June 05, 1998
IRS Corrects Improper Collection Practice
WASHINGTON - The Internal Revenue Service is apologizing to
about 20,000 taxpayers for mistakes it made in handling their
accounts. The IRS has stopped the improper practice and is taking
steps to correct the situation for affected taxpayers. Those
affected were paying taxes owed for tax years before 1990 through
"We sincerely regret our errors with these taxpayers," said
Taxpayer Advocate Lee Monks," and we are acting quickly to ensure
that we correct each account and make whatever refunds the law
allows. I am sending letters of apology to potentially affected
taxpayers, explaining the situation."
A special customer service team at the Philadelphia IRS Center
will ensure that each taxpayer receives the appropriate relief.
Taxpayers who receive a letter from the Taxpayer Advocate may return
a simple claim form or call a special toll-free number to protect
their right to a refund. The IRS will determine the proper refund
amounts as it processes their claims.
The matter came to light through internal inquiries from the
Taxpayer Advocate and IRS field offices, as well as a letter
referred by the Senate Finance Committee.
The mistakes involved only a small percentage of taxpayers with
installment agreements -- those who would not pay off the taxes owed
before the 10-year legal time limit for collection would expire.
About a year before this deadline, the IRS would ask taxpayers to
agree to extend the deadline or else face cancellation of their
installment agreements, meaning that the full balance would become
Most of the adversely affected taxpayers agreed to extend the
legal deadline and kept paying beyond that date. A small fraction
had their agreements cancelled by the IRS and were subject to
collection actions for the balance due.
The law permits the IRS to end an installment agreement for
certain reasons, such as a failure to make a scheduled payment or a
substantial change in the taxpayer's ability to pay. The IRS can
also properly ask for an extension of the collection deadline as a
condition to granting the installment agreement. But once the IRS
decides to accept the agreement, the law does not allow it to
terminate that agreement because a taxpayer would not extend the
time left to collect the tax.
Upon determining that the requests for extensions were not in
accordance with the law, the IRS immediately ordered its field off
ices to stop this practice and took steps to identify and provide
relief for those adversely affected.
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