IRS COLLECTIONS

This Article is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.

The IRS Collection Division enforces collection of past due amounts. IRS Collection Division is results oriented: the greater collections, the more likely the Collections Officer will be promoted. More referrals for criminal prosecution come from Collection Division than from any other source.

Once a matter reaches Collection, the amount is deemed owed. Collection personnel cannot correct erroneous information: their sole job is to squeeze money. There are few IRS guidelines to limit the parameters of their discretion and job function - the IRS Collection Officer has enormous power and latitude.

Conversations with Collection start with, "Mr. X, I just want to verify I am really talking to you. Please give me the name of your employer and bank so I may verify you are who you claim to be."

If you are ever contacted by Collection, do not give any information or a wage garnishment and bank levy may follow.

[Since Collection does not get involved until repeated billings have been sent, you should always respond (in writing) to IRS billings and other correspondence, to build a record of cooperation and credibility.]

If IRS Collection should contact you, you have 6 options.

1: Pay what they claim is owed. Fight any mistakes later.

2: Obtain a freeze of Collection activity for 30 days to allow you to provide proof to an audit department (Examination Division) that the amounts claimed owed are incorrect.

3: Ignore them. Switch banks before they attach your accounts. [Note: Lying to the IRS is illegal; however, if you are truthful about your present circumstances, and thereafter immediately rearrange those circumstances, that is not improper.]

4: Make an Installment Plan. This requires a financial statement and is usually a manageable amount. The IRS wants to collect money, now and in the future. They do not want to put people in jail or make them homeless welfare recipients. Homeless or incarcerated people do not pay any prior or future taxes. The IRS wants people to be productive and pay more taxes.

5: Make an Offer In Compromise. If you have limited income and low net worth, the IRS may accept a small amount to satisfy the entire tax bill. Nationwide, the average amount paid for Offers in Compromise is 15%.

If you are in the prime of your earning years, the IRS might rather wait and try to collect it all.

New regulations have made IRS more receptive to Offers in Compromise.

6: Declare Bankruptcy. Personal Income Taxes can be bankrupted if they are old enough. See an experienced bankruptcy lawyer for more information about this option.