2016 IRS Collections Representation Boot Camp · Notice of Federal Tax Lien •Federal tax liens are automatic and statutory in all cases, even without 668-Y filing. •The 668-Y

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2016 IRS CollectionsRepresentation Boot Camp

Presented by:

Dan Henn, CPA &

Jassen Bowman, EA

IRS Program Number: SDQJW-T-00040-16-I

Sponsors:

Sponsor ID #137128.

Before We Get Started…

• For proper CPE tracking, please sign in and out each day.• No need to sign in/out for breaks and lunch.• Please sign out if you are going to miss a particular session, also.

• Twitter hashtag: #TaxResolutionTraining

• Acronyms: Don’t hesitate to ask what they mean.

• Questions: Feel free to ask questions during the presentations. This makes for better learning for everybody.

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IRS Collections Process Overview

Jassen Bowman, EA

Course Objectives

• Explain how tax liabilities are created.

• Understand the IRS collections process

• Identify the letters in the IRS notice cycle.

• Understand the ramifications and opportunities of each IRS Collections notice.

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Where Tax Debts Come From

Return Filing Assessment

SFR SNOD Assessment

Examination SNOD Assessment

The IRS Collections Cycle

• Most tax debtors owe for multiple periods.• 1040: Annual cycle• 941: Quarterly cycle

• Very high SB/SE enforcement priority• Breaking the cycle is the key to resolution.

• Initial assessment notice is a bill.

Assessment

Bill 1

Bill 2

NTFL

CP-504

Letter 1058

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Bills

•Also known as “21-day letter”.• Pay within 21 days to avoid further P&I.

•Common notice codes:• CP-11: Miscalculations• CP-21: Corrections• CP-22: Audits• Letter 2257C, 3030C: Service Center Balance Due Notice

Notice of Federal Tax Lien

• Federal tax liens are automatic and statutory in all cases, even without 668-Y filing.

• The 668-Y is the public notice filing.• Filed with county/state.• Public record.• 30 days to Appeal.

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Notice of Intent to Levy

•CP-504

•Provides notice of right to seize state refunds

•30 days after 668-Y

• Taxpayer has 30 days to resolve

Final Notice of Intent to Levy

•Letter 1058 (LT 11)•This is the Intent to Levy notice as required by statute

•30 days after the CP-504

•Levy action may commence 30 days later

•CDP Appeal rights• File CDP ~10 days before due date

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Field Assignment

• This means Revenue Officers

• Inventory Delivery System routes cases:• ACS

• SB/SE Field Collection (RO)

• Other areas (ENTITY)

• IDS fed from:• ACS

• ASFR

• TDA

• TDI

• IDRS

Field Assignment

• Risk-based collection assignment• Amount due

• Tax type

• Taxpayer history

• Resolution history

• Priority Assignment To FC• Delinquent Return Investigations

• Large Cases

• FTD Alerts (pyramiding 941 debts)

• Special compliance initiatives

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Breaking The Cycle

•Temporary collections holds

•Get current with FTD/ES payments• Stop pyramiding liabilities

•Get compliant with filing requirements•1040: At least most recent 6 years of returns•941/940: File everything

•Seek final resolution

Conclusion

•Understanding this cycle is critical to your ability to resolve tax liabilities.

•I encourage you to explore and enumerate your state collections notice cycle, also.

•Bedtime Reading: IRM 5.19.1

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Presented by:

Dan Henn, CPA &

Jassen Bowman, EA


Sponsors:

Sponsor ID #137128.

Mechanics of IRS Collections Case Work

Jassen Bowman, EA

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Course Description

This course will explore the IRS collections process from the taxpayer representative’s point of view. Students will learn a systematic structure for approaching the resolution of tax debt cases, starting from the IRS account research and financial analysis necessary to determine eligibility for resolution option, through the resolution process itself and ongoing compliance monitoring best practices.

Mechanics of IRS Collections Case Work

• Mechanics of working IRS cases• Investigation of Liability

• Financial Review/Analysis

• Resolution Options

• The IRS side of the process

• Resolution• Appeals

• Penalty Abatement

• Monitoring

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IRS Collections Activity In FY15

• 8.1 million new collections cases• 463,000 more new cases than in FY14

• Closed 7.1 million collections cases

• 13.3 million open collections cases• Net increase of over 900,000 collections cases over FY14

• $137 billion in outstanding tax, penalties, and interest

More Collections Activity In 2015• Over 3 million delinquent tax returns

• Net reduction of 500,000 from FY14

• 515,247 new tax liens filed• 707,768 in 2012

• 602,005 in 2013

• 635,580 in 2014

• 2012 threshold change from $5k to $10k

• Serial debtors will have smaller liens filed

• Nearly 1.5 million levies served on third parties• Down from 2 million in 2014

• 27,000 Offers in Compromise accepted out of 67,000 applications, collecting $205 million• Note that only 0.37% of cases resolved via OIC

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Investigation of Liability

• TaxPrac/eServices

• Transcripts• Returns

• SFR

• 1058 Dates

• Payments

• Break out TPI

• Identity CSED

• Notices

Financial Analysis

• Think of it like a mortgage application.

• Form 433-A/B/F• Assets

• Even retirement accounts can be levied.

• Income

• Expenses• IRS National Standards

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Resolution Pathways

• Assets Access the equity• Loan applications/denials

• Lien discharge/subordination

• Disposable income Installment Agreement• Maximize allowable expenses

• Minimize income

• No assets, no disposable income CNC

• What about OIC?• Assets + Disposable Income x (12 or 24) < Debt

• Fresh Start changes can be rescinded any time

Appeals

• Large % of cases resolved in Appeals.• Defeats purpose of CFF

• Settlement Officers have more time in service and more extensive authority than an RO.

• Collections Due Process Appeal• Most common: 1058• Often takes months

• Collection Appeals Program• Most common: Actual levies• Mandatory review timeframes

• IA Denials, TFRP Proposals/Assessments, OIC Rejections

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Penalty Abatements

• After Installment Agreements

• Reasonable cause criteria• Death or serious illness• Alcohol/drug issues• Destruction of records• Criminal activity• Reliance on IRS or professional advice• “Undue economic hardship”

• 941: “Ordinary business care & prudence”• “Economy” or drop in business no excuse

• Can’t pay the taxes? You can’t afford the employee.

Account Monitoring

• Pull updated transcripts to check for:• IA payments

• Pyramiding

• FTDs

• Return Filing

• Advise on compliance

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Other Necessary Services

• Tax resolution often requires other services:• Tax prep

• Payroll

• Bookkeeping

• Write-up work

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Presented by:

Dan Henn, CPA &

Jassen Bowman, EA


Sponsors:

Sponsor ID #137128.

Collections Financial Standards For Individuals

Dan Henn, CPA &

Jassen Bowman, EA

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Course Objectives

•Understand the purpose and application of IRS Collection Financial Standards.

•Explain each individual expense category and how to apply them.

•Understand the purpose of IRS Form 433-A.

•Complete the Form 433-A Income & Expense Table (IET).

Purpose & Application of Collection Financial Standards

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Purpose

To determine a taxpayer’s ability to repay

Scope

•Differentiates between necessary and unnecessary living expenses

•Designed around a middle class lifestyle

•Reviewed quarterly

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Allowance Beyond Standards• Standards intended to cover basic living expenses,

nothing more.

• Service may allow for actual expenses in rare situations.

• Taxpayers living significantly beyond standards will be required to downsize their lifestyle or obtain alternate resolution.

Expenses Never Allowed

• Private school tuition

• Higher education tuition

• Tithing

• Charitable contributions

• Retirement contributions

• Payments on unsecured debts

• 2012: Minimum credit card payments and minimum student loan payments permitted in OIC RCP calculations.

• Ref: Pub. 1854

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National Standards: Food, Clothing, Health Care, Misc.

Lump Sum National Standard

• Food•Housekeeping supplies•Clothing and maintenance•Personal care products and services•Misc (the catch-all)•Allowed without questioning actuals•One person: $585• Four people: $1,513• Each additional: $378

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Health Care

•Actual out of pocket costs or…

•Standard amount of $60 or $144 (65 and over) plus…

•Actual health insurance premiums

Local Standards: Housing, Utilities, & Transportation

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What’s Included

•Rent or mortgage (PITI)

•Maintenance

•Gas, electric, water, garbage

•Home phone, cell phone, cable TV, and Internet

Basis

•US Census Bureau

•American Community Survey

•Bureau of Labor Statistics (income)

•Most localities were decreased from 2015 allowances.

•Reminder: Designed to approximate a median income lifestyle.

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Example

Exceeding the Housing Standard

•Most commonly exceeded standard

•Some taxpayers may think the standard unfair

•12-month adjustment period

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Transportation Standards

• Public transit OR a car, not both

• Car free and clear? Only operating costs allowed

• Public transit: $173 per month (nationwide)

• Ownership Costs: $517/$1,034• This is a 9% reduction from 2015 levels.

• Operating Costs, West Region: $213/$426

• Operating Costs, Seattle Metro: $173/$346

Overview of IRS Form 433-A

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Section 4: Personal Assets

• Cash

• Personal bank accounts• Checking

• Savings• Money Market

• Investments• Stocks, bonds, etc.

• Retirement accounts (IRA, 401k, etc.)• Yes, the Service can force retirement account liquidation.

• Any business entity in which you have a financial interest


•Available credit•Credit cards•Lines of credit•Home equity lines

•Annuities

•Life insurance with cash surrender value

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•Real estate•Personal residence• Investment properties•Vacation homes•Partial ownership• Inherited


•Vehicles• Owned & leased• Cars• Boats• Motorcycles• Aircraft• ATVs• PWCs• Trailers

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Section 4: Personal Assets• Other Personal Assets

• Furniture

• Clothing

• Art

• Coins• Stamps

• Comic books

• Guns

• Antiques

• Intangibles: Intellectual property, contracts, mining claims

Income/Expense Table

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Form 433-A, Section 5

•Often the most important item on 433-A

•This is where Collection Financial Standards are actually applied

•Determines IA payment or OIC remaining income for offer amount

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Self-Employed

•Complete Form 433-A, Section 6 to include all business information, including assets.

•Section 7 income goes into IET

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Self-Employed Tip

Simply submit P&L, Balance Sheet, & Depreciation Report

Conclusion• Understanding the Collection Financial Standards is important to properly represent

collections clients.

• Proper completion of Form 433-A, and inclusion of necessary documentation, can significantly accelerate the resolution timeframe.

• Proper 433 documentation is often the most difficult thing to obtain from the client.• Mortgage analogy

• Even when not required, as in Streamline cases, completing a “rough draft” 433-A allows you to better assist your client.

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Presented by:

Dan Henn, CPA &

Jassen Bowman, EA


Sponsors:

Sponsor ID #137128.

Understanding Statutes of Limitations:

ASED & CSED

Presented by Dan Henn, CPA

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Course Objectives

• Define ASED and CSED.

• Understand events that extend the CSED.

• Understand how to utilize CSED expiration as a resolution option.

• Know to use ASED extensions as a negotiation tool.

Definitions

ASED: Assessment Statute Expiration Date• The final day by which the government must assess a tax

liability against a taxpayer, or forever lose the ability to do so.

CSED: Assessment Statute Expiration Date• The final day by which the government must assess a tax

liability against a taxpayer, or forever lose the ability to do so.

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Statutory Basis

Administrative Procedures

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Tolling Events

Form 2751

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Presented by:

Dan Henn, CPA &

Jassen Bowman, EA


Sponsors:

Sponsor ID #137128.

Tax Liens:Withdrawal, Subordination, & Discharge

Presented by Jassen Bowman, EA

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Course Objectives

• Explain the difference between lien withdrawal and release

• Understand conditions for lien withdrawal

• Understand the process for lien withdrawal

• Know how and when to utilize the subordination and discharge processes

Tax Lien Withdrawal

Withdrawal is not a release!

668(Z) vs 10916(c)

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Tax Lien Withdrawal

668(Z), Certificate of Release of Federal Tax Lien:Formal public notice of release of statutory lien under IRC 6321.

10916(c), Withdrawal of Notice Of Federal Tax Lien: Only removes adverse impact of the NTFL public notice. Removes NTFL from public record and credit reports, but does NOT release statutory lien against property and rights to property.

Withdrawal Conditions

1. Premature filing

2. Resolved via payment agreement

3. To facilitate collection

4. “…best interest of the taxpayer and the United States…” (Taxpayer Advocate)

Reference: IRC 6323(j)

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Premature Filing

1. Administrative procedures

2. Bankruptcy

3. Combat

4. MFT 35

5. LLCs

6. Disaster Areas

IA Resolutions

• Lien withdrawal as condition of IA• DDIA

• IMF – all

• BMF – income only or OOB

• $25k or less bal due• Full pay in 5 years or by CSED

• Defaults

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Withdrawal to Facilitate Collection

• The IRS wants to get paid

• Liens can occasionally hamper this• Lump sum payments

• Access to credit

• Ability to operate business

• Maintain employment• Security clearances

• Securities licenses

Withdrawal Requests

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How To File

• Directly with Revenue Officer for field cases

• If no RO, file with Advisory Group (formerly Technical Services) serving local area (see Pub. 4235)

• Can also be filed in Appeals

• Be prepared to submit supporting documentation

• Be sure to request 3rd party notification

• More info: IRM 5.12.9

Lien Subordination

Does not release or withdraw the lien!

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Lien Subordination Application

•Use Form 14134

•Must describe both the collateral in question and the lender

•Must cite code section applying under

•45 day processing time

Lien Subordination Code Sections

•6325(d)1 -- IRS gets their share now

•6325(d)(2) -- IRS will get more later

•6325(d)(3) – certain liens on farm property• Do not use Form 14134• See Pub 1153

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Lien Discharge

•Discharges a specific asset from being covered under the lien

•Certificate of Discharge (COD) issued

Lien Discharge

•Use Form 14135• Almost identical to Form 14134

•Must describe the asset, sale details, and what the IRS is getting out of it

• Estate Tax Liens require special processing (6325(c))

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Lien Discharge Code Sections

•6325(b)(1) – remaining assets = 2x tax debt

•6325(b)(2)(A) – IRS receives amount equal to their interest in the asset up front

•6325(b)(2)(B) – value of US interest is $0

•6325(b)(3) – sale proceeds are escrowed and IRS gets their share

•6325(b)(4) – 3rd party bond (buyer)

Subordinations/Discharges

•May require an appraisal

•Asset specific

•Driven primarily by the math

•File directly with Advisory Group

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Conclusion

•These are tools to facilitate resolution

•Be sure clients understand purpose

•Don’t be afraid to explore “outside the box” options that apply these tools

Documents

2016 IRS Collections Representation Boot Camp · Notice of Federal Tax Lien •Federal tax liens are automatic and statutory in all cases, even without 668-Y filing. •The 668-Y