Bulletins

Taxpayer Advocate Service - A Government Agency There to Help

by Mike R. Gohde, CPA, PFS

Dear clients and friends,

For years, the old line of "I'm from the government and I'm here to help" has drawn remarkably consistent laughter from audiences. However, in one case, the saying is really true. The IRS' Taxpayer Advocate is from the government and really does help practitioners and their clients.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS specifically charged with helping taxpayers who are suffering harm, who can't get problems with the IRS resolved through normal channels, or who find an IRS process isn't working as it should. The TAS also addresses systemic IRS problems that it finds and recommends solutions to them.

Taxpayer Advocates retain their independence by reporting directly to the National Taxpayer Advocate (currently Nina Olson), who answers only to the IRS Commissioner. Thus, the Advocates aren't afraid of mixing it up with the other IRS employees when it comes to helping taxpayers.

Still skeptical? In the 2012 annual Taxpayer Advocate's report to Congress, the TAS reported it received over 219,000 cases and closed over 232,000 cases, meaning it closed more cases than it received during the year, obviously closing some received in the prior year. T AS works to obtain full or partial relief for taxpayers whenever the law and the facts of the case (including supporting documentation) support it. In FY 2012, TAS provided relief in 77% of the cases.

The Taxpayer Advocate Service Has Some Real Teeth-Sometimes

What can the Taxpayer Advocate do for a client with an IRS problem? The answer is basically anything. However, its real teeth comes from its ability to issue a Taxpayer Assistance Order (TAO). Usually, the threat of a TAO is enough to get the IRS to act as it should. For example, of the 232,000 cases closed in FY 2012, the Advocate had to issue only 434 TAOs! Another reason TAOs are so potent-Once issued, only the Commissioner, Deputy Commissioner or the Taxpayer Advocate can rescind or modify one.

Assuming the taxpayer qualifies (see later discussion), a TAO can be issued requiring (1) the IRS to take or refrain from taking any action permitted by law and needed to relieve the taxpayer's significant hardship, and (2) that the action be taken by a certain time. Some of the things a TAO can do include:

  • Require the IRS to release levied property; to the extent it can do so by law. Since bank levies are subject to a 21-day freeze, the client in many cases will have sufficient time to request a return of the levied-upon money. Once the funds have been paid to the IRS, however, the Advocate can't demand a refund of the money.
  • Require the Collection Division to review certain issues or information, such as financial information supporting a request for an installment agreement.
  • Require a case to be reconsidered by the Examination Division.
  • Require action be taken on an amended return, letter request, or response to a notice.
  • Require the issuance of a manual refund.
  • Expedite the consideration of a claim, request for determination, or other information under consideration in another function. For example, the Advocate can require the Appeals Office to expedite consideration of a non-docketed case, or the Examination Division to review a request for transfer of the case to another office.

Example: John and Linda Badluck will face eviction if their delinquent rent is not paid. The Badluck's return was just completed and shows a tax due of $1,500 and withholding of $4,000, generating a refund of $2,500. The local Taxpayer Advocate can request a manual refund of $2,500 and then have the return processed after the refund posts.

Unfortunately, there are some situations that Taxpayer Advocates can't help. The Advocate can't intervene in a criminal case, enjoin an action of the IRS Chief Counsel, or contest the merits of the underlying tax liability. Thus, for example, the Advocate can't make an IRS auditor allow a deduction, but a TAO can force the auditor to reconsider the decision. Finally, the Advocate can't circumvent the Internal Revenue Code, even if the results produce a hardship.

Requirements for Getting a TAO

As stated earlier, the Advocate's real power is the ability to issue a TAO. The overriding requirement for getting the TAO is that the client must be suffering or is going to suffer a significant hardship if relief isn't granted. A significant hardship includes any of the following situations (this list is not exhaustive):

  • There is an immediate threat of adverse action.
  • There has been a delay of more than 30 days in resolving the taxpayer's account problems.
  • The taxpayer will have to pay significant costs (including fees for professional services) if relief is not granted.
  • The taxpayer will suffer irreparable injury, or a long-tern adverse impact, if relief is not granted.

The significant hardship need not be financial. Basically, any loss, or potential loss, of life's necessities, a job, or an educational opportunity; a negative impact on the taxpayer's credit rating; or substantial physical or emotional distress are factors that weigh heavily in favor of determining that there is a significant hardship. For businesses, inability to meet payroll or credit problems also qualifies as significant hardships. The Advocate makes this determination independent of other circumstances, such as whether the client has been compliant in the past, or who is to blame for the problem.

A finding that a taxpayer is suffering or about to suffer a significant hardship will not automatically result in the issuance of a TAO. After making a determination of significant hardship, the Advocate must determine whether the facts and the law support relief for the taxpayer. In cases where an IRS employee is not following applicable administrative guidance (including the Internal Revenue Manual), the Advocate will construe the factors in the taxpayer's favor.

Conclusion

The TAS can be a godsend for taxpayers with problems with the IRS. The Advocates are truly independent and will not hesitate to challenge their IRS counterparts when the process doesn't work as it should or where the taxpayer is being harmed or about to be harmed by an IRS action or inaction. Give us a call if you would like some assistance in dealing with the IRS.

Very truly yours,

Michael R. Gohde, CPA, PFS
Daniel A. Kosmatka, CPA, PFS, CFF, CGMA
Dennis W. Donnelly, CPA, PFS