Have you ever actually tried to call the IRS to discuss your tax problem? You’ll literally wait for hours before you get through to a human being. To add insult to injury, when you finally do get through to someone, you’re often told their computers are down and you’ll need to call back another time. It’s about that time you fight the urge to throw your phone out the window and instead decide to go down to the IRS office. But going down to the local IRS office isn’t any better either: often, you’ll have to wait half a day in line before you can actually speak to a customer service representative at the counter (who may or may not be able to assist you).
Over the last three years, Congress has cut the IRS budget by 30% and customer service has suffered the most in these cuts.
So, if it seems like the wait times to speak to someone at the IRS are way worse than they used to be: you’re right, they are.
What has not been cut back is enforced collection (liens, levies, seizures, and all the other scary stuff). The pendulum is swinging back from a kinder, gentler IRS to an IRS that wants to collect in any way possible. The IRS wants its Revenue Officers, sometimes called ROs, to collect as much as possible in the most efficient way possible. Unfortunately, what’s most efficient often involves frustrating your ability to appeal.
The Restructuring Act of 1998 provided that the IRS couldn’t levy a taxpayer without first giving them the right to an appeal hearing in front of a total independent Appeals Officer. For years, this was the process that insured you, the taxpayer, had the right to have your side fairly heard. In recent years, different IRS districts have adopted different policies and procedures that frustrate your right to appeal. Some IRS offices will even levy you while you’re waiting for your appeal, arguing that some years weren’t included in the appeal request (meaning they can go right on collecting). There is no consistency in these policies across the country.
Darrin Mish, a tax attorney in Florida, explained,
“I file [Collection Due Process Hearings] all the time from [Revenue Officers] . . .I’m not seeing [Revenue Officers] levy after I file a [Collection Due Process Hearing] or [Equivalent Hearing].”
A Collection Due Process Hearing, often called a CDP Hearing, is one of the most important tools a tax debtor has at their disposal. An Equivalent Hearing is, well, an equivalent hearing to a CDP that must be filed within one year of the IRS issuing a Notice of Intent to Levy. The difference between the two hearings is that while a taxpayer will get an Appeals Hearing with their request for Equivalent Hearing, the IRS may legally continue to levy. So, an Equivalent Hearing may not stop the collection action, while a CDP always has.
Historically, the IRS doesn’t levy people while they are in CDP status, even if some periods aren’t covered under that CDP request. This is holding true in Florida, where Darrin Mish practices, but what about the rest of the country?
Dan Pilla, President of the Tax Freedom Institute, explains what he’s seeing:
“My experience is they (the IRS) DO NOT levy while any CDP appeal is pending. But they can. Where you see it mostly is the employment tax cases, where prior CDP appeals produced no results. In that case, you’re dealing with a disqualified employment tax levy. Under 6330, they can levy on those.”
The IRS has always been very tough on back payroll taxes, much more so than they are even for the worst income tax cases. Where a taxpayer has had a prior Appeals hearing, but continues to accrue new payroll tax liabilities, you can expect the IRS to be hard-nosed. In situations like those, you should expect aggressive levy action.
Nathan MacPherson, a tax attorney in Anchorage, Alaska, explains:
“I have [Collection Due Process Hearings] in several of the states united and have had excellent results. Note that the collection prohibition is only statutory respecting the year(s) in [Collection Due Process Hearings]; general rule is no collection for any year if [Collection Due Process Hearings], but the RO and SO manager may agree to allow collection for non-[Collection Due Process Hearings] years if they determine it is warranted, such as tax protester, etc.”
In Darrin’s case, he does not run into the problem at all of a Revenue Officer continuing to levy while an Appeal is in place. Dan, who practices nationally, sees it only in Payroll Tax cases. Nathan sees the levying while an Appeal is proceeding only with people the IRS doesn’t like, like tax protesters (who are the folks the IRS dislikes the most in the tax debtor community).
Tax Crisis Institute practices in three of the most aggressive IRS districts in the country: central California, Southern California, and Las Vegas, Nevada. In these IRS districts, there has been a paradigm shift in the willingness to levy while a tax case is on appeal. In these districts, a Revenue Officer will levy a taxpayer if there is even one period outside of the CDP window.
In 1998, Congress passed the IRS Restructuring Act. This act was passed to stop IRS collection abuse that was running rampant throughout the country. This law stated that the IRS had to allow a collection appeal before they could levy or seize assets.
Previously, the IRS had no way to split up the collection file, so if you had a Request for a Collection Due Process hearing on some of the years, the Revenue Officer would forward the entire collection file to the Appeals department. A taxpayer would much rather have an Appeals Officers than a Revenue Officer reviewing their case, as Appeals does not levy and cannot harm the taxpayer in that way.
Appeals and the CDP Hearing processes are excellent avenues to work on Offers in Compromise, to get Installment Agreements (payment plans), to obtain penalty abatement, to pursue an Innocent Spouse Claim, or to even obtain Uncollectable Status (CNC Status).
Our problem is that in Central and Southern California, a Revenue Officer will continue to hold the gun of a levy to the taxpayer’s head while an Appeal is being processed. If a taxpayer doesn’t agree to what the Revenue Officer wants (almost always payment of the tax and withdrawal of the CDP request), the Revenue Officer will continue their often severe enforcement.
The Revenue Officers in Central and Southern California will also sandbag the filing of a Request for Collection Due Process Hearing for up to 45 days when they receive such a filing from the taxpayer. The Revenue Officer will often not forward the Appeals request to Appeals. They further justify this action based on Internal Revenue Manual Section 18.104.22.168.3.9. Upon manager approval, the Revenue Officer can withhold forwarding the Appeals request for an additional 45 days.
Ultimately, this is a very confusing and nuanced process. It’s vital that you have a representative that is familiar and experienced with the district you are in.
If you’re in Southern California (Orange County, Los Angeles), Central California (Bakersfield, Tulare, Fresno, Visalia), or Las Vegas, please give me a call at 661-837-1100 so I can advise you on the best path to navigate you through this complicated process.
October 16th, 2015