An Overview of the IRS Tax Collections Process for Non-Tax Lawyers
Good morning. I’m Sam Brotman with Brotman Law here to give you an overview of the IRS collection process for non-tax lawyers.
I have a running joke with a lot of my family law attorney colleagues that I’m often the most popular person in their divorce cases. And the reason for that is because I’m solving a very, very complex issue that oftentimes the sides can’t agree on and most everybody hates their own lawyers.
So, as a general frame of reference, what we do as tax people is solve really particularly nasty problems that most people just don’t want to deal with. But my goal here today is to give you an overview of the IRS collection process because it causes a lot of fear for people’s clients and to better inform you on how collections work within the IRS to dispel some of the myths and some of the preconceive stereotypes that you may have about how the IRS tends to operate.
As part of the presentation, what I will be covering today is kind of a general overview on how to tax returns are filed and how balance dues occur within the IRS systems. From there, we’re going to talk about the Automated Collection Systems process or ACS. After that, I will cover what revenue officer does, who these people are, what their job functions are and how they operate within IRS collections. And then finally, we will be going over IRS collection resolutions and discussing the different methods of tax liabilities – the pros and cons. And I will also be sharing you some stories that will illustrate some of our examples.
First of all, I want to talk about the benefits of understanding the IRS collection process for people who are tax attorneys and why that is particularly important.
Tax is an area of law that is highly specialized. It is one that touches multiple areas of law. In my experience as a tax attorney, we have touched family court litigations; we have touched probate law litigations, state planning. We have touched civil litigations, business corporate transactions and kind of a broad range of matters here and there.
Understanding IRS collections is important because it’s an issue that a lot of the times clients really care about and the clients are really focused on because it’s a fairly serious issue. Large tax liabilities with the presence of IRS, it creates fear and it creates doubt amongst clients who are uncertain as to how to navigate the waters.
A broader understanding of how the collections work will help facilitate those conversations with your client at least on a very basic level.
It also helps you identify how serious a tax problem is and how important that problem is whether it’s big deal little deal or no deal. That’s important as well because the client may be freaking out. “I got a notice in the mail. What do I do? What do I do? What do I do?” And you can tell them, “Look, this is a basic collections notice. It’s not the end of the world. You still got some time to deal with the problem reasonably before really, really bad things start to happen to you.”
It also will also help you frame who you’re dealing with within the IRS collections system. The type of employee you’re dealing with whether it is a IRS criminal special agent or whether it’s revenue officer or somebody from automated collections systems, the job title and the responsibilities that person will help frame how serious the IRS is taking the problem or approaching the problem.
It will also give you a basic framework on how to deal with that individual. We all have a job to do. We all have a responsibility, roles within our organizations. The IRS works pretty much the same way. Everybody who works for the IRS has a responsibility. If you know who that person is and what they do, you can help your client deal with them more effectively.
One of the other goals of the presentation is to explain IRS collection on a very basic level. Because of the way collections are setup, there are a few different ways you can navigate through the process whether choosing to do an installment agreement or a tax settlement which is more commonly known as offering compromise; or any number of options in between.
It’s important you know those options so that you know going in how to approach the problem with your client and what the different options for resolution are. Specifically, we will talk about the offering compromise process, some of the myths that have been surrounding that program.
You often see those advertisements on TV that will settle your tax liability for pennies on the dollar. And while that’s generally true, there are a couple of caveats that you should be aware of and that you want to make sure that you can identify.
And then, probably the most important part for a non-tax lawyer is knowing whether the client is in the position to handle this problem themselves; whether you’re in a position as a practitioner to guide them through it.
If the clients are relying on a certified public accountant or bookkeeper, whether that person is qualified and whether or not it can be something to be solved with self-help or whether it’s something that you really do need to call in a tax professional to really take advantage of.