Taxpayer Assistance Orders: The Taxpayer Advocate's Power to Make the IRS Act

Most of the time, the Taxpayer Advocate Service gets results by working the problem: finding the right IRS employee, explaining what went wrong, and pushing the case forward. Sometimes that is not enough. For those cases, Congress gave the National Taxpayer Advocate a formal tool: the Taxpayer Assistance Order, or TAO.

The authority is in IRC 7811. The regulation that implements it is Treasury Regulation 301.7811-1. Together they answer four questions: when can a TAO issue, what can it order, who can overrule it, and how do you ask for one.

The legal test: significant hardship

Under IRC 7811(a)(1), on application by a taxpayer, the National Taxpayer Advocate may issue a TAO if the Advocate determines the taxpayer is suffering or about to suffer a significant hardship as a result of the manner in which the internal revenue laws are being administered, or if the taxpayer meets other requirements set out in regulations. "National Taxpayer Advocate" includes designees, such as a Local Taxpayer Advocate.

The regulation defines significant hardship as a serious privation caused or about to be caused to the taxpayer as the result of the particular manner in which the revenue laws are being administered by the IRS. It includes situations where a system or procedure fails to operate as intended or fails to resolve the taxpayer's problem. The statute and regulation list four examples, not as an exclusive list:

1. An immediate threat of adverse action. The regulation's example: the IRS levies a bank account and the taxpayer needs the money for a medically necessary surgery scheduled in one week.
2. A delay of more than 30 days in resolving taxpayer account problems. The regulation defines this as either not getting a response by the date the IRS promised, or a delay of more than 30 days beyond an established normal processing time.
3. Significant costs, including fees for professional representation, if relief is not granted.
4. Irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted. The regulation's example: a homeowner who will lose the house to foreclosure unless the IRS subordinates or discharges its lien so a refinance can close.

Hardship is necessary, not sufficient

The regulation is explicit that a finding of significant hardship does not automatically produce an order. After finding hardship, the Advocate must determine whether the facts and the law support relief. In other words, you need both: real hardship, and a legitimate basis for the relief you want.

One rule tilts that analysis in your favor. Under IRC 7811(a)(3), when an IRS employee is not following applicable published administrative guidance, including the Internal Revenue Manual, the Advocate shall construe the factors in the manner most favorable to the taxpayer. If you can show the IRS skipped its own procedure, say so, and cite the manual section.

What a TAO can order

Under IRC 7811(b), a TAO may require the IRS, within a specified time period:

• to release property of the taxpayer that was levied upon, or
• to cease any action, take any action as permitted by law, or refrain from taking any action with respect to the taxpayer under the collection chapter, the bankruptcy and receivership provisions, the chapter on discovery of liability and enforcement of title, or any other provision of law specifically described in the order.

The regulation adds that, although the Advocate may not make the substantive determination of a tax liability, a TAO may require the IRS to expedite, reconsider, or review at a higher level an action taken on the determination or collection of a tax. The regulation's examples include ordering release of a wage levy causing economic hardship, ordering reconsideration of a rejected offer in compromise, and ordering Appeals to refrain from issuing a final determination and to reconsider an innocent spouse denial.

TAOs also reach private collection contractors. IRC 7811(g) applies orders to persons performing services under a qualified tax collection contract, the same way they apply to the IRS.

What a TAO cannot do

• It cannot decide how much tax you owe. The regulation says the Advocate may not make a substantive determination of any tax liability.
• It does not replace appeals or court. A TAO is meant to supplement existing administrative and judicial procedures, not substitute for them. Your rights to administrative or judicial review are neither diminished nor expanded by seeking TAS help.
• It generally will not go to Chief Counsel. And it will not be issued to IRS Criminal Investigation if the ordered action could reasonably be expected to impede a criminal investigation.

Who can overrule a TAO

Under IRC 7811(c), a TAO may be modified or rescinded only by the National Taxpayer Advocate, the Commissioner of Internal Revenue, or the Deputy Commissioner, and only if a written explanation of the reasons is provided to the National Taxpayer Advocate. The regulation says the IRS will comply with a TAO unless it is appealed and then modified or rescinded by one of those officials.

There is also accountability to Congress. The National Taxpayer Advocate's annual report to the tax-writing committees must identify any TAO that was not honored by the IRS in a timely manner, under IRC 7803(c)(2)(B)(ii)(VII).

A side effect to know about

Applying for a TAO has a timing consequence. Under IRC 7811(d), the running of any period of limitation for the actions involved is suspended from the date of your application until the Advocate decides it, plus any period the Advocate specifies in an order. The regulation adds that no suspension occurs if the Advocate issues an order without a written application. The computation of those periods is technical and fact-specific. If timing matters to your strategy, discuss it with a representative before you file.

A hypothetical, to see how the pieces fit

Consider an invented example. A self-employed taxpayer answered an IRS notice in May with documents showing the income in question was already reported. In July an IRS employee told her the response would be worked within 30 days. In September, instead of an adjustment, she received a levy on her business checking account, which holds the money she needs for payroll on the first of the month.

Run her facts through the rules. There is an immediate threat of adverse action. There is a missed promised date, which the regulation treats as a delay of more than 30 days in resolving an account problem. There may be significant costs and long-term harm if payroll fails. And if the IRS levied while her timely response sat unprocessed, she can ask whether the employee followed the applicable manual procedures, which would trigger the favorable construction rule in section 7811(a)(3).

Her Form 911 would document each of those points and ask for two specific things: release of the levy before payroll, and processing of the May response. That is the anatomy of a strong TAO application. The TAS case acceptance criteria give you the checklist, and the right to a fair and just tax system gives you the frame.

If you want someone to file for you and argue the case, give that person authority with a Form 2848.

How to apply

You apply on Form 911, which is titled in part "Application for Taxpayer Assistance Order," or in a written statement that gives TAS enough information to understand the harm and the need for assistance. The Advocate can also act without an application under IRC 7811(e).

To make your application strong:

• Show the hardship with documents. Levy notices, foreclosure letters, medical scheduling, termination notices.
• Show the IRS's role. The hardship has to result from how the tax laws are being administered, including IRS action or inaction.
• Point to any procedure the IRS did not follow. Cite the manual section if you can. That triggers the favorable construction rule.
• Ask for a specific, lawful action. Release the levy by a date. Reconsider the rejection. Process the response.

In my experience, most cases that qualify are resolved by TAS working with the IRS function before a formal order is needed. The TAO is the backstop. Knowing it exists, and building your Form 911 as if one might be needed, tends to make the backstop unnecessary.