Possible IRS Collection Activity

[Tax Sleuth]

An Enrolled Agent’s client has received a Letter 1058 in relation to a past unfiled Form 1040. The EA faxes the POA, and the IRS personnel promises the EA on the telephone to put a hold on collection activity and negotiate a payment plan for their client in the future, if necessary, as long as the client’s unfiled return is filed by the end of the month. The EA timely submits the finished tax return through certified mail along with the client’s check for the total amount that he believes that their client should pay. The EA documents the above conversation in a representation letter along with a request to be notified in writing if any additional outstanding tax liabilities are determined by the IRS well in advance of any potential collection activity.

About six weeks later the EA calls the IRS to follow up as had been requested by the IRS. The IRS personnel states that they are not finished working upon the case and do not know when it will be completed. If additional tax liabilities are determined by the IRS, is the IRS likely to heed the information and request contained within the representation letter and not take the client’s money without first issuing a written warning? Is the EA required to do anything else at this juncture in time or can he safely wait for a response from the IRS in relation to their client’s account?

[mlinderEA]

Irs collection

IRS will issue a bill before they do any collection activity.The tax payer has filed and paid it is now up to the IRS to process the return and bill if money is owed.You can assume there is interest due and some penalties .

[New York Enrolled Agent]

An Enrolled Agent’s client has received a Letter 1058 in relation to a past unfiled Form 1040. ... Is the EA required to do anything else at this juncture in time or can he safely wait for a response from the IRS in relation to their client’s account?

There is a high probability (all the facts are not known), the EA should have filed a CDP hearing request within 30 days upon receipt of Letter 1058. Letter 1058 is the final notice of levy and comes with notification of a right to a hearing. The regulations require the cessation of collection activity when a taxpayer files a CDP request. No absolute answer can be offered without a full knowledge of all the facts.

[Tax Sleuth]

Re: Possible IRS Collection Activity

Wouldn't the IRS be violating some rules though if it were to determine there were additional outstanding liabilities and just take the client's money without first notifying the EA in writing and giving him a chance to respond? Should an Equivalent Hearing be requested at this time as a precaution or should the EA wait for an answer from the IRS first in regards to the matter?

[New York Enrolled Agent]

Wouldn't the IRS be violating some rules though if it were to determine there were additional outstanding liabilities and just take the client's money without first notifying the EA in writing and giving him a chance to respond?

The IRS cannot collect tax unless there is an assessment. Letter 1058 suggests that the IRS generated an SFR for the client, subsequently assessed the tax and after being ignored is now doing enforced collections. If that's what you're referring to, the IRS has no obligation to notify the EA.

You write additional liabilities - if you mean taxes besides what was previously assessed then the IRS must go through the deficiency procedures before assessing any additional liability. That would create a different assessment and provide the taxpayer with an opportunity to contest it before imposition.

Generally, IRS policy is to suspend collection during an EH but there is no requirement to do so.

[taxea]

The EA will only be notified by the IRS sending a copy of the notice to the tax payer if the EA already had a POA on file. Once the POA is in the IRS system the EA will get all correspondence sent to the taxpayer.