I have dealt with Iris tax collectors (Also known as revenue officers) From all across the country for years. Most of them are honest people just trying to do their job. Unfortunately, for the taxpayer who deals directly with a revenue officer (Without representation) It often ends up badly. Here’s why:
The service simply doesn’t have enough revenue officers to deal with all of the delinquent taxpayers. So each revenue officer has a “caseload”. Let’s say just for example that a revenue officers’ caseload is 50 taxpayers. The revenue officer has a boss…. Also known as his manager…. The manager has a whole list of delinquent taxpayers that he wants to turn over to the revenue officers working for him. But if the revenue officers caseload is ‘full’
…. Let’s say he’s already got 50 taxpayers…. His manager cannot give him number 51. The revenue officer has to “close” One of his files so his manager can give him/her another one from the list.
Revenue offices close files by putting the taxpayer into (A) a payment plan or (B) Something called ‘currently not collectible’. If you’re dealing directly with a revenue officer They will gather financial information from you for the purpose of making that decision. Simply stated they want to know your average monthly income and your average monthly expenses. They will then compare your monthly expenses with something they call allowable expenses. Whatever money you have left over every month after you pay your expenses (the allowable ones) Is the key. If there is nothing left over they will probably put you into the currently not collectible status. If there is money left over that will be the amount of your monthly payment to IRS.
The problem is that under either scenario the penalties and interest continue to climb daily. The IRS can add as much as 20% to 25% per year To your debt.
Here’s an example from someone came to see me last week (November 2013):
Taxpayer was frustrated and angry because she had been contacted by the Service in the fall of 2011. At that time she owed a little over $46,000. She tried to do the “right thing” By working with the IRS. She agreed to a payment plan of $550 a month. She had diligently made that payment every month for about two years.
Now, two years later, after paying the IRS over $13,000 her current total tax bill was $53,300.
How could that happen? It happened to this young lady because she didn’t understand the ‘system’. While she was paying the IRS $6600/year, The IRS was adding back close to $9000 a year in penalties and interest. It happens all the time. This is one of the most common problems I see. It wasn’t the revenue officer’s’ fault’. In fact the revenue officer was described by the taxpayer as “a nice lady”.
The revenue officer was just doing her job. She put the taxpayer into a payment plan, Then she was able to “close her file” And move onto the next Taxpayer. By the time the taxpayer came to see me-Two years later-the Revenue officer Had long ago moved on and probably forgotten about this particular taxpayer. Keep in mind, the revenue officer doesn’t add the penalties and interest. The ‘system’ does it… Really, it’s the computers….but it’s all ‘Legal’.
If by chance the revenue officer would put you into ‘currently not collectible’, The same thing happens, only the debt grows faster because you’re not making payments.
So it’s hopeless, Right? WRONG. There are several ways to eliminate an IRS problem once and for all. For example, settlements, penalty abatement, Partial pay installment agreements etc….