- 5.1.30.1 Introduction
- 5.1.30.2 Strategic Approach Case Type – In Business Trust Fund Pyramiding Taxpayer
- 5.1.30.3 Strategic Approach Case Type – Individual Master File (IMF) Sole Proprietor
- 5.1.30.4 Strategic Approach Case Type – IMF Non-Filer
- 5.1.30.5 Strategic Approach Case Example – Balance Due Won’t Pay
- 5.1.30.6 Strategic Approach Case Example – Economic Reality
- 5.1.30.7 Strategic Approach Case Example - No Equity Situations
- 5.1.30.8 Strategic Approach Case Example – Successor Entities
- 5.1.30.9 Strategic Approach Case Example - Unable to Locate, Large Dollar Liability
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The purpose of this chapter is to communicate the principles of a strategic approach to casework and how those principles can be applied directly to the actions revenue officers take to resolve cases. A strategic approach encompasses looking at the overall case and devising a strategy that will generate compliance and resolve balance due accounts or unfiled returns. The strategy developed will take into account the different aspects of the case. The factors that will influence the strategy developed include:
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Size of the liability
The amount of time and depth of the investigation needs to be in accordance with the compliance impact and the amount of the liability. -
Complexity of the case
The strategy needs to encompass all aspects of the case and will be more detailed when multiple entities are involved. -
Type of liability and entity
Trust fund taxes of a corporation may involve different contacts and sources of information than an income tax liability of an individual. -
Compliance history
Taxpayers who have not been able to stay in compliance for several years or quarters may require a different approach to resolve the case. Different actions may be necessary when working with a taxpayer that is not making current Federal Tax Deposits (FTD) compared to a taxpayer that is current with FTDs. -
Cooperation level of the taxpayer
Taxpayers that provide full financial disclosure will require different steps to reach resolution than taxpayers that refuse to provide a listing of all assets and liabilities. -
Results of financial analysis
The steps necessary to resolve the account will be driven by the results of the financial analysis. -
Type of business activity in which the taxpayer is engaged
The contacts and methods needed to resolve a case need to be geared to the type of business activity of the taxpayer. By understanding the business activity, unique sources of income or information can be identified.
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These factors will influence other aspects of the case investigation. They need to be considered when deciding the amount of research needed before initial contact and the depth of the financial investigation required for locating and verifying asset information.
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While the strategy developed will be unique for each case, all existing IRM requirements must still be followed and this section does not replace any IRM procedures. Developing a strategic approach to a case involves more than taking an action, but rather incorporates a plan that determines why that action is the best choice to take at a given time. It involves anticipating potential problems and taking actions that will help avoid those problems. It involves weighing the different options available and selecting the one(s) that will produce the desired results for each individual case.
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The timing and coordination of actions are part of the overall case strategy that is developed. Often the strategy will include taking simultaneous case actions to maximize the benefits of the actions. The process of adopting a strategic approach to casework involves not only selecting the proper actions, but includes avoiding actions that can be time consuming or that produce minimal results. Duplicating actions that were unsuccessful in moving a case forward, including actions taken by Automated Collection System (ACS) or a prior revenue officer, are steps the revenue officer should avoid unless there are indications they will now be more effective. The strategic approach to casework differs from the plan of action in that it encompasses the analysis and decision making that takes place in formulating a plan of action. Applying a strategic approach involves analyzing the case information and using that information to develop a comprehensive case strategy that focuses on case resolution. This will result in an action plan that can be expected to produce the most effective results.
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In order to develop the strategy there will be times where you will have to place yourself in the shoes of the account you are working. If you are working a business account you will need to consider the types of expenses and income sources related to that business activity. If you are looking for information on a particular business or asset, you will have to consider how and where the asset is used and the expenses associated with that business or asset. This will help locate information and assets that can be used to resolve an account.
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The balance of this IRM section consists of strategy templates based on the type of case assigned to the revenue officer. While not all inclusive, the templates are intended to assist the revenue officer in developing the best strategy to apply in different types of case assignments.
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Initial Analysis - The initial analysis involves examining the overall case to understand the issues involved and the steps necessary to move the case to resolution. It will include the development and refinement of potential initial case actions necessary to prepare for the initial field call.
Scope:
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Type of case, complexity, and grade of the case determines the amount and depth of initial analysis. An in business trust fund pyramiding taxpayer will usually require a more detailed level of research.
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The objective is to conduct only the amount of research and analysis necessary to formulate an initial plan of action and to discuss the case in a reasonably knowledgeable manner with the taxpayer.
Research:
IRM 5.1.10.1, Pre-Contact, outlines the actions required during the initial case analysis. The revenue officer should determine if further research should be done before the field call. In making this determination the revenue officer needs to avoid spending too much time securing information that may not be necessary to resolve the case. Additional research can always be performed after the initial contact when the revenue officer will have a better understanding of what is needed to move the case towards resolution.
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Determine potential officers and check for prior Trust Fund Recovery Penalty (TFRP) assessments. Be alert for any indications that the taxpayer is pyramiding under a new Employer Identification Number (EIN) by checking compliance on any cross-referenced EINs. Be aware of situations where the taxpayer's filing requirements have been eliminated but it appears that the taxpayer is continuing to operate.
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Research Integrated Data Retrieval System (IDRS) and determine taxpayer's compliance history. If the taxpayer has unfiled returns, project the amount owed and incorporate the additional liabilities into the plan of action.
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Review Information Returns Processing (IRP) transcripts and attempt to determine the type of business prior to initial contact and locate potential levy sources.
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If the case warrants more detailed research, use web-based search engines to locate any web sites referencing the taxpayer or used by the taxpayer and research the site(s). For a comprehensive list of search engines and internet search techniques visit the
E-Business and Emerging Issues web site. Determine what, if any, additional internet research is necessary based on the key elements of the case and type of business. -
The objective is to find as much information as possible on how the taxpayer operates, such as the following:
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cash and/or credit card
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potential levy sources (account receivables, contracts, etc)
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other web sites owned by the taxpayer
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products and services offered by the taxpayer
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taxpayer’s business relationships
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information on the taxpayer’s industry, such as financial data and the legal environment for that type of business
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Consider reviewing the SB/SE web site, Investigative Techniques and Sources. This web site provides information specific to various professions and industries on sources of income, best techniques to locate assets/income, recommendations for financial analysis and probing interview questions.
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Document research findings and analysis in the Integrated Collection System (ICS) history.
Developing an Initial Plan of Action:
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Follow IRM 5.1.10.1, Pre-Contact, to develop a plan of action.
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The purpose is to address what was noted during the initial analysis.
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The goal is to anticipate what information will be needed and actions taken to continuously move the case towards resolution. Consider the most efficient order of actions and whether any case actions can be completed simultaneously.
Focus Point: If real property records list the owner of the taxpayer’s house or business address as a probable relative (same last name, living at same address, etc), review the ownership history to determine if the taxpayer transferred the asset to move it out of the government’s reach.
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Initial Contact
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Preparing for Initial Contact:
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Read IRM 5.1.10.3.2, Effective Initial Contact, for the minimum items that need to be addressed at initial contact.
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Know what is owed and what needs to be filed, i.e. Forms 941, 940, 1120, Federal Tax Deposits.
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Project the additional liabilities that can be expected from unfiled returns. This can be secured from the taxpayer or determined from internal resources, such as previously filed returns.
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Determine if the taxpayer is required to make federal tax deposits and the type of depositor.
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Determine the forms that will be needed, such as Forms 433-A and B, Form 4180, and blank tax returns.
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Know the questions and issues to address with the taxpayer and consider preparing an outline to ensure that all issues are covered.
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Determine the key issues to discuss with the taxpayer, such as the Notice of Federal Tax Lien, levy sources, and major account receivables. The key issues should be tailored to the taxpayer’s type of business.
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Consider the best time to make a field call based on the taxpayer’s location and type of business. For example, if the taxpayer operates a restaurant and the purpose is to observe the volume of business, it may be appropriate to make a field call at lunchtime. If the purpose is to conduct an interview, then a non-peak time would be appropriate. Another example is a construction business. In this situation it would be best to make a field call early in the morning when the officer/owner along with any assets are at the business location and not at a construction site.
First Contact:
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The goal of the initial contact is to bring the taxpayer into full compliance with all filing, paying, and deposit requirements.
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In most cases the initial contact will be a field visit to the business. The revenue officer should allow ample time to complete a thorough and comprehensive contact. If full payment and delinquent returns are not secured immediately, take full advantage of this opportunity to learn as much as possible about the taxpayer, their surroundings, and their business operation. Have the taxpayer give a tour of the business. Note the type of business and assets, whether taxpayer operates on a cash basis or accepts credit card payments, the type of credit cards accepted, and the number of employees. Make copies of lease, deed, mortgage statement, current balance sheet and other items if available.
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If the taxpayer is not at the place of business, consider asking an employee to telephone the taxpayer. The revenue officer should ask the taxpayer to come to the business. If the taxpayer is unable to come to the place of business, the revenue officer should attempt to hold an interview with the taxpayer over the telephone and request that an employee provide a tour of the business.
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Complete the Collection Information Statement (CIS), Form 4180, and any other necessary forms. If a complete CIS cannot be secured, gather as much information as possible so that if there is no further contact from the taxpayer, information will be available to take the next actions to resolve the case. Secure levy sources, such as account receivables, bank information, brokerage accounts, and income sources from other relevant parties, like spouses or business partners. If a complete Form 4180 cannot be secured, get key information, such as a list of officers and decision makers. Determine where the business banked during the delinquent period and secure copies of bank statements and cancelled checks.
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Ask open-ended questions when interviewing the taxpayer. Listen to the taxpayer’s answers and allow them ample opportunity to respond and expand on their answers. Make notes of all the facts given by the taxpayer. The questions should be tailored to fit the taxpayer and/or their type of business. For example, if the taxpayer is an attorney find out the type of practice, any industry specialization, and whether the taxpayer has a regular client base.
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Set a deadline for the taxpayer to perform any action required and calendar the item. Set a specific date and time with the taxpayer to discuss the results of the analysis of the CIS and calendar the item as a follow up action.
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Prepare for the next actions. This includes preparing for possible enforcement action by:
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Issuing Letter 1058 at first contact.
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Gathering effective levy sources concurrently with the issuance of the Letter 1058. If requested information is not provided by the taxpayer, then secure levy sources through third parties. IRM 5.1.17.3, Before Contacting a Third-Party, lists the actions required before generating third-party contacts.
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If necessary, summon bank deposits or other third-party sources to secure the information. Issue summonses early enough so that the information will be available once levy action is possible.
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Focus Point:
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Find the asset or income stream that will have the most impact if the taxpayer does not comply. This might be a major business receivable or an asset that is used in the daily operation of the business. A revenue officer’s first action after a missed deadline should be the one most likely to get the taxpayer’s engagement. If there is some fact or document the taxpayer can provide that will facilitate a levy or seizure, such as a deed copy or landlord’s phone number, then secure it during the initial contact.
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When conducting the TFRP investigation, consider all potentially responsible persons including the taxpayer’s spouse. If the spouse is found to be responsible and willful per IRM 5.7.3.3, Basis for Liability Under IRC 6672, and a determination is made to assert the TFRP, having an assessment on the spouse may facilitate a future action. An example is the seizure of both halves of a jointly owned asset, depending on local law.
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Financial Analysis
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Effective financial analysis involves securing the necessary information in order to make the proper decisions that will result in case resolution.
Determine where the taxpayer’s funds are coming from and where the funds are being dispersed. Secure the information directly from the taxpayer. If this is not possible, secure and/or verify the information through third parties. Once the information is secured, take the appropriate steps that will lead to case resolution. Analyze the CIS to determine ability to pay shortly after receipt and verification of the CIS.
Communicate the ability to pay determination to the taxpayer within a reasonable amount of time after receipt of the CIS.
Consider the following factors when deciding which items need verification and the best sources to use for verifying the information:
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The size of the liability, the type of business
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How the typical business in that industry operates
If no CIS is secured. There are times when a complete CIS cannot be secured. It may be the taxpayer can’t be located, the taxpayer provides incomplete information, or the taxpayer refuses to meet with the revenue officer. When a CIS or basic financial information cannot be secured on the initial contact, the revenue officer needs to take steps to secure the information. The revenue officer will need to locate assets and financial information through third-party records, interviews, and summonses. This will allow the revenue officer to proceed with actions that will move the case towards resolution.
Check internal sources
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A starting point can come by analyzing and summoning records for sources of income identified on IRP, such as Forms 1099 from bank and brokerage houses. Request copies of filed Forms 941 to determine who is signing them.
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Credit reports
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Internal websites, such as the E-Business and Emerging Issues and Investigative Techniques and Sources web sites, contain a variety of tools that can be used to locate taxpayers and their assets.
Check External Sources
Sources to identify assets or third parties to interview include:
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Business Contacts of the Taxpayer
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Neighbors
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Landlords or tenants
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Internet Research
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Lien Holders on vehicles
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Credit card companies
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Public Records:
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Title Companies
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Escrow Companies
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Purchasers or Sellers of real or personal property
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Civil files, including divorce records
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Property tax payments
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Take steps to locate the taxpayer’s bank account(s). In addition to being a levy source, the bank account(s) provides detailed financial information to use to locate additional assets. It also contains information to utilize to construct a detailed picture of the taxpayer’s financial situation. To locate the bank account(s), examine payments made to the taxpayer or payments made by the taxpayer. Use the payments as a starting point for locating assets and identifying links to assets or cash flow. An example of this would be summoning a utility company for a copy of the payment made by the taxpayer to identify the taxpayer's bank account. From that starting point the funds can be traced forward to obtain current information. Though the utility payment may be several months old, a summons to the taxpayer's bank will yield more current financial information.
It is important to analyze these sources and determine which ones will have the most current information that can be traced back to the taxpayer’s bank account. Once the bank account has been identified appropriate actions, including levy or summons, can be initiated. Some sources of information, such as lien holders on vehicles, secured parties on real property, landlords, and escrow files, will not only provide the link to the taxpayer’s bank account, but also may lead to loan applications on file. Recent loan applications may be reflected on a credit bureau report and can be summoned.
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Determining Case Direction/Developing and Implementing Case Strategies
A key element is whether the taxpayer is continuing a pattern of non-compliance. Identify this situation early in the case by reviewing IDRS and then verify payment and filing compliance with the taxpayer. Communicate to the taxpayer that non-compliance on their part prevents consideration of Installment Agreements (IA) or Offers in Compromise (OIC) and requires enforcement action.
If a business is operating at a deficit, direct case actions toward preventing the continued accruing of taxes and collecting as much of the taxes from the available sources. A plan of action coming from this case direction could be the seizure and sale of assets, if the requirements for seizure and sale have been met, or encouraging the voluntary closure of the business and liquidating the business assets.
While securing and verifying the financial situation of the taxpayer, continue to monitor and address current compliance. Calendar the taxpayer’s FTD due dates; then monitor and document the taxpayer’s deposit and filing compliance. FTD compliance can be verified and monitored by having the taxpayer fax copies of payroll ledgers and proof of federal tax deposits.
If there are unfiled returns, include in the case strategy specific actions that will enable the returns to be processed under IRC 6020(b). If the taxpayer has not filed several employment tax returns, contact state employment agencies or workers' compensation insurance companies for wage and employee records after the initial demand deadline for the returns is not met.
If the taxpayer is uncooperative or continues a pattern of non-compliance, enforcement is an obvious plan of action. Actions to accomplish this include the following:
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Verifying issuance of Letter 1058.
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Proceeding with enforcement against assets identified through the financial analysis noted above. See IRM 5.1.30.2(3). Assets include bank accounts, accounts receivables, brokerage accounts, retirement accounts, personal property, and real property.
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Concentrating on key assets that may result in significant payment or result in the taxpayer becoming more cooperative. Examples are levying major receivables, such as credit card processors, or seizing vehicles used in the everyday course of the taxpayer’s business.
When developing case strategies, consider using multiple tools to resolve the case. For example, an installment agreement coupled with an equity loan reduces the amount of time required for the installment agreement.
The TFRP is a tool that can be used effectively in conjunction with other collection tools. An in business installment agreement can be done in tandem with the TFRP, assessed or paid with personal assets. The TFRP can be assessed and collection initiated against the responsible individuals while proceeding with collection against the business entity.
Analyze the taxpayer's assets and encourage the taxpayer to factor accounts receivable to facilitate immediate full pay of the liability.
Consider issuing L903 in appropriate circumstances.
Often the taxpayer will propose a plan to resolve the liabilities, but don’t allow the taxpayer to dictate the case direction. Always verify the details of the plan to ensure that it is plausible. If a cash payment is offered, determine the source of payment. If the source is a loan from property, verify the equity in the property. If the plan offers monthly payments, review the financial statement to verify that there is a sufficient amount of net income available for a monthly payment.
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Revising Case Strategies
The key elements of the taxpayer case may change.
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Taxpayer may become compliant or non-compliant.
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Business may go out of business or change into a different entity.
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Liabilities may be significantly reduced by payment or adjustment.
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Liabilities may be significantly increased when delinquent returns are secured.
The case direction and strategy will change as the case characteristics change. As a result, case strategy requires frequent reviews and revisions.
In addition to adjusting to changes in the taxpayer’s situation, it is important to analyze the effectiveness of the actions taken. If an action has been ineffective in moving the case toward a case resolution, reevaluate the case strategy.
Focus Point:
Anticipate sudden actions such as the taxpayer filing bankruptcy. Take actions needed to protect the government’s interest, such as timely filing a Notice of Federal Tax Lien. Coordinate actions with Insolvency. Review bankruptcy schedules filed by the taxpayer for any inconsistencies. Attend the 341 hearing if appropriate. Formulate questions to ask the taxpayer at the 341 hearing.
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Initial Analysis - The initial analysis will involve examining the overall case to understand the issues involved and the steps necessary to move the case to resolution. It will include the development and refinement of potential initial case actions necessary to prepare for the initial field call.
Scope:
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Consider dollar amount, complexity, grade of the case, and other readily identifiable issues to determine the scope of initial analysis. For example, the presence of a Form 941 filing requirement will increase the level of case research.
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The objective is to conduct the amount of research and analysis necessary to formulate a plan of action.
Research:
IRM 5.1.10.1, Pre-Contact, outlines the actions required during the initial case analysis. The revenue officer should determine if further research should be done before the field call. In making this determination the revenue officer needs to avoid spending too much time securing information that may not be necessary to resolve the case. Additional research can always be performed after the initial contact when the revenue officer will have a better understanding of what is needed to move the case towards resolution.
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Research IDRS and determine compliance history for IMF entity and if applicable, Business Master File (BMF) entity. If the taxpayer has unfiled IMF or BMF returns, project the amount owed and incorporate the additional liabilities into the plan of action.
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Review IRP and attempt to determine the type of business prior to initial contact and locate potential levy sources.
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If the case warrants more detailed research, use a web-based search engine to locate any web sites referencing the taxpayer or used by the taxpayer and research the site(s). For a comprehensive list of search engines and internet search techniques visit the
E-Business and Emerging Issues web site. Determine what, if any, additional internet research to conduct based on the key elements of the case and type of business. -
The objective is to find as much information as possible on how the taxpayer operates such as:
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cash and/or credit card
-
potential levy sources (account receivables, contracts, etc)
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other web sites owned by the taxpayer
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products and services offered by the taxpayer
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taxpayer’s business relationships
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information on the taxpayer’s industry, such as financial data and the legal environment for that type of business
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If previous history indicates taxpayer’s profession consider reviewing the SB/SE web site Investigative Techniques and Sources. This web site provides information on sources of income, best techniques to locate assets/income, recommendations for financial analysis and probing interview questions.
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Document research findings and analysis in ICS history.
Developing an Initial Plan of Action:
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Read IRM 5.1.10.1, Pre-Contact, and then develop a plan of action.
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Consider all issues noted during the initial analysis and determine how they impact your plan.
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The goal is to anticipate what information will be needed and actions taken to continuously move the case towards resolution. Consider the most efficient order of actions and whether any case actions can be completed simultaneously.
Focus Point: Examine business records and IDRS to see if the business entity changed and liabilities exist under a different entity. -
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Initial Contact
Preparing for Initial Contact:
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Read IRM 5.1.10.3.2, Effective Initial Contact, for the minimum items that need to be addressed at initial contact.
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Know what is owed and what needs to be filed—Forms 1040, 941, 940, FTDs, estimated tax payments.
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Project the additional liabilities that can be expected from unfiled returns. Bring all forms that will be needed such as Forms 433-A and 433-B, and blank tax returns.
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Know the key questions and issues to discuss with the taxpayer such as the Notice of Federal Tax Lien, levy sources, and major account receivables. The key issues should be tailored to the taxpayer’s type of business. Consider preparing an outline to ensure that all issues are covered.
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Consider the best time to make a field call based on the taxpayer’s location and type of business. For example, if the taxpayer operates a construction company, it may be appropriate to make a field call in the early morning before the equipment and truck operators move to their work site for the day so that you can better observe the assets.
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Keep in mind that a sole proprietor's personal assets, as well as business assets, are subject to collection for the tax debt.
First Contact:
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The goal of the initial contact is to bring the taxpayer into full compliance with all filing, paying, and deposit requirements. Ask the taxpayer for full payment and any delinquent returns due.
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In most cases the initial contact will be a field visit to the business, or if the taxpayer operates the business from their home, their residence. The revenue officer should allow ample time to complete a thorough and comprehensive contact. If full payment and delinquent returns are not secured immediately, take full advantage of this opportunity to learn as much as possible about the taxpayer, their surroundings and their business operation. Have the taxpayer give you a tour of the business. Note the type of business and assets, whether taxpayer operates on a cash basis or accepts credit card payments, the type of credit cards accepted, and the number of employees. Make copies of lease, deed, mortgage statement, current balance sheet or other items if available.
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If the taxpayer is not at the place of business, consider asking an employee to telephone the taxpayer. The revenue officer should ask the taxpayer to come to the business. If the taxpayer is unable to come to the place of business, the revenue officer should attempt to hold an interview with the taxpayer over the telephone and request that an employee provide a tour of the business.
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Complete CIS and any other necessary forms. If a complete CIS cannot be secured gather as much information as possible so that if there is no further contact from the taxpayer, information will be available to take the next actions to resolve the case. Secure levy sources, such as; account receivables, bank information, brokerage accounts, and income sources from other relevant parties, like spouses or business partners.
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Ask open-ended questions when interviewing the taxpayer. Listen to the taxpayer’s answers and allow them ample opportunity to respond and expand on their answers. Make notes of all facts given by the taxpayer.
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Address further issues with the taxpayer based on the type of business involved. The questions should be tailored to fit the taxpayer and/or their type of business. For example, if the taxpayer is an attorney find out the type of practice, any industry specialization, and if the taxpayer has a regular client base.
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Set a deadline for the taxpayer to perform any action you require and put the item on your calendar. If you told the taxpayer you will get back to them after you analyze the CIS, set a specific date and time with the taxpayer to discuss the results of your analysis and then place this deadline on your calendar as a follow up action.
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Prepare for the next actions. This would include preparing for possible enforcement action by:
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Issuing Letter 1058 at first contact.
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Gathering effective levy sources concurrently with the issuance of the Letter 1058. If requested information is not provided by the taxpayer, then secure levy sources through third parties.
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If necessary summons bank deposits or other third-party sources to secure the information. Issue the summonses early enough so that the information will be available once levy action is possible.
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Making copies of lease, deed, mortgage statement, current balance sheet or other items if available.
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Focus Point: Even though the TFRP is not an issue for a sole proprietor, the TFRP can be asserted against an employee, surety lender, or spouse if they are found to be responsible and willful per IRM 5.7.3.3, Basis for Liability Under IRC 6672. If that appears to be the case, secure all the information on the employee or spouse you would need to complete the penalty. Having an assessment on the spouse could facilitate a future action such as seizure of both halves of a jointly owned asset, depending on local law.
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Financial Analysis
Effective financial analysis involves securing the necessary information in order to make the proper decisions that will result in case resolution.
The revenue officer needs to determine where the taxpayer’s funds are coming from and where the funds are being dispersed. This information will be secured directly from the taxpayer, or at other times, it will require securing or verifying the information through third parties. Once the information is secured the revenue officer needs to move forward in taking the appropriate steps that will lead to case resolution. Analyze the CIS to determine ability to pay shortly after receipt and verification of the CIS.
Communicate the ability to pay determination to the taxpayer within a reasonable amount of time after receipt of the CIS.
When deciding which items need verification and the best sources to use for verifying the information, there are several factors to consider, such as:
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The size of the liability, the type of business
-
How the typical business in that industry operates
If no CIS is secured. There are times when a complete CIS cannot be secured. It may be the taxpayer can’t be located, the taxpayer provides incomplete information, or the taxpayer refuses to meet with the revenue officer. When a CIS or basic financial information cannot be secured on the initial contact, the revenue officer needs to take steps to secure the information. The revenue officer will need to locate assets and financial information through third-party records, interviews and summonses. This will allow the revenue officer to proceed forward with actions that will move the case towards resolution.
Check internal sources
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A starting point can be determined by analyzing and summoning records for sources of income identified on IRP, such as Forms 1099 from bank and brokerage houses. Request copies of filed Forms 941 to determine who is signing them.
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Credit reports.
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Internal web sites, such as the E-Business and Emerging Issues and Investigative Techniques and Sources web sites contain a variety of tools that can be used to locate taxpayers and their assets.
Check External Sources
Sources to identify assets or third parties to interview include:
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Business Contacts of the Taxpayer
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Neighbors
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Landlords or tenants
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Internet Research
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Lien Holders on vehicles
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Credit card companies
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Public Records:
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Title Companies
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Escrow Companies
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Purchasers or Sellers of real or personal property
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Civil files, including divorce records
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Property tax payments
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The revenue officer should take steps to locate the taxpayer’s bank account(s). In addition to being a levy source, the bank account(s) will provide detailed financial information that the revenue officer can use to locate additional assets. It will also contain information that the revenue officer can use to construct a detailed picture of the taxpayer’s financial situation. To locate the bank account(s) the revenue officer should examine payments made to the taxpayer or payments made by the taxpayer to use as a starting point for locating assets and identifying links to assets or cash flow. An example of this would be summoning a utility company for a copy of the utility payment made by the taxpayer. From that starting point the funds can be traced forward to obtain current information. Though the utility payment may be several months old, a summons to the taxpayer's bank will yield more current financial information.
It is important to analyze these sources and determine which ones will have the most current information that can be traced back to the taxpayer’s bank account. Once the bank account has been identified appropriate actions including levy or summons can be initiated. Some sources of information, such as lien holders on vehicles, secured parties on real property, landlords, and escrow files will not only provide the link to the taxpayer’s bank account, but also may have loan applications on file. Recent loan applications may be reflected on a credit bureau report and can be summoned.
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Determining Case Direction/Developing and Implementing Case Strategies
A key element is whether the taxpayer is continuing a pattern of non-compliance. Identify this situation early in the case by reviewing IDRS and then verify payment and filing compliance with the taxpayer. Communicate to the taxpayer that non-compliance on their part prevents consideration of IAs or OICs and requires enforcement action.
If a business is operating at a deficit, case actions will be directed toward preventing the continued accruing of taxes and collecting as much of the taxes from the available sources. A plan of action coming from this case direction could be the seizure and sale of assets or encouraging the voluntary closure of the business and liquidating the business assets.
While securing and verifying the financial situation of the taxpayer, continue to monitor and address current compliance. Calendar the taxpayer’s FTD due dates, then monitor and document the taxpayer’s deposit and filing compliance. FTD compliance can be verified and monitored by having the taxpayer fax copies of payroll ledgers and proof of federal tax deposits.
If there are unfiled returns, include in the case strategy specific actions that will enable the returns to be processed under IRC 6020(b) if the taxpayer fails to file the returns. If the taxpayer has not filed several employment tax returns, contact state employment agencies or workers' compensation insurance companies for wage and employee records after the initial demand deadline for the returns is not met.
If the taxpayer is uncooperative or continues a pattern of non-compliance, enforcement is usually the appropriate plan of action. Actions to accomplish this include the following:
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Verifying issuance of Letter 1058.
-
Proceeding with enforcement against assets identified through the financial analysis noted above. See IRM 5.1.30.3(3).
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Levying of bank accounts, accounts receivables, brokerage accounts, retirement accounts, tangible and intangible personal property, and real property.
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Concentrating on key assets that may result in full payment, significant payment, or would necessitate the taxpayer’s cooperation in order to continue business. Examples would be levying major receivables, such as credit card processors, or seizing vehicles used in the everyday course of the taxpayer’s business.
When developing case strategies, consider using multiple tools to resolve the case. For example, an installment agreement coupled with an equity loan reduces the amount of time required for the installment agreement.
The TFRP, where applicable, is a tool that can be used effectively in conjunction with other collection tools. An in-business installment agreement can be done in tandem with a proposed TFRP against the responsible individuals while proceeding with collection against the business entity.
Analyze the taxpayer's assets and encourage the taxpayer to factor accounts receivable to facilitate immediate full pay of the liability.
If a creditor is advancing credit to the taxpayer, hand deliver a copy of the Notice of Federal Tax Lien to the creditor. If the creditor receives actual knowledge of the filed tax lien before the forty-five days from lien filing have expired, the creditor must immediately stop lending the money if it wants to have priority for the entire amount loaned. See IRM 5.17.2.5.3.4, 45-Day Period for Making Disbursements.
Consider issuing L 903 in appropriate circumstances.
Often the taxpayer will propose a plan to resolve the liabilities. Analyze such plans objectively. Don’t allow the taxpayer to dictate the case direction. Always verify the details of the plan to ensure that it is plausible. If a cash payment is offered, determine the source of payment. If the proposed source is a loan from property, verify the equity in the property. If the plan offers monthly payments, review the financial statement to verify that there is that amount of net income available for a monthly payment.
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