It’s difficult to imagine a less-welcome telephone call, letter, or notice than one coming from an IRS Revenue Officer or IRS Collection Office (particularly from “ACS”, the Automated Collection System). Think about it. The job of IRS Collection personnel, all day long, is to get money from people who mostly aren’t real excited to hear from you and are even less thrilled to part with dollars they don’t believe they have to spare. IRS collectors have already heard just about every reason for non-payment, some well-grounded, and some obviously fabricated under pressure of the moment. As a result, they tend to approach each matter with an understandable skepticism, and the atmosphere can become a bit charged. Two initial observations: 1) emotions can get in your way; and 2) experience dealing with those offices and with particular collection personnel is an important credential, not only to know the “rules of the game”, but to know which tools will serve your best interests.

Understanding the Tax Collection Request

So what’s the first step? Take a careful look at what’s being requested. If you don’t fully understand the nature and complexity of what’s being asked, go immediately to the second step, which is to get help from someone who does.  You may have heard the phrase “anyone who represents him/her self has a fool for a client”, but there is good reason to take advantage of a free initial consultation with a legal tax professional who knows the playing field. Use that consultation to find out what options are available, and at what cost. And if you think the IRS Collection Officer is that someone, you need to think again.

The resolution of IRS Collection issues has morphed over the years into a more affirmative focus on tax collection “defenses” to be selectively applied, each with its own particular set of guidelines and rules, some published formally, and others known only by extensive experience. Obviously, the broader your tax attorney’s experience in dealing with different collection issues, the more defensive options you’ll have available. Handling the matter yourself may be an option, but it’s not usually a good idea.

Get Legal Consultation with a Tax Attorney

The right legal counsel can help you in many ways, such as:

• Defending you in an audit
• Removing tax liens or stopping IRS levies (including wage garnishments) and seizures
• Negotiating installment payment agreements and “offers in compromise”
• Appealing IRS collection actions, like a levy or the filing of tax liens) through “Collection Due Process” or the Collection Appeals Program
• Resolving an IRS collection summons seeking the production of documents or testimony
• Assisting with “trust fund recovery penalty” matters
• Preparing and negotiating claims for “innocent spouse” relief
• Helping you reduce your tax liabilities if you are considering bankruptcy
• Advising on your best course of action with delinquent or unfiled tax returns or unreported income
• Advising with respect to international tax considerations

When considering retaining a tax attorney, take advantage of a free consultation, and ask questions, lots of ‘em. Look carefully at the disclosed educational and experiential credentials of those in the firm, paying particular attention where those credentials are not disclosed, and compare the reviews on their websites with the reviews that are not. Appreciate that the greater the breadth of their practice, the greater the number of available resolution options. Look not only at the “black letter” descriptions of the kinds of matters they handle, but the fullness and understandability of their explanations and the articles they have written on what that involves. And finally, note the extent of their on-staff litigation experience, particularly in US Tax Court where the vast majority of tax cases are brought, as a measure of the level of their sophistication in determining the most efficient and effective path to resolving administrative matters in your particular jurisdiction. While you might initially think these kinds of considerations will simply result in greater costs, to the contrary, they’ll minimize your exposures and make the resolution path more efficient. Contact Tax Workout Group and you’ll see.

Tax Collection FAQs

• How long should you keep tax returns and tax return information?
  

  No, it’s not just 3 years from the date of filing of your return. If you didn’t file for any particular year, you should keep all info, including any draft returns, indefinitely. Otherwise, although the general statute of limitations for the IRS to assert a tax liability is 3 years from date of filing of the return, in some instances that statute is extended to six years from the date of filing. The better answer for retention is 7 years.

• Is there a time limit for the IRS to go after unfiled returns?
  

  Technically, there is no statute of limitations that prevents the IRS from pursuing unfiled returns and their respective unreported tax liabilities. As those who have practiced before the IRS and the Department of Justice are aware, the internal policy (not statute) is not to go after unfiled returns for years earlier than the last six, although it is not uncommon to request them for use in evaluating the credibility of the last six. Importantly, all requested unfiled returns should be prepared before filing any, rather than preparing and filing each return piecemeal. The reason for this is that there may be items or revelations in one requested return that affect what is, or should be, reflected in an earlier or later return, and an incorrect piecemeal filing of any of the requested returns can complicate things considerably (particularly since all filings are expressly made “under oath”). And importantly, have them prepared by a CPA, not by yourself, a bookkeeper, or a non-CPA accountant. That extra measure of credibility is well worth any extra expense. Uniformly, one question the IRS will ask as part of its investigation is “why didn’t you file?” There are a number of bad answers to that question, and although one might wonder why the best answer is not simply to tell the truth, how that “truth” is phrased can have a considerable impact, positive or negative. Professional input is a clear recommendation.

• How likely is it that you can go to jail for unpaid IRS liabilities?

  It’s not. The most important criteria for the Feds seeking Incarceration is not the fact of unpaid tax liabilities. Absent aggravating circumstances like making false oral as well as written statements to a federal official, (which are subject to substantial monetary penalties as well as up to 5, and in some instances up to 8, years of imprisonment for each violation), or like a willful failure to file tax returns (the policy threshold for a recommendation of criminal investigation is 3 consecutive years of non-filing), we still don’t have debtor’s prison in this country. The critical line is not the “avoidance” of payment of IRS liabilities, but “evasion” (e., taking illegal or purposely deceptive steps to hide assets or put them beyond IRS reach).