How the IRS works

Little Known Facts That Can Help Most Taxpayers’ Cases

The Internal Revenue Service is a process-driven system implemented by the United States government for the collection of revenue. This agency does not earn its money like the private entities. The IRS has the authority and the power to make rules that will allow the collection of revenue to fund government operations. It has longevity and resources and can outlast any citizen or corporation in a fight.  Given the time constraints under which the agency must operate, fear and intimidation are tools that the agency uses to meet its directive. Remember, the IRS MUST COLLECT REVENUE.

The IRS, although extremely powerful, does not issue blind challenges to any taxpayer it targets.  Rather, it comes prepared to fight and win any potential case involving a tax audit, a tax collection, a tax appeal, or any other form of litigation. You cannot defeat the IRS.  The Agency possesses both the resources and the wherewithal to fight a pitched, prolonged battle to defend its position.   You can – on virtually any occasion – learn how to win alongside the IRS, meaning, help the IRS help you resolve your tax issues with them.

How the IRS Often Sees Taxpayers

The IRS makes many mistakes and avoids admitting those mistakes.  One of many mistakes the IRS makes is that they code most taxpayers selected for an IRS investigation as unwilling, uncooperative, and recalcitrant.  Unless you fight to correct this perception, you stand an excellent chance of being charged with penalties and interest you may not legitimately owe.

So, what is behind this IRS coding of the taxpayer as being unwilling, uncooperative and recalcitrant?   It is the IRS’ long-standing perception that taxpayers do not want to pay taxes and will cheat to get out of paying their taxes.  So the IRS’ rules, policies and procedures are designed to force taxpayer capitulation and compliance. The IRS employee who carries out this enforcement is concerned with only accomplishing the task for which they have been trained.

I have found in my practice when I help the IRS agent achieve what they are responsible for (analyzing, categorizing and closing of cases) I am really a step closer to resolving my client’s issues with the IRS.  Often my clients ask me:

1. Why should we help the IRS when the IRS causes damage to the taxpayer’s credit, finance and standard of living?

2. Why help the IRS when the IRS enforcement of the tax laws usually end in IRS liens on property, rights to interest in properties, levies on wages, bank accounts, and receivables?

3. Why help them when they collect enormous penalties and interest that the taxpayer may not owe?

Well, the answers to the above questions are located in the   TAXPAYER BILL OF RIGHTS – T.B.O.R.

The Taxpayer Bill of Rights provides affirmative rights and protections to all taxpayers.  This includes those who have made mistakes, errors, or who have taken reasonable but incorrect positions trying to resolve their tax problems.  The TBOR was granted by Congress to help both the IRS employee and the taxpayer. The problems inherent in implementing these rights are cumbersome and complex. Your tax practitioner must understand how these rights are implemented in rules within the policy and procedures the IRS has put in place, such as “service level agreements (SLAs)” between the IRS Taxpayer Advocate and the various functions within the IRS.

PHW has keen insight as to which U.S. Treasury department, region, branch, office, level, and employee you have to go to inside the IRS to present your case, whether in examinations, collections or appeals. We always choose the best forum to implement your rights.

PHW truly understands how the IRS views or perceives you.  This means developing a sharp, succinct understanding for what the IRS’ intentions are toward you and what your IRS coded transcripts say about you. How they perceive you is vital to the success of your case.  Developing the appropriate tax strategy based on the IRS System’s intentions and the employee’s intentions toward you is also vital.  It will help determine the taxpayer rights and where is the best venue to implement those rights in order to resolve your tax issues favorably.

The 6 Most Common Tax Problems

Below is a list of the most frequent types of classifications I find.  Please note that you may be classified in more than one category adding to the length and complexity of your case.

1.  Simple math correction, correspondence or office audit to verify selected information on a simple 1040 tax return

2.  Line by line examination

3.  Erroneous refund investigation

4.  Special projects investigation

5.  Fraud investigation

6.  A combination investigation that includes Nos. 3, 4 or 5 (above), in addition to Nos. 1 or 2, above.

The IRS system is designed for functions to operate independently of each other. The following constitute the three IRS functions implementing the Agency’s systemic intentions including: examinations, collections and appeals. Examinations is intended to locate revenue, and utilizes reporting of income by sources external to the IRS and alternative methods for measuring income when there is no reporting of income such as lifestyle and bank account records. How the IRS perceives you will establish whether examinations concedes, compromises or files a notice of deficiency (a bill for additional taxes).

How the IRS perceives your case determines whether or not Collections accepts or rejects your claim; prevents or releases a levy; refrains or seizes the property or liens the rights or interest in the property.

The appeals division of the IRS establishes whether or not to concede, or compromise, or proceed to federal court and risk litigation in competition of your case.

How the IRS system perceives you determines the success of your case!

Understanding and presenting your case all depends on your IRS coded transcript.