November 13, 2012

The United States tax code has grown from its original 900+ pages in 1913 to over 70,000 today. As a political football and vehicle for elected officials to deliver tax breaks to special interests that help get them reelected, don’t look for the tax code to be simpler and more user-friendly anytime soon. In fact, if you’re facing a tax debt look for more aggressive tax enforcement from the IRS as a triad of irresistible forces converges on you:

1.  Government deficits will continue.

Look for a fiscal year 2012 federal deficit up in the stratosphere of $1.33 trillion! If all the government borrowing and interest on the debt is taken into account, we can expect the debt to grow even faster. The deficit provides a powerful impetus to the IRS to be aggressive and relentless in its collections. Even so, the IRS estimates that about 16 percent of people who owe taxes never file. That delinquency costs the government over $500 billion each year and makes the IRS look bad.

2. The IRS will improve its collection enforcement process.

Look for the IRS to do several things in addition to adding to their army of collectors. Their game plan will include speeding up individual collections by:

  • Giving final notice of IRS “Intent to Levy” much earlier in the process. This forces a longer appeal process, but could cause the taxpayer problems if the appeal is not filed quickly.
  • Quicker levies to bank accounts and wages when the IRS feels that the taxpayer’s appeal has not been filed early enough.
  • Dealing with taxpayer levy appeals and “frivolous” Tax court cases. Previously it took 6 to 12 months for such appeals. The IRS has cut that time in half. Moreover, if the IRS can convince a tax court judge that someone has filed a Tax Court case with no merit and for the purpose of delaying the process they will file a motion for summary judgment as well as sanctions.

3. The deficits will not be resolved by less government spending.

Unfortunately, so long as we have a federal government with its millions of people who benefit from government, the deficit will not go away anytime soon. In fact, over half of the federal budget (i.e., entitlements) each year is spent before any government agencies gets their budget. Again, the IRS, as the principal revenue- raising agent, can expect to experience even more pressure from law makers to at least collect what is already owed.

The IRS also has a great argument to resist budget cuts for their own organization in these times of recession: They are the only government agency that actually brings in more money than it spends.)

The good news is…

In view of public pressure and the continuing recession, the IRS will likely be more willing to engage in the “Offer in Compromise.”  Using that process, eligible taxpayers can wipe out a hefty tax debt. Here at Optima Tax Relief we can help with tax negotiation and settlements, back taxes, etc.