Posted On January 14, 2015

IRS tax liens reversed by tax court where discretion was abused

It may be unknown to most people in Nevada and elsewhere, but there is a tax law that gives IRS agents the discretion to exercise their judgment in pursuing collection cases. If that discretion is abused by the agent, the taxpayer may have the chance of reversing the agent’s actions in a federal tax court. This rule applies to the injudicious entrance of tax liens against a taxpayer when a more conservative collection approach would have been more reasonable and fruitful.

Sometimes, the premature entry of a tax lien can prevent the taxpayer from getting the financing to pay off the tax debt or from entering into a monthly payment plan. The IRS computers are very jumpy and essentially programmed to use tax liens on every case. For people with a small business who are making arrangements to pay, the tax lien may result in dumping the taxpayer’s chances to work out an agreement.

This kind of double bind was placed on a taxpayer who was trying to make arrangements to pay a $200,000 debt in an installment agreement. He pleaded with the IRS to not enter a tax lien so that he could raise funds toward the agreement. The IRS said it was too big of a risk. The lien gives notice to the public that the purchase of the taxpayer’s assets or the provision of financing to him or her may be a losing or much more difficult proposition due to the assets being tied up.

A United States Tax Court ruled that the IRS had exceeded its discretion in insisting on tax liens under the circumstances. The best way for a taxpayer in Nevada or elsewhere to approach a problem like this is to obtain the advice and assistance of a tax collection attorney to represent one’s interests before the IRS. With the support of cases like the above, a tax professional can give the taxpayer the greatest leverage and strongest impact when negotiating with the IRS.

Source: elpasotimes.com, “David Leeper: Get creative with tax payment structure“, David Leeper, Jan. 11, 2015