Collection Matters
TAXPAYER BILL OF RIGHTS II
6. TITLE V--COLLECTION ACTIVITIES
6.1. Modifications To Lien And Levy Provisions.
A. Withdrawal Of Public Notice Of Lien. Under prior law, the IRS must file a notice of lien in the public record, in order to protect the priority of a tax lien. A notice of tax lien provides public notice that a taxpayer owes the Government
money. The IRS has discretion in filing such a notice, but may withdraw a filed notice only if the notice (and the underlying lien) was erroneously filed or if the underlying lien has been paid, bonded, or become unenforceable. The new law allows the IRS
to withdraw a public notice of tax lien prior to payment in full by the indebted taxpayer without prejudice, if the Secretary determines that (1) the filing of the notice was premature or otherwise not in accordance with the administrative procedures of
the IRS, (2) the taxpayer has entered into an installment agreement to satisfy the tax liability with respect to which the lien was filed, (3) the withdrawal of the lien will facilitate collection of the tax liability, or (4) the withdrawal of the lien
would be in the best interests of the taxpayer (as determined by the Taxpayer Advocate) and of the Government. The IRS must also provide a copy of the notice of withdrawal to the taxpayer. The new law also requires that, at the written request of the
taxpayer, the IRS make reasonable efforts to give notice of the withdrawal of a lien to creditors, credit reporting agencies, and financial institutions specified by the taxpayer. The provision is effective on the date of enactment. TPBR2 §501(a). IRC §6323(j). SEC. 501 OF THE BILL
B. Return Of Levied Property In Certain Cases. Under prior law, the IRS is authorized to levy on the property of a taxpayer as a means of collecting unpaid taxes. The IRS is able to return levied property to a taxpayer only when the
taxpayer has fully paid its liability with respect to tax, interest, and penalty for which the property was levied. The new law allows the IRS to return property (including money deposited in the Treasury) that has been levied upon if the Secretary
determines that (1) the levy was premature or otherwise not in accordance with the administrative procedures of the IRS, (2) the taxpayer has entered into an installment agreement to satisfy the tax liability, (3) the return of the property will
facilitate collection of the tax liability, or (4) the return of the property would be in the best interests of the taxpayer (as determined by the Taxpayer Advocate) and the Government. The provision is effective on the date of enactment. TPBR2 §501(b). IRC §6323(j) and §6343(d). SEC. 501(b) OF THE BILL
6.2. Modifications To Certain Levy Exemption Amounts. Under prior law, property exempt from levy includes personal property with a value of up to $1,650 and books and tools of a trade with a value of up to $1,100.] The new law increases
the exemption amount to $2,500 for personal property and increases the exemption amount to $1,250 for books and tools of a trade. These amounts are indexed for inflation commencing January 1, 1997. The provision is effective with respect to levies issued
after December 31, 1996. TPBR2 §502. IRC §6334(a) and §6334(f). SEC. 502 OF THE BILL
6.3. Offers-In-Compromise. The IRS has the authority to settle a tax debt pursuant to an offer-in-compromise. IRS regulations provide that such offers can be accepted if: the taxpayer is unable to pay the full amount of the tax liability
and it is doubtful that the tax, interest, and penalties can be collected or there is doubt as to the validity of the actual tax liability. Under prior law, amounts over $500 can only be accepted if the reasons for the acceptance are documented in detail
and supported by an opinion of the IRS Chief Counsel. The new law increases from $500 to $50,000 the amount requiring a written opinion from the Office of Chief Counsel. Compromises below the $50,000 threshold must be subject to continuing quality review
by the IRS. The provision is effective on the date of enactment. TPBR2 §503. IRC §7122. SEC. 503 OF THE BILL
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