The duties of the National Taxpayer Advocate (NTA) are set out in IRC 7803(c). Section 7803 describes the duties not only of the NTA but also of the Commissioner, the Chief Counsel and the Treasury Inspector General for Tax Administration. The code section merits reading because of the roadmap it provides to various parts of the IRS organization. Included among the duties assigned to the NTA is the duty to “develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to local offices of taxpayer advocates…”
In this post I will address the newly listed policy criteria for getting a case into the local Taxpayer Advocate Service (TAS) office. Before doing that, however, a look at the traditional criteria sets the scene. A detailed analysis of the factors for acceptance into TAS and the role of case advocates can be found in the National Taxpayer Advocate’s 2015 annual report.read more...
The two most common criteria for TAS referral are hardship and repeated failure of the IRS to respond to a taxpayer inquiry. These two criteria, however, only serve as general principles. The actual criteria exist in the Internal Revenue Manual (IRM) 126.96.36.199. TAS breaks the criteria into four categories and describes them in slightly different terms from me. The first category involves cases creating an economic burden (hardship) and allows local TAS offices to accept cases meeting one of four listed economic burden criteria: (1) the taxpayer is experiencing economic harm or is about to suffer economic harm; (2) the taxpayer is facing an immediate threat of adverse action; (3) the taxpayer will incur significant costs if relief is not granted; and (4) the taxpayer will suffer irreparable injury or long-term adverse impact if relief is not granted.
As with any of the TAS criteria discussed here, a taxpayer who can demonstrate to TAS that their case fits into one of the enumerated criteria will have their case accepted by the local taxpayer advocate office and assigned to a case advocate. Having their case assigned to a single advocate can create a significant benefit for many taxpayers whose cases would otherwise end up with a rotating pool of IRS employees at the Automated Call Sites or Correspondence Exam. Except for the fact that the case advocates may have too many cases to effectively handle them all, the single point of contact with a person inside the IRS working to resolve your problem offers a great advantage in trying to work through the maze of the federal tax system.
In addition to the four criteria under the economic burden label, TAS provides three criteria for accepting cases under system burden. In general, these cases involve a failure in the IRS system to operate as intended. The three criteria under this label are: (1) the taxpayer has experienced a delay of more than 30 days to resolve a tax account problem; (2) the taxpayer has not received a response or resolution to the problem or inquiry by the date promised; and (3) a system or procedure has either failed to operate as intended or failed to resolve the taxpayer’s problem or dispute within the IRS. Of course, as the IRS becomes more dysfunctional due to the funding cuts, more cases meet the system burden criteria which means even more work for TAS which means it too has become somewhat dysfunctional because the case advocates there have too much work to do. The failure to properly staff the IRS creates a vicious cycle in this regard.
The eighth criteria for getting a case accepted by TAS goes under the name “best interest of the taxpayer” and seeks to ensure that taxpayers will receive equitable treatment and that their rights as taxpayers receive respect and protection. The IRM describes this criteria as one where the “manner in which the tax laws are being administered raises considerations of equity, or has impaired or will impair the taxpayer’s rights.” Of course, this criterion fits like a glove with the new Taxpayer Bill of Rights and offers the prospect of TAS assistance where the taxpayer can demonstrate that some facet of TBOR has failed in application to their situation. This criterion makes it worthwhile to learn and apply TBOR to every case where you want to seek TAS assistance.
The final basis for getting a case accepted by TAS is public policy. The first eight criteria are essentially static but this last basis changes periodically based on problems that the NTA identifies. On November 2, 2015, the NTA issued TAS-13-1115-007 providing interim guidance on cases TAS will accept based on public policy. The guidance lists three circumstances: (1) organizations where IRS automatically revoked their tax-exempt status because the organization did not file an annual return or notice for three consecutive years; (2) cases involving any tax account-related issue referred to TAS from a Congressional office; and (3) cases involving an IRS levy on any Thrift Savings Plan (TSP) as part of the pilot program in IRS ACS units. I suspect soon the NTA will issue guidance including any case in which a private debt collection company seeks to collect from a taxpayer. She issued such guidance the last time private debt collectors were loosed on taxpayers. It will be interesting to see if private debt collectors are allowed to collect on debts arising from the Affordable Care Act that would otherwise rely essentially on notices and offset.
Of the public policy bases for TAS relief, I want to focus levies issued to TSP. TSP is the 401(k) type plan available to federal employees. This issue only affects current or former federal employees because only these individuals will have such an account. On December 7, 2015, Chief Counsel Notice 2016-001 issued and superseded Chief Counsel Notice 2013-007. These notices provide guidance concerning how the IRS will levy on TSP accounts. Because of an interpretation of the enabling legislation, the IRS has taken the position that it can levy on these accounts to reach funds which the employee could not reach. Ordinarily, a levy on a retirement account only reaches the amount of funds available to the owner of the retirement account at the time of the levy. So, the interpretation with respect to TSP accounts represents a significant departure from the IRS ability to reach funds from any other type of retirement account and has gained the attention of the NTA.
On January 14, 2013, Congress amended 5 U.S.C. § 8437(e)(3) to provide that moneys due and payable from TSP were subject to a Federal tax levy under I.R.C. § 6331. The provision specifically provides that:
“Moneys due or payable from the Thrift Savings Fund to any individual and, in the case of an individual who is an employee or Member (or former employee or Member), the balance in the account of the employee or Member (or former employee or Member) shall be subject to legal process for the enforcement of the individual’s legal obligations to provide child support or make alimony payments as provided in section 459 of the Social Security Act (42 U.S.C. 659), the enforcement of an order for restitution under section 3663A of title 18, forfeiture under section 8432(g)(5) of this title, or an obligation of the Executive Director to make a payment to another person under section 8467 of this title, and shall be subject to a Federal tax levy under section 6331 of the Internal Revenue Code of 1986. For the purposes of this paragraph, an amount contributed for the benefit of an individual under section 8432(c)(1) (including any earnings attributable thereto) shall not be considered part of the balance in such individual’s account unless such amount is nonforfeitable, as determined under applicable provisions of section 8432(g).”
On September 10, 2014, the Federal Retirement Thrift Investment Board published final regulations to implement the statute detailing the procedures for complying with federal tax levies on TSP accounts. The regulations allow the IRS to reach the TSP and may go beyond the grant in the statute. In her 2015 annual report the National Taxpayer Advocate identifies levies on retirement accounts as #11 in her most serious problems. The write up regarding this problem does not specifically discuss special problems with the levy on the Thrift Savings Plan but provides useful information for anyone interested in the general issue of the ability of the IRS to levy on retirement accounts and the policies that the IRS applies in making decisions to levy on these accounts. Watch for comments from the NTA on this issue because its location on this list signals that it will receive criticism from the NTA in her annual reports and elsewhere due to the perceived unfairness to federal employees.
If you have an issue that raises policy issues for a group of taxpayers, you can bring this to the attention of the NTA in hopes that it will make the policy list and open the doors to TAS assistance. TAS assistance does not mean that someone whose TSP is levied will get their money back but it does mean that the IRS actions on the account will receive significant scrutiny from the TAS caseworkers who may see procedural irregularities practitioners might find difficult to spot.