The IRS Collection Appeals Program recommended Dosage: Use Sparingly and Only When Absolutely Necessary
By Deborah J. Muhlbauer Bluestein & Muhlbauer, P.C.
From 1992 to 1994, the Internal Revenue Service tested various appeal procedures for collection actions. On April 1, 1996, the Service implemented, nationwide, a Collections Appeals Program, CAP for short, which provides for appeals of liens, levies, and seizures. Appeal procedures already in place for alternative methods of collection, such as the imposition of the trust fund recovery penalty or appeals of rejections of offers in compromise, are not included in this program, and remain subject to their own previously established IRS appeals procedures.
My personal analysis of this program is that it is unnecessary for approximately 90% of the cases you will see as a practitioner. It will be ineffective in most cases because of the standard of review to be employed by Appeals. Lastly, it will probably adversely affect other matters pending at Appeals in terms of resolution time because of the short turn-around time required for collection appeals.
You are probably saying to yourself, tell me what you really think about this program. Don't get me wrong. As a taxpayer advocate, I am all in favor of programs that give the taxpayer some input in the Service's collection process, and for fair and reasonable resolutions to collection matters. However, this is not such a program, nor does it necessarily provide such results.
In a nut shell, this program allows for taxpayers to appeal any of the three types of collection actions specifically included in the program, either prior to or after the collection action has taken place. Normally, collection action will be suspended during the appeal process, unless withholding collection action would be detrimental to the collection of the tax liability in issue. However, this will normally only result in a five business day delay of collection because Appeals must make every effort to close all collection appeals and is expected to close these cases within five business days of the date of the taxpayer's filing of a Form 9423, Collection Appeal Request. Hence, practitioners may experience delays resolving other matters at Appeals, as they will necessarily be subordinated to collection appeals due to their extremely stringent time frames.
Collection appeals are appropriate, and should only occur, after the taxpayer has first discussed the problem with the collection manager of the office in which the individual revenue officer is employed. This is the one sound directive contained in the program. However, a program is not necessary to direct a taxpayer to do what he/she could, and should, do in the first place. Moreover, remember that revenue officers, like judges and priests, are human beings with feelings and egos that are not left at the front door everyday when they enter a federal building. Therefore, while the program requires a taxpayer to discuss a collection matter first with a collection manager, as a practical matter, I advise you to first discuss the matter with the revenue officer assigned to the case.
If resolution can not be had, request a meeting with the collection manager and present your arguments to him/her. The manual does not discuss the standard of review to be employed by collection managers examining these matters. However, I suggest that an effective presentation will include all arguments in favor of a less restrictive and harsh form of collection action, as well as an alternative plan for resolving the matter. If this is done, it should be unnecessary to proceed any further as the collection manager will most likely agree to the alternative plan as long as it is reasonable, and fully accounts for the Service's collection potential. If the Service's Automated Collection Service (ACS) is handling your client's tax liability, request to speak with an ACS manager. The same suggestions apply to conversations with ACS managers as with collection managers.
If again, resolution can not be had, the taxpayer must make a written request for an appeal on a Form 9423, if his/her case is in the field. If the case is at ACS, an oral request for an appeal is sufficient. This request must be received by the revenue officer within two business days after the meeting with the collection manager, or received by ACS within two business days after the telephone conference with the ACS manager. Failure to timely make this request will result in the resumption of collection action.
Collection or ACS must send the case to Appeals within two days of the latter of the manager's rejection of the taxpayer's proposal, or the manager's receipt of the Form 9423. As Appeals is required to close these matters within five business days, the manual suggests that Appeals hold a conference with the taxpayer or representative within two days of receipt of the case. Given the short time limits, conferences will most likely be conducted by telephone.
Now, what can Appeals do? The manual provides a very sketchy and unclear discussion of the standard of review to be employed by Appeals, so it is presently unclear what will be the outcome of most of these cases. Internal Revenue Manual ß8719.7 states that appeals should review the case for appropriateness based on law, regulations, policy, and procedures, considering all the facts and circumstances. Appeals is further directed that Collection's judgment should not be reversed just because of a difference of opinion concerning the choice of one of several possible correct actions taken on the case. For reversal Collection's actions must be inappropriate given all of the facts and circumstances. IRM ß8719.7.
Interestingly, however, IRM ß8719.7 also states that Appeals may decide that some alternative collection method or slight alteration might be more appropriate under the circumstances. Therefore, appeals officers are apparently expected to exercise discretion, as the manual specifically recognizes that most of these cases will involve judgement calls.
So will Appeals review for appropriateness, inappropriateness, or more appropriateness? Most likely, a little of all of the above. Thus, practitioners should be prepared to explain to Appeals the reasons why the collection action was inappropriate, why some other action is more appropriate, and provide Appeals with a plan to resolve the matter. The appeals officer should orally inform both Collection and the taxpayer of his/her decision within the five day time frame.
The appeals officer must then follow up with a written closing letter no later than three business days after this decision is orally rendered. The appeals officer must also write an appeals memorandum specifying complete instructions on what decisions were made and any action that will need to be completed by Collection, i.e. an installment payment agreement. The memorandum is unnecessary if the closing letter contains the specific information required in the appeals memorandum. I would anticipate that most appeals officers will avoid the need to prepare a memorandum by preparing detailed closing letters.
Another suggestion for practitioners; write the closing letter and/or the appeals memorandum for the appeals officer. This can be done with either an attachment to the Form 9423, or in a separate letter to the appeals officer assigned to the case detailing the reasons why the collection action was inappropriate, a discussion of what collection action is more appropriate, and an alternative plan to address the taxpayer's liability.
Lastly, make sure that your client understands that when an agreement is proposed to Appeals, he/she must be ready, willing, and able to timely perform all actions required under the agreement. Default renders the agreement null and void, and Collections is released from its terms. Additionally, any material misrepresentation of fact or failure to fully disclose information by the taxpayer will render the agreement null and void. Before a collection officer declares an agreement void, he/she must first confer with Appeals.
In conclusion, remember that the goal of every revenue officer is to close his/her file. A revenue officer usually only resorts to seizure or levy when he/she has been ignored by the taxpayer. A levy or seizure usually serves to get the taxpayer's attention. Once obtained, a revenue officer will very often voluntarily release a levy, or reverse seizure action, if the taxpayer agrees to address his/her tax liability. As for liens, Appeals can direct that a lien not be filed, direct that a lien be discharged, or direct that the Service subordinate or provide a certificate of non-attachment. However, all of the above can be obtained by the taxpayer by simply making a request to the revenue officer or the District Director's office. CAP does nothing to expand the very limited circumstances in which a lien can be released. This remains strictly governed by statute, and only available in very specific circumstances. So there you have it; the IRS Collection Appeals Program in a nutshell. It is, in my opinion, a program without teeth, and more distressingly, without purpose. My suggestion to practitioners is that you use this program as you would salt, butter, or some other unhealthy and fattening food additive...sparingly, and only when absolutely necessary.
Bluestein & Muhlbauer, P.C.
333 International Drive
Williamsville, NY 14221
716.633.3200
