NEGOTIATING OFFERS IN COMPROMISE

The last article in this series on dealing with the Collection Division addressed Installment Agreements — arrangements through which tax debts can be resolved by means of monthly payments. Some folks, however, owe so much that an installment agreement is not a practical solution. Interest and penalties can accrue so quickly that the liability actually increases, despite the monthly payments. For such clients, one option often considered is an “Offer in Compromise.”

Statutory authority

The IRS’s authority to accept compromises in full settlement of tax debts is found in IRC §7122. There are only two statutory grounds for such compromises — “doubt as to liability” and “doubt as to collectibility.”2 Compromises premised on doubt as to whether the underlying tax is properly owed are handled by the Examination Division. We will focus on offers based on doubt as to collectibility, which are presented to and investigated by the IRS Collection Division.

The IRS’s reasons for entertaining and accepting Offers in Compromise are explained succinctly in Policy Statement P-5-100:

The Service will accept an Offer In Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An Offer in Compromise is a legitimate alternative to declaring a case as currently not collectible or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government.

This statement of policy provides a frame of reference by which the Service’s procedures and standards for evaluating offers can be more readily understood.

A history lesson

There have been radical shifts in the Service’s attitude toward Offers in Compromise over the years. Prior to 1992, it was nearly impossible to convince the IRS to exercise its statutory authority to compromise tax liabilities. The Service was roundly criticized by Congress and taxpayer advocates for its refusal to enter into reasonable compromises, and for its inability to control the ever growing number and magnitude of delinquent accounts.

As a result of this criticism, on February 26, 1992, the IRS issued a new Internal Revenue Manual section dealing with offers.3 This signaled the start of what would turn out to be the Gold Age of the Offer in Compromise. Under the old rules, Collection Division personnel were discouraged even from informing hard-pressed taxpayers of the Service’s authority to compromise tax debts. But under the new IRM provisions, employees were directed to “discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms.”4 As a result of the new liberalized attitude, acceptance rates and the number of offers filed both increased.5

Unfortunately, however, there were wide variances in the administration of the Offer in Compromise program in different parts of the country.6 Some practitioners, aware of these disparities, lobbied the IRS for more uniformity. At the same time, the system was being overwhelmed by the increasing number of offers. For these reasons the Service wanted to bring more efficiency and uniformity to the offer evaluation process. The result was yet another major change in policies and procedures. On August 29, 1995, the IRS adopted a system of local and national “standards” for the evaluation of a taxpayer’s “ability to pay,” and dividing expenditures into categories of “necessary expenses” and “conditional expenses.” This was discussed in detail in my last article on the subject of negotiating installment agreements because the standards used for determining ability to pay are the same. I explained in that article that these new expenditure classification and allowance standards make it more difficult to negotiate reasonable installment agreements. And they have the same effect on Offers in Compromise, often pushing the amount the IRS will accept beyond the reach of many taxpayers who might have fared better under the old procedures. These standards, however, represent the current environment. Thus, in drafting Offers in Compromise for our clients, we must deal with the rules as the IRS has defined them.

Inclusion of all tax liabilities

As a preliminary matter, note that an Offer in Compromise must include all of the taxpayer’s liabilities. Thus, it is often necessary to bring about the assessment of any taxes which could otherwise be assessed in the future. For income taxes, any unfiled returns must be prepared and filed so that the full liability is known.7 And for withholding taxes or trust fund recovery penalties, assessments must be made for all quarters for which the client is potentially liable.8 Furthermore, if there are unfiled returns the IRS typically will not consider the offer anyway because the taxpayer is not in “current compliance.”9

Forms to be submitted

An Offer in Compromise is filed using IRS Form 656, accompanied by Form 433-A and/or 433-B.10 Guidance for properly completing these forms can be found in the instructions, in IRS Pub. 1854, and in IRM 57(10)6.1. If a computer generated Form 656 is used, the taxpayer must initial each page certifying that it is a verbatim duplicate of the official form.

The IRS is currently working on a new version of Form 656.11 A controversial draft of the new form would have required the preparer to sign along with the taxpayer, certifying under penalties of perjury that he or she had “examined” the Offer and related documents, and that the information presented therein was true and correct to the best of the preparer’s knowledge and belief. When presented at the AICPA Tax Division Annual Conference in late October, this draft produced a storm of protest, and in response the IRS quickly abandoned the idea of requiring the signature of anyone other than the taxpayer.12

Cash versus deferred payment offers

The Service prefers cash offers. A “Future Income Collateral Agreement” (Form 2261) was once required for most Offers in Compromise, but is now rarely used.13 Today, the IRS only wants cash on the barrelhead. If the taxpayer can’t fund a lump sum offer, and must by necessity deal with the taxes through monthly payments, the Service may permit an Installment Agreement, but generally will not agree to an Offer in Compromise. A cash offer means anything up to paying 90 days after notification that the offer has been accepted.14 Deposits are encouraged, but not required.15

Nevertheless, despite the Service’s strong preference for cash offers, if your client simply can’t come up with the money, you should know that the Internal Revenue Manual does permit the acceptance of offers with deferred payment periods of up to two years:16

1. A deferred payment offer is one where any part of the amount offered is to be paid at any date(s) more than 90 days after acceptance of the offer. As a general rule, deferred payment should not be extended beyond two years. . .
2. A longer or shorter period of time may be acceptable if extraordinary circumstances exist and are documented in the case file. However, regions or districts may not establish a general rule to require payment within a specific time frame.
3. If the amount of the offer is acceptable and will be paid within two years, an offer will not be rejected unless exceptional circumstances are clearly documented which establish why a shorter period of time for payment is appropriate. . .
4. The terms of a deferred payment offer should be precisely stated so there can be no doubt as to the taxpayer’s intent if the offer is accepted.

A deferred payment offer is much harder to sell than a cash offer. But if the taxpayer’s circumstances require, you may be able to use the above-quoted IRM provision to good advantage.

The “processability” determination

After submitting the required forms, the first obstacle is the “processability” determination. To control the workload of the few Revenue Officers in each district trained as “offer examiners,” an offer package is given an initial screening to determine if it warrants further consideration. The large number of offers which the IRS sends back as unprocessable has been a source of great frustration. The IRS asserts that many offers are not presented in processable condition because taxpayers don’t understand the offer process, or don’t fill out the required forms in accordance with the instructions, or don’t provide the necessary supporting documentation. Some practitioners suspect, however, that the Service uses “processability” as a cover to reject offers on their merits, while keeping acceptance statistics artificially high (i.e. by excluding many offers from the “rejected” column by asserting they were incomplete or in some other way deficient.)

IRM 57(10)9.1 outlines the circumstances in which an offer will be considered unprocessable. They include the following:

1. The taxpayer is not identified.
2. The liabilities are not identified.
3. No amount is offered.
4. Appropriate signatures are not present.
5. Financial statement is not provided.
6. The offer “does not reasonably reflect net equity in assets” and the amount “recoverable from future income sources.”
7. An obsolete version of Form 656 has been used.
8. Terms have been altered or deleted.

In theory, local IRS offices are not permitted to deviate from the published processability criteria without National Office approval.

One advantage of this initial screening is that it provides an opportunity for the correction of any real defects in the offer package. There is also, however, a less obvious benefit. The fine print on the Form 656 points out that the normal ten year statute of limitations on collections is extended for the period the offer is pending, plus one year. However, this suspension does not begin until an IRS employee signs the offer and fills in the date on the “waiver” portion of the Form 656. If the offer is unprocessable, it is returned before the waiver is signed. Accordingly, an unprocessable offer does not extend the statute of limitations.

On the other hand, when an Offer in Compromise is returned as unprocessable, the taxpayer is denied the opportunity to plead his case to the IRS Appeals Office. If the offer package is incomplete or deficient, it is appropriate that there be a mechanism for its correction so that determinations are only made on the basis of complete and proper documents. However, when the processability determination is used as a back door way to reject an Offer in Compromise on its merits without giving the troublesome taxpayer the right to appeal, it is an odious and pernicious abuse of power.

Determining the amount to offer

Obviously, the key question in an Offer in Compromise is the amount the taxpayer will have to pay. Procedural shortcomings in the documents can be overcome. But if the amount offered is not enough, nothing you can say will cause the IRS to accept it. Simply stated, to be acceptable the amount must represent the present value of the Service’s maximum reasonable collection potential. Again, the Manual (at IRM 57(10)(10).1) provides invaluable information about how the Service approaches this determination:

1. An offer is adequate if it reasonably reflects collection potential. An acceptable offer is made up of the following components: (a) the amount collectible from the taxpayer’s assets; (b) the amount collectible from the taxpayer’s present and future income; (c) the amount collectible from third parties, e.g., trust fund recovery penalty and transferee; and (d) the amount the taxpayer should reasonably be expected to raise from assets in which he or she has an interest but the interest is beyond the reach of the government. For example, property located outside the U.S. or property owned by tenancy by the entirety.
2. The starting point in the consideration of an offer submitted based on doubt as to collectibility is the value of the taxpayer’s assets less encumbrances which have priority over the federal tax lien. Ordinarily, the liquidating or quick sale value of assets should be used.

Quick sale value is defined as a value greater than forced sale value. In turn, forced sale value may be no less than 75% of fair market value. Nevertheless, any discount you can support with cogent evidence should be claimed, and the computation explained in the Form 433-A and supporting documents. The “minimum bid” amount may be used to approximate quick sale value.17 The minimum bid amount can be determined with IRS Form 4585 (Minimum Bid Worksheet).18

The IRS requires that all assets be considered in determining collectibility. Importantly, this includes even assets against which the Service could not take enforcement action. A source of frequent problems is the demand that where only one spouse is liable for the tax at issue, the amount to be offered must include the value of tenants by the entireties real estate, even though the Service readily concedes it could not reach such property through levy and distraint action. IRM 57(10)(13).92 provides the IRS’s justification for this position, as well as guidelines for its application:

1. . . . It is reasonable to expect that if a taxpayer wishes to compromise a tax liability, the taxpayer should be asked to include in the amount offered at least a portion of the amount accessible to the taxpayer but unavailable to the Service for collection action.
2. In the consideration of real estate and other related property held by tenancy by the entirety, where the assessment for the liability is made against only one spouse, the starting point for negotiations will be 50% of the net equity in the property. The revenue officer or offer examiner must apply the facts of the specific case to determine whether a lesser percentage is appropriate. In any case, a minimum of 20 percent and a maximum of 50 percent of the equity must be included in arriving at an acceptable offer in compromise.

You may be told that district policy requires including at least 50% of the value of jointly held real estate. To respond, point out that 50% is merely a suggested starting point, that the Manual provides authority for including as little as 20% in appropriate circumstances, and that local office deviations from these standards are prohibited without National Office approval.

As indicated above, the Service also considers the amount collectible from the taxpayer’s future income. The Manual requires that in evaluating future income, “the taxpayer’s education, profession or trade, age and experience, health, past and present income will be considered,” and that in determining necessary living expenses,” the procedures in IRM 5323 will be used.”19 Since these standards were extensively discussed in my previous article, they will not be presented in detail here.20 Suffice it to say, however, that determining “allowable” living expenses in the manner most favorable to your client requires the preparation of Form 433-A in strict yet creative compliance with the IRM 5323 standards.

Once the taxpayer’s ability to make monthly payments is determined, the present value of those potential future payments must be ascertained. Remember, what we’re looking for is the total present value of the IRS’s collection potential, both from assets and from future income. If the amount offered exceeds this figure, the offer has at least a chance of being accepted. But if it doesn’t exceed this amount, the offer will be rejected. To translate future monthly payments into a present value figure, the IRS starts with what the taxpayer could pay over 60 months, and then discounts this stream of payments to present value.21 The interest rate to be used in making this discount computation is the rate charged by the Service on tax delinquencies as of the date the computation is made.22 This multiplier effect underscores the importance of carefully computing and negotiating the monthly ability to pay. A reduction of $100 per month in ability to pay translates into a reduction of approximately $5,000 in the amount the taxpayer would have to offer in order for his compromise proposal to be favorably considered.

Compromising employment taxes

Compromising employment taxes presents special problems.23 Offers in Compromise are frequently considered in these cases for two reasons: First, the magnitude of the liability, even for a small employer, can be staggering. Second, unlike income taxes, employment taxes, and the related trust fund recovery penalty, cannot be discharged in bankruptcy, and thus bankruptcy is not an option.

Unfortunately, the Service’s policies often make it hard to compromise tax liabilities of this nature. If the business in question is still operating, the IRS normally will not accept an offer for an amount less than the tax, exclusive of penalties and interest.24 Nevertheless, if the taxpayer shows an ability to stay current, and the IRS can be convinced that the offer is in the best interest of the government, an Offer in Compromise for an amount less than the tax can be accepted, as long as it reasonably reflects collection potential.

Public policy considerations

Some situations raise special “public policy” considerations. Unlike everything else the IRS does, the acceptance of offers is subject to public disclosure. The IRS believes that voluntary compliance with the tax laws could be adversely impacted by accepting Offers in Compromise from certain taxpayers in certain situations. IRM 57(10)1.3 explains the IRS’s position that offers may be rejected as contrary to public policy, “even though it is shown conclusively that the amounts offered are greater than could reasonably be collected in any other manner.” The Manual also states, however, that “a decision to reject an offer for public policy considerations should be extremely rare,” and that it should be made “only where a clear and convincing case can be made that public reaction to the acceptance would be so negative that future voluntary compliance by the public would be diminished.”

One such situation often encountered involves tax liabilities arising due to fraud. Revenue Officers will sometimes assert that such liabilities may not be compromised. The Internal Revenue Manual, however, states that “an offer will not be rejected solely because a taxpayer was criminally prosecuted for a tax or non-tax violation.” Nevertheless, an offer may be rejected “when it is suspected that the financial benefits of the criminal activity are concealed or the criminal activity is continuing.”

For similar reasons, the Service routinely rejects Offers in Compromise from taxpayers who work for the federal government. Again, there is no flat prohibition on acceptance of such offers, but the Manual states that “based upon public policy considerations, acceptances should be rare.” This is a particularly important consideration for practitioners here in the Washington metropolitan area with its large number of federal employees.

Recourse to the Appeals Office

As noted above, if an Offer in Compromise is rejected (after being deemed processable and investigated), the taxpayer has the right to an independent review by the IRS Appeals Office. The IRS Pattern Letter used to communicate the rejection of the offer explains that a review by the Appeals Office may be sought by filing a written protest within 30 days.25 New information presented with the protest will be evaluated initially by the offer examiner. This may result in the examiner agreeing to accept the offer. Usually, however, the protest and the case file are simply forwarded to the Appeals Office.

In addition to preparing the rejection letter, for all rejected offers the examiner is required to prepare a Form 1271 (Rejection or Withdrawal Memorandum) and an accompanying narrative report explaining the reasons for the rejection:

A brief report outlining the reasons for rejection must accompany Form 1271. If the offer was based on doubt as to collectibility, the facts as to collectibility must be set out in sufficient detail including the amounts and term determined to be acceptable, so that the information can be used both for further collection action and as a basis for discussion of the case in the event the rejection is appealed. IRM 57(10)(17).3(1).

The IRS does not routinely send this report to the taxpayer. However, given its obvious value in preparing for an appeals conference or fashioning a new offer, every effort should be made to secure a copy, either directly from the offer examiner or through a Freedom of Information Act request.

If a deposit was made with the offer, upon rejection it will be refunded (without interest) unless the taxpayer authorizes it to be applied to the tax liability. A Form 3040 (Authorization to Apply Offer in Compromise Deposit to Liability) must be signed by the taxpayer in cases where the deposit is to be applied.26

Effect of acceptance

An Offer in Compromise is a contract. It is conclusive and binding on both the IRS and the taxpayer, and precludes further inquiry into the matters it covers. In the absence of fraud or mutual mistake, the courts have denied either party recovery of any part of the consideration given. However, an offer which was accepted under a mutual mistake as to a material fact, or because of false representations about a material fact, may be set aside.27

In addition to the main terms of the offer — the taxpayer’s agreement to pay the amount offered and the IRS’s agreement to accept it in full settlement of the tax liability and to release any previously filed liens — the Offer in Compromise contains other boilerplate promises. The most important of these is the promise to stay in full compliance with all tax obligations for five years. Failure to file tax returns or pay tax can result in the retroactive termination of the offer, and the resurrection of the tax liabilities. In addition, the taxpayer agrees to the offset of any refunds due for prior years and for the tax year during which the offer is accepted. If the IRS computer mistakenly sends out a refund check, the taxpayer must return it. Failure to do so is a violation of the terms of the offer, and may result in its revocation.

Renegotiating accepted offers

Sadly, it is not unusual to push an offer through to acceptance, only to find that the client can’t come up with the money to pay the amount offered. Why? Sometimes through negotiation the IRS increases the amount beyond what the taxpayer can afford. And sometimes the Service takes so long to evaluate the offer that circumstances have changed and the taxpayer can no longer raise the money through borrowing or selling assets. In these situations, it is possible to renegotiate an accepted offer.28 No special form is required. Instead, a proposal to renegotiate an accepted offer is made by letter explaining the circumstances requiring the change. The renegotiated amount must be paid in full before the proposal will be accepted. The standards applied by the IRS in evaluating a renegotiation proposal are similar to those applied to the initial evaluation of an offer.

IRS Restructuring and Reform Act

Among its many new taxpayer protection provisions, the IRS Restructuring and Reform Act of 1998 makes several changes applicable to Offers in Compromise (some merely codifying existing IRS practice). The more important changes are the following:

First, the Act prohibits levies while an offer is pending, and for 30 days following rejection. Furthermore, this prohibition continues during the period an appeal is pending.29 Prior to the Act, the IRS usually withheld collection action while an offer was pending, but was not required to do so.

Second, the IRS is directed to develop guidelines and publish schedules of national and local allowances providing adequate means to cover basic living expenses. This, of course, was done in 1995. But the Act also directs the Service to develop guidelines for Revenue Officers to use in determining whether the published national and local schedules are adequate for the particular taxpayer. Congress was concerned that the rigid application of the local and national standards inappropriately made offers unavailable in some cases. It is hoped that this will restore some of the flexibility which was taken away by the imposition of the local and national standards.

Third, the IRS is directed to conduct an independent internal administrative review of any rejected Offer in Compromise before the taxpayer is informed that the offer is to be rejected. Whether this will make any practical difference depends on how the IRS implements this new procedural requirement.

Fourth, the Act protects one spouse from having an accepted offer rescinded because of the subsequent noncompliance of the other spouse. As noted above, one condition of an offer is that the taxpayer stay in full compliance for five years after acceptance. The Act provides a mechanism for the reinstatement of an offer as to the spouse who remains in compliance.

Fifth, in the accompanying Committee Report, the Congress expressed its desire that the IRS adopt a liberal acceptance policy for Offers in Compromise to provide an incentive for taxpayers to continue to file tax returns and pay their taxes. No standards are given, so we will have to await the IRS’s response to this statement of Congressional intent to see the extent to which it causes an increase in the offer acceptance rate.

Finally, the most important aspect of the IRS Restructuring and Reform Act as it affects Offers in Compromise is increased taxpayer access to appeals consideration in the face of threatened collection action. Effective 180 days after enactment, the Act prohibits levy and distraint action unless the Service has first issued a “Notice of Intent to Levy,” similar to that currently required by IRC §6331(d). For 30 days thereafter, the taxpayer may demand a “pre-levy hearing” with the IRS Appeals Office.30 At this hearing the taxpayer may challenge the appropriateness of threatened collection actions and present “alternatives,” including an offer in compromise.31 Accordingly, one approach in representing a taxpayer faced with threatened levy action will be to propose an Offer in Compromise at a pre-levy appeals hearing. This will undoubtedly have the effect of increasing the number of offers filed.

Conclusion

More than 40 years ago the Offer in Compromise was authorized by Congress to give taxpayers a “fresh start,” but for most of this time relatively few taxpayers seeking to invoke this procedure have actually obtained relief. Congress has now expressed its desire that acceptance policies be liberalized, and has given taxpayers increased opportunities to thwart more aggressive collection actions on the part of the Service. Thus, we can anticipate greater use of Offers in Compromise in the future. A detailed knowledge of the process may prove extremely useful in representing clients who find themselves saddled with tax liabilities exceeding their ability to pay.

1 Mr. Haynes is an attorney with offices in Burke, VA, and Burtonsville, MD, and is a member of the Maryland Society of Accountants’ Newsletter Committee. From 1973 to 1981 he was a Special Agent with the IRS Criminal Investigation Division in Baltimore, and in 1980 was named “Criminal Investigator of the Year” by the Association of Federal Investigators. He specializes in civil and criminal tax disputes and litigation, IRS collection problems, and the tax aspects of bankruptcy and divorce. (phone 703-913-7500; website www.bjhaynes.com)

2 See Regs. 301.7122-1(a).

3 IRM 57(10)0 et seq. (2-26-92).

4 IRM 57(10)1.1 (2-26-92).

5 In FY 1991, the IRS rejected three out of four offers. But in FY 1992, 45% were accepted. In FY 1993, the rate climbed to 53%. And the number of offers filed tripled between 1992 and 1993. See Tax Notes, published by Tax Analysts, October 3, 1994.

6 For example, in FY 1993 (through June), the Fargo District accepted 80% of offers filed, while the Laguna Nigel District accepted only 15.2%. The Newark, Brooklyn and Los Angeles Districts all had acceptance rates of 30% or less.

7 An offer for “Substitute for Return” liabilities will be considered, but the IRS will review the SFR assessment to see if it includes all of the taxpayer’s income. If not, a return will be required. IRM 57(10)1.43. Thus, it is best to prepare and file all delinquent returns, including those for which SFR assessments have been made, before filing the offer.

8 IRS has no authority to compromise unassessed taxes. However, “this does not preclude consideration of an offer prior to assessment.” See IRM 57(10)1.42. Nevertheless, to avoid having the offer returned as “unprocessable,” it is best to make sure that all possible liabilities have been assessed.

9 The importance of “current compliance” was discussed in my article in October-November issue of The Free State Accountant. See also IRM 57(10)(10).2(3), which states “(s)ince an offer will not be accepted if a taxpayer is not current in all filing and payment requirements, efforts should be directed towards bringing the taxpayer into compliance so the offer can be accepted.”

10 Regs. 601.203(b).

11 The current version of Form 656 is Rev. 1-97.

12 The preparer signature requirement was being promoted within the IRS by the Criminal Investigation Division. This raises concerns that Offers in Compromise, and those who assist taxpayers in filing them, may soon receive a higher degree of “attention” from CID. See BNA Daily Tax Report, Oct. 22, 1998.

13 IRM 57(10)(15).1 (9-22-94) states in part “(c)ollateral agreements should not be routinely secured, but secured only when a significant recovery can reasonably be expected. Securing of a collateral agreement should be the exception and not the rule.” Nevertheless, collateral agreements are still used (a) where it is clear that the taxpayer will receive a substantial increase in income, (b) where the taxpayer agrees to a reduction in basis in property likely to substantially appreciate in value, or (c) where the taxpayer waives the future benefit of net operating losses, capital losses and/or unused investment tax credits.

14 The IRS will charge interest on the offer amount from the date of acceptance until the date of payment.

15 IRM 57(10)5.1(5) states “(t)he taxpayer should be encouraged to submit a deposit as a sign of good faith. However, lack of a deposit does not make an offer unprocessable.” An Offer in Compromise Task Force set up earlier this year by the IRS, with participation from practitioner groups including the AICPA, is considering eliminating the suggestion that a deposit be submitted because the processing and refund of these deposits often poses unnecessary administrative problems for the Service.

16 IRM 57(10)6.4 (9-22-94).

17 See IRM 57(10)(10).1(2).

18 See IRM 56(13)5.1.

19 IRM 57(10)(10).1(4) (9-22-94).

20 If you need a copy of “Negotiating Installment Agreements” from the September-October Free State Accountant, please call my office (703-913-7500) and we will be glad to send you a copy.

21 See IRM 57(10)(13).(10)(2) (9-22-94).

22 The IRS Offer in Compromise Task Force is leaning toward recommending looking at only 48 months of future income (instead of the 60 months now used), and dispensing with the present value discount computation.

23 For more on the Trust Fund Recovery Penalty, see IRM 5630.

24 See IRM 57(10)(14).1 (2-26-92).

25 IRM Ex. 5700-36. See also IRS Pub. 5 (Appeal Rights).

26 If the taxpayer consents, the deposit will be applied as of the date the offer is rejected.

27 Practitioners should be keenly aware of IRC §7206(5), which makes it a felony to submit false information to support an Offer in Compromise: [Any person who–] in connection with any compromise under section 7122, or offer of such compromise, . . . willfully– (A) Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or (B) Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax; shall be guilty of a felony . . .

28 See IRM 57(10)(21).2 et seq.

29 See new IRC § 6331(k)(1) and (2); effective after 1999.

30 See new IRC § 6330.

31 The taxpayer may dispute the underlying tax and interpose appropriate defenses, including the enhanced “innocent spouse” protections. (See my article on the new innocent spouse rules in the August-September issue of The Free State Accountant.)