Thomas B. and Labelle B. Lance v Commissioner of Internal Revenue- In this case the taxpayers requested an offer in compromise on the basis of doubt as to collectibility or, in the alternative, an installment payment arrangement, but refused to provide to the IRS officer a completed collection information statement.
The IRS officer did not give the taxpayers a collection alternative because of the missing financial statement and enforced collection ensued.
Judge Joel Gerber ruled that the IRS did not abuse its discretion in disallowing a collection alternative:
In this case the lack of financial information rendered any intended offer incomplete and prevented respondent from considering collection alternatives.
When a hearing officer is unable or refuses to consider collection alternatives because of a taxpayer’s failure to provide financial information, courts have held that there was no abuse of discretion. Schwersensky v.Commissioner, T.C. Memo. 2006-178.
We hold that the settlement officer’s actions were appropriate and not an abuse of discretion.
Author’s Observation
It is understandable that taxpayers are reluctant to divulge their personal financial data to the federal government. It is private information and generally the government does not have the right to know it.
However, the IRS is not unconditionally obligated to grant a taxpayer an installment agreement or an offer in compromise.
Collection alternatives will only be considered if the taxpayer seeking them complies with certain specified conditions of application.
Consequently, except in the case of an offer in compromise based on doubt as to liability, the consideration of a collection alternative will require the submission (under penalties of perjury) of an IRS collection information statement and all relevant supporting documentation.
If you are not willing to provide a financial statement, you will not be eligible for any one of the following collection alternatives:
- Offer in Compromise based on your inability to pay
- Offer in Compromise based on effective tax administration
- Installment payment agreement
- Non-collectible status
2 responses so far ↓
1 Diana Fahl // Mar 25, 2010 at 3:24 pm
We filled out the personal finance form in order to be placed on the “non-collectable” status. It was very time consuming and took a few days of getting all available info from our creditors. I lost my pharmaceutical job about 2 years ago-and have not been able to find another. Its no fun to do this process. I would rather be working and paying taxes. But, its better than having IRS agents coming into our home and taking everything.
2 Peter // Mar 25, 2010 at 9:38 pm
Diana,
Have you considered doing an Offer in Compromise to settle your tax debt once and for all? If you are in non-collectible status, you probably will qualify.
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