IRS
TAX COLLECTION
Any tax system is only as
good as its ability to collect taxes. The American system of voluntary
compliance is the envy of the world. Nowhere on earth do more people
voluntarily pay their taxes. The IRS Collection branch tries to collect the
maximum amount of taxes with the absolute minimum effort. Commentators and
critics alike have leveled a barrage of complaints about IRS Collection practice in recent
years. Understanding that they are indeed in the business of collecting taxes
with minimum effort explains some of the tactics used to compel, trick, or
cajole taxpayers into paying their tax bills. The 1998 IRS Restructuring and
Reform Act resulted in monumental changes to collection procedure and the appeals
available to taxpayers dealing with Collection issues. Sections 6320 and 6330
now permit taxpayers to seek IRS Appeals branch and judicial review of collection actions.
The primary work of
Collection is twofold:
·
To solicit unfiled tax returns;
and
·
To collect open tax liabilities.
The chief powers of Collection
personnel are the powers to seize through levy and sell the property of the
taxpayer. A levy on wages has been the stranglehold the IRS has used to collect
taxes from wage earners. All enforced collection activity is intrusive to the
taxpayer. To perform their duties, agents file liens and do financial
investigations. The practitioner, in dealing with Collection, must respect the
powers that have been given Revenue Officers to upset the taxpayer’s financial
and personal life.
The IRS attempts
collection in several distinct ways:
Service Center
Taxpayer Contact: whether it is a notice generated from a filed tax
return showing a balance due or an adjustment made by the Examination Division,
the taxpayer’s first contact with the IRS Collection Branch will be by a notice
issued by the IRS Service
Center. Generally issued by the Service
Center where the return was filed,
a series of notices will be sent, usually four in number, the last of which is
the IRS Notice of Intent to Levy, sent certified mail return receipt requested.
Each of these notices carries addresses and telephone contact numbers which the
practitioner should use to explain the taxpayer’s financial situation. When the
taxpayer has been a previous delinquent (i.e., a notice has been sent within
the last 12 months), the taxpayer will not receive four notices, but only two:
the initial CP:501 and CP:504, which is the Notice of Intent to Levy. If the
client tells the practitioner he or she received only two notices, this should
tip the practitioner off to the fact that the client has been a previous
delinquent. The notices issued by the Service
Center are computer generated and
no individual Agent is assigned to the matter.
IRS Automated Collection System (ACS): These are
IRS computer-assisted personnel who use computer screen prompts to obtain levy
information from taxpayers and initiate enforced collection activity. ACS is
manned at various sites in the taxpayer’s district. ACS personnel are probably
the least trained and least sophisticated in both tax law and collection procedures,
but are able within limited parameters to resolve collection matters.
District
Offices: Each district is broken into field offices staffed by
Revenue Officers who are IRS Collection specialists. The Revenue Officer will
receive a file if it could not be resolved by the Service
Center or ACS Branches. IRS Revenue
Officers will obtain financial information and do financial investigation and
the necessary legwork through personal contact with the taxpayer in an attempt
to obtain payment. Revenue Officers are given the widest latitude to resolve
collection disputes. In the reorganized IRS, most collection Agents are aligned
with the small business/self-employed operating division.
Receipt of the "Notice of Intent to Levy and Your Right to a Hearing" is the final step before IRS, 30 days later, will be permitted to seize a taxpayer's assets and must be responded to if levy is to be avoided.
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