How do you negotiate with a revenue officer? So IRS revenue officers are notoriously difficult to deal with. So number one, IRS revenue officers only get involved in cases that the IRS feels are particularly serious. For individual liabilities, usually that has to be a quarter million dollars or more. For payroll tax liabilities, the amount can be much smaller. If the business is continuing to accrue payroll tax liabilities, revenue officers will step in much sooner.
Revenue officers are not like other collection agents. Usually what happens with collections is collections is centralized into what’s called ACS, which is automated collection systems. There’s one in San Diego and it’s like a big, big call center and agents work out of there and are initiating collections and taking collection actions and getting taxpayers on installment agreements and so on and so forth.
A revenue officer is a local collection agent. They’re assigned to a particular region in San Diego, they’re across the street from us, and the revenue officers are charged with locating taxpayers, locating assets, and getting as much money as they can and satisfaction of those assets. So revenue officers are usually very senior. They’re usually trained. Some of them have accounting backgrounds, and they’re particularly good for finding taxpayers, locating their assets, and taking those from taxpayers.
Now, there are a variety of revenue officers. Some are revenue officers that work criminal cases, some are revenue officers that were principal in the businesses or who work with difficult assets to collect and so on and so forth. But when you’re dealing with a revenue officer, always know that you’re going to deal with somebody who has a very superior knowledge base when it comes to collections. This is what they do. They have 40, 50, sometimes more cases, and they’re dealing with collections issues all all day, every day. We’re just dealing with delinquent taxpayers over and over and over again. So not only do they understand a lot about tax, but they understand a lot about how this process goes. They’ve usually dealt with a variety of representatives and a variety of taxpayers, so they’re very knowledgeable.
So the trick to negotiating with a revenue officer is understanding what result you want to get at the beginning, so you start with the goal. Understanding, let’s say I have a client who wants to pay $500 a month on their IRS liability. I know that I’m working towards that end goal with the revenue officer. The first thing you do in a revenue officer case is contact the revenue officer and tell them that you can agree, you think you can agree to a solution and tell them what the solution is. You want to get a number in their mind and say look I know you have to work your case, I know you have to do your investigation, I know we have to go through the steps but here’s what my clients looking to pay. Five hundred dollars a month, I’ll get you everything to make your determination, so on and so forth. So right there what you’re doing is you’re setting a target. You’re setting an expectation with the revenue officer.
The second thing you do is you gather all the things the revenue officer is going to request. Revenue officer may send you a short list, and it’s a laundry list, but in working towards the financials and in developing your financial statement, you know what your target is. When you do the income minus expense analysis, you know you need to get it to about $500. And if it doesn’t work at $500, you’re going to have to figure out how to get it there. Taxpayer’s circumstances change all the time, but you at least have a target.
Hopefully at that point you’re producing financials and other information that’s consistent with the taxpayer having an ability to pay $500 a month. And then if you do that, and you show deference to the Revenue Officer, and you work through the motions, that’s the end goal. And so essentially what you’re trying to do when you present all the financial information is to gift wrap the Revenue Officers case form. You’ve stated that you’re trying to pay $500. You’ve given them consistent financials that show a $500 ability to pay. They’re well organized, they’re well presented, and you say, look, I know you got 50 cases, let me just go ahead and take care of this one for you. And so by putting together this package and negotiating with the revenue officers, it’s not going to work 100 % of the time, because Revenue officers are still people. You get good revenue officers, you get bad revenue officers, but you’ll have more success than not by taking this negotiation tactic. Because what you’re doing is you’re creating a goal, and then you’re leading the Revenue Officer along in satisfaction of the goal. The Revenue Officer goes off course, you show them more information and we get them back to that $500 a month payment.
And then if negotiations totally fail with the Revenue Officer, you want to exit in the best way possible. You can go to Appeals to negotiate an installment agreement or another collection’s resolution. You can submit an offer and compromise. You can talk to the revenue officer’s manager. But the goal is you’re trying to maintain a good and fluid relationship with them. You’re trying to get on their good side. You’re trying to make their life as easy as possible. And that will lead to the biggest avenue of success when you’re dealing with revenue officers.