yeah, we said “easy” and “congress” in the same breath. we’re optimists.
by 卡塔尔世界杯常规比赛时间 research
everyone talks about fixing the irs. but where do you start?
more: 4 ways to fix irs collections | 3 ways to improve irs levies | how the irs abuses ‘math errors’
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we’ve found five slam-dunks that congress should be able to agree on.
1. provide due “collection due process” rights to third parties holding legal title to property subject to irs collection actions.
current law authorizes an unfortunate necessity: the power of the irs to file notices of federal tax lien (nftls) and subsequently issue levies against taxpayer property. nobody wants tax collection to come down to what is effectively the seizure of taxpayer (or, more accurately, tax dodger) property. but ultimately, when voluntary compliance fails, that’s what needs to be done.
trouble is, that property may have third-party co-owners, creditors, transferees and others who have certain rights to the property. they are not considered the taxpayer in question, yet they are liable to lose their property.
despite that liability, they are not entitled to the collection due process (cdp) and hearing procedures prescribed in irc § 6320 and 6330. the irs does not issue them cdp lien notices or notice of proposed levies.
the irs’s taxpayer advocate service warns that third parties might benefit from cdp hearings and processes as much as the underlying taxpayer. in fact, the third party may deserve more protection because the alleged liability isn’t his, hers or its. without cdp protections, the third parties have comparatively limited remedies.
this is easy to fix.
recommendation: amend irc § 6320 and 6330 to extend cdp rights to “affected third parties” who hold legal title to property subject to irs collection actions.
2. extend the time limit for taxpayers to sue for damages for improper collection actions.
taxpayers have a right to sue the irs if it recklessly, intentionally or negligently disregards any regulation in the collection of federal tax. but there’s a time limit. the suit must be brought within two years from the date the taxpayer had opportunity to discover all essential elements of the cause of the collection action.
before filing the suit, the alleged culprit must file an “administrative claim” with the irs. he or she may not file a suit in court until the earlier of a) six months after filing the administrative claim or b) the date on which the irs renders a decision on that claim.
but if the claim is filed within the last six months of the two-year period, the taxpayer may file suit before the end of that period.
simple enough (if you read it two or three times). and the administrative claim policy is a good one to the extent that it helps keep such cases out of court, where nobody – neither irs nor taxpayer – wants to go.
but the policy can leave taxpayers hanging while the clock is ticking. if the taxpayer files the administrative claim in the last six months of the two-year period, the irs may not have time to render a decision, and the taxpayer will have no choice but to move the case to court.
the clock is also ticking on whatever the irs decides about the claim. the taxpayer doesn’t have two years from that decision. the two years started back when the collection action started. the taxpayer could conceivably have a day or less to file a suit after an unsatisfying irs decision on an administrative claim.
the solution is a mere matter of changing timelines.
recommendation: amend irc § 7433(d)(3) to allow taxpayers who file an administrative claim to file a civil action suit any time after six months from the date the claim was filed or, if the irs renders a decision, any time within two years of the decision.
3. codify the rule that taxpayers can request equitable relief any time before the expiration of the period of limitations on collection.
irc § 6015(b) and (c) allow taxpayers relief from joint and several liability that results from filing a joint income tax return. these are cases in which an innocent spouse seeks relief from a noncompliant spouse’s understatements or underpayments. but the request for relief has to be made within two years.
if relief is unavailable from (b) and (c), there’s also a subsection known as (f), which provides for “equitable” relief. but (f) has no time limit.
the two-year limit has been in and out of courts a few times. though it was ultimately sustained, the irs decided to drop it. it’s still technically not applicable, but at any moment, the irs could reimpose it.
the tas says that the purpose of subsection (f) is to provide a safety mechanism for innocent spouses. two years has nothing to do with innocence or the need for relief. so it offers the easy and obvious solution.
recommendation: amend irc § 6015(f) to allow taxpayers to request equitable relief within the time limit on collection in irc § 6502 or, for any credit or refund, within the time limits of irc § 6511.
4. direct the irs to study the feasibility of an automated formula to identify taxpayers at risk of economic hardship.
the internal revenue code contains several provisions that protect taxpayers experiencing economic hardship from irs collection actions. such taxpayers can seek relief from levies and challenge the appropriateness of collection action.
to recognize economic hardship, the irs is required to develop schedules of national and local “allowable living expenses” (ales) to ensure that taxpayers entering into offers in compromise (oics) are left with enough to live on.
the irs routinely enters into installation agreements (ias) to help taxpayers pay over time. too often, however, the irs neglects to consider whether a given agreement will create hardship.
some of these taxpayers – 4.3 million in the last six years – are shunted into the irs’s automated collection system (acs), and 84 percent of them were streamlined. streamlined means little or no human interaction. it’s all done online. of that 84 percent, about 40 percent agree to an ia that leaves them with income below their ales.
these hard-pressed americans could plead hardship if they knew it was an option. but the irs computer doesn’t mention that, and if anyone wants to inquire about the possibility, few are willing to enter the labyrinthian inferno of the irs phone system.
the tas has a solution. it has developed an automated algorithm that can identify taxpayers with incomes below their ales. it would not automatically grant them hardship relief, but it would alert collection employees to the need to talk with the victims delinquent taxpayers.
recommendation: congress should direct the irs to study the feasibility of such an automated formula. if it works, its use should be required.
5. exclude the debts of taxpayers whose incomes are less than their ales from assignment to private collection agencies or, if that is not possible, exclude the debts of those whose incomes are less than 250 percent of the federal poverty level.
irc § 6306(c) requires the irs to assign certain receivables to private collection agencies (pcas). several categories of receivables are exempt from such assignment, but poverty is not one of them.
economic hardship – living below a family’s ale – can qualify a taxpayer from some or all of a tax debt. often, however, the taxpayer fails to identify as unable to pay the debt, so the irs never knows. instead of resolving the case, the irs passes it on to a pca. but pcas have no power to seek settlements based on economic hardship.
it isn’t hard to identify taxpayers who may be living below their ale or 250 percent of the federal poverty line. any algorithm with a high school diploma can do the job.
and any taxpayer so identified should be spared the problems that come with pca collection.
the tas offers a humane solution.
recommendation: amend irc §6306(d) to exclude from eligibility for assignment to a pca the debts of taxpayers whose incomes are less than their ales or 250 percent of the federal poverty limit.