IRS PROCEDURE UPDATE
by Frances D. Sheehy, Esq.
This article will provide an update on several areas of tax procedure with respect to collection due process, innocent spouse, offers in compromise, and practitioner issues.
Collection Due Process:
With respect to collection due process and IRC Section 6320, the IRS has recently issued Regulations, which were published January 18, 2002. Some of the issues which will attempt to be resolved with the regulations include: (1) clarification that the IRS will accept unsigned collection due process requests as valid with the condition that the request be signed by either the taxpayer or the representative upon discovery of the omission; (2) guidance with respect to the conduct of collection due process hearings; and (3) centralized review of the process. The federal tax division of the tax section would like members interested in assisting with preparing comments on behalf of the Tax Section, to contact either Fran Sheehy or David Pratt. The Tax Court has entered several recent decisions with respect to collection due process. In Parker v. Commissioner, 117 T.C. 63 (2001), the Tax Court held that it had jurisdiction to review a levy determination, even if the IRS filed a lien prior to the effective date of the Tax Court jurisdiction over collection actions. In Johnson v. Commissioner, 117 T.C. No. 18 (Nov. 30, 2001), the Tax Court held that it had no jurisdiction to review the IRS collection procedures of a frivolous return penalty, and thus would not review the collection due process hearing requirements in such cases. The Tax Court determined in Lunsford v. Commissioner, 117 T.C. No. 16 (Nov. 30, 2001), that it would not look behind a determination notice to decide if the notice was valid by examining whether the proper collection due process hearing was provided, overruling its prior decision in Meyer .v Commissioner, 115 T.C. 417 (2000).
Innocent Spouse:
Proposed regulations with respect to IRC Section 66 (the community property provision of the innocent spouse statute) will be issued on January 22, 2002 for review and comment. These regulations mirror the Section 6015 regulations, which are about to be issued in final form. The IRS has centralized consideration of all innocent spouse claims at their Service Center in Cincinnati, Ohio. The technicians make the determination of eligibility through the use of a software program which is basicly a technology flowchart applying each of the factors and considerations for each provision of IRC Section 6015. Completion of the flowchart results in a determination of eligibility or ineligibility based on the information input by the technician, and creates a workpaper that sets forth each of the criteria and input information. Should relief be denied, a request for this workpaper should be helpful in determining what determining factors caused the denial. The denial letters issued to the taxpayer merely state the conclusion, rather than the factors considered in the review. The IRS is currently reviewing each request for relief under all provisions, even if the taxpayer has requested only equitable relief under IRS Section 6015(f). The Tax Court has issued several recent rulings which are discussed in the February issue of the Florida Bar Journal.
Offers in Compromise:
The IRS has published a new Form 656 ( a 24 page booklet), which includes the new Forms 433 requiring documentation to be attached. The service is currently considering charging a $471offer processing fee, which would not be refundable, but would be included as part of the offered amount if the offer is accepted. Consideration of offers has been centralized to Brookhaven, New York and Memphis, Tennessee. Florida is under the Brookhaven jurisdiction. The IRS has issued Delegation Order 11, which allows hardship, doubt as to collectibility, and doubt as to liability up to $100,000 offers to be approved at the territory level, and and offers less involving less than $50,000 to be worked in the field. The Tax Court recently rejected a claim for abatement of interest in a case where the IRS lost the taxpayer's offer in compromise for over a year. Downing v. Commissioner, 118 T.C.No. 2 (Jan. 7, 2002).
Practitioner Issues:
There is a centralized address and fax to file Form 2848 (power of attorney) and form 8821 with the IRS. The form can be faxed to 901-546-4115 and will be entered on the IRS system nationwide within 48 hours. The address and telephone number related to that office is: IRS - CAF, Accounts Management Center, Taxpayer Relations Dept. 2, 5333 Getwell Road, Memphis, TN 37501, telephone number 901-546-4176.
The new national tax practitioner's hotline number is 866-860-4259. That number is available from 7:30am to 5:30pm.
The IRS has instituted a national federal payment program which identifies individuals receiving payments from the federal government from social security, disability, as government contractors, or as government employees, or otherwise, who also owe income taxes. Such individuals are then issued a notice of seizure of those government payments. The program is scheduled to begin seizing these funds in February 2002. There may be glitches in the program as it appears to override any existing accepted offers in compromise, installment agreements, and bankruptcy stays.
