Tax Collection Techniques

Current IRS collection issues, including online installment agreements, offers in compromise and collection due process, are discussed. Online installment agreements are available for total balance due amounts that are less than $25,000 for all years including accrued interest and penalties that will be paid in full in 60 months or less. New down payment requirements for are effective for offers in compromise submitted on or after July 16, 2006. The Tax Increase Prevention and Reconciliation Act of 2005(2) requires that a taxpayer who files a lump-sum offer in compromise must submit, at the time of filing of the offer, a payment of 20% of the amount he or she offers. The American Jobs Creation Act provided that the IRS may hire private collectors to collect unpaid taxes. Three preliminary contracts were issued by the IRS in March 2006. Congress provided certain protections in the bill by providing a new Section 7433A allowing suits against private collectors who violate the law while attempting to collect taxes. It seems that the choice should be: do not deal with the PCAs; deal with the Internal Revenue Service. The dangers of privacy violations are less, and your client will receive a more generous installment agreement.