Baker Law Firm, P.C.
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Did the IRS fairly evaluate the collectability of your tax debt?

Our tax firm has helped many clients negotiate with the IRS. An administrative settlement can be a win for both parties: a taxpayer is able to move forward, and the IRS saves the time and expense of going to Tax Court or a federal district court.

Depending on the specific circumstances, the IRS may consider a taxpayer’s ability to pay when agreeing to a settlement. For example, an offer in compromise generally requires a showing that the taxpayer is unable to pay the entire tax debt because of his or her financial situation. An approved OIC results in the IRS accepting a partial payment and forgiving the remaining tax liability. Between fiscal years 2010 and 2015, the IRS wrote off $130 billion as uncollectible receivables.

Unfortunately, a recent report prepared by the Treasury Inspector General for Tax Administration found inconsistencies in the IRS’ evaluation of collectability. The Internal Revenue Manual expressly provides procedures to guide IRS examiners in evaluating a taxpayer’s ability to pay. Of the 110 individual cases sampled in the report, TIGTA officials found that IRS examiners failed to follow procedures in over half.

Some of the deviations involved IRS personnel failing to complete financial information against a taxpayer, from which future collection efforts are based. Other failures involved IRS personnel failing to communicate with the agency’s collection function.

Our law firm has helped many taxpayers evaluate their settlement options with the IRS. Offers in compromise can be a hard sell, as the IRS typically approves less than one-third of such offers. With an experienced tax attorney’s help, however, a taxpayer can maximize his or her chance of success.

Source: Accounting Today, “IRS Skirted Procedures for Determining Ability to Collect Tax Debts,” Michael Cohn, Oct. 28, 2016

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