Collection Enforcement

• Author: W. PATRICK CANTRELL
• Pages: 267-310

267

CHAPTER 6

Collection Enforcement

Dealing with the IRS Collection Function

I. Introduction and Background

A. Prior to the 1998 IRS Restructuring Act, the IRS consisted of numerous

functional “divisions,” the most important of which, from a tax

practitioner’s viewpoint, are as follows:

1. Appeals,

2. Collection,

3. Criminal Investigation (CI), and

4. Examination (formerly Audit).

Presently the Collection function of the IRS is under the Small

Business/Self-Employed Operating Division. Collection groups and

examination groups are combined under “territory managers.”

B. I n many cases a tax practitioner gets a tax case after the tax liability has

already been determined. In most cases an assessment will have been

made. Once an assessment has been made, the case is in the hands of

the Collection function. At that point the practitioner is not concerned

about either the Examination function or the Appeals function. Even

if the assessment is the result of an audit, the Examination personnel

will no longer have the files, and contact with them is pointless. At

this juncture, then, the practitioner needs to know and understand the

Collection operations, such as the Automated Collection System (ACS)

and the Special Procedures Function (SPF). A working knowledge of

the Taxpayer Advocate Service (TAS) is also important.

C. The primary functions of the Collection personnel are as follows:

1. To collect unpaid federal taxes that have been assessed;

2. To solicit unfiled tax returns that are due; and

3. To investigate and make recommendations in “trust fund liability”

(formerly known as “100 percent penalty”)1 cases.

268 COLLECTION ENFORCEMENT

II. TDAs versus TDIs

A. Revenue officers (ROs), the primary collection field employees,

generally handle two types of cases:

1. Taxpayer delinquent accounts (TDAs)

2. Taxpayer delinquency investigations (TDIs)

TDAs are cases where a taxpayer has filed a return, but has not

paid the tax; TDIs are cases where a taxpayer simply has not filed a

required return.

B. I n a TDI case, where a taxpayer refuses to file a return (either income

tax or employment tax), ROs are empowered to file a return for him

or her. This authority is contained in I.R.C. §6020(b). Note that if the

IRS executes a return under § 6020(b), the statute of limitations (for

assessment purposes) does not start to run.2

Practice Tip

If an RO requests that a delinquent return be filed, send it to the IRS

service center and give a copy to the RO. This prevents mishandling by

the RO.

C. It is important to remember that ROs know little, if anything, of

substantive tax law. They are trained in neither tax law nor accounting.

Consequently, they cannot generally read or interpret the substantive

aspects of a tax return. Therefore, in TDI cases, it does not really

matter much how accurate the return is; it only matters that the return

gets fi led.

III. Revenue Officers

A. Titles

Field collection employees are known as ROs. Do not confuse them

with revenue “agents.” Agents are IRS Examination employees. ROs,

on the other hand, are generally not trained in accounting, and do not

necessarily have a college degree.

B. Powers

ROs have a difficult and unpleasant job, dealing with delinquent

and often recalcitrant taxpayers. But Congress has given them broad,

sweeping powers to do their job effectively, including the power to file

liens and to levy on wages and other property.

C. RO Perspectives

Revenue agents (RAs) have a totally different perspective than ROs.

As a practical matter, RAs could not care less whether the tax ever gets

paid; they are concerned only with the accuracy of the returns. On the

Financial Statements 269

other hand, ROs could not care less about the accuracy of the return;

they care only about the tax being paid.

D. Challenging RO Aggression

If an RO appears to be taking an overly aggressive position, the tax-

payer should consider requesting a review of these actions by his or

her group manager. There is a certain risk in making th is request,

however, since the group manager usually sides with the RO, and

the request for review may not be welcomed by the RO. In challeng-

ing an RO’s actions, one should keep in mind the official chai n of

command. The chain of command withi n each district, from bottom

to top, is (1)revenue officer, (2) group manager, (3) territory manager,

and (4)area director.

E. Oral Statements Made by ROs

Verbal representations made by ROs (or any IRS employee, for that

matter) may not be relied on by taxpayers or representatives.3 Such

statements are useless.

Practice Tip

On critical matters, always try to get revenue officers to commit to prom-

ises or agreements in writing where possible.

F. Due to the broad, sweeping powers of ROs to seize property, it is

important to treat IRS Collection cases with a great deal of delicacy.

IV. Automated Collection System (ACS)

A. Smaller and more routine IRS Collection matters are often assigned

to the ACS.

B. ACS employees do not make field visits. Instead, they operate

exclusively by making telephone contacts with delinquent taxpayers.

Each ACS employee has a computer terminal and can access any

taxpayer’s account simply by entering a Social Security number. ACS

has access to levy source information and has the power to issue liens

and levies in appropriate cases.

C. In smaller cases, ACS has the power to take financial in formation over

the telephone and work out installment agreements.

V. Financial Statements

A. Revenue officers will in virtually all cases request that a taxpayer

fill out and sign a Form 433-A. This is a very detailed form

requiring disclosure of all assets and liabilities as well as a listi ng of