The Realities of Resolving Back Tax Debt

Tax resolutions aren’t for every accountant, but it can be lucrative if you know the right way to deal with them.

For any tax pro, sooner or later their clients need to resolve back tax debt. This inevitably leads to many hours of dealing with the IRS, going through the right processes and, of course, the emotional aspects of clients who have fallen into arrears with their taxes, usually due to avoidance.

According to Eric L. Green, tax resolution work isn't to be taken lightly, but it can be fulfilling, and he thinks more accountants would do it if they were taught how.

During AccountingWEB Live Summit, tax attorney Eric L. Green and Darren Guillot, IRS Deputy Commissioner of SBSE Collection & Operations Support detailed the processes and procedures accountants can go through to properly conduct tax resolutions for their clients.

May 11th 2022

Tax resolutions aren’t for every accountant, but it can be lucrative if you know the right way to deal with them.

For any tax pro, sooner or later their clients need to resolve back tax debt. This inevitably leads to many hours of dealing with the IRS, going through the right processes and of course the emotional aspects of clients who have fallen into arrears with their taxes, usually due to avoidance.

According to Eric L. Green, tax resolution work isn't to be taken lightly but can be fulfilling and, moreover, he felt more accountants would do it if they were taught how.

"I've always wondered why tax resolutions aren't taught. It is a niche area where you end up practicing in and some don’t intend to do. As you do it more, you will get the reputation for it and it can be good business," said Eric. " Tax collection is very linear, when clients start getting levied they panic and most accountants are not trained to deal with it and, as we know, calling the IRS these days has been a ‘joy.’ But it doesn't have to be this way. It really just becomes more a matter of helping clients be more proactive about their tax debts."

Eric explained that the first step to a tax resolution starts when a client comes to you with a tax debt problem, get them into compliance as soon as possible. More specifically, they filed returns that they are due and owe in the current tax year and if they are not in compliance you can’t do a Offer in Compromise (one of the most common resolution vehicles.

Some of the hesitation of getting into tax resolution work is, as Eric mentioned, the idea of spending hours on the phone with the IRS not being appealing. The IRS's Darren Guillot, however, professed that the agency is making improvements to help deal with the sheer volume of calls it does receive to resolve back tax debts.

"Enforcement is always a last resort, even though it’s what the IRS is known for," said Darren.  “I receive calls from practitioners when they cannot reach IRS personnel and I personally get involved and look into those cases.”

He mentioned that short-term installment agreements have been extended 120 to 180 days and that the IRS is trying to work more with those who owe. The default rate on these agreements is only 11 percent, he said, adding that most people who set up payment plans are keeping them. Offers In Compromise are also still 120 days to make up a missed payment,

Darren also broke some news on how the IRS plans to handle the amount of calls it receives to help resolve tax debts, addressing it in two ways. The first was through AI. He said “ The IRS has been using chat bots since December 11 and unauthenticated voice bots since January 3rd.”,  By the middle of June the IRS will have authenticated voice bots that could close a case with a payment agreement and also get a transcript for the taxpayer. AI is where that is going to happen. By the end of June or July, if you see better service from the IRS it's because the bots are picking up a lot of those calls."

"The most immediate problem for us is the tens of millions of calls coming in that we can’t answer, we need the bots," said Darren.  “We want to answer every call, but Automated Collection System call site (ACS) had only been answering 2 out of every 10 calls and now 3 out of every 10.”

 "SBSE Collection sent 980 employees to help with  the backlog of returns and correspondence

Darren also noted that IRS employees will be returning to the office and back out in the field at the end of June. In addition, an IRS campus in Puerto Rico recently hired over 400 employees and another 400 are to be hired making 850 new employees there this summer. It will be the largest ACS site in the US and most, but not all, of those employees will be bilingual.

He also professed that he saw a time, in the not too distant future, where the IRS could be far more automated than it's ever been. "I expect a future soon where all taxpayers will file electronically and interact with us digitally and chat would be the main way we’d help them online.”