By: Dan Pilla – NewsMax.com – March 05, 2020
In a recent announcement, the IRS made it clear that it will be unleashing its revenue officers (ROs) for a new wave of face-to-face collection action.
The announcement states, in part: As part of a larger effort by the Internal Revenue Service to ensure fairness in the tax system, the IRS is taking steps to conduct special compliance efforts for individual and business taxpayers in various communities. See: FS-2019-15, November 2019.
What is not stated in the notice is what constitutes the “larger effort” by the IRS to “ensure fairness in the tax system.” However, that was made clear in IRS News Release IR-2019-159.
IR-2019-159 is the news release that followed the release of IRS Publication 1415, Federal Tax Compliance Research. Recall that Publication 1415 is the report that identifies small business owners as those chiefly responsible for the purported $381 billion tax gap. IR-2019-159 tells us the IRS will “focus on those” who are cheating on their taxes. That is to say, they are going after small businesses because the IRS believes that over half the total tax gap is directly attributable to small businesses cheating on their taxes.
The plan is to carry out a series of personal “visits” by ROs with citizens who have ongoing tax delinquency issues. The IRS declares that the purpose of the face-to-face meetings is to “help resolve tax compliance issues.” Said another way, they want to collect the tax by whatever means is necessary.
I find it curious how FS-2019-15 sugar-coats the role of ROs in the enforcement process. It says, “Revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or taxes owed.”
In fact, however, ROs carry the power to issue wage and bank levies, file tax liens and seize property, including business tools and equipment. ROs are the true “business end” of the IRS. While much of what happens in the audit process involves bluff and intimidation, ROs generally do not bluff. And though they can be most intimidating, if they threaten to levy a bank account or an income stream, they mean it. All of this can be carried out without a court order, except that the IRS must follow the Collection Due Process appeal rights set forth in code §6320 and §6330. See my book “How to Get Tax Amnesty” for more details on these important taxpayer rights.
Expect the anticipated RO visits to be unannounced. They will be targeted to citizens who have a known tax issue that wasn’t resolved through mail contact. The purpose is for the RO to interview the citizen to gather detailed financial information, including income and expenses, assets and liabilities. From there, the RO determines whether and to what extent one is capable of paying the tax. Of course, all this is accompanied by a demand for full payment.
This is also the point at which ROs generally serve the citizen with a Final Notice of Intent to Levy, and perhaps, a Notice of Filing Federal Tax Lien. These are critical notices that carry Collection Due Process (CDP) appeal rights. The IRS cannot carry out an actual levy until thirty days from serving the Final Notice. During that time, the citizen has the right to file a CDP appeal. If he does, enforcement action cannot proceed. Rather, the case must be sent to the IRS’s Office of Appeals for consideration of the citizen’s proposed “collection alternatives.”
If surprised by an unannounced RO visit, there are a couple of critical things to keep in mind.
- Don’t give financial information on the spot. The RO will ask you to complete IRS Forms 433-A and B. These are financial statements. The “A” consists of the individual financial statement and the “B” consists of a business financial statement. These forms are very detailed and specific, and they are signed under penalty of perjury. They must be accurate and complete. You cannot accomplish that on the spur of the moment under the stress imposed by an RO who’s “just here to help.”
- Don’t blow your CDP appeal rights. The right to a CDP appeal is statutory, and the time for filing the appeal is likewise statutory. There is no such thing as an “extension of time” to file a CDP request, regardless of what any IRS employee might tell you. It must be filed by the deadline stated in the letter. If you blow that deadline, you lose important appeal rights and the IRS can enforce collection immediately.
- Don’t ignore the problem. The IRS announcement states that ROs will be visiting those whose problems were not resolved by correspondence. That is to say, the taxpayer didn’t step up and work toward a resolution. The notice warns, “When necessary, [ROs] will take the appropriate actions to collect the amount owed.” This means that in the absence of some firm plan to resolve the case, ROs will pull the trigger on liens, levies and seizures. Make no mistake about it. The problem will not go away on its own.
Beginning in about 2010, the IRS experienced a decline in personnel, due in large part to employee retirements. Budget restrictions prevented the IRS from hiring replacement personnel. This attrition left many areas of the county without ROs to conduct face-to-face contacts with delinquent taxpayers. That is coming to an end.
The announcement states that the “IRS will focus these efforts in areas where there have been a limited number of revenue officers available due to declining IRS resources. The new effort involves focusing resources in a specific area during a specific time.”
Anybody with an existing tax problem must take steps to get their situation resolved as quickly as possible. While it is true that the IRS is turning the dogs loose, it is also true that there are specific programs that will help you pay the taxes on your terms, not theirs.
In addition, those who qualify for an Offer in Compromise can potentially settle their liabilities for a small fraction of what they owe.
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