CONTINUING EDUCATION FOR TAX & FINANCIAL PROFESSIONALS

Did your dead-broke client receive an IRS audit letter? If so, ask for a collectability determination. If your client has piled up medical bills or credit card debt or business losses and has no ability to pay additional taxes, an IRS audit can be halted.

Throughout an IRS tax examination, examiners are expected to follow Internal Revenue Manual procedures to consider the taxpayer’s ability to pay a potential assessment. The purpose of these “collectability determinations” is to ensure that the IRS’s accounts receivable are collectible.

Yet in FY 2015, 50% of all IRS Field Collection closures and 19% of all IRS Automated Collection System closures of taxpayer delinquent accounts resulting from an examination were closed as currently not collectible. IRS examiners did not follow collectability procedures in 56% of collection cases reviewed in a recent Treasury Inspector General report (see report here).

So… since the IRS examiner might not volunteer to go to his or her manager to discuss collectability issues (i.e., blood from a turnip), it’s up to us to know the rules and give a friendly push. The bonus: the broke client is saved from further trouble and we are saved from what would likely end up being hours of pro bono work.

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