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How IRS Collections Works – Part Three

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IRS Collections Step Five – Your Case is Assigned to IRS Automated Collection Systems (ACS)

At a certain point (usually after sixteen weeks), the service center makes the determination that its collection efforts have not yielded sufficient results and the taxpayer’s account is transferred to one of two places: Automated Collection Systems (ACS) or to the Collection field function (i.e. a revenue officer at a local IRS office). Most collection accounts will start in ACS though. ACS is a system of twenty-three computerized telephonic collection centers spread across the United States.[1] ACS essentially has three functions[2].

Key Takeaways

  • If you do not contact ACS directly, rest assured that they will make the effort to get in touch with you. ACS has several different avenues for getting ahold of taxpayers.
  • The best time to call ACS is either early in the morning or late at night. As with most telephone response systems, ACS hits high call volume during mid-day. ACS’s hours also stagger based on the area of the country you are calling from.

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How IRS Collections Works – Part Two

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IRS Collections Step Three – You Receive a Notice of Intent to Levy (CP 504)

After this sixteen week time period, the taxpayer’s account has entered into IRS collections status. As such, they will receive a threatening letter notifying them of the government’s intent to seize their property if they do not pay their outstanding balance in full or they do not enter into a suitable payment arrangement. This letter will be sent by certified mail to the last known address of the taxpayer. However, in some instances where the taxpayer has a large balance due to the IRS, the IRS may skip the prior Notices of Balance due and jump straight to the Notice of Intent to Levy. This is done to compel action on the part of the taxpayer to resolve the account.

Key Takeaways

  • After this sixteen week time period, the taxpayer’s account has entered into IRS collections status.
  • This Notice of Intent to Levy is an important step because it satisfies the initial requirement of the government to notify the taxpayer before it begins to seize their assets.
  • Steps four, five, and six are generally interchangeable. After a Notice of Intent to Levy has gone out, your account will likely be sent to Automated Collection Systems.

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How IRS Collections Works – Part One

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There is alot of confusion among many of my clients about the IRS collections process and what actions the IRS is able to legally take against the taxpayer. People who owe balance dues see a series of increasingly threatening letters and I often get panicked phone calls from taxpayers who think that the IRS is going to take their house because of the five thousand dollar balance they have accumulated. As such, I wanted to trace the lifecycle of a balance due to the IRS in order to better educate people on exactly how the IRS collections process works. I hope this serves as a helpful resource and alleviates some of the stress associated with owing money to the government.

Key Takeaways

  • There is alot of confusion among many of my clients about the IRS collections process and what actions the IRS is able to legally take against the taxpayer.
  • After your return has been processed, if your return indicates a balance due or the IRS makes a change to the return and additional tax is assessed, then you will start to receive notices from the IRS.

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Beat the Clock: Address Tax Problems Early

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One of the most common problems that I see in my practice is a failure of taxpayers to properly address their tax problems in a timely manner. Many taxpayers feel wait for the problem to grow to a point where serious action must be taken in order to be resolved where the problem could have rather been addressed by simple preventative action at the beginning of the problem. Specifically, this happens often in the arena of collections problems and where taxpayers owe a sum of money to the IRS. While I do want to remind taxpayers that it is never too late to properly resolve a tax issue, I did want to discuss some of the added benefits to solving your tax problems early.

Key Takeaways

  • One of the most common problems that I see in my practice is a failure of taxpayers to properly address their tax problems in a timely manner.
  • One of the biggest advantages of solving tax problems before they start is the ability of taxpayers to significantly reduce the amount of penalties and interest that they may owe to the IRS.
  • Too often, I counsel clients who have made their tax problems way worst than necessary by letting them fester. Clients either leave stacks of unopened mail just sitting there or fail to pick up certified letters when they become due.

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IRS Innocent Spouse Relief

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IRS Innocent Spouse Relief

This is the most commonly known form of relief, which can absolves a taxpayer from liability if their spouse or former spouse either did not report income, made an error in the calculation of income, or misapplied any deductions or credits that they were not entitled to. Innocent Spouse Relief relieves a person of any tax, interest, and penalties associated with the account based on the preceding errors. However, the taxpayers are still held jointly and severally liable for any amounts that are not granted innocent spouse relief. The following requirements must be met in order for IRS innocent spouse relief to be granted.

Key Takeaways

  • 2. There is an understated tax on your return, i.e. the IRS determines that your total tax should be more than the amount that was actually shown on your return.
  • 4. You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed (Absence of “Actual Knowledge” or “Reason to Know”).
  • 5. Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. (“Unfairness”).

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The CAN-SPAM Act and Compliance Challenges for Startups

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As our techno-centric culture increasing depends on email as a form of communication, an increasing amount of regulatory attention has been devoted to policing unsolicited bulk electronic communication, much of it unwanted, also known as “SPAM.” Although bulk mail has been in existence for decades, mass electronic messages are extremely inexpensive to produce and distributed, especially when programmers use cookies[1] or other “trolling” features to obtain them. While direct email marketing (along with search engine marketing) is widely considered as the next evolution for early-stage companies looking to raise awareness of their product/service, SPAM is viewed as a considerable annoyance by the general public. Users are often inundated with unsolicited messages and have to waste a lot of precious time sorting through a sea of junk mail, often risking the possibility that legitimate or important email messages will be lost while deleting unwanted mail messages from their inboxes.[2] In addition, a vast majority of the messages received are for products of suspect legality, scams, chain letters, and often pornographic material.[3]

Key Takeaways

  • As our techno-centric culture increasing depends on email as a form of communication, an increasing amount of regulatory attention has been devoted to policing unsolicited bulk electronic communication, much of it unwanted, also known as “SPAM.
  • In response to increasing public outrage, in December of 2003, Congress enacted the “Controlling the Assault of Non-Solicited Pornography and Marketing Act,” otherwise known as CAN-SPAM.
  • Enforcement action may be brought by citizens in federal court and also may be initiated by the Federal Trade Commission on a civil or criminal scale, depending on the provision violated.

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Jurisdictional Issues for Startups

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Jurisdiction

Key Takeaways

  • The first major potential pitfall that startups face when operating through an Internet presence is the question of jurisdiction.
  • As a result, startups weary of subjecting themselves to jurisdiction in foreign venues should take active measures to minimize their contacts there.
  • There are also other means that companies may take to curtail their liability.

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Issues for Startups – Privacy, Privacy Protection, and Data Security

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An increasing number of legal challenges for startups that utilize the Internet, are in the area of informational privacy protection. To date, there is no single piece of legislation or bill of rights which provides comprehensive regulation of the collection, storage, transmission or use of personal information.[1] Personal information is defined as data that is used to identify, contact, or locate a person, including name, address, telephone number, or email address. [2] Currently, protection of consumer privacy over the Internet is a piecemeal collection of various state and federal statutes. However, as users and regulators become increasingly savvy about the methods of data collection and its uses, that legislation slowly creates a framework that becomes of increasing importance to small businesses and startups that utilize the internet. The Federal Trade Commission has been particularly active in recent years in assessing the threats posed by online data collection and issuing several reports on the subject.[3] In particular, Congress has already taken action with respect to data collection obtained from minors.[4] Failure to take privacy issues into consideration may subject companies to federal or state action, in addition to consumer class action suits. Because enforcement actions are on the rise, startup companies must exercise particular vigilance in this area to protect themselves and the privacy of their users.

Key Takeaways

  • An increasing number of legal challenges for startups that utilize the Internet, are in the area of informational privacy protection.
  • Before addressing what startups can do to minimize the risk of privacy related adverse action, it is necessary to briefly address what informational privacy means.
  • Although there are many important things for company management to consider when formulating their internal privacy policies, the elements of what should be included have been outlined by the Federal Trade Commission in their Fair Informational Practices.

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Privacy Issues that Arise for Startups Doing Business in or with the Residents of California

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As in many other areas of law, the State of California has been on the front line of bringing about aggressive changes in the laws concerning protection for online consumers. The economic power and size of California, in addition to being the primary locus for much of the startup activity in the technological world, means that the cost of doing business for many companies includes compliance with California privacy law. Many elements of privacy protection, which are merely recommended by the Federal Trade Commission and other regulatory bodies, are required by statute in California. A prime example is the Online Privacy Protection Act. Technology law scholars, Richard Raysman and Peter Brown, note that the law “requires that any collection of personally identifiable information from California residents through a Web site or online service for commercial purposes be done pursuant to a conspicuously posted privacy policy.” [1] Federal law creates no such requirement for disclosure.

Key Takeaways

  • Go to Brotman Tax Resolution Services
  • Go to The Brotman Virtual Law Office
  • Go to Resource Blog Homepage

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CAN-SPAM

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Because of public vehemence toward SPAM communication, small businesses and startup must exercise extreme caution when engaging in electronic marketing or any other communication that is not specifically solicited by the user. Failure to do so, in addition to regulatory and civil penalties, can expose a new business to significant damage to their goodwill, which depending on the nature of the business could be fatal to an early-stage company. However, early stage companies can avoid violation of the CAN-SPAM act by engaging in good business practices related to electronic communications. Messages that are advertisements or that otherwise solicit business should identify themselves as an advertisement. The Federal Trade Commission has not issued guidelines on how to achieve disclosure, given the variance in messages and their layout it might be difficult to do so, but communicating in a manner that is clear to the recipient will generally comply with the requirements of the statute.[13] In addition, the message must provide to the recipient the identity of its sender, including critical contact information, such as physical address or registered post-office box and some other means of communication with the sender, such as telephone number or reply email address.

Key Takeaways

  • Because of public vehemence toward SPAM communication, small businesses and startup must exercise extreme caution when engaging in electronic marketing or any other communication that is not specifically solicited by the user.
  • Companies should also ensure compliance with the notice and opt-out provision guidance of the Federal Trade Commission.

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Brotman Law Featured in Inc. Magazine - Fastest Growing Law Firm in California