Coleman Jackson, P.C. | Transcript of Legal Thoughts

LEGAL THOUGHTS:  THE IRS COLLECTION PROCESS AND TAXPAYER’S OPTIONS | Published November 28, 2022

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Legal Thoughts is an audiocast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This episode of Legal Thoughts is an audiocast where the Attorney, Coleman Jackson is being interviewed by Johana Powell, Tax Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “THE IRS COLLECTION PROCESS AND TAXPAYER’S OPTIONS.” You can listen to this podcast by clicking here: https://anchor.fm/coleman-jackson/episodes/THE-IRS-COLLECTION-PROCESS-AND-TAXPAYERS-OPTIONS–ENGLISH-VERSION-e1ooft6

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TRANSCRIPT:

ATTORNEY: Coleman Jackson

LEGAL THOUGHTS

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY: Coleman Jackson

Welcome to Legal Thoughts

• My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, contracts litigation and immigration law firm based in Dallas, Texas.
• Other members of the law firm are Alexis Brewer and Johana Powell – Tax Legal Assistants, Leiliane Godeiro – Litigation Legal Assistant, and Gladys Marcos – Immigration Legal Assistant.
• On today’s “Legal Thoughts” podcast, our Tax Legal Assistant, Johana Powell, will be interviewing me on the important topic of: “THE IRS COLLECTION PROCESS AND TAXPAYER’S OPTIONS.”

INTERVIEWER: Johana Powell, Tax Legal Assistant

Hi everyone, my name is Johana Powell and I am a Tax Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.

Good afternoon, Attorney; thank you for agreeing to sit with me as I interview you with respect to this interesting topic: “THE IRS COLLECTION PROCESS AND TAXPAYER’S OPTIONS.”

Let’s get started!

Question 1:

Attorney what is likely to happen when a taxpayer files a tax due return with the IRS?

Attorney Answer – Question 1:

Good afternoon, Johana.

When a taxpayer files a tax return with the IRS, they can expect the following to happen in short order:  If a balance is due on the return;

1. the IRS will— Put the balance due on its books; technically that step is called ‘tax assessment’ under tax law;

the IRS will— Send the taxpayer a bill requesting full payment by a certain date;

In the event the taxpayer fails to pay the first bill in full or contact the IRS to make payment arrangements, the IRS will send the taxpayer a second bill requesting full payment of all taxes, penalties and interest due by a certain date;

4. In the event the taxpayer fails to pay the second bill in full or contact the IRS to make alternate payment  arrangements, the IRS will pull tools out of its collections tool box and rachet up the heat on the recalcitrant        taxpayer.

INTERVIEWER: Johana Powell, Tax Legal Assistant

Okay attorney; how much heat can the taxpayer expect to be coming their way if they fail to voluntarily pay that tax debt!

QUESTION 2: Explain what collection tools are in the IRS collection’s tool box?

Attorney Answer – Question 2:

Johana, taxpayers who owe the IRS need to understand that the law gives the IRS broad authority and awesome powers to collect delinquent federal taxes, penalties and interest without any involvement of the courts.  In fact, injunctive relief is not available to the taxpayer.  Taxpayers cannot get any court to enjoin the IRS in its collection efforts.  Taxpayers may have the right to seek that federal courts review and quash some of these collection tools that I am about to discuss; but extremely strict rules apply to quashing an IRS action.  The IRS is authorized under the provisions of the Internal Revenue Code; which is codified in 26 United States Code, to collect taxes by use of its collection tools:

1. The IRS is authorized to apply all refunds due to any delinquent tax debt owned by the taxpayer until the delinquent taxes, penalties and interest are paid in full;

2. The IRS is authorized to file a federal tax lien in the property records wherever the taxpayer has property.  The IRS tax lien attaches to all property owned by the taxpayer at the time the lien is recorded in the records and it also attaches to all property of any kind the taxpayer may have in the future until the taxes, penalties and interest are paid in full or the lien is lawfully released;

3. The IRS is authorized to assign a Revenue Officer to physically contact the taxpayer at home or at the taxpayer’s business without notice in an attempt to collect the taxes, penalties and interest owed;

4. The IRS is authorized to summon the taxpayer or third party to appear in the IRS offices to give testimony and produce relevant documents to an IRS Officer;

5.  The IRS is authorized to serve a levy on third parties to collect the taxes, penalties and interest owed by the taxpayer.  For example, the IRS levy and seize the taxpayers bank accounts, wages and other monies owed the taxpayer or held on behalf of the taxpayer; and

6. The IRS collections division is authorized to make criminal referrals to the IRS Criminal Division for criminal investigation and potential criminal tax charges against the taxpayer and others aiding and abetting the taxpayer in violation of U.S. Tax Laws; and finally;

7.  The IRS is authorized to file a declaration with the U.S. Department of State declaring the taxpayer’s account seriously delinquent; thereby, informing the U.S. Department of State that the seriously delinquent taxpayer’s U.S. Passport should be revoked or the taxpayer’s passport renewal should be denied.

Let me point out clearly here; all of the collection tools that I have discussed here can be used by the IRS without any court involvement or supervision what-so-ever!

INTERVIEWER: Johana Powell, Tax Legal Assistant

Well with all that potential heat!  What are the actions that the taxpayer should take when they receive a tax bill from the IRS?

Attorney Answer – Question 3:

1. The taxpayer should immediately open the correspondence from the IRS as soon as they receive it.  That is the very first thing the taxpayer should do.  Time is of the essence because critical deadlines to act are often in IRS correspondence.  By failing to act, taxpayers can forsake very important rights.  For example, the right to seek relief in the U.S. Tax Court without first paying the taxes, penalties and interest due comes in a 90-day letter from the IRS.  Failure to act within 90 days and you lose that right forever.
2. Second, the taxpayer should read the correspondence carefully; and if they don’t understand it, they should either contact the IRS and arrange to discuss it with them; or, contact an attorney, accountant or IRS enrolled agent and schedule an appointment and bring the IRS correspondence with them to their initial meeting.
3. Third thing that needs to happen is that the taxpayer will need to decide what further actions they need to take; that is going to depend upon the following
   1. What actions are the IRS requesting the taxpayer to take in the correspondence, if any;
   2. If it’s a tax bill or notice of tax adjustment where the IRS is requesting a payment by a date certain-
      1. In the event the taxpayer agrees that they owe the taxes, penalties and interest, the taxpayer either needs to pay in full or negotiate some kind of payment arrangement with the IRS;
      2. In the event the taxpayer disagrees with the balance owed or any part of it; the taxpayer needs to exercise its collection due process rights, or the taxpayer’s right to challenge the assessment in court within the deadlines set forth in the IRS correspondence, or exercise any number of other rights the taxpayer may have depending upon all the facts and circumstances.

4. Taxpayers dealing with the IRS should seriously seek professional representation; especially, if they are certain about what the tax issues are or they are in great civil and criminal exposure.

INTERVIEWER: Johana Powell, Tax Legal Assistant

Question 4: Attorney Jackson, what happens if the taxpayer cannot pay the taxes, penalties and interest in full?

Attorney Answer – Question 4:

Again, the particular options available to a taxpayer is going to depend on all the facts and circumstances.  Facts matters, such as, the type of tax debt; such as, income taxes, business taxes, payroll taxes, excise taxes and things like that.  The amount of the tax debt is very important as to what options are going to be available to resolve the matter.  The taxpayer’s history with the IRS also can matter a lot.  Anyway, all the facts and circumstances matter as to what options are available.  Some of the options that might be available are

1. Negotiate a full pay or partial pay installment payment arrangement with the IRS. Again, depending on all the facts and circumstances the taxpayer may be able to apply for an installment agreement at irs.gov, on the phone, by mail or by visiting an IRS local office.  Again, whether this can be done is going to depend upon the amount of the tax debt, the tax payer’s prior history, the taxpayer’s current tax compliance, and a lot of other things.  The taxpayer may want to consult and attorney or other professional whenever they are dealing with large tax debts, unfiled tax returns and other times when they have criminal exposure due to their actions or inactions as far as it goes in terms of compliance with U.S. federal tax laws.
2. The fresh start or offer in compromise might be available for some taxpayers.  There are some options for these taxpayers but they must act promptly once they receive their bills. The taxpayer that cannot pay in full may apply for an installment agreement, which consists in a payment plan so the IRS will allow you to make smaller periodic payments according with your financial capacity. Usually, you can apply for the installment agreement online, by phone, by mail, or in person in one of the local offices, however, this is just possible when it is early in the process. When a taxpayer has a big tax debt or it is past due from several years and has interest and penalties accrued for a long period of time, you should consult with your tax attorney.  An offer in compromise is sought to settle unpaid taxes for less than the full amount owed, the IRS may accept an OIC when the Service believe that the taxpayer’s tax debt might not be accurate, or when the taxpayer has proven to the OIC division of the IRS that the taxpayer does not have sufficient assets and income to pay the tax debt, or because paying the debt would cause the taxpayer undue hardship. In recent years, not many offers in compromise request are approved.  The IRS is more likely to accept a partial pay installment agreement or put the taxpayer’s account in uncollectable status and review it in subsequent years to determine whether the tax debt is collectible.

INTERVIEWER: Johana Powell, Tax Legal Assistant

Attorney, thank you for siting with me today to inform us about the IRS collection process and taxpayer’s options, it is very important for the taxpayers to be aware of this information. In United States all individuals and businesses must prepare tax returns, it is important to maintain records of this returns, and to make them accurate to avoid issues with the IRS.

Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast.  Everybody takes care!  And come back in about two weeks, for more taxation, contracts, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.

English callers:  214-599-0431 | Spanish callers:  214-599-0432 |Portuguese callers: 214-272-3100

Attorney Closing Remarks

This is the end of today’s Legal Thoughts!

Thank you for giving us the opportunity to inform you about: “THE IRS COLLECTION PROCESS.”

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