The Complete Guide to IRS Collections

Brotman Law Presents

The Complete Guide to IRS Collections

Owing money to the IRS is a very serious matter. And it will not go away if you just ignore it. Keep reading to learn what your options are and how Brotman Law can help.

Owing the IRS is every taxpayer’s worst nightmare.

Your first clue will be a letter from the IRS informing you of the amount due. Then, the notifications keep piling on, with an increasingly threatening tone.

When you start receiving certified mail, you know you had better act … FAST!

If you have received notice from the IRS that you owe them money and you cannot pay, then give us a call. We understand your predicament and can review your case and discuss your options. In most cases, we can work out a settlement that will satisfy both you and the IRS.

If you owe taxes to the IRS, do not think that you can blow it off, like you might delay paying a credit card or medical bill.

The IRS takes tax collection very seriously and does not want to hear your excuses or sob stories as to why you did not or cannot pay your taxes.

They are not going to let you off the hook and you can count on them keeping in regular touch with you. Like a pesky fly that you just can not quite swap into oblivion.

What is the IRS collection process? People not paying their taxes is a very serious issue for the IRS. It is something that we as tax practitioners call the tax gap.

The IRS collection process is an increasingly serious step of collection measures designed to get people in compliance and make sure they stay in compliance.

One of the reasons people complain about penalties and interest so often is because it is a deterrent that the IRS uses to make sure that you do not owe money on your taxes.

When you see liabilities rise by 25, 30, 40 percent or, even higher, it is going to make you think twice about not paying your taxes. 

The IRS does not just issue penalties and interest; they start out by taking increasingly serious actions such as garnishing your wages, levying your bank accounts, putting liens against your property and a whole host of other measures designed to force you back into compliance.

Usually, the IRS will give you a lot of latitude and opportunity to resolve your tax issue within reason.

One of the favorite sayings of the revenue officers that we deal with is that the IRS is not a bank. It is not giving you a loan on your taxes to pay for other things. 

Therefore, what ends up happening is a disconnect between the IRS calling the terms of its loan so to speak, and between what most people consider ordinary and reasonable living expenses.

Most of the job that we do as a tax firm in defending clients against the IRS collection process, is translating their circumstances in terms that the IRS will respect and understand.

As you move through the process, the more you step out in front of it and mitigate your liability will go a long way to avoiding some of those more serious actions.

Actions the IRS Can Take Against You

The IRS uses the carrot and stick to get people into compliance and to get liabilities resolved. Generally, they use the stick more than the carrot.

What happens is the more time that passes from when the IRS is aware that you owe a liability, the more significant and strong the actions they take against you are. 

Again, they want you in compliance. They want you to pay your taxes, they want you to get on a payment plan if you cannot afford to pay your taxes in full, and they are not going to tolerate you owing money to the government.

IRS actions can come in the form of straight-forward letters of notification to the extreme of sending special agents to your home of business.

As time passes, the IRS will take increasingly serious action against you. They start with letters.

You start getting letters — correspondence of increasing urgency. The IRS generally goes after low-hanging fruit. They start seizing bank accounts and wages and they can take a portion of your Social Security. 

They are also looking for assets that they can quickly find and liquidate in order to satisfy the liability.

If they cannot locate those assets, and depending on how much liability you owe, then they may take stronger action against you. 

They may send a field agent to your house. They may summon you and bring you in for an interview. They may demand the production of financial information or other documents that they may review to get their money back.

What happens is the longer that IRS liabilities go unresolved, the more serious the government is and the harder and faster they move against you. 

From a planning perspective, It is really important that as soon as you become aware of an IRS liability, or as soon as you are in a position to take care of a tax problem, that you do so as quickly as possible.

Taking swift and prompt action will mitigate most IRS problems very quickly.

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Strategies for Dealing With IRS Collection Cases

What is the strategy for dealing with IRS collection cases? Our firm’s strategy is to throw the IRS completely out the window and just start with the client. We take a client’s situation — and every situation is different — but we always focus on what the end goal is. 

You may owe the IRS a sum of money and you may not be able to pay that sum of money but the really important thing is not that you pay the money, but that your life moves forward and that you are able to meet your personal, professional and financial goals. 

We start with an understanding of what the goal is and then we work the solution into that.

That solution can look like a lot of things. It can look like a payment plan, it can look like a hardship, it can look like a tax settlement, but the long or the short of it is, let us work on hitting the goal based on what you want, not based on what the government wants.

The way that we approach IRS collection issues and the strategy behind that is to start by looking in a situation, figuring out where we want to be, figuring out the fastest way to get there and then navigating the government through that hurdle.

Options If You Cannot Pay the IRS

Number one, the keyword is options. You have lots of options. The options that we recommend are ones that get you into compliance.

You can, number one, pay the liability in full. If you do not have enough money to pay the liability in full, you can ask them for an extension of say, four or five months before the IRS is going to request your payment in full.

If you still cannot pay the liability, then you should enter into a payment plan or propose a settlement. A payment plan is exactly what it sounds like, you make a series of payments to the IRS over time. 

A settlement is what is more commonly known as an offer in compromise, where if you have a liability and you know that you will never ever be able to pay it, you could offer the IRS a reduced amount. In exchange for that amount, they will forgive your liability.

If, for whatever reason those do not work for you, you can enter into a hardship which is currently called non-collectible status.

You have to document evidence of your hardship and provide the IRS with financial information and then they will put a reprieve on you from collecting the liability either in the short-term or in the long-term.

Generally, non-collectable status can last anywhere from six months to about two years.

The last option that you have is bankruptcy, but bankruptcy is something that I consider generally to be a nuclear option because bankruptcy has a lot of impact on you outside of your tax situation.

If the only thing you owe is tax debt, or maybe some small consumer debts and credit cards, generally working through the administrative process is much more favorable to bankruptcy. 

That is the lay of the land, you can pay it, you can request more time to pay it, you can put yourself on a payment plan, you can settle the liability, you can ask for a hardship, or you can go into bankruptcy. Those are your six options for dealing with liabilities that you cannot afford to pay.

That is why we created this free book, “The Tax Attorney’s Complete Guide to IRS Collections.” Our firm has represented many, many small business clients in IRS collections cases.

Although it is a daunting process, there is light at the end of the tunnel. Come in for a consultation and we will review your situation and together, we will figure out a strategy to pay off your debt to the IRS. We have an experienced team of attorneys with a solid record of satisfied clients, so you know you will be in good hands.


Keep reading! Hopefully you will find answers to your questions about owing money to the IRS. The following is an overview and summary of each of the different chapters in “A Tax Attorney’s Complete Guide to IRS Collections”:


How Does the IRS Collections Process Work?

In this chapter, we will walk through the six steps of the IRS collections process. You will gain a thorough understanding of what to expect — from filing your taxes to working with an IRS Revenue officer. 


What Are the Consequences of Running from the IRS?

Chapter 2 discusses the six options for paying your IRS tax debt. You can pay your debt in full, set up a payment plan or declare bankruptcy. Maybe you should just wait out the statute of limitations?


IRS Tax Debt Relief Options

Learn how automated collection systems work and how you can use them to your advantage. This chapter will outline five strategies that you can use and how planning pays off when facing the IRS.


Are There Statute of Limitations for IRS Collections

Like the old saying goes, “Keep your friends close and your enemies closer.” Find out why it is a smart move to get on the revenue officer’s good side right from the start. Building rapport is definitely in your favor, but so is getting tough when you need to.

We go deep into the IRS statute of limitations in this section.


5 Strategies to Resolve Tax Debt with the IRS

In this chapter, we will delve into how IRS installment agreements are structured, the different types, and what you need to do to set one up. We will also explain how the IRS examines your income and expenses to determine the amount of your monthly payments.


What to Do If an IRS Agent Visits My Home or Business?

In Chapter 6, we get into partial payment plans, how to apply for one, the IRS’ criteria and what happens if you default. We will also walk you through the forms you must complete to apply for a partial payment plan so they will be accurate and prevent delays in the review and approval process.


6 Tips for Dealing with IRS Revenue Officers

We will review the three reasons why the IRS could reject your installment agreement request. You will also read about a “silver lining” — there are several categories for appealing an IRS rejection.


What Are IRS Bank Levies? [Definition & Examples]

Learn all about the different types of levies the IRS can assess against you, the requirements and what is considered exempt property.

We will also discuss the difference between a wage levy and wage garnishment. Lastly, find out if the IRS can issue a levy if you are in Currently Not Collectible status.


IRS Wage Garnishments: What You Need to Know

If you owe money to the IRS, one method they can resort to is through a wage lien or garnishment.

This is when the IRS can take all or part of your monthly take-home pay.

The three-part process for attaching an interest to your wages is discussed in this chapter.


What Is an IRS Tax Lien Release?

Chapter 10 discusses what to do if you are slapped with a tax lien. We will take a look at release and subordination, and withdrawal.

We will discuss strategies for when the IRS places a lien on your property and how to avoid liens in the first place.


How to Navigate IRS Collections Forms

In this chapter, I will explain the main forms you need to apply for an IRS installment agreement.

I have broken down the key sections into easy-to-understand bite-sized pieces.

Once you read through this, you should be able to return to the IRS instructions and finish the forms.


How the IRS Conducts Financial Analysis

In this chapter, I will explain to you how the IRS conducts financial analysis, what they take into consideration and how they compare it to national standards.

I will also discuss how the IRS will apply local standards to your specific case.


What Are IRS Allowable Living Expenses? [Definition & Classifications]

The IRS takes collection of taxes owed seriously but stops short from collecting assets that a person needs to survive and meet their basic living requirements.

The IRS calls these “Allowable Living Expenses” and they are excluded from the calculation that collection agents use to determine a taxpayer’s reasonable collection potential.

In this chapter, I will discuss the three different categories of necessary expense test the IRS uses to determine how much cash you can keep.


How to Negotiate a Payment Installment Agreement with the IRS

In this chapter, we will delve into how IRS installment agreements are structured, the different types, and what you need to do to set one up.

I will also explain how the IRS examines your income and expenses to determine the amount of your monthly payments.


How to Request a Partial Payment Plan with the IRS

In Chapter 15, I describe partial payment plans: how to apply for one, the IRS’ criteria and what happens if you default.

I will also walk you through the forms you must complete to apply for a partial payment plan so they will be accurate and prevent delays in the review and approval process.


What Happens If You Default on Your IRS Installment Agreement

The IRS can propose termination of your installment agreement in the event that the taxpayer fails to make an installment payment when it comes due.

Find out what happens after your 30-day notice expires and what options you may still be able to exercise in this chapter.


Requirements and Benefits of a Streamlined IRS Payment Plan

Find out how you could get a “fresh start” through this repayment option. This chapter outlines how to qualify, the requirements and the benefits.

You will also learn how much it costs to apply and how long the repayment period is.


How to Appeal the Rejection of Your IRS Installment Agreement

In this chapter I will review the three reasons why the IRS could reject your installment agreement request.

You will also read about a “silver lining” — there are several categories for appealing an IRS rejection.


What Is Offer in Compromise (OIC)?

Offer in Compromise is a good strategy for reducing your debt to the IRS. Chapter 19 discusses in full what an OIC is, the pros and cons and how to apply.

There is a lengthy discussion about the IRS standards for living expenses and how you can maximize your expenses to lower your debt.

We will also talk about how to appeal an IRS decision against you.


What Are the Rules for an IRS Offer in Compromise

With an OIC, you are proposing paying a lesser amount to the IRS, based on your ability to pay.

When you apply for an OIC, the IRS will put you through the ringer to determine what your standard of living should and will be going forward.

Learn what the rules are and what to expect if you apply in this chapter.


What to Do When an IRS Offer in Compromise Is Rejected

If the IRS rejected your Offer in Compromise, the first thing you’ll find out in this chapteris that it is not a lost cause. There are ways to counter the IRS and get your application approved.

In this chapter, I will outline what happens when your OIC is rejected and what you can do to reverse the situation.


What if I Cannot Pay the IRS?

In this chapter I will give you the pros and cons of receiving a currently not collectible specific to the taxpayer’s ability to pay taxes owed.

If the taxpayer is unable to pay, then they will receive this consideration.


Types of IRS Penalties

Chapter 23 goes in-depth about the many different types of IRS penalties — ranging from simple oversights to intentional criminal fraud.

There are also references to the IRS website for more background information.


Am I Eligible for a IRS Tax Penalty Abatement?

In this chapter, you will learn about the different types of penalty abatements and reasonable cause.

I will break down the eight types of penalty abatements to give you a clearer understanding.


What Is the First Time Penalty Abatement Process?

In this chapter, I talk about how to qualify for the First Time Penalty Abatement Program and how to apply.

If you think you are a candidate this is a good option to reduce your tax debt, especially if you are confident that you can stay out of the IRS cross-hairs going forward.


How to File an IRS Interest Abatement

Chapter 26 addresses interest abatements. You will learn the requirements for interest abatement, how to file one and the types of documentation you will need.

Lastly, we will talk about how the IRS calculates interest.


What Is Innocent Spouse Relief?

Innocent spouse relief is a caveat that a partner can use to be relieved of tax liability incurred within the marriage.

This chapter talks about who qualifies and spells out key terms such as actual knowledge and reason to know.


What Is the FAST Act?

The FAST Act gives the IRS the authority to revoke the passports of taxpayers with outstanding debts. The chapter discusses the monetary amounts in question, how this affects persons living abroad, enforcement and possible consequences.


How to Work with Brotman Law on Your IRS Collections Case

In this chapter, we will talk about what to expect if you retain Brotman Law to represent you in your IRS collections case. I will spell out our strategies and how we will bill for our services. This chapter concludes with a discussion of the psychological impact of being embroiled in an IRS collections case.


How IRS Tax Debt Affects Home Buying or Refinancing

If you owe back taxes to the IRS, this means that on your short list of creditors, the IRS bumps to the top.

This is not a good look to a bank; they will wonder when or if they are going to be repaid.

In this chapter, you will learn the truth about IRS tax debt and the consequences when it comes to buying or refinancing a home.


Frequently Asked Questions About IRS Collections and Taxes

In my years of representing clients before the IRS, I have been asked some common questions about the IRS, filing taxes and collections.

This chapter is a compilation of my responses to some of the questions I hear the most from my clients.

As always, if you have additional questions, please feel free to call me and I will do my best to answer them for you.

Thank you in advance for reading “A Tax Attorney’s Complete Guide to IRS Collections.” It was a labor of love and our law firm welcomes all questions, comments, concerns, and feedback that you may have about this free resource.

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