REPRESENTATION TECHNIQUESREPRESENTATION TECHNIQUES
Dennis G. PhillipsDennis G. Phillips
WHAT WE WILL DISCUSSWHAT WE WILL DISCUSS
 Audit ProcessAudit Process
 Audit/Collection TipsAudit/Collection Tips
 Appea...
THE AUDIT PROCESSTHE AUDIT PROCESS
 The IRS uses a computerized statistical samplingThe IRS uses a computerized statistic...
THE AUDIT PROCESSTHE AUDIT PROCESS
 The office audit is conducted in an InternalThe office audit is conducted in an Inter...
AUDIT TIPSAUDIT TIPS
 Conduct yourself courteously and professionallyConduct yourself courteously and professionally
show...
PREPARING FOR
EXAMINATIONS
 Interview your client before the IRS does
 Anticipate what is going to be asked of your
clie...
DO AND DON’TS WITHDO AND DON’TS WITH
AUDITSAUDITS
 Don’t impede the audit processDon’t impede the audit process
 Present...
WHAT HAPPENS IF I DON’TWHAT HAPPENS IF I DON’T
AGREE WITH THE AUDITORAGREE WITH THE AUDITOR
OR THE REVENUE OFFICEROR THE R...
FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Usually done prior to issuance of the 30 dayUsually done prior to issuance of...
FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Appeals officer trained in MediationAppeals officer trained in Mediation
 Ac...
FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Cases that can be fast tracked are:Cases that can be fast tracked are:
 Non-...
FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 Fast Track Excludes:Fast Track Excludes:
 Most collection casesMost collecti...
FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT
 The benefits of fast track are:The benefits of fast track are:
 Hazards can ...
COLLECTION ISSUESCOLLECTION ISSUES
 Many taxpayers will be coming toMany taxpayers will be coming to
you for collection a...
COLLECTION CASESCOLLECTION CASES
 Correspondence with Collection Division andCorrespondence with Collection Division and
...
The “Tiered” ApproachThe “Tiered” Approach
 Collection uses the tiered approach forCollection uses the tiered approach fo...
TiersTiers
 First Tier- Abatement/Adjustment when tax,First Tier- Abatement/Adjustment when tax,
penalty, or interest inc...
WORKING WITH REVENUEWORKING WITH REVENUE
OFFICERSOFFICERS
 They have been instructed to collect as much ofThey have been ...
WORKING WITH REVENUEWORKING WITH REVENUE
OFFICERSOFFICERS
 Often, RO’s will give you ideas to resolve yourOften, RO’s wil...
TAX LIENTAX LIEN
 Can be a “secret lien”Can be a “secret lien”
 Can be public lienCan be public lien
 Attaches to all p...
Tax LienTax Lien
 Can be releasedCan be released
 If an OIC is acceptedIf an OIC is accepted
 Bankruptcy dischargeBankr...
TAX LEVYTAX LEVY
 A levy is a legal seizure of the taxpayer’sA levy is a legal seizure of the taxpayer’s
property to sati...
COLLECTION DUE PROCESSCOLLECTION DUE PROCESS
 If a taxpayer received either a Notice of FederalIf a taxpayer received eit...
COLLECTION DUE PROCESSCOLLECTION DUE PROCESS
 IRS issues notice of intent to levy and right toIRS issues notice of intent...
Request for a HearingRequest for a Hearing
• Must be in writingMust be in writing
• Must include:Must include:
 Name, add...
Equivalent hearingEquivalent hearing
• Late request for hearing (more than 30 days)Late request for hearing (more than 30 ...
Nature of HearingNature of Hearing
 InformalInformal
 By correspondence, telephone, or face-to-faceBy correspondence, te...
What Appeals Considers:What Appeals Considers:
The “Big” ThreeThe “Big” Three
1.1. Did IRS follow required procedures?Did ...
Issues the Taxpayer May RaiseIssues the Taxpayer May Raise
 Innocent SpouseInnocent Spouse
 Challenges to the appropriat...
Challenges to the appropriateness ofChallenges to the appropriateness of
proposed actionproposed action
Excludes:Excludes:...
Collection AlternativesCollection Alternatives
 Installment AgreementsInstallment Agreements
 Offers In CompromiseOffers...
Underlying Liabilities???Underlying Liabilities???
Must consider:Must consider:
 Innocent spouseInnocent spouse
 Self-as...
Underlying Liabilities???Underlying Liabilities???
Must not consider:Must not consider:
 Liabilities for which taxpayer r...
Issues PrecludedIssues Precluded
 Issues decided by a court, or raised andIssues decided by a court, or raised and
consid...
Determination LetterDetermination Letter
Includes:Includes:
 Appeals determination re levy or notice of lienAppeals deter...
Judicial ReviewJudicial Review
Did Appeals abuse itsDid Appeals abuse its
discretion in this case?discretion in this case?
APPEALS PROCESSAPPEALS PROCESS
 To minimize the cost of litigation in both timeTo minimize the cost of litigation in both...
APPEALS PROCESSAPPEALS PROCESS
 The Appeals Office will review the case and make aThe Appeals Office will review the case...
““DON’TS” IN APPEALSDON’TS” IN APPEALS
 Don’t go in unprepared.Don’t go in unprepared.
 Don’t argue frivolous issues.Don...
Expediting your case throughExpediting your case through
AppealsAppeals
 Set realistic target dates.Set realistic target ...
EX-PARTEEX-PARTE
COMMUNICATIONSCOMMUNICATIONS
 Appeals cannot have communications withAppeals cannot have communications ...
APPEALS JUDICIAL APPROACHAPPEALS JUDICIAL APPROACH
AND CULTURE (AJAC)AND CULTURE (AJAC)
 In July 2013, the Appeals functi...
AJACAJAC
NEW ISSUESNEW ISSUES
 New issues will not be raised by Appeals
 Appeals also will not reopen an issue on which
...
AJACAJAC
CDP CASESCDP CASES
 CDP files sent to Appeals should contain
sufficient documentation for Appeals to make a
dete...
AJACAJAC
CDP CASESCDP CASES
 If a taxpayer asks for a collection alternative andIf a taxpayer asks for a collection alter...
AJACAJAC
OIC CASESOIC CASES
 In a non-CDP OIC case, Appeals will not “re-work”
the offer rejected by Collection. Appeals ...
AJACAJAC
OIC CASESOIC CASES
 Agreed RCP issues that were previously
addressed during the investigation by Collection
will...
WHAT’S NEW IN APPEALS
 Virtual Service Delivery
 Quick Look Process
STATUTE OF LIMITATIONS
AND
TRANSCRIPT AWARENESS
ASSESSMENT STATUTE
 The form 1040 is due three and a half
months after the close of a taxable year or
fiscal year. The as...
ASSESSMENT STATUTE
 The 1120 is due 15th of the third month after
the close of the entity’s taxable year or fiscal
year. ...
ASSESSMENT STATUTE
6 year statute
 If taxpayer omits from gross income an amount
properly includible in income that is in...
MISCELLANEOUS STATUTE
ISSUES
 Delinquent return filed after SFR – three year
statute begins upon filing of delinquent ret...
MISCELLANEOUS STATUTE
ISSUES
 Claims-A refund claim is timely if it is filed
within three years from the date on which th...
TRUST FUND RECOVERY
PENALTY
 The IRS has 3 years from the later of the
succeeding April 15th or from the date the
return ...
MISCELLANEOUS STATUTE
ISSUES
 Notice of Deficiency suspends statute for 90 days (150
days if mailed outside the U.S.) to ...
Collection Statute Expiration
Date - CSED
IRC 6502
Tax may be collected by levy or by a proceeding in
court, but only if begun:
--within 10 years of assessment, or
...
Suspension & Extension of
CSED
 Suspension:
 halts the running of the statute, which results in
extension of general CSE...
Waiver - After 12/31/99:
Only with I/A
Limited to 5-year extension by policy
6503 Suspensions:
 (a): Notice of Deficiency
 (b): Custodia Legis
 (c): TP outside of US
 (f): Wrongful levy
 (h): Ba...
Other suspensions:
 IRC 7811(d): Taxpayer Assistance Order
 IRC 7508: Military Deferments
 Certain collection suits
 I...
IRC 6330(e): Collection Due Process
 Suspension of CSED for period while hearing is
pending, and any appeals.
 CSED won’...
TRANSCRIPTS
 Return Transcript
 includes most of the line items of a tax return as
filed with the IRS. Transcripts are o...
TRANSCRIPTS
 Account Transcript
 Contains information on the financial status of the
account, such as payments made on t...
TRANSCRIPTS
 Record of Account
  is a combination of line item information and later
adjustments to the account. Availab...
TRANSCRIPTS
 Individual Master File (IMF)
 IMF is the Individual Master File.  This file shows all
individual returns an...
TRANSCRIPTS
 Business Master File (BMF)
 All tax data and related information pertaining to
individual business income t...
TRANSCRIPTS
 NON-MASTER FILE (NMF)
 This is a database that has entries that cannot be
input on the master file. A NMF t...
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  • It’s a moment any taxpayer dreads. A letter arrives from the IRS — and it’s not a refund check. But don’t panic. Many of these letters can be dealt with simply and painlessly.
    Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry. Most notices also give you a phone number to call to ask questions.
  • Field exams always have a review of gross receipts. I always perform my own bank deposit analysis prior to the audit. I am able to identify issues that may arise during the exam
    I always interview my client and ask the majority of questions that will be asked by the agent during the examination.
    Such as cash hoards, bartering, reporting of income, who prepared the return,
  • You will be asked to submit documents. Only give the agent the documents that are requested.
    I always scan all documents that are presented to the agent.
  • A tax lien is separate and distinct from the underlying tax assessment. The federal tax lien is probably the IRS’s most important tool in collecting delinquent taxes. The creation of an IRS tax lien is made:
    With the assessment made by the IRS
    A notice and demand within 60 days
    Nonpayment of tax
    A statutory lien filing, sometimes referred to as a “secret lien” is created if all the above items exist.
    The IRS can also file a Notice of Federal Tax Lien. As mentioned previously, the notice of the notice is done in order to protect the interest of the government in the taxpayer’s property and rights to property. The public recordation can often have negative consequences for the taxpayer. The taxpayer’s unsecured creditors are not at an increased risk of not getting paid, and other creditors that the taxpayer many have wish to borrow from are now uninterested in assuming the risks inherent in being junior in right to a federal tax lien. The Notice of Federal Tax Lien can appear on the taxpayer’s credit report for years, even after it is satisfied making obtaining credit difficult and more expense for the taxpayer in the future.
  • A levy is a legal seizure of the taxpayer’s property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
    Many clients confuse the levy and lien notices. The IRS is required to send a taxpayer a Final notice of intent to levy and notice of their right to a hearing. This is either a Letter 1058 (a copy is attached to this handout)
  • Under Section 6330, no levy may be made on any property unless the IRS sends the taxpayer a notice at least 30 days before the levy is made -- which provides the taxpayer with an opportunity for a CDP hearing.
    The L.1058 or the LT 11 is the letter the taxpayer would receive.
  • Appeals classifies these requests as timely, equivalent and retained jurisdiction. Collection is suspended by law on timely requests. Timely filed requests for CDP hearing in Appeals maybe appealed to the Tax Court on income, estate or gift taxes and to the United States District Court for employment taxes. Untimely requests are entitled to an equivalent hearing in Appeals, but no judicial review.
  • Equivalent Hearing
     
    Although an Equivalent Hearing is not provided for in the code, Treas Regs §§ 301.6320 and 301.6330.provide for such a hearing. The Equivalent Hearing is available where the taxpayer, intentionally or inadvertently, missed the 30-day CDP hearing request deadline. In an Equivalent Hearing, Appeals will consider the same issues as in a CDP hearing.
     
    The Equivalent Hearing differs from the CDP hearing in the following significant areas:
            the statutes of limitations under IRC §§ 6502, 6531 and 6532 are NOT suspended
            collection action is NOT suspended during the pendency of the appeal. (However, normally collection action is suspended as in the instance of a CAP).
            a decision letter, rather than a determination letter, is issued by Appeals. (The Appeals decision is final and not subject to judicial review. There is an exception in the case of innocent spouse issues under IRC §§ 6015(b) or (c), which may be petitioned to the Tax Court within 90 days after Appeals' decision on the innocent spouse issue).
  • In any hearing conducted under IRC 6320 and 6330 there will be:
    a requirement that Appeals obtain verification from the Secretary that the requirements of law of administrative procedures have been met
     allowance of certain issues to be raised by the taxpayer, to include but are not limited to:
     appropriate spousal defenses
     challenges to the appropriateness of collection actions
     offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise
     challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability
     The taxpayer is precluded from raising an issue in appeals if the taxpayer raised the issue at a previous CDP hearing or in any other previous administrative or judicial proceeding and the taxpayer participated meaningfully at such hearing.
     
  • Appeals Officers have, in the past, attempted to resolve all taxpayer arguments in conferences. In CDP cases, the taxpayers offer several arguments that may or may not be resolved by Appeals. In many of the CDP requests that we receive, the taxpayers contest the underlying liability. Most of these taxpayers have had a previous opportunity to contest the liability. In these instances, the taxpayers did not appeal/protest the decision made by Compliance.
     
    There are areas where the taxpayer can raise the underlying liability issue at a CDP hearing. They are:
    Spousal Defense Issues
    Frivolous Return & Questionable Withholding Statement Penalties
    Voluntarily Filed Returns Without Deficiency Assessments and Returns With Math Errors
  • Appeals will generally not consider the liability issue if the taxpayer has received a deficiency notice or Letter 1153 (in a TFRP case), or has otherwise had an opportunity to appeal the assessment of the liability
    Challenges barred by § 6330(c)(4): issue raised and considered at a previous hearing under § 6320 to any other previous administrative or judicial proceeding and person seeking to raise the issue already participated meaningfully in such a hearing
    Letters Providing Prior Opportunity:
    Letter 1153(DO) – trust fund recovery penalty proposed
    Letter 950 – employment tax assessment proposed
    Letter 955 – excise tax assessments proposed
    Letter 1125(DO) – return preparer penalties proposed
  • If a liability cannot be considered as part of a CDP hearing, the taxpayer has rights through an audit reconsideration. Publication 3598 provides the details on audit reconsideration. The taxpayer has appeal rights through an audit reconsideration.
  • Under the tax code, a taxpayer is entitled to a fair hearing conducted by an impartial IRS appeals officer.
    In many administrative appeal contexts, review on an abuse of discretion standard can be accomplished through a review of a comprehensive formal record, complete with pleadings and transcripts of administrative hearings.
    An Appeals Officer or Settlement officer does not abuse his/her discretion when the requirements of applicable law had been met and the taxpayer has been afforded statutorily-required administrative procedures.
  • Set realistic target dates for information, proposals and counter-proposals with the Appeals Officer.
  • This was done to preserve the independence of Appeals
  • Appeals Campus Operations is fully implementing the Virtual Service Delivery (VSD) program
    •VSD employs teleconferencing technology that permits parties to conduct virtual face-to-face meetings from remote locations
    •VSD will provide an alternative conferencing method in addition to telephonic and face-to-face interactions
  • For levy to be valid, it must be delivered to the party being levied before the statute expires. As a form of levy, notice of seizure must be given to taxpayer to qualify.
    Filing of proceeding of court extends the statute until the liability for the tax is satisfied or becomes enforceable.
    Review Figure 6 TXMOD on Page 2-23 to show CSED (Line 9) and TC 150 (Line 22) connection.
    Caution: a number of suspensions of the CSED make it impossible to use this feature, such as OIC and CDP.
    Prior to 11/5/90, the statute was six years. Periods open on 11/5/90 were automatically extended to ten years.
    Examples:
    TC 150 date: 12/1/90, CSED to 12/1/00.
    TC 150 date: 12/1/85, CSED to 12/1/95.
    TC 150 date: 10/31/84, CSED to 10/31/90.
    Review Figure 7 on page 2-24 to show how only earliest CSED is reflected in the CSED indicator.
    MULTIPLE ASSESSMENTS:
    -Each assessment starts its own CSED.
    -Easily possible that TC 150 assessment is not enforceable and TC 300 is still valid.
    -Accruals associated with the assessment can only be collected until that statute goes, despite any of their assessments showing on IDRS. (Especially interest, for example.)
  • A number of conditions, discussed individually below, can suspend or extend the “general” statute of limitations for collection. It is important to understand that “suspension” halts the running of the statute for a period of time, which consequently results in an extension beyond the general CSED. An “extension,” on the other hand, does not suspend or otherwise affect the general 10-year period. It simply adds additional time to the end of the period.
    Baseball game analogy:
    Rain delay suspension vs. tie game extension
  • EXTENSION AGREEMENT ENTERED INTO IN CONNECTION WITH AN     INSTALLMENT AGREEMENT. If the Secretary and the taxpayer enter into  an installment agreement for the tax liability prior to the expiration of the period of limitations on collection, the Secretary and the taxpayer, at the time the installment agreement is entered  into, may enter into a written agreement to extend the period of limitations on collection to a date certain. A written extension agreement entered into under this paragraph shall extend the period  of limitations on collection until the 89th day after the date agreed upon in the written agreement.
  • You are familiar with the fact that the issuance of a statutory notice of deficiency (SND) extends the assessment statute. The same is true of the CSED. IRC § 6503(a) provides that both the ASED and CSED with regard to income, estate, gift and certain excise taxes are suspended from the date of mailing the SND until the date the Secretary is no longer prohibited from assessing or collecting, and for 60 days thereafter. This suspension applies to the statutes on amounts named in the SND only
    The CSED would be extended on a deficiency (T/C 300) which is assessed, for whatever reason, before the 90th day (before the decision of the tax court becomes final), but not on any original tax assessment (T/C 150 or 290) balance still due.
    IRC § 6503(b) provides that the CSED is suspended for a period during which the taxpayer’s assets (all or substantially all) are in control or custody of any court (“custodia legis”) of the United States, any state, or the District of Columbia, and for 6 months thereafter.
    IRC § 6503(c) provides that the CSED is suspended for the period during which the taxpayer is outside of the United States, if such absence is continuous for at least 6 months.
    IRC § 6503(f) prescribes that the CSED will be suspended for a period of time equal to the period during which property (including cash) of a third party is wrongfully seized or received, plus 30 days.
  • IRC § 781l(d) provides that the CSED is suspended from the date on which a taxpayer files an Application Taxpayer Assistance Order (ATAO) on Form 911, to the date of the Problem Resolution Officer’s (T/A) decision on the application.
     
    IRC § 7508 provides for suspension of the CSED for the time period which an individual served in an officially designated combat zone or was hospitalized outside the United States as a result of such service, plus the next 180 days thereafter.
     
  • Must be timely request. Equivalent hearings don’t qualify.
    IDRS: TC 520 AC 66/67
  • TFRP CASES ARE USALLY PUT ON THE IMF FILE UNDER MFT 55
  • Reasons for NMF
    Large Dollar Accounts-balances too large for the MF
    Overflow accounts- Accounts which have an excessive amount of transactions for the MF to systemically process.
    New Legislation- Accounts which require immediate tax law implementation, but time does not permit for extensive modifications to the MF
    Immediate Legal Assessments-Accounts which require immediate (24hours) legal assessments when the MF would be too slow to post the assessments.
    Reversal of Erroneous Abatements
  • Representation techniques july 16, 2014

    1. 1. REPRESENTATION TECHNIQUESREPRESENTATION TECHNIQUES Dennis G. PhillipsDennis G. Phillips
    2. 2. WHAT WE WILL DISCUSSWHAT WE WILL DISCUSS  Audit ProcessAudit Process  Audit/Collection TipsAudit/Collection Tips  AppealsAppeals  CDP 101CDP 101  Statute of LimitationsStatute of Limitations  TranscriptsTranscripts
    3. 3. THE AUDIT PROCESSTHE AUDIT PROCESS  The IRS uses a computerized statistical samplingThe IRS uses a computerized statistical sampling technique to select tax returns for most audits.technique to select tax returns for most audits.  When a return is selected for an audit it isWhen a return is selected for an audit it is usually subject to an “office” audit or a “field”usually subject to an “office” audit or a “field” audit.audit.
    4. 4. THE AUDIT PROCESSTHE AUDIT PROCESS  The office audit is conducted in an InternalThe office audit is conducted in an Internal Revenue Office and is typically for individualRevenue Office and is typically for individual taxpayers with little or no business activities.taxpayers with little or no business activities.  In a field audit, the IRS agent reviews aIn a field audit, the IRS agent reviews a taxpayer’s books and records at the taxpayer’staxpayer’s books and records at the taxpayer’s place of business or the office of the accountant.place of business or the office of the accountant.
    5. 5. AUDIT TIPSAUDIT TIPS  Conduct yourself courteously and professionallyConduct yourself courteously and professionally showing that you have prepared for the auditshowing that you have prepared for the audit  Review the strengths and weaknesses of your positionReview the strengths and weaknesses of your position before the agent arrivesbefore the agent arrives  Cooperate with the agent and promptly respond to allCooperate with the agent and promptly respond to all requestsrequests  Establish time tables for completion of auditEstablish time tables for completion of audit
    6. 6. PREPARING FOR EXAMINATIONS  Interview your client before the IRS does  Anticipate what is going to be asked of your client  Try to resolve all issues before the IRS makes assumptions.
    7. 7. DO AND DON’TS WITHDO AND DON’TS WITH AUDITSAUDITS  Don’t impede the audit processDon’t impede the audit process  Present your case in a clear and logical mannerPresent your case in a clear and logical manner  Don’t argue frivolous issuesDon’t argue frivolous issues  Don’t submit fraudulent documentsDon’t submit fraudulent documents
    8. 8. WHAT HAPPENS IF I DON’TWHAT HAPPENS IF I DON’T AGREE WITH THE AUDITORAGREE WITH THE AUDITOR OR THE REVENUE OFFICEROR THE REVENUE OFFICER Every taxpayer has the right to appeal theEvery taxpayer has the right to appeal the findings of the examiner.findings of the examiner.
    9. 9. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT  Usually done prior to issuance of the 30 dayUsually done prior to issuance of the 30 day letter.letter.  Form 14017 must be completed by the taxpayerForm 14017 must be completed by the taxpayer and the IRS (Both must agree)and the IRS (Both must agree)  The taxpayer must provide the examiner with aThe taxpayer must provide the examiner with a brief, concise and soundly written statement ofbrief, concise and soundly written statement of the facts along with a statement of theirthe facts along with a statement of their position.position.
    10. 10. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT  Appeals officer trained in MediationAppeals officer trained in Mediation  Acts asActs as neutralneutral mediatormediator  Assists in aAssists in a neutralneutral locationlocation  Works with TP and Compliance officerWorks with TP and Compliance officer  Can settle cases based on hazards of litigationCan settle cases based on hazards of litigation
    11. 11. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT  Cases that can be fast tracked are:Cases that can be fast tracked are:  Non-docketed cases while in SB/SENon-docketed cases while in SB/SE  Fully developed factual and legal casesFully developed factual and legal cases
    12. 12. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT  Fast Track Excludes:Fast Track Excludes:  Most collection casesMost collection cases  No-response casesNo-response cases  TEFRA casesTEFRA cases  Campus and ACS casesCampus and ACS cases  Whipsaw issuesWhipsaw issues  Frivolous ArgumentsFrivolous Arguments
    13. 13. FAST TRACK SETTLEMENTFAST TRACK SETTLEMENT  The benefits of fast track are:The benefits of fast track are:  Hazards can be used to resolve the caseHazards can be used to resolve the case  Resolution usually takes about 60 daysResolution usually takes about 60 days  Can opt out any timeCan opt out any time  Taxpayer retains traditional Appeal RightsTaxpayer retains traditional Appeal Rights
    14. 14. COLLECTION ISSUESCOLLECTION ISSUES  Many taxpayers will be coming toMany taxpayers will be coming to you for collection adviceyou for collection advice  You should understand theYou should understand the Services policy on Collection ofServices policy on Collection of unpaid taxes.unpaid taxes.
    15. 15. COLLECTION CASESCOLLECTION CASES  Correspondence with Collection Division andCorrespondence with Collection Division and ACS is very important.ACS is very important.  Strict time framesStrict time frames
    16. 16. The “Tiered” ApproachThe “Tiered” Approach  Collection uses the tiered approach forCollection uses the tiered approach for collecting delinquent taxes.collecting delinquent taxes.  The IRS employee usually makes the ultimateThe IRS employee usually makes the ultimate decision, not the taxpayer.decision, not the taxpayer.
    17. 17. TiersTiers  First Tier- Abatement/Adjustment when tax,First Tier- Abatement/Adjustment when tax, penalty, or interest incorrectpenalty, or interest incorrect  Second Tier-Full paymentSecond Tier-Full payment  Third Tier-Short extensionThird Tier-Short extension  Fourth Tier-Installment AgreementFourth Tier-Installment Agreement  Offer in compromiseOffer in compromise  Currently not collectibleCurrently not collectible
    18. 18. WORKING WITH REVENUEWORKING WITH REVENUE OFFICERSOFFICERS  They have been instructed to collect as much ofThey have been instructed to collect as much of the tax as possible.the tax as possible.  Don’t jeopardize your reputation by providingDon’t jeopardize your reputation by providing false information.false information.  Some RO’s are hard to work with.Some RO’s are hard to work with.  If you cannot communicate effectively with theIf you cannot communicate effectively with the RO, call their manager.RO, call their manager.
    19. 19. WORKING WITH REVENUEWORKING WITH REVENUE OFFICERSOFFICERS  Often, RO’s will give you ideas to resolve yourOften, RO’s will give you ideas to resolve your case. They may tell you that the case appears tocase. They may tell you that the case appears to qualify for an Offer in compromise or anqualify for an Offer in compromise or an installment agreementinstallment agreement  But remember they will still try to collect asBut remember they will still try to collect as much as possible.much as possible.
    20. 20. TAX LIENTAX LIEN  Can be a “secret lien”Can be a “secret lien”  Can be public lienCan be public lien  Attaches to all property owned by the taxpayer.Attaches to all property owned by the taxpayer.
    21. 21. Tax LienTax Lien  Can be releasedCan be released  If an OIC is acceptedIf an OIC is accepted  Bankruptcy dischargeBankruptcy discharge  Innocent SpouseInnocent Spouse  Paid in fullPaid in full  Collection statute expiresCollection statute expires
    22. 22. TAX LEVYTAX LEVY  A levy is a legal seizure of the taxpayer’sA levy is a legal seizure of the taxpayer’s property to satisfy a tax debtproperty to satisfy a tax debt  A levy attaches funds due to the taxpayer fromA levy attaches funds due to the taxpayer from third parties, such asthird parties, such as  Salary paymentsSalary payments  Business receivables orBusiness receivables or  Money in a bank accountMoney in a bank account
    23. 23. COLLECTION DUE PROCESSCOLLECTION DUE PROCESS  If a taxpayer received either a Notice of FederalIf a taxpayer received either a Notice of Federal Tax Lien or a notice of intent to levy, theTax Lien or a notice of intent to levy, the taxpayer a right to a collection due processtaxpayer a right to a collection due process hearing with Appeals.hearing with Appeals.
    24. 24. COLLECTION DUE PROCESSCOLLECTION DUE PROCESS  IRS issues notice of intent to levy and right toIRS issues notice of intent to levy and right to hearinghearing  Exceptions:Exceptions:  Jeopardy levyJeopardy levy  Levy on state income tax refundLevy on state income tax refund  Right to a hearing is after levyRight to a hearing is after levy  Taxpayer must request hearing within 30 daysTaxpayer must request hearing within 30 days
    25. 25. Request for a HearingRequest for a Hearing • Must be in writingMust be in writing • Must include:Must include:  Name, address, daytime telephone number, signature, and dateName, address, daytime telephone number, signature, and date • Form 12153Form 12153 • Suspends collection statuteSuspends collection statute • IRS may not levyIRS may not levy • Right to judicial review of Appeals determination if requestedRight to judicial review of Appeals determination if requested timelytimely
    26. 26. Equivalent hearingEquivalent hearing • Late request for hearing (more than 30 days)Late request for hearing (more than 30 days) • Same issues consideredSame issues considered • No collection suspensionNo collection suspension • IRS may levy, but generally will notIRS may levy, but generally will not • No right to judicial review of Appeals decisionNo right to judicial review of Appeals decision
    27. 27. Nature of HearingNature of Hearing  InformalInformal  By correspondence, telephone, or face-to-faceBy correspondence, telephone, or face-to-face meetingmeeting  With an Appeals or Settlement Officer withWith an Appeals or Settlement Officer with no prior involvement in case (unless waived)no prior involvement in case (unless waived)
    28. 28. What Appeals Considers:What Appeals Considers: The “Big” ThreeThe “Big” Three 1.1. Did IRS follow required procedures?Did IRS follow required procedures? 2.2. Issues the taxpayer raisesIssues the taxpayer raises 3.3. Balancing the need for efficient taxBalancing the need for efficient tax collection with the taxpayer’s legitimatecollection with the taxpayer’s legitimate concerns re its intrusivenessconcerns re its intrusiveness
    29. 29. Issues the Taxpayer May RaiseIssues the Taxpayer May Raise  Innocent SpouseInnocent Spouse  Challenges to the appropriateness of theChallenges to the appropriateness of the proposed collection actionproposed collection action  Offers of Collection AlternativesOffers of Collection Alternatives
    30. 30. Challenges to the appropriateness ofChallenges to the appropriateness of proposed actionproposed action Excludes:Excludes: Moral, religious, constitutional, conscientiousMoral, religious, constitutional, conscientious objection, or similar grounds.objection, or similar grounds.  Challenges to assessment process, unlessChallenges to assessment process, unless separate FOIA requestseparate FOIA request
    31. 31. Collection AlternativesCollection Alternatives  Installment AgreementsInstallment Agreements  Offers In CompromiseOffers In Compromise  Currently not collectibleCurrently not collectible
    32. 32. Underlying Liabilities???Underlying Liabilities??? Must consider:Must consider:  Innocent spouseInnocent spouse  Self-assessed returnsSelf-assessed returns  Assessments for which no statutory notices wereAssessments for which no statutory notices were issuedissued
    33. 33. Underlying Liabilities???Underlying Liabilities??? Must not consider:Must not consider:  Liabilities for which taxpayer received statutoryLiabilities for which taxpayer received statutory notice of deficiency (90-day letter)notice of deficiency (90-day letter)  Other opportunity for Appeals considerationOther opportunity for Appeals consideration  Example: Letter proposing trust fund recoveryExample: Letter proposing trust fund recovery penaltypenalty
    34. 34. Issues PrecludedIssues Precluded  Issues decided by a court, or raised andIssues decided by a court, or raised and considered at a previous CDP hearing orconsidered at a previous CDP hearing or Appeals conference regarding this tax liability,Appeals conference regarding this tax liability, andand  The taxpayer participated meaningfully in such aThe taxpayer participated meaningfully in such a hearing or proceeding.hearing or proceeding.
    35. 35. Determination LetterDetermination Letter Includes:Includes:  Appeals determination re levy or notice of lienAppeals determination re levy or notice of lien  Consideration of the “Big Three”Consideration of the “Big Three”  Explains right to request judicial review inExplains right to request judicial review in appropriate court within 30 daysappropriate court within 30 days
    36. 36. Judicial ReviewJudicial Review Did Appeals abuse itsDid Appeals abuse its discretion in this case?discretion in this case?
    37. 37. APPEALS PROCESSAPPEALS PROCESS  To minimize the cost of litigation in both timeTo minimize the cost of litigation in both time and money, the IRS encourages the resolution ofand money, the IRS encourages the resolution of tax disputes through an administrative appealstax disputes through an administrative appeals process.process.  The Appeals Office provides the taxpayer with aThe Appeals Office provides the taxpayer with a final opportunity to resolve the tax controversyfinal opportunity to resolve the tax controversy without litigation.without litigation.
    38. 38. APPEALS PROCESSAPPEALS PROCESS  The Appeals Office will review the case and make aThe Appeals Office will review the case and make a determination that is fair and impartial to both thedetermination that is fair and impartial to both the government and the taxpayer.government and the taxpayer.  The meeting with the Appeals Employee is an informalThe meeting with the Appeals Employee is an informal meeting.meeting.  The Appeals Office has the authority to settle all factualThe Appeals Office has the authority to settle all factual and legal issues raised by exam.and legal issues raised by exam.  Appeals can also settle on the hazards of litigation.Appeals can also settle on the hazards of litigation.  No hazards on an Offer in CompromiseNo hazards on an Offer in Compromise
    39. 39. ““DON’TS” IN APPEALSDON’TS” IN APPEALS  Don’t go in unprepared.Don’t go in unprepared.  Don’t argue frivolous issues.Don’t argue frivolous issues.  Don’t talk down to Appeals OfficerDon’t talk down to Appeals Officer  Don’t submit fraudulent documents.Don’t submit fraudulent documents.  Don’t try to arbitrarily settle cases on aDon’t try to arbitrarily settle cases on a percentage.percentage.
    40. 40. Expediting your case throughExpediting your case through AppealsAppeals  Set realistic target dates.Set realistic target dates.  Follow up in writing the target dates discussed.Follow up in writing the target dates discussed.  If the Appeals person is not meeting agreedIf the Appeals person is not meeting agreed upon target dates, then you should contact theupon target dates, then you should contact the Appeals Team Manager.Appeals Team Manager.
    41. 41. EX-PARTEEX-PARTE COMMUNICATIONSCOMMUNICATIONS  Appeals cannot have communications withAppeals cannot have communications with another Service function without theanother Service function without the participation of the taxpayer or taxpayer’sparticipation of the taxpayer or taxpayer’s representative.representative.  Appeals may ask questions that involveAppeals may ask questions that involve ministerial, administrative or procedural mattersministerial, administrative or procedural matters and do not address the substance of the issues.and do not address the substance of the issues.
    42. 42. APPEALS JUDICIAL APPROACHAPPEALS JUDICIAL APPROACH AND CULTURE (AJAC)AND CULTURE (AJAC)  In July 2013, the Appeals function implementedIn July 2013, the Appeals function implemented AJACAJAC  AJAC impactsAJAC impacts  New issuesNew issues  Docketed casesDocketed cases  Offer in compromisesOffer in compromises  Collection Due Process casesCollection Due Process cases
    43. 43. AJACAJAC NEW ISSUESNEW ISSUES  New issues will not be raised by Appeals  Appeals also will not reopen an issue on which the taxpayer and the Service are in agreement..
    44. 44. AJACAJAC CDP CASESCDP CASES  CDP files sent to Appeals should contain sufficient documentation for Appeals to make a determination..  If a CDP file lacks documentation, it cannot be returned to Collection as a premature referral due to statutory requirements  Appeals will either secure the information or willAppeals will either secure the information or will make a determination based on information inmake a determination based on information in the file.the file.
    45. 45. AJACAJAC CDP CASESCDP CASES  If a taxpayer asks for a collection alternative andIf a taxpayer asks for a collection alternative and the taxpayer does not qualify for a guaranteed orthe taxpayer does not qualify for a guaranteed or streamlined IAstreamlined IA  A Collection Information Statement of 12 monthsA Collection Information Statement of 12 months or less is considered current.or less is considered current.  Appeals will treat a current CIS that comes with a CDP case will be deemed verified since Collection reviewed it or had an opportunity to review it.
    46. 46. AJACAJAC OIC CASESOIC CASES  In a non-CDP OIC case, Appeals will not “re-work” the offer rejected by Collection. Appeals will consider those items in dispute at the time of the rejection  A case will not be returned as a premature referral where Collection did not fully develop certain issues. Weigh Collection’s development of the issue versus information and testimony provided by the taxpayer, and make the decision based upon those factors.  The Appeals hearing officer will not request information or evidence (from any party) solely for the purpose of strengthening the government's case.
    47. 47. AJACAJAC OIC CASESOIC CASES  Agreed RCP issues that were previously addressed during the investigation by Collection will not be re-examined by Appeals.  Appeals employees will not attempt to identify and value any additional assets. In addition, Appeals employees should not revise the value of an asset to an amount that is higher than previously determined by Collection.
    48. 48. WHAT’S NEW IN APPEALS  Virtual Service Delivery  Quick Look Process
    49. 49. STATUTE OF LIMITATIONS AND TRANSCRIPT AWARENESS
    50. 50. ASSESSMENT STATUTE  The form 1040 is due three and a half months after the close of a taxable year or fiscal year. The assessment statute is three (3) years from when a return is filed (if filed before the due date, the actual due date for the return begins the due date for the return)
    51. 51. ASSESSMENT STATUTE  The 1120 is due 15th of the third month after the close of the entity’s taxable year or fiscal year. Early and late return provisions apply as with Form 1040; regular statute is three years.
    52. 52. ASSESSMENT STATUTE 6 year statute  If taxpayer omits from gross income an amount properly includible in income that is in excess of 25% of the gross income reported on the return, the statute becomes six years IRC Sec. 6501(e) (1)
    53. 53. MISCELLANEOUS STATUTE ISSUES  Delinquent return filed after SFR – three year statute begins upon filing of delinquent return.  Failure to file – no statute IRC 6501(c)(3)  False or fraudulent return – no statute IRC 6501(c)(1)  Net Operating Loss – statute of carryback years, with respect to this issue, is controlledby the statute on the originating year of the NOL
    54. 54. MISCELLANEOUS STATUTE ISSUES  Claims-A refund claim is timely if it is filed within three years from the date on which the original return was filed, or two years from the time the tax was paid (whichever occurs later). If no return is filed, the period for filing a refund claim expires two years from the time the tax was paid. A substitute return prepared by the IRS does not constitute a return filed by the taxpayer for this purpose.
    55. 55. TRUST FUND RECOVERY PENALTY  The IRS has 3 years from the later of the succeeding April 15th or from the date the return was filed to assess the Trust Fund Recovery Penalty against the responsible person. For example, if the corporation files a 941 tax return for the period ended 9/30/12 by 10/31/12, the IRS has until 4/15/2016 to assess the penalty against the responsible person for any unpaid trust fund taxes still outstanding for that quarter.
    56. 56. MISCELLANEOUS STATUTE ISSUES  Notice of Deficiency suspends statute for 90 days (150 days if mailed outside the U.S.) to allow taxpayer to file Tax Court petition. Another 60 days is added to the statute to allow the assessment to be made.  Notice of Deficiency – If a taxpayer agrees during the 90 day period, the 90 day period ends on the date the agreement form is received. The revised statute date is generally the number of days between the notice issuance and the agreement receipt date, plus 60 days, added to the original statute date
    57. 57. Collection Statute Expiration Date - CSED
    58. 58. IRC 6502 Tax may be collected by levy or by a proceeding in court, but only if begun: --within 10 years of assessment, or --prior to expiration of any period agreed on with Secretary and taxpayer before the ten years expires.
    59. 59. Suspension & Extension of CSED  Suspension:  halts the running of the statute, which results in extension of general CSED.  Extension:  Addition of time at the end of general 10-year period.
    60. 60. Waiver - After 12/31/99: Only with I/A Limited to 5-year extension by policy
    61. 61. 6503 Suspensions:  (a): Notice of Deficiency  (b): Custodia Legis  (c): TP outside of US  (f): Wrongful levy  (h): Bankruptcy
    62. 62. Other suspensions:  IRC 7811(d): Taxpayer Assistance Order  IRC 7508: Military Deferments  Certain collection suits  IRC 6015(2): Innocent spouse  Involves only 6015(b) and (c).  CSED is suspended during period no levy may be made pursuant to 6015(e)(1)(B).
    63. 63. IRC 6330(e): Collection Due Process  Suspension of CSED for period while hearing is pending, and any appeals.  CSED won’t expire less than 90 days after final determination.
    64. 64. TRANSCRIPTS  Return Transcript  includes most of the line items of a tax return as filed with the IRS. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S.
    65. 65. TRANSCRIPTS  Account Transcript  Contains information on the financial status of the account, such as payments made on the account, penalty assessments, and adjustments made by you or the IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. Account transcripts are available for most returns.
    66. 66. TRANSCRIPTS  Record of Account   is a combination of line item information and later adjustments to the account. Available for the current year and three prior tax years.
    67. 67. TRANSCRIPTS  Individual Master File (IMF)  IMF is the Individual Master File.  This file shows all individual returns and transactions that occur on individual returns.
    68. 68. TRANSCRIPTS  Business Master File (BMF)  All tax data and related information pertaining to individual business income taxpayers are posted to the BMF.
    69. 69. TRANSCRIPTS  NON-MASTER FILE (NMF)  This is a database that has entries that cannot be input on the master file. A NMF taxpayer may have several accounts for the same tax period

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