Tax Problems Blog

January 29, 2018

IRS infringing on Taxpayer Due Process Rights. The Taxpayer Advocate has issued a Taxpayer Assistance Order concerning the passport certification program.

On Jan. 22, 2018, the IRS began implementation of the passport certification program. Under this program (IRC § 7345) the IRS is authorized to certify a taxpayer’s seriously delinquent tax debt to the Department of State for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed, individual tax liability exceeding $51,000 for which either a notice of federal tax lien has been filed and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or a levy has been made. Exceptions include: current installment agreements (IAs), offers in compromise (OICs), and Collection Due Process (CDP) hearings.

The Taxpayer Advocate has advised that the IRS planned procedures for implementing this program is a Most Serious Problem in its Annual Report to Congress.

The Most Serious Problem includes the lack of prior notice to taxpayers and the potential for this lack of notice to infringe on U.S. Constitutional due process protections. Research estimates that over three-quarters of the individual taxpayers potentially eligible to be certified will not have received any notice at all prior to certification because they received their CDP notices prior to the IRS including passport information in these notices.

One of the major issues which the Taxpayer Advocate has focused upon is the REFUSAL OF THE IRS to exclude from the passport certification program taxpayers with already open Taxpayer Advocate cases. Moreover, the IRS has ignored the legislative history, which reflects Congress’s intent that taxpayers not be certified until their administrative rights have been exhausted or lapsed. In addition, the IRS also ignores its own guidelines. Further, the IRS has refused to exclude taxpayers who have come to the Taxpayer Advocate for help in trying to resolve their tax debts, either because they have economic difficulties or because IRS processes have failed the taxpayer.

Because the IRS has denied the repeated requests by the Taxpayer Advocate for the IRS to exclude already open Taxpayer Advocate cases from certification, the Taxpayer Advocate has taken action to protect these taxpayers.

On Jan. 16, 2018, the Taxpayer Advocate issued Taxpayer Assistance Orders (TAOs) for every one of almost 800 taxpayers, ordering the IRS not to certify their seriously delinquent tax debts to the Department of State. By operation of law, the IRS must refrain from certifying any of these taxpayers until these Taxpayer Advocate Orders are rescinded or modified.

The action was necessary due to the imminent, irreparable harm that taxpayers may face by the loss of their passports and the right to travel internationally, such constituting a clearly compelling public policy for assisting any taxpayer subject to passport certification.

Taxpayer Advocate posting at this link – HERE

January 28, 2018

IRS Accountability at the top – can we hope for “change”?

Do you have a tax problem? Do you find yourself hitting the concrete wall of bureaucracy? A new IRS Commissioner is on the Horizon and it’s time to correct the business management model for the Office of the Commissioner.

There was a time, before the prior administration, that a one could actually reach the Office of the IRS Commissioner without too much difficulty. Attempt to locate the telephone number for the Office of the IRS Commissioner and you will be referred to the IRS web site.

In the past, a FAX could be sent to the Office of the IRS Commissioner detailing a problem and an actual response would be received. There was previously, as I recall, an Executive Services Office. Also, the IRS had a Collection Due Process Coordinator and ACS support staff which you could contact. Many times, excellent assistance was obtained using these resources. For example, at one time, I had written the Commissioner’s Office with a very troubling collection case. Shortly thereafter, I received a call and was advised (along these words) – “…you wrote the Commissioner, stuff rolls down hill, and it is on my desk, what can I do for you?” The result was a very professional individual who worked with me on the case and helped resolve it!

Years ago, on collection cases and dealing with Field Revenue Officers, a Manager advised me (along these words) “ … when you write these faxes to the Commissioner, this results in our having conference calls lasting many hours between the east coast and the west coast…” . Typically those cases had involved abusive collection matters and resulting lengthy faxes by legal counsel with support and argument. But, this actually allowed log jams to be cleared and move forward. This was because someone at the “top”, with more “in the trenches” experience and knowledge, could see the larger picture and cut to the chase. But, today, the IRS publishes information about your “bill of rights”; however, as the Taxpayer Advocate reports, the actions by the IRS violate your rights.

In the arena, the Office of the Commissioner remains “missing in action”, as it has for years. The Mission of the IRS is to provide “top quality service”, but taxpayer’s and representatives are left to deal with an institution whose training budget has been reduced by nearly 75% since FYE 2009. Moreover, IRS employees receive training in the form of “virtual training”. The shift has been away from in-person, face-to-face training.

As stated by the Taxpayer Advocate, “The downstream consequences to the IRS and taxpayers, including rework, misleading or incomplete advice, improper
compliance actions, and distrust in the IRS serve to further degrade the relationship between the IRS and taxpayers and violate the taxpayer rights to be informed, to quality service, and to a fair and just tax system.”

A common concern, of taxpayers and practitioners alike, is that they are not receiving accurate advice in order to resolve their issues when they contact the IRS. One consequence to an “out of control” IRS Collection situation is that you may have to file for a Taxpayer Assistance Order (through the Taxpayer Advocate). However, this can serve to reward the IRS for its abusive conduct, by extending the statute of limitations for collection on the matter you are seeking to resolve. Thus, with one hand, you are trying to restrain the attack dog, while at the same time enticing him with a juicy, bloody bone in the other.

Do you ever call the IRS and feel you are speaking to a robot? Well, the IRS employee may merely be in fact reading from a script! To compound the situation, you will find that if you disagree with the scripted text that the IRS employee is robotically reading from, he or she may “resolve” the issue by hanging up on you!

On the other hand, you may have spent time on the phone with IRS/ACS and faxed in financial information. Then during your next follow up call you find out that the prior IRS employee didn’t enter the information into the computer at all, or entered erroneous information. Sometimes you find out that the IRS/ACS employee actually tossed in the trash the documentation provided. Another situation is that the subsequent IRS/ACS employee reverses the IRS position on a matter previously already worked out by the prior IRS/ACS employee. It would appear that resolution of calls and “taxpayer service” is not the actual objective.

Request a Manager call back? What a joke! You end up with a low level call back (if you even get one at all), with a big Rubber Stamp on it. If a voice message is left for you, no direct manager telephone number is provided – you are to call the 800 number and start over. At times, the purported manager leaves a message but doesn’t even mention the case name. The system is not designed to resolve matters!

With new leadership, it is recommended that the Office of the IRS Commissioner be made available and be proactive in working with the taxpayers the IRS is to serve. In the past, procedures were in place that allowed interface with tax practitioners. It facilitated case resolution. A new IRS Commissioner is going to be appointed. Now is the time to correct the business management model for the Office of the Commissioner.

December 19, 2017

IRS – Private Debt Collectors

Filed under: IRS Levy and Tax News — Administrator @ 12:31 pm

The Internal Revenue Service is again using Private Debt Collectors to collect outstanding inactive tax receivables. The Internal Revenue Service Advisory Council (2017 Report) has raised a number of issues regarding the use of Private Debt Collectors, discussed below.

1. Taxpayers and their representatives have dealt solely with the IRS concerning the collection of outstanding tax debts. The use of Private Debt Collectors introduces another layer of complexity with the potential for diminishing transparency.

2. Increased opportunities for Identity Theft, Fraud and Scamming of taxpayers.

3. The Private Debt Collectors will have access to confidential taxpayer information, increasing the potential abuse of taxpayer confidential information. Further, since taxpayer data will now reside on additional databases, there is an increase in the taxpayer’s exposure to potential identity theft by hackers.

4. Concerns about fraudsters claiming to be the IRS demanding immediate payments to fraudulent accounts.

5. The Private Debt Collectors may be motivated to use aggressive tactics since their compensation is based on a percentage of their collections.

If you owe the IRS, contact me. The consultation if free.

September 20, 2017

IRS Allowable Living Expense Standards Do Not Provide Taxpayers With a Sustainable Standard of Living

The Taxpayer Advocate (August, 2017) has made findings as to the method the IRS uses to determine the amount of basic living expenses it should take into account concerning payment of tax debt over time. The following are the key points:

1. Congress directed the IRS to make sure taxpayers who enter into offers in compromise still have enough money to cover their basic expenses.

2. Congress told the IRS to “develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses.”

3. The IRS Allowable Living Expenses (ALE) standards have come to play a large role in many types of collection cases (e.g., non-streamlined installment agreements, claiming economic hardship… ).

4. ALE standards are used by the IRS to calculate a taxpayer’s monthly expenses, which in turn affects the resolution of the taxpayer’s case because it reflects how much he or she can afford to pay the IRS. ALEs cover common expenses such as food, clothing, transportation, housing, and utilities.

5. The Taxpayer Advocate identified the following problems with the current ALE standards:

a. “The standards are based on what taxpayers pay, not what it costs to live. And since many of the IRS standards are based on average expenditures, there is a chance the taxpayer’s expense is greater than the survey average.”

b. “Spending habits are not consistent over income levels. For instance, while housing costs now account for about 25 percent of a family’s pre-tax income, among low income renters, some may spend up to half of their pre-tax income on rent.”

c. “The ALE standards are outdated and should include all expenses necessary to maintain the health and welfare of households today, including an allocation for digital technology access, child care, and retirement savings.”

d. “The IRS decreased the amounts for some of the expenses in 2016 based on its belief that expenses are going down. This was done despite the fact that the IRS and TAS reached a joint agreement in 2007 saying “the allowance amount for any ALE category cannot be decreased unless something economic changes significantly, such as a major sustained recession or depression.” Even with TAS’s concerns with the IRS decision last year, the IRS again decreased ALE standards in 2017. All of our research shows that costs are going up. More importantly, the average taxpayer is facing more financial strain.”

e. “Until there is improvement, the ALE standards won’t truly capture what it costs for a taxpayer to pay for basic expenses. And any taxpayer who is unable to resolve their tax debt will be vulnerable to IRS collection action otherwise prohibited by Congress.”

Read More HERE

September 19, 2017

IRS Telephone Impersonation Phone Scam – Still in the Dirty Dozen. Taxpayers to remain alert and Report.

Filed under: IRS Levy and Tax News — Administrator @ 10:41 am

For over 10 years, the IRS has provided on its web site the “Dirty Dozen” of tax scams. The IRS telephone impersonation scam is again included in the IRS’s 2017 “Dirty Dozen” list.

The Treasury Inspector General for Tax Administration Semiannual Report to Congress (October 1, 2016 – March 31 2017) advises that between October, 2013 and March 31, 2017, the Treasury Inspector General for Tax Administration logged more than 1.9 million contacts from taxpayers who reported that they had received telephone calls from individuals who claimed to be IRS employees.

During these telephone impersonation calls, the impersonators told the victims that they owed additional tax and that if they did not immediately pay they would be arrested, lose their driver’s licenses, or face other adverse consequences.

The scam involves substantial monies. As of March 31, 2017, the TIGTA reports that more than 10,300 victims reported that they had paid the impersonators a total amount in excess of $55 Million.

Although almost every State has victims, the top five states where victims suffered financial losses are: California, Florida, Illinois, New York, and Texas.

In addition to investigations, the TIGTA has developed other steps to counter this scam and protect taxpayers. Such have included identifying the impersonation scam telephone numbers and requesting the telephone carrier to take shut the number down; posting the scam-related telephone numbers on the Internet so that potential victims could search to determine if the call they received was part of the scam; and a TIGTA auto-dialer to call back the impersonators with a message ordering them to stop their criminal activity (occupied the impersonators time and telephone lines).

Technology is being looked at to stop the spoofed calls. In one situation almost two million calls were blocked that had been spoofed to appear as though the calls were being made from the IRS.

The companies used by the impersonators to monetize the scam have been cooperative in using techniques to help warn consumers. For example, when a prepaid debit card is purchased, there is a fraud warning that now appears on the signature screen. MoneyGram has placed banners on its kiosks advising customers “that if they have been told to pay their taxes by MoneyGram, it is a scam and they should not proceed with the transaction”. iTunes cards have been used by the impersonators as a means of cashing in on the fraud about 70 to 80 percent of the time. Nationwide, distribution of warning messages have been made at grocery and convenience stores.

TIGTA is continuing to urge taxpayer to remain on HIGH ALERT.

If you believe you have been a victim of an IRS Impersonation Scam, you can fill out a form at the TIGTA website. The link is here:

A copy of the Treasury Inspector General for Tax Administration Semiannual Report to Congress (October, 2016 – March 31 2017) is HERE.

Note: The TIGTA website Alert, as of September, 2017, states the following:
“As of June 13, 2016, TIGTA has received additional information that callers impersonating Internal Revenue Service (IRS) or Treasury Department employees are demanding payments not only on iTunes Gift Cards but on other gift cards as well. Scam callers may also request payment of taxes on Green Dot Prepaid Cards, MoneyPak Prepaid Cards, Reloadit Prepaid Debit Cards, and other prepaid credit cards. These are fraudulent calls.’
“As a reminder, any call requesting that taxpayers place funds on an iTunes Gift Card or other gift cards to pay taxes and fees is an indicator of fraudulent activity! No legitimate United States Treasury or IRS official will demand that payments via Western Union, MoneyGram, bank wire transfers, or bank deposits be made into another person’s account for any debt to the IRS or Treasury. Hang up on these fraudulent callers and go to the TIGTA scam reporting page to report the call. …”

September 2, 2017

Sample IRS letter to taxpayer when collection case assigned to private debt collector

Filed under: IRS Levy and Tax News, IRS levy and wage garnishment — Administrator @ 3:15 pm

Sample letter to taxpayer when collection case assigned to a private debt collector at IRS
linK: IRS

September 1, 2017

IRS Tests W-2 Verification Code for Filing Season 2017

Filed under: IRS Levy and Tax News — Administrator @ 10:20 am

For filing season 2017, the Internal Revenue Service will expand an initiative to verify the authenticity of Form W-2 data. This initiative is one in a series of steps to combat tax-related identity theft and refund fraud.

The objective is to verify Form W-2 data submitted by taxpayers on e-filed individual tax returns. The IRS has partnered with certain Payroll Service Providers (PSPs) to include a 16-digit code and a new Verification Code field on a limited number of Form W-2 copies provided to employees.

Verification codes will appear on approximately 50 million Forms W-2 in 2017, up from the 2 million forms in 2016. Tax professionals are urged to look for “Verification Code” on W-2s because location will vary.

The code will be displayed in four groups of four alphanumeric characters, separated by hyphens. Example: XXXX-XXXX-XXXX-XXXX.

The Verification Code will appear on some versions of payroll firms’ Form W-2 copies B and C, in a separate, labeled box (Copy B is “To be filed with employee’s federal tax return” and Copy C is “For employee’s records.”)

The form will include these instructions to taxpayer and tax preparers: (link to IRS page)

August 28, 2017

IRS Issues Urgent Warning to Beware IRS/FBI-Themed Ransomware Scam

Filed under: IRS Levy and Tax News — Administrator @ 12:44 pm

IRS Issues Urgent Warning to Beware IRS/FBI-Themed Ransomware Scam

Issue Number: IR-2017-134 (August 28, 2017)

WASHINGTON – The Internal Revenue Service today warned people to avoid a new phishing scheme that impersonates the IRS and the FBI as part of a ransomware scam to take computer data hostage.

The scam email uses the emblems of both the IRS and the Federal Bureau of Investigation. It tries to entice users to select a “here” link to download a fake FBI questionnaire. Instead, the link downloads a certain type of malware called ransomware that prevents users from accessing data stored on their device unless they pay money to the scammers.

“This is a new twist on an old scheme,” said IRS Commissioner John Koskinen. “People should stay vigilant against email scams that try to impersonate the IRS and other agencies that try to lure you into clicking a link or opening an attachment. People with a tax issue won’t get their first contact from the IRS with a threatening email or phone call.” …

August 18, 2017

IRS Streamlined Processing Criteria – to end Sept 30, 2017

Filed under: IRS Levy and Tax News — Administrator @ 4:43 pm

August, 2017 – Reminder the temporary increase of the Streamlined Processing Criteria that raises the limit to total tax liability of $100,000 is due to end Sept 30, 2017.

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