The IRS has recently revised the guidance Revenue Officers use to evaluate a taxpayer’s finances use to evaluate a taxpayer’s finances and ability to pay. They signal a more aggressive, asset focused approach to collecting unpaid taxes
What’s Changed?
Effective July 2026, Revenue Officers are now directed to request full payment at the initial interview. Before considering many payment arrangements, they may look for assets that can be:
- Sold to pay the tax debt;
- Used as collateral for a loan;
- Borrowed against; or
- Applied toward a substantial upfront payment.
As a result, taxpayers may face greater pressure to use home equity, investments, retirement accounts, digital assets, or other property before the IRS approves an installment agreement, partial-payment installment agreement, currently not collectible status, or offer in compromise.
Expect more questions
The IRS financial interview may also become more detailed and intrusive.
Revenue Officers may ask probing questions about a taxpayer’s:
- Income and future earning potential;
- Employment and professional history;
- Health and age;
- Real estate, vehicles, and personal property;
- Retirement accounts and investments;
- Cryptocurrency and other digital assets; and
- Ability to meet ordinary living expenses.
Business taxpayers should also be prepared for onsite visits to verify assets and observe business operations. In some individual cases, the Revenue Officer may request a meeting at the taxpayer’s residence.
Bank statements will receive closer attention
Revenue Officers may examine bank statements for undisclosed income and assets. They may also look for recurring deposits from Venmo, Zelle, PayPal, Cash App, and similar platforms.
Amounts deposited through these services may be questioned and potentially treated as income unless the taxpayer can properly explain and document them.
Life insurance may now be examined differently
One especially important development involves life insurance. The IRS is now charged with balancing taxpayer’s hardship claims against the marketability of certain life insurance contracts.
For certain taxpayers over age 65 or those who are terminally ill, the IRS may investigate whether a policy could be sold in the secondary market—even if it has little or no cash surrender value.
Preparation matters more than ever
The message is clear: waiting until a Revenue Officer becomes involved can make a collection case more difficult, intrusive, and expensive.
Effective representation requires more than knowing yesterday’s rules. It requires monitoring IRS procedural changes, understanding how Revenue Officers are being instructed, and preparing for their questions before the first meeting.
That is why I continually study changes to the Internal Revenue Manual and translate them into practical strategies for taxpayers and the professionals who advise them.
Ron Friedman CPA helps taxpayers understand their IRS collection options and build a strategy around their actual financial situation.
If you or someone you know owes back taxes, has been contacted by an IRS revenue officer, or is worried about IRS collection action, call Ron Friedman CPA at 914.712.6919 for a consultation.
