OFFICIAL
DOCUMENTS
Tax
Increase Prevention and Reconciliation Act of 2005
("TIPRA")
DEALING WITH DELINQUENT TAXES
|
|
TOPICS
TAX COLLECTION INTERVENTION
|
|
TOPICS
SPOUSAL DEFENSES
|
|
TOPICS
OTHER PROBLEMS & REMEDIES
|
|
TOPICS
OBTAINING TAXPAYER'S IRS RECORDS
|
|
TOPICS
SUING THE IRS
|
|
TOPICS
[Under
construction]
- Generally
- Violation of statute or law
(wrongful levy, etc.)
- Violation of Fair Debt Collection
Act
- Suit for refund
- Violation of bankruptcy
discharge
- Other grounds for suit
OTHER TOPICS
|
|
TOPICS
A Guide to the
Taxpayer's Rights & Remedies
For Handling Delinquent Taxes And
Tax Collection Emergencies
1.
DEALING WITH DELINQUENT TAXES
|
|
Many a taxpayer suffers from the
emotional stress and financial upheaval caused by
delinquent tax debts. Fortunately, in a great many cases
there are legal remedies for such situations, and quite
often there is a remedy that allows the taxpayer to get
rid of the tax debt and obtain a financial "fresh start."
If the taxpayer has a great deal of equity in valuable
real or personal property, it may be difficult to erase
past tax debts without giving up some of that wealth. But
for the vast majority of middle-class Americans who have
relatively little equity in property, it is often
possible to escape the tax debt with no loss of assets or
income.
In any event, a taxpayer with
unpayable old tax debts is certainly well advised to
explore whether any of the legal remedies may be the
perfect solution for his or her problem. And,
consultation with a tax expert about those solutions is
always a good idea. After all ... talking to a tax expert
may cost a few dollars, but delay or avoidance may cost
you everything!
There are typically four problems
facing the taxpayer who owes, or is alleged to owe,
delinquent taxes for past years. These are, how to
convince the IRS the taxes are not owed; how to make the
tax liabilities go away; how to stop tax collection
levies or other seizures; how to get rid of tax
liens.
Associated with those four issues may
be a host of other ramifications, problems, or solutions.
The taxpayer has eight options available, any one or
several of which may offer a remedy to the
problem.
Briefly, the options are:
1. Pay the taxes in a lump
sum
2. Wait out the statute of limitations
3. Challenge the liability
4. Do an installment plan
5. Do an offer-in-compromise
6. Seek non-collectible status
7. Discharge the taxes in bankruptcy
8. Seek protection from abusive collection
Below is a discussion of the most
frequently available ways of solving delinquent tax
problems.
Pay off the liability
in a lump sum
Paying the liability in full is, of course, an obvious
option. However, it is equally obvious that had the
taxpayer the sufficient means to pay the tax he or she
probably would have done so, and would not be exploring
other remedies or visiting the office of a tax
professional for help.
The most frequent reason a taxpayer cannot pay the
liability is not enough money. In fact, many taxpayers
would dearly love to pay the tax, and they often have the
money to do so, but they don't have enough money to pay
the interest and penalties that have accrued over a
period of time.
Some taxpayers haven't paid the liability because they
believe they should not be liable for the tax. For
example, a taxpayer who has not file a tax return may
have been assessed a bigger tax than he or she would have
had the return been filed. Perhaps the taxpayer is unable
to file the return because the records have been lost or
destroyed. Or, the taxpayer may believe he or she was not
a "responsible officer" for a corporation's payroll
taxes, or a spouse was an "innocent spouse" and should
not be required to pay the taxes incurred due to the
other spouse's incompetence or dishonesty. Thus those
taxpayers object to the assessment, and seek to challenge
it somehow.
A few lucky ones admit they owe the taxes and can get
the money. They may borrow it, or perhaps have obtained
the benefit of a windfall enabling them to pay the
tax.
The more typical situation, however, is the taxpayer
who either disputes the assessment, or can't pay it. For
those taxpayers, the first option, paying the tax, is not
a feasible option.
KEY BENEFITS:
Paying off the liability in a lump sum ends the
problem. The longer the liability remains unpaid, the
more interest and interest on the interest accrue. Paying
it saves the costs of paying a professional to haggle
over it, and avoids the necessity to use other, perhaps
less desirable remedies such as bankruptcy or litigating
the liability.
MORE: about
paying off
the liability
LAWYERS' REFERENCES:
FORMS:
The Statute of Limitations
Assessment - Three years from date return is filed
Collection - Ten years from date of assessment
In most cases the IRS does not have an unlimited
amount of time to assess or collect a tax. In a nutshell,
the IRS must assess a tax within three years of the
taxpayer filing a tax return, and must collect it within
ten years after the assessment. These periods of time may
be tolled, or extended, by certain events.
The statute of limitations of the enforceability of a
tax lien is the same as for the collection of the tax,
i.e., ten years from date of assessment.
KEY BENEFITS:
MORE: about IRS
statutes of limitations
LAWYERS' REFERENCES: IRS
MANUAL
FORMS:
Challenge the liability
Taxpayers frequently have legal
defense to tax debts. There is a variety of situations in
which such a legal defense is more likely to appear. The
taxpayer may intuitively feel that he or she should not
be assessed a certain tax liability. However, it usually
takes an experienced tax professional, such as a lawyer
or enrolled agent, to properly identify and take
advantage of legal defenses. We discuss a few of the most
common defenses, below.
1. File the tax
returns
It is not uncommon for a taxpayer to receive a notice
of intent to assess taxes for a year for which he or she
neglected to file a return. The IRS often obtain income
information on the taxpayer from sources other than the
tax return. With that information the IRS will prepare
and file a blank substitute for return, and then soon
after assess income taxes based on the information.
However, it is also common for the information to be
incorrect or fail to reflect exemptions and deductions
available to the taxpayer. In those situations, the
simplest solution is to file the tax return and thereby
provide the IRS with the correct income and expense
information. In most cases, the IRS will adjust its
proposed assessment to reflect the data provided by the
taxpayer on the return, even if the return is late. Of
course, the IRS has three years from the date of filing
the return to conduct an audit and, if justification is
found, assess additional taxes
2. Responsible
officer liability
A person who has or supervises employees and who is
supposed to withhold federal income taxes may be
personally liable for those taxes if they are not
withheld or paid, and if the person qualifies as a liable
person. Such a person is often referred to as a
"responsible person" or "responsible officer."
Internal Revenue Code § 6672 authorizes
assessment of liability against a person if the right
circumstances exist. That section provides that -
Any person required to
collect, truthfully account for, and pay over
any tax imposed by this title who willfully
fails to collect such tax, or truthfully
account for and pay over such tax, or willfully
attempts in any manner to evade or defeat any such
tax or the payment thereof, shall, in addition to
other penalties provided by law, be liable to a
penalty equal to the total amount of the tax
evaded, or not collected, or not accounted for and
paid over.
A person who is operating a business as a sole
proprietorship is easily found to be personally liable
for unpaid payroll taxes. However, if the company is a
corporation and the individual is merely an employee or
officer of the corporation, such individual may have
defenses to personal liability. This is because, in order
to assess an individual for a corporate payroll tax
liability, the IRS must prove two things; that the
individual was authorized to collect and pay the taxes,
and that the individual deliberately failed to do so. In
many cases this is not easy.
KEY BENEFITS:
MORE: about
responsible
officer liability
LAWYERS' REFERENCES:
FORMS:
Link to IRS Manual
3. Audit
appeal
Out of the clear blue you receive a notice of
deficiency or a notice of proposed assessment. This
document notifies you that the tax collector intends to
sock you for a big additional tax you didn't know you
owed. Or, perhaps you were expecting it, but you don't
think it's fair or correct.
These notices give you so many days to file an appeal
or object to the proposed tax. If you miss your deadline
for filing the appeal or objection, the only way you'll
get out of the problem is to pay it, reduce it with an
offer-in-compromise, or erase it in a bankruptcy.
If you decide to appeal or object, you're wise to
consult first with an enrolled agent, tax attorney, or
bankruptcy attorney first. And, in many cases you're much
better off employing such a professional to stand between
you and the tax collector!
KEY BENEFITS:
MORE: about your
audit rights
LAWYERS' REFERENCES:
FORMS:
4.
Innocent spouse defenses
5. Suit to obtain civil judgment
6. Fraudulent
transfer / nominee lien
Installment agreements
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 payments, penalty and interest continue to
accrue. No levies may be served while an installment
agreement is in effect. The taxpayer may have up to three
years to pay the liability. The installment agreement is
IRS Form 433-D.
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.
MORE: about INSTALLMENT
AGREEMENTS
LAWYERS' REFERENCES:
The full IRS procedure and policy on installment
agreements may be found at the IRM, Installment
Agreement Handbook. The IRC reference to
installment agreements is IRC § 6159. IRS procedure
for defaulted
installment agreements. The IRS checklist
for Compliance and Customer Service Managers. Guaranteed
installment agreements and completing
Form 433-D.
FORMS:
Request for installment agreement, IRS
Form 9465.
Online
request for payment plan
Offer-In-Compromise
In a nutshell, an offer is made
for a settlement of the claim by submitting
IRS
Form 656, with personal
financial statement IR Form
433-A. A taxpayer in
business for himself must also attach IRS
Form 433-B. 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.
MORE: about Offer-In-Compromise
LAWYERS' REFERENCES:
Application fee ($150 with submission of
Form 656)
Beginning November 1, 2003,
a $150 application fee or Form 656-A, "Income
Certification for Offer in Compromise
Application Fee" must be submitted with the
Form 656. The $150 fee is required unless the
offer is based solely on doubt as to
liability, or the taxpayer's total monthly
income falls at or below income levels based
on the Department of Health and Human
Services poverty guidelines. Taxpayers who
claim the poverty guideline exception must
certify their eligibility using Form 656-A.
The poverty guideline exception applies only
to individuals.
Summary
of OIC
IRS
OIC
Handbook
Code
of Regulations
IRS
OIC Expense standards
(Collection
Standards)
Where
to File
FORMS:
IRS
Form
656
| Form
433-A
| IRS
Form 433-B
Appealing
the rejection of an offer
Bankruptcy
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. "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.
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.
More about Discharging
Taxes
LAWYERS' REFERENCES
IRS
Bankruptcy Handbook
IRS
Publication 908
2.
TAX COLLECTION INTERVENTION
|
|
The
IRS Explains The
Collection Process
Fair Debt
Collection Act
The Internal Revenue Code, at § IRC 6304,
requires the IRS to comply with certain sections of the
Fair Debt Collection Practices Act (FDCPA). These deal
with:
- contacts regarding unpaid tax, and
- harassment and abuse of taxpayers.
This law applies to contacts with all taxpayers,
including corporations and partnerships. Violations of
IRC 6304 could subject the IRS to civil action (IRC 7433)
by the taxpayer.
Specifically, the statute prohibits the following
kinds of behaviour:
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.
Contacting Taxpayers
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.
Exceptions:
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.
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,
or
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.
CAUTION:
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
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. "The
Secretary may not engage in any conduct the natural
consequence of which is to harass, oppress, or abuse any
person in connection with the collection of any unpaid
tax."
EXCEPTION:
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.
KEY BENEFITS:
MORE: about Fair
Debt Collection
LAWYERS' REFERENCES:
Full text, Federal
Fair Debt Collection Practices Act: Public
Law
104-208,
110 Stat. 3009 (Sept. 30, 1996)
Full text of
statute 15
U.S.C. § 1692
Exempt
amounts in tax levy
FORMS
The IRS Restructuring & Reform Act of
1998
The Internal Revenue Service
Restructuring and Reform Act of 1998 is a major piece of
legislation overhauling the way the IRS governs itself
and the way in which the IRS interacts with
taxpayers.
KEY BENEFITS:
The R&R Act codified
important new protections for taxpayers. Collected
together these new rights are sometimes called The
Taxpayers' Bill of Rights III. Among these are, the right
to appeal proposed tax levies or recent tax liens; the
right to sue the IRS for damages for violation of
taxpayer rights; extends the attorney-client
confidentiality privilege to include federally authorized
tax practitioners (called "enrolled agents"); expands
grounds for "innocent spouse" relief; expands the
offer-in-compromise program; and other enhanced
protections for taxpayers.
MORE: about
LAWYERS' REFERENCES:
Congressional
testimony re the R&R
Act ("Uncle Fed's
Tax Board")
IRS link:
Complete
Text of R&R Act
Summary
of Taxpayers' Rights under the R&R
Act
Short
explanation of R&R
Act by Douglas A.
Fleming
IRS
Collection Procedures under the R&R
Act
Taxpayer
Bill of Rights
III (based on the
R&R Act)
Exempt
amounts in tax levy
FORMS
IRS
Form 12153
request for due
process hearing
Due Process Hearings
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). "Timely
mailed constitutes timely filed if the taxpayer's
request for a CDP hearing is correctly addressed to the
IRS office listed in the CDP hearing notice or if that
address is not known, to the Area Director serving the
location of the taxpayer's residence or principal place
of business." IRM § 5.1.9.3.2 (Part 5, Chapter 1,
Sec. 9 "Collection Appeal Rights."
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.
1. LEVY DUE PROCESS HEARING
The IRS begins the process of
levying on the taxpayer's funds by sending a warning.
There are typically three warning letters. The first two
are sent out from the Service Center and are referred to
as "CP 504." The letters "CP" mean computer paragraph.
Both of these are entitled "Final Notice of Intent To
Levy." The first one is sometimes called the "soft" CP
504, and the second is the "hard." notice. Either of
these triggers a 30-day period in which to file a request
for a due process hearing. The third letter is form 1058
and comes from the revenue officer, once the Service
Center has assigned it for collection. This letter also
triggers a 30-day request period. "Timely mailed
constitutes timely filed if the taxpayer's request
for a CDP hearing is correctly addressed to the IRS
office listed in the CDP hearing notice or if that
address is not known, to the Area Director serving the
location of the taxpayer's residence or principal place
of business." IRM § 5.1.9.3.2 (Part 5, Chapter 1,
Sec. 9 "Collection Appeal Rights."
The request is supposed to be
sent to the address from which the notice came.
Accordingly, where the taxpayer receives a notice of
intent to levy coming from the respective service center,
the request for hearing should be sent to that address,
certified. Similarly, if the letter comes from the
revenue officer the request should be sent there.
2. LIEN DUE PROCESS
HEARING
The taxpayer has the right to
request a "due process" hearing to contest the validity
of a tax lien. The request for the hearing must be made
within 30 days following the notice of the filing of the
lien. Note that unlike the notice of levy, which gives
the taxpayer the right to request the hearing before the
levy actually takes effect, the opportunity to request a
hearing for a lien follows the actual filing of the lien.
"Timely mailed constitutes timely filed if the
taxpayer's request for a CDP hearing is correctly
addressed to the IRS office listed in the CDP hearing
notice or if that address is not known, to the Area
Director serving the location of the taxpayer's residence
or principal place of business." IRM § 5.1.9.3.2
(Part 5, Chapter 1, Sec. 9 "Collection Appeal Rights."
3. IMPORTANT: Submitting the
request for due process hearing form must be carefully
done:
- The exact type of tax and
exact tax periods must be indicated on the
form
- Before the IRS can
accomodate the taxpayer at the due process hearing the
taxpayer must be in compliance (i.e., have all tax
returns filed).
- The attorney's
power-of-attorney must precisely reflect the types of
tax forms, type of tax, and the precise tax periods at
issue.
- Any irregularities in the
request will be used by the IRS to deny the taxpayer's
remedies at the hearing
- The IRS will attempt to
conduct the hearing by telephone. You may insist on a
face-to-face hearing.
KEY BENEFITS:
MORE: about Due Process hearings
LAWYERS' REFERENCES:
IRM § 5.1.9 Collection
Appeal Rights
IRM
Manual section on requesting due-process
hearing
26 U.S.C. § 6320
(hearing after notice of lien) and § 6330 (notice of
levy): Collection. 26
U.S.C. § 6301 et
seq.
FORMS
IRS
Form 12153
Fill-in Request
for due process hearing
3. EQUIVALENCY
HEARINGS
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 (collection appeals process, or
"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.
KEY BENEFITS:
MORE: about equivalency hearings
LAWYERS' REFERENCES:
IRM
§ 5.1.9.3.5, Collection Appeal Rights, Part 5,
Chapter 1, Section 9.
FORMS
Non-collectible
status
The IRS may designate your account as "Currently not
collectible," designated as Collection Status Code 530.
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.
KEY BENEFITS:
MORE: about non-collectible status
LAWYERS' REFERENCES: INTERNAL
REVENUE MANUAL
TO REQUEST
NON-COLLECTIBLE STATUS 800-829-7650
Economic
hardship
FORMS: COLLECTION INFORMATION FORM 433-F
REQUEST FOR
TAXPAYER ASSISTANCE ORDER FORM
911
Taxpayer's
Advocates' Office
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:
à Whether or not there
is an immediate threat of adverse action;
à Whether there has been a
delay of more than 30 days in resolving the taxpayer's
account problems;
à Whether the taxpayer will
have to pay significant costs (including legal fees)
if relief is not granted; or
à 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 BENEFITS:
The advantage is that it is
relatively inexpensive in terms of legal
fees.
MORE: about the Taxpayer
Advocate
Service
LAWYERS' REFERENCES:
The national phone
number, and local phone numbers and fax
numbers of offices of the Taxpayers' Advocate may be
downloaded from IRS
Publication 1546
Reaching
the taxpayer's advocates office
Reform
Act of 1998 - Taxpayer Advocates
Who
can use TA office?
IRS web
site link
FORMS
IRS
Form 911
Violation of
bankruptcy stay
If you are in bankruptcy you have very good protection
from tax collection by either the IRS or a state tax
agency. This is because of the restraining order called
the "automatic stay" that arises the moment one files
bankruptcy. This protection prevents any kind of effort
to collect the tax. Levies on a paycheck or bank account
that have been filed must be dismissed.
If the taxes are dischargeable in bankruptcy, once the
bankruptcy is over and the taxpayer has received a
discharge, the taxes are erased and cannot be collected
in the future. If the taxing entity filed a tax lien
before the start of the bankruptcy, the lien will
survive, but only on existing assets, not future income
or property.
If the taxing entity attempts to collect the tax
during the bankruptcy, or attempts to collect a
discharged tax after the bankruptcy, the Bankruptcy Court
is empowered to severely sanction the taxing entity for
violating the taxpayer's automatic or permanent stay.
The taxing entity is, however, entitled to continue
other activities such as investigations and audits, as
long as they do not involve attempts to collect the
tax.
IRC § 7433 provides that, in the event of
negligent or willful violation of the automatic stay or
the permanent discharge, the aggrieved debtor/taxpayer
may sue in civil court [§ 7433(b)] for
actual damages, costs of litigation, and additional
statutory damages [§ 7433(e)(1)]: "If, in
connection with any collection of Federal tax with
respect to a taxpayer, any officer or employee of the
Internal Revenue Service willfully violates any provision
of section 362 (relating to automatic stay) or 524
(relating to effect of discharge) of title 11, United
States Code (or any successor provision), or any
regulation promulgated under such provision, such
taxpayer may petition the bankruptcy court to recover
damages against the United States."
REFERENCES: Judicial Proceedings, 26
U.S.C. § 7401 et seq.
KEY BENEFITS
File Chapter 13
petition
Make an
Offer-In-Compromise
Apply for an installment agreement
No levy on §
6334 property
No levy on § 6323 property
No levy on retirement
plan until pay-status
No sale of home without egregious
circumstances
3.
SPOUSAL DEFENSES
|
|
Is the taxpayer liable for spouse's taxes?
Community property
states
Imputed liability
Innocent
spouse defenses
Versions of innocent
spouse defense
Injured spouse
Separate
liability
KEY BENEFITS
MORE: about
innocent
spouses
LAWYERS' REFERENCES:
Brochure: IRS
Publication 971 - Innocent Spouse
Innocent spouse pursuant to Cal. Revenue and Taxation
Code Sections are:
1. 18533(b): Relief from Additional
Tax
2. 18533(c): Relief by Allocation of
Liability
3. 18533(f): Equitable Relief
4. 18534: Relief from Community Income
5. 19006(b): Relief by Court Order
6. 19006(c): Relief from Return Tax
2383 Processing Request for Innocent Spouse
Relief
All calls regarding Innocent Spouse relief
should be transferred to the Innocent Spouse Program
at (916) 845-7072.
FORMS: FORM 8857 Request
For Innocent Spouse
Relief
WHERE TO MAIL INNOCENT SPOUSE CLAIMS
(10/16/2007)
The processing of Forms
8857 Request for Innocent Spouse Relief (And
Separation of Liability and Equitable Relief) has been
centralized at the Cincinnati Compliance Campus
located in Covington, Kentucky. Completed Forms
8857, should be mailed directly to:
IRS-Stop
840-F
Innocent Spouse
PO Box 120053
Covington, KY 41012
Mailing completed
Forms 8857 to any other office will greatly increase
the length of time to process the
request.
The bankruptcy co-debtor stay
Transmutation and
other property agreements
KEY BENEFITS
MORE: about
transmutation
agreements
LAWYERS' REFERENCES:
FORMS:
4.
OTHER PROBLEMS & REMEDIES
|
|
Unfiled tax
returns
IRS
Assistance
Penalty abatement
KEY BENEFITS
MORE: about
penalty
abatement
LAWYERS' REFERENCES:
IRS
Handbook
FORMS:
Petition to Tax
Court
Remedies
for liens
KEY BENEFITS
MORE: about
LIENS
& LEVIES
LAWYERS' REFERENCES:
IRS
Handbook
FORMS:
Fraudulent transfers
and nominee liens
Abusive
trusts
Summons
LAWYER'S REFERENCE
IRM ENFORCEMENT
OF SUMMONS
Tax
Crimes
CRIMINAL
PROSECUTION FOR
VIOLATIONS
OF
THE
FEDERAL TAX
LAWS
Are you in danger
of going to prison?
In most cases taxpayers with
delinquent tax liabilities will not be subject to
criminal charges under the Tax Code. In the vast majority
of cases a delinquent taxpayer will not realistically
face incarceration in prison, particularly where the
errant taxpayer takes the initiative to resolve the
problem. Thus, in those cases the sooner the taxpayer
contacts a Tax Help Lawyer the better.
However, in some egregious cases the
U.S. Department of Justice will initiate criminal charges
which may result in a prison sentence.
The examination division or
collections division of the IRS may recommend a criminal
investigation with the IRS Criminal Investigation
Division (CID). The CID has the option of forwarding the
case to the Justice Department, or letting it "slide."
Many lower division recommendations to the CID for
criminal prosecution do not result in actual criminal
charges.
However, once an investigation is
initiated or criminal charges made the situation is
potentially very serious; the accused taxpayer is well
advised to contact a local The Tax Help Lawyer
immediately.
There are basically five acts which
may constitute a crime under the Tax Code. These are
-
1. Making a false statement to the IRS
or a Justice Department officer.
2. Failure to file tax returns (i.e.
failure to report income)
3. Willful attempt to evade or defeat
tax or tax assessment
4. Filing a fraudulent tax
return
Note that IT IS NOT A CRIME to fail to
pay the taxes; debtors' prison was done away with in this
country long ago. But failure to file the return may
result in criminal charges. Therefore even if the
taxpayer cannot pay the taxes it is a good idea to at
least file the tax return.
What is tax
evasion?
There are basically two kinds of tax
evasion. One is where the taxpayer attempts to evade the
proper assessment of tax by hiding income, making
fraudulent transfers of income or assets, or claiming
dummy deductions or expenses. Failure to report income by
failing to file the returns, or filing false returns are
forms of tax evasion. The IRS takes this kind of evasion
very seriously. The other kind is where the taxpayer has
honestly and fully reported all income, and filed honest
tax returns, but is trying prevent the IRS from
collecting the tax. In that situation the taxpayer may,
for example, try to conceal the location of his income or
assets so that the IRS can't seize them. He may deposit
his paycheck in a bank account under someone else's name,
for example, or purchase property in someone else's name.
Or, he may transfer title to his house to a relative,
etc. Although this kind of conduct can arouse the ire of
the IRS, it is more common and typically less serious,
depending on the degree of the evasion.
In either case, if the taxpayer comes
forward (comes in "out of the cold") and voluntarily
reenters the "system," that is, comes back into
"compliance" with the tax laws, it is rare for the
Government to undertake to seek any criminal sanctions.
An errant taxpayer can often gracefully come back into
compliance through the offer-in-compromise process, or a
Chapter 13 court approved payment plan.
Tax crimes are investigated and
prosecuted by the Criminal Investigation Division
("CID"). You may visit the CID
web site.
Inspector
General
The IRS Restructuring & Reform Act of 1998 created
the independent Office of the Treasury Inspector General
for Tax Administration ("OTIGTA").
If you believe you are being harassed or abused by an
IRS tax collector, consider filing a complaint with the
Treasury Inspector General for Tax Administration. This
is office is completely independent of the Internal
Revenue Service, and oversees criminal, wasteful or
abusive conduct on the part of any IRS employee.
REPORTING FRAUD, WASTE &
ABUSE
If you are aware of fraud, waste, mismanagement, and
abuse in the IRS
programs and operations, report it to the OTIGTA's
Hotline! This includes abuse or illegal activity by an
IRS revenue officer or other IRS employee.
What kinds of things should you
report?
Mismanagement or violations of law, rules, or
regulations by the IRS employees or contractors.
Mismanagement or violations of law, rules, or
regulations by the OTIGTA employees or contractors.
Confidentiality
Your complaint will be kept confidential if
it is received on the phone, through the mail, or in
person. We cannot guarantee confidentiality if you
send your complaint by e-mail (online submission).
Retaliation
Laws protect you from reprisals (any action taken
against you because you filed this complaint).
|
TELEPHONE
HOTLINE
to report tax collection abuse or illegal
activity
1 (800)
366-4484
|
FAX (703) 812-1724
ADDRESS:
Treasury Inspector General For Tax
Administration
Hotline
P.O. Box 589
Ben Franklin Station
Washington, D.C. 20044
KEY BENEFITS
MORE: about
the
inspector general
LAWYERS' REFERENCES:
FORMS:
Taxpayers' Bill of
Rights
KEY BENEFITS
MORE: about
taxpayers'
rights
LAWYERS' REFERENCES:
IRS
Summary
of Taxpayers' Rights
<
Morgan King's Library of Taxpayers' Rights & Remedies For
