Taxation & Estate Planning

The IRS doesn?t always act in its own self-interest

By Darrin Mish

I don't write a lot of blog articles about particular cases. Generally I stick to more generic explanations and fact patterns. Today I can't help myself. Here is a short background on this particular taxpayer's case.

Mr. Taxpayer is a shareholder of a rather large company that had a payroll tax problem. He is over 70 years of age and is trying to wind down his work and responsibilities etc. Due to a downturn in business and an embezzlement by a trust employee, the IRS assessed the Trust Fund Recovery Penalty against he and his partner. The total liability for the Trust Fund Recover Penalty was in the neighborhood of $200,000.00. When the Automated Collection System (ACS) issued a Final Notice of Intent to Levy, we filed a Request for a Collection Due Process (CDP) knowing that it would likely be easier to deal with IRS Appeals rather than ACS. ACS has a reputation for being difficult to deal with. I believe that they are difficult to deal with and the reason is that they are not entrusted with very much authority whatsoever. Their authority extends to those acts which are detrimental to the taxpayer not those acts that might be considered helpful to a taxpayer. Even when they know the law is not on their side, they stonewall and rarely act in a manner consistent with the law. But I digress….

Back to our story. Mr. Taxpayer agrees to a monthly installment agreement in the amount of $3150.00 and pays it for 11 months. IRS levies his bank account (in my opinion contrary to the law.) Initially when we called to request a release of the IRS bank levy (a very rare concept, they almost never agree to release money they have already seized) they agree to the release and request copies of the checks paid against the installment agreement. Fast forward…..10 days goes by and no bank levy release? What's up with that? I call them back and I'm told the manager didn't approve the release. You see it turns out that Mr. Taxpayer made two payments (over six months ago) about a week late. So…the IRS seized the $9000 he had in the bank and defaulted his installment agreement. Now they want to go over his financials again. A process that is guaranteed to take over six months. All the while he won't be making his $3150.00 payments. So it will turn out to be a net loss for the IRS. It just goes to show you that the IRS routinely bites its nose off to spite its face.

Full post as published by IRS Problem Solver Blog on October 07, 2008 (boomark / email).