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Pursuant to IRC § 7811 an independent office called the Office of the Taxpayer Advocate is empowered to conduct a fast investigation of a tax collection problem, including abusive or unfair tax collection, and if necessary issue an order for the IRS collection officer to cease collection activities, such as levy or wage garnishment. And, the taxpayer advocate may order the return of seized assets.
The Advocate may issue such an order if, in the view of the Advocate, "the taxpayer is suffering or about to suffer a significant hardship as a result of the manner in which the internal revenue laws are being administered by the (revenue officer)."
Factors that the Taxpayer Advocate will consider include:
Ã Whether or not there is an immediate threat of adverse action;
Ã Whether there has been a delay of more than 30 days in resolving the taxpayer's account problems;
Ã Whether the taxpayer will have to pay significant costs (including legal fees) if relief is not granted; or
Ã Whether the taxpayer will suffer irreparable injury, or a long-term adverse impact, if relief is not granted.
[IRC § 7811(a)]
The help of the Taxpayer Advocate is initiated by the filing of IRS Form 911, Request For Taxpayer's Assistance Order. The form may be faxed to one of the various offices of the Taxpayer's Advocate, or Taxpayer's Assistance offices, located around the country. The taxpayer may have his attorney initiate such action, in which case the attorney will require the taxpayer's signature on a Power of Attorney permitting the IRS to discuss the matter with the attorney.
In clear-cut cases of abusive collection this remedy may work quite well. One downside is that the reaction time of the Taxpayer's Advocate may not be fast enough to stop a pending seizure, levy or lockup. The request for the order is first screened by an IRS employee, then turned over for managerial review, then assigned to a case worker, who will contact the relevant revenue officer. All of this may take from a couple of days to a week or more.
KEY BENEFIT: The advantage is that it is relatively inexpensive in terms of legal fees.
The offer-in-compromise option is discussed in detail at this website; click on Offers-In-Compromise (at top of page).
In a nutshell, an offer is made for a settlement of the claim by submitting IRS Form 656. The offer of settlement may be made on the ground that the taxpayer does not have the financial ability to pay the full liability, or there is doubt about the taxpayer's legal liability to pay the claim, or where under the circumstances it would be unfair to force the taxpayer to pay the claim.
KEY BENEFITS: A key benefit of making an offer using this method is that the IRC requires that all tax collection activity stop while the offer is being considered by the IRS. The average settlement nationwide is 15 cents on the dollar.
In many cases taxes, interest and penalties may be discharged in a Chapter 7 bankruptcy, or paid out over a three-to-five year court approved payment plan (based on the taxpayer's ability to pay) in a Chapter 13 bankruptcy. This option is discussed in more detail at this website.(scroll up and click on "Learn About Your Rights." "Discharge" means to erase ... in other words, you will never have to pay the discharged taxes. In some cases not all of one's income taxes may be discharged.
The very instant your bankruptcy petition is filed the tax collector (yes ... even the IRS!) must cease all collection activities. A kind of an invisible shield called the "automatic stay" surrounds you. No levy, lien, seizure, lockup or harassment to pay is allowed. Your bank account, paycheck, car and other assets are protected. The degree of protection varies according to each individual's particular circumstances.
Discharging income taxes in bankruptcy is tricky, and many bankruptcy lawyers do not know how to do it. Your odds of a successful discharge of taxes in bankruptcy are better if you select one of the Tax Help Lawyers from this web site.
KEY BENEFITS: A key benefit to either Chapter of bankruptcy is that it immediately halts all tax collection activity. And, it usually erases all or a large portion of delinquent taxes.
In any situation where the IRS is about to levy on a bank account, attach a paycheck, file a lien, or take other tax collection action, the taxpayer has the right to request a hearing by an independent IRS appeals officer. This hearing is called a "due process" hearing.
At least 30 days prior to performing the threatened collection action the revenue officer must give the taxpayer notice of his or her right to a hearing. If the taxpayer does not make the request within the 30 days of date of the NOTICE OF INTENT TO LEVY the right to the hearing is waived (note, if you wait until you receive the actual Notice of Levy, it is too late to request a due process hearing; however, you can still "appeal" the collection. See below).
The request is initiated by filing IRS Form 12153, "Request For A Collection Due Process Hearing." Pursuant to Internal Revenue Manual § [5.1] 9.1, "The taxpayer is asked to file the request for the hearing with the employee or function initiating the action. Cases assigned to the Collection Field function will have the assigned revenue officer's name and address listed on the Collection Due Process (CDP) hearing notice."
If adverse to the taxpayer, the decision of the appeals officer may be appealed to the U.S. Tax Court or other court of competent jurisdiction. This process potentially may tie up the collection activities for months or years.
The things that the appeals officer may consider include a broad range of issues, including illegal collection techniques, abusive assessments or collection actions, the taxpayer's liability and legal defenses to liability, and alternatives to collection, such as installment plans and offers-in-compromise.
KEY BENEFITS: A key benefit to filing for a due process hearing is that all collection activity must cease, unless the IRS has good reason to believe the taxpayer may be attempting to transfer or conceal assets. And, anything illegal or unjust about the lien or levy will be reviewed by a neutral arbiter.
Needless to say, in most cases it will be prudent for the taxpayer to be represented by legal counsel at the hearing.
If the request for a due process hearing is untimely (not filed within 30 days of the notice of intent to levy or file a lien) the taxpayer may still file a collection "appeal," or request an "equivalency" hearing ("CAP". However, in both cases continued collection activity is within the discretion of the IRS, and there is no appeal to court if the taxpayer does not like the ruling.
IRM § [5.1] 1.7 05/27/99
1. IRC 6304 requires the IRS to comply with certain sections of the Fair Debt Collection Practices Act (FDCPA). These deal with:
2. This law applies to contacts with all taxpayers, including corporations and partnerships.
3. Violations of IRC 6304 could subject the IRS to civil action (IRC 7433) by the taxpayer.
1. Some contacts require the taxpayer's consent, first. These include:
A. contacting the taxpayer at any unusual time or place, or a time or
place an employee knows or should know, is inconvenient to the taxpayer,
B. contacting the taxpayer at work, if there is reason to believe the employer does not allow this,
C. directly contacting a taxpayer who has a known, authorized representative or one that can be readily identified.
D. If the representative does not respond in a reasonable time, they can be bypassed. See Section 1.10 of this chapter. Also the taxpayer can be
contacted directly if the representative consents to the employee's direct contact.
E. If the contact is authorized by a court.
2. Employees can generally assume that it is convenient to contact the taxpayer after 8:00 a.m. and before 9:00 p.m. local time at the taxpayer's location, unless there is reason to know otherwise.
Awareness that the Taxpayer has a Representative
1. An IRS employee is considered to know about the representative if the taxpayer says there is one. This can be written or oral. If the taxpayer is represented:
A. ask for a written power of attorney or disclosure authorization form,
B. ask the taxpayer to provide the name and address of the representative
2. There may be doubt whether a person still represents the taxpayer or an issue is covered. If so contact the representative and ask.
If the IRS employee does not have the power of attorney or some other written authorization, the representative may be contacted, but no more can be disclosed than what is authorized in IRC 6103(k)(6).
Promoting Public Confidence
1. It is IRS policy not to use methods which are threatening or harassing to the public. See Policy Statement P-1-1. IRC 6304 prohibits employees from harassing, oppressing, or abusing any person in connection with the collection of any unpaid tax.
2. The following actions are considered violations:
A. the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person,
B. the use of obscene or profane language to abuse the hearer or reader,
C. causing a telephone to ring or engaging any person in telephone conversation with the intent to annoy, abuse or harass any person at the called number,
D. placing telephone calls without meaningful disclosure of the caller's
identity, except as similar to rules in Section 804 of the FDCPA.
If the telephone call is only for the purpose of acquiring location information about the taxpayer, the employee cannot:
E. tell any third party that they are an employee of the IRS, or
F. provide their title (R/O, TE, etc.) to the third party unless , that information is requested by the third party. "Location information" is defined as the taxpayer's place of abode and phone number at such place, or place of employment.
Installment Agreements are arrangements whereby the Internal Revenue Service allows taxpayers to pay liabilities over time. Only agreements that provide for full payment of liabilities may be granted. During the course of agreements, penalty and interest continue to accrue. No levies may be served during installment agreements. For further information on this remedy see the IRS Installment Agreement Handbook.
KEY BENEFITS: Once an installment agreement is entered into, the IRS is barred from collection activity. And, typically collection is halted while the agreement is being negotiated, if the taxpayer is acting in good faith.
The IRS may designate your account as "Currently not collectible," designated as Collection Status Code 53. This is sometimes referred to as the account being "53'd." This means the IRS is convinced that collection against you is not possible without creating an undue hardship, or is simply not collectible at all, and so all collection efforts are stopped until there is a change of circumstances allowing collection to resume. For further information about this remedy, visit the Internal Revenue Manual.
© The Morgan D. King Organization 2000