Current State of IRS Collections Policies

Current state of collections:

There has been a net gain of 580 Revenue Officers by end of 2010, primarily in the small business and self-employed division. However this is expected to end up a 127 RO gain by the end of 2011, due mostly to attrition

Inspector General report states that the IRS doesn’t have the staff to collect past due taxes.

The IRS budget has been targeted for cuts by Republicans. The House proposed a $603 Million in cuts to the IRS for 2011. The White House proposed a $486 Million increase in the IRS budget. Both plans were unsuccessful. The actual cut was .2%

It seems that RO’s are carrying a bigger caseload now and seem to have less time to spend on individual cases. That does seem to make things a bit easier for practitioners and taxpayers, in that the IRS seems a little more willing to accept proposals that they would have continued to negotiate on in the past.

It also seems that the time for matters to get assigned to Revenue Officers is increasing.

A bit of good news:

The IRS has instituted a new policy concerning streamlined installment agreements. They will no longer file liens if the amount owed is under $25,000 and the taxpayer sets up a streamlined IA.

In addition, (from the IRS website):

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.

• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.

• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.

• Creating easier access to Installment Agreements for more struggling small businesses.

• Expanding a streamlined Offer in Compromise program to cover more taxpayers.

The news release also states that the IRS will withdraw liens for taxpayers on a streamlined IA, who have a direct deposit payment set up, after a trial period.

The changes will also allow small businesses to set up streamlined Installment Agreements for up to $25,000. (I personally have not been successful in getting anything longer than a 24 month term, though).

They have also increased the amount of tax that qualifies for streamlined OIC’s to $50,000 and allow up to $100,000 in family income or for businesses with no employees up to $500,000 in gross receipts.

The IRS also claims to be taking a more relaxed view in determining what a taxpayer’s income is. Previously, they would (usually) average income over 3 years for OIC purposes. Now they will (are supposed to) look at current income and give it greater weight than the average.

We have also found that filing through a Collection Due Process Appeal is the easiest way to get an Offer Accepted. The Appeals Officers have more latitude in settling cases and are much more well trained.

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