IRS tax enforcement is described as harsh but the criticism highlights the need to have a qualified tax professional at your side.
There’s more pressure than ever on the Internal Revenue Service to increase tax collections.
That’s because the sluggish economy, which has depressed wages and tax revenue, and the ballooning national debt have combined to make tax collections even more urgent.
The IRS has responded to this pressure by increasing enforcement — the active effort of auditing consumers and collecting money owed to the IRS. Revenue agents’ goal is to decrease the so-called “tax gap” — the difference between reported tax revenue and collected tax revenue.
In 2006, the most recent year for which data is available, the tax gap was $400 million.
In an effort to close that tax gap, the IRS has increased rates to one of the highest levels in history.
Today, approximately 1 of every 100 U.S. taxpayers will be audited. If you earn more than $200K per year, your audit risk triples.
The IRS has also placed technology on its side, developing an algorithm that helps revenue agents identify tax returns most likely to require auditing, meaning that tax audits today are more likely to result in collections, civil penalties and even criminal charges.
But the use of technology to make tax collection more efficient has come under criticism.
In January, National Taxpayer Advocate Nina E. Olson released her annual report to Congress. Olson specifically argues that IRS enforcement procedures impair the rights of taxpayers.
“Nowhere is this more apparent than in the IRS’s increasing use of automated enforcement procedures,” Olson wrote in her report.
“To conserve resources, the IRS has largely automated its correspondence audits and its issuance of liens and levies. It typically moves forward with tax assessments without first talking to taxpayers to give them a chance to substantiate their return positions, and it proceeds with liens and levies before having a conversation to find out whether a tax delinquency is due to financial hardship, which would suggest that an Installment Agreement or Offer in Compromise should be considered.”
Is she right?
Are taxpayers’ rights being impaired?
That’s a matter for Congress and the courts to decide.
But Olson’s criticism of the IRS’s automated enforcement procedures highlights the need to have a qualified tax professional at your side when you are dealing with tax debt.
Long before you receive any automated liens or levies from the IRS, a qualified tax professional could determine whether you qualify for the Installment Agreement or the Offer in Compromise, allowing you to take advantage of programs that will give you time to pay off your tax debt or reduce your tax debt by a significant amount.
We should be thankful that Olson’s office is looking out for taxpayers.
But if you’re dealing with the IRS, you should also have someone looking out for you.
This article is written by Michael Rozbruch who is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers and a Maryland CPA. You can contact him at 866-477-7762 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
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