10 Secrets the IRS Does Not Want You to Know

Posted 12/30/2009 9:43:10 AM

Unfortunately, when it comes to tax debt collection, there are dozens of secrets that the IRS does not want taxpayers to know about. As a government agency, they want to collect as much money as they can. However, after working with the IRS for nearly two decades, our attorneys already know many of these IRS secrets and tactics.

1. Automatic Extensions
Although we all rush to get our tax returns filed before the April 15th filing deadline ever year, the IRS actually provides you with an easy way to get an extra six months to file your return. By requesting an automatic extension using IRS Form 4868, you can get a few extra months to file your return. In many cases, it is often better to request an extension then to file a flawed return that will result in an audit or back tax liability.

In addition, filing for an extension alone carries no penalty with it. Rather, it is the failure to pay on time that will result in interest and penalties. An automatic extension does not extend the deadline to pay taxes to the IRS. Therefore, if you anticipate having an outstanding tax liability, you will still need to pay the IRS by April 15th to avoid penalties and interest. On the other hand, if you are expecting a refund, then you need not worry about being penalized for requesting an extension.

2. The IRS Wants To Settle Quickly
It may not seem like it when you are dealing with them, but the IRS actually wants to settle your delinquent account as quickly as possible because pursuing collections against you can be expensive. In some cases, the IRS can even be convinced to settle your account for less than what you owe. However, you will need to convince the IRS that because of your financial circumstances it is better for them to accept your offer to pay a reduced amount.

3. The IRS Does Not Want to Seize Your Assets
One common misconception is that the IRS prefers to seize your personal property and liquidate it to satisfy your tax debt. However, the process of identifying, locating, seizing, and selling your assets is a very difficult and labor-intensive process for the IRS. As such, the IRS would much rather settle with you then go down this path. Additionally, issuing a wage garnishment or bank levy is much easier and cheaper for the IRS to obtain. If you ignore your tax debts, then the IRS will likely try to use a wage garnishment or bank levy to try to collect from you as opposed to seizing your assets.

4. The Fear Tactic
One of the IRS’s most common tactics to collect from you is the use of fear. The IRS will often remind you of their power to garnish your wages, issue liens, seize assets, etc. And they will leave it up to you to find out about your rights and options. This is enough to leave most people feeling a little fearful such that you will divulge harmful information about your tax situation or will agree to enter into a less than beneficial resolution for your particular financial circumstances.

5. The Streamlined Installment Agreement
One of the IRS’ biggest secrets is the Streamlined Installment Agreement (SIA). Unlike the traditional Installment Agreement, you can get an SIA accepted by the IRS without providing a full financial disclosure so long as your tax debt is less than $25,000 and you agree to repay your entire tax debt in five years or less.

6. The IRS Can Waive Your Application Fees
When you submit an Offer in Compromise (OIC) or another tax debt resolution application, the IRS will require you to pay a small fee as well as some type of deposit. With an OIC, the IRS requires that you pay a $150 fee and a 20% deposit on your tax debt before the IRS will review your application. However, if you meet certain income restrictions, the IRS will waive both the fee and deposit.

7. The TAS Is Part Of The IRS
The Taxpayer Advocate Service (TAS) promotes helping taxpayers with their IRS problems, but they are actually part of the IRS. Although the TAS is supposed to be an independent organization within the IRS, who would you rather have fighting the IRS on your behalf – an experienced tax attorney or another IRS employee? Keep this in mind when you are thinking of requesting help from the TAS.

8. Statute Of Limitations On Tax Debts
If your tax debt stems from a tax return that was filed over a decade ago, then the IRS might not be able to collect on your account because there is a 10-year statute of limitations on tax debts. There are several instances where the IRS can extend this deadline. One way is to get you to unwittingly and “voluntarily” agree to extend the limitations period. Don’t be fooled. The IRS cannot force you to extend the limitations period, so avoid agreeing to an extension as part of any agreement you enter into with them.

9. You Can Appeal Collection Activities
After the IRS notifies you that they intend to begin collection activities, usually through an intent to levy letter, you will have 30 days to file an appeal. Through the Collection Due Process hearing, you can have a senior technical advisor for the IRS review your case and issue a decision. Alternatively, if you believe the IRS erroneously rejected your request for an IRS tax debt resolution (e.g. Installment Agreement, Currently Not Collectible status, or an Offer in Compromise), you can appeal that rejection. However, be diligent since you only have a limited amount of time to do so.

10. You Are Not Required To Meet With The IRS
Oftentimes, the IRS will call or send letters requesting that you meet with them to discuss your tax return or unpaid balance due. So many of our clients contact our law firm scared by these requests and feel like they will are required to attend. The truth is, very rarely will you be required to meet with the IRS. You are only required to meet with the IRS upon being served with Summons or if you are being audited. In both instances, you still have the right to be represented, and can also request for the meeting to be rescheduled to a more convenient date, time, or location.