What is the difference between an irs financial hardship and a taxpayer assistance order (tao)?

If the TAS determines that a taxpayer is facing significant difficulties and the facts and the law support the remedy, the LTA can issue a TAO when the IRS refuses or fails to take the steps the TAS requested to resolve the case. An IRS system or procedure hasn't worked as intended or hasn't resolved your problem or dispute with the IRS. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they have financial difficulties or if the IRS has not resolved their tax problems in an appropriate and timely manner through its usual channels. IRS system problems are those where an IRS process, system, or procedure has not worked as intended and, as a result, the IRS has failed to respond to or resolve a taxpayer problem in a timely manner.

Taxpayers have the right to file objections and submit additional documentation in response to formal actions or proposals from the IRS, to expect the IRS to consider their objections and timely documentation quickly and fairly, and to receive a response if the IRS disagrees with their position. An economic hardship distribution is a withdrawal from a participant's elective deferment account that is made because of an immediate and serious financial need, and is limited to the amount needed to meet that financial need. Financial difficulties are those that involve financial difficulties for a taxpayer, or if an IRS action or inaction has caused or will cause negative financial consequences, or has a long-term adverse impact on the taxpayer. For example, if the TAS has issued a TAO on behalf of a taxpayer who has filed an OIC and the taxpayer makes periodic payments while the IRS is processing the OIC, the LTA office will immediately inform the person handling the appeal if the taxpayer's periodic payment is delayed, as that may cause the IRS to consider that the offer has been withdrawn.

Under IRC 7811 (b) (), the LTA can issue a TAO ordering the IRS to release the tax, thus alleviating the taxpayer's economic difficulties. The LTA may not order the IRS to accept the OIC because it is a substantive determination, but it can direct the IRS to expedite the review of the OIC and consider the taxpayer's argument. The TAS can deny or accept this request taking into account IRS restrictions and weighing the impact on the taxpayer and any difficulties the taxpayer may suffer if the extension is granted. The significant difficulties are due to the way the IRS administers internal tax laws.

If the IRS employee who is actively working on the case does not disclose the information, or if the taxpayer wants to obtain documents that the TAS cannot disclose, the taxpayer can file a FOIA request, as described in the IRS FOIA Guide on the IRS website. For example, IRS employees who work on open cases are generally ordered to give taxpayers “routine access” to their files (including copies of work documents and other records), unless doing so would harm the application, as described on the IRS website. As part of the accepted offer agreement, the IRS will keep any refunds, including interest, of taxes due until the date the IRS accepts the offer.

Dorothy Skeete
Dorothy Skeete

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