Getting an unexpected call from a Revenue Officer as a business owner indicates that your tax situation has just become much more serious. When the IRS attempts to collect unpaid taxes from a business, most of the efforts are automated. Letters get sent out on a pre-determined schedule, and taxpayers are given time to respond. But when a Revenue Officer gets involved, the timeline on enforced collection actions gets significantly shorter.
If you’re a business owner and the IRS has assigned a Revenue Officer to your case, it’s important to understand the severity of your current situation without panicking. You do have to act, but you do not have to handle this situation alone. Learn more about why an RO has been assigned to your business tax file, the potential outcomes, and how to prepare.
If you’re feeling overwhelmed and unsure of how to proceed, contact Seattle Legal Services. We know how to navigate even the most complex tax situations.
Key Takeaways
- The IRS may assign a Revenue Officer to a business when the business fails to pay trust fund taxes, ignores communication efforts, or has a substantial tax bill.
- Although Revenue Officers don’t pay surprise house calls, they may show up at your place of business unannounced.
- The Revenue Officer will attempt to secure payment and uncover the cause of your unpaid tax issues.
- Working with a tax attorney can help you better prepare for your RO visit and negotiate payment terms.
Why the IRS Assigns a Revenue Officer
Revenue Officers are high-level IRS professionals who take on unpaid tax cases that have escalated beyond the scope of the normal collections process. Most unpaid taxes go through the Automated Collection System, which sends notices and responds to taxpayer questions without any higher-level intervention.
However, when a tax account becomes seriously delinquent and the IRS has not received any communication from a taxpayer, the IRS may assign a Revenue Officer. There are several situations that may result in a business’s account being assigned to an RO:
- Unpaid trust fund taxes: The IRS tends to be flexible with unpaid tax debt if a taxpayer is attempting to catch up or demonstrates financial need. However, that is not the case with trust fund taxes. When a business withholds payroll taxes from employees’ wages, those are funds held in trust for the IRS until the next deposit date. When a business fails to do so, the IRS views this as theft. When a business has significant unpaid payroll taxes, the IRS tends to step in fairly quickly.
- Significant or long-unpaid tax debt: The IRS does not have the resources needed to chase down every taxpayer who owes them money. But when an account has gone unpaid for years or the amount has reached an unsustainable level, the IRS may bring in a Revenue Officer to attempt to secure payment.
- Continued refusal to respond: The IRS tries to make it easy to reach out to them if you have questions about your tax debt or want to explore payment options. When taxpayers ignore attempts at communication, the IRS may use an RO to force a taxpayer to communicate with them, especially if their tax debt is substantial.
- High-risk businesses: Certain businesses are at higher risk of non-compliance with tax requirements. These may include cash-heavy businesses, seasonal employers, and businesses that have frequently filed or paid late in the past. If a business fits into one of these categories and starts to struggle with compliance, the IRS may step in more quickly than it would otherwise.
If a revenue officer has been assigned to your case, you should reach out to a tax attorney who has experience with business tax problems.
What to Expect During a Revenue Officer Visit
In some cases, especially if dealing with a federal tax deposit alert, an IRS revenue officer may come to your business in person. In other cases, they may reach out to you first through the mail. This letter, IRS Letter 725-B, will include a time, date, and location for your scheduled meeting. It may be in person or over the phone.
What They May Request
The Revenue Officer will likely request extensive documentation of your business’s finances and tax payments. Be prepared with tax returns, payroll records, bank statements, profit and loss statements, and any other financial documents your business generates. The Revenue Officer wants to assess your ability to pay or look for any red flags that indicate you may not be able to pay.
In-Person Visit
Revenue Officers often prefer to visit businesses in person versus handling meetings over the phone. There is a sizable amount of documentation required when assessing a business’s tax situation, and visiting in person makes it easier to review this information. It also gives the RO to check out the business, verify that it’s a legitimate operation and not a shell company, and look for any signs of fraud.
Interviews
The Revenue Officer may want to speak to the owner, management, and members of staff during their time at the business. This isn’t always the case; however, if there are trust fund tax issues, these discussions may help them determine who should be held liable for the Trust Fund Recovery Penalty.
The Business Impact of a Revenue Officer Assignment
Having an RO assigned to your business can disrupt your business’s operations and reputation within the industry. While the IRS will not reveal details of your tax situation to other parties, these issues are rarely kept secret. It just keeps one or two employees who see an IRS letter, overhear a phone call with the IRS, or see the RO show up on-site to start rumors.
This can raise questions among customers and clients, make vendors and suppliers worry about getting paid on time, and generally weaken your standing within your industry.
These tax issues can also cause serious issues in your normal business operations. If half of your management team is preparing for an IRS visit and gathering financial documentation, that’s manpower taken away from employee and customer or client support. Employees may wait longer for answers to questions, clients’ questions or concerns may go unanswered, and deadlines may pass without status updates.
How to Prepare Before the Visit
As the day of your scheduled visit approaches, taking the time to prepare can help ensure that everything goes smoothly. Keep these tips in mind:
- Have your documentation ready: You know what your business’s financial records look like—make sure a tax agent can navigate them easily. Have them categorized, labeled, and in chronological order so the RO can find what they’re looking for quickly and easily. You don’t want them to ask for a form and then watch you dig through an overfilled filing cabinet to find it.
- Keep staff informed: Keep staff informed to a reasonable level. They do not need to know the in-depth details of your business’s tax situation, and telling them too much will invite gossip and rumors. At the same time, don’t try to hide that a Revenue Officer is visiting. If anyone is likely to be interviewed—likely anyone with control over payroll and other financial aspects of your business—brief them on what to expect.
- Choose a designated person to handle questions: If the Revenue Officer has questions, it’s better for them to get answers from one designated and fully informed person than to get different answers from half a dozen people.
What to Do During the Visit
When the Revenue Officer visits, stay professional and calm throughout the visit. There’s a wide range of personalities amongst ROs. Some do everything they can to make nervous taxpayers feel relaxed and understood, some are aggressive and demanding, and others fall somewhere in the middle. Regardless of where your Revenue Officer fits on this scale, you want to stay collected and focused.
If the Revenue Officer asks questions that imply fault or financial mistakes, be careful about how you answer. You don’t want to do anything that admits fault. For example, if they ask about withheld payroll taxes, you don’t want to come out and tell them that you used it to pay an overdue supplier bill unless your tax professional has told you to say that. You can defer questions until your tax attorney has had a chance to review them—you definitely don’t want to implicate yourself or your company.
If you don’t know the answer to a question, you can ask for time to review your records and find an answer. It’s better to admit that you don’t know than to guess and potentially give a wrong answer. It’s safest to have your legal representation with you when you meet with the Revenue Officer.
Next Steps After the Visit
After the Revenue Officer leaves, immediately review any requests they made, questions they had, or deadlines they gave you. This is your chance to jot down everything you remember so you can address it immediately. If you start addressing issues well in advance of the deadline, you have some flexibility in case you run into issues.
If you have to take action and start paying off your tax debt to avoid losing business assets—or worse, facing a Trust Fund Recovery Penalty—take some time to discuss tax resolution options with a tax professional. Installment plans, offers in compromise, and other options may give you some breathing room and help you get caught up.
Schedule a meeting with your tax attorney as soon as possible after your RO visit. You’ll likely have multiple deadlines and tasks to handle, and your tax attorney can help you fulfill your obligations and avoid further issues.
When to Call a Tax Attorney
It’s normal to feel unprepared or overwhelmed when handling serious tax issues. While receiving collection notices from the IRS is already stressful, it’s an entirely new level of anxiety when a Revenue Officer is handling your case. If you’re so overwhelmed that you can’t figure out what your next steps should be or how to prepare, it is time to talk to a tax professional who can assist you in dealing with the RO.
The right tax professional can also help you navigate aggressive or unrealistic deadlines, potential liens and levies, and Trust Fund Recovery Penalties. These issues can threaten not just the financial well-being of your business, but your own financial stability. Throughout this process, your tax attorney can negotiate on your behalf, protect your rights, and help you avoid enforcement actions that may put your company out of business.
A Revenue Officer visit is serious and requires in-depth preparation, but it does not mean you’re out of options. If you are proactive about your tax debt and show your willingness to find a solution, the IRS may be willing to work with you. Get the professional support and guidance you need with Seattle Legal Services. Call us at 206-536-3152 or send us a message online to discuss your business tax issues.
Frequently Asked Questions
What is an IRS Revenue Officer?
IRS Revenue Officers handle serious tax collection cases, typically those involving extremely high tax bills, very delinquent tax accounts, or accounts with unpaid trust fund taxes.
Why did the IRS assign an officer to my business?
You may have unpaid trust fund taxes, a history of non-compliance, or an extremely high tax bill that the IRS wants to address.
Do I have to be careful what I say to a Revenue Officer?
Yes. What you tell a Revenue Officer can be used against your business, so it’s important to prepare ahead of time so you know what to say (and what not to say). While you should not lie, you also want to avoid oversharing.
Are my personal finances at risk?
If your business has unpaid trust fund taxes, you could face personal liability at the state or federal level. The IRS may be looking to impose a Trust Fund Recovery Penalty on someone it deems to be a responsible party.
Sources:
https://www.irs.gov/individuals/understanding-your-letter-725-b
https://www.irs.gov/help/how-to-know-its-the-irs
https://www.taxpayeradvocate.irs.gov/tax-terms/automated-collection-system-acs/
https://www.irs.gov/businesses/small-businesses-self-employed/trust-fund-taxes