Collection: Defenses and Remedies

• Author: W. PATRICK CANTRELL
• Pages: 311-358

311

CHAPTER 7

Collection: Defenses and Remedies

Applications for Taxpayer Assistance Orders

I. General Information and Background

A. Statutory Authority

Taxpayers are authorized to file with the Taxpayer Advocate Service

(TAS) an application for a taxpayer assistance order (ATAO). The TAS

office was, prior to July 30, 1996, known as the Office of Ombudsman.1

The term “taxpayer advocate” (TA) also includes any designee of the

TA (typically, the TA caseworker in each major city).2

II. “Hardship” Issues

A. General Rule

For an application for an ATAO to succeed, the taxpayer must be “suf-

fering” or “about to suffer” a significant hardship as a result of the

manner in which the interna l revenue laws are being administered by

the IRS. 3 This determination of hardship is required to be made by the

TA prior to the issuance of a TAO.4

B. Definition of Hardship

1. The term “significant hardship” means a serious privation; it

does not include mere economic or personal inconvenience to the

taxpayer.5

2. Significant hardship is a subjective determination and is to be

made on a case-by-case basis. IRS employees have been advised to

use good judgment and not to let personal values or opinions bias

their determinations. The following factors are to be considered:

a. The imminence of the hardship;

b. The taxpayer’s ability to retain housing, utilities, or employment;

312 COLLECTION: DEFENSES AND REMEDIES

c. The taxpayer’s ability to obtain food, clothing, or medical

treatment;

d. The chance of irreparable damage to the taxpayer’s credit

rating;

e. The likelihood of serious financial hardship, such as inability

to meet payroll or an imminent bankruptcy;

f. Loss of education to the taxpayer or his or her family; and

g. The taxpayer’s physical or mental state as a result of his or

her tax situation, as demonstrated by depression, despair, or

threat of personal harm.

All doubts concerning the existence and extent of the hardship are

to be resolved in favor of the taxpayer.6

3. TA case workers can decide that hardship exists, but only the TA

can decide that hardship does not exist.7

4. If a taxpayer is simply getting tax due notices, this is not

considered a threat of hardship sufficient to require the filing of

an ATAO.8

5. Moreover, enforcement action (levies, etc.), in and of itself, is not

a significant hardship without additional factors being present.9

III. Relief

A. The TAO (following the filing of an ATAO), if issued, may require the

IRS to do one of the following things:

• Release any property levied on or10

• Cease taking any other collection action.11

B. A finding of signif icant hardship by the TA will not always result

in the granting of the relief requested. The TA will also look at the

behavior of the taxpayer and action or inaction of the IRS that is

causing the hardship.12

C. Timing of Response by the TA’s Office

The TA’s office is required to notify the taxpayer and complete certain

action within prescribed time limits.13 The TA’s office should complete

its review of the ATAO and come to a decision within two work-days

of receipt of the ATAO.14

IV. Form 911 Procedures

A. The application for a TAO should be made on a Form 911 or in a

written statement containing the following information:

1. Name and Social Security number of the taxpayer;

2. The kind of tax involved;

3. A description of IRS action causing the hardship;

4. A description of the specific hardship; and

5. The signature of the taxpayer or his or her representative.15

Other Miscellaneous Rules 313

B. Place of Filing

ATAOs (911s) should be filed with the Taxpayer Advocate Office of the

IRS where the taxpayer resides.16 If other field or office employees of

the IRS receive the ATAO, they are to be immediately forwarded to the

TA’s office for handling.17

C. Timing of Filing

An ATAO should be submitted within a reasonable time after the tax-

payer becomes aware of the significant hardship or the potential sig-

nificant hardship.18

D. Alternative Ways to File

Although the Form 911 is the preferred way to file an ATAO, one can

always file by means of a letter or a telephone call. Actually, the fastest

way to file is to fill out the 911 form and then fax it to the local TAS

office.

V. Statute of Limitations Issues

A. General Rule

The collection statute of limitations19 is suspended during the follow-

ing per iod:

Start date: date of application for TAO

End date: date of TA’s decision on the application

The collection statutory period is also suspended for any period

specified by the TA in the issued TAO.20

B. Unilateral Action by the TA

The statute of limitations is not suspended if the TA acts on his or her

own without an application being filed by the taxpayer.21

C. “Decision” Date

For statute of limitations purposes, the decision date is the date on

which the TA makes a decision with respect to the application.

D. Written Explanation Required

If the statute of limitations is extended, the taxpayer must be given a

written response from the TA explaining which statute was extended,

why it was extended, and for how long.22

VI. Other Miscellaneous Rules

A. Rescission

Once issued, a TAO can only be rescinded by the TA or by the IRS com-

missioner (or his or her deputy).23