Accounting News

The Realities of Resolving Back Tax Debt

Tax resolutions aren’t for every accountant, but it can be lucrative if you know the right way to deal with them.

For any tax pro, soorner or later their clients need to resolve back tax debt. This inevitably leads to many hours of dealing with the IRS, going through the right processes and of course the emotional aspects of clients who have fallen into arrears with their taxes, usually due to avoidance.

According to Eric L. Green, tax resolution work isn’t to be taken lightly but can be fulfilling and, moreover, he felt more accountants would do it if they were taught how.

“I’ve always wondered why tax resolutions aren’t taught. It is a niche area where you end up practicing in and some don’t intend to do. As you do it more, you will get the reputation for it and it can be good business,” said Eric. ” Tax collection is very linear, when clients start getting levied they panic and most accountants are not trained to deal with it and, as we know, calling the IRS these days has been a ‘joy.’ But it doesn’t have to be this way. It really just becomes more a matter of helping clients be more proactive about their tax debts.”

Eric explained that the first step to a tax resoltion starts when a client comes to you with a tax debt problem, get them into compliance as soon as possible. More specifically, they filed returns that they are due and owe in the current tax year and if they are not in compliance you can’t do a Offer in Compromise (one of the most common resolution vehicles.

Some of the hesitation of getting into tax resolution work is, as Eric mentioned, the idea of spending hours on the phone with the IRS not being appealing. The IRS’s Darren Guillot, however, professed that the agency is making improvements to help deal with the sheer volume of calls it does receive to resolve back tax debts.

“Enforcement is always a last resort, even though it’s what the IRS is known for,” said Darren. “I personally answer two out of every 10 calls, there aren’t enough of us to answer all of them, but we do want to hear from you to help with client tax debts.”

He mentioned that short-term installment agreements have been extended 120 to 180 days and that the IRS is trying to work more with those who owe. The default rate on these agreements is only 11 percent, he said, adding that most people who set up payment plans are keeping them. Offers In Compromise are also still 120 days to make up a missed payment,

Darren also broke some news on how the IRS plans to handle the amount of calls it receives to help resolve tax debts, addressing it in two ways. The first was through AI. He said since January 1, bots have been answering 1.9 million questions in English and Spanish. And in June 2022, AI will be used to close cases with a collection resolution.

“The most immediate problem for us is the tens of millions of calls coming in that we can’t ansser, we need the bots,” said Darren. “I personally sent 980 employees to help with resolving back tax debt, they are helping move work to a desk where no one is sitting. AI is where that is going to happen. By the end of June or July, if you see better sevice from the IRS it’s because the bots are picking up those calls.”

Darren also noted that in June, all IRS employees will officially return to the office full time. In addition, an IRS campus in Puerto Rico will be up and running at the beginning of the summer with over 400 new, bilingual employees and 850 new employees expected by July.

He also professed that he saw a time, in the not to distant future, where the IRS could be far more automated than it’s ever been. “We are going to get to the point where anything that can be filed electronically will be, I see it coming.”


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