The IRS is constantly updating and refining its tax collection processes. In recent months, the IRS has formally announced many changes to its tax collection procedures. For taxpayers with delinquent taxes, some of these changes may create additional challenges. Some of these changes, however, could be welcome news.
Let's start with the good news first
Two recent IRS changes could positively impact taxpayers. First, in 2013, the IRS rolled out the "fresh start program", where the IRS beganaccepting installment agreements for those taxpayers whose total debt did not exceed $50,000 without a requirement to provide a "collection information statement" to the federal government. The program gave taxpayers six years (72 months) to repay their outstanding balance, depending of the applicable statute of limitations.
Due to the success of the "the fresh start program", the IRS has been testing an expanded program now called the "streamlined process" applying to installment agreements for taxpayers with total tax debts of between $50,000 and $100,000. Under this expanded trial program, taxpayers would now have up to seven years (84 months) to repay a past due balance, depending on the applicable statute of limitations and would still not have to provide a "collection information statement" to the federal government, as long as the taxpayer makes automatic monthly payments. Previously, these options were not available to taxpayers with these levels of tax debt. This test program is in effect until September 2017 and applies only to those accounts in Automated Collection status, at which point it will be revisited.
Recently, the IRS set forth increased living expenses for taxpayers seeking to pay past due tax balances. The IRS uses Collection Financial Standards when determining how much money a taxpayer can repay each month. The IRS looks at many different expenses, including housing, transportation, food, clothing, and out-of-pocket health care expenses. Some of these expenses, such as food, clothing and health care, are tied to national standards. Other expenses, such as housing and transportation, are tied to local standards. By increasing the living expenses in these Collection Financial Standards, taxpayers entering into or renegotiating repayment plans can seek more comfortable payment terms.
And now the bad news, starting with offers in compromise
One of the biggest changes for taxpayers dealing with the IRS relates to offers in compromise. As of March 27, 2017, the IRS requires that taxpayers seeking an offer in compromise must have filed all applicable tax returns. If a taxpayer has incomplete tax returns, the IRS will not consider the offer in compromise. The IRS will, however, keep any payments you have made and apply them to the outstanding balance.
Passport revocation and denial
One new tool at the IRS's disposal is to work with the State Department to revoke or deny passports for taxpayers with certain types of delinquent debts. As our blog discussed in a previous post, taxpayers with more than $50,000 in unpaid taxes, penalties and interest and an IRS-issued lien or levy could lose the ability to travel internationally. For taxpayers with these "seriously delinquent tax debts", the IRS will send notice to the State Department to revoke the taxpayers' passport or to deny a passport application or renewal. Taxpayers who have already established installment agreements are not subject to this restriction.
Private debt collectors
As discussed previously this in this blog, the IRS has hired private debt collectors to attempt collection on old tax debts. These private collectors are seeking repayment on unpaid taxes meeting any of the following criteria.
- A portion of the debt (more than one-third) has lapsed under the statute of limitations
- No IRS agent is assigned to the account
- The IRS has not attempted to contact the taxpayer in more than a year
Private debt collectors cannot place liens on property or levy accounts. Furthermore, they cannot accept offers in compromise or installment agreements.
The tax landscape is always evolving, and skilled tax lawyers are essential when dealing with the IRS. Based in New York City and serving a global clientele, the attorneys of Goldburd McCone provide the highest levels of representation in the full range of tax controversies.