If you have tax debt (known as back-tax liability), the IRS may assign your case to a Revenue Officer if one of the following applies: (1) the IRS has been unable to collect the taxes through the normal channels (notices, levies, liens, telephone calls, etc.); (2) you have a history of not filing taxes; (3) you have not paid certain types of taxes (e.g. payroll taxes); or (4) you owe a very large amount. If you are contacted by an IRS revenue officer, you should immediately try to resolve your tax liability. You do have options: the IRS is given wide latitude to resolve tax liabilities by negotiating payment plans, placing clients into a protected status (Currently Not Collectible status), and granting extensions to full pay.
IRS revenue officers
IRS revenue officers are highly skilled employees of the IRS collection division. Revenue officers have more training than regular IRS collection employees. Sometimes this can be a plus, as they will follow normal protocol. However, it also means they have an advantage over taxpayers, a situation that usually results in the revenue officer gaining the upper hand.
The IRS grants revenue officers absolute collection authority. This means they have the ability to send notices, make phone calls, make at-home or at-work visits, and issue summons (calling you to mandatory meetings at IRS offices). They are also authorized to issue levies (garnishing your wages or putting holds on your bank accounts), seize accounts receivable, and initiate seizure of valuable property, among others.
If an IRS revenue officer is assigned to your tax liability case
If an IRS Revenue Officer is assigned to your tax liability case, you should immediately prepare to resolve it. Following these steps will ensure that you do not get strong-armed into a form of resolution that you can't afford.
- (Optional) Contact a tax attorney who specializes in resolving IRS back-tax liability. A competent attorney will review your financial situation for free to determine what form of resolution to pursue concerning your back-tax liability; if hired, he or she will also take care of the rest of this process.
- Contact the IRS and confirm that all necessary returns have been filed. Also get an updated balance due (with penalties and interest) through the current date (who knows, you may be able to afford to pay it off right away).
- If you have not filed some tax returns, prepare and file those immediately. Pay the associated balance due on the return (once you file your missing returns, any eligible refund may be enough to pay your liability in full).
If you still have an IRS back-tax liability after taking those steps, do the following:
- Gather the last 3 months' worth of paycheck stubs and bank statements. You will need them when you call the IRS later.
- Complete IRS Form 433-F. This will help determine whether your gross monthly income exceeds your allowable monthly expenses and if you have enough liquefiable assets (checking account funds, cash in hand, etc.) to pay your liability in full.
- If you have equity available in valuable real estate/property, make two attempts at two separate banks to borrow against that equity (per parcel of property). You will need to prove that you attempted to borrow against the property equity when you call the IRS later.
- Call the IRS Revenue Officer again and state that you would like to discuss your financial situation to determine what form of resolution is appropriate. You may be able to pay what you owe in installments or apply for Currently Not Collectible status.
After you take action
If you or your attorney is able to get a second call, the IRS representative will ask some questions to verify your income, expenses, and assets. The representative will then use a form similar to IRS Form 433-F to complete the calculation. At the end of that call, you will be told what your financial information indicates you can afford to pay. If you cannot afford a monthly payment, you will qualify for Currently Not Collectible status. This will protect your account from IRS collection efforts. If you are already facing an IRS bank levy or IRS wage garnishment, ask at this time that it be immediately released. Be prepared with appropriate contact information so that the revenue officer can immediately fax over the release.
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