IRS To Increase Focus On Delinquent-Filed Returns

The Internal Revenue Service (IRS) announced, in a recent Information Release and Fact Sheet, that it is going to make more site visits to taxpayers who have delinquent-filed tax returns. Fact Sheet 2020-02 notes that this increased use of compliance strategies is being fueled by the IRS’s increased use of data analytics, research, and other recently implemented compliance strategies, like the aforementioned site visits.

Some of the specific steps that the IRS intends to take to promote additional voluntary compliance are as follows:

1. Increase the identification and case creation for individual and business non-filers. Essentially, this just means an increase in resources dedicated to delinquent-filed tax returns.
2. Automated substitute for return (ASFR) program. The ASFR program specifically targets taxpayers who have not filed a tax return but whose third party information indicates a significant income tax liability. The ASFR program will use third party information to prepare an estimated tax return. As you might imagine, these estimated tax returns are usually not that accurate.
3. Automated Internal Revenue Code 6020(b) process. This will promote tax filing compliance for businesses as the process will identify businesses that have not filed for a specific period.
4. Delinquent Return Refund Hold (DRRH) program. The DRRH program will hold a taxpayer’s refund if it is determined that there is a delinquent return within five years of that tax year.

The IRS has emphasized personal visits with taxpayers who have outstanding obligations with the IRS. Those personal visits, in our experience, have increased compliance and streamlined the collections process.

From a technical perspective, when an IRS Revenue Officer makes a personal visit, it is important to note the following:

1. There is usually a letter advising the taxpayer of the visit; however, some personal visits are unannounced.
2. The IRS Revenue Officer will provide two forms of official credentials, including both a serial number and photo identification.
3. Most IRS Revenue Officers will explain to the taxpayer the consequences of noncompliance. Though, they will not make threats or demand immediate payment.

Ultimately, any negotiated resolution with the IRS is going to be driven by a taxpayer’s compliance. For example, if a taxpayer cannot remain current and compliant, it is going to be nearly impossible to negotiate any sort of reasonable alternative to enforced collection action for the taxpayer.