Can IRS Just Shut Me Down? Unfortunately....Yes (But It Doesn't Have To Get To That).
Jul 10, 2017
There was a news story over the weekend recounting how the government went to an immigrant elderly couple's dress and tuxedo shop and proceeded to sell all their inventory--which was valued at over $600K--for just over $17K.
The original bill owed to the government amounted to just over $31K.
As you can imagine, this pretty much left the family destitute and most definitely out of business. The story then proceeds to give the details (from the couple's POV) as to what happened and also informs us that the couple is seeking $1.8M in a lawsuit for the maltreatment.
The article read almost like a movie: unmarked cars with over 20 agents pulling up to the location and selling everything but the kitchen sink in a matter of hours. The reporter's narrative quickly conjures images of four or five black Suburbans and a Tommy Lee Jones-looking guy as the lead agent, barking orders and ruining this poor immigrant couple's future as all the other black suited, sunglass-wearing agents effortlessly, emotionlessly and efficiently execute those orders, proudly brandishing their badges on their belts for all to see while the couple sadly looks on as they can only tightly hug each other and watch helplessly as this nightmare unfolds in front of them. Their last hope to stop the auction is to be able to produce $10K within two hours, but what small business has access to that kind of cash?
This was no movie. This really did happen. Not in Venezuela, North Korea, China, or Cuba. It happened right next door in Dallas, Texas. Another American dream ripped to shreds courtesy of those evil folks at the IRS, right?
OK, so IRS is not known for coddling taxpayers. In countless cartoons, talk shows, internet posts, etc...they are always portrayed to be so ruthless that even death itself is afraid of them! Satan is seen walking the corridors of IRS as their leader in comics--heck, we have many of them posted in our own waiting room!
But did this have to happen? IS the purpose of IRS to ruin people's lives? We're here to tell you the answer is a definitely a big, loud: "OF COURSE NOT!" Their job is to enforce our nation's tax rules and to collect the taxes that arise from our following (or in some cases NOT following) those ruses.
Sure, many IRS agents out there--just as in any profession--can be cocky, eager, power-hungry, etc., but the honest truth that we have experienced dealing with hundreds of them through the years is that they're folks just like us who are just trying to do their job to the best of their ability without hurting anyone in the process. Their job just happens to have the full weight and resources of the United States Treasury behind it!
In the news article, we aren't privy to the events that led to the nightmare that this poor family faced. However, it's not hard to deduce that the problem escalated from this couple's ignorance of the law--but more importantly from their failure to act. IRS has made it very clear that ignorance of the law does not excuse you from paying the correct amount of tax. In many cases, taxpayers who have proved that they relied on the advice of experts (attorneys, financial advisers, tax preparers, etc) for incorrectly reporting items on their tax return were lucky to see reductions and/or full waiver on some penalties--but never the actual tax that is due (or accompanying interest).
It could very well be that this unfortunate couple relied on someone else's advice. If that was the case, it seems like the blind leading the blind because it produced horrendous results. If you ever get a letter from IRS, your first step should be to take it to your tax professional's office. If you prepare your own taxes...do not attempt to handle it yourself unless you are 100% sure of what the problem--and solution--should be.
An IRS letter is not the type of letter you discuss with your friends to see what they would do. And whatever you do--don't just throw them away (we see this all the time!) because the problem doesn't go away. I have a strong suspicion that this couple--or their representative--failed to reply and comply to any requests presented by IRS. In fact, for IRS to have taken the very strong and aggressive position of using the speedy sale protocol, it would have to mean that there was no communication going on between the couple and IRS, or there was a very strong indication that the couple were going to move or destroy the merchandise out of maliciousness.
The chance that an elderly couple would try to defraud the government by moving or tainting merchandise seems very low, so I'm sticking with this being a case of IRS being totally ignored and being forced to see the collection process all the way to its sad, irrefutable end. The fact that IRS gave the couple one last option to come up with $10K to stop the auction also leads me to believe the IRS was doing everything by the book.
That $10K money would have likely been applied toward the tax liability owed and the couple could have easily entered into some sort of repayment agreement. IRS offers streamlined repayment programs of up to 72 months for tax debts under $50K, so all this could definitely have been avoided if they would have just known about it. But how could they have known about it if you A) ignore the countless letters IRS sends regarding these matters or B) rely on someone who does not know how to deal with the IRS?
Don't get us wrong here. Could the IRS have handled this better? We think so. They could've just chained and locked up the establishment, effectively confiscating the inventory, and then selling it with more advance notice, buyers and a better financial outcome. In fact, with the extra time, the couple may have even been able to come up with the $10K plus whatever extra it cost to pay for the seizure.
But like we said, the article doesn't mention what happened on the months leading up to the auction. Maybe Trump's recent victory gave the couple and/or their representative some extra bravado (this happened in Texas after all) and they got a little mouthy with the agent? That's never a good idea with someone who has the power to make your financial life very miserable. Agents have a lot of latitude and are allowed the authority to use their judgement on most situations--especially those not deemed "emergencies".
Or maybe it was a power-tripping agent who, for whatever reason, personally disliked these poor folks and decided to make an example out of them? Abuse of power would certainly not surprise anyone. Again--you can get an agent with a chip on their shoulder and they'll just allow you the very minimum as far as extensions, down payments, etc; with no room for negotiation. If you happen to be reading this and you're experiencing this type of abusive treatment, it is your right to request a meeting with the agent's supervisor to seek a fair treatment. In fact, you should call either a tax attorney or an enrolled agent (like us here at Larry's Income Tax) and get help ASAP because if you have a rogue agent, things could very quickly turn unpleasant for you!
Or maybe it's our original hunch. That IRS inundated these folks with letters. They either chose to ignore them hoping the problem would go away or enlisted the help of someone who was not qualified. Maybe they read or heard from someone that, "hey, after three (or five, seven, ten) years it all goes away" and they believed it since the debts were supposedly for 2005, 2008 and 2010. After a certain period, IRS stops sending letters, which could have given the couple a false sense of security. By the time they realized that those seizure notices weren't jokes, they only had two hours to come up with $10K and couldn't.
Whatever the true facts were, always remember these things:
*Do not ignore.
*Bring the letter to your tax professional. if you don't have one, call a tax attorney or an enrolled agent.
*If you think the matter is small enough to handle yourself, be courteous and non-belligerent with IRS agents. Remember they're people just like you and I.
*Read your taxpayer Bill of Rights, which should accompany the audit notice, and don't be afraid to get clarification when you don't understand anything.
*If you feel something is grossly unfair, ask to speak to the supervisor. Everyone has a supervisor.
*Give the agent whatever documents pertain to the periods being audited...don't go offering other years or types of documents---stick with what they 're asking.
*Whether you're representing yourself, or you have someone helping you, say a prayer that things end up well for you!
The link to the story is below: