The IRS, like the rest of society, has faced several challenges as a result of the pandemic. Some of those challenges are still lingering, such as funding, backlog, lack of guidance and inexperienced auditors. Efforts to fix these problems are underway but will take time. As taxpayer advisors, it’s important to recognize the limitations in
Negotiating with the IRS Collection Division
Once the IRS makes an assessment against a taxpayer, the taxpayer will receive several notices before the IRS takes enforced collection action.
Notice of Intent to Levy
This is the notice that is required before the IRS can levy and seize a taxpayer’s assets.
Some form of response should be sent with respect to these notices. The response, along with a copy of the notice, should be sent by certified mail, return receipt requested, using the envelope provided by the IRS. The purpose in sending a response is so that it will show that the taxpayer is concerned about the taxes and is not ignoring them.
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Recent Supreme Court Case Provides Possible Pre-Assessment Judicial Review for Onerous Penalties
The Supreme Court’s recent decision in CIC Services, LLC v. Internal Revenue Service may have significantly expanded taxpayers’ ability to obtain immediate injunctive relief against onerous tax reporting requirement.
The Anti-Injunction Act bars any “suit for the purpose of restraining the assessment or collection of any tax.” Civil penalties are usually considered to be “taxes” for purposes of the Anti-Injunction Act. But in CIC Services, the Supreme Court sustained a suit to enjoin the enforcement of IRS Notice 2016–66 which provides that micro-captive insurance arrangements are “listed transactions” which must be disclosed (regardless of the ultimate validity of the transaction) upon pain of a civil monetary penalty under IRC § 6707A – as well as potential criminal sanctions under § 7203 for the willful failure to make a return or supply information required by law or regulation. The IRS’ problem in CIC Services was that in issuing Notice 2016-66, it had failed to comply with the Administrative Procedures Act (APA) which requires that a rule with the force and effect of law may be issued only after an opportunity for public notice and comment. No public notice, no enforceable rule, the Court held. The Anti-Injunction Act did not deprive the courts of jurisdiction.
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Obtaining Information from the IRS
There is a wealth of information available from the IRS that is not generally made available to the public. Most of this information can be obtained by asking. This information includes files the IRS assembles about a taxpayer, and various training manuals used by the IRS to train its employees. In addition to training given to its employees, the IRS, like most professional organizations, conducts continuing education on an annual basis for its various divisions. Most of the training manuals and annual training materials are available to the practitioner pursuant to the Freedom of Information Act (FOIA).
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Guidelines for Protecting Privilege in Tax Cases
Lawyers, tax or otherwise, understand that privileged information must be protected to encourage a full and frank dialogue between clients and their attorneys. Tax information, in particular, contains some of the most private information for both individuals and businesses. Gray Reed attorneys Joshua D. Smeltzer, David Gair and Larry Jones recently published an article
Tips for Negotiating with the IRS
While dealing with the IRS generally involves submitting documents or legal authority to support a client’s position, in most cases the element of negotiating is present. Negotiating becomes particularly important in dealing with the IRS where documentation may not exist, or the law is in the gray area. Most practitioners will find that when dealing with the Examination Division, Appeals Office, and Collection Division, negotiating skills and techniques are helpful in resolving issues in favor of the client.
Almost everything is negotiable–even when dealing with the IRS. Negotiating face to face with someone is generally more effective than negotiating over the telephone. Accordingly, it is good policy to always arrange a meeting with the representative of the IRS.
In all levels of negotiations there is no substitute for preparation. This includes knowing the facts of your case, the Internal Revenue Code, the Regulations, Internal Revenue Rulings and Procedures, the Internal Revenue Manual, Circular 230 and other ethical requirements. Also, you should have a network of other professionals with whom you can discuss your case.
The following are general negotiating tips which, if followed, should give you a greater chance of success in dealing with the IRS:
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How to Select a Tax Attorney
Understanding the IRS and the tax laws is very difficult and confusing. When a taxpayer has a tax controversy matter with the IRS, selecting a tax attorney may be just as confusing and complicated. Not all attorneys are created equal when it comes to the tax laws and representing clients before the IRS. Dealing with the IRS can be risky and confusing for someone, including an attorney, if that person is not familiar with IRS procedure. Clients seeking a tax attorney when they are having problems with the IRS must be careful to select someone who understands this unique area of the law. Challenging the IRS requires an attorney with special expertise and experience.
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Tax Practice Pointer: Potential Client Interview
A new client presents a great opportunity, but there is also great risk that the relationship will not be a good fit. If the client is not a good fit it will be bad for both sides and result in hurt feelings, damaged reputation or worse. Here are some steps for conducting successful interviews with potential clients.
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Tax Practice Pointer: Selecting the Right Client
Clients come from many sources. Most of our practices deal with clients who are having problems with the IRS. These problems can range from a simple audit to serious criminal problems. The first two things that come to mind are 1) who do we want for our clients and 2) how do we select clients who will follow our advice?
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IRS Commissioner and President Biden Draw Battle Lines
The battle outside ragin’
Will soon shake your windows
And rattle your walls
For the times they are a-changin’
-Bob Dylan
A change in presidential administrations brings with it the uncertainty of what the political, legal and tax landscape will look like in the future. Statements from the Commissioner of the Internal Revenue Service and the President of the United States are starting to provide clarity of what things will look like going forward. Here’s what we know and what you, as a taxpayer, should be thinking about as you adjust your financial planning.
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