documents and/or correspondence, including any letters explaining or discussing special circumstances. The scanned consolidated PDF document will be placed in the appropriate electronic storage location for review by the IAR. If the IAR determines that any information is missing or incomplete that may hinder the review process, the scanned consolidated PDF may be returned or a memorandum may be sent to the OE, OS, or the manager requesting the information.
Independent Administrative Review Procedure for EOIC
5.8.12.4 (06-09-2026) Independent Administrative Review Procedure for EOIC The IAR retrieves all rejections via the SCOIC Inventory Portal (or any future platform). The IAR is responsible for reviewing all documents and cases histories on AOIC and ICS, as appropriate. The ICS and AOIC case histories are available in real time and should be referred to online so that the latest entries are not overlooked. The OE/OS managers should assign the offer to IAR on AOIC for inventory control. The IAR will create an incoming Other (OI) on ICS for field and campus cases. Once the review is complete, the IAR will make a determination as to whether the rejection is appropriate or not. If the rejection is not appropriate, follow procedures defined in IRM 5.8.12.6.3, IAR Decision Rejection Not Sustained, below. If the rejection is appropriate, the IAR should electronically sign and save the Form 1271 and use the Specialty Collection Offer in Compromise Inventory Portal (or other future platform) to upload the Form 1271. The case should be routed to the COIC/FOIC manager to either sustain the OIC rejection or return the case to the OE/OS managing the correction including Form 5942, Advisory's Reviewer's Report. IAR managers will review the case file electronically and request additional information for approval, if necessary.
Submitting the File for Independent Administrative Review
5.8.12.5 (06-09-2026) Submitting the File for Independent Administrative Review Prior to the proposed rejection being forwarded to the IAR, the authorized official must have reviewed the scanned consolidated PDF and electronically sign the Form 1271, indicating concurrence with the proposed rejection. Note: Failure to secure this signature before transmission to the IAR will result in return of the case to the OE/OS without the IAR completing the review. Once the approving official has electronically signed the Form 1271, the offer must be assigned to the IAR pool on AOIC. Cases forwarded will be placed in the appropriate electronic storage location.
IAR Initial Process
5.8.12.6 (06-09-2026) IAR Initial Process The IAR will load the case onto ICS no later than seven (7) calendar days after receipt. The IAR will be responsible for updating AOIC to reflect the IAR's assignment number. The IAR should complete the review and reach a determination no later than thirty (30) calendar days from opening the ICS OI or assignment on AOIC. Upon completion of the review, the IAR must update AOIC documenting information on the results of the review. In addition, the IAR must document the results of the review on ICS and AOIC and complete the disposition of the assigned OI. The results of the review should be communicated in a clear, concise, professional and easy to understand manner.
IAR Review
5.8.12.6.1 (06-09-2026) IAR Review The IAR must review the employee's analysis of the taxpayer's OIC to determine if the basis for the rejection determination was appropriate. The IAR should consider if the taxpayer's rights have been observed during the offer investigation, in communications, and/or discussions with the taxpayer or Power of Attorney (POA). These considerations should be based on issues that would impact the recommended rejection. The IAR must consider if the taxpayer has been given reasonable time frames to comply with requests. The IAR must check to be sure that the taxpayer is in filing and payment compliance. When reviewing a doubt as to collectibility offer, the IAR must compare the offered amount with the RCP in order to determine if the decision to reject is reasonable. Review the Asset/Equity Table (AET), Income Expense Table (IET), and the taxpayer's financial information to determine if the reasonable collection potential (RCP) determination is fully supported by the documented facts and circumstances in the case file; including making sure the OE/OS has fully developed the RCP and discussed all issues with the taxpayer before recommending the rejection. Note: It is not the responsibility of the IAR to re-work the case; however, it is the responsibility of the IAR to make sure all aspects of the offer have been taken into consideration. If the scanned consolidated PDF indicates any circumstances that could impact either future earning potential or allowable expenses, the documentation must support the decision to exclude or include assets, expenses and/or income relating to the taxpayer's circumstances. If information contained in the scanned consolidated PDF indicates issues were raised that meet either Effective Tax Administration (ETA) or Doubt as to Collectibility Special Circumstance (DCSC) criteria, as defined in IRM 5.8.11, Effective Tax Administration, the case history must address these issues as well as support the rejection decision. Note: It is not a requirement that the taxpayer specifically ask for consideration of special circumstances. If the IAR identifies the existence of special circumstances that meet ETA or DCSC criteria, this fact should be addressed. The IAR should be alert to instances of Payroll Service Provider Fraud for ETA Special Circumstance consideration and review the victim's individual unique circumstances. The IAR must verify that the rejection letter being sent to the taxpayer has the correct address, name, and TIN. The IAR also reviews for the correct delegated official signature on the rejection letter and Form 1271. Note: If the offer contains a valid POA the POA's letter should be reviewed for correct address and name. The IAR must ensure that all of the facts and circumstances of the case were considered during the investigation and that the decision to reject the offer is reasonable, based on the case analysis. The AOIC/ICS remarks must indicate an attempt to communicate the results of the OIC investigation with the taxpayer or POA, prior to recommending the rejection. The IAR must determine whether the communications were reasonable based on the facts of the case. Note: Communications may not necessarily be telephone calls. In some cases, they may be conducted via electronic means such as Secure Messaging or regular mail by way of letters to the taxpayer or their authorized representative. When circumstances dictate, the OE/OS should use problem solving and professional judgment, and in so doing, consider the taxpayer's perspective when working toward case resolution.
IAR Decision Rejection Sustained
5.8.12.6.2 (06-09-2026) IAR Decision Rejection Sustained If the proposed rejection of the offer is sustained by the IAR, the reviewer will: Update the IAR "Main Screen" on AOIC indicating the appropriate disposition. Review Form 1271 to be sure that all offer periods are reflected, the taxpayer's name, address, and TIN are correct. The IAR will then sign and date as the reviewer, indicating concurrence with the proposed disposition. Update AOIC to reflect the results of the completed review. The IAR must document the results of the review on ICS and AOIC and complete the disposition of the assigned OI. When the case is closed, follow procedures in IRM 5.8.12.4, Independent Administrative Review for EOIC, above. Once the signed, approved Form 1271 is received from the IAR, the OE/OS must include a copy in the case file. Cases reviewed electronically will be updated to the correct electronic storage location.
IAR Decision Rejection Not Sustained
5.8.12.6.3 (06-09-2026) IAR Decision Rejection Not Sustained If the proposed rejection is not sustained by the IAR, the reviewer will: Update the IAR "Main Screen" on AOIC indicating the appropriate IAR disposition. Prepare Form 5942, providing an explanation of why the determination was not sustained and providing instruction on additional actions required by the investigating employee. IARs will complete an ICS history entry noting that rejection was not sustained and the specifics of the review are noted on Form 5942 and close the OI assignment on ICS. The IAR manager is required to electronically sign Form 5942. After the IAR manager approves the Form 5942, the case will be routed as follows: The electronic Form 5942 and the scanned consolidated PDF will be returned to the OE/OS manager by uploading to the Speciality Collection Offer in Compromise Inventory Portal (or other future platform). A copy of the electronic Form 5942 will be retained by the IAR group manager for two years after the year prepared. The following procedures describe necessary actions once the offer file is received by the OE or OS: If… Then… Reconsideration of the offer based on recommendations from the IAR results in a determination to accept the offer Process the acceptance recommendation following procedures defined in IRM 5.8.8, Acceptance Processing. Reconsideration of the offer based on recommendations from the IAR results in a determination to continue to recommend rejection of the offer Update the scanned consolidated PDF with the additional case actions and any new information and re-submit to the IAR for a second review via the Speciality Collection Offer in Compromise Inventory Portal. The investigating employee determines that the rejection is the correct action without further development, after reviewing the Form 5942 The scanned consolidated PDF will be returned to the IAR for reconsideration. If necessary, additional history should be included on AOIC/ICS to further support the offer rejection. After a second review by the IAR, the rejection is still not sustained and if the OE/OS and the IAR still disagree The decision will be elevated to the second level manager for resolution. The IAR manager will forward an electronic memorandum to the Offer manager with an explanation of why the rejection cannot be sustained. A copy of the electronic memorandum will be forwarded to the second level manager. The IAR manager and the second level manager will discuss the issues to reach a resolution. The final decision will be made by the field second level manager for cases assigned to the field and the second level manager for those cases decided by the COIC sites. The electronic Form 5942 and any other documentation regarding second level management involvement and decisions must be attached to the scanned consolidated PDF as a record of actions taken during the IAR process.
Source: official text