collection statute presentation

Collection Due Collection Due Process HearingsProcess Hearings

Restructuring and Restructuring and Reform Act of 1998Reform Act of 1998

Taxpayers are entitledTaxpayers are entitled:: to same protections in dealing with the to same protections in dealing with the

IRS as other creditorsIRS as other creditors adequate notice of collection activity andadequate notice of collection activity and a meaningful hearing before IRS deprives a meaningful hearing before IRS deprives

them of their property them of their property

When?When?

Taxpayer entitled to a hearing before Taxpayer entitled to a hearing before Appeals:Appeals:

after Notice of Federal Tax Lien after Notice of Federal Tax Lien filed filed (IRC § 6320)(IRC § 6320)

IRC § 6330: After notice of IRC § 6330: After notice of intent intent to to levy issuedlevy issued

IRC § 6320IRC § 6320

Taxpayer: Taxpayer: notified of notice of lien within 5 days of notified of notice of lien within 5 days of

its filingits filing Must request hearing within 30 daysMust request hearing within 30 days

IRC § 6330IRC § 6330

IRS issues notice of intent to levy and right to IRS issues notice of intent to levy and right to hearinghearing Exceptions:Exceptions:

• Jeopardy levyJeopardy levy• Levy on state income tax refundLevy on state income tax refund• Right to a hearing is after levyRight to a hearing is after levy

Taxpayer must request hearing within 30 daysTaxpayer must request hearing within 30 days

Request for a HearingRequest for a Hearing

• Must be in writingMust be in writing• Must include:Must include:

• Name, address, daytime telephone number, Name, address, daytime telephone number, signature, and datesignature, and date

• Form 12153 or any written requestForm 12153 or any written request• Suspends collection statuteSuspends collection statute• IRS may not levyIRS may not levy• Right to judicial review of Appeals Right to judicial review of Appeals

determination if requested timelydetermination if requested timely

Equivalent hearingEquivalent hearing

• Late request for hearing (more than 30 days)Late request for hearing (more than 30 days)• Same issues consideredSame issues considered• No collection suspensionNo collection suspension• IRS may levy, but generally will notIRS may levy, but generally will not• No right to judicial review of Appeals decisionNo right to judicial review of Appeals decision

Nature of HearingNature of Hearing

InformalInformal By correspondence, telephone, or face-By correspondence, telephone, or face-

to-face meetingto-face meeting With an Appeals or Settlement Officer With an Appeals or Settlement Officer

with no prior involvement in case with no prior involvement in case (unless waived) (unless waived)

What Appeals Considers:What Appeals Considers:The “Big” ThreeThe “Big” Three

1.1. Did IRS follow required procedures?Did IRS follow required procedures?

2.2. Issues the taxpayer raisesIssues the taxpayer raises

3.3. Balancing the need for efficient tax Balancing the need for efficient tax collection with the taxpayer’s collection with the taxpayer’s legitimate concerns re its intrusivenesslegitimate concerns re its intrusiveness

Issues the Taxpayer May RaiseIssues the Taxpayer May Raise

Innocent SpouseInnocent Spouse Challenges to the appropriateness of Challenges to the appropriateness of

the proposed collection actionthe proposed collection action Offers of Collection AlternativesOffers of Collection Alternatives

Challenges to the Challenges to the appropriateness of appropriateness of

proposed actionproposed action

Excludes:Excludes: Moral, religious, constitutional, Moral, religious, constitutional,

conscientious objection, or similar conscientious objection, or similar grounds.grounds.

Challenges to assessment process, unless Challenges to assessment process, unless separate FOIA request separate FOIA request

Collection AlternativesCollection Alternatives

Installment AgreementsInstallment Agreements Offers In CompromiseOffers In Compromise Substitution of other assetsSubstitution of other assets Posting of a BondPosting of a Bond

Underlying Liabilities???Underlying Liabilities???

Must consider:Must consider: Innocent spouseInnocent spouse Self-assessed returnsSelf-assessed returns Assessments for which no statutory Assessments for which no statutory

notices were issuednotices were issued

Underlying Liabilities???Underlying Liabilities???

Must not consider:Must not consider:

Liabilities for which taxpayer received Liabilities for which taxpayer received statutory notice of deficiency (90-day letter)statutory notice of deficiency (90-day letter)

Other opportunity for Appeals considerationOther opportunity for Appeals consideration• Example: Letter proposing trust fund Example: Letter proposing trust fund

recovery penaltyrecovery penalty

Issues PrecludedIssues Precluded

Issues decided by a court, or raised and Issues decided by a court, or raised and considered at a previous CDP hearing or considered at a previous CDP hearing or Appeals conference regarding this tax Appeals conference regarding this tax liability, andliability, and

The taxpayer participated meaningfully in The taxpayer participated meaningfully in such a hearing or proceeding.such a hearing or proceeding.

AUDIT RECONSIDERATIONSAUDIT RECONSIDERATIONS

IRS ACCEPTS AN AUDIT IRS ACCEPTS AN AUDIT RECONSIDERATION REQUEST IF: RECONSIDERATION REQUEST IF: You have new information that will decrease You have new information that will decrease

the tax owed.the tax owed. You filed a return after the IRS filed a return You filed a return after the IRS filed a return

for you.for you. IRS made a computational or processing error IRS made a computational or processing error


IRS WON'T ACCEPT AN AUDIT IRS WON'T ACCEPT AN AUDIT RECONSIDERATION REQUEST IF:RECONSIDERATION REQUEST IF: A Closing agreement was signed.A Closing agreement was signed. An agreement on Form 870-AD with the Appeals An agreement on Form 870-AD with the Appeals

Office was signed.Office was signed. The amount of tax was due to a final partnership The amount of tax was due to a final partnership

adjustment in a TEFRA proceedingadjustment in a TEFRA proceeding The United States Tax Court, or another court, has The United States Tax Court, or another court, has

issued a final determination on your tax liabilityissued a final determination on your tax liability


If the IRS accepts the information, then If the IRS accepts the information, then they will either eliminate, reduce or in they will either eliminate, reduce or in some cases refund money already paid.some cases refund money already paid.

If you do not accept the findings of the IRS If you do not accept the findings of the IRS you have the right to request an Appeals you have the right to request an Appeals conference. conference.

STATUTE OF STATUTE OF LIMITATIONSLIMITATIONS

ASEDASED

STATUTE OF LIMITATIONSSTATUTE OF LIMITATIONS

Form 1040 – 3 years after the return was Form 1040 – 3 years after the return was filed or from the due date, whichever is filed or from the due date, whichever is laterlater (same for Forms 1041)(same for Forms 1041)

Failure to file – no statute IRC 6501 (c)Failure to file – no statute IRC 6501 (c)(3) (3)

False or fraudulent return – no statute IRC False or fraudulent return – no statute IRC 6501(c)(1) 6501(c)(1)


Form 1120 – is due 15th of the third month Form 1120 – is due 15th of the third month after the close of the entity’s fiscal year. after the close of the entity’s fiscal year. Early and late return provisions apply as Early and late return provisions apply as with Form 1040; regular statute is three with Form 1040; regular statute is three years.years.


Form 941 – filed quarterly, due the last Form 941 – filed quarterly, due the last day of the month following the end of the day of the month following the end of the quarter. If filed prior to April 15 of the quarter. If filed prior to April 15 of the succeeding year, it is deemed filed, for succeeding year, it is deemed filed, for statute purposes, on April 15 of the statute purposes, on April 15 of the succeeding year. Three year statute. If succeeding year. Three year statute. If filed after April 15 of succeeding year, filed after April 15 of succeeding year, statute is three years from filing date.statute is three years from filing date.


Form 940 – due annually – January 31 of Form 940 – due annually – January 31 of the next calendar year. Three year the next calendar year. Three year statute.statute.

Form 706 – Estate – due 9 months after Form 706 – Estate – due 9 months after date of death. Early and late return and date of death. Early and late return and three year general rule applies. Statute three year general rule applies. Statute may not be extended IRC Sec 6501(c)(4)may not be extended IRC Sec 6501(c)(4)


Delinquent return filed after SFR – three Delinquent return filed after SFR – three year statute begins upon filing of year statute begins upon filing of delinquent return. Exception – if the SFR delinquent return. Exception – if the SFR case has already become docketed – case has already become docketed – statute is suspended as with any docketed statute is suspended as with any docketed case. (Note if the delinquent return has a case. (Note if the delinquent return has a spouse that was not part of the docketed spouse that was not part of the docketed case. This individual still has an open case. This individual still has an open three year statute.three year statute.


Amended return – if taxpayer submits Amended return – if taxpayer submits amended return showing additional tax, amended return showing additional tax, within 60 days before the expiration of the within 60 days before the expiration of the statute, the statute does not expire until 60 statute, the statute does not expire until 60 days from the receipt of the amended days from the receipt of the amended return.return.


Net Operating Loss – statute of carryback Net Operating Loss – statute of carryback years, with respect to this issue, is years, with respect to this issue, is controlled by the statute on the originating controlled by the statute on the originating year of the NOL. This does not affect the year of the NOL. This does not affect the statute for carryforward years.statute for carryforward years.


Notice of Deficiency – suspends statute for Notice of Deficiency – suspends statute for 90 days (150 days if mailed outside the 90 days (150 days if mailed outside the U.S.) to allow taxpayer to file Tax Court U.S.) to allow taxpayer to file Tax Court petition. Another 60 days is added to the petition. Another 60 days is added to the statute to allow the assessment to be statute to allow the assessment to be made. This is why the revised statute date made. This is why the revised statute date for a normal timely filed return, where the for a normal timely filed return, where the taxpayer defaults (does not petition) is taxpayer defaults (does not petition) is always September 12 – April 15 plus 90 always September 12 – April 15 plus 90 days plus 60 days days plus 60 days


Notice of Deficiency – taxpayer agrees Notice of Deficiency – taxpayer agrees during the 90 day period – the 90 day during the 90 day period – the 90 day period ends on the date the agreement period ends on the date the agreement form is received. The revised statute date form is received. The revised statute date is generally the number of days between is generally the number of days between the notice issuance and the agreement the notice issuance and the agreement receipt date, plus 60 days, added to the receipt date, plus 60 days, added to the original statute date.original statute date.


Notice of Deficiency – taxpayer petitions Notice of Deficiency – taxpayer petitions Tax Court – the statute is suspended from Tax Court – the statute is suspended from the date the notice is issued to the date the date the notice is issued to the date the Tax Court decision becomes final (90 the Tax Court decision becomes final (90 days after it is entered), then 60 days are days after it is entered), then 60 days are added to allow for the assessment. This added to allow for the assessment. This entire “tack-on” period is added to the entire “tack-on” period is added to the regular statute date regular statute date


Omission of 25% of Gross Income – if Omission of 25% of Gross Income – if taxpayer omits from gross income an taxpayer omits from gross income an amount properly includible in income that amount properly includible in income that is in excess of 25% of the gross income is in excess of 25% of the gross income reported on the return, the statute reported on the return, the statute becomes six years IRC Sec. 6501(e)(1)becomes six years IRC Sec. 6501(e)(1)

Collection Statute Expiration Collection Statute Expiration Date - CSEDDate - CSED

IRC 6502IRC 6502

Tax may be collected by levy or by a Tax may be collected by levy or by a proceeding in court, but only if begun:proceeding in court, but only if begun:

--within 10 years of assessment, or--within 10 years of assessment, or

--prior to expiration of any period --prior to expiration of any period agreed on with Secretary and taxpayer agreed on with Secretary and taxpayer before the ten years expires.before the ten years expires.

Suspension & Extension of Suspension & Extension of CSEDCSED

Suspension:Suspension: halts the running of the statute, which results halts the running of the statute, which results

in extension of general CSED.in extension of general CSED.

Extension:Extension: Addition of time at the end of general 10-year Addition of time at the end of general 10-year

period.period.

Waiver - After 12/31/99:Waiver - After 12/31/99:• Only with I/AOnly with I/A

• Limited to 5-year extension by Limited to 5-year extension by policypolicy

6503 Suspensions6503 Suspensions::(a): Notice of Deficiency(a): Notice of Deficiency(b): Custodia Legis (b): Custodia Legis (c): TP outside of US(c): TP outside of US(f): Wrongful levy(f): Wrongful levy(h): Bankruptcy(h): Bankruptcy

Other suspensionsOther suspensions::

IRC 7811(d): Taxpayer Assistance OrderIRC 7811(d): Taxpayer Assistance Order IRC 7508: Military DefermentsIRC 7508: Military Deferments Certain collection suitsCertain collection suits IRC 6015(2): Innocent spouseIRC 6015(2): Innocent spouse

• Involves only 6015(b) and (c).Involves only 6015(b) and (c).• CSED is suspended during period no levy may be CSED is suspended during period no levy may be

made pursuant to 6015(e)(1)(B).made pursuant to 6015(e)(1)(B).

IRC 6330(e): Collection Due IRC 6330(e): Collection Due ProcessProcess

Suspension of CSED for period while Suspension of CSED for period while hearing is pending, and any appeals.hearing is pending, and any appeals.

CSED won’t expire less than 90 days after CSED won’t expire less than 90 days after final determination.final determination.

OFFER IN COMPROMISEOFFER IN COMPROMISE

CSED is suspended during the period that CSED is suspended during the period that an offer-in-compromise was filed and if an offer-in-compromise was filed and if the offer is rejected by the IRS, during the the offer is rejected by the IRS, during the 30 days thereafter (and, if an appeal of 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, such rejection is filed within such 30 days, during the period that such appeal during the period that such appeal is pending).is pending).

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