When a taxpayer owes money to the IRS, they enter the IRS Collections system. The IRS has a very detailed process that they are required by law to follow when it comes to collecting tax debts. Knowing a little bit about how this system works and how IRS collections personnel are required to act can be very beneficial to you.
There are two distinct collections units within the IRS. The first is the Automated Collection System (ACS), which consists of computerized lien filings, automated send out of bills and notices on set intervals, and the call center agents that perform basic collections functions. It is important to understand that the people you’re talking to on the phone at ACS have limited authority, and may not be able to assist you with every tax matter without elevating to a supervisor or other personnel.
The other distinct collection unit within the IRS is the Collection Field Function. Field agents, called Revenue Officers, are located in cities and towns across the country. Rural Revenue Officers may work from home and have a field territory covering hundreds of miles, while thousands of agents in big cities have extremely small territories and may hardly ever leave their Federal Building.
Revenue Officers are required to do many things in order to “resolve” a tax liability placed under their control. They are required, by law and regulation, to collection certain information, verify things through whatever means available, and close out cases. Over the course of the past year and a half or so, I have personally noticed a significantly reduced emphasis on simply reducing the number of open cases, and instead increasing cash collections through whatever means necessary.
In order to demonstrate to IRS management that they are doing their jobs properly, here are some of the biggest actions that Revenue Officers are required to perform (and document in their files):
- Make sure you’ve filed every past tax return you should have (and if not, make you do so)
- Verify that you are making payments on time and in full for any new taxes you have come up, such as employment taxes or estimated tax payments (and if you’re not, making sure that you do)
- Collect detailed financial information from you concerning your income, expenses, assets, and other debts
- Based on that financial information, determine sources of money from which the government can collect on the tax debt (this can include forcing you to apply for loans against property with equity or tapping into retirement accounts)
- Place you into whatever program you qualify for in order to address the tax liability, such as a monthly payment plan, reduced settlement, or even giving you a grace period of a year or two in which they close your case (but you still owe the debt, and it grows)
- Make sure you don’t accumulate any new tax debts
- Physically visit your home or business at least once in order to determine if you’re hiding anything (free and clear Hummer sitting in the barn — it’s happened)
- If you are a business and owe employment taxes, determine whom to assess the Trust Fund Recovery Penalty against on a personal level, and do so
- If you are not meeting deadlines or they believe you are stalling, hiding money, or have an ability to make payments and you’re simply not, then to issue levies and take money from your bank account, paycheck, customers, etc.
All IRS collections employees keep meticulous notes whenever they talk to anybody (hint: so should you!). It’s not uncommon for an IRS Collections file to be hundreds of pages of material, even for what might seem like a relatively small case.
All in all, don’t forget that the IRS Collections division has one priority: To collect money. Hopefully, having a little bit better understanding of how they work cases will help you in resolving your own IRS matters. Be sure to contact a licensed tax professional for assistance with these kinds of matters, especially if a Revenue Officer is assigned to your case.