As discussed in our February 14, 2022 Buzz, IRS enforcement has and will continue to become more visible to taxpayers and practitioners.
Even before the Covid-19 pandemic, many individuals were surprised to find out that the IRS operates in the field. And now, after a more than two-year hiatus prompted by the pandemic, at the end of June 2022, IRS Revenue Officers resumed field visits to individual taxpayer’s homes and to business taxpayer’s offices to collect delinquent tax and secure delinquent returns. Thus, for taxpayers with significant overdue tax liabilities and multiple unfiled tax returns, there is a real likelihood of an unexpected visit from the IRS.
Naturally, for taxpayers facing such a surprise, receiving this knock on the door will result in considerable stress. Nonetheless, to paraphrase the Stoic philosopher Epictetus, the imagined anxiety may be worse than the real tax problem. Even if the role of the Revenue Officer is to collect the tax, interacting with a specific IRS employee familiar with the taxpayer’s matter actually provides the taxpayer with the opportunity to understand their options and begin the path towards putting their tax problems behind them.
During this initial visit, the IRS Revenue Officer will first identify themselves. The Revenue Officer will show the taxpayer their official credentials (called the pocket commission) as well as their HSPD-12 Federal ID card. Taxpayers should call the IRS Field Employee Verification Center at 1-844-809-4566 to verify the Revenue Officer’s identity.
The Revenue Officer will ask for immediate (or part) payment of all delinquent accounts. The IRS will never ask for payment by prepaid debit card, gift card or wire transfer. If tax returns are delinquent, the IRS will request their immediate filing. Since most taxpayers visited in-person are unlikely to be able to make a full payment, the goal of the Revenue Officer then during this initial visit will be to secure a financial statement and discuss other collection alternatives. At a minimum though, the Revenue Officer will attempt to secure bank account information and other information regarding the taxpayer’s assets, other levy sources, and employment and wage information. If the taxpayer does not wish to– or is unable to speak at the time—the Revenue Officer will leave their contact information and ask the taxpayer to respond within two business days. It is important that the taxpayer responds. Otherwise, enforcement action will begin.
Taxpayers should always be cordial and respectful to the Revenue Officer because this initial encounter can establish the tone of future interactions. Taxpayers need to recognize that Revenue Officers wield a vast array of resolution alternatives which span the gamut from voluntary but manageable (e.g., installment agreements) to involuntary and consequential (e.g., wage garnishments and asset seizures). Although the nature of the job can be difficult, most Revenue Officers (and other IRS employees) are well-intentioned and want to arrive at a fair solution to resolve the tax liability. Revenue Officers though, expect taxpayers to satisfy their obligations and commitments to provide financial information and make agreed-upon forward progress to agreeing to a voluntary collection alternative (such as a full or partial pay installment agreement, submitting an offer in compromise, and/or requesting currently not collectible status). If not, Revenue Officers are trained to distinguish between “can’t pay” as opposed to “won’t pay” situations and, when necessary, will take involuntary enforcement action.
In almost all instances, the taxpayer should not attempt to complete a financial statement “on the spot.” If the taxpayer states at any time during an interview that he or she wishes to consult with an authorized representative (such as an attorney, CPA, or other individual enrolled to price before the IRS), the IRS employee will immediately suspend the interview to permit such consultation. In these circumstances, the IRS will allow a minimum of 10 business days for the taxpayer to consult and for the authorized representative to contact the Revenue Officer. Once a representative is retained, with very few and infrequent exceptions, the IRS must speak with the authorized representative and not directly with the taxpayer.
The taxpayer and representative will work together to understand the advantages and disadvantages of the various voluntary collection alternatives discussed above. In assisting the taxpayer with preparing the financial statements (and responding to any other IRS information requests), the representative will make sure that the information is well-documented and supportable.
It is important that information submitted to the IRS not raise uncontemplated new questions. Further, often to support the taxpayer’s desired collection alternative, the taxpayer needs to provide information beyond what is directly asked in order to present a full picture of the taxpayer’s financial situation and its nuances.
The IRS is hiring and has hired many new Revenue Officers over the past few years. During the period that field visits were suspended, many of these new Revenue Officers have been working without being able to perform one of the most consequential aspects of their job (i.e., the field visit). It is entirely possible that as these individuals learn and grow into their job, they might not possess the judgment and willingness to exercise administrative discretion possessed by more seasoned Revenue Officers. Taxpayers must be vigilant about exercising their rights and not agreeing to a premature and not viable collection alternative.
At a minimum, before the IRS will grant any of the voluntary collection alternatives, the taxpayer must have submitted all delinquent tax returns. Thus, these should be prepared and submitted.
It is always desirable for the taxpayer to initiate contact with the IRS. If a case has not been referred to a local office, the IRS Automated Collections System (ACS) will likely be able to assist with a payment arrangement.
Taxpayers should always make sure the IRS has their current address. Taxpayers may change their address by submitting a Form 8822 to the IRS. Otherwise, taxpayers who have moved since the taxpayer filed their last tax return may not receive important notices regarding potential liens and levies.
Taxpayers should begin preparing the necessary financial statements and gathering appropriate documentation (including developing the non-quantitative factors) to understand the advantages and disadvantages of the various voluntary collection alternatives.
Taxpayers with significant tax liabilities should consider retaining a representative experienced in dealing with IRS collection matters and submitting a Form 2848 (Power of Attorney and Declaration of Representative) to the IRS. As indicated above, once this is on file, the initial field visit by the IRS Revenue Officer will be to the representative and not to the taxpayer. In this regard, representatives should also develop procedures and instruct office staff with how to handle such visits.
If you need assistance with the IRS, do not hesitate to contact H.T. Astrov or any of our ZHF professionals.