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How to Survive the IRS Collection Process

IRS

The Internal Revenue Service’ Collection Process begins with this mission “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all”.

If we’re going to digest every word from this statement of commitment, people who are going through financial difficulties and struggling to pay the taxes they’re due and owing, may find “light at the end of this tunnel.”

But, just like any other debts, you ought to face it! Take charge and deal with it diligently and reasonably! How?Pretty simple, know your rights and your benefits that you are all entitled to as a taxpayer.

The diligent part can be achieved by knowing the law; taking time to read IRS’ literatures; visit their website, www.irs.gov, and/or by calling their 1-800 numbers, and find available relief that will ease your burden. You must also act and think reasonably too; this part begins after contacting them about your account. Regardless, if it is a balance from your previous returns, or a miscalculation/miscomputation; or any kind of auditing and even delinquencies on your tax payments, you have to communicate with them in any form. Write them, call them; make efforts to reach them out and let them know your issues, your situation and the means you have in your hand, then work out a plan that you can afford.

The IRS Collection Process may begin by:

o Contacting you by telephone;

o Assign a revenue officer to resolve your account, and that officer may contact you in person and/or;

o Take enforced collection account to prevent possible enforcement action.

Keep in mind that you have the right to be treated professionally, fairly, promptly and courteously by IRS employees and Private Collection Agencies that they partnered with.

IRS emphasizes among others your right to:

o Disagree with your tax bill. You may write, call or visit your local IRS office;

o Complain on the IRS employee who’s handling your case/account, through that employee’s manager;

o Appeal on most IRS’ actions;

o Have your case transferred to a different office in the event you move state of residency;

o Be represented by an attorney or a designated agent;

o Receive receipts for any payments you make.

For more details on your rights, please refer to Publication 1, Your Rights as a Taxpayer, http://www.irs.gov/pub/irs-pdf/p1.pdf

And, when corresponding to IRS to dispute or complain on anything; they encourage taxpayers to make copies of the bill or statement that is in dispute. Always keep one original (authenticated by your specimen/signature) for your records. Gather all documents needed and explain your concerns in your letter, be straight forward and specific, then send your correspondence, along with all its attachments through a certified mail.

If you want to designate someone for your behalf, whether it’s an attorney, a designated agent, or a family member, or in the case of business an authorized employee, general partners or bona fide officers; you may have to fill up Form 2848, Power of Attorney and Declaration of Representativehttp://www.irs.gov/pub/irs-pdf/f2848.pdf. And, you may also authorize an individual who receive or inspect confidential material but not represent you by filling out Form 8821, http://www.irs.gov/pub/irs-pdf/f8821.pdf, also known as Tax Information Authorization.

Below are the options you might want to consider in seeking relief from the collection process:

1. Low Income Taxpayers Clinics (LITCs). LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for fee, or for a nominal charge. The clinics also provide tax education and outreach for taxpayers with limited English proficiency. For list of clinics in your area, you can check on Publication 4134, Low Income Taxpayers Clinics,http://www.irs.gov/pub/irs-pdf/p4134.pdf.

2. Innocent Spouse Relief. If you are married, or previously married and you owe taxes with your spouse and you feel you are actually not responsible for the debts incurred under your names. IRS may grant you a relief that is called Innocent Spouse Relief. But you have to file a request, Form 8857, Request for Innocent Spouse Relief, http://www.irs.gov/pub/irs-pdf/f8857.pdf. But, you must file within 2 years after the first date that the IRS attempted to collect the tax following July 22, 1998.

3. Request for an Installment Agreement. Installment Agreement allows taxpayers who owe the IRS to make a small amount of payments that they (taxpayers) can manage. To qualify for the agreement, an enrollment fee would be assessed on taxpayers’ balance, along with interests and penalties. Write to IRS and attached Form 9465, Request for Installment Agreement, http://www.irs.gov/pub/irs-pdf/f9465.pdf.

4. Request a Temporary Delay in the Collection Process. IRS can wait if you’d let them know that you are suffering from serious financial constraints. They may temporarily delay the collection process until your financial condition improves. But, keep in mind that even if they delay, interests and penalties will still be applied to your balance, or file a Notice of Federal Tax Lien.

5. Apply for an Offer in Compromise. The Internal Revenue Service may accept an Offer in Compromise (OIC) to settle unpaid tax owing for less than the full amount of the balance due. This applies to all taxes, including any interest, penalties, or additional amounts that may incur under the Internal Revenue laws. The OIC gives taxpayers an option if they are unable to pay their tax debts in a lump sum or Installment agreement, and have exhausted all other payment arrangements. An OIC submitted an application fee of $150.00 and a non-refundable payment of 20% of the offered amount, and the remainder balance to be paid in 5 installments from the notice of acceptance. Forms needed for OIC include, but not limited to:

o Form 656, Offer in Compromise, http://www.irs.gov/pub/irs-pdf/f656.pdf

o Form 656-A, Income Certification for Offer in Compromise,http://www.ct.gov/drs/lib/drs/offersofcompromise/ct-656a.pdf

o Form 656-B, Offer in Compromise Booklet, http://www.irs.gov/pub/irs-pdf/f656b.pdf

o Form 433-A, Collection Information for Wage Earners and Self-Employed Individuals, http://www.irs.gov/pub/irs-pdf/f433a.pdf

o Form 433-B, Collection Information for Businesses,

http://www.irs.gov/pub/irs-pdf/f433b.pdf,

o Publication 1660, Collection Appeal Rights, http://www.irs.gov/pub/irs-pdf/p1660.pdf .

6. Taxpayer Advocate Service. A special program from an independent organization designed to help taxpayers who are experiencing economic harm; who are seeking help in resolving tax problems that have not been resolved through a normal channel, or who believe that the IRS collection system and procedure failed to work as it should.

Bankruptcy doesn’t cover tax liens and arrearages. If you owe IRS money, they are governed to:

o File a Notice of Federal Tax Lien;

o Serve a Levy;

o Serve a Summons;

o Assess trust fund recovery penalty.

It takes 10 years after tax is assessed before the IRS release tax liens automatically. They will issue a Certificate of Release of Federal Tax Lien if all predetermining conditions were met.

IRS encourages a taxpayer who had precedent of overdue taxes to:

o Lower number of allowances (See Publication 919, How do I Adjust My Tax Withholding, http://www.irs.gov/pub/irs-pdf/p919.pdf);

o Take advantage of Electronic Federal Tax Payment System (See Publication 966, Electronic Choice to Pay All Your Federal Taxes, http://www.irs.gov/pub/irs-pdf/p966.pdf) ;

o Increase Estimated Tax Payments (See Publication 505, http://www.irs.gov/pub/irs-pdf/p505.pdf);

o For Employers, check out Publication 15, Circular E, Employer’s Tax Guide, http://www.irs.gov/pub/irs-pdf/p15.pdf.

Never be scared in contacting the Internal Revenue Service. Be brave and bold to assert your rights and if you are really financially, the IRS can help. But, they won’t know your situation, until you take the initiative for yourself.

For more of these, please check out, Publication 594, The IRS Collection Process, http://www.irs.gov/pub/irs-pdf/p594.pdf.