Editor: Valrie Chambers, CPA, Ph.D.
When the IRS's processes are not working as they should, the Taxpayer Advocate Service (TAS) may be able to help. Sec. 7811 authorizes TAS to issue a Taxpayer Assistance Order if the taxpayer is suffering, or about to suffer, a significant hardship as a result of the way the internal revenue laws are being administered.
For this purpose, a "significant hardship" includes: (1) an immediate threat of adverse action; (2) a delay of more than 30 days in resolving taxpayer account problems; (3) the taxpayer incurring significant cost (including fees for professional representation) if relief is not granted; or (4) irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted (Sec. 7811(a)(2)). Regs. Sec. 301.7811-1(a)(4)(ii) further explains that significant hardship means "a serious privation [is] caused or about to be caused to the taxpayer as the result of the particular manner in which the revenue laws are being administered by the IRS."
In addition to economic burden cases as enumerated in the statute, TAS has also formulated categories for relief when there is a systemic burden, when an action is in the best interests of the taxpayer, or when public policy supports relief. A systemic burden can include a 30-day delay as noted above, but other eligible systematic burdens include when the IRS does not respond within a promised time period or when a system or procedure has not operated as it is supposed to.
The "best interests of the taxpayer" can include considerations of equity or fairness, or when the IRS's approach impairs or will impair the taxpayer's rights. Those rights include the Taxpayer's Bill of Rights, which the IRS adopted on the recommendation of the last national taxpayer advocate, Nina Olson, and includes the right to be informed, the right to quality service, the right to challenge the IRS's positions and to be heard, and the right to a fair and just system, among other rights.
While these categories can address many taxpayer problems within the IRS, taxpayer representatives should first escalate the issue up to the appropriate supervisory levels in the examinations or collection functions to try to resolve the case within the IRS. For example, if a collection case is being worked by a revenue officer (RO), first address the issue with the RO as well as the collection manager or territory manager. However, in many instances, the adverse action may not be accompanied by a notice or the contact number for a specific representative with whom you can communicate, and TAS assistance may be appropriate immediately after the system does not work properly.
To apply for assistance, the taxpayer can either call a local office (see TAS's contact page at taxpayeradvocate.irs.gov) or submit a Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order). Form 911 can either be mailed or faxed, and more recently TAS has begun implementing email submissions. The local office where the taxpayer resides, or the business address for nonindividuals, should be used.
Internal Revenue Manual (IRM) Section 18.104.22.168 sets forth Taxpayer Advocate case criteria. These criteria expand upon the statutory definition of "significant hardship" and define "threat of adverse action" to include IRS actions that create negative financial consequences or economic burdens for the taxpayer because of the nature of the taxpayer's situation. An immediate threat is defined as an action that will take place in the "very near future" (IRM §22.214.171.124.1(2)).
The IRM defines "significant costs" as "[s]ituations where the IRS is unable to immediately make adjustments, process returns, release a lien, etc." and the taxpayer will incur significant costs or expenses, including professional fees (IRM §126.96.36.199.1(3)). Finally, there may be a significant hardship if "irreparable injury or long-term adverse impact [to a taxpayer will occur] if relief is not granted," which includes situations where a taxpayer "may lose assets, income or potential income if relief is not provided" (IRM §188.8.131.52.1(4)).
Form 911 should set forth each criterion in Sec. 7811 that is met and explain with specificity how the individual or business is being detrimentally impacted. For instance, if there is an immediate threat of adverse action under Sec. 7811(a)(2)(A) in the form of a levy before an appropriate notice is received, the Form 911 should set forth the specific right or notice requirement that was not met, as well as the specific immediate consequences.
While the taxpayer may meet the eligibility requirements when the rights are deprived, explaining how the levy of the funds, for example, would render the taxpayer unable to make a rent payment and face eviction would be helpful in emphasizing the urgency of the taxpayer's situation when an advocate is assigned to the case. Local advocates often have a high case volume, particularly this year related to requests for economic impact payments included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, in response to the COVID-19 pandemic. Additional COVID-19 challenges faced by TAS are summarized in the National Taxpayer Advocate's Fiscal Year 2021 Objectives Report to Congress.
A representative can protect a client by presenting the client's case so that it may be prioritized consistent with the urgency required. Collection actions such as the imposition of a federal tax lien or a levy may cause general significant, immediate, long-term, and irreparable financial harm to a client and his or her credit, but the client's case should include specifics.
Advocates often respond within a few days. In the initial call, the advocate will set up a time frame for when he or she will follow up on the investigation of the client's request. To protect the client, verify that the time frame is manageable given the client's specific needs. Perhaps the taxpayer has a seasonal business and much of his or her annual income will be earned in the few months following the request for relief. The advocate needs this information to understand the immediate nature of the problem.
Additionally, note that TAS is limited in that it must work within and through the applicable IRS divisions to obtain relief for taxpayers. TAS cannot make the fix outright. For instance, with the levy example above, TAS would interact with IRS personnel in the IRS Collection Division to understand the issue, communicate it to the appropriate personnel, and then facilitate a solution. This is why it is important to escalate the issue first with the RO and supervisors in collection situations.
During the COVID-19 pandemic, some advocates have worked remotely since many IRS offices and service centers have been closed; other IRS personnel in the compliance divisions have had limited access to mail or the ability to work remotely. This has hampered TAS's ability to interact in a normal way to resolve certain issues. These issues are being remedied as various IRS functions resume. However, where relief is sought under Sec. 7811(a)(2)(B) and the IRS has taken more than 30 days to respond, anticipate that the "normal" or required response dates may have been revised as a result of COVID-19. Applications for client relief should clearly establish that the taxpayer is eligible for relief under both the 30-day and any revised timeline so that the initial call can focus on the harm the client suffered and the relief needed.
Additionally, set forth the specific relief or assistance requested in Form 911. For instance, requested relief may include: (1) assistance facilitating a prompt response to a request; (2) assistance understanding the rationale for the denial of a claim — for example, why an e-filing expulsion was issued or why a penalty abatement was denied; (3) the release of an improper levy or the abatement of a penalty; and (4) other specific types of relief. The TAS may find an alternate solution after interacting with the appropriate IRS function, but a list of possible relief actions may be helpful for an advocate to understand what types of relief can help the client before the advocate reaches out to the IRS.
By following these steps and engaging with TAS, taxpayer representatives demonstrate to clients their familiarity with IRS processes and how they can add value when the usual procedures are not working properly.
Contributors Valrie Chambers, CPA, Ph.D., is an associate professor of accounting at Stetson University in Celebration, Fla. Cory Stigile, CPA, J.D., LL.M., is a principal with Hochman, Salkin, Rettig, Toscher & Perez PC in Beverly Hills, Calif. Mr. Stigile is a member of the AICPA Tax Practice & Procedures Committee. For more information on this article, contact email@example.com.
Valrie Chambers, CPA, Ph.D., is an associate professor of accounting at Stetson University in Celebration, Fla. Cory Stigile, CPA, J.D., LL.M., is a principal with Hochman, Salkin, Rettig, Toscher & Perez PC in Beverly Hills, Calif. Mr. Stigile is a member of the AICPA Tax Practice & Procedures Committee. For more information on this article, contact firstname.lastname@example.org.