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3. Either allow a taxpayer to compro-
mise trust taxes collected (sales tax
and payroll tax) or create a 10-year
collection statute so that taxpayers
who suffer a failed business and/or
bankruptcy can at some point move
on and get a fresh start, similar to
the federal approach; and
4. Create an automatic installment
agreement for taxpayers who owe
under a certain threshold amount
of taxes so that limited collection
resources are not wasted chasing
installment agreements for modest
amounts.
The Federal Approach
These suggestions are not my novel
ideas, but rather time-tested strategies
that the IRS has discovered by trial and
error. Similar to the bankruptcy code,
the federal government has concluded
that it is in our society's best interest to
have people be able to settle their
debts and go forward to be productive
members of society.
1. "Currently Not Collectable" Status:
The IRS has found that they collect
more taxes if they can focus their per-
sonnel and resources on those tax-
payers who actually have the ability to
pay. For those taxpayers who do not
have the current ability to make pay-
ments, the IRS does not write off the
balance but rather designates the
account as "currently not collectable"
and moves on to other taxpayers who
may be able to pay their debt.
"Currently not collectable," or "CNC,"
simply stops any enforced collection
action now and allows the taxpayer to
focus on current compliance.
The IRS reserves the right to revisit the
taxpayer later, making a request for
updated collection information to see if
the taxpayer later can start making
payments against the old tax debt. The
state of Massachusetts came to the
same conclusion as the IRS regarding
using its resources for taxpayers who
can actually pay and now has a "hard-
ship" category for taxpayers who can-
not pay currently, which acts similarly
to the federal CNC status.
2. Expanding the Offer of
Compromise Program
:
It is in the taxing system's best interest
to allow taxpayers who do not have the
ability to pay their tax debt to compro-
mise that debt, even if the taxes were
trust fund taxes collected by the busi-
ness. When the IRS or Massachusetts
settles an outstanding tax debt, includ-
ing those for trust funds, it is a decision
not made lightly but rather analyzed
with multiple years of earnings and a
complete financial analysis done to see
if the taxpayer cannot truly pay. Why
agree to this? Because it is in every-
one's best interest to resolve the out-
standing debt and move on; the gov-
ernment can collect what it can and
focus its limited resources elsewhere
and the taxpayer can move forward
again. The Massachusetts Department
of Revenue came to this conclusion
and now allows Offers of Settlement for
all tax debts, including withholding and
sales taxes collected. By contrast,
Connecticut DRS policy is to deny an
offer for less than the taxes actually
collected and/or withheld, regardless of
the taxpayer's ability to pay.
advocacy community education
17
I believe that the approaches the IRS has taken to
collect taxes have applicability for Connecticut.
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