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In other words, if a taxpayer incurs an
employment tax liability, requests a
CDP hearing, and subsequently incurs
a new or additional employment tax
liability within two years, the IRS is not
required to issue a pre-levy notice to
the taxpayer and may immediately levy
the taxpayer's assets.
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Questions over the use of the term
"requested" within the statutory
language have resulted in situations
where a taxpayer may have requested
a CDP hearing but been denied for
lack of timeliness or otherwise. The tax
code does not require that the taxpayer
actually be given a CDP hearing in
order for the taxpayer to be subject to
the DETL.
Questions over whether a newly formed
business constitutes a "predecessor
business" for purposes of the DETL
exception have also arisen. The IRS
has provided the following factors
to offer some guidance to assist
taxpayers in determining "predecessor
business" status under IRC 6330(h):
(1) the taxpayer has substantially
the same owner(s) or shareholder(s)
and the same officer(s) as the prior
business; (2) the same individual(s)
are actively involved in running the
taxpayer that were actively involved in
running the prior business, regardless
of whether they are officially listed
as the owners/shareholders/officers;
(3) there is no evidence that the
taxpayer's owner(s) or shareholder(s),
if different than before, acquired the
business in an arm's length transaction
for fair market value; (4) the taxpayer
provides substantially the same
product(s), service(s), or function(s)
as the prior business; (5) the taxpayer
has substantially the same customers
as the prior business; (6) the taxpayer
has substantially the same assets as
a prior business; and (7) the taxpayer
has the same location, telephone, fax
number, etc. as the prior business.
No one factor is determinative and
the analysis will depend on the facts
and circumstances surrounding the
taxpayer and the prior business. Note,
however, that a business will generally
not be considered a predecessor if
there has been a genuine change in
control and ownership of the business,
which is typically evidenced by an
arm's length transaction for fair market
value and the previous owner ceasing
all involvement in running the business.
The IRS has had the authority to utilize
DETLs since the Small Business and
Work Opportunity Tax Act of 2007,
but for reasons known only unto itself,
has chosen not to use them on any
large scale until recently. No longer.
Since the beginning of 2016, the IRS
Collection Division has been given new
instructions to make greater use of the
DETL when they come across situations
where it is applicable. Letter 903, which
is sent out to businesses not paying
their payroll taxes, was revised in March
of 2016 and explains that unless the
taxpayer's account does not become
current with the required deposits within
30 days of the date of the letter, the IRS
may seize the taxpayer's property to
satisfy the tax debt.
Conclusion
Although the IRS has rarely utilized
the DETL, that appears to be quickly
changing. It is imperative, therefore, for
accountants and tax practitioners to
be fully aware of the DETL exception
for clients who have a payroll tax issue
and to advise such clients that failure
to maintain payroll tax compliance may
result in levy action by the IRS in the
future, with the client's first notice of the
problem happening only when they find
out they have no money in the bank.
(continued)
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The following is an illustrative example:
Taxpayer owes taxes on Form 941 for the
fourth quarter 2012 (ending Dec. 31, 2012).
The taxpayer timely requested a CDP hearing.
The taxpayer subsequently accrues additional
employment tax liability on Form 941 for the
second quarter 2013 (ending June 30, 2013). The
liability period for additional tax began on April
1, 2013. The additional liability for the second
quarter 2013 qualifies for a DETL because the
taxpayer requested a prior levy hearing for a
quarter that ended (Dec. 31, 2012) within the
two-year lookback period (April 1, 2011 through
April 1, 2013).
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IRM 5.1.9.3; IRM 5.1.9.3.16.
29
IRM 5.11.1.5.3.
30
Id.
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Your author had two clients receive such
notices and when he called the IRS Director of
Field Collections was told that the IRS had given
the field new instructions to make more use of
the DETL.
If a taxpayer incurs an
employment tax liability,
requests a CDP hearing, and
subsequently incurs a new
or additional employment tax
liability within two years, the
IRS is not required to issue a
pre-levy notice to the taxpayer
and may immediately levy the
taxpayer's assets.
Lauren McNair is an associate
with Green & Sklarz, where she
focuses on taxpayer representation,
bankruptcy, and commercial
litigation. She can be reached at
lmcnair@gs-lawfirm.com.
Eric Green is a partner with Green
& Sklarz, where he focuses on civil
and criminal taxpayer representation,
as well as tax and estate planning.
He can be reached at
egreen@gs-lawfirm.com.
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