Tax Controversy Training for Pro Bono Lawyers and CPAs Presented - - PowerPoint PPT Presentation

Tax Controversy Training for Pro Bono Lawyers and CPAs

Presented by Maryland Volunteer Lawyers Service, Inc. May 8, 2018

What you will get when you are assigned a client:

• Copy of the presentation slides
• IRS forms and publications
• Sample documents
• TAS Roadmap to Tax Controversy
• Fall 2016 Maryland Tax Practitioner’s Handbook
• Access to mentors

Instructors

Gerald W. Kelly Kelly | Dorsey, P.C. gkelly@kellydorseylaw.com 410-740-8750 James P. Leith Local Taxpayer Advocate – Maryland James.P.Leith@irs.gov 443-853-5145 Andrew “Jay” Maschas Comptroller of Maryland amaschas@comp.state.md.us 410-767-4124 Cheri P. Wendt-Taczak Law Office of Cheri P. Wendt-Taczak, LLC cheri@cwtlaw.com 410-793-7233

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Introduction

• Who are MVLS’ LITC clients? - Individuals with income <250% FPL who

have an income tax controversy with the IRS and/or MD Comptroller in which the amount in controversy does not exceed $50K per tax year.

• What is a tax controversy? – dispute between the Taxpayer (“TP”) and the

Government concerning a tax matter directly, financially impacting TP.

• What is the role of the attorney?

– Education

• Taxpayer rights and responsibilities
• Tax laws pertaining to specific case

– Bring taxpayer into Current Compliance – Resolution of Outstanding Issues

4

Types of Controversy Cases you will Encounter

• Examination (Audit)
• Appeals
• U.S. Tax Court Litigation
• Collection
• Audit Reconsideration
• Non-filers
• Innocent Spouse Relief
• Claim for Refund
• ID Theft
• More

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Types of Controversy Cases - Comptroller of Maryland

• Compliance Division

– MD Tax Adjustments following CP2000 Federal Adjustments – MD Tax Adjustments following Federal Adjusted Gross Income (FAGIM) – Revenue Adjustment Reports (RAR) – Computer Matching Program – Non-Filer Cases

• Revenue Administration Division

– Balance Due Return – Processing Adjustments – Refund Denials – Amended Return Denials – Questionable Return Detection Team (“QRDT”) – Field Enforcement

6

IRS Taxpayer Bill of Rights

1. The right to be informed. 2. The right to quality service. 3. The right to pay no more than the correct amount of tax. 4. The right to challenge the IRS’s position and be heard. 5. The right to appeal an IRS decision in an independent forum. 6. The right to finality. 7. The right to privacy. 8. The right to confidentiality. 9. The right to retain representation.

• 10. The right to a fair and just tax system.

Maryland Taxpayer Bill of Rights

All Maryland taxpayers have:

1. The right to fair treatment and helpful advice. 2. The right to privacy of tax records. 3. The right to free forms and instructions available 24-hours a day at www.marylandtaxes.com. 4. The right to free assistance and state tax return preparation at any of the Comptroller’s 11 taxpayer service offices. 5. The right to a free copy of previously filed state tax returns.

Taxpayers who disagree with a tax assessment:

1. The right to file an appeal and ask to have case heard by a hearing

• fficer.

2. The right to have representation. 3. The right to file an additional appeal with the Maryland Tax Court within 30 days from the date of the final determination by the hearing

• fficer.

Case Management Overview

• Client contacts attorney w/in 1 week of receiving letter from MVLS.
• Attorney conducts initial client interview.
• Attorney submits POA to IRS / MD Comptroller.
• Attorney obtains account status information from IRS / Comptroller.
• Attorney discusses next steps and resolution options with client.
• Attorney executes resolution of dispute.
• Attorney submits Case Update Form to MVLS on quarterly basis.
• Upon completion of case,

– Attorney sends client written notification of case closure; – Attorney withdraws POA from IRS / Comptroller; and – Attorney sends MVLS Case Closure Form.

• MVLS closes case & sends Client Satisfaction Survey to client.

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Initial Client Contact / Interview

• Gather Info from Client

– ALL IRS & Comptroller Notices for all tax years at issue – ALL W-2s, 1099s, other support docs (if unfiled returns) – Form 433 Collection Information Statement (if collections issue) – Any other relevant documentation (tax returns, documentation already submitted by TP to IRS/MD Comptroller

• Review with TP & both sign:

– Engagement Letter – POA – IRS Form 2848 or IRS Form 8821

• Discuss the 3 Cs: Cause, Compliance and Cure

IRS POA - Form 2848

• Completing Form 2848

– IRM 21.3.7.5 (09-08-2016). – Years: Before and after problem years – Forms: 1040, “separate assessment” – TP Tel#: Yours (POA) – CAF: All representatives are assigned CAF #. If no CAF, write “none” to get one assigned. – Married couple: Must have separate POA for each spouse – If working with client’s POA, client’s POA signs on behalf of TP – If client has/had business, list business, business address, EIN, TPs title

• Submitting Form 2848:

– Fax Form 2848 to Centralized Authorization Unit (“CAF”) – Fax #: 855-214-7519 (Memphis CAF Unit) – If urgent, fax POA to PPS rep during initial call.

MD POA - Form MD 548

• Verbal POA. There are no Verbal POAs, but…

– MD websites states that if a TP and their representative is present, the TP can give permission for the representative to speak with the Comptroller’s office at that time. “The approval is for phone call at that time only.”

• Written POA. Effective July 1, 2016, Comptroller’s office has a new Power
• f Attorney, Form MD 548.
• Completed Form must have:

– Taxpayer’s Name, Address, Social Security Number(s), Signature(s), and Date – POA’s Name, Address, telephone number, and signature – Type of MD Tax, MD Form Number, Years Covered – Declaration of Representative

• Not currently suspended or disbarred
• Aware of regulations and penalties for false statements
• Designation Number
• Volunteer Organizations.

– Volunteers can use MD POA with no PTIN – Clearly indicate the volunteer organization on the form

• Married Couples. Can use single MD Form 548 for married couples

MD POA - Form MD 548 Submitting the POA

• Can submit POA by fax, email, or mail:

– Fax #:

• 410-260-6213 General
• 410-974-3053 Collections

– Email: RADPOA@comp.state.md.us – Mailing Address:

Comptroller of Maryland Revenue Administration Division P.O. Box 1829 Attn: POA Annapolis, Maryland 21404-1829

MD POA - Form MD 548 Missing Power of Attorney

• Upon receipt of your POA, an employee of the

Comptroller’s office will enter your information into the notes screen of your taxpayer’s account.

• The POA information will be entered into the “F107” notes

screen, but may be entered into the “F601” notes screen.

• If your client has filed tax returns using the single and

married filing joint status, there will be two separate accounts.

• Questions on MD POAs

– Call 410-260-7424 – E-mail taxprohelp@comp.state.md.us

Contacting the IRS & Comptroller

• IRS

– Practitioner Priority Service: Tel # 866-860-4259 – Automated Collection System (“ACS”)

• Individual Collections: Tel # 800-829-3903
• Large Dollar Unit
• Federal Government Employees Unit

– Revenue Officers

• MD

– Visit www.marylandtaxes.com for information – Individual Tax Collections: Tel # 410-974-2432 or 888-674-0016 – Taxpayer Services: Tel # 410-260-7980, 1-800-MD TAXES,

• r e-mail taxhelp@comp.state.md.us

– Correspondence Unit: Fax # 410-974-2967 – Hearing & Appeals: Tel # 410-767-1572, Fax # 410-333-7745,

• r e-mail cdhearings@comp.state.md.us

– Nexus Unit: Tel # 410-767-1966; Fax # 410-767-7924

Contacting the IRS & Comptroller

Best Practices

– Both IRS and Comptroller representatives take notes

• f conversations so BE POLITE!

– When calling IRS, always write IRS representative’s name & ID#. – When calling Comptroller, the employee may only give you his or her first name. Employees of the Comptroller’s Office do not have Employee ID Numbers. – When writing:

• Include key case info on ALL pages, and
• Send documents certified, “return receipt.”

Resolving Tax Collection Cases Flow Overview

• IRS Roadmap
• MD

Resolving Tax Collection Cases First Steps

• Gather Relevant Information

– What Initial Info Needed – How to Obtain

• Tax Assessment – Was it proper?
• Validity of Collection Action
• Filing Compliance
• Financial Analysis to Determine Viable Options
• Client Preference

Gathering Relevant Information Transcripts

– IRS Transcripts

• Types

– Account Transcript - by year and type of tax – Wage & Income Transcript - Past ten years – Tax Return Transcript - Past three years

• E-Services

– Maryland Transcripts

• The Comptroller’s office cannot produce transcripts that are similar

to the IRS transcripts.

• Wage information is available if electronically submitted by employer.

– Wage information shows Maryland withholding. – Available for approximately 8 prior tax years

• Tax return can be reprinted if filed by paper tax return.

Tax Assessment – Was it Proper? Ways to Assess Tax

• Filed Tax Returns – Self-Assessment

– Data sufficient to calculate tax

– Must purport to be tax return – Must be honest and reasonable attempt to satisfy tax law requirements – Must be executed by TP under penalty of perjury

• Math Error – Automatic Assessment - I.R.C. § 6213(b)(1)
• Examination – Deficiency Assessment

– I.R.C. § 6211 – MD Tax-Gen. § 13-301.

• Substitute for Return (“SFR”) – IRS or Comptroller may execute its own return based on

information obtained if TP fails to file valid return or files a false or fraudulent return.

– I.R.C. § 6020(b)(2) – SFR “shall be prima facie good and sufficient for all legal purposes.” – I.R.C. § 6501(b)(3) – SFR does not start SOL on assessment or collections – I.R.M. § 25.6.1.9.4.5 (10/5/2016). – MD Tax-Gen. § 13-402(a)(3), Tax assessment when return not filed.

• Federal Adjustment by Comptroller – MD Tax-Gen. § 13-409.
• Non-MD Taxpayer who has been erroneously assessed (MD) - Proof of residency, or
• ther state income tax returns

Tax Assessment – Was it Proper? Considerations

• Assessment Statute of Limitations (ASED)

– IRS:

• 26 U.S.C. § 6501
• Generally, 3 years from date return was filed. I.R.C. § 6501(a)
• No time limit for SFR. I.R.C. § 6020
• If no return filed, statute of limitations (“SOL”) does not begin to run so

indefinite ASED.

– MD

• Generally, 3 years from date of filing or due date of tax return. Tax-General § 13-

1101(a).

• No limit if failure to file, false tax return/willful evasion of tax, or failure to report

IRS adjustments. Tax-General § 13-1101(b).

• “To the extent practicable, the Comptroller shall apply the administrative and

judicial interpretations of the federal income tax law to the administration of the income tax laws of this State.” Tax-Gen. § 10-107.

• Application for revision of assessment – w/in 30 days. Tax-Gen. § 13-508(a).

Tax Assessment – Was it Proper? Considerations

• Proper Notification of Assessment

– IRS Notices

• Notice of assessment sent to TP w/in 3 years of tax liability. I.R.C. § 6501(a).
• Plus tax refunds, federal payments

– MD Notices

• Tax-General § 13-410, Assessment notice
• MD MVA Notices
• Notice of Income Tax Assessment must only be sent to the last known address
• Fraud - Impacts validity of return

– TP-signed return that was later altered by fraudulent preparer prior to filing – Return filed without TPs knowledge or consent – ID Theft

Validity of Collection Action

• Was there notice of the unpaid tax and

collection action?

• Was the collection action taken within the

collections SOL?

• Was the collection action taken proper?

Validity of Collection Action

• IRS Notices

– Initial Request for Payment –

• Sent w/in 60 days of assessment of tax.
• Informs TP of amount due & demands payment. I.R.C. § 6303

– Later Notices

• CP14 – Notice of Unpaid Tax. 3 weeks to pay
• CP501 – “You have a balance due…”
• CP503 – 2nd Notice – “We have not heard from you and you still have

an unpaid balance…”

• CP504 – Final Notice – Balance Due – “You have an unpaid amount

due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe.”

Validity of Collection Action

• Collection SOL (CSED)

– IRS

• IRS may collect timely assessed tax by levy or court proceeding. I.R.C. § 6502.
• If return filed, 10 years generally.
• Collection Statute Expiration Date (“CSED”) - I.R.M. 5.1.19 (04/26/2018).
• If SFR or no return, clock not started.

– I.R.C. § 6501(b)(3) – Notwithstanding [§ 6020(b)(2)], execution of a return by the Secretary … shall not start the running of the period of limitations on assessment and collection. – I.R.M. 25.6.1.9.4.5(1) (10/05/2016) – “If the Service processes a tax return prepared under…IRC Section 6020(b), the assessment date will start the period for the [collections SOL] per IRC Section 6502(a)(1), but does not start the period of limitations for assessment. – I.R.M. 5.1.19.3.15 (01/01/2006) – Upon deficiency assessment, the IRC § 6502(a)(1) collections SOL begins.

– MD

• 7 years from date of tax assessment, but…for all practical purposes, no SOL.
• Tax-General § 13-1103 states the Comptroller’s office may only collect seven years

from date of tax assessment unless…

Collection Action

• Ways to “Encourage” TP Compliance

– Refund Offset – Lien – Secret and Not So Secret (NFTL & MD) – Wage Lien (Levy) – MD Tax-Gen. § 13-811 – Bank Levy – Seizure & Sale of Assets – MD MVA & Professional License Hold

• Collection Alternatives Ways to Resolve Outstanding Tax Liability

– Extension to Pay – Installment Agreement – Partial Pay Installment Agreement – Currently-Not-Collectible Status / Hardship Status – Offer-In-Compromise – Innocent Spouse Relief – Amended Return

“Encouraging” TP Compliance Liens – IRS

• Liens – Secret and Not So Secret

– Statutory or Secret Lien – Arises 10 days after notice and demand for payment. I.R.C. § 6321. This notice and demand is almost always the first notice that TP receives concerning the balance due. – Notice of Federal Tax Lien (“NFTL”)

• Filed in the jurisdiction where TP resides and other jurisdictions where

TP owns real property.

• IRS’s lien is perfected against real property upon the filing of the NFTL

in the jurisdiction where the property is located. Establishes priority with respect to other creditors of the taxpayer.

• Attaches to T by E property even if tax debt is owed by only one spouse.
• Letter 3172, Notice of Federal Tax Lien and Right to CDP Hearing

“Encouraging” TP Compliance Liens – IRS

• Most Common Types of Relief Associated with Lien:

– Lien Release

• Required w/in 30 days if liability is satisfied or collection SOL
• expires. I.R.C. § 6325(a).
• Ask for Certificate of Withdrawal as opposed to Release.
• Pub. 1450

– Certificate of Discharge

• Most common reason: sale of property to an unrelated party for

FMV.

• Request is submitted to the IRS Advisory Unit using Form 14135.
• Pub. 783

“Encouraging” TP Compliance Liens – IRS

• Most Common Types of Relief Associated with Lien

(cont’d):

– Subordination of Lien.

• IRS will allow TP to refinance mortgages at a lower rate.
• Argue, if necessary, that the subordination, not release, of the lien

will facilitate collection of the tax.

• Pub. 784

– Withdrawal of Filed NFTL. I.R.M. 5.12.9 (12/07/2015)

• Preferable for credit reporting purposes.
• Does not affect the secret lien. The release extinguishes it.
• I.R.C. § 6323(j) authorizes the IRS to withdraw a lien if:

– IRS procedures not followed – TP enters into certain installment agreements – Withdrawal will facilitate collection of tax – Best interests of IRS and taxpayer

“Encouraging” TP Compliance Liens – MD

– Lien arises on “the date of notice that tax is due” as to unpaid tax, interest, and penalties.

– MD Tax-Gen. §§ 13-805(a); 806(a).

– Filing of a lien “has the full force and effect of a judgment lien.”

– MD Tax-Gen. § 13-808.

– Lien must be filed in Circuit Court where property is located.

– MD Tax-Gen. § 13-807.

– A lien continues until satisfied or released by Comptroller. – Lien may be “released” because it is “unenforceable by reason of lapse of time, or uncollectible.”

– MD Tax-Gen. § 13-806(a).

– Comptroller v. Shipe, (Court of Special Appeals, Feb. 3, 2015).

“Encouraging” TP Compliance IRS Levy Power

• Levy: a legal seizure of property or rights to property to

satisfy a debt.

• IRS can levy if:

– Tax properly assessed, – Tax not paid within 10 days after notice and demand.

• Levy must be made within:

– 10 years from assessment – Collections period as agreed between TP and IRS in writing at time entering into IA or before release of levy. I.R.C. § 6502(a)(2).

“Encouraging” TP Compliance IRS Levy Power

• Types of Levy (applicable to individuals only):

– Bank Levy. I.R.M. 5.11.4 (02/15/2018).

• Attaches only to monies in a bank account at time of levy.
• Levy on joint bank account allowed.

– Continuous Wage Levy. IR.C. § 6331(e); I.R.M. 5.11.5 (12/23/2016).

• Attaches to all future paychecks until/unless levy released. IRC 6331(e).
• Wages, salary, fees, bonuses, commissions

– Federal Payment Levy Program. I.R.C. § 6331(h); I.R.M. 5.19.9.3 (10/20/2016).

• Continuous levy
• Attaches to specific federal payments

– Includes Social Security benefits, Railroad benefits – Medicare – only in flagrant cases

• Low Income Filter Exclusion – If TPs income is <250% FPL, TP should be

excluded from FPLP program. I.R.M. 5.19.9.3.2.3(6) (10/20/2016).

“Encouraging” TP Compliance IRS Levy Power

• Levy NOT allowed:

– During pendency of IA or OIC (begins date OIC received) – 30 days after rejection of OIC or IA – While any timely filed appeal of the rejection of OIC or IA is pending – While IA in effect and 30 days after IA terminated – If it would cause economic hardship to TP. Vinatieri v. Commissioner, 133 T.C. 392 (2009).

• Property Generally Exempt from Levy (I.R.C. § 6334):

– Wearing apparel and school books – Fuel, provisions, furniture and personal effects not exceeding $6,450 – Primary residence – Unemployment benefits – Certain service connected disability payments – Certain public assistance payments – Title IV, XVI, and SSA – Child support – Certain portion of wages (based on standard deduction, allowed personal exemptions) – Tangible personal property or real property used in the trade or business of TP

“Encouraging” TP Compliance IRS Levy Power

• How implemented. I.R.M. 5.11.1.3.2 (11/09/2017). Before

property can be levied, IRS must provide TP:

1. Notice & Demand, I.R.C. § 6303(a); 2. Notice of Intent to Levy at least 30 days prior to levy, I.R.C. § 6331(d)(2); and

• Delivery must be:

– In person, – Left at dwelling or usual place of business, or – Sent by certified or registered mail to last known address.

• Notice of Levy:

– Final Notice of Intent to Levy - Letter 1058 – Final Notice of Levy Upon Social Security Benefits – CP91 – Forms 668-A & 668-W

• Exception: Jeopardy Levy – No notice required. I.R.C. § 6331(d)(3);

I.R.M. 5.11.3 (11/20/2017).

3. Notice of Right to Collection Due Process (“CDP”) Hearing, IR.C. § 6330.

“Encouraging” TP Compliance IRS Levy Power

• Levy Release. I.R.C. § 6343(a). The IRS shall release a levy:

– If determined levy is creating economic hardship for TP – When TP enters into IA, unless agreement provides otherwise – When liability satisfied – When release will facilitate collection of liability – FMV of property exceeds liability and release of levy on part of the property can be made w/o hindering collection – If TP and IRS agree that the tax is not collectible (wage/salary levy only)

• Return of Levied Property. If wrongful levy – I.R.C. § 6343(b)

– If Service determines that

• Levy was premature,
• TP enters into IA,
• Return of property would facilitate collection, or
• In best interest of TP (with consent of TP, TAS and U.S.). I.R.C. § 6343(d).

– TP or 3rd party must file claim for the return of specific property w/in 9 months from date of levy.

Encouraging” TP Compliance Maryland Levy Power

• The Comptroller’s office may execute:

– A Bank Levy, Tax-Gen. § 13-812; or – A Wage Garnishment, Tax-Gen. § 13-811

• A notice of tax lien must have been filed before the

Comptroller’s office issues a bank levy or wage garnishment

• Any defenses?

– Tax-Gen. § 13-812(g)

• Property Exempt from Levy?
• Levy Release?

“Encouraging” TP Compliance

• Refund Offset.

– IRS – Automatic when liability exists.

• Bypass of Refund Offset (TAS) in case of extreme economic hardship

– MD – Refund withheld if taxes or other state debts owed by TP.

• Appeals
• Offset provision under Tax-General § 13-909
• Seizure & Sale of Assets.

– IRS – I.R.M. 5.10 – MD – Tax-General § 13-816; Commercial Law Article § 15-601-1

• MD MVA Hold & Professional License Hold.

– Released IF

• Prove TP is in economic hardship
• Enter into payment plan (25% down + 24 month plan)
• Offer-in-Compromise

Determining Viable Collection Alternatives - Financial Analysis

IRS Necessary Living Expense Allowance Standards

• Defines expenses and amounts allowed in financial

analysis for CNC/hardship status and OIC.

• Expenses must be necessary:

– For the production of income, or – For the health and welfare of TP’s family. IRM 5.8.5.22.1

(10/22/2010)

• http://www.irs.gov/Individuals/Collection-

Financial-Standards

• Changes annually. Check IRS.gov for updates.

Determining Viable Collection Alternatives - Financial Analysis

IRS Necessary Living Expense Allowance Standards (Cont’d)

• National Standards – IRM 5.15.1.8 (11/17/2014).

– Food, clothing, personal care products, miscellaneous household items

• Client is allowed this amount even if actual expense is lower.
• Verification of this expense is not required.

– Vehicle ownership – monthly lease or car loan payment; $497 per car; 1 vehicle per person. – Out-of-Pocket Health Care - Expenses for co-pays, prescriptions, etc.

• Per person:

– Under 65: $52 – 65 & older: $114

• Verification is not required unless national standards is exceeded.
• Local Standards

– Housing & Utilities – IRM 5.15.1.9 (11/17/2014).

• Based on where TP resides and size of household.
• Functions as a cap on this expense.
• Deviations are allowed but rarely granted.

– Vehicle Operation – IRM 5.15.1.9 (11/17/2014).

• Based on where client resides
• Verification is not required, as long as claimed expense does not exceed the standard.
• Taxes (federal and state) – IRM 5.15.1.10 (11/17/2014).

Determining Viable Collection Alternatives - Financial Analysis

Collection Information Statement (“CIS”)

– IRS Form 433-A, 433-F, 433-B, 433-A(OIC) – MD Form 433-A, 433-B – Client documentation to support CIS

• Income

– Last 3 Paystubs, – Most recent SSA, SSDI, Unemployment, Food Stamp award letters

• Expenses

– Last 3 months bank statements – Last 3 months mortgage statements, utility bills, – Latest apartment lease, life insurance, homeowner’s / renter’s insurance, auto insurance premium statements – Other: Medical bills, auto repair bills,

• Assets: home, vehicle, other

Determining Viable Collection Alternatives - Financial Analysis

Reasonable Collection Potential (“RCP”)

• Amount of money IRS thinks it can collect

from a taxpayer for tax debts

– Net Equity in Assets – Future Income

• http://www.irs.gov/taxtopics/tc204.html

Financial Analysis Collection Information Statement

Getting Relief – Collection Alternatives

• Extension to Pay. Allows TP extra time in case of undue

hardship

– Have to explain why undue hardship to timely pay tax; extension not granted for general statement of hardship – Must include detailed statement with income, expenses, assets and liabilities – TP may propose date to pay tax – IRS Form 1127

• MD Lump Sum Payment

– More favorable settlement terms – Penalty and partial interest waivers (case by case basis)

Getting Relief – Collection Alternatives Installment Agreements

• Generally.

– Penalty and interest continue to accrue – Collections not extended – Depending on nature of liability, liens may be filed

• IRS

– User Fees. IRM 5.14.1.2 (01/01/2016).

• $43 for low-income TPs (Form 13844)
• $50 for reinstated agreements
• $52 for DDIA
• $120 for others

– How to Request Installment Agreement

• On-line payment Agreement (“OPA”)
• By Phone

– Individuals: 800-829-1040 – Businesses: 800-829-4933

• My Mail - Form 9465, Installment Agreement Request

Getting Relief – Collection Alternatives Installment Agreements – IRS

• Types of Installment Agreements.

– Guaranteed Installment Agreement – Fresh Start – Streamlined Installment Agreements – Partial Pay Installment Agreement

• Resources.

– I.R.C. § 6159(a). – Treas. Reg. § 301.6159-1(a). – I.R.M. 5.14; I.R.M. 5.19.1.5

Getting Relief – Collection Alternatives Installment Agreements - MD

• Payment plan vs. voluntary payments
• Payment Plan

– As low as $10 per month – 2 to 99 months – Need financial discussion statement for longer payment plans

• Penalty waiver (case by case basis)
• No interest waiver (generally)

Getting Relief – Collection Alternatives CNC Status – Generally

• IRS - As policy, IRS will not pursue collection if TP

does not have means to pay necessary living expenses.

– CNC is granted if:

• No available income or assets, or
• Limited assets but levy would create hardship.

– Hardship is based on financial analysis using necessary living expense allowances.

• I.R.M. 5.19.17.2.1.3 (10/05/2017).

– Impact of CNC status:

• Collection ceases so long as TP remains in economic hardship.
• Collection SOL continues to run while account in CNC status.
• Existing liens remain in place. New NFTL may be filed.
• No levy while account in CNC status.
• Refund offset continues unless bypass (TAS).

Getting Relief – Collection Alternatives CNC Status – How to Request

IRS

• Obtain completed Form 433 & substantiation from client.
• Call IRS PPS/ACS line and request account be put into CNC

status.

• Provide financial information statement as requested by IRS rep.

IRS will sometimes but not always request substantiation be submitted.

• If SSA, welfare or unemployment benefits are sole source of

income or in case of terminal illness, financial statement not

• needed. IRM 5.19.17.2.1.2(1) (10/05/2017).
• Determination usually made during call; IRS sends confirmation

letter w/in 10 days.

• Wise to send client follow-up letter explaining impact and

encouraging future compliance.

Getting Relief – Collection Alternatives CNC Status – How to Request

Maryland

• Short term “hardship status”

– Obtain completed Form 433 & substantiation from client. – Fax to Comptroller’s Individual Collections Unit along with cover letter. 6 – 8 weeks to process. – May only last a few weeks or months – Must be approved by management

• Hardship Liability Write-off

Getting Relief – Collection Alternatives Offer in Compromise (OIC) – IRS

• I.R.C. § 7122 grants the IRS the authority to compromise any civil or criminal tax
• bligation.
• Objectives of OIC program, per I.R.M. 5.8.1.2.4 (09/23/2008).

– Effect collection of what can reasonably be collected at the earliest possible time and at the least cost to the government. – Achieve a resolution that is in the best interest of both the individual taxpayer and the government. – Provide the taxpayer a fresh start toward future voluntary compliance with all filing and payment requirements. – Secure collection of revenue that may not be collected through any other means.

• Basis for Submitting OIC.

– Doubt as to Collectibility (“DATC”)– Inability to pay the entire amount during the remaining collection SOL. – Doubt as to Liability (“DATL”) – TP is not legally liable for the tax. – Efficient Tax Administration – TP has sufficient resources to pay the full amount but cannot due to exceptional circumstances which “would cause economic hardship, would be unfair and inequitable.”

Getting Relief – Collection Alternatives OIC Considerations

• TP future compliance. If offer is accepted, TP must remain compliant with all

tax filing and payment requirements for 5 years or until Offer is paid in full, whichever is later. If not, offer is defaulted and liability is reinstated.

• Time remaining until CSED vs. post-offer period of compliance
• All open years must be included.

– Need proper assessment of outstanding liability. – If not included, overlooked liability can be added before the offer is accepted. IRM 8.23.3.4(16) (10/15/2014).

• While offer is pending, SOL for assessment and collection is suspended.
• If offer is rejected, IRS keeps deposit and periodic payments and apply those

to the outstanding liabilities.

• Once accepted, the offer cannot be re-opened unless there is mutual mistake
• f material fact.

– Treas. Reg. § 301.7122-1(e)(5); Rosenberg v. U.S., 313 F.Supp. 28 (N.D. 1970). – Rev. Proc. 2003-71.

• Refund in year of OIC acceptance – IRS keeps any refund due to TP for any

tax period through the calendar year in which IRS accepts offer.

Getting Relief – Collection Alternatives IRS OIC

Components of OIC Submission - DATC.

• IRS Form 656, Offer
• IRS Form 656-A, Income Verification - Low-income TPs do not have to

pay the $186 processing fee, the 20% lump sum, or periodic payments

• IRS Form 433-A (OIC), Collection Information Statement
• IRS Form 2848, Power of Attorney
• Substantiation

– Income - Paystubs, benefit award notices, etc. – Bank Statements (3 mos.) – Lease / mortgage statements – Housing & utility bills – Medical expenses – Vehicle expenses – Other

• Statement in Support of OIC – tells TPs story – facts, law and application

Getting Relief – Collection Alternatives IRS OIC

Offer Amount. Based on Reasonable Collection Potential (“RCP”). Requires analysis of income, expenses, and assets.

• Future Income.

– If OIC paid in ≤ 5 months, RCP considers only 1 year of future income. – If OIC paid in 6-24 months, RCP considers 2 yrs of future income.

• Expenses - IRS Allowable Necessary Living Expense Stds

– Website - http://www.irs.gov/taxtopics/tc204.html – Miscellaneous expenses can include credit card payments and bank fees and charges. – Payments for TPs post-high school educational loans guaranteed by the federal government allowed. – Payments for delinquent state and local tax based on a percentage basis of tax owed to the State and IRS allowed.

• Assets.

– Dissipated assets. – Income producing assets. Equity in income-producing assets generally will not be included in RCP for on-going businesses.

Getting Relief – Collection Alternatives IRS OIC

Payment Terms. All Offers must be fully paid within 24 months of the date Offer is accepted.

• Lump Sum Cash Offer.

– 20% down payment and remainder paid in 5 or fewer payments from date

• f acceptance; OR

– 20% down payment and remainder paid in 6 to 24 months of acceptance date.

• Periodic Payment Offer.

– Requires down payment of 1/24 of offer amount with the Offer, and remainder payments each month for 24 months while offer is pending.

Getting Relief – Collection Alternatives IRS OIC

• Other Considerations.

– Age – taxpayer & debt – Health of taxpayer and family members supported by taxpayer – Education – Work history – Employability – Source of Income – Social Security Benefits vs. Wages – Living Situation – Reason for Tax Liability – Past Compliance – Bankruptcy – Location of Taxpayer – Liens Filed

Getting Relief – Collection Alternatives MD OIC

• Offer-in-Compromise program is “used to

resolve tax liabilities with the Comptroller when the taxpayer is unable to pay in full and all other efforts to resolve the liability have been unsuccessful.”

http://taxes.marylandtaxes.com/Tax_Compliance _and_Enforcement/Tax_Compliance_Informatio n/Get_Help/Assistance_Programs/Offer_in_Co mpromise.shtml

Getting Relief – Collection Alternatives MD OIC

• Requirements for Maryland Offer-in-Compromise:

– TP incurred a delinquent tax liability that resulted in an assessment. – TP exhausted all other avenues of administrative appeal. – TP cannot make an offer-in-compromise if there is any issue remaining that can be appealed. – Two years must have passed since TP became liable for the tax. – TP must be current with respect to all return filing requirements with the Comptroller’s Office. – TP must not be currently involved in an open bankruptcy proceeding. – TP is unlikely to be able to make payment in full any time in the foreseeable future due to TP’s financial situation. – TP is either without resources or unable to apply present and/or future resources to paying the outstanding tax liability.

Getting Relief – Collection Alternatives MD OIC

Practical Tips.

• Complete Application

– Form MD 656, Offer-in-Compromise Statement

• Doubt as to Liability
• Insufficient Resources
• Economic or Other Hardship

– Form 433-A, Collection Information Statement

• Compliance

– Contact Taxpayer Services to ensure tax filings and balance due.

• Submit Form MD 656 and MD 433-A and/or MD 433-B to:

Offer in Compromise Program Comptroller of Maryland 301 West Preston Street, Room 203 Baltimore, Maryland 21201

Getting Relief – Collection Alternatives MD OIC

Comptroller’s Procedures.

• All decisions under the Offer-in-Compromise Program are final and

cannot be appealed.

– Carefully consider the facts and arguments you submit with the original offer. – If no grounds for adjustment exist, then you will receive notice of decline. – If the Comptroller determines that grounds for adjustment exist but that the amount offered is insufficient, you will be advised as to an acceptable amount. – If the Comptroller determines that your offer is acceptable, you will be notified so payment can be made. – The Comptroller’s Office will consider another Offer if circumstances change.

• Must remain current with future filings for at least 3 years after

Offer is accepted. Full liability will become due immediately for failure to be current.

Getting Relief – Collection Alternatives MD OIC

Comptroller’s Procedures.

• OIC Documentation is forwarded to either individual or business tax

collections for review.

– Denial letter if liability is less than two years old or if taxpayer has unfiled tax returns. – Employee will summarize the liabilities and payments received on a write up sheet. – Summary write up sheet and documentation is then forwarded to chair of OIC case review board. – OIC case review board reviews applications and documentation and renders a decision. – Letter is mailed to taxpayer or representative regarding the decision made by the case review board. – If you experience a significant delay, email cdoic@comp.state.md.us or call 410- 767-1555.

Getting Relief – Collection Alternatives MD OIC

Factors Considered.

• Age

– Taxpayer – Debt

• Income

– Amount – Source

• Location of Taxpayer
• Bankruptcy
• Lien filed

Getting Relief – Collection Alternatives Penalty Abatement – IRS

Types of Penalties.

• Failure to file timely – 5% of the tax due up to 25% after 5

months.

– I.R.C. § 6651(a)(1). – Must be reduced by the amount of the failure to pay penalty for each month that both penalties apply. IRM 20.1.2.2.7.3 (04/19/2011).

• Failure to pay - 0.05% per month for a maximum of 25%.

– I.R.C. § 6651(a)(2).

• Failure to make estimated tax payments.

– I.R.C. § 6654.

• Many others

Getting Relief – Collection Alternatives Penalty Abatement – IRS

Abatement of Penalties.

• First Time Abatement (“FTA”).

– Can be available even if TP doesn’t meet reasonable cause standard. IRM 20.1.1.3.3.2.1 (11/21/2017). – No prior penalties for prior 3 years, except estimated tax penalty. – In filing compliance for current year and has paid or made arrangements to pay balances due.

• Reasonable Cause. Relief from penalties shall be

granted when TP demonstrates reasonable cause.

Getting Relief – Collection Alternatives Penalty Abatement – IRS

Reasonable Cause – I.R.M. 20.1.1.3.2 (11/21/2017).

• Reasonable cause should be determined based upon the

individual TP’s situation.

• Reasonable cause exists when

– TP exercises ordinary business care and prudence in determining his tax obligation, but is unable to comply with those obligations. – TP shows that the failure to file a return was not due to willful neglect.

• Failure to pay penalties can be abated if payment in full would

have cause an undue hardship.

• TP must show that he or she acted in a reasonable manner

during the period in question.

Getting Relief – Collection Alternatives Penalty Abatement – IRS

• Examples of Situations of Possible Reasonable Cause:

– Death, serious illness, or unavoidable absence – Fore, casualty, natural disaster – Unable to obtain records – Mistake or ignorance of the law – combined with other facts & circumstances – Erroneous advice from tax professional – Erroneous advice from IRS – Oral advice from the IRS

• Penalty abatement request may be made:

– Over the phone (not preferred method, except for FTA), – Using IRS Form 843, or – Through correspondence to the IRS.

Getting Relief – Collection Alternatives Penalty/Interest Abatement - MD

• Penalties.

– 10% penalty for late payment of tax. Tax-Gen. § 13-701(a). – 25% penalty for failure to file return after notice & demand. Tax-

• Gen. § 13-708(a).

– $500 penalty for filing “frivolous” tax return. Tax-Gen. § 13-705. – May be waived for “reasonable cause”

• Case by case basis
• TP must be in “full” - not “substantial” – compliance
• Tax-Gen. § 13-704.

– Generally waived if TP agrees to lump sum or payment plan – One time abatement only

Getting Relief – Collection Alternatives Penalty/Interest Abatement - MD

• Interest.

– 12% interest rate set by MD Legislature. Tax-Gen. § 13-601(a). – May be waived for “reasonable cause”

• Case by case basis
• Reliance on tax preparer or mistake by State employee
• No adjustment because interest rate is excessive
• Tax-Gen. § 13-606.

– Generally no interest waiver under payment plan (lump sum only) – One time abatement only

Getting Relief – Collection Alternatives Amended Returns – IRS

• Reasons to file an amended return:

– Change filing status (but not from married joint to married separate); – Claim additional dependents; – Claim credits; or – Claim additional deductions.

• How:

– File using Form 1040X. – Amended return cannot be filed electronically. It must be sent via U.S. Mail.

• When:

– In order to receive refund, it must be filed

• within 3 years of original due date of the return, or
• within 2 years of payment.

– Can be filed at anytime to reduce a tax assessment. – I.R.M. 21.5.3 (09/17/2017). – I.R.M. 25.6.1.10.2.7.2 (10/01/2013).

Getting Relief – Collection Alternatives Amended Returns – IRS

• Generally, the amended return does not extend the

assessment SOL.

– I.R.C. § 6501(c)(7).

• If TP believed original return was accurate when

filed, TP is not required to file an amended return.

• No statutory right to file an amended return

requesting a reduction in tax; however, IRS will consider such requests as a matter of policy.

– I.R.M. 25.6.1.10.1 (09/20/2016).

• Also consider a Doubt as to Liability Offer-in-

Compromise.

Getting Relief – Collection Alternatives Amended Returns - MD

Amended Income Tax Denials – 3 year statute of limitations for refund – Statute of limitations if only decreasing tax without refund? – Must provide documentation of federal acceptance – 1 year statute of limitation extension if federal adjustment

Getting Relief – Collection Alternatives Audit Reconsideration - IRS

• Audit Reconsideration: a process by which TPs can contest the result
• f an IRS audit of TPs filed tax return, or a tax return created for TP

by IRS (an SFR).

• During audit, examiner can only inspect books/records for each

taxable year once

– Unless TP requests otherwise, or – Unless IRS, after audit, notifies TP in writing that additional inspection is

• necessary. I.R.C. § 7605(b).
• Reasons for Request – I.R.M. 4.13.1.3 (12/16/2015):

– TP did not appear for audit, – TP moved and did not receive IRS correspondence, – TP has new information, which was not presented during original audit, – TP has been denied tax credits during prior audit, – TP disagrees with assessment IRS made by SFR, or – TP disagrees with assessment resulting from audit of his/her tax return.

Getting Relief – Collection Alternatives Audit Reconsideration - IRS

• Criteria for Acceptance - I.R.M. 4.13.1.4 (12/16/2015). In order to request an

audit reconsideration,

– TP must have filed a tax return. – The assessment must be unpaid or TP disputes credits that were denied by the IRS. – TP must identify which adjustments s/he is disputing. – TP must provide additional information not considered during the original audit. – There was an IRS computational or processing error in assessing the tax. – Additionally:

• No final USTC or other court determination must exist
• TP did not previously sign an agreement to pay the amount due

– No OIC filed, – No signed Form 906 Closing Agreement or Form 870-AD (Appeals Office)

• Timing of Audit Reconsideration Submission:

– Within 3 years from date return was filed, or – Within 2 years from date the taxes were paid, whichever is later.

• Resources:

– IRS Pub. 3598 – I.R.M. 4.13, Audit Reconsideration

Getting Relief – Collection Alternatives Audit Reconsideration – MD

“Application to Correct An Erroneous Assessment” – Tax-Gen. 13-509

• Maryland tax assessments become “final” after 30 days
• Can apply to correct erroneous assessments made beyond 30 day

appeal period

• Application is made to Hearing & Appeals Section
• Length of lateness does not matter, but may only be filed once
• Document request from Hearing Officer
• Hearing Officer review documents to determine if adjustment of

tax assessment is warranted

• No “late” appeals of refund denials
• No appeal to Maryland Tax Court …decision in final!
• Cannot increase tax liability for late appeal

Getting Relief – Collection Alternatives Innocent/Equitable Spouse Relief

• Spouses are jointly and severally liable for any tax, interest

and penalties due on a MFJ return, regardless of who earned the income creating the tax liability.

– I.R.C. § 6013(d). – MD

• Divorce - Even if the divorce decree states that one spouse

will be responsible for pre-divorce tax debt, joint and several liability continues.

• Death of spouse – joint and several liability of remaining

spouse continues.

• Exception – Innocent spouse / Equitable Relief

Getting Relief – Collection Alternatives Innocent/Equitable Spouse Relief

• In certain cases, one spouse can obtain relief as to tax

debt due as a result of other spouse’s income.

– Innocent Spouse.

• Understatement of tax. I.R.C. § 6015(b).

– Requesting spouse did not know, or had no reason to know of the understatement – Not equitable to hold the requesting spouse liable.

• Deficiency. I.R.C. § 6015(c).

– Must be made w/in 2 years of commencement of IRS collection activity – No longer married; legally separated or no longer living with non-requesting spouse

– Equitable Relief. I.R.C. § 6015(f) provides relief from underpayment or understatement of tax when TP not eligible for I.R.C. § 6015(b) or (c).

Getting Relief – Collection Alternatives Innocent/Equitable Spouse Relief

• How to request:

– Review and discuss factors to determine eligibility:

• Knowledge / reason to know of understatement, deficiency on the joint return
• Control and involvement in financial affairs, tax return filing and payments
• Transfer of assets from non-requesting spouse to requesting spouse
• Significant benefit by requesting spouse
• Abuse by non-requesting spouse
• Duress on part of requesting spouse
• Marital status / living situation
• Economic hardship (requesting spouse)
• Allocation of income attributable to each spouse
• Compliance with tax laws
• Mental or physical health

– Complete Form 8857, Request for Innocent Spouse Relief – Submit Form 8857 along with supporting documentation

Getting Relief – Collection Alternatives Injured Spouse – IRS

• Injured Spouse.

– Used when one spouse’s share of an overpayment shown on a return was, or is expected to be, applied to the other spouse’s outstanding liability:

• Federal or state taxes,
• Child or spousal support payments,
• State unemployment compensation debts,
• Federal nontax debt (ex – student loans)

– How to request:

• Form 8379, Injured Spouse Claim and Allocation
• Submitted with return

Getting Relief – Collection Alternatives Injured Spouse – MD

• Injured Spouse.

– Form 502INJ – To file an injured spouse claim, the injured spouse must have:

• Filed a joint return with the spouse owing the debt
• Received income
• Made payments
• An overpayment will be applied to other spouse’s: past due

state or federal taxes, child support or other state debt.

• Innocent Spouse. MD generally follows IRS

determination.

Other Considerations Appeal Rights - IRS

• Collection Appeals Process (“CAP”)

– I.R.M. 8.24.1 (12/02/2014) – Any proposed collection action can be appealed, including:

• Levy or seizure action that has been or will be taken.
• Notice of Federal Tax Lien (NFTL) that has been or will be

filed.

• Rejected, proposed for modification, or proposed for

termination or terminated IAs.

– Call telephone # on notice or file IRS Form 9423 – Must have managerial conference first. – No judicial review.

Other Considerations Appeal Rights - IRS

• Collection Due Process (“CDP”)

– I.R.M. 8.22.4 (09/25/2014) – Form 12153 must be filed w/in 30 days of FNIL or NFTL – Collections SOL tolled. – Must be filed by deadline to preserve judicial review in U.S. Tax Court. – Adverse Notice of Determination - gives TP right to judicial review in U.S. Tax Court.

• Standard of review is abuse of discretion for failure to accept a collection alternative. Sevo v.

Commissioner, 114 T.C. 604, 610 (2000).

• De Novo review for penalty and interest abatement denials. Goza v. Commissioner, 114, T.C. 176,

181-82 (2000).

• Equivalent Hearing – Untimely CDP Requests

– I.R.M. 8.22.4.3 (03/29/2012). – I.R.C. § 6320 hearing must be requested within 1 yr & 5 days of the CDP Notice date – I.R.C. § 6330 hearing must be requested within 1 yr of the CDP Notice date. – Collections SOL is not tolled. – A Decision Letter will be issued as opposed to a Notice of Determination. – No judicial review. I.R.C. § 6331(k)(1)(B); § 7122(c).

Other Considerations Appeal Rights - IRS

• Appeal of Notice of Federal Tax Lien Filing pursuant to I.R.C. § 6320

– No appeal rights until after the lien is filed. – Deadline for filing appeal is on the IRS letter transmitting the lien. – If applicable, argue that:

• Lien withdrawal will facilitate collection, and
• The lien does not give the government much security in terms of assets it can attach.
• Appeal of Final Notice of Intent to Levy pursuant to I.R.C. § 6330

– Must be filed w/in 30 days of notice. If not, IRS can take enforcement action. – Can only dispute underlying liability, incl. penalties, if no prior opportunity to do so. – Can propose any / all collection alternatives:

• Offer-in-Compromise
• Penalty Abatement
• Installment Agreement
• CNC Status
• Innocent Spouse Relief
• Interest Abatement

Other Considerations Appeal Rights - IRS

• Appeal of Rejection of Offer-in-Compromise

– 30 days from date of rejection. – Is a statutory deadline. – No judicial review – In most cases, the issues are narrowed on appeal.

• U.S. Tax Court Petition
• Statutory Notice of Deficiency or Notice of Determination
• Answer and Reply
• Discovery (Informal – Branerton)
• Appeals Conference
• Notice of Trial
• Pretrial Memos
• Stipulations of Facts
• Calendar Call
• Trial and Post Trial Briefs

Other Considerations Appeal Rights - MD

– Hearing & Appeals (“H&A”)

• Located in Baltimore
• Part of the Compliance Division

– Administrative Appeals of Tax Assessments and Refund Denials – Appeal must be in writing:

• Letter to: Comptroller of Maryland, Hearings & Appeals, 301 W.

Preston Street, Room 315, Baltimore, MD 21201

• Email: cdhearings@comp.state.md.us
• Online: www.marylandtaxes.com
• Fax: (410) 333-7745

Other Considerations Appeal Rights - MD

• Types of Appeals.

– Hearing Not Required (“HNR”).

• Simple issues
• Resolved with document submissions
• Does not warrant personal appearance

– Penalty and Interest Waiver Requests (“PWs”).

• Appeal of penalty and interest assessments
• Unable to resolve with collections

– Hearing Request.

• Complex or novel legal issue
• Factual dispute
• Personal appearance in Baltimore Office

– Application to Correct Erroneous Assessment.

• Missed 30 day window for a timely appeal

Other Considerations Appeal Rights - MD

• Informal Administrative Hearing.

– Baltimore Office Only – Format:

• 45 minutes for individuals
• Recorded
• Hearing officer introduces case
• Swearing in parties who are testifying
• Auditor gives overview of assessment
• TP or Representative presents case
• Hearing Officer controls hearing
• Sets deadline

Other Considerations Appeal Rights - MD

• Informal Hearing.

– Respond to Hearing Officer’s request and deadline. – Hearing Officer evaluates evidence and testimony. – May disallow evidence or testimony based on credibility or relevancy. – Disputes on constitutional issues, Comptroller’s office policy, legal issues, and evidentiary matters typically go to MD Tax Court. – H&A and MD Tax Court does not waive tax due to financial hardship. – One of three decisions:

• Closing Letter
• Settlement Agreement
• Notice of Final Determination

– Decision appealable to MD Tax Court.

Tips for Negotiating with IRS

• Carefully evaluate options prior to submitting a proposal to

the IRS, especially if it will extend the Collection SOL.

• Stop collection action without extending the collections SOL.
• Avoid the filing of the NFTL
• Bankruptcy / health issues / age can be used to reduce

collection potential.

• Press IRS on collection alternatives
• Promptly respond to IRS requests for information. Missed

deadlines lead to levies.

• Make a strong case in your initial submission.
• Be thorough and well-organized in your submission.
• Manage client expectations.

Other Considerations Affordable Care Act - IRS

• Premium Tax Credit (“PTC”).

– Treated for assessment and collections purposes like existing refundable credits.

• Anyone who receives advanced payments of PTC (APTC) must file a tax return

to reconcile advanced payments with the PTC actually due to the taxpayer. Treas.

• Reg. § 1.36B-4.
• Excess payments are treated as additional income tax liability. I.R.C. § 36B(f)(2).
• Treas. Reg. § 1.36B04(a)(1)(i).

– Deficiency procedures apply per I.R.C. § 6211(b)(4).

• But math error authority will (may) also be used. I.R.M. 21.6.34.2.16.3.1 (Oct. 1,

2014).

• Penalties and interest may be assessed as with any other overpaid refundable

credit.

• Because ACA does not impose limits on IRS’s collection powers for excess PTC,

IRS may use levy, lien and refund offset to collect.

• Same collections options as any other tax apply, including CDP rights.

– No right to USTC petition before assessment.

Other Considerations – Affordable Care Act - IRS

• Individual Shared Responsibility (“ISRP”).

– ISRP reported via federal tax return. – If not paid with return, IRS will send notice & demand (like income tax) – If not paid by due date after notice & demand, I.R.C. § 6601 interest accrues from date of the notice & demand. – NO right to CDP because IRS is not legally obligated to provide rights conferred by I.R.C. § 6330 and I.R.C. § 6331 when employing its offset authority.

• Boyd v. Commissioner, 451 F.3d 8 (1st Cir. 2006).

– Collection.

• IRS MAY offset refunds, send letters requesting voluntary payment, consider ISRP when considering

collection alternatives for other IRS debt.

• IRS may NOT use levy, criminal sanctions, or file NFTL to collect ISRP. § 5000A(g)(2).
• IRS may NOT seize state refunds or Social Security benefits.

–

• Penalties. ISRP is assessed and collected like any other assessable penalty. Following do not apply:
• I.R.C. § 6651 Failure to Pay Penalty
• I.R.C. § 6662 Accuracy-Related Penalty
• I.R.C. § 6663 Fraud Penalty
• I.R.C. § 6654 Estimated Tax Penalty
• I.R.C. § 6657 Bad Check Penalty

Research Tools

• MD

– Comptroller Website - www.marylandtaxes.com – Administrative Releases - http://taxes.marylandtaxes.com/Resource_Library/Tax_Publications/Administrative_Releases/ – Tax Court - http://taxcourt.maryland.gov/ – Regulations - http://www.dsd.state.md.us/COMAR/ComarHome.html

• IRS

– Internal Revenue Manual (I.R.M.): www.irs.gov/irm – Internal Revenue Code (Title 26) – Regulations – IRS Website

• Case Law
• Treatises and Handbooks

– Effectively Representing Your Client Before the IRS – http://www.abanet.org/abastore/index.cfm?section=main&fm=Product.AddToCart&pid=5470721

• News & Journals

– www.journalofAccountancy.com/news – CPA newsletter – – IRS Newswire - http://www.irs.gov/uac/Subscribe-to-IRS-Newswire

Tax Return Preparation Referrals

Federal Income Tax Return Preparation.

• IRS Suggestions as listed on www.IRS.org

– VITA (Volunteer Income Tax Assistance) or TCE (Tax Counseling for the Elderly): http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for- You-by-Volunteers) – AARP Foundation Tax-Aide Program: available late January until April 15 - http://www.aarp.org/applications/VMISLocator/searchTaxAideLocations.ac tion – IRS Free File Do-It-Yourself Tax Return Preparation: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free

• CASH Campaign of Maryland

– Sites open during tax season: http://mdcash.org/free-tax-preparation/ – During off-season, taxpayers can call 2-1-1 for available back tac preparation days. – Also during off-seasons, taxpayers may use free software: http://www.myfreetaxes.com/

Tax Return Preparation Referrals – cont’d

Maryland Income Tax Return Preparation.

• Locations:

http://taxes.marylandtaxes.com/Resource_Library/Taxpayer_ Assistance/Contact_Information/Local_Offices_and_Directi

• ns.shtml

– Hours: Monday – Friday, 8:30 am to 4:30 pm – http://taxes.marylandtaxes.com/Individual_Taxes/Taxpayer_Assis tance/Free_Income_Tax_Preparation.shtml

• MVLS also has a handful of volunteer accountants who are

willing to prepare tax returns for our clients. If you wish to

• btain help from one of the MVLS volunteer accountants,

please contact Janice at jshih@mvlslaw.org.

Outstanding Clients

1. 16-0122474 Baltimore City IRS/MD tax 63 year old taxpayer with multiple medical issues including memory and comprehension problems with IRS balance from 2011 of $1106 and MD balance from 2010 and 2011 of $2417, with MVA flag. Client's sole income is social security benefits. 2 18-0135895 Baltimore City IRS/MD tax 46 year old maintenance worker at funeral home with IRS and MD balances from 2016 when client was listed as 1099 employee, unbeknownst to him. Although client's recent 2017 refunds were offset to reduce outstanding balances, client was unable to maintain an installment agreement due to moving and personal illness" 3. 18-0137050 Baltimore City IRS tax Married couple with outstanding IRS balance from 2016 due to IRA withdrawal. Both were working for same company in 2016 when first husband, then wife were fired. Wife was given her 401K money but she was unaware that could roll over and also did not realize that it was taxable. Husband withdrew from his 401K for a settlement, again not paying taxes. Wife currently is only income- earner earning $14.75/hour, while husband is awaiting SSDI.

Outstanding clients 2

4. 18-0136323 Baltimore City IRS/MD tax 70 year old retired mother of disabled son, working to pay off creditors, with significant tax debt due to 1099 status and Cancellation of Debt Income. Client has been on installment agreement for payment of IRS balance ($13,509) which has just increased by $4039 with filing of 2017 tax return. Client also has been on an installment plan to MD, where the balance will also increase. Client will be unable to maintain installment agreements with these new balances. 5. 17-0132817 Baltimore County 17-0132817 IRS/MD tax 70 year old homeless individual originally from Denmark with outstanding balances to IRS and MD from 2011, 2015 and now 2017. Initial debt from foreclosure of house, with more recent debt due to Cancellation

• f Debt Income. Client's earlier IRS balances appear to be in CNC.

6. 18-0136941 Charles County 18-0136941 IRS/MD tax 59 year old retired federal government employee with outstanding balance to MD of $24,103, now on IA which is unsustainable. Client filed for bankruptcy in 2010, with house listed as short sale, but not sold until 2012, when she received a 1099. Client owed taxes starting then, and has not been able to catch up. Client also did OIC with IRS 2014, but will have outstanding taxes due for 2017 for which she cannot pay.

Outstanding clients 3

7. 18-0137202 Cecil IRS/MD tax 63 year old nurse for special needs kids needs to renew nursing license, but has outstanding MD balance from 2010-2014 of $27,83. Client also has IRS balance from 2013 and 2014 of $32,387, currently in CNC. Client's husband, who was in charge of finances, died, leaving client to deal with back taxes which led her to lose nursing license, job and house. Client has since recovered her nursing license by entering into an IA with MD, but is at risk for losing it again as she is unable to maintain

• payments. Client also interested in future OIC with IRS.

8. 18-0137392 Baltimore City IRS/MD tax 61 year old surgical suite housekeeper who claims "0" exemptions but still has outstanding IRS and MD tax balances from 2016 and 2017. Client is currently in an installment agreement for 2016, but also will have additional balance for 2017 (total IRS $1500, total MD $1000). Client needs assistance in filling out W4 with appropriate information to prevent future balances, as well as assistance in dealing with current balances.

Outstanding Clients 4

9. 18-0136687 Baltimore City 42 Year old Tool Tester for Black & Decker with outstanding balances to IRS ($1943) and MD ($2900) due to insufficient withholdings. Client has set up payment plans with both the IRS and MD but does not believe that they will be sustainable. 10. 18-0136372 Baltimore County 18-0136372 MD Tax 68 year old retired, widowed salesman on Social Security with outstanding balance to MD of $12,000 from 1994, 2003, 2006, 2007 and 2009. Client also has outstanding balance to IRS of $533 from 2007 which is in CNC. Client's MD balance stems partially from SFRs filed by the Comptroller. Client has been unable to renew his vehicle registration.