IRS Appeals Arbitration Program

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Online Bill Paying
If you are like most people, you know that paying bills is an important part of maintaining good credit. If you are late or if you miss payment on a particular bill, you could soon find yourself hit with dunning letters or worse: your credit score could take a hit. Thanks to online bill paying those cares are done away with for the most part. If you aren't paying the majority of your bills online ... Read personal finance article



Inheritance Tax
With ever-increasing property prices, more and more people's assets are now worth more than the inheritance tax threshold of £285,000, which has never been increased in proportion to the recent property boom. With a rate of 40% inheritance tax on any assets above the £285,000 threshold in the estate, this can really put a dent in what your heirs receive from your estate.

Inheritance tax... Read personal finance article



IRS Appeals Arbitration Program
The IRS recently released Revenue Procedure 2006-44, which sets out the rules for the finalized IRS Appeals Arbitration program. This new program presents some new opportunities that taxpayers must consider.

The new IRS Appeals Arbitration program provides yet avenue to appeal factual issues that are cannot be resolved by the IRS appeals process. The program is not available for legal issues, issues that the IRS wants to litigate, and some collection issues. The program is available for factual issues related to rejected offers in compromise and responsible persons for purposes of the trust fund recovery penalty.

Both the taxpayer and the IRS must mutually agree to submit to arbitration and the issues, questions, and amounts can be limited in the arbitration agreement between the IRS and the taxpayer.

The taxpayer may initiate arbitration by submitting a written request, after consulting with the IRS appeals office that is handling the case. The Revenue Procedure specifies that the Appeals Team Manager "will" respond within two weeks (this is somewhat humorous, as it often takes months for a team manager to even return a phone call).

The IRS Revenue Procedure says that IRS refusal to arbitrate is not subject to judicial review (which may or may not be true).

The Revenue Procedure then says that after the IRS okay's the request to arbitrate, the parties "will" enter into a written agreement to arbitrate. The Procedure does not specify what happens if the parties cannot agree on the arbitration terms.

The parties can then select an arbitrator, which can be an IRS Appeals Officer from a different Appeals Office or an outside third party who is registered with "any local or national organization that provides a roster of neutral [arbitrators]." (Just FYI: I might be willing serve as an arbitrator in this type of proceeding, so please contact me if you need this service). The Revenue Procedure also provides that the IRS and the taxpayer are to pay for the cost of arbitration, regardless of which party prevails.

This new program raises a number of issues. First, this new program seems to be an admission by the government that the IRS Appeals process is flawed. By law, the IRS Appeals Office is supposed to provide an independent third party review. There are even specific prohibitions on ex parte communications between the IRS and the IRS Appeals Office, etc. That begs the question of "why the unbiased third party IRS Appeals Office needs to bring in an unbiased third party to handle an IRS appeal?"

Second, if the IRS and taxpayer agree to enter into arbitration, what happens to the statute of limitations for the IRS to assess additional taxes or for the IRS to collect taxes? For example, the statute of limitations for collecting the underlying tax is suspended if the case is before the IRS Appeals Office pursuant to a collection due process hearing request. Is the IRS going to merely not issue a final determination in the collection due process hearing until after the arbitration hearing in order to extend the statute of limitations for collection beyond what is already provided for? If this is the case, is the IRS going to notify taxpayers about this issue in advance?

Can taxpayers use this program to delay IRS collection efforts? We all know that taxpayers are going to try this, yet the IRS Revenue Procedure does not provide any guidance on this. Does this invite taxpayers to use this new program to delay IRS collections?

By the way, are IRS collection efforts going to be suspended during the time that the arbitration hearing is pending (my guess is that in most cases it will not be suspended).

Third, can taxpayers use the new procedure as a sword and not merely a shield? For example, can taxpayers use the arbitration proceeding to get a ruling that the IRS's position had no basis in fact or law to entitle the taxpayer to an award of attorney fees? Or can taxpayers get a ruling that an IRS employee has violated our tax laws and/or IRS policy (such as the Revenue Restructuring Act of 1998) which requires that the IRS employee be fired?

Even with these questions, the new program may be helpful for taxpayers who find themselves unable to get a fair appeals hearing because the IRS appeals officer has failed to comply with our tax laws and/or IRS policy. I personally have worked a number of cases where the IRS appeals employees' have failed to give any consideration to any law or fact (In fact, in one case I had an IRS appeals employee tell me that she would not consider anything that was presented and she was going to deny the taxpayers claim - and that was before the taxpayer had an opportunity to submit any evidence, make any arguments, or even say one word).

While this new proceeding might be helpful in these types of cases, my guess is that the IRS will simply refuse any request to arbitrate in these types of cases - i.e., the types of cases for which the program was intended for.

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Budgeting Services

You can easily make changes to your monthly household budget but the important thing is to find places and things that you can do that are quick hits and will slow down the flow of money out of you household

1. Keep a record book as well as your bankbook

It takes time and requires a lot of self-discipline. Start each month with the balance and enter every payment, etc in advance, in the form of a calendar. It works well for most people due to the fact that they always have their actual working balance handy. Remember the comment about having your financial information at your fingertips? Here is a sure-fire way to get you on that path quickly.

2. Calendar Calculations

Putting regular bills on a calendar based on due dates and when salaries are received proves helpful to some. This helps specifically to get everything paid on time and keep in perspective where the money actually goes, since all miscellaneous expenses are also recorded.

3. Getting bills paid

Working out all the major and large bills (i.e., rent, car payment, insurance, etc.), dividing it up so every week, that amount is removed from the family ''paycheck'. Therefore, at the end of the month, there is need or risk to lose an entire paycheck to rent or car registration.

4. 1-2-3-4 Plan

Divide all bills weekly. A set amount goes to a savings account each week. When there is a 5th Friday in a month, you have a "free paycheck" to save.

5. Open a household account

In a second checking account, deposit a sum that covers your monthly expenses. Have all of your bills automatically withdrawn. This account acts as a holding cell for household obligations - the primary account is for day-to-day operations. Works for me!

6. A timely budget

Get a notebook. List expenses and their due dates. Divide payments into small amounts & use labeled envelopes for payments and money storage. Reduce duplicate credit usage to 1 or 2 credit cards. Use the net for bill paying and to check your accounts.

7. Yearly savings

Making a list of all annual or once-a-year type bills (car registration, shots for pets, school pictures, etc.) and divide them by 12. Save this amount each month and, when one of these items come up, you have the money to pay it. No more surprises.

8. Save credit card receipts

Keep an envelope in the car for the credit cards you use. When you buy anything using a card, put the receipt in the envelope as soon as you enter the car. Keep changing the envelope every month. This will save you time and hassle when looking for receipts.

9. Only twice a month

Separate all bills to be paid on either the 1st or 15th of the month. This enables you to pay all bills at once and on time. An added bonus is that you will also immediately know how much money you have left over for entertainment, vacation and other discretionary items.

10. Split into Savings and Checking

Figure out a budget based on a savings account/checking account split. Savings builds up for things like real estate taxes, vacations, and insurance. Checking is monthly (e.g. phone, groceries, etc.). Split your monthly income into the savings and checking accounts according to the budget. Savings amounts are strictly budgeted. The checking account is controlled by watching the balance until the next payday.

11. Respect your partners need for financial security

Everyone likes to buy their toys, but the overall financial security of the household needs to be considered first. I am not against toys; just save up the money first to buy them versus putting non-essential day-to-day expenses on credit.

An example of a toy in my relationship was the spouse's need to have a big expensive truck in the driveway. I was not against the truck, I was against the debt to purchase the truck when there was no money in the savings or money built up for college tuition. Be considerate of the overall family financial situation and provide financial security for your family.




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IRS Appeals Arbitration Program
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