- Written by E. Martin Davidoff
This is the eighth and final in a series of articles chronicling a real IRS matter. For details on what has transpired, please see the previous seven issues of this magazine.
Richardson’s letter of Feb. 6 was a standard letter (Letter 725) requesting that the client meet with him at 9 a.m. on March 3, 2009, to talk about unpaid amounts totaling more than $270,000. We found it odd that he did not even attempt to set up a mutually-convenient time and place.
In reply to Richardson’s letter, we pulled out the draft we had filed away the previous October (see Part VII) and supplemented it to bring Richardson up-to-date about Jim’s pending knee surgery and the loss of his job. We offered to meet Richardson but suggested in our letter that such a meeting probably was not necessary:
“As you will recall, Mr. Smith has just turned 66 years of age, and the probability of securing gainful employment in an amount sufficient to even meet his basic living needs is low. Accordingly, I believe that this case should be placed in uncollectible status.”
On Feb. 17, 2009, Richardson called and spoke with our paralegal, agreeing to place the case into currently not collectible status (CNC status) as long as we could provide verification of the medical procedure to be performed and the physical therapy required. Eager to finally resolve this matter, our client quickly secured a letter from his physician describing the procedure and explaining that he will convalesce for approximately three months and receive home physical therapy visits. We faxed this letter to Richardson. On Feb. 24, 2009, we received a detailed telephone message from Richardson saying that he reviewed the fax and that we sent exactly what he was looking for in this situation.
When a case is placed in CNC status, the IRS will take no collection action unless the taxpayer’s income changes. IRS policy is to revisit the taxpayer in two years to secure an update of his or her financial position. Sometimes such a revisit takes place within the stated time frame, but often a revisit never occurs. With a 66-year-old taxpayer, we figured that this case was finally done!
But, as you may recall, Jim had decided to sign up for Social Security benefits in January 2009, when he lost his job. You can probably guess what happens next. On March 23, 2009, we received 16 notices (CP 91) via certified mail.
Final Notice Before Levy on Social Security Benefits
The notices advised that the IRS may proceed to take 15% of Jim’s Social Security benefits to pay his overdue taxes. Jim could avoid this by either paying the tax or requesting a hearing. However, the notices were unclear about how to request a hearing and warned that the hearing might not stop the pending levy action. The notices also posed another possibility: Call the IRS and prove economic hardship. We already had done that!
The IRS’ central computers and Richardson were not in sync. Although Richardson knew that Jim had proved his economic hardship, Richardson had not entered this information into the computer; and he had no idea that another arm of the IRS was about to seize a portion of Jim’s Social Security benefits. This is a common flaw in the IRS collection machinery. Automated processes often take action in cases presumably under a revenue officer’s control.
In our case, we immediately called Richardson and asked him to block any further collection action by the IRS. We also filed a Form 9423, Collection Appeals Request (also known as a CAP Appeal), on April 2, 2009, to the origin of the levy notices, requesting Appeals consideration.
The CAP appeal was forwarded to Richardson, not to Appeals. On May 26, 2009, Richardson confirmed that the case was closed on his end and that the matter was placed into uncollectible status.
We never received written confirmation of our appeal or Richardson’s closure of the case. As I write this article, no IRS activity has taken place since May 2009, and Jim is awaiting 2016, when the IRS statute for collections will run out on the assessments.
Our firm has billed more than $10,000 in fees, which we are receiving at a rate of $250 per month. The IRS was offered $791 per month in February 2008 but rejected that offer and has received nothing to date.
Jim’s wife, Mary, sold the family home in 2009. Mary is working, and Jim is collecting unemployment. Jim and Mary are planning to retire to Florida this summer. For now, they are living here in New Jersey, spending time with their family and trying to make ends meet. For the time being, they are able to do so without the IRS breathing down their necks. But who knows how long that will last?