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Survey of Proseeedyure > Collections > Flashcards

Collections Flashcards

1
Q

What are the methods that IRS can use to collect tax?

A
  1. Garnishment (get from employer)
  2. Lien
  3. Levy (IRS takes bank account, house = taking assets)
  4. Offset (if IRS owes you money, they can be offset)
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2
Q

What things can the IRS take?

A

The IRS is a “super creditor” and can take almost anything to satisfy a tax liability. Only exceptions are clothing, books, tools in trade, etc.

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3
Q

Must the tax be assessed before the IRS can collect it?

A

Remember that the tax must be assessed before the IRS can collect it.

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4
Q

What is the Notice & Demand for Payment?

A
  • Before the IRS can collect tax, it must send the taxpayer a “Notice and Demand” for payment.

IRC 6303:
(a) General rule Where it is not otherwise provided by this title, the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person’s last known address.

(b) Assessment prior to last date for payment Except where the Secretary believes collection would be jeopardized by delay, if any tax is assessed prior to the last date prescribed for payment of such tax, payment of such tax shall not be demanded under subsection (a) until after such date.

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5
Q

Failure to pay within 10 days give the IRS the right to collect by what?

A

Failure to pay within 10 days give the IRS the right to collect by levy.

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6
Q

Failure to pay within 21 days (10 days in cases involving more than $100,000) triggers what?

A

Failure to pay within 21 days (10 days in cases involving more than $100,000) triggers the failure to pay penalty of IRC 6651(a)(3).

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7
Q

What happens if the IRS fails to send the Notice & Demand?

A

Failure to send the Notice & Demand does not invalidate the assessment, but the IRS must send it out first before a lien or levy.

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8
Q

What is a levy?

A

A levy is a legal seizure of property to satisfy a tax debt.

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9
Q

What is a lien?

When does a federal tax lien come into being?

A

A lien is a legal claim against property to secure payment of tax debt.

A federal tax lien comes into being when the IRS assesses a tax against a taxpayer and sends a notice and demand for payment.

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10
Q

What is a Notice of Federal Tax Lien?

A

A public document; filed in county where taxpayer resides, has property.

To alert creditors that the IRS has a legal right to the taxpayer’s property.

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11
Q

What are federal tax liens?

A
  • Failure to pay after Notice and Demand immediately results in a lien.
  • Lien gives the IRS the right to levy against and seize property and it establishes priority.
  • The federal tax lien attaches to all of the taxpayer’s property, real and personal and intangible, and rights to property, that presently exists or is after-acquired.
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12
Q

What are the lien notice requirement rule under IRC 6320?

A

The Secretary must notify in writing the person described in section 6321 of the filing of a notice of lien under section 6323.

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13
Q

What are the time and method rules for notice of federal tax liens?

A

The lien must:

  1. given in person;
  2. left at the dwelling or usual place of business of such person; or
  3. sent by certified or registered mail to such person’s last known address, not more than 5 business days after the day of the filing of the notice of lien.
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14
Q

What is the right to fair hearing under IRC § 6320(b)?

A

(1) In General: If the person requests a hearing in writing under subsection (a)(3)(B) and states the grounds for the requested hearing, such hearing shall be held by the Internal Revenue Service Independent Office of Appeals.
(2) One Hearing per Period: A person shall be entitled to only one hearing under this section with respect to the taxable period to which the unpaid tax specified in subsection (a)(3)(A) relates.
(3) Impartial Officer: The hearing under this subsection shall be conducted by an officer or employee who has had no prior involvement with respect to the unpaid tax specified in subsection (a)(3)(A) before the first hearing under this section or section 6330. A taxpayer may waive the requirement of this paragraph.
(4) Coordination with Section 6330: To the extent practicable, a hearing under this section shall be held in conjunction with a hearing under section 6330

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15
Q
  1. When, how, and who can get a priority for liens against certain persons?
  2. What is the requirement for a lien to get priority?
  3. Who are some examples of who can get priority?
A
  1. Prior to assessment; from the time the tax is assessed until the lien is filed; through FILING; and ANYONE can get priority before the tax is assessed
  2. Only if their lien is perfected before the tax lien is filed
    • purchasers;
      - holders of security interests;
      - mechanics lienors; and
      judgement lien creditors (but only if their lien is perfected)
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16
Q

Who can’t get priority?

A
  • purchaser of a security who did not have actual notice;
  • purchaser of a motor vehicle who did not have actual notice;
  • purchaser of personal property at retail in the ordinary course of the seller’s trade or business unless the purchaser knows the sale was intended to defraud the IRS;
  • purchaser of personal
  • property in a casual sale for an amount less than $1,000 as long as the purchaser did not have actual notice;
  • Personal property subject to a possessory lien;
  • Real property tax and special assessment liens;
  • Residential property subject to mechanics liens for certain repairs and improvements of not more than $5,000;
  • Attorneys’ liens
  • Certain insurance contracts
  • Certain deposit insured loans;
  • Certain commercial financing agreements
  • certain interests described in IRC 6323(b) and (c)
17
Q

What are 3 ways to get rid of a lien?

A
  • A lien must be released within 30 days after the lien has been satisfied.
  • DISCHARGE of certain property from the coverage of the lien
  • SUBORDINATION of the lien (does not remove the lien, but allows other creditors to move ahead of the IRS, which may make it easier to get a loan or mortgage)
18
Q

What property can the IRS put a levy on?

A

(a) Authority of Secretary: If anypersonliable to pay anytaxneglects or refuses to pay the same within 10 days after noticeanddemand, it shall be lawful for theSecretaryto collect suchtax(andsuch further sum as shall be sufficient to cover the expenses of thelevy)bylevyupon allpropertyand rights toproperty(except suchpropertyas is exempt under section 6334) belonging to suchpersonor on which there is a lien provided in this chapter for thepaymentof suchtax. . . .
(b) Seizure and Sale of Property: The term “levy” as used in this title includes the power of distraintandseizure by any means. Except as otherwise provided in subsection (e), alevyshall extend only topropertypossessedandobligations existing at the time thereof. In any case in which theSecretarymaylevyuponpropertyor rights toproperty,he may seizeandsell suchpropertyor rights toproperty(whether real or personal, tangible orintangible).

19
Q

Does the IRS has the right to collect an assessment by levy?

Do you need to bring a judicial proceeding?
How many days before must the IRS give 30 days notice of intent to levy?

Once they give notice, can they seize the property?

A
  • The IRS has the right to collect an assessment by levy
  • No need to bring a judicial proceeding
  • IRS must give 30 days notice of intent to levy
  • Once they give notice, they can just seize the property
20
Q
  • What does a taxpayer need to receive and do to get a Collection Due Process Hearing?
  • The request must be made within how many days of the Notice of Intent to Levy? Can it be extended?
  • Who will the hearing be with? And what will they issue after the hearing?
  • Taxpayer has how many days to petitioner for review in the Tax Court?
  • Does a CDP hearing request stay collection activity? Except for?
  • Does a CDP hearing request toll the statute of limitations for collection?
A
  • A taxpayer who receives a Notice of Intent to Levy may make a written request for a Collection Due Process Hearing (Form 12153)
    Request
  • The must be made within 30 days of the Notice of Intent to Levy – deadline cannot be extended.
  • Hearing will be with the Independent Office of Appeals who will issue a written Notice of Determination
  • Taxpayer has 30 days to petitioner for review in the Tax Court
  • A CDP hearing request stays collection activity, except for tax lien
  • A CDP hearing request also tolls the statute of limitations for collection
21
Q

What kind of issues can be brought up in a CDP hearing?

A
  • Spousal defenses;
  • Challenges to appropriateness of collection actions; and
  • Offers of collection alternatives (i.e., installment agreement or offer in compromise)
  • The underlying tax liability? (generally not, but see next slide);
22
Q

Can you challenge underlying liability/assessment in a collection due process hearing?

What is the exception?

Can you get a CDP if you had an appeal conference?

Can you discuss assessable penalties in CDP?

What is an example?

A
  • Generally not considered in CDP because taxpayer had other avenues for review (Appeals, Tax Court)
  • EXCEPTION: the taxpayer may raise challenges to the existence or amount of the underlying tax “if the person did not receive any statutory notice of deficiency (SNOD) for such tax liability or did no otherwise have an opportunity to dispute such tax liability.”
  • IRS and courts interprets: “Opportunity to dispute” to mean that the taxpayer did not get an opportunity to seek review of underlying assessment with IRS APPEALS (basically if you didn’t have an appeals conference)

Assessable penalties can be challenged if NO PRE-COLLECTION APPEAL. This is an instance where you can get tax court to review an assessable penalty

Example:

  • Pre-collection appeal first
  • If they issue notice of intent to levy, before appeal heard, you can file collection due process appeal. So you have 2 appeals at same time. If appeal rejected, then you get appeal to IRS tax court.
23
Q

How many days until you can get to make a petition to Tax Court for a CDP?

What can you do if you missed the deadline?

What are the differences between a CDP and equivalency hearing?

A

Thepersonmay, within 30 days of aDETERMINATIONfor review of suchdetermination (andtheTax Courtshall have jurisdiction with respect to such matter).

If you miss the 30-day deadline but files CDP/Equivalency Hearing Request within 1 year – IRS will offer “Equivalency Hearing”

Main differences:

  • No automatic stay of collection
  • No judicial review
24
Q

What are installment agreements? What are its rules?

What are offers in compromise? What are its rules?

A

Installment Agreements

  • For larger liabilities, must submit a financial statement known as a Collection Information Statement (Form 433-A, Form 433-B)
  • IRS will allow certain expenses, require liquidation of certain assets and require payment within a certain time frame.
  • Generally, the IRS will not allow an installment agreement if the taxpayer can pay his liability by liquidating assets.
  • May require the taxpayer to extend the statute of limitations on collection
Offer in Compromise
Based on:
- Inability to pay
- Doubt as to liability
- Certain other equitable grounds
- To avoid economic hardship, good policy, etc
25
Q

What are taxpayer assistance orders?

What do they do?

A

If the taxpayer is about to suffer significant hardship and have a legitimate claim, taxpayers can also request the assistance of the Taxpayer Advocate on Form 911.

TAS may order revenue officer to cease collection efforts, but usually try to mediate resolution.

26
Q

Can sister courts aid the IRS in collection? Why?

What are some examples?

A

Yes, can give to sister courts to aid in collection.

US can bring any type of civil action available – IRC 7402 - 7404

Examples:

  • Action to Enforce lien or to subject property to payment of tax (foreclosure)
  • Action to reduce the assessment to judgment
  • Action to enter and seize property
  • Action to appoint receiver
27
Q

What are foreclosures?

What are the differences between judicial and administrative foreclosure?

What determines the type of foreclosure?

A

A foreclosure is the process by which an owner’s right to a property is terminated, the foreclosing party’s interest is liquidated, and junior creditor interests on the property are extinguished

Judicial foreclosures are processed either in federal or state courts and are the primary responsibility of the DOJ

Non-judicial foreclosures do not require court involvement and are handled by IRS. IRC 7425(b)

State law determines the type of foreclosure a creditor must use to enforce its interest– judicial or non-judicial.

28
Q

What is the statute of limitation for collections?

Can it be extended?

What law governs over collections statute of limitations case judgments?

A

10 years after assessment

Can be extended if the IRS sues to reduce the lien to judgement in federal court (IRC 3201)

Then the state statute for judgments applies (In NY, 20 years with possibility to extent another 20 years)

29
Q

The 10 year SOL can be suspended or stayed under what circumstances?

For individuals what are the rules?

A
  • Waiver of the statute by agreement
  • For individual, an extension can be entered into only in connection with an installment agreement or release of levy under 6343. If individual agrees, then can assess within 90 days after such agreement expires
  • Absence from the country of 6 consecutive months or more
  • Bankruptcy
  • Application for a taxpayer assistance order
  • CDP
  • Request for an OIC

Survey of Proseeedyure (16 decks)

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