The IRS speaks: bankruptcy, OICs, e-filing highlight Liaison meeting.

• Author: Ascierto, Jerry
• Position: Offers-in-Compromise

Bankruptcy law, examinations, offers-in-compromise, e-filing and practitioner enforcement were among the issues discussed at CalCPA's 2005 IRS Liaison meeting.

Bankruptcy Abuse Prevention Act

Pat Montero, an attorney in the Small Business/Self-employed (SBSE) division of the IRS Office of Chief Counsel, presented an overview of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which has "imposed a lot of additional duties on the debtor," she said. "The benefits of filing for bankruptcy have been greatly diminished."

With respect to Chapter 7, debtors are no longer able to go into bankruptcy at will, Montero said. Individuals are now subject to a "means test" to be eligible for relief.

Chapter 11 bankruptcies for corporations will see the U.S. Trustee take on a more active role in monitoring the case--with expended authority to review the debtor's books, records and conduct on-site inspections--while debtors are required to file more detailed periodic reports.

Chapter 13 bankruptcies also have changed to include a means test, and debtors are now subject to dismissal for failure to meet their tax obligation after filing a petition.

Offers-in-Compromise

The IRS has seen a drop in the volume of OICs in recent years, although a higher percentage of those offers are being accepted, said John Crawford, director, SBSE collection, California Area. "We're also seeing far fewer frivolous claims."

In fiscal year 2005, the IRS received nearly 67,000 OICs, down from 97,000 in 2004. Part of the drop may be due to the new fee requirement for taxpayers making the offer.

Several CalCPA members expressed concern regarding the efficiency of the OIC process, saying changes in the bankruptcy act, coupled with the OIC fee, impose additional hurdles for taxpayers seeking to resolve a past liability.

Crawford pointed the way toward relief. If practitioners are having problems with OIC employees, they can raise the issue with that employee's manager. If that doesn't work, they may request to speak with Gloria Orozco, the OIC territory manager for California. Practitioners also can contact the Taxpayer Advocate or the Treasury Inspector General of Tax Administration for highly contentious issues.

Additionally, the IRS will host phone forums this year so practitioners can have their OIC questions answered by national and territory OIC managers.

Partial Pay Installment Agreement

A partial pay installment agreement is available for taxpayers who have...