Collection Process Flashcards
What is the role of a Revenue Officer?
A Revenue Officer works for the IRS Collection Division and collects unpaid taxes by meeting with taxpayers to resolve tax issues such as setting up payment plans, granting penalty relief, and temporarily suspending collections for financial hardship cases.
What is Injured Spouse Relief?
If one spouse has a separate debt and a joint refund is applied to it, the other spouse can file Form 8379 to recover their share of the refund.
Example: Tom has past-due taxes from before marriage. His wife Lucy files Form 8379 to protect her share of their $5,000 joint refund.
What are the three types of relief from Joint and Several Liability?
- Innocent Spouse Relief: For when one spouse failed to report income or claimed improper deductions.
- Separation of Liability Relief: For divorced or separated taxpayers, splitting tax based on responsibility.
- Equitable Relief: For underpaid taxes when other relief types do not apply.
What happens when taxes are unpaid?
The IRS sends a Notice of Tax Due and Demand for Payment. Payments can be made via credit card, check, electronic funds transfer, or cash.
What is Currently Not Collectible (CNC)?
If taxpayers cannot pay their tax debt due to hardship, they can request to have their account marked as Currently Not Collectible. The IRS will stop collection but may still add interest and penalties.
What is the Extension of Time to Pay (Undue Hardship)?
Taxpayers can file Form 1127 to request an extension if paying taxes on time would cause significant financial harm. Extensions can be granted for up to 6 months or 18 months, but interest will still accrue.
What is the IRS Collection Information Statement (Form 433)?
The IRS uses Form 433 to review a taxpayer’s financial situation, with different forms for wage earners, businesses, and general financial statements.
What are the types of payment plans available?
- Short-Term Payment Plan: Pay in 180 days or less with no setup fee if paid in time.
- Long-Term Payment Plan: Payments spread over up to 72 months, with streamlined options for balances of $50,000 or less.
What is an Offer in Compromise (OIC)?
The IRS may settle tax debt for less than the full amount through an Offer in Compromise. File Form 656 for doubt as to liability, doubt as to collectibility, or effective tax administration.
What is a Federal Tax Lien?
A Federal Tax Lien is a legal claim on a taxpayer’s property for unpaid taxes, automatically arising if the IRS sends a notice and the taxpayer does not pay.
What is a Levy?
A Levy is the legal seizure of property to satisfy tax debt. The IRS can seize property or garnish wages if taxes are unpaid after proper notice.
What are Collection Appeal Rights?
- Collection Due Process (CDP): Taxpayers can appeal IRS actions within 30 days of notice.
- Collection Appeals Program (CAP): Faster appeals but cannot challenge the tax liability.
What is Passport Revocation?
The IRS can certify taxpayers with seriously delinquent tax debt to the State Department, which may result in passport application denial or revocation of an existing passport.
