Tax Controversy Resolution
If you are notified of an IRS, FTB or other State Tax Agency tax audit or collection action (IRS tax lien or IRS tax levy – or a lien or levy from any state), you need to be very careful what you tell – or don’t tell – an IRS (or other tax agency) employee. Taxpayers who represent themselves hoping for a favorable resolution of their IRS tax controversy or state tax controversy, or who are represented by individuals who lack in-depth knowledge of the IRS or State Agency procedures and practices, can find themselves owing more than the professional representation fees they believed they saved. As mentioned previously, an IRS tax audit appeal is a complicated process that requires experience and knowledge of not only tax law, but of the internal procedures and the Internal Revenue Manual that IRS employees are supposed to follow.
To illustrate this point, are you familiar with the concept of Hazards of Litigation? Do you know which employees in which IRS division have the authority to consider these hazards in formulating their proposed resolution of your IRS tax controversy? Are you aware of the value and appropriate use of Closing and Collateral Agreements? Do you know when you should ask an Auditor (Tax Compliance Officer), Internal Revenue Agent or an IRS Appeals Officer for a Restricted Consent? Do you know if you even qualify for one? Do you know the requirements for filing an IRS appeal to a tax audit or collection matter?
If you and your spouse filed a joint return, you may not be aware that you both are jointly and severally liable for any delinquency (non-payment) of tax. Is that always the case? Are you aware of the Innocent Spouse provisions of the IRS Tax Code that, if specific requirements are met, could relieve the “innocent spouse” of part or all of the deficiency?
IMPORTANT TIP! If you filed joint returns during marriage, and are now contemplating a separation or divorce, be sure to talk with an attorney about ensuring your separate maintenance or divorce decree addresses how you and your ex-spouse will split or allocate unpaid taxes from previously filed (or delinquent) returns. In addition, you need to address how you and your ex will pay any deficiency that arises in the future from an audit of your prior joint returns.
By the way, the tax agencies are NOT bound by your agreement on how you will allocate the deficiency or liability. The tax agency will get the money from either taxpayer – usually from whoever they can get it from the easiest. The language in the decree of divorce simply enables one party to recover from the other – in a civil action – whatever amount they were forced to pay that was in excess of what they should have paid per their agreement or decree.
These are just a few of the numerous terms and procedures that most taxpayers – and some representatives – do not know about, or do not fully understand. Some IRS employees will help you by pointing out opportunities to reduce your liability. When I managed IRS Revenue Agents and Appeals Officers in the IRS Examination Division and IRS Appeals, I stressed my expectation that they be fair and impartial to their taxpayers. They knew that I expected them to “get the right answer” – not the last buck! In many instances, this lead to them suggesting to their taxpayers ways to reduce their liability.
With my technical and managerial experience with the IRS, I can anticipate the questions the Revenue Agent, Revenue Officer, Appeals Officer or Settlement Officer – or their manager – will likely ask you regarding your IRS tax controversy. As you can appreciate, just as in the game of chess, anticipating your opponent’s future moves is a key toward winning the game. The same is true in dealing with the IRS and other tax agencies. If you understand the job functions of the technical and managerial employees and have been through their training courses, you can anticipate where the employee or manager is heading with a line of questioning. With that insight, truthful answers can be given with proper explanations to minimize the chance of the IRS employee raising another issue or adjustment in an IRS tax audit or appeal.
With my prior experience as an IRS Revenue Officer, and from my review of hundreds of Collection cases in IRS Appeals, I have a solid understanding of IRS Collection procedures. I can anticipate how the ACS (Automated Collection System) or an IRS Revenue Officer will most likely proceed against you to collect a tax deficiency. Fortunately, Congress enacted the ‘Due Process” provisions of the Internal Revenue Code (Sections 6320 and 6330) to enable most collection actions to be reviewed by Appeals. These sections require the IRS to issue taxpayers a special notice (referred to as the CDP Notice) and provide taxpayers with new procedural rights when the Internal Revenue Service files a Notice of Federal Tax Lien and when it sends a notice (Letter 1058) that it intends to levy upon the taxpayer’s property or right to property
Section 6320 requires the IRS to issue a notice to inform the taxpayer that a Notice of Federal Tax Lien has been filed and to provide the taxpayer with the opportunity to request a Collection Due Process hearing (“CDP hearing”) with the IRS Appeals Office with respect to the tax liability for the taxable period or periods to which the lien relates.
Section 6330 requires the IRS (in non-jeopardy situations) to give the taxpayer whose property or rights to property (other than a State tax refund) are to be levied, the right to a CDP hearing with Appeals at least 30 days prior to levy, with respect to the tax liability for the taxable period or periods for which the levy is intended to be made.
In a tax controversy collection situation, you can file an IRS appeal to any of the following collection actions by the IRS:
As your advocate and a tax resolution specialist, I can advise you on the choice of appeal (CAP or CDP – the difference is discussed later) and represent you and get you the best deal in your tax controversy resolution with the Collection and Appeals Divisions.
If the taxpayer timely requests a CDP hearing (by completing Form 12153 – Request for a Collection Due Process Hearing), IRS Appeals will consider the case and render a written determination concerning the appropriateness of the IRS tax lien filing or proposed IRS levy. A request will be considered timely if it is submitted within 30 days of the date of the CDP Notice. In filing the appeal, it is critical that you or your representative identify all of your reasons for disagreement with the IRS Collection action as you generally cannot raise additional arguments later. If the taxpayer does not agree with the IRS Appeals Officer’s or IRS Settlement Officer’s determination, the taxpayer has the opportunity to seek judicial review in the United States Tax Court.
To recap the above, the taxpayer may have the opportunity to challenge both administratively and in Court their tax liability for the tax years stated on the Notice of Federal Tax Lien or levy, raise any additional defenses with respect to that liability, challenge the appropriateness of the filing of the Notice of Federal Tax Lien, or proposed levy, and offer collection alternatives. Because the taxpayer will only have one opportunity (per tax period) for a CDP hearing and subsequent judicial review, the taxpayer is required to raise all relevant substantive and collection issues at that hearing
A taxpayer must receive notice of the filing of an IRS Notice of Federal Tax Lien not more than five business days after the date of any filing This notice describes the taxpayer’s right to request a Collection Due Process hearing with respect to any taxable periods described on the Notice of Federal Tax Lien, within the 30-calendar day period beginning on the day after the 5-day period for notification has expired. The taxpayer is entitled to only one CDP hearing with respect to each taxable period to which the unpaid tax relates.
The Appeals determination may be appealed to the United States Tax Court. The running of the periods of limitations for collection after assessment, for criminal prosecutions, and for suits described under IRC § 6532 are suspended for the periods in which the CDP hearing and any appeals are pending.
The timing of your IRS appeal is critical! If a taxpayer does not request a CDP hearing within the statutory 30-day period, (from the date of the 1058 letter), a taxpayer can still request a hearing at a later date. In this circumstance, the IRS will provides a hearing equivalent to a CDP hearing. However, if the Appeals’ determination in the “Equivalent Hearing” is unfavorable to the taxpayer, the taxpayer will not be entitled to judicial review. This illustrates the need to retain a tax resolution specialist familiar with the IRS appeal procedures to handle your tax controversy resolution.
Notification is not required for any refilling of Notice of Federal Tax Liens. However, a taxpayer may still seek administrative review of a re-filing with IRS Collection, Appeals or the National Taxpayer Advocate. Notification is not required to be given to any known nominees of the taxpayer. However, any person named on a filed Notice of Federal Tax Lien, other than the taxpayer, may seek administrative review with IRS Collection, Appeals, or the National Taxpayer Advocate.
There is another appeal procedure available for Collection cases called Collection Appeals Program (CAP). CAP is generally much quicker than CDP (which can take several months to resolve in Appeals) and available for a broader range of IRS collection actions. CAP appeals are initiated by the completion of Form 9423. One significant difference between CDP and CAP is that you cannot go to Court if you disagree with the CAP decision.
I have the three-decades of income and employment tax administration experience inside-the-IRS and two decades post-retirement experience to effectively represent you in your tax controversy before the Internal Revenue Service, the Franchise Tax Board or the EDD. The following are just some of the areas where I can help you get through the process:
- Assessed Penalties (IRS Service Center)
- Offers in Compromise
- Innocent Spouse
- Collection Appeals (liens, levies and seizures)
- Collection Due Process
- Taxpayer Assistance Orders (Form 911)
- Installment Payment Plans
- Penalty and Interest Abatements
- Administrative Appeals
- Delinquent Returns
- Trust Fund Recovery Penalties
- Statute of Expiration Defense
- FOI (Freedom of Information Request)
- Collateral and Closing Agreements
If any of the above terms are unfamiliar and you would like to learn more about any of them, please click on the following link to the Technical Issues page where these topics and many more are discussed in more depth.
My representation fees for the resolution of your tax controversy are based upon a standard hourly rate for my time preparing your case and meeting with IRS or State employees, plus direct expenses such as travel, parking, fax, copying, etc.
For preparing and negotiating Offers in Compromise for individual wage earners for the IRS, I can fairly well estimate what likely will be the total cost. For businesses and complex financial situations, it is far more difficult – but we should be able to give you a range. The fees for representing you in an Offer in Compromise (as well as for most other tax controversies) are based on my hourly rate plus actual costs.
For discussing your potential eligibility for an Offer in Compromise, my initial brief consultation regarding your likely qualification for an OIC by telephone or at my office is free. First, however, you first need to complete and Email me the Offer in Compromise Questionnaire.
If we decide that I will be representing you, I will E-mail you an Engagement Letter and Power of Attorney to review and sign.
Dick Norton , EA
Tax Resolution Specialist