An Overview of the IRS Tax Collections Process for Non-Tax Lawyers
13. Collection Action a Revenue Officer Can Take
Let’s talk a little bit briefly about IRS revenue officers’ specific collection actions.
All collection agents within the IRS can either lien or levy. They can seize assets. They can garnish wages. But revenue officers have a couple of things that they can do that are particularly unique to their style or classes.
The first thing I mentioned was field visits. IRS personnel can visit your client or they can investigate third-party sources.
They can go knock on neighbor’s doors. They can knock on employer’s doors. They can track down former employer. If the taxpayer on a business, they can go after your customers.
The IRS revenue officers have broad latitude in contacting third parties for information on tax payers. No, they do not have to provide you with notice before they make those calls.
When dealing with a revenue officer, if you’ve got a client who is particularly concerned about their business or their privacy, it is important to make contact with that revenue officer and dissuade those face-to-face visits as soon as possible.
The second thing that revenue officers tend to do is enforce things called IRS administrative summons. The IRS will issue a summons for records, oftentimes to banks or to taxpayers or to other parties requesting information or face-to-face interviews.
If a taxpayer or a third-party refuses to comply with those summons orders, then the IRS can get district council involved, take those summons to court. If the court enforces the summons and the taxpayers still doesn’t reply, then the taxpayer will be held in contempt of court.
On the administrative level, they don’t really have much teeth. But at the same time, you’d never want to advise a client to ignore an administrative summons because the consequences of doing so are fairly severe.
Generally speaking, it’s not a good idea to get district council involved in matters unless you absolutely have to.
The other thing that IRS revenue officers can do is issue something called a Jeopardy Assessment. A jeopardy assessment is a specialized assessment that the IRS issues when they feel that assets are at risk.
If you’ve got a taxpayer who is thinking about fleeing the country or you’ve got a taxpayer who is considered a collection risk, then the IRS will come in and speed up the assessment process and seize assets.
Happens all the time in tech cases where there are criminal issues or where the taxpayer is a wealthy individual or corporation and has threaten insolvency. Jeopardy assessments can happen for a number of reasons.
The other thing that revenue officers do is they are the starting point for IRS initiated lawsuits. If the taxpayer has a large asset – for example, have a taxpayer right now who is making pretty good money but they are “cash in and cash out”. They don’t really have the ability to pay the IRS on a monthly basis.
But the taxpayer has about four million dollars in equity in their primary residence. They’ve tried to get a loan against the property. They’ve been unsuccessful. It’s been a long, ongoing process but unfortunately they have not been able to pull the equity out of their house.
The IRS reaction initially, is to file a suit to foreclose against the house so that they can sell the property, get the four million dollars out of it and satisfy the tax liability.
The revenue officer is the ground floor in that conversation. When determining whether the IRS is going to pursue a lawsuit or a suit to foreclose or any number of judicial remedies, the revenue officer is usually the first one on the case who makes that determination.
The revenue officer is often the first party of contact for resolving those matters in terms of their own investigation.