Making Your Tax Case Before IRS Appeals

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Published by the Montgomery County Bar
by: Chaya Kundra

There can be no doubt that the IRS is revitalizing its collection efforts. From our prior newsletter, the Robinette opinion was decided by the 8th Circuit only a few weeks ago. It touched on a theme becoming more prevalent among the tax community: making the administrative record while looking to the statute of limitations.

When a client receives a notice of intent to levy or a notice of federal tax lien filing with rights to protest within 30 days-counsel should give serious consideration to doing so-and not doing so. Relative to the current climate of the IRS and its intense focus on collection, filing a request for a collection due process (CDP) hearing should not be ignored.

The Robinette courts considered whether the failure to timely file a refund return constituted a material breach of a previously accepted offer in compromise. Looking to the administrative record and contract law, the USTC found that it did not. The 8th Circuit disagreed. In Robinette, both the USTC and the Court of Appeals looked to what was established in the administrative record when reviewing a matter for abuse of discretion.

Administrative Record: Two pervasive concerns are now at large: (1) consideration of whether the client has been given the opportunity to present alternatives to forced collection action before the federal government takes lien and/or levy action and (2) being ready to go to court. The administrative record substantially consists of what you and the appeals officer discuss at your client's CDP. At the hearing you will need to take the necessary actions to preserve the administrative record. Even if the Appeals Officer denies your alternative, it will often behoove you to present your best evidence. This is because the court ultimately deciding your matter may not be the USTC. If that is the case, the standard of review may be limited to the CDP.

Statute of Limitations: When filing a timely CDP, the IRS' statute of limitations on collection action, normally ten (10) years, is suspended. And the IRS is not to take collection action while the CDP is pending. However, while collection action may be on hold for the period(s) in issue, but actions related to periods not at issue are still fair game. Additionally, since many taxpayers who come to you may have a problem that encompasses several years, you will want to determine when the statutes expire so as to not inadvertently extend them. When not wanting to extend a statute, you could still file for a CDP, but you would no longer have a right to proceed to Tax Court. Keep in mind however, that when client fails to file a return, or the IRS files for them, the statute does not begin to run. And, that unless your client is in current compliance at the time the CDP is filed, your hearing will be a short one.

Finally, when making a request for a CDP, do not be surprised when the assigned Revenue Officer calls and wants to hear your alternatives. They are supposed to attempt to resolve the matter before sending it up to the IRS Office of Appeals.