What to expect from the IRS collection division in 2010:
1. More aggressive IRS tax lien filing practices.
IRS Revenue Officers have been instructed to make decisions on the filing of Federal tax liens within 10 days of case assignment. The IRS hit an all-time low for lien filings in 1999 of 167,000. That has rebounded to 867,000 in 2008, still off the mark from of 1,400,000 in 1992. Expect the IRS to continue to improve on securing its claims.
2. Quick issuance of levies from Automated Collection Service.
The IRS Automated Collection Service has been issuing levies immediately upon expiration of their mandatory 30 day waiting period. (The IRS cannot take levy action until 30 days after it mails you a Final Notice of Intent to Levy. You have the right to stop this by filing a collection appeal during this waiting period).
This has caught many who have filed timely collection appeals off guard. The IRS seems to be making quick matches on levy sources immediately upon expiration of the 30 day period, acting before it completes processing of the appeal. This aggressiveness has resulted in clients who have timely filed a collection appeal receiving a wage or bank levy. Be careful – file your collection appeal as soon as possible.
3. Increased collection of the trust fund recovery penalty.
The IRS Taxpayer Advocate reports that between 2002 and 2007 the IRS collected only 13.5% on trust fund recovery penalty assessments. The IRS knows this has been a problem, and indications are it is being fixed.
In the past, I would often be retained by clients who are 7, 8 and 9 years past assessment of the trust fund penalty and have never heard from the IRS on collection. (This is important – the IRS only has 10 years to collect after assessment). That is changing. Expect IRS Revenue Officers to seek collection of the trust fund penalty after they assess it.
4. “Pyramiding” tax cases, owing year after year.
IRS will continue its focus on those that “pyramid” tax liabilities – that is, owe the IRS year after year. This is especially true for nonfilers and employment taxes. IRS Goal #1 is to stop the problem of not paying every year, every quarter. Expect these cases to be high priority in the IRS collection queue.
5. Areas involving fraud, including fraudulent 1099 OID.
An evolving issue the IRS is working to immediately clamp down on is the fraudulent use of 1099 OIDs (original issue discount). Known as “OID Redemption” schemes, false forms are being filed claiming bogus 1099 OID credits and false withholding. The Justice Department reports that a total of $3.3 trillion in false claims have been filed.
The IRS is now catching those claims before issuing the refunds, but millions have already gone out the door. High level IRS Revenue Officers are being assigned these cases as priorities. They are receiving approval to issue immediate jeopardy levies to recoup the credits illegaly claimed.
With the tax gap at $300 billion and the budget deficit at 1.45 trillion, expect the IRS to continue its efforts to bring money back into the Treasury.