Tax Season 2010

Anatomy of a Real IRS Collection Case: Part VII

Most Revenue Officers Will Be Reasonable

By E. Martin Davidoff, CPA, Esq.

This is the seventh in a series of articles chronicling a real IRS matter. For details on what has transpired, please see the previous six issues of this magazine.

After our conversation with the manager, Kubek, we began a series of conversations with our client. We now had an opportunity to negotiate a resolution of this case directly with Richardson, the revenue officer. Most revenue officers will be reasonable if you meet agreed-to deadlines and tell the truth. Their job is to assess whether the IRS will be able to collect the tax from the debtor taxpayer and if so, how best to collect and protect the interests of the government. In so doing, they realize the rights of the taxpayer and respect those rights.

Before our conversation with Richardson, we met with our client and came up with a strategy. Initially, we had proposed to pay $791 per month on an installment agreement. On appeal of the rejection of that proposal, we reduced the amount to $265 per month based upon updated financial information. We thought that if we could settle this matter now at $791 per month, we should make the deal and enter into an installment agreement. Why? Primarily because our professional fees would stop accruing! Although Jim could not quite afford $791 per month, Mary could chip in each month. At age 65, Jim is unlikely to be working much longer and by the time he retires, the case could be placed into uncollectible status.

Our client agreed. We would approach the revenue officer to resolve the matter at $265 per month but have the flexibility to go up to $791 per month. If the revenue officer was unreasonable, we could insist that our pending appeal be moved forward.

We spoke to Richardson on Oct. 16, 2008, and found that he was, indeed, reasonable. We could work with him. Immediately following our call, we faxed him 50 pages, including our original request for an installment agreement, the Appeal and copies of all financial disclosures.

After some messages back and forth, Richardson called us on Oct. 29 to confirm that he had received our faxes. During that call with our tax controversy specialist on the case, Richardson suggested that the IRS take half the equity in the marital residence. Our specialist pointed out that the house was in Mary's name, and Richardson retorted, "well, he may eventually inherit the house."

We then attempted to set up a meeting for Richardson to discuss this issue directly with me. On Nov. 17, 2008, Richardson said he could not meet with us because he was being transferred to another IRS office. He said he would call us when he was resituated and assured us that no collection activity would be taken during this hiatus. We agreed to gather the information about the house and secured a copy of the deed to document the origin of ownership. Shortly after the call, we finalized and filed away a letter that stated:

"On Oct. 29, 2008, you made an additional request of our tax controversy specialist regarding the ownership of the personal residence located at 123 Main Street, Anywhere, NJ. Please be advised that the sole owner of this residence is Mary Smith, and she has been the sole owner since the end of 1980. Under Mrs. Smith's will, the house will pass solely to her children."

For reasons outlined below, we did not send this letter to the revenue officer until Feb. 12, 2009.

There was no need to rush the process along. Each month that went by was saving my client a cash outflow ranging from $265 to $791, depending upon where the final agreement fell. Weeks went by, as did months. We did not hear from Richardson until February, and we didn't try to contact him. Our instructions were to wait, and we did so, patiently.

Meanwhile, our client's situation changed. On Jan. 7, 2009, Mary told us that Jim had lost his job because of the economy and that he would be receiving a 16-week severance package. Although Jim was nearly age 66, he intended to secure another job. During the following weeks, Jim scheduled knee surgery that he had been putting off. He also decided to start collecting Social Security.

On Feb. 11, 2009, we received Richardson's letter of Feb. 6, 2009, which we will discuss when this article continues in the next issue.