Many taxpayers get frustrated when dealing with the IRS Automated Collection System (ACS). After what can be some long wait times, taxpayers are sometimes presented with seemingly inflexible options for resolving their balance due to the IRS. After reaching an impasse with ACS, they often resort to hiring professional help to resolve their tax problems. While I do appreciate the business from prospective clients, I am sympathetic to their financial difficulties and encourage them to at least try to resolve their own tax issues before turning to professional assistance. In the spirit of trying to encourage this, I have put together a short list of some of my best strategies for dealing with ACS.
Collections
How IRS Collections Works – Part Five
IRS Collections Step Seven and Eight – Adverse Actions Against the Taxpayer
Finally, we turn to the most serious of actions by IRS collections: Property seizures (including levies) and lawsuits filed against the taxpayer.
How IRS Collections Works – Part Four
IRS Collections Step Six – Your Case is Assigned to the Field to be Handled by a Revenue Officer
When telephonic contact fails and the efforts of ACS are not fruitful and if your case meets a certain collection priority (usually based on the amount due or estimated due by the IRS), then you will be referred by ACS to the field where a local IRS office will assign you to a revenue officer. Revenue officer assignments are based geographically on the IRS office that is closest to the taxpayer. These offices contain collection personnel, who handle collection efforts at the local level.
How IRS Collections Works – Part Three
IRS Collections Step Five – Your Case is Assigned to IRS Automated Collection Systems (ACS)
At a certain point (usually after sixteen weeks), the service center makes the determination that its collection efforts have not yielded sufficient results and the taxpayer’s account is transferred to one of two places: Automated Collection Systems (ACS) or to the Collection field function (i.e. a revenue officer at a local IRS office). Most collection accounts will start in ACS though. ACS is a system of twenty-three computerized telephonic collection centers spread across the United States.[1] ACS essentially has three functions[2].
How IRS Collections Works – Part Two
IRS Collections Step Three – You Receive a Notice of Intent to Levy (CP 504)
After this sixteen week time period, the taxpayer’s account has entered into IRS collections status. As such, they will receive a threatening letter notifying them of the government’s intent to seize their property if they do not pay their outstanding balance in full or they do not enter into a suitable payment arrangement. This letter will be sent by certified mail to the last known address of the taxpayer. However, in some instances where the taxpayer has a large balance due to the IRS, the IRS may skip the prior Notices of Balance due and jump straight to the Notice of Intent to Levy. This is done to compel action on the part of the taxpayer to resolve the account.
How IRS Collections Works – Part One
There is alot of confusion among many of my clients about the IRS collections process and what actions the IRS is able to legally take against the taxpayer. People who owe balance dues see a series of increasingly threatening letters and I often get panicked phone calls from taxpayers who think that the IRS is going to take their house because of the five thousand dollar balance they have accumulated. As such, I wanted to trace the lifecycle of a balance due to the IRS in order to better educate people on exactly how the IRS collections process works. I hope this serves as a helpful resource and alleviates some of the stress associated with owing money to the government.
Beat the Clock: Address Tax Problems Early
One of the most common problems that I see in my practice is a failure of taxpayers to properly address their tax problems in a timely manner. Many taxpayers feel wait for the problem to grow to a point where serious action must be taken in order to be resolved where the problem could have rather been addressed by simple preventative action at the beginning of the problem. Specifically, this happens often in the arena of collections problems and where taxpayers owe a sum of money to the IRS. While I do want to remind taxpayers that it is never too late to properly resolve a tax issue, I did want to discuss some of the added benefits to solving your tax problems early.
IRS Transcripts – Part Two – W&I and Return Transcripts
IRS Transcripts – Wage and Income Transcripts
These types of IRS transcripts are a record of all of the wage and income data provided to the IRS by 3rd party providers including your employer, banks, financial institutions, brokerage houses, other government agencies, corporations, casinos, and a few others. All W2s, W2-Gs, 1099s, 1098s, 5498s, K1s, and other records of income on file for your social security number will be listed. Wage and income transcripts are most beneficial when preparing past returns because they are a quick and easy listing of income that you may have earned for that tax year. However, wage and income IRS transcripts should be checked for potential errors and compared with the information that you have in your records. 3rd parties can and frequently do make mistakes. Also, equally important, is to check your wage and income transcript for instances of identity theft. Wage and income transcripts are also an excellent provide insight into what information the IRS has on file for you. Although hopefully you will be able to prevent adverse collection activity before it occurs after reading this book, wage and income transcripts can give some idea of what they may come after (and how quickly they will be able to find it) if collection activity does occur.
IRS Transcripts – Part One – IRS Account Transcripts
To assist taxpayers and practitioners, the IRS will provide taxpayers with transcripts of the information that the IRS has on file. There are three main types of IRS transcripts that taxpayers should be aware of before checking their account. These are IRS account transcripts, IRS return transcripts, and IRS wage and income transcripts.
What if I Cannot Pay an IRS Balance Due?
In the tax world, to quote Benjamin Franklin, an ounce of prevention is worth a pound of cure. Almost all taxpayers can engage in some level of tax planning to their benefit prior to a return being filed. As a practitioner, I like to perform a mid-year check with my clients to review their current tax situations and to make sure they are on track with where we have identified they need to be. Although particularly helpful with self-employed individuals and those with small businesses, to ensure that they are making proper tax deposits, it can also be helpful for W2 employees who want to adjust their withholdings during the course of the year. In addition, I would recommend checking in with a tax professional to understand the tax consequences of any major life events. Getting married, having a child, changing jobs, getting a raise, buying a house, moving, caring for another individual, and a variety of other changes can all impact your future tax situation. It is always better to be able to be aware that you may have a balance due at the earliest possible juncture in order to try and minimize your liability.