As part of a larger transformation effort, the Internal Revenue Service (IRS) announced on August 3, 2023 a major policy change that will end most unannounced visits to taxpayers by IRS Revenue Officers to reduce public confusion and enhance overall safety measures for taxpayers and employees.
The change reverses a decades-long practice by IRS Revenue Officers, the unarmed agency employees whose duties include visiting households and businesses to help taxpayers resolve their account balances by collecting unpaid taxes and unfiled tax returns. Effective immediately, unannounced visits will end except in a few unique circumstances and will be replaced with mailed letters to schedule meetings.
IRS Commissioner Danny Werfel announced the change as part of a larger effort to transform IRS operations following passage of the Inflation Reduction Act last year and the creation of the new IRS Strategic Operating Plan in April 2023.
“We are taking a fresh look at how the IRS operates to better serve taxpayers and the nation, and making this change is a common-sense step,” Werfel said. “Changing this long-standing procedure will increase confidence in our tax administration work and improve overall safety for taxpayers and IRS employees.”
Werfel also noted that there have been increased security concerns in recent years on multiple fronts. The growth in scam artists bombarding taxpayers has increased confusion about home visits by IRS Revenue Officers. Sometimes scam artists appear at the door posing as IRS agents, creating confusion for not just the taxpayers living there but local law-enforcement.
For IRS Revenue Officers, these unannounced visits to homes and businesses presented risks. IRS Revenue Officers routinely faced hazards and uncertainty making unannounced visits to attempt to resolve delinquent tax matters.
“These visits created extra anxiety for taxpayers already wary of potential scam artists,” Werfel said. “At the same time, the uncertainty around what IRS employees faced when visiting these homes created stress for them as well. This is the right thing to do and the right time to end it.”
The change reflects the ongoing evolution of tax administration work taking place. Werfel noted that funding under the Inflation Reduction Act will add more staffing for compliance work. The IRS continues to focus on key areas, such as high-income taxpayers with tax issues, as efforts continue on transforming the IRS. Improved analytics will also help IRS compliance efforts focus on those with the most serious tax issues.
“We have the tools we need to successfully collect revenue without adding stress with unannounced visits,” Werfel said. “The only losers with this change in policy are scammers posing as the IRS.”
IRS New Policy On Contacting Taxpayers Who Owe Taxes
In place of the unannounced visits, IRS Revenue Officers will instead make contact with taxpayers through an appointment letter, known as a 725-B, and schedule a follow-up meeting.
The IRS noted there will still be extremely limited situations where unannounced visits will occur. These rare instances include service of summonses and subpoenas; and also sensitive enforcement activities involving seizure of assets, especially those at risk of being placed beyond the reach of the government. In perspective, the IRS states that these types of situations typically number less than a few hundred each year – a small fraction compared to the tens of thousands of unannounced visits that typically occurred annually under the old policy.
Don’t Think That The IRS Is Easing Collection Enforcement
These changes come as part of the IRS Strategic Operating Plan, which was unveiled in April 2023. With the 10-year funding available from last year’s Inflation Reduction Act, the IRS has set in motion an effort to transform the agency to improve taxpayer service, add fairness to tax compliance efforts and modernize technology to better serve taxpayers, tax professionals and the nation.
Options To Consider If You Owe The IRS
- IRS payment plans
There are two main types of payment plans that do not require the submission of financial disclosures.
- Short-term payment plan – The payment period is 120 days or less and the total amount owed is less than $100,000 in combined tax, penalties and interest. A 180-day payment plan is also possible. However, as you are financing a liability with IRS, interest and the late-payment penalty continue to apply.
- Long-term payment plan – The payment period is longer than the short-term payment plan. Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties and interest. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.
Taxpayers who do not qualify for either of these plans would be requires to submit financial disclosures in order to arrange for a payment plan with IRS.
- Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. Sometimes this is referred to as putting a taxpayer’s account on a Currently Not Collectible (CNC) status. Once the account is placed on a CNC status, the IRS does not pursue collection activity against the taxpayer and the statute of limitations on the tax liabilities will continue to run. Additionally, the total amount owed will still increase because penalties and interest are charged until paid in full or otherwise settled. Generally, unless the taxpayer’s financial situation changes, the account will remain on a CNC status until the tax liabilities expire. However, if the taxpayer’s financial situation improves the account will be taken off of CNC status so that the IRS can collect the taxes through full payment or an Installment Agreement.
- Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis, based on “reasonable cause”. Alternatively, where a taxpayer has filed and paid on time during the past three years, the IRS can typically provide relief under the “First Time Abatement Program”.
- Offer in Compromise
Established by the IRS, the Offer in Compromise Program is a formal application to the IRS requesting that it accept less than full payment for what you owe in taxes, interest, and penalties. An offer in compromise may allow you to settle back taxes or IRS liability at a substantial discount on the basis of doubt as to collectability, liability, or effective tax administration. In addition, while your offer is under consideration, the Internal Revenue Service is prohibited from instituting any levies of your assets and wages.
While an offer in compromise can help pay IRS debt for less, most people do not have the necessary skills or knowledge of the IRS collection process to make an offer in compromise that is in their best interest. Many people fill out the forms incorrectly, overstate their assets and income, and offer too much. Government figures show that 75% of offers are returned at the beginning due to forms being filled out incorrectly, and of the 25% that are processed, approximately 50% are rejected.
What Should You Do?
Let the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and offices elsewhere in California get you set up with a plan that may include being qualified into a voluntary disclosure program to avoid criminal prosecution, seek abatement of penalties, and minimize your tax liability. If you are involved in cannabis, check out what else a cannabis tax attorney can do for you. Also, if you are involved in crypto currency, check out what a Bitcoin tax attorney can do for you.