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Collection Action a Revenue Officer Can Take

August 12, 2024July 17, 2020 by Brotman Law

Let’s talk a little bit briefly about IRS revenue officers’ specific collection actions. All collection agents within the IRS can either lien or levy. They can seize assets. They can garnish wages. But revenue officers have a couple of things that they can do that are particularly unique to their style or classes. The first thing I mentioned was field visits. IRS personnel can visit your client or they can investigate third-party sources. They can go knock on neighbor’s doors. They can knock on employer’s doors. They can track down former employer. If the taxpayer on a business, they can go after your customers. The IRS revenue officers have broad latitude in contacting third parties for information on tax payers. No, they do not have to provide you with notice before they make those calls. When dealing with a revenue officer, if you’ve got a client who is particularly concerned about their business or their privacy, it is important to make contact with that revenue officer and dissuade those face-to-face visits as soon as possible. The second thing that revenue officers tend to do is enforce things called IRS administrative summons. The IRS will issue a summons for records, oftentimes to banks or to taxpayers or to other parties requesting information or face-to-face interviews.

Asset Seizure

November 4, 2024July 17, 2020 by Brotman Law

The final thing that revenue officers can do is they can seize assets. While ACS can seize assets as we mentioned earlier, revenue officers can seize physical property, which makes it very difficult. One of the nasty stories that we have is we had a client who was called to an IRS meeting for a summons interview. When the client showed up at the building and saddened him with an interview with the agent, the agent took the stub of seizing the client’s vehicle out of the parking lot while the administrative summons is going on. That’s a pretty extreme case. The client in this case had done some particularly bad things and had kind of upset the revenue officer and sort of had it coming. But at the same point, the revenue officers have the ability to seize vehicles.

How to Resolve IRS Collections Issues

August 12, 2024July 17, 2020 by Brotman Law

Now we want to move on to the meat of the presentation, which is how to resolve IRS collections issues. There are a series of remedies that are prescribed within the IRM and that the IRS will accept as an acceptable means of resolving a taxpayer’s delinquent account. Those measures are as follows: The first measure is the IRS will always allow you to pay them in full. They will take a cheque for the full amount anytime you want to give it to them. They are happy to do so. The next remedy is if a taxpayer needs more time to pay, they will give you a 120-day extension to pay. It’s just very nice of them. The next method of resolving – although not prescribed by the IRM – is to run. You can run from the IRS. You can flee. You can evade their collection statute. You cannot keep any cash in the bank and say, “IRS, come after me”.

How to Pay the IRS in Full

August 12, 2024July 17, 2020 by Brotman Law

I want to give you some tips on how to pay the IRS in full. It seems pretty easy at face value. You write them a check. You hand to them and you say, “Thank you. Have a nice day.” But there’s actually some new answers that I want to go over that you may not be aware of and that may help you in guiding clients towards paying their liability. The first thing that I would caution you on is that IRS liabilities are somewhat negotiable, particularly the penalty portion of the liability. If you had a client with a failure to file penalty, let’s say they’ve been assessed a $5,000 failure to file penalty, just asking the IRS to negotiate or abate the penalty, and/or possibly submitting a penalty abatement letter can reduce the balanced owed particularly if the client is going to pay the underlying tax. If you have a situation where you’re willing to pay the underlying tax, then in a lot of situation the penalties are highly negotiable depending on the circumstances.

The 120 Day Extension to Pay

August 12, 2024July 17, 2020 by Brotman Law

The next method for resolving IRS liability is the 120-day Extension to Pay. The IRS particularly if the client has a wonderful compliance history will grant an automatic 120-day Extension to Pay. You can get this simply by calling ACS or writing in. We recommend you call ACS in saying, “My client intends to pay fully. But we need a little bit of time. Can we get 120 days?” Generally, if you don’t ask for 120 days then we won’t give you 120 days. So, make sure you say, “I want a 120 days.” Again, when you’re dealing with ACS agents, a lot of times they are not being most taxpayer-friendly. You want to make sure you ask for your 120 days. However, what the IRS doesn’t tell you is even though a 120-day Extension is granted for you automatically, there may be ways to buy your client a little bit more time. For example, if you call ACS and you say, “My client is going to pay you but we need 30 days to pay it off. Can you give me a 30-day collection hold?” The IRS will say, “Great.

The Statute of Limitations on Collections

August 12, 2024July 17, 2020 by Brotman Law

Briefly I want to talk to you a little bit about the Statute of Limitations on Collections. By law, the IRS has 10 years to collect on a liability from the daily assessment. The IRS when a liability is assessed, let’s say the taxpayer will file the return on April 15th of 2010, then, the IRS would have until April 15th of 2020 to collect on that liability. Now, the date of assessment is really important for determining statute of limitations because there are multiple things that would cause the Statute of Limitations to talk. For example, if you have a 2010 return which is due in 2011 and you don’t file it until 2014, then the date of the assessment is not 2011, it is 2014. Correspondingly, if you file a return on 2011 and then amend the return in 2014, that will re-trigger the Statute of Limitations on Collections. Also note, if you got a client with SFR filings, a Substitute for Returns, and you go and file the tax return, that will reset the collection’s Statute of Limitations. So, it’s very important to be mindful of the collection’s Statute of Limitations.

The Problems with Running From the IRS

August 12, 2024July 17, 2020 by Brotman Law

Briefly, I also want to talk about some of the problems associated with running from the IRS. Now, it seems like a funny subject–people running or evading their collection potential. I don’t want to use the term ‘evading’ very loosely because I will not want to see a criminal activity. But we may be dealing with a client who has just been off the grid for a couple of years, or through a series of an unfortunate circumstances has not met their filing obligations, and maybe have not been using their bank account or have been kind of sticking their head in the sand. By ‘evading,’ we don’t suggest they’re criminals. They’re just ducking their responsibilities from the IRS as it tends to happen from time to time. The problems with “running” from the IRS are these. Mainly you are always at risk of collections. Any asset that you have, any job that you hold, if you are not actively working on an installment agreement with the IRS or negotiating an Offer in Compromise or doing something to resolve your account, then you are technically not in compliance. When you are technically not in compliance, the IRS can take a serious of actions against you. They can levy you. They can garnish your wages. They can put liens on you. That pressure doesn’t go away if you are not doing something to actively resolve your account.

Currently Non-Collectible Status

November 4, 2024July 17, 2020 by Brotman Law

Now, I want to talk to you about Currently Non-Collectible status. Currently Non-Collectible status or as it’s called in the IRS system, it’s what’s called Code 53, the code that the IRS uses. Currently Non-Collectible status is a temporary hardship status that’s granted from the IRS that frees people from the burden of paying their tax liabilities immediately. It’s like a ceasefire when you negotiate with the IRS. The IRS won’t take any collection activity. The taxpayer doesn’t have to pay any liability. This is usually temporary. It usually lasts for a period of about 18 months. When the IRS places a taxpayer in Currently Non-Collectible status, they will not designate a time that the Currently Non-Collectible status will expire. So, it’s an undefined period before a Currently Non-Collectible status expires. However, usually about the 18-24 month mark after Currently Non-Collectible status has been implemented the IRS will take a review of the account and often ask the taxpayer for updated financial information. Or if you’ve obtained a job, they’ll ask your current information on that. Or, they can ask for a variety of information. In addition, taxpayer should file tax returns showing large swings in income–If your client’s unemployed for a month or for a year, and the next year he gets a $150,000 job and file the tax return reflecting that–that will automatically kick some clients out on the Currently Non-Collectible status. Because of the temporary nature of the status, the IRS can make a determination and kick them out of it at anytime. With that said, it is a viable option for several reasons. Number One, Currently Non-Collectible status will toll the Statute of Limitations. It will cause the Statute of Limitations to keep running.

Installment Agreements

August 12, 2024July 17, 2020 by Brotman Law

The next thing I want to talk to you about is Installment Agreements or payment plans. The IRS is famous for accepting payment plans for liability. They recognize the taxpayers who may owe a large liability may not have all the money upfront. Therefore, in order to get back in the compliance they need to be put on the payment plan. There are four types of payment plans that you should be generally be aware of. The first one is what’s called an automatic payment plan or an automatic installment agreement. An automatic installment agreement is an Installment Agreement by right. If you owe less than $10,000, the IRS statutorily require to put you in a payment plan if you request it. That’s a very powerful tool for taxpayers with smaller liabilities and you can call the IRS, and put them in a payment plan immediately without much consideration to their financials. The second type of an installment agreement is what we call a Streamline Installment Agreement. Taxpayer should owe $25,000 or less or in certain cases $50,000 or less can apply for a streamline installment agreement.

What to do if your Installment Agreement is Rejected

September 4, 2024July 17, 2020 by Brotman Law

What happens when an Installment Agreement is rejected? When an Installment Agreement is rejected, fear not. You have several options. What will happen is you usually submit a request for an installment agreement to the IRS with the company financials. If the IRS decides to reject that Financial Statement, they will issue a letter. That letter is a formal rejection of the installment agreement. They say, “Dear taxpayer, we have decided to reject your installment agreement. We think you can pay.” We know you want to pay $300 a month; we think you can pay $3,000 a month.” The taxpayer goes, “Oh, no. I can’t pay $3,000 a month.” At that point you can take your Installment Agreement to the Appeals Division of the IRS through what’s called the Collection Due Process Appeal. You can appeal the rejected installment agreement. That letter is your ticket. In your appeals, you file a CDP Form and get into appeals. An Appeals officer will give you a second bite of the apple with respect to your financial statement. The Appeals Officer generally is not allowed to consider new information. He has to go base on the financial statement that you submitted. But oftentimes that letter that you received from the IRS rejecting your financial statement will clue you in to what the problem is. The IRS thinks you have available equity in your home.