QUESTION: Does the IRS really send its employees to visit people at their homes or businesses?
ANSWER: Yes. Whenever the IRS believes that a person or business has not paid all the taxes it owes, the IRS may send out a field agent called a “Revenue Officer” to talk to the taxpayer in person. ROs typically work “high dollar” cases. They frequently investigate business cases, employment tax liabilities, people who fail to file their tax returns and known or suspected repeat offenders. Many targets of RO visits are business owners who are also employers.
QUESTION: What is a “high dollar case”?
ANSWER: High dollar cases involve tax debt, sometimes called “back-tax liability” in amounts of $25,000 or greater.
QUESTION: If I’m an employer, what kinds of back taxes are likely to trigger an RO visit?
ANSWER: The IRS is especially interested in “IRS 940” and “IRS 941” taxes. IRS 940 is the the employer’s annual federal unemployment (FUTA) tax return. Employers must file the IRS 940 quarterly to inform the IRS of the unemployment taxes they have paid on behalf of their employees. Employers must file Form 941 to report income tax and other federal withholdings that they have withheld from employee’s paychecks. In addition, the IRS pays careful attention to other payroll taxes, including Federal income tax withholdings and Medicare and Social Security Taxes.
QUESTION: If I’m not an employer, what things might result in a visit from an RO?
ANSWER: If you work for someone who is not withholding Federal income, social security or Medicare taxes from your paychecks, then you are technically self-employed. Self-employed people, also called independent contractors or contract employees (even though they are not really employees at all for tax purposes), need to file quarterly returns using the IRS 1099 MISC form if they owe more than $1,000 in taxes. The IRS does not take kindly to people who skip quarterly filings and just pay their taxes in a single lump sum for the whole year.
Self-employed individuals may also receive visits from ROs if the IRS suspects them of failing to disclose all their income or of improperly claiming business expenses.
QUESTION: What is the first thing I should do when an IRS agent comes to my door?
ANSWER: Ask to see the agent’s identification. Revenue Officers (ROs) carry plastic identification cards. IRS Special Agents (SAs) are law enforcement officers and carry badges. This article is mostly about ROs. Ask the RO to allow you to copy down his name, field office and the other information from his identification card. Your attorney will need this information to represent you with the IRS.What will an RO do when he makes an unannounced visit?
QUESTION: What will an RO do when he makes an unannounced visit?
ANSWER: After showing you his IRS employee card, the RO will leave with some documents. These documents will explain what information the RO requires from for the investigation, with a deadline to get those documents to the IRS. It’s important to comply with this deadline, and any other deadline in an IRS investigation, or the IRS will proceed to garnish bank accounts or levy against your other assets. An attorney can talk to the IRS about extending the deadline if you need more time to obtain and organize all the documents.
QUESTION: What is the difference between an IRS Revenue Agent (RA), an IRS Revenue Officer (RO) and an IRS Special Agent (SA)?
ANSWER: All are IRS agents.
Revenue Agents perform audits or “examinations:, but they do not collect taxes. An RA’s job is to determine how much tax you owe.
Revenue Officers are collections agents and they are the IRS employees most often sent to visit homes and businesses. Their job is usually to collect on unpaid payroll taxes, although they may collect on unpaid income taxes as well. They are not law enforcement officers and they do not carry firearms or badges. They carry plastic IRS identification cards. This article mostly discusses visits from ROs. Even though ROs are not law enforcement officers, they can arrange for a court to issue a summonses and subpeonas to make you comply with their investigations. If you fail to comply with a summons or subpeona, law enforcement officers can be called in.
An IRS Special Agent typically investigates tax crimes. They are law enforcement agents and they carry badges and guns. They often travel in pairs. Unlike ROs, they have the power to arrest people.
QUESTION: Why does the IRS use field agents?
ANSWER: The IRS uses field agents because it’s an effective way for them to learn whether people are paying all the taxes they should. They look for suspicious circumstances, such as people with lavish lifestyles who are not paying taxes or who are only reporting modest levels of income on their tax returns. They try to discover assets that the IRS can levy against to collect back taxes. They gather information by noticing the kind of house you live in and the sort of car you drive. They may also gather information by speaking with your friends, family or employers, who can tell them if you take expensive vacations or have costly hobbies and home furnishings. This is very embarrassing for the person under investigation and the IRS knows very well that getting the embarrassment to stop is a great incentive to get people to cooperate with the IRS.
QUESTION: Do I have to agree to let IRS employees into my home or business?
ANSWER: IRS employees are government employees. They are only entitled to enter public areas in your home or business, unless they present you with a warrant signed by a magistrate judge. Of course, most private homes do not have public areas, so you can normally refuse to allow them into your home entirely.
QUESTION: Do I have to talk to the IRS agent who shows up unannounced at my door?
ANSWER: You have to cooperate with an IRS investigation. However, that does not mean you are obliged to have a discussion about your taxes or other financial matters when an IRS Revenue Officer appears at your door. Whether or not you decide to allow the agents into your home, you can phone your tax professional, who can be a Certified Public Accountant (CPA) or an attorney. You can allow the IRS agent to speak to your tax professional over the phone.
Of course, if the IRS agent is a Special Agent, then you have the same rights as the subject of any criminal investigation. If the SA is there to arrest you, state that you need a lawyer and say nothing further until a lawyer arrives to represent you. Otherwise, tell SA that you will have your attorney phone him and ask him to give you a card with his contact information.
QUESTION: What will happen if no one answers the door when the RO makes a surprise visit?
ANSWER: The RO will leave a written notice of her visit and with information about how to contact her. There is usually a deadline for doing this. Do not ignore this notice and do not throw it away! If you ignore the notice, the IRS will issue a summons for you to appear at the IRS office. If you don’t appear, the RO will arrange for a court to issue a summons for you to appear at the IRS office to testify. Your best course of action is to contact an attorney to represent you as soon as you discover the RO has visited. That attorney can then contact the IRS, learn the details of whatever case they believe they have against you and make sure that you are no longer contacted by the IRS without your attorney present.
QUESTION: What can I do if I don’t have a tax professional or cannot reach that person while the Revenue Officer is at my home or business?
ANSWER: Remain polite, and explain that you are getting representation. Ask to see the RO’S ID card again, and write down his or her name and ID number. Ask the RO to write down a quick note describing the tax matter (Are you suspected of unpaid payroll taxes? Underpaid income taxes? Something else?), the Form number and tax year(s) in question. Your tax representative will need this information to discuss your case with the IRS.
QUESTION: Do I really need a lawyer to deal with the IRS?
ANSWER: If the IRS considers your case serious enough to send an RO to your door, then you certainly do. The RO’s job is to collect back taxes. He or she may encourage you to agree to an offer in compromise or a payment plan. A lawyer can tell you the advantages and disadvantages of different types of agreement with the IRS, and what rights you keep or lose under those different types of agreement. Once you give your lawyer permission to communicate with the IRS on your behalf, the IRS is no longer allowed to communicate with your directly without your lawyer present. Finally, a lawyer can intervene before the IRS levies against your assets.
QUESTION: If I believe the IRS is correct about the taxes it says I owe, why shouldn’t I simply enter into agreement with the RO agreeing to pay the IRS?
ANSWER: It can be tempting to do this, because it’s natural to want to put problems like this behind you as soon as possible. You need to remember, however, that an RO is a collections agent. His job is to get you to agree to pay the IRS as much as possible as quickly as possible. Revenue Officers may try to push you into an installment agreement or other collection alternative that you can’t afford. You have to remember, no matter how nice and professional a Revenue Officer is, his job is to represent the government’s best interest and not yours. have to fill it out on the spot.
QUESTION: What happens when I engage an attorney?
ANSWER: Once your attorney contacts the IRS to inform them that he is representing you, the IRS will stop contacting you. That means no RO visits. Your attorney can also request something called a “collections hold” while he obtains the documents the RO requested during the unannounced visit. This can be an extension on the deadline the RO gave you to produce those documents. This way, you’ll be able to collect and organize your financial records in an orderly way and your attorney will have time to review them before dealing with the IRS. In the meantime, the IRS will not file any levies or attachments against your assets.
QUESTION: Who can an IRS agent talk to during the course of his or her investigations?
ANSWER: An IRS field agent can talk to you, your employer, your family, your neighbors, business contacts and anyone else he or she believes might have information relevant to the investigation. This can be extremely embarrassing and you may be tempted to enter into an agreement with the IRS just to stop the investigation. Do not give into this impulse. You need the services of an attorney who can tell you the consequences of any type of agreement you might reach with the IRS as well as the consequences if you do not reach an agreement. Do not let embarrassment to stop you from becoming informed about your rights!
QUESTION: What can I do if I don’t believe I owe as much money as the IRS says I do?
ANSWER: Contact an attorney who has experience in representing taxpayers with the IRS. Sometimes, a taxpayer will believe that he is not required to file certain returns or pay certain taxes. Perhaps you thought you were considered an employee for tax purposes and never filed 1099 MISC quarterly returns, but the IRS believes you were an independent contractor and should therefore be treated as if you were self-employed. Your attorney can advise you on whether you, or the IRS, has the mistake.
QUESTION: What can I do if I don’t have enough money to pay the IRS?
ANSWER: This is a common situation. Once again, it is important to contact an attorney to discuss your options. You want to be aware of the legal consequences of any agreement you might enter into with the IRS. What if you are unable to fulfill your side of the agreement at some time in the future? Will you be able to discharge those debts in bankruptcy? Will the IRS be able to seize your assets? How long can the IRS enforce an agreement against you? There are various ways to deal with the situation of not having the money to pay the IRS, but federal tax law is complex and you should learn the pros and cons of these different methods from an attorney.
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