Completion Date: 09/30/2022
4th Quarter: The Taxpayer Advocate Service (TAS) completed identifying taxpayers with recently defaulted installment agreements, which have not been reinstated, where the taxpayer’s likely allowable expenses exceed their gross income. IRS will test the effectiveness of soliciting offers in compromise from a statistically valid sample of these taxpayers. All actions on this objective have been completed as of 9/30/2022.
3rd Quarter: The Taxpayer Advocate Service (TAS) identified taxpayers with recently defaulted installment agreements, which have not been reinstated, where the taxpayer’s likely allowable expenses exceed their gross income. The Small Business Self-Employed (SBSE) Operating Division agreed to test the effectiveness of soliciting offers in compromise from a statistically valid sample of these taxpayers after next filing season. This is the first time the IRS has agreed to use the algorithm TAS developed.
2nd Quarter: The Taxpayer Advocate Service (TAS) solicited input from the Low Income Taxpayer Clinics (LITCs) regarding the difficulties they encounter when using the IRS’ allowable expenses to determine a taxpayer’s ability to pay. Also, TAS Research is working with the IRS offer in compromise (OIC) unit to establish a pilot testing the effectiveness of soliciting OICs from taxpayers with defaulted installment agreements and offset tax refunds, and where the TAS algorithm indicates the taxpayer is unable to pay toward the unpaid tax delinquency. The extensive financial evaluation occurring with OIC submissions will provide additional data to measure the effectiveness of the TAS economic hardship algorithm.
1st Quarter: The Taxpayer Advocate Service (TAS) has implemented several activities to improve collection practices and communication provided by IRS, specifically for low-income taxpayers including;
Working with IRS so they no longer offset, or recoup, refunds for the calendar year in which an Offer in Compromise (OIC) is accepted and systemic offset of overpayments will continue before the OIC acceptance date. For taxpayers who had submitted an OIC, the offset bypass refund (OBR) remedy was unavailable to them and the IRS retained the refunds shown on their tax returns for the calendar year when IRS accepted the OIC. Under the new procedures, the IRS is allowing qualifying taxpayers experiencing financial hardship to seek OBRs while their OICs are pending the IRS’s consideration and these individuals will be able to retain their tax refunds if they meet the criteria in the Internal Revenue Manual (IRM).
Working with the IRS on various communications to taxpayers including revising Notice CP (Computer Paragraph) 15 and any other correspondence to taxpayers that in the IRS’s view constitutes “an opportunity to dispute such liability” for purposes of IRC § 6330(c)(2)(B). The revisions will include detailed information about taxpayers’ rights and consequences of an administrative appeal, explain the notice constitutes their only “opportunity to dispute” the liability, and explain the taxpayer will not be permitted to dispute the merits of the liability at a future Collection Due Process (CDP) hearing or before the U.S. Tax Court.
Proposing through the Annual Report to Congress (ARC) Collections Most Serious Problems (MSP) administrative recommendations including, allowing the taxpayer’s current financial situation to be considered instead of the income listed on the most recent tax return and adopting procedures that allow the IRS to consider changes in taxpayers’ circumstances when determining the applicable Installment Agreement (IA) user fee, similar to procedures in place for considering whether a taxpayer qualifies for an Offer in Compromise (OIC) fee waiver. TAS is also advocating for taxpayers to prevent undue hardship for those waiting for waiver consideration, as well as for any taxpayer where the user fee is more than their agreed upon regular payment by proposing an administrative recommendation to change IAs to incorporate user fees into the agreed-upon payments over the life of the agreement rather than requiring taxpayers to pay the user fee in the first month.
Discussing with the Small Business/Self Employed (SB/SE) division how the IRS uses allowable living expenses including discussing the importance of either implementing an algorithm to detect taxpayers at risk of their Installment Agreements (IAs) causing economic hardship or conducting more research to further perfect the TAS algorithm in identifying taxpayers where the IA would likely cause economic hardship.