by John T. Anderson, Chairman
Certified Specialist in Estate Planning, Trust
and Probate Law by the State Bar of California,
Board of Legal Specialization
Appropriately, the speaker at the April 15, 2010 meeting of the Estate and Trust Council of Long Beach was Mr. Benjamin Duncan, Esq. of the Office of Chief Counsel, IRS, Deputy Area Counsel. Last year he had a staff of 65 attorneys; he now has 90 attorneys.
He said he has tortured us in the past on procedural issues; this year he is torturing us with collection issues. He loves collecting taxes.
Revenue Agents determine tax liability, Revenue Officers collect taxes. He works with Revenue Officers. They have a lot of discretion. Mr. Duncan’s job, in part, is to advise Revenue Officers. It is challenging and fun.
The key is when tax owed becomes an “assessment.” That is when the Revenue Officer gets involved. He sees what the debtor owes, then he gets to look into everything the debtor has to see what the easiest way to collect will be. He sees whether the debtor will be a cooperative person or if he is in for a fight.
He will send out a Demand for Payment. Ten days later a lien goes out on “everything” that the debtor owns, the “secret tax lien.” Then there can be a public recording of the secret tax lien and a publication of notice.
Next, a “piece of paper” is issued called a “levy.” No court is involved. The Revenue Officer writes it out and send it certified mail to, for example, the debtor’s bank. The bank, who is loyal to it’s customer, will give all the money the debtor has on deposit over to the IRS or the bank is liable for the amount PLUS A 50% PENALTY.
The Revenue Officer might suggest installment payments, or the debtor might propose an Offer and Compromise. The Offer and Compromise is just an agreement to settle the debt for some compromised amount. The least that will be settled is 20%.
In the past, IRS could “seize” the debtor’s house, advertise, then auction it. Many of the buyers are the same groups of people. IRS’s sales price is usually well-below market price, in part because the Buyer still has to get the Debtor out. Oftentimes there is damage to the house and there are expenses to sell.
With a “cooperative” debtor (one who responds, returns calls, etc.), the Revenue Officer will usually use the least intrusive method to collect; they will attempt to work things out.
With an “uncooperative” taxpayer, the Revenue Officer immediately starts looking into levy and seizure. They have a “wage levy” they can send to the employer. There is a formula to determine the share of each paycheck to go to IRS.
A Homestead Allowance is not superior to a Federal Tax Lien.
There are 5,000 to 6,000 tax cases in Los Angeles per year. All but about 1,000 will be settled by the Appeals Division. IRS will win about 95% of the cases which go to trial because the laws are stacked in the government’s favor and the Taxpayer has had numerous opportunities to resolve the matter before it gets to trial.
He spoke of the Taxpayer’s Bill of Rights and a procedure for the Taxpayer to go into Tax Court and challenge the method of tax collection being used as not being the “least intrusive.” He says that initially collections was concerned that it would make their work much harder. In fact, he cited a study done over a five year period (rounding-off the numbers) finding that there were three million assessments; and 300,000 tax liens recorded, with 3,000 challenged by the Debtor as overly intrusive collections. Of these 3,000 only 30 were successful.
John T. Anderson, Section Chair
Certified Specialist in Probate, Trust and Estate Planning
By the California State Bar Board of Legal Specialization