If you are notified of an IRS, FTB or other State Tax Agency tax audit or collection action, you need to be very careful what you tell - or don't tell - an IRS (or other tax agency) employee.  Taxpayers who represent themselves hoping for a favorable resolution of their tax controversy, or who are represented by individuals who lack in-depth knowledge of IRS or State Agencies procedures and practices, can find themselves owing more than the professional representation fees they believed they saved.  As mentioned previously, an IRS appeal is a complicated process that requires experience and knowledge of not only tax law, but of the internal procedures and the Internal Revenue Manual that IRS employees are supposed to follow.

To illustrate this point, are you familiar with the concept of Hazards of Litigation?  Do you know which employees in which division have the authority to consider these hazards in formulating their proposed resolution of your tax controversy?  Are you aware of the value and appropriate use of Closing and Collateral Agreements?  Do you know when you should ask an Auditor, Revenue Agent or Appeals Officer for a Restricted Consent?  Do you know if you even qualify for one?   Do you know the requirements for filing an IRS appeal to an audit or collection matter?

If you and your spouse filed a joint return, you may not be aware that you both are jointly and severally liable for any delinquency of tax.  Is that always the case?  Are you aware of the Innocent Spouse provisions of the IRS Tax Code that, if specific requirements are met, could relieve the "innocent spouse" of part or all of the deficiency?  

IMPORTANT TIP! If you filed joint returns during marriage, and are contemplating a separation or divorce, be sure your separate maintenance or divorce decree addresses how you and your ex-spouse will split or allocate unpaid taxes from previously filed (or delinquent) returns.  In addition, you need to address how you and your ex will pay any deficiency that arises in the future from an audit of your prior joint returns. 

By the way, the tax agencies are NOT bound by your agreement on how you will allocate the deficiency or liability.  The tax agency will get the money from either taxpayer - usually from whoever they can get it from the easiest.  The language in the decree of divorce simply enables one party to recover from the other - in a civil action - whatever amount they were forced to pay that was in excess of what they should have paid per their decree.

These are just a few of the numerous terms and procedures that taxpayers - and some representatives - do not know about, or do not fully understand.   Some IRS employees will help you by pointing out opportunities to reduce your liability.   When I managed IRS Revenue Agents and Appeals Officers in Examination and Appeals, I stressed my expectation that they be fair and impartial to their taxpayers.  They knew that I expected them to "get the right answer" - not the last buck!   In many instances, this lead to them suggesting to their taxpayers ways to reduce their liability.

With my technical and managerial experience with the IRS, I can anticipate the questions the Revenue Agent, Revenue Officer, Appeals Officer or Settlement Officer - or their manager - will likely ask you regarding your tax controversy.   As you can appreciate, in the game of chess, anticipating your opponent's future moves is a key toward winning the game.  The same is true in dealing with the IRS and other agencies.  If you understand the job functions of the technical and managerial employees and have been through their training courses, you can anticipate where the employee or manager is heading with a line of questioning.  With that insight, truthful answers can be given with proper explanations to minimize the chance of the IRS employee raising another issue or adjustment.  

With my prior experience as a Revenue Officer, and from my review of hundreds of Collection cases in Appeals, I have an understanding of Collection procedures.  I can anticipate how the ACS (Automated Collection System) or a Revenue Officer will most likely proceed against you to collect a tax deficiency.  Fortunately, Congress enacted the 'Due Process" provisions of the Internal Revenue Code (Sections 6320 and 6330) to enable most collection actions to be reviewed by Appeals.   These sections require the IRS to issue taxpayers a new notice (CDP Notice) and provide taxpayers with new procedural rights when the Service files a Notice of Federal Tax Lien and when it intends to levy upon the taxpayer's property or right to property

Section 6320 requires the IRS to issue a notice to inform the taxpayer that a Notice of Federal Tax Lien has been filed and to provide the taxpayer with the opportunity to request a Collection Due Process hearing ("CDP hearing") with the IRS Appeals Office  with respect to the tax liability for the taxable period or periods to which the lien relates. 

Section 6330 requires the IRS (in non-jeopardy situations) to give the taxpayer whose property or rights to property (other than a State tax refund) are to be levied, the right to a CDP hearing with Appeals at least 30 days prior to levy, with respect to the tax liability for the taxable period or periods for which the levy is intended to be made.

In a tax controversy situation, you can file an IRS appeal to any of the following collection actions by the IRS:

As your advocate and a tax resolution specialist, I can advise you on the choice of appeal (CAP or CDP - the difference is discussed later) and represent you in your tax controversy before the Collection and Appeals Divisions. 

If the taxpayer timely requests a CDP hearing (by completing Form 12153 - Request for a Collection Due Process Hearing), Appeals will consider the case and render a written determination concerning the appropriateness of the tax lien filing or proposed levy.   A request will be considered timely if it is submitted within 30 days of the date of the CDP Notice.  In this form, it is critical that you identify all of your reasons for disagreement with the Collection action.  If the taxpayer does not agree with Appeals' determination, the taxpayer has the opportunity to seek judicial review.  

The taxpayer may have the opportunity to challenge administratively and in Court the taxpayer's liability for the tax years stated on the Notice of Federal Tax Lien or levy, raise any additional defenses with respect to that liability, challenge the appropriateness of the filing of the Notice of Federal Tax Lien, or proposed levy, and offer collection alternatives. Because the taxpayer will only have one opportunity (per tax period) for a CDP hearing and subsequent judicial review, the taxpayer is required to raise all relevant substantive and collection issues at that hearing  

A taxpayer must receive notice of the filing of an Notice of Federal Tax Lien  not more than five business days after the date of any filing   This notice describes the taxpayer's right to request a Collection Due Process hearing with respect to any taxable periods described on the Notice of Federal Tax Lien, within the 30-calendar day period beginning on the day after the 5-day period for notification has expired.  The taxpayer is entitled to only one CDP hearing with respect to each taxable period to which the unpaid tax relates.   

The Appeals determination may be appealed to either the United States Tax Court  or a United States District Court.  The running of the periods of limitations for collection after assessment, for criminal prosecutions, and for suits described under IRC § 6532 are suspended for the periods in which the CDP hearing and any appeals are pending.  

The timing of your IRS appeal is critical!  If a taxpayer does not request a CDP hearing within the statutory 30-day period, a taxpayer can still request a hearing at a later date.  In this circumstance, the IRS will provides a hearing equivalent to a CDP hearing.  However, if the Appeals' determination in the "Equivalent Hearing" is unfavorable to the taxpayer, the taxpayer will not be entitled to judicial review.   This illustrates the need to have a representative familiar with the IRS appeal procedures.

Notification is not required for any refilling of Notice of Federal Tax Liens.  However, a taxpayer may still seek administrative review of a re-filing with IRS Collection, Appeals or the National Taxpayer Advocate.   Notification is not required to be given to any known nominees of the taxpayer.   However, any person named on a filed Notice of Federal Tax Lien, other than the taxpayer, may seek administrative review with IRS Collection, Appeals, or the National Taxpayer Advocate.

There is another appeal procedure available for Collection cases called Collection Appeals Program (CAP).  CAP is generally much quicker than CDP (which as of September 2004, typically takes 250 days to resolve in Appeals) and available for a broader range of collection actions.   CAP  appeals are initiated by the completion of Form 9423.  One significant difference between CDP and CAP is that you cannot go to court if you disagree with the CAP decision.

I have the three-decades of income tax administration experience to effectively represent you in your tax controversy before the Internal Revenue Service or the Franchise Tax Board.   The following are just some of the areas where I can help you get through the process:

If any of the above terms are unfamiliar and you would like to learn more about any of them, please click on the following link to the Technical Issues page where these topics and many more are discussed in more depth. 

My representation fees for the resolution of your tax controversy are based upon a standard hourly rate for my time preparing your case and meeting with IRS or State employees, plus direct expenses such as travel, parking, fax, copying, etc.   

For preparing and negotiating Offers in Compromise for individual wage earners for the IRS, I can fairly well estimate the cost.   My estimated fee will normally cover my services for the preparation of the extensive documentation, submitting the documents, meetings with Collection Offer Specialist and management, and if necessary, with the Appeals Office.   An initial payment toward the total retainer is due upon signing of the Engagement Letter.  The balance of the retainer will be due after the Offer forms and attachments are completed, but before submission to the IRS. 

Offers in Compromise applications and negotiations for individuals with more extensive investments (such as rentals) or in business (self employed), for other types of entities (Corporations, Trusts, etc.) , and for the liabilities owed to the California agencies (Franchise Tax Board and EDD) can be  complex.  Accordingly, they will be prepared and negotiated based upon my time and travel costs.  I do require a retainer for these types of Offers, and payment in advance for estimated direct costs.   

For discussing your potential eligibility for an Offer in Compromise, my initial consultation by telephone or at my office is free.   First, however, you first need to complete and Email me the Offer in Compromise Questionnaire.  

Finally, if you have Adobe Acrobat, and you wish me to represent you in your tax controversy, you can download the Power of Attorney form 2848 (fill-in PDF form) by right-clicking here, and then selecting Save Target As to copy it to your computer's hard drive.   When you have downloaded the form, please contact me so that I can assist you in completing it.  It must be accurate to be accepted by the IRS or State of California. 

You can also view a sample of the Engagement Letter that I require my clients to sign before I represent them.  Please click here to view that letter.   If you wish me to represent you in your tax controversy, I will complete the letter and E-mail or mail it to you for signature.

Dick Norton , EA
Tax Resolution Specialist

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Updated: 2/3/2005