The Beginners Guide to Collection Representation
20/20 Tax Resolution’s Vice President, David Miles, EA, was recently published in The National Association of Enrolled Agents (NAEA) July-August 2015 bi-monthly publication, EA Journal. This prestigious publication allows members of the NAEA to stay up-to-date on any industry trends, tax updates and association news.
Published on: Mar 3, 2016
Transcripts - The Beginners Guide to Collection Representation
Vol.33 No.3 May • June 2015
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ffective collection representation comes from a
combination of client management, an under-
standing of IRS rules, and industry experience.
Rather than focusing on the nuances of the
Internal Revenue Manual (IRM), we will focus on certain
aspects of client management, together with practical input
from field experience that will prove helpful in building a
foundation for collection representation work.
To comprehend the current state of affairs within the
IRS, one must look no further than the last five years
of budget cuts. In response to the 2015 budget, IRS
Commissioner John Koskinen stated in a January 2015
email to IRS employees, “… realistically we have no choice
but to do less with less.” Congress responded in April to
the IRS rhetoric with a House Ways and Means Committee
report that pushes back on the notion that the IRS’ poor
performance is the result of congressional cuts.
A practitioner must understand that issues seemingly
outside the context of day-to-day collection work, like the
budget wrangling in Washington, DC, can trickle down
to every level of the IRS across the country. Consequently,
being a good practitioner is no longer based solely on the
breadth of one’s knowledge of the IRM. Just as important
is awareness of IRS trends in practice, insight into the
By David F. Miles, EA
THEBEGINNER’SGUIDETHEBEGINNER’SGUIDETO COLLECTION REPRESENTATIONTO COLLECTION REPRESENTATION
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practical application of IRS rules, and how each
can affect taxpayer expectations.
Introduction to Collection
The essence of collections work is the IRS’
attempt to collect on a balance-due account or
gain cooperation with a nonfiler account. The
collection process begins when a taxpayer files
a return and does not pay the balance due in
full. An unpaid balance may be clear on the
face of the return, but a case may also arise
from an audit, simple math errors, mistaken
refunds, or misapplied and returned pay-
ments. The pursuit of the unpaid balance will
continue until the debt is paid in full, the IRS
loses the right to collect through the expira-
tion of the collection statute, or the taxpayer
proposes and establishes an acceptable alter-
Two important initiatives within the last
seventeen years introduced the law and policy
that serve, in large part, as the basis of modern
IRS collection procedure. The first is contained
in the Restructuring and Reform Act of 1998
(RRA 98). RRA 98 created and defined many
of today’s collection policies by seeking to
i e stomer service and expand taxpayer
r g M e specifically, collection policies,
ifying the offer in compromise,
g g atutory rights to certain installment
ag e , and granting taxpayers appeal
r g e enforcement action, all have their
roots n RRA 98.
sh Start Initiative, rolled out by
m issioner Doug Shulman in 2012,
i m recent change. It is not consid-
e qu the milestone of RRA 98, but it
h d significant impact nonetheless.
a ges offered by the program are
m o monly seen in the offer in compro-
m r (where taxpayers were given the
o u y to recalculate future income),
l d installment agreements (where
g ibility now allows agreements on
h g b ances with less paperwork), and in
t ng f notices of lien (where lien filing
thresholds were increased for the first time
i y y ars).
What Is Collections Thinking?
The first thing to be aware of is that dealing with
IRS Collections is unlike other interactions with
the IRS. Many taxpayers—and even tax profes-
sionals—approach collections with the same
mindset that goes into making business deci-
sions or preparing returns. However, IRS collec-
tions is not guided by the same principles that
underlie such business activities. As opposed to
IRS Exam, Collections is not concerned with the
reasoning behind filing a return a certain way,
the treatment of income, or even the merits of
relevant business/tax issues. And, unlike a busi-
ness, the IRS does not always make decisions
based on what strategy will collect the most
money. This is mostly due to IRS reform, most
notably those reforms embodied in RRA 98,
intended to create a more uniform and impartial
system for taxpayers. Collections’ approach is
achieved by balancing the goal of collecting
unpaid tax revenue, following IRM guidelines,
and consideration of case-specific issues.
The term “compliance” is arguably the
most important term in collection work. In
the context of IRS collections, compliance
means paying current taxes (i.e., the current
employment quarter or the current income tax
year) and having filed all returns through the
present date, including valid extensions to file.
Compliance is required both to qualify for a
resolution and to maintain a resolution plan.
It is also something that, if not accomplished,
will most certainly lead to enforcement action.
Therefore, it should always be a taxpayer’s and
a representative’s first priority.
Rule of thumb: IRS Collections’ focus is
on protecting the government’s interest, not
Making contact with the IRS is critical at
any phase of a collection case. The question
becomes who is the best person to contact
at the IRS? The simplest answer is that it
depends on where the case stands in the col-
lection process. It is important to speak to the
representative in control of a taxpayer’s case,
and early on that may be IRS customer service.
But, if the liability remains unresolved, the
case is likely to move up the collection chain of
command to the automated collection system
and eventually to a revenue officer.
There are also other very effective methods
of gathering information about a client’s
case that do not involve directly contact-
ing the person in control of the case, such as
Practitioner Priority Service and E-Services.
Here, one can get the background of the
liability, determine if compliance is being met,
obtain transcripts, and understand where the
case is assigned (if is not already clear).
Communicating with the IRS by phone and
by mail should be expected in each case. Phone
calls are very effective in achieving immediate
relief—such as a stay of enforcement—whereas
letters may be more appropriate to propose
resolutions, counter an IRS proposed change,
or to request penalty waivers.
Rule of thumb: Never end a call with IRS
without a deadline for next contact.
The collections process can be intimidating and
time-consuming. However, it actually begins
rather mildly. IRS Collections starts with mail,
and lots of it. Each individual tax period of
liability makes its way through the IRS’ sys-
temic mail campaign. The IRS’ use of a single
case summary letter is almost non-existent. Yet,
however overly burdensome the letters may
seem, they can actually be quite helpful to a tax
professional by identifying where in the collec-
tion process the specific case stands.
For example, a taxpayer who is just receiv-
ing IRS CP 14 is being notified of the balance
due. This is generally the first letter that is sent
out in the collection process. Assuming no
other periods of liability are owed, one can
safely assume that there is no immediate threat
However, receipt of IRS Letter 1058 within
the last thirty days presents a situation that
is much more urgent. An immediate deci-
sion needs to be made on the need for filing a
Collection Due Process hearing request, which
is an appeal right offered through the issuance
of today’s collection policies by seeking toof today’s collection policies by seeking to
improve customer service and expand taxpayerimprove customer service and expand taxpayer
righ More specifically, collection policies,rights. More specifically, collection policies,
such as codifying the offer in compromise,such as codifying the offer in compromise,
granting statutory rights to certain installmentgranting statutory rights to certain installment
agreements, and granting taxpayers appealagreements, and granting taxpayers appeal
rights before enforcement action, all have theirrights before enforcement action, all have their
roots in RRA 98.roots in RRA 98.
The Fresh Start Initiative, rolled out byThe Fresh Start Initiative, rolled out by
IRS Commissioner Doug Shulman in 2012,IRS Commissioner Doug Shulman in 2012,
is the more recent change. It is not consid-is the more recent change. It is not consid-
ered quite the milestone of RRA 98, but itered quite the milestone of RRA 98, but it
has made a significant impact nonetheless.has made a significant impact nonetheless.
The changes offered by the program areThe changes offered by the program are
most commonly seen in the offer in compro-most commonly seen in the offer in compro-
mise arena (where taxpayers were given themise arena (where taxpayers were given the
opportunity to recalculate future income),opportunity to recalculate future income),
streamlined installment agreements (wherestreamlined installment agreements (where
greater flexibility now allows agreements ongreater flexibility now allows agreements on
higher balances with less paperwork), and inhigher balances with less paperwork), and in
the filing of notices of lien (where lien filingthe filing of notices of lien (where lien filing
thresholds were increased for the first timethresholds were increased for the first time
in thirty years).in thirty years).
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NATIONAL CONFERENCENATIONAL CONFERENCENATIONAL CONFERENCE
of the 1058. Furthermore, if the appeal is not
filed or it has been longer than thirty days since
the 1058 was issued, a representative needs to
be wary of levies at any time.
Rule of thumb: Not every piece of IRS col-
lection correspondence warrants a response.
Understanding the correspondence, what it is
asking, and the consequences of forgoing an
immediate response are important steps in
Know Your Taxpayer
A representative’s interaction with the taxpayer
client is vital to the successful resolution of a
tax debt. This involves making sure a taxpayer
has appropriate expectations for his or her case,
is given correct information to use in making
decisions, and is committed to pursuing a reso-
lution to the issue. A representative is going
to find it very difficult to resolve a tax liability
without a taxpayer who is involved throughout
the entire process.
Many taxpayers fail to disclose the full
extent of their collection trouble. This can
either be due to ignorance or that the client
is not realistically confronting the extent of
the problem. Unfortunately, there are many
scenarios in which a representative must rely
on the client’s explanation of the case, at least
initially, and the representative should be aware
of possible taxpayer ignorance at that stage.
Most importantly, a taxpayer must keep
a representative abreast of compliance.
Knowing that compliance is the backbone to
a resolution plan, both the taxpayer and the
representative need to continually revisit the
issue of compliance to be sure it is main-
tained. The requirement is ongoing and so
must be the conversation.
Rule of thumb: Always establish the facts of a
case and monitor compliance.
The IRS uses several techniques for col-
lecting on the debts it is owed, including,
but not limited to, the filing of a Notice of
Federal Lien (NFTL); issuing levies on wages,
bank accounts, and other sources of equity
or revenue; and offsetting money that a
taxpayer may be due from another govern-
mental agency, such as the Social Security
Administration or state income tax refunds.
An NFTL filing is done by the IRS to put a
taxpayer’s creditors on notice of the existence
of a federal tax debt. An NFTL differs from a
statutory lien, which is created automatically
ten days after a demand for payment is made.
Historically, an IRS NFTL was a foregone con-
clusion in almost any collection case. Certain
IRS policy changes and budget constraints
have changed my previous assumptions on
this topic. Presently, if a practitioner begins a
Collections case in which there is no NFTL,
discussing the implications of the eventual
NFTL or how to avoid the NFTL are important
conversations to have with a taxpayer.
Enforcement is the IRS’ most aggressive
form of collecting money (IRC Sec. 6331, IRM
Parts 5.10 and 5.11). The IRS has the power to
levy money and/or property, but the question
relating to when the IRS will levy and why it
may happen can have myriad answers. Despite
the many reasons as to when and why a levy
may be issued, the most common are missed
deadlines or lack of contact.
Many fear the IRS’ power to seize homes
and cars. But with only 432 seizures in 2014,
compared to almost two million levies, clearly
it is not IRS’ preferred action. Interestingly,
there is actually no legal distinction between
a levy and a seizure, but there are different
procedures that must be followed by the IRS.
Therefore, there is a distinct practical differ-
ence between levies and seizure from the IRS’s
perspective, which results in far fewer seizures.
Rule of thumb: The IRS will take a taxpayer’s
money, but usually not without first giving the
taxpayer or representative an opportunity to
Practitioners should be familiar with Circular
230 as well as Publication 1 (Your Rights as a
Taxpayer), Publication 594 (The IRS Collection
Process), and Publication 1660 (Collection Appeal
Rights) prior to engaging in collection represen-
tation. A collection case should always begin
with an engagement letter. This should define
the circumstances of the case, what will be done,
and the limitations or exclusions to the work.
In most every case, IRS Collections is
interested in getting the details of the tax-
payer’s financial condition. For businesses, this
is usually done by completing Form 433-B.
Individuals should be completing Form 433-A.
These financials serve as the foundation to
any discussion of a resolution regardless of the
ultimate goal being an offer in compromise,
an installment agreement, or uncollectible
status—a situation in which the IRS does not
demand back-tax payments.
Very few resolutions are based solely on the
amount owed or a period of time. However,
the IRS’ Fresh Start Initiative broadened the
☑ Have a properly completed Power
of Attorney (POA) submitted to
CAF and prepared for fax to PPS/
☑ Nothing beats a call! Call IRS, PPS,
ACS, or revenue officer depending
on best idea of case location to deter-
mine who within IRS controls case.
☑ Inquire about all potential issues,
including, but not limited to,
balance due, filings, and deposit
☑ Acquire transcripts of all periods
of liability (PPS, ACS, E-Services).
☑ Determine if there are pending
☑ Set deadline with IRS for action.
☑ Inform client.
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streamlined installment agreement to qualify
individual taxpayers owing up to $50,000, and
it increased the period of time to pay from five
years to six.
Other rules found throughout IRM Part 5
highlight opportunities that both serve taxpay-
ers’ best interests and limit resolutions in other
cases. For example, individual taxpayers can be
allowed up to one year at a lower installment
agreement payment in order to make neces-
sary lifestyle changes. On the other hand, the
IRS’ offer in compromise program allows the
government a number of reasons to reject an
offer because it is “not in the government’s best
interests.” Knowing such nuances is important
to successfully guide a taxpayer client through
the collection process.
Rule of thumb: Get the taxpayer started on a
433 immediately in order to identify issues that
may impact your recommendations and goals.
Bringing It All Together
Understanding how the IRS runs its col-
lection system is an important step in good
collection work. Currently, what we have is
an IRS system that is in desperate need of
resources to effectively address its mission.
Understanding that issue, together with one’s
familiarity of the IRM and a keen sense of
client management, usually means that a suc-
cessful practice is not far off.
Developing proficient collection work
takes time and, most of all, experience.
Circumstances, taxpayers, and IRS repre-
sentatives change from case to case. The key
to a successful interaction with Collections
is to be empowered as a professional repre-
sentative and advocate rather than simply
serving as a conduit of information between
parties. The sooner you can prepare your
client for the reality of his or her own situ-
ation, the easier accomplishing their goals
will become. EA
About the Author:
David F. Miles, EA, is a consultant with 20/20 Tax
Resolution. He has been practicing taxpayer representation
for eighteen years. He has been interviewed about a range
of tax topics for various news articles, as well as television,
and was a panelist on Tax Talk Today in November of 2012.
David can be reached at email@example.com.
To learn more about this topic, visit the NAEA Forums.
☑ Acquire signed engagement.
☑ Acquire POA covering enough time and tax matters necessary to identify all issues.
☑ Provide 433-A and/or 433-B for client to begin drafting.
☑ Ask client to describe situation in their own words and provide any recent documen-
tation (ninety–120 days) from IRS.
☑ Ask client if compliance is being met.
☑ Ask client if there are pending deadlines.
☑ Prepare client for your initial interaction with IRS: what it will entail and what will