taxgirl » collections

Taxes from A to Z: O is for Offset

Kelly — Fri, 18 Mar 2011 01:14:27 +0000

If you owe money to the federal government, your federal income tax refund can be seized to satisfy your debt. This is often referred to as “offset” since the seizures are part of the Treasury Offset Program (TOP); the program is administered by Financial Management Service, a branch of the U.S. Department of Treasury. Examples of debts that might trigger offsets include federal income tax delinquencies and student loan defaults.

Seizures don’t just apply to federal debts. Under TOP, states may enter into agreements with the IRS to intercept, or offset, federal tax refunds for state tax obligations or money owed to state agencies. This includes not only state tax delinquencies but matters such as child support arrears.

What’s supposed to happen is that you are notified in advance of any offset action to be taken. That doesn’t always happen that way and occasionally, taxpayers are surprised come tax time. It’s even more confusing this year for some taxpayers now that the IRS has stopped issuing those debt indicators to third parties. If you have concerns about the status of your debt or a potential seizure, you can call the TOP Call Center at 1.800.304.3107. They can’t make arrangements for you to pay off your debt or tell you how much you owe but they can tell you the best number to call (sometimes, that’s half the battle).

As we discussed on Tuesday, sometimes an offset can affect a refund due to a taxpayer who files a joint return when the taxpayer’s spouse owes a debt. If you’re one of those affected, you’ll need to file a federal form 8379 (downloads a pdf). It’s not a quick form to process. The IRS suggests on the instructions that you should expect to wait 8 weeks if you file the form after your joint return or 14 weeks if you file it together with your joint return (the number shrinks to 11 weeks if you efile). So, be patient.

As a side note, in addition to your federal income tax refund, TOP may also attempt to collect by attaching your wages, including military pay; retirement pay; and certain federal benefit payments, such as Social Security. TOP also has a catch all which allows them to collect from federal payments that are otherwise not exempt by law or by action of the Secretary of the Treasury.

Technorati Tags:
IRS, refund, refund check, tax, offset, Treasury Offset Program, seized refund

Similar Posts:

IRS Reverses Course on Collections

Kelly — Sat, 07 Mar 2009 13:54:45 +0000

IRS Commissioner Doug Shulman has announced that the IRS will not renew its contracts with two private debt collection agencies. Those contracts expire this year.

You may recall that I was not a fan of turning over collections matters to private companies. Like many other tax professionals, I had concerns about the tactics used by commercial debt collectors, including the real possibility that those collectors might not advise taxpayers of their rights and alternatives. I was skeptical of the rates of return using private companies and the effect that turning over collections work to private companies might have on Offers in Compromise, Installment Plans and Appeals. Most disturbing, however, were issues related to taxpayer privacy; though the agencies were allegedly screened, at least one of the agencies involved in the initial collections plans had already been investigated for misconduct.

The IRS anticipates hiring over 1,000 new collection personnel in 2009. They had hoped to do this in prior years but Congress turned them down, despite studies that showed projected $1.1 billion collection from private companies versus $87 billion from IRS revenue officers. Instead of hiring new collections personnel, Congress forced IRS to resort to private companies who collected fewer dollars at a higher cost to taxpayers. And we wonder why the country is operating in the red…

The Commish swears that the ramping up of collections personnel does not signal a shift away from the kinder, gentler IRS that we’ve been promised. Shulman said:

In these challenging economic times, I have asked all IRS employees to go the extra mile to help financially distressed taxpayers. IRS employees have more options available to them to resolve difficult collection cases.

Let’s hope so. Call me crazy but I think effectively enforcing collections rather than raising taxes would go a long way towards balancing the budget.Similar Posts:

Fix The Tax Code Friday: Offers in Compromise

Kelly — Fri, 02 Nov 2007 10:43:30 +0000

My recent post about an Offer in Compromise (where a taxpayer pays less than their existing liability as part of a deal) gone bad is in stark contrast to a rosier picture painted by CBS News. CBS seems to imply that offers are a bad idea because they reward those with outstanding tax liabilities by giving them a “break” that may not be deserved. Advocates argue that it is administratively more efficient to offer compromises because it’s better for the IRS to accept a dollar today than to take its chances on accepting a dollar tomorrow.

What do you think? Today’s Fix the Tax Code Friday question is:

Are Offers in Compromise good tax policy? Or are they unfair to taxpayers who regularly pay their obligations?Similar Posts:
None Found

Are IRS employees actually responsible for anything?

Kelly — Thu, 01 Nov 2007 17:50:39 +0000

Apparently not.

It’s rare that I blog about client matters. I like to keep them private for a variety of reasons not the least of which are ethical considerations. But a recent client matter has me steamed. Really steamed. And it’s blog worthy. I’ll keep it generic.

Client had a tax matter that needed immediate attention. IRS Rep #1 advises me, quite candidly, that the current administration is leaning on the IRS to collect outstanding liabilities and despite earlier pledges of a “kinder, gentler IRS”, the marching orders are to take no prisoners, make no deals. Client submits offer with helpful suggestions from rep.

Client’s offer is kicked around for months and months. One rep, different rep, different rep. Finally, specialist steps in. Specialist advises us that our proposed deal is not acceptable and sends us in writing a deal that he claims is acceptable. Specialist even includes specific language for use in our offer and sends us a completed form for signature. More months pass. Nothing.

One day, deal is inexplicably denied by IRS. Adding insult to injury, collection activity immediately resumes for client’s “failure” to resolve the matter.

When we question why this happened, this is the response we get: The IRS cannot be bound by its employees’ actions. And further, while this cost our client time and money, there is nothing further that can be done.

Really?

Unbelievable.

(Yes, quietly contemplating next move but completely floored by IRS’ “ain’t our fault, we just hired the guy” attitude.)Similar Posts:

House Cleaning.

Kelly — Thu, 11 Oct 2007 02:31:55 +0000

The House has approved legislation that would end the extremely unpopular program that allows private collection agencies to collect tax debts for the IRS. The IRS had previously argued that the policy was not financially viable.

Of the $32 million brought in since the collection bill went into effect, the IRS collected $7 million on its own. The collection agencies received almost 25% of the total. That leaves a net collections by the agencies of less than $20 million, which pales in comparison to the $71 million in start up costs. Further, it has been estimated that spending that $71 million on more agents would have resulted in $1.4 billion in revenue.

Senate Republicans claim that the bill won’t pass. However, if it does, the White House threatened a veto by President Bush. Hmm, anyone else find that interesting considering that one of the three collection agencies is a Texas law firm?Similar Posts:

You Mean the IRS is Going to Collect Taxes?

Kelly — Thu, 19 Jul 2007 10:38:40 +0000

What? You think that’s crazy talk? You would if you have been following the debacle that is allowing private debt collectors to pursue the collection of taxes even though it is more expensive and is expected to collect fewer tax dollars. Government at its finest, no?

Concerns about privatizing tax collections have included privacy issues, the integrity of the collections agencies selected and the consequences of an incentive-based collections system. With this in mind, the Ways and Means Committee had a hearing to investigate whether the relatively short-lived system should be abolished.

They decided it should. On July 18, the Ways and Means Committee passed H.R. 3056, the Tax Collection Responsibility Act of 2007, which would repeal the use of private debt collection companies for purposes of collecting federal income taxes. The Committee approved the measure by a vote of 23 to 18. “The private debt collection program is an insult to the American taxpayer and our Federal tax system,” said Oversight Subcommittee Chairman John Lewis (D-GA).

The Act also includes provisions for, among other things, delaying the application of a 3% withholding requirement on businesses, increase the estimated payment requirements for large corporations and immediately taxing US citizens who renounce their citizenship (that’ll teach ‘em!).Similar Posts:

The Poll Tax is Gone But…

Kelly — Mon, 09 Jul 2007 00:30:50 +0000

Voting and paying taxes are still hand in hand. The IRS has admitted that it has collected information on the political party affiliations of taxpayers in 20 states, while vowing that it has never used the information. This, of course, begs the question “why do it?”

The states for which political party affiliation data were collected are Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Louisiana, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Utah and Wisconsin. In these states, voters must register as a member of a party and this information is publicly available.

The IRS has advised that outside vendors collected this information while scouring databases searching for those who owed money for tax debts. This is troubling. Congress has debated whether collections from outside agencies should remain, addressing concerns about the policy including charges of corruption from the agencies chosen as vendors. It is disconcerting that this information will be in the hands of those who might use it for inappropriate reasons and might, as a result, discourage citizens from registering to vote.

And again, if the IRS claims that the information is not relevant and not used, why collect it at all?Similar Posts:

Tax Court Just Got a Little Busier.

Kelly — Wed, 23 May 2007 12:55:55 +0000

The US Supreme Court ruled this week in Hinck v. U.S., 06-376, that only the U.S. Tax Court may review refusals by the Internal Revenue Service to reduce interest payments for underpayment of taxes.

John and Pamela Hinck initially brought their case in the US Court of Federal Claims seeking an $18,000 refund of interest, alleging delays by the IRS, in processing their case (delays? IRS? Surely they jest…). Federal Claims Court said it did not have jurisdiction to consider the suit and the US Court of Appeals for the Federal Circuit agreed. At the Supreme Court level, the Court unanimously ruled that jurisdiction belonged solely with the US Tax Court.Similar Posts:

A Not So Private Matter

Kelly — Thu, 16 Nov 2006 13:28:38 +0000

Word on the Street (Wall Street, that is) is that one of the items on the Dems’ new agenda will be to reverse the prior decision to outsource IRS Collections activities to private collection agencies. Democratic leaders have been among the most vociferous opponents to the change, which was to take effect in September 2006.

Similar Posts:

None Found

Please sir, can I have some more?

Kelly — Tue, 14 Nov 2006 13:09:41 +0000

As previously reported, the IRS appears to be on a fee raising binge… And they’ve struck again!

According to the IRS, as of the first of the year (January 1, 2007) fees for installment agreements will increase as follows:

The fee for new direct debit installment agreements, where payments are deducted directly from a taxpayer’s bank account, will increase from $43 to $52.
The fee for other new installment agreements will increase from $43 to $105.
The fee to restructure an existing or reinstate a defaulted installment agreement will increase from $24 to $45.

These fees will also apply to the online payment agreements.

Averaged together, this represents an increase of nearly $12 per agreement. You think that doesn’t add up? Last year, taxpayers reached agreement on 2.8 million payment plans. At an average increase of $12 per plan, that adds up to $33.6 million – which is the total cost of the entire Housing and Urban Development budget for the fiscal year 2007.

Similar Posts: