Apologies to all for getting to this topic a month after the TIGTA report
was issued. Nevertheless, I want to take a moment to discuss the relevance of this report. The Treasury Inspector General audited the IRS’s handling of partial pay installment agreements. Partial pay installment agreements arise when the IRS reviews a taxpayer’s financial information and determines that the monthly amount the taxpayer can pay will not pay off the entire tax debt within the statute of limitations.
The Treasury Inspector General found that the IRS was not following their own requirements to review these installment agreements every two years. The IRS is suppose to review the agreements on a regular basis to determine the ability for greater collection. Tax practitioners have noticed for some time that our clients who have been placed into these installment agreements have not been followed-up on as the collection statute runs. For our clients, this has been a wonderful blessing, and often has resulted in significant reductions in what is paid versus what was owed.
Unfortunately for the taxpayer, the IRS has agreed with the findings and have stated they will work to implement better controls to ensure that proper reviews are done. This means for taxpayers in installment agreements, they will need to discuss with their tax advisor what the specifics are of their installment agreement. A reputable tax practitioner should have advised their client on the ramifications of each of the collection alternatives that the IRS provides. So taxpayers be forewarned, just because the IRS contacts you again regarding an installment agreement, it does not mean your prior representative did anything wrong. It may mean the IRS is finally doing what they were suppose to do all along.
The world of tax resolution has seen quick growth in companies and attorneys assisting individuals and businesses with their tax matters. This increase in assistance has had an overall positive impact for taxpayers that find themselves struggling with the stress and burden of dealing with the IRS. However, while much good has been done, I am constantly amazed by the stories of woe that clients tell me of experiences with other firms that provide tax resolution services. The over-arching theme I routinely hear is that they were over-sold on what the firm could deliver, and based on those promises thousands of dollars were spent.
The most common belief that taxpayers have is that a tax attorney can immediately reduce the amount that is owed. The phrase “pennies on the dollar” is like fingernails on a chalkboard to me. If you are seeking assistance with your tax problems, and the person you are speaking to uses a phrase similar to “pennies on the dollar,” I suggest you seriously question whether you should move forward with their services. Yes, the IRS has a program whereby they may reduce the total amount owed, but this program is operated at the IRS’ discretion. Less than half of all offers are accepted by the IRS. Your representative should have a very candid conversation with you regarding the pro’s and con’s of pursuing an offer-in-compromise.
There also exists the myth of penalty abatement. While the IRS has recently relaxed some standards on who is eligible for an abatement of penalties, such an abatement is not a guarantee to anyone. I have been told from numerous clients that they met with tax practitioners that promised interest and penalties would be removed. Again, I caution moving forward with any representative that guarantees you an outcome.
In the end, when looking for representation to assist you with your tax matter, do not be afraid to ask the practitioner of their experience and education with tax. For example, were they an insurance defense attorney that now sells the firm as a tax firm? What education do they have in the area of tax? Was it a weekend seminar on how to prepare installment agreements, or have they focused on tax from law school and through continued studies and work as a professional. Ask who will actually be working on your matter and what their experience includes. Is your case going to be passed off from an attorney who was merely providing you a sales pitch to staff that has not received tax training? Ask them what are you getting for the fees paid? Finally, do not be pressured into signing up immediately. Most tax practitioners provide a free consultation. Call several and see who best fits your needs.