IRS Collection Cases
Never Ignore a Collection Notice from the IRS
The Internal Revenue Service (“IRS”) has sweeping administrative powers that it aggressively employs in collecting federal tax obligations. The IRS is able to attach bank accounts, business receivables, wages, and seize property, both real and personal. Therefore, the first priority in these cases must be to remove the threat of enforcement action. If collection activity has already begun, immediate steps must be taken to bring the situation under control.
Next, a comprehensive strategy must be implemented, based on the specific facts and circumstances presented. The successful resolution of cases in this practice area requires a thorough familiarity with current IRS collection procedures and the institutional culture of the agency. There are often multiple avenues, or procedural devices, for seeking relief within the IRS. Selecting the right one is of paramount importance.
Being a former Revenue Officer of the IRS Field Collection Division and having 25 years of experience as an attorney representing taxpayers, I am well versed in the procedures that can be used to effectively resolve challenging collection cases.
Offer in Compromise
An Offer in Compromise (“OIC”) is a method for settling a balance owed to the Internal Revenue Service for less than the full amount due. Resolving a case for “pennies on the dollar” is no simple matter. The amount of an OIC is based on a taxpayer’s assets and not the amount of tax owed. Therefore, the starting point to determine if an OIC is a viable option is an analysis of current assets and projected future income. Complex formulas are employed by the IRS to determine the amount a taxpayer can pay. A successful OIC requires a thorough familiarity with the IRS’s formulas and OIC practice and procedure.
There are important safeguards in place that protect the rights of taxpayers with debts to the IRS. One of the most powerful is the right to request a Collection Due Process (“CDP”) Hearing prior to the IRS taking enforcement action, which includes bank attachments, wage garnishments, and the physical seizure of property. This hearing must be requested on a timely basis. CDP Hearings, as well as Equivalent Hearings, provide the taxpayer with an excellent forum for resolving their tax issues. Alternatives to enforced collection measures can be proposed, such as an installment agreement or OIC, and others forms of relief can be requested, such as an abatement of penalties or innocent spouse relief.
If a taxpayer can demonstrate “reasonable cause” for the failure to file a tax return or to pay a tax obligation timely, the IRS will abate assessed penalties. The penalties imposed are, in many cases, significant. For example, the filing of a tax return more than five months after the due date results in a late filing penalty of 25% of the tax stated on the return. Businesses that fail to file employment tax returns and make federal tax deposits can face penalties of more than 40% of the initial tax due. It is imperative that the request for abatement of penalties be presented in a timely manner, in the proper format, and to the appropriate office of the IRS.
Additional Forms of Assistance
Other avenues for resolving a balance due account with the IRS include, but are not limited to, currently not collectible status, an installment agreement, and innocent spouse relief. There are also situations where a Federal Tax Lien might be hindering your ability to sell or obtain a loan against real property, or to obtain credit. It is possible to achieve relief in these situations, as well.
I have represented many clients in the following types of cases:
- Offers in Compromise
- Collection Due Process Appeals
- Levy Releases
- Innocent & Injured Spouse Claims
- Fraudulent Conveyances
- Estimated (SFR) Tax Assessments
- Lien Releases, Subordinations, and Withdrawals
- Expired Collection Statutes
- Installment Agreements
- Improper Levy/Seizure Action
- High Income Non-Filers
- Penalty and Interest Abatements
- Responding to IRS Summonses for Interviews and Records
- Trust Fund Recovery Penalty Assessments
- Currently Not Collectible Status