Recently I was engaged in a heated discussion with an IRS Appeals Settlement Officer. The subject was an Offer in Compromise (Tax Settlement) I had filed on a client’s behalf. The IRS did not want to approve our Offer because they noticed that my client had been late with a few tax payments during the time the Offer was being considered. Naturally, I wanted to see the Offer through to acceptance. Between preparing the Offer itself, and “litigating” for its acceptance at multiple levels of the IRS bureaucracy, my client and I had spent a good 14 months on this project.
Ultimately, the Settlement Officer cared little for any of my arguments. I then did something that, judging by her reaction, people don’t do to her very often: I asked for her supervisor, known as the Appeals Team Manager. After speaking with the Appeals Team Manager (who had a similar opinion of my argument), I asked for another supervisor: the Area Director. The reaction of the Appeals Team Manager when I asked for her Area Director was that of an even more stammered reply than her subordinate. Clearly, these people were not used to being questioned in such a way.
The truth is that resolving your tax problem with the IRS can be as much about dogged determination as it is about smarts and craft. Any salesperson would tell you that they would starve if they halted their pitch at the first “no.” Similarly, you’re not likely to get the best result for yourself if you let the first negative response from the IRS be your last response from the IRS. There is a veritable family tree of IRS employees who exist to monitor employees further down the tree. Sometimes, to get results, you have to climb. This article will discuss the method of barking up the IRS chain of command in order to get results.
Most taxpayers and, I would venture to say, many tax professionals think that the words on any IRS notice or the response from any IRS employee are gospel. Often, you can get a very different (and more favorable) response if your gripe has merit, and you get the right person to hear it. The Automated Collections System, for example, is choc-full of “Collections Representatives” who are the first line of defense from taxpayers who seek to resolve problems, or ask questions. All of these people are the first human you speak to after calling one of the IRS’s toll-free collections line. All of these people have a supervisor. However, if the need arises, it can often be difficult to speak to the supervisor because they’re responsible for a number of employees, and are often already dealing with an issue at the time of your request.
In that case, Collections Representative will then promise a “24-hour call back” which, as it implies, means the manager will call you back within 24 hours. I’ve found that a flip of the coin will tell you the likelihood of this call happening. (You may be able to get some relief from this uncertainty by using the Taxpayer Advocate, which I will discuss further, below.) Sometimes, provided you have spare time, you can quickly hang up and call back, and ask another operator for assistance. For whatever reason, a different operator is often more willing to grant leniency, agree to a payment plan, or solve your problem easier or quicker than the prior person. Obviously, these operators frequently take notes, so it would be a good idea not to overuse this method (or the method of barking up the chain of command in general).
Many taxpayers (mostly businesses with employment tax debt or individuals who owe substantial amounts to the IRS) are assigned to field Revenue Officers (ROs). You develop a much closer relationship to this person than you ever would with a Collections Representative at the other end of the toll-free line. These people tend to be more experienced and better trained than the Collections Representative, but they are still more or less at the front line of the Collections apparatus. You may come to know this person very well. And though they may seem like the alpha and omega of your fate with the IRS, they are not.
Above the RO you will find a Group Manager (GM), responsible for overseeing a number of ROs. Among their various duties include approving any Installment Agreements, and supervising the actions of their Revenue Officers. Particularly in the case where a Revenue Officer is being abusive, rude, or is violating a taxpayer’s rights, the GM can be your best friend. Generally, this person works in the same office as the Revenue Officer, and a request to speak to this person must be honored. Sometimes, they rotate among offices, or work in a different city, so you may need to wait a day or two. In the meantime, it’s always good to have a firm understanding with the Revenue Officer that the RO will take no adverse action (levies, seizure, etc.) while you’re awaiting contact from the GM.
Does the bureaucratic tree stop there? Nope. Above the Group Manager you can find the Territory Manager, a person responsible for a relatively hefty swath of geography filled with multiple GMs, and dozens of ROs handling various Collections cases. While you can seek an audience with this person in the event that you and the GM cannot come to an agreement, you should pick your battles carefully, and prepare your argument. It will take quite a story to sway the Territory Manager into overruling the GM and the RO. Moreover, the TM will thoroughly review the case history before speaking with you. This case history is written entirely from the perspective of the Revenue Officer, so you have quite a burden of skepticism to overcome when you’re claiming misconduct, or that a Revenue Officer is in the wrong. It’s always handy to have independent proof that your side of the story should be given more credit.
Even before fighting your way through three levels of command to get a result, however, you can try to get assistance from the National Taxpayer Advocate (NTA). This is an independent organization that exists to assist taxpayers who’ve been unsuccessful in getting results while working directly with the IRS. The NTA, however, shouldn’t be mistaken for another rung in the bureaucratic ladder. Their power to overrule any IRS collections employee is virtually nonexistent. My take is that the NTA exists to facilitate better communication. If the NTA agrees with your side of the story, the influence that the NTA exerts on the collections employee could be enough to change the outcome of your case.
One of the more obvious alternatives to working with the plain old Collections folks is requesting consideration from the Office of Appeals. This opportunity can be available to you when a Revenue Officer or the Automated Collections System issues a notice threatening to “levy” your bank accounts, wages, receivables, or other assets. While an Appeal is always nice to have at your disposal, you still have to convince Appeals to take a different course than the Collections level, which was bound and determined to collect from you forcibly.
As I mentioned above in my anecdote about the struggling client with the pending Offer, the Appeals section has a bureaucracy all its own. The Settlement Officer is generally the opening act. The Appeals Team Manager – much like the GM – signs off on all Offers, Installment Agreements, or other resolutions that the Settlement Officer brings to her for approval. Finally, the Area Director oversees numerous Appeals offices, including many Appeals Team Mangers and still more Settlement Officers. As with soliciting help from a Territory Manager, you should have all your ducks in a row prior to speaking with the Area Director. In fact, often the Area Director will assign a subordinate – called the Technical Adviser – who will screen your case to see if it is a problem that can be solved easily. Such is the degree of workload facing an Area Director. Proceed with caution.
Back to my Offer in Compromise, and the epic battle with Appeals: The Area Director, after speaking with me and both subordinates, saw merit to my argument, and overruled both the Appeals Team Manager and the Settlement Officer. As a result, I saved my client over $100,000 and 14 months of additional hard work. This wasn’t necessarily a case of fancy legal loopholes. It was just about not giving up. If you avoid giving up when you think you may be right, it could pay off.