If you’ve owed the IRS over the past 10 years, while you may not have been lucky to have an IRS problem, in general, we've seen a much less aggressive IRS in collecting tax debt. As an Advocate for Taxpayers with IRS problems, I have found the IRS to be less likely to take agressive enforcement action and easier to work with to resolve my client's tax problems. This decrease in enforcement has been primarily due to reduced funding for the department, resulting in an a shortage of experienced staff. Over this time, we’ve seen decreases in audits, levies and liens and overall less effective tax collections for the government.
What Does the Future Look Like?
We may be seeing this come to an end. The IRS received a 2.6% increase in its base budget for 2020. While most of this is allocated toward improving the IRS's antiquated infrastructure and computer systems, another $362 million has been proposed towards funding for audits and collections. This should allow the IRS to bring on new staff to effectively address taxpayer debt. In addition, the IRS has reassigned staff in an attempt to utilize their work force in a more effective manner.
We’ve already seen increased enforcement actions. In 2018, we saw an 8% increase in levies, the first increase in about a decade and the plan is to continue to increase enforcement by filing more levies and liens that will get the attention of taxpayers. The IRS is also also working with the State Department to restrict new passport applications and renewals and is using private collection agencies to contact taxpayers that their lack of staff does not allow them to currently. In addition, the IRS has identified approximately 7 million potential taxpayers that they believe are non-filers. The belief is that those taxpayers most likely owe taxes and the government is looking to address non-filers. If you are a non-filer, it's likely that you are on their radar.
What Can You Do?
You may want to get a heads up on getting your returns filed and effectively dealing with your tax debt. When taxpayers do not voluntarily file their returns, the IRS is authorized to file a Substitute for Return (SFR) to assess the tax and enter them into the collection queue. SFRs are filed using the worst filing status available to the taxpayer with minimal deductions. It is almost always to the benefit of the taxpayer to file their return voluntarily. This can also give them an opportunity to plan the best option available to address their tax debt. These options include:
- Filing an Offer-In-Compromise for less than the full amount owed,
- Entering into a Payment Plan that best benefits them,
- Being classified as Currently Uncollectible,
- Getting Penalties Abated (Removed), and
- Bankruptcy if the debt qualifies.
Before you enter into any alternative above, you must be tax compliant and get your returns filed to date.
Do you Need Help?