25

Oct

WAGE GARNISHMENTS AND ASSET SEIZURES

The Internal Revenue Service has various powers at their disposal to collect taxes that are owed and not paid, including the power to levy.  A levy can result in the garnishment of income (such as your wages, salary, commissions, or other payments for personal services) and/or the seizure and sale of assets to satisfy outstanding tax debt.

Wage Garnishments.

Many have asked incredulously: can the IRS really take away a significant portion of my wages?!

They sure can.  Fortunately, an IRS wage garnishment or wage levy is a tactic that is usually a last resort measure and is usually not done unless the tax problem has gone unresolved for quite some time after numerous attempts at notification.

When the IRS decides to levy your wages, the IRS will send written notice to your employer requiring the employer to withhold a portion of your pay and send it directly to the IRS.  Your employer is obligated by law to follow these instructions or face serious penalties.  If you’re self-employed, the IRS can send a IRS wage levy to your accounts receivable.  In other words, they will send notice to your customers telling them to pay your accounts receivable directly to the IRS.  This won’t be good for customer relations and can be quite embarrassing.

Furthermore, an IRS wage levy will generally remain in place until the tax liability is paid or other arrangements are made to satisfy the tax debt.

Be proactive!  Make arrangements with the IRS before they garnish your wages.

Asset Seizures.

Likewise, the IRS has the power to seize your house, your car or any other property you own.   Once again, this is usually a last resort for the IRS.  They will not seize your assets until they have given you proper notice and ample opportunity to pay your tax debt or work out a payment plan.  (We will discuss payment alternatives in a future blog post).

Before the IRS conducts a property seizure, they will normally perform an investigation to determine the equity in the item to be seized.  In almost all cases, the IRS will not seize the asset unless there is sufficient equity.

Due to governmental protections, except in extreme cases, it is unlikely that the IRS will consider seizing your principal home.  However, rental properties or vacation homes are fair game and if there is sufficient equity in these assets, they can be seized without great difficulty.  Businesses may be seized as well, but again, it is the exception, not the rule.

What to do if you get a Notice of Intent to Levy.

If you receive a Notice of Intent to Levy, you need to act fast!  Either pay your taxes, if possible, or negotiate with the IRS.  This is not the time for procrastination.  This is the time to hire a tax attorney to represent you.  The longer you wait, the more difficult it becomes and the more time and cost it will likely take to repair the damage that has already occurred.

If you’d like to consult with us regarding your options, we are available to help.

Muiños & Morales

575 days ago Short URL Comments

Asset Seizures/IRS Collection Procedures/Liens and Levies/Wage Garnishments

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03

Oct

HOW THE IRS CAN GET TO YOUR MONEY

The Collection Period.

By law, the IRS has the authority to collect outstanding taxes for 10 years from the date your tax liability was assessed.  However, this 10-year collection period is suspended in certain circumstances such as when the IRS is considering a request for an installment agreement, an offer in compromise or for innocent spouse relief, or during the period you are exercising your rights to court review and appeal.  Additionally, the collection period will be suspended while you are residing outside the United States for a continuous period of six months or more.  The amount of time the suspension is in effect will be added to the 10-year collection period.  Thus, the IRS has at least 10 years to collect your outstanding tax liability.  Ten years or longer!

IRS Collection Tactics.

The IRS is the most powerful creditor you will ever encounter.  The IRS has broad powers at its disposal to collect taxes that are owed and not paid.

1.  Tax Refund Offset.

The IRS will apply future federal tax refunds that you are due to offset the amount you owe.  Any state income tax refunds you are owed may also be applied to your federal tax liability.

If you have overpaid your taxes for one tax period, but owe taxes for another, the law allows the IRS to apply your refund to reduce the unpaid tax.  However, if you are a non-liable spouse (what the IRS calls an “Injured Spouse”) and the IRS offsets a federal income tax refund belonging jointly to you and your liable spouse, you may request return of your share of the refund.

2.  Federal Tax Lien.

The federal tax lien is a legal claim to your property including property that you acquire after the lien arises and to all your rights to property (such as the accounts receivable of your business).  The federal tax lien arises automatically when you fail to pay the taxes you owe within ten days after the IRS sends you their first Notice of Tax Due and Demand for Payment.

However, the IRS may file a Notice of Federal Tax Lien in the public records. The Notice of Federal Tax Lien publicly notifies your creditors that the IRS has a claim against all your property, including property acquired after the Notice of Federal Tax Lien is filed. The filing of a Notice of Federal Tax Lien will appear on your credit report and will seriously harm your credit rating and affect your ability to get a loan, buy a house or a car, get a new credit card or sign a lease.

Once a lien arises, the IRS generally cannot release the lien until the taxes, penalties, interest, and recording fees are paid in full or until the IRS may no longer legally collect the tax (usually 10 years after the tax is assessed).

However, under certain circumstances the IRS may withdraw a Notice of Federal Tax Lien.  The IRS may withdraw a Notice if:

  • the Notice was filed while a bankruptcy automatic stay was in effect;
  • the Notice was filed too soon or not according to IRS procedures;
  • withdrawal will allow you to pay your taxes more quickly;
  • withdrawal is in your best interest, as determined by the National Taxpayer Advocate, and the best interest of the government.

A tax attorney can help you by making sure the IRS has met all legal requirements for filing its tax lien.   If defects are found, at a tax attorney can appeal the filing of the tax lien.  Additionally, a tax attorney may be able to get the IRS to subordinate its tax lien to another lender.   For instance, the IRS may subordinate its tax lien in order to allow you to refinance the mortgage on your house.  This may enable you to borrow money against your assets to satisfy all or part of the tax lien.

3.   Tax Levy.

The IRS also may use a levy to collect taxes.  A levy is a legal seizure of your property to satisfy a tax debt. The IRS may seize property such as your car, boat, or house for the purpose of selling the property to satisfy a tax debt.  The IRS may levy against assets such as wages, bank accounts, Social Security benefits, retirement accounts, rental income, accounts receivables or commissions.   (We will further discuss wage garnishments and asset seizures in a future blog post.)

There are various reasons why the IRS must or will release a levy or return levied property.  A tax attorney can review the facts of your individual case and determine whether one of these reasons exist.  A tax attorney may assist you in getting the IRS to release the tax levy by entering into an installment agreement or otherwise settle the taxes owed through an offer in compromise.  Additionally, there may exist other relief options available in your case such as innocent spouse or injured spouse relief.

The Point.

The point is that the IRS has a looooong time to collect taxes from you and many tactics at their disposal.  They will not stop chasing you.  Even leaving the country will not help.  They will ruin your credit and latch on to any money or property you currently own or may acquire in the future.   You need to face the problem head on and come to an agreement with the IRS in order to achieve peace of mind.

If you would like to consult with us regarding your options, please contact us.

Muiños & Morales

597 days ago Short URL Comments

IRS Collection Procedures/Liens and Levies

17

Sep

WHY YOU NEED A TAX ATTORNEY TO HELP YOU WITH YOUR IRS TAX PROBLEMS

We love accountants.  They are our homeboys.  However, would you hire your wedding planner to help you with your divorce?   I didn’t think so.

It is true that any “tax professional” can represent you before the IRS.  That includes tax attorneys, accountants, CPAs and what the IRS calls enrolled agents.

Your accountant is highly skilled at preparing your tax returns and knowledgeable about IRS regulations.   He discovered deductions that saved you tons of money.   He doesn’t get angry (well, maybe he does just a little) when you show up to his office with a box full of crumpled up receipts the day before your tax return is due and answers the phone when you call him at 2 a.m. in a fit of panic because you dreamt that he forgot to remit your payroll taxes this quarter.  He knows all the ins and outs of your business and is a trusted confidant.  He knows all your secrets…

A Little Thing Called Attorney-Client Privilege.

Hmm… let’s talk about something you may have heard of called the Attorney-Client Privilege.  Only conversations with attorneys are protected by the attorney-client privilege, which means that, in general, any information you share with your tax attorney cannot be used against you or disclosed to a third party (such as the IRS, the Florida Department of Revenue, or in a court of law).  There is no such guarantee with your accountant – the one who knows all your secrets and is a trusted confidant.  Oh and guess what?!  The IRS can subpoena (i.e., force him) to testify against you in court.   Umm….yeah.

We Have the Code and Know How to Use It. 

The Internal Revenue Code that is.  Your tax attorney (at least the one you really want to hire) should have a specialized degree called an LL.M. (Masters of Law) in Taxation that provided him with the necessary education and training with regard to researching and analyzing the tax laws in relation to your specific factual circumstances.  This “super power” differentiates an attorney from an accountant/CPA/enrolled agent.

The Art of War. 

Most tax controversies involve a significant amount of negotiation.   Attorneys are educated and trained in the art of negotiation, and to advocate on behalf of their clients.   Your tax attorneys are prepared to step into your shoes and be your eyes, ears and voice.  Stay home watching HGTV/Bravo or whatever is on your DVR while we deal with that nasty IRS agent.   We know what to do.  We know what NOT to do.

Besides, what if you really want to fight the IRS tooth and nail and the matter ends up in court?  Your tax attorney would obviously be your go-to guy.

Geez, Just Call Us Already.

If the IRS is chasing you and you’re overwhelmed… If you are forced to take an Ambien each night because you can’t fall asleep worrying that the IRS is going to put a lien on your house, garnish your wages and levy your bank account…  DON’T CALL YOUR ACCOUNTANT.  CALL US.

Muiños & Morales

613 days ago Short URL Comments

Innocent Spouse Relief/IRS Audits/IRS Collection Procedures/Late or Unfiled Tax Returns/Liens and Levies/Payroll Taxes/Tax Debt Relief Solutions/Wage Garnishments

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