Understanding IRS Collections: The EA Advantage
The Critical Role of the Enrolled Agent in Safeguarding Taxpayer Rights
Receiving a notice from the IRS begins a complex and stressful process, particularly when the issue involves unpaid taxes or discrepancies in reported income. Understanding the IRS collection process and the vital role of an Enrolled Agent (EA) can make a significant difference in achieving a fair resolution while protecting taxpayer rights.
This article outlines the IRS collection process step by step, beginning with the CP2000 notice, and highlights how an Enrolled Agent serves as a key advocate throughout.
Step 1: CP2000 – Notice of Underreported Income
The process often begins with Notice CP2000, issued when the IRS identifies discrepancies between income reported on a tax return and information provided by third parties such as employers, banks, or investment firms. This may result when a 1099-B or its substitute is overlooked or not received by the taxpayer.
Purpose of CP2000:
This notice proposes changes to a tax return based on unreported income. It is not an official audit but may lead to additional tax, penalties, or interest if the taxpayer agrees or fails to respond.
Enrolled Agent’s Role:
An Enrolled Agent reviews the notice and the taxpayer's documentation to determine accuracy. If the IRS’s findings are incorrect, and they are incorrect a surprising amount of the time, the EA prepares a formal response with supporting evidence. This proactive approach helps to prevent further escalation or financial penalties.
Step 2: Payment Requests and Escalating Notices
If the proposed changes are accepted or unresolved, the IRS issues a series of notices demanding payment. These typically include:
CP14 – Initial notice of balance due
CP501 – First reminder notice
CP503 – Second, more urgent reminder
CP504 – Final reminder indicating potential enforcement action (such as levies)
EA's Involvement:
At this stage, the Enrolled Agent works to establish communication with the IRS, ensuring that all taxpayer information is up to date and accurate. The EA may initiate resolution discussions or submit proposals to prevent enforced collection measures.
Step 3: Final Notice of Intent to Levy – LT11 or Letter 1058
When tax liabilities remain unpaid, the IRS sends Letter 1058 (also referred to as LT11), titled Final Notice of Intent to Levy and Notice of Your Right to a Hearing. This letter is a formal warning that the IRS may begin seizing bank accounts, wages, or other property if no action is taken within 30 days.
Significance of This Stage:
This is a legal requirement before enforcement action can commence, and it presents the last opportunity to challenge the collection process through a Collection Due Process (CDP) hearing. The taxpayer has only 30 days from the date of the final notice to request a CDP hearing.
Enrolled Agent’s Action:
The EA files a timely request for a CDP hearing and represents the taxpayer before the IRS Office of Appeals. During the hearing, the EA will present evidence and objectively argue the case for the taxpayer. Often the taxpayer isn’t at the hearing. It often happens over the phone.
Depending on the outcome of the CDP hearing, the EA may recommend filing in tax court or negotiating an alternative such as an installment agreement, Currently Not Collectible application, or an Offer-in-Compromise. While the EA generally can’t represent the taxpayer, he or she may help them prepare to file pro se or recommend a competent tax attorney.
Step 4: IRS Collection Enforcement
If no resolution is reached, the IRS may proceed with enforcement actions such as:
Bank levies
Wage garnishments
Federal tax liens
Asset seizures
How the EA Advocates:
The Enrolled Agent intervenes to halt or reverse collection actions where appropriate. This includes negotiating payment alternatives, requesting lien withdrawals, or submitting documentation that demonstrates economic hardship or other valid reasons why such enforcement actions are not in the best interest of the government.
Step 5: Long-Term Resolution Options
The IRS offers several structured programs for resolving tax liabilities over time:
Installment Agreement (IA): Allows repayment in monthly installments
Partial Payment Installment Agreement: Permits reduced payments based on ability to pay
Currently Not Collectible (CNC): Suspends collection when the taxpayer cannot pay
Offer in Compromise (OIC): Enables settlement for less than the full amount owed
EA’s Guidance:
An Enrolled Agent evaluates eligibility for each option, prepares financial disclosures, and ensures that IRS submissions are complete and timely. The EA also advocates for penalty abatement when either the taxpayer has a record of being in compliance without penalties or there is reasonable cause that contributed to the situation.
The Enrolled Agent: A Trusted Representative Before the IRS
Enrolled Agents are federally licensed tax professionals authorized to represent taxpayers before the IRS across all 50 states. Unlike many tax preparers, EAs specialize in tax resolution and are required to maintain ongoing education in tax law and IRS procedures. At Books, Taxes & More, we specialize in representing taxpayers. This is our primary focus.
Key Functions of an EA Include:
Representing clients before the IRS in audits, appeals, and collection matters
Ensuring that taxpayer rights are fully protected throughout the process
Negotiating favorable outcomes based on accurate financial analysis and legal standards
Preventing or mitigating collection actions through strategic engagement
Conclusion
The IRS collection process unfolds through a series of structured communications and legal procedures, beginning with the CP2000 and potentially leading to severe enforcement actions. Throughout this journey, the involvement of a skilled Enrolled Agent is crucial.
By offering representation, negotiation, and procedural guidance, an EA, such as Steve Perry at Books, Taxes & More plays a pivotal role in ensuring compliance while minimizing financial and legal exposure. Early intervention, professional expertise, and clear communication with the IRS often lead to the most favorable outcomes for taxpayers.
Give us a call at 678-717-9818 or email us at steve@bookstaxesatl.com
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