Taxpayer Issues - And Resources to Help 

Assisting Clients Who Expect IRS to Keep Their Refund 

Taxpayer owes unpaid federal tax? 

They can request an Offset Bypass Refund **I have referred several people to TAS for this

 Taxpayers who need a refund to meet basic needs can get it (if they will suffer a hardshiip if they don't get it)-- reach out to TAS, complete Form 911 and fax it in with a statement--I suggest writing Offset Bypass Request boldly on form so it gets seen easier and gets processed faster
•IMPORTANT: Do not e-file or mail the return! Place it on HOLD. It is nearly impossible to reverse offset after the fact

Taxpayer Owes non-IRS federal or state debt? Then there will ne no Offset Bypass Refund – IRS can’t stop a refund offset to a state or non-IRS federal debts  such debts include child support & state tax debts

 

NOTE: If a refund was already offset for federal debt and you are not sure why:

• The taxpayers should call Treasury Offset Program (800-304-3107) or Bureau of Fiscal Services (816-414-2100) to learn the name and contact information for the creditor who received the refund. Taxpayers must contact the creditor (not IRS) to request refund or address inaccuracies.

Have a Large Debt where paying would be a hardship?

Hardship Status -Currently Non Collectible (CNC)

 If a Taxpayer has a debt they have no chance of paying  (I have had Taxpayers who have become disabled and are on a fixed income from Social Security Disability, they will never be able to pay the debt. OR... Maybe your taxpayer is going through a medical crisis and can't afford to pay the debt for the next year or so... they can try to get Currently Non Collectible (CNC) status from the IRS. You do not need an LITC to request this, but they can help with it. CNC does not forgive the debt, it just stops collection temporarily (interest still accumulates). With CNC the IRS might still put a lien on the house for up to 10 years. Taxpayer could have to reverify income every couple years or so.. debt still grows in interest, but eventually it will be written off if situation/hardship does not change. CNCs can be short term or until debt is written off (after 10 years)

How to get CNC status?  There are a few options: Taxpayer can call IRS directly and request it, or they can contact an LITC or contact TAS to assist them.  Taxpayer may be required to complete Form 433 to gather financial information like assets and debt from the Taxpayer and write a statement as to their current circumstances. **I have helped quite a few people get CNC status. 

Settlement -Offer in Compromise (OIC)

There is also Offer in Compromise (OIC) which the LITC could help the Taxpayer apply for. An OIC allows the Taxpayer to settle ytheirtax debt for less than the full amount owed. Yes, the offer amount can be paid in either one installment or over an agreed amount time. Taxpayers must use the OIC Qualifier Tool to see if they qualify first (my LITC has the Taxpayer print out the results from the screen and submit it with their request for help). There might be an application fee for an OIC (waiving of fee might be possible based on income and other circumstances.)

Taxpayers can complete an OIC application online by logging into their irs.gov account and going to Forms.  This would be much faster than mailing in a form. 

**An LITC or TAS can make recommendations as to which option (CNC or OIC) is the best-- if they won't qualify for either they can help set up a payment plan. (from previous experience-If they have no chance of paying now or in the future, a  CNC might be the way to go.)

Compliance Requirements for IRS Resolution Options

The IRS generally requires taxpayers to be in filing compliance before approving most resolution options.

This means that all required tax returns must be filed, typically for the last six years, before the IRS will consider:

  • Payment plans (Installment Agreements)
  • Currently Not Collectible (CNC) status
  • Offers in Compromise (OIC)

Even if a taxpayer cannot pay, filing is still required to move forward with resolution options. Once compliant, taxpayers may qualify for multiple relief options depending on their financial situation.

In practice, the IRS considers a taxpayer “compliant” when:

  • All required returns for the past 6 years have been filed
  • The taxpayer is current with estimated tax payments (if self-employed)
  • The taxpayer is current with withholding (if an employee)

IRS Love Letters (Notices)

If a Taxpayer receives a love letter (notice or letter), they should review it carefully. Some notices are informational and do not reqire any action (unless they disagree), while others do require action being taken.

It is important to read the letter carefully and respond accordingly. Here is a link to the IRS' Understanding your IRS Noitice or Letter page.

Some letters the taxpayer can address on their own or with the help of the tax preparer, Others may need to seek help from an LITC or TAS office.

LITC - Low Income Tax Clinics

There are more than 130 Low Income Taxpayer Clinics (LITCs) the help with collection alternatives and more.  LITCs represent low income individuals in disputes with the Internal Revenue Service (IRS), including audits, appeals, collection matters, and federal tax litigation. LITCs can also help taxpayers respond to IRS notices and correct account problems.  Low income taxpayers who need assistance in resolving a tax dispute with the IRS and cannot afford representation, or who speak English as a second language and need help understanding your taxpayer rights and responsibilities, may qualify for help from an LITC that provides free or low cost assistance.   The following link has a list of all the clinics and phone numbers for each.  https://www.irs..gov/pub/irs-pdf/p4134.pdf

Income Limitations:

• Generally, household income under 250% of FPL (Federal Poverty Level) . However, they are allowed to assist a limited amount of Taxpayers who do have a slightly higher income.

What Issues Can You Refer to LITCs?
Tax Controversy:

• “[…] any dispute between an individual and the IRS concerning the
determination, collection, or refund of any tax, penalties, or interest. The
definition is very broad and encompasses all types of [non-criminal]
disputes arising under the IRC.” IRS Publication 3319

LITC can also go to tax court for/with the Taxpayer.

 

LITCs and TAS work closely together. LITCs can  transfer cases to TAS when needed.

TAS -Taxpayer Advocate Services 

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that serves as your voice, protecting your rights and providing free, confidential assistance to resolve tax issues you cannot fix through normal IRS channels.  **TAS can do everything an LITC can do and more and there are no income limits.

Here is a quick summary of what the TAS does:

  • Protects Rights: Ensures all taxpayers are treated fairly and understand their rights under the Taxpayer Bill of Rights.
  • Assists with Financial Hardships: Helps individuals and businesses experiencing severe economic harm or significant costs (including professional fees) due to IRS actions. 
  • Resolves Un-fixed Issues: Steps in when you have been unable to resolve an issue with the IRS, or if you have experienced delays of more than 30 days. 

If you qualify for help, a dedicated advocate will work with you to find a resolution. You can request assistance by submitting Form 911. For more detailed guidance, you can also connect with the Taxpayer Advocate Service directly. 

To Learn What You can do with and IRS.GOV account, click here.