(Part 3 of 3)
11. Your case is referred to an Automated Collection System (ACS). The ACS is a nameless, faceless computerized collection system that utilizes telephones. IRS personnel at various “call sites” have little authority to help you by way of compromise or installment but have great authority to harm you. If I may suggest, do not be rude to them of as they could easily levy your bank accounts by simply pushing buttons in their computer terminals.
12. If ACS fails, your case is then assigned for collection to a Revenue officer who contacts and visits you at your residence or place of business. It is at this time that you really have to be represented by a CPA, enrolled agent, or tax lawyer. This is serious, folks. I do not appreciate Revenue Officers visiting my clients at their homes in a pricey neighborhood where they can spot a Lexus or Mercedes in your driveway in periods when you reported losses year after year. The Revenue Officer interviews and asks you to complete a detailed collection information statement that gives him/her a road map to what you own. The Revenue Officer then proceeds to collect by using several avenues: file a lien on your properties, levy your bank accounts, garnish your wages, sell your assets, or allow you to enter into an offer in compromise or installment arrangement.
13. Your collection case is closed when delinquent taxes are paid or an offer in compromise or installment agreement is in place. If collection efforts fail, your liabilities are entered into your very own individual master file where it will remain for the next 10 years. Future refunds will be seized to offset your outstanding liabilities.
14. You may go to the Appellate Division of the IRS just after your return is examined (pre- assessment case) or after you are referred to the Collection Division (post-assessment case). About 10% of examined returns are brought to Appeals with only less than 2% unresolved requiring litigation. Invocation of Appeals Division jurisdiction to hear contested issues before a petition is filed in Tax Court is a non-docketed case. On the other hand, it becomes a docketed case after a petition is filed in Tax Court.
As you can see, going through an audit and subsequent collection can be intimidating. It can be an exciting lesson if you seek adventure. But this is not one adventure that you want to take. In the end, your win or loss will depend on the condition of your records, the auditor, and the expertise of your representative. One final thought: You may save funds by defending yourself but do not represent yourself when issues get tough. Do not save on representation fees and end up with a horrifying experience and a bunch of taxes, penalties and interests.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at firstname.lastname@example.org.