III. Payment Procedure

By law you are required to pay a bill within 10 days after receiving the notice and demand Most taxpayers respond to the first notice and pay the full amount owed

If your tax is not paid on time, the law provides for interest and penalty for late payment.

Interest-Effective February 1, 1982, through December 31, 1982, the rate is 20 percent a year on the unpaid tax By law, the interest rate is subject to periodic adjustment and shall become effective January 1 of each year after

1982.

Penalty for Late Payment-is 1⁄2 of 1 percent of the unpaid tax for each month, or part of a month the tax remains unpaid. The penalty cannot exceed 25 percent of the unpaid amount

Penalty for Failure to File-If you fail to file your return by the prescribed due date, you will be penalized 5 percent per month, or any traction of a month that the return is late, up to a maximum of 25 percent (However, when the lability for both the failure to file and failure to pay penalty exists in the same month, the failure to file penalty will be reduced by 1/2 percent per month, so that the total combined penalty does not exceed 5 percent for any given month)

We may eliminate the penalties for late payment and filing if you show reasonable cause for not making the payment or filing timely (see Section VI G).

You should pay your account promptly to keep interest and penalty charges to a minimum Whenever you make tax payments, be sure to enclose a copy of your bill, and enter your social security number and tax period on your check, money order or postal note, to ensure that your payment is correctly credited to your account

A. If You Believe Your Bill Is Wrong

If you believe that your bill contains an error. you should reply in writing to the office from which the bill was sent. It is important that you provide any records (always retain a copy for your files) you believe would help in correcting the mistake, such as cancelled checks (photocopies of both sides of the checks), or tax returns. If you are correct, the necessary adjustment will be made to your account. We will ask you to pay any tax, interest and penalty still due after the correction is made.

B. If You Believe You Can't Pay

If you believe that you cannot immediately pay your bill in full, write us immediately, explaining your circumstances.

We may ask you to complete a Collection Information Statement. If you need help, we will assist you in completing this statement Once you have completed the statement, we will carefully review your financial condition to determine how you can pay the amount due.

1. Immediate Full Payment

We may be able to identify assets which could readily be sold, mortgaged or used to se

and interest stop accruing. Collection action is merely suspended until your financial condition has improved to the point where you can pay

C. Refund Offset

If you become entitled to a refund during the time you owe a tax hability, we will offset the refund due you against your unpaid liability. Only the excess refund, if any, will be paid to you. However, we will generally not withhold collection pending refunds you feel you may be entitled to in the future on returns not yet filed.

D. Bankruptcy Proceedings

If you are a debtor in an ongoing bankruptcy, do not pay the bill without immediately contacting your local IRS office While the bankruptcy proceeding will not necessarily relieve your obligation to pay, a temporary stay of collection may be in effect.

E. Summary

The most important step for you in the collection process is to immediately respond to the notices you receive from the Internal Revenue Service

2. Installment Payments

If we determine that you cannot make immediate full payment but that you are able to pay the tax liability through installments, we will help you prepare a form itemizing your monthly income and expenses to establish your maximum ability to pay. In certain cases we can arrange, through a payroll agreement, for your employer to withhold and regularly pay to us amounts deducted from your pay. In other cases we may afford you the opportunity to give us post-dated checks to be deposited as your installment payments become due. You may, depending on the amount owed and other critena, be given an installment agreement without submitting detailed financial information.

We will not enter into an installment agreements unless you agree to remain current in paying your future taxes Once an installment agreement is made, you must make each payment on time. If you miss an installment without contacting us and discussing the circumstances causing the failure to pay, we may take prompt enforced collection action. Also, during the time you are making payments, we may require you to appear for a review of your financial condition to enable us to determine if you are able to increase the amount of your installment payments.

3. Delayed Collection

If your financial condition indicates that you cannot make any payment towards your liability at this time, we may decide to delay collection temporarily. This does not mean your debt is forgiven, or that the penalty for late payment

Policy

If you do not follow the recommendations just discussed, the law provides that we may take enforced collection action against your property or rights to property The following is an expla nation of our enforcement activity and your rights in relation to it.

A. Federal Tax Lien

Once notice and demand for payment (that is a bill for the tax due) is sent and you neglect or refuse to pay the tax, a statutory lien attaches to your property and rights to property. This lien is not valid against claims which certain of your creditors may have until a Notice of Federal Tax Lien has been filed. The filing of the Notice of Federal Tax Lien constitutes public notice to your creditors that a tax lien exists against your property, including property acquired after the Notice of Federal Tax Lien is filed

Under normal circumstances, we don't need to file a Notice of Federal Tax Lien, because most taxpayers pay the tax due after receiving a bill But if you neglect to pay the tax due, we must determine whether filing the Notice of Federal Tax Lien is necessary in order to protect the interest of the Government in your property Once a Notice of Federal Tax Lien is filed, it becomes a matter of public record and may adversely affect your business transactions or other financial interests. (For example, it could impair your credit rating) Therefore, it is normally filed only after we have tried to contact you and afford you the opportunity to pay.

In situations where the account is being paid through an installment agreement, a Notice of Federal Tax Lien may also be filed to secure the government's interest until the final payment is made. In addition, a Notice of Federal Tax Lien

may be filed when collection action is delayed temporarily

Generally, the Notice of Federal Tax Lien is filed with an office designated by State law.

A Federal Tax Lien will be released when the tax due (including interest and other additions to the tax) has been fully satisfied by payment or adjustment. All fees charged by the state or other jurisdiction for both filing and releasing a Notice of Federal Tax Lien will be added to the balance you owe.

B. Levy

The Internal Revenue Code provides that if you are liable to pay tax and you neglect or refuse to pay the tax within 10 days after the date of notice and demand, the tax may be collected by levy on any property, or rights to property. belonging to you.

A levy is the taking of property to satisfy a tax liability Levy can be made on property either in the hands of third parties (employers, banks, etc.), or in your possession (automobile, boat, etc.). We will provide you with an opportunity to voluntarily satisfy your tax liability. If you do not resolve the matter voluntarily, we may then levy to collect the delinquent taxes. If collection of the tax is in jeopardy, we will take immediate levy action.

A levy on salary or wages, once served, continues in effect until your tax liability is satisfied or becomes unenforceable due to lapse of time. The Service will notify your employer or other person against whom the levy was served when the tax is fully paid. The law provides a minimum exemption from levy on wages, salary and other income as explained in 1() below.

Generally court authorization is not required before levy action is taken unless collection personnel must enter into private premises to accomplish their levy action. (See Section VI. J. below). The only legal requirements are that the tax is owed and that a notice and demand for payment has been sent to your last known address; if payment is not made within the 10 day period stated on the notice and demand, it is lawful to levy immediately. As noted earlier, in situations where collection is in jeopardy, the 10-day waiting period does not apply.

If, at any point, during the levy process you establish reasonable doubt as to the correctness of the tax bill, the levy may be released. Further, the levy will be released in full or in part if you pay your tax bill or agree to an acceptable installment agreement.

1. Property Exempt from Levy

Certain types of property are exempt from levy by Federal Law. They are:

(a) Wearing apparel and school books. (However, expensive items of wearing apparel. such as furs, are luxuries and are not exempt from levy.)

(b) Fuel, provisions, furniture and personal eftects, not to exceed $500 in value (for the head of household).

(c) Books and tools used in your trade, business or profession, not to exceed $250 in value

(d) Unemployment benefits. (e) Undelivered mail.

(f) Certain annuity and pension payments. (g) Workmen's Compensation

(h) Salary, wages or other income subject to a prior judgment for court-ordered child support payments.

(1) Deposits to the special Treasury fund made by members of the armed forces and Public Health Service employees on permanent duty assigned outside the United States or its possessions.

(1) A minimum exemption for wages, salary and other income of $50 per week, plus an additional $15 for each legal dependent.

The Internal Revenue Service employee levying on property of the type described above will appraise and set aside to you, when applicable, the amount of such property declared to be exempt. If you object at the time of the levy to the valuation fixed by the employee making the levy, you can request a valuation by three disinterested individuals.

2. Property Generally Not Levied On

As a matter of policy, some types of property are generally not levied on, or are levied on only in flagrant and aggravated cases of refusal to pay. These include, for example, the following:

(a) Social Security benefits.

(b) Medicare payments.

(c) Welfare payments.

(d) Payments under the Manpower Development and Training Act of 1962 or the Area Redevelopment Act

(e) Cash loan value of insurance policies. (1) Death benefits.

(g) Pension plan proceeds.

(h) Contributions to individual retirement accounts (IRA) and KEOGH Accounts.

(1) Household property, for a head of household, up to $1,500 and business property up to $1,000, if it is concluded that levy action on property below these amounts would cause severe hardship.

C. Seizures and Sales

1. Seizures

Any type of real or personal property (including residential and business property) may be seized and sold to satisfy your tax bill However, before seizing property, IRS considers other means of collection and factors such as your equity in the property and the sale value of the property. Management concurrence is required before a seizure can be made.

2. Sales

After we seize property for nonpayment of taxes, we then take action to sell it. Except in the case of perishable property which must be sold immediately, we do not sell until at least 10 days after notice to you and to the public about the proposed sale. Prior to sale, we compute a minimum price that we will accept for the property and advise you of the amount. If you are in disagreement, you may request a Service valuation engineer or a private appraiser to assist the Internal Revenue Service employee in reevaluating the computation figures.

3. Proceeds of Sale

Sale proceeds are applied first to the expenses of the levy and sale, the remaining amount is then applied against the tax bill. If the sale proceeds are less than the tax bill and ex

penses of levy and sale, the unpaid portion will, of course, be subject to further collection action. When sale proceeds exceed the tax bill and expenses of levy and sale, the surplus money is held by IRS pending a request for distribution. Unless a person, such as a mortgagee or other lienholder, submits a claim superior to yours, these excess funds will be credited or refunded to you upon request.

4. Release/Redemption of Property

We may release the property to you if you pay an amount equal to the amount of the Government's interest in the property, you enter into an escrow arrangement, you furnish an acceptable bond or you make an acceptable agreement for payment of the tax.

You have the right to redeem your property at any time prior to the sale Redemption consists of paying the tax due, including interest and penalties, together with the expenses of the seizure. Real estate may be redeemed at any time within 120 days after the sale by paying the purchaser the amount he/she paid for the property plus interest of 20 percent per annum

V. Claim Procedure

A. How to Claim a Refund or Credit

Once you have paid your tax bill in full, you have the right to file a claim for refund or credit if you feel the tax is erroneous or excessive. You can obtain the necessary forms and information about filing your claim by calling or visiting any Internal Revenue Service office. You should file your claim by mailing it to the Internal Revenue Service Center where the original return was filed. A separate form must be filed for each tax year involved You should attach to such form a statement supporting your claim, including an explanation of each item of income, deduction or credit on which you are basing your claim.

B. Time for Filing a Claim for Refund or Credit: General Rule

You must file a claim for refund or credit within three years from the date the return was filed (returns filed before the due date are considered to have been filed on the due date) or within two years from the date the tax was paid, whichever date is later.

C. Limit on Amount of Refund or
Credit

Limits on amounts of refund or credits are governed by the time period between the date you filed your tax return and the date you filed your claim. For claims filed within three years of the date of a timely filed tax return, the credit or refund may not exceed the amount of tax paid within that three year period. This would include amounts paid prior to the due date of the tax return (such as tax withheld from your wages and estimated tax payments) since these amounts are considered paid on the due date. If you do not file your claim within three years of the date of a timely filed tax return, the credit or refund may not exceed the amount of the tax paid within the two years immediately preceding the filing of your claim.

D. Processing Claims for Refund or Credit

Your claim for refund or credit may be accepted as filed, or may be subject to examination. If your claim is examined, the procedures are the same as in the examination of a tax re turn. (Publication 556, "Examination of Returns, Appeal Rights and Claims for Refund” is available at your local IRS office to explain our procedures for examining returns and claims)

E. Rejected Claims-Filing Suit in District Court and Court of Claims If we reject your claim, you will receive a statutory notice of disallowance of your claim. After receiving a notice of disallowance, you may file a suit for refund in a US. District Court or in the US. Court of Claims. You must file suit within 2 years from the date the notice of disallowance is mailed to you. Also, if we have not acted on your claim within six months from the date you filed it, you can then file suit for refund. If you seek prompt court action, without availing yourself of an IRS determination, a request in writing, that the claim be immediately rejected, must accompany your claim for re fund. You can obtain information about proce dures for filing suit in the District Court by contacting the Clerk of your District Court. You can obtain information about procedures for filing suit in the Court of Claims from the Clerk of the Court of Claims. 717 Madison Place, NW.. Washington, D.C. 20005.

VI. Rights

The following section contains an explanation of taxpayer rights. Read this section carefully to be sure that you are aware of the rights which may pertain to your tax account.

A. Representation

You may represent yourself or you may be represented by an attorney, certified public ac countant, or an individual enrolled to practice before the Internal Revenue Service. If your representative attends a conference without you or telephones on your behalf, your representative must file a power of attorney or a tax information authorization before receiving or inspecting confidential information.

Form 2848, "Power of Attorney", or 2848D, "Authorization and Declaration", (or any other properly written power of attorney or authoriza tion) may be used for this purpose. Copies of these forms may be obtained from any internal Revenue Service office.

B. Transfer of Your Tax Case to
Another Geographical Area

In any case where your tax problem can be handled more quickly and conveniently in another district, you may request that the case be transferred to that district. If you give a valid reason when making your request, the case will be transferred. For example, this would be done when your place of residence changes either before or during the discussion of your tax

case.

C. Interest on Refunds

You will receive interest on any refund delayed more than 45 days after either the filing of your return or the due date of the return, whichever is later. (By law, the interest rate is subject to periodic adjustments.)

D. Receipts

You have the right to a receipt for any payment you make, including a receipt for all cash payments. You also have the right to receive copies of all contractual arrangements (such as an installment agreement) made with us.

E. Privacy Act Notice

The Privacy Act of 1974 says that each Federal agency that asks you for information must tell you the following:

(a) Its legal right to ask for the information and whether the law says you must give it.

(b) What major purposes the agency has in asking for it, and how it will be used.

(c) What could happen if the agency does not receive it.

For the Internal Revenue Service, the law covers

Tax returns and any papers filed with them. Any questions we need to ask you so we canComplete, correct, or process your return. Figure your tax.

Collect tax, interest, or penalties

Our legal right to ask for information is Internal Revenue Code sections 6001 and 6011 and their regulations. They say that you must file a return or statement with us for any tax you are liable for Code section 6109 and its regulations say that you must show your social security number on what you file This is so we know who you are, and can process your return and papers

You must fill in all parts of the tax form that apply to you But you do not have to check the boxes for the Presidential Election Campaign

Fund.

We ask for tax return information to carry out the Internal Revenue laws of the United States. We need it to figure and collect the right amount of tax

We may give the information to the Department of Justice and to other Federal agencies, as provided by law. We may also give it to States, the District of Columbia, and U.S.commonwealths or possessions to carry out their tax laws. And we may give it to foreign governments because of tax treaties they have with the US

If a return is not filed, or if we don't receive the information we ask for, the law provides that a penalty may be charged. And we may have to disallow the exemptions, exclusions, credits, deductions, or adjustments shown on the tax return. This could make the tax higher or delay any refund. Interest may also be charged.

This is the only notice we must give you to explain the Privacy Act. However, we may give you other notices if we have to examine your return or collect any tax, interest, or penalties.

Please keep this notice with your records. It may help you if we ask you for other informa

tion

F. Confidentiality of Tax Matters

You have the right to have your tax case kept confidential. The IRS has a duty under law to protect the confidentiality of your tax return information. However, if a levy is served or if a Notice of Lien or lawsuit is filed, certain aspects of your tax case, such as the amount of tax due and type of tax owed, may become a matter of public record.

G. Elimination of Penalty-
Reasonable Cause

The Internal Revenue Code provides for elimination of penalties when you show reasonable cause rather than willful neglect for either late filing of a return or late payment of a tax

Reasonable cause, broadly defined, is a cause which arises despite ordinary care and prudence exercised by you. If you believe you have reasonable cause for elimination of a penalty, discuss your reason with our representative. If he or she agrees, your penalty will be eliminated upon your supplying us a written statement setting forth the facts establishing reasonable cause. (Under the law, interest cannot be eliminated due to reasonable cause.) If our representative does not believe you have established reasonable cause, you may appeal this determination to the Regional Director of Appeals You may make known your desire to appeal, either in writing or orally to our representative. You will then be contacted and a conference will be arranged at a time and place that is mutually convenient.

H. Offers In Compromise

By law you have the right to submit an offer in compromise on your tax bill. The Commissioner of the Internal Revenue Service has the authority to compromise all taxes (including any interest, penalty, additional amount or addition to tax) arising under the Internal Revenue laws, except those relating to alcohol, tobacco, and firearms.

A compromise may be made on one or both of two grounds-(1) doubt as to the validity of the amount owed or (2) doubt as to your ability to make full payment of the amount owed. The doubt as to the validity of the amount owed must be supported by evidence and the amount acceptable will depend upon the degree of doubt found in the particular case. In the case of inability to pay, the amount offered must exceed the total value of your equity in all your assets. The amount must also give sufficient consideration to your present and future earning capacity which may require a written agreement to pay a percentage of future earnings as part of the offer. A written agreement may also be required to relinquish certain present or potential tax benefits. (Individual hardship of a temporary nature alone is not a basis for our accepting an offer.)

Submission of an offer in compromise does not automatically suspend collection of an account. If there is any indication that the filing of the offer is solely for the purpose of delaying collection of the tax or that delay would negatively affect collection of the tax, we will continue collection efforts.

All forms necessary for filing an offer in compromise plus additional information regarding the procedure, can be obtained at local internal Revenue Service offices.

1. Managerial Review of Employee Decisions

If at any step in the Collection process you do not agree with the recommendations of our employee, you have the right to discuss the matter with his/her manager Our employees will tell you the name and location of their manager.

J. Entry upon Private Property

You have the right to refuse to permit Collection personnel to enter upon your private property when the purpose of the visit is to conduct a seizure of your assets. If you decide to avail yourself of this right, the IRS may then decide to seek court authorization to enter upon the property to carry out the seizure action.

K. Problem Resolution Program (PRP)

The PRP is designed for taxpayers who have been unable to achieve a resolution to their tax problems through the other avenues of review explained in this booklet. To use the service you should contact the Problem Resolution Officer, who is available in each of our District offices. You may contact the Problem Resolution Officer on our toll free telephone system or visit him/her in the District office