Glossary of IRS Tax Relief Terms

Terms used throughout this guide, defined as the IRS and practitioners use them.

A

ACS (Automated Collection System) — The IRS call-site collection function that handles cases before they are assigned to a Revenue Officer.

Allowable expenses — The living expenses the IRS permits when computing ability to pay, capped by the Collection Financial Standards rather than by actual spending.

Appeals (Independent Office of Appeals) — The IRS function that resolves disputes without litigation, independent of the examination and collection functions.

Assessment — The formal recording of a tax liability on IRS records. It starts the ten-year collection period.

Audit reconsideration — A request that the IRS re-examine an assessment made after an audit the taxpayer did not participate in, or where new records exist.

C

CAP (Collection Appeal Program) — A fast appeal of specific collection actions. No Tax Court review follows a CAP determination.

CDP (Collection Due Process) — The hearing right triggered by a final notice of intent to levy or a lien filing notice, requested on Form 12153 within 30 days.

CNC (Currently Not Collectible) — A hardship status suspending collection. Interest and penalties continue to accrue.

Collection Financial Standards — IRS-published National and Local Standards capping allowable food, housing, utilities, transportation, and health care expenses.

CSED (Collection Statute Expiration Date) — The date the IRS loses administrative authority to collect an assessment, generally ten years after assessment.

D

Deficiency — The difference between the tax reported and the tax the IRS determines is owed. A notice of deficiency confers the right to petition the Tax Court.

Dissipated assets — Assets transferred or spent before or during an offer evaluation that the IRS adds back to Reasonable Collection Potential.

E

Effective tax administration — A rare basis for an Offer in Compromise where the tax is collectible but collection would create hardship or undermine compliance.

Enrolled Agent (EA) — A tax practitioner licensed by the U.S. Department of the Treasury with unlimited rights to represent taxpayers before the IRS.

Equivalent hearing — A CDP-style hearing available for one year when the 30-day CDP deadline is missed. It carries no right to Tax Court review.

F

Failure to deposit penalty — A tiered penalty under IRC § 6656 for late employment tax deposits.

FBAR — Report of Foreign Bank and Financial Accounts, FinCEN Form 114, required of U.S. persons with foreign accounts exceeding the reporting threshold.

Field audit — An examination conducted in person by a Revenue Agent, typically at the business location.

I

IDR (Information Document Request) — The written request an examiner uses to obtain records during an audit.

Injured spouse — A spouse whose share of a joint refund was applied to the other spouse’s separate debt. Relief is requested on Form 8379.

Innocent spouse relief — Relief under IRC § 6015 from joint and several liability arising from a joint return.

Installment agreement — A monthly payment arrangement under IRC § 6159.

IRM (Internal Revenue Manual) — The IRS’s internal procedural guidance. It binds IRS personnel administratively but does not have the force of law.

L

Levy — The seizure of property or rights to property to satisfy a tax debt.

Lien (Notice of Federal Tax Lien) — The public filing that perfects the government’s statutory claim against a taxpayer’s property.

N

Net realizable equity — Quick sale value of an asset less valid encumbrances — the asset component of Reasonable Collection Potential.

O

OIC (Offer in Compromise) — A settlement of an assessed liability for less than the full balance under IRC § 7122.

P

PPIA (Partial Payment Installment Agreement) — An agreement whose payments will not full-pay the liability before the CSED expires.

Q

Quick sale value — The value an asset would bring in a sale under time pressure, generally treated as 80% of fair market value.

R

RCP (Reasonable Collection Potential) — Net realizable equity plus future remaining income — the IRS’s measure of collectibility.

Reasonable cause — The statutory basis for penalty relief where a taxpayer exercised ordinary business care and prudence but could not comply.

Revenue Agent — An IRS employee who conducts examinations. Distinct from a Revenue Officer.

Revenue Officer — An IRS field collection employee with authority to levy, summons records, and make field visits.

S

SFR (Substitute for Return) — A return prepared by the IRS under IRC § 6020(b) when a taxpayer does not file. It allows no deductions or credits beyond the standard minimum.

Seriously delinquent tax debt — Unpaid, legally enforceable federal tax debt above the annual threshold that may be certified to the State Department for passport action.

Streamlined installment agreement — A payment plan available without financial disclosure for individual balances at or below $50,000.

Summons — A legal demand for testimony or records, enforceable in federal district court.

T

TAS (Taxpayer Advocate Service) — An independent organization within the IRS that assists taxpayers facing hardship or unresolved procedural problems.

TFRP (Trust Fund Recovery Penalty) — Personal liability under IRC § 6672 for the trust fund portion of unpaid employment taxes, assessed against responsible persons who acted willfully.

Transaction code — A numeric code on an IRS account transcript identifying an action — assessment, payment, lien filing, or a suspension of the collection period.

Transcript (account, return, wage and income) — IRS records showing account activity, the return as filed, and third-party reported income.

Trust fund taxes — Amounts withheld from employee wages and held in trust for the government — income tax withholding and the employee share of FICA.

W

Willfulness — For TFRP purposes, voluntary and intentional disregard of a known duty to pay over trust fund taxes — not evil motive.