Here is the transcript of an online chat that I recently had with a concerned taxpayer regarding the possibility of an Offer in Compromise...
Benjamin: I have one year unfiled tax return with nearly 20,000 dollars in tax debt to the irs. I'd like someone to review all of it and see if an offer in compromise is available and set up a payment plan for all years owed.
Brent: Hi Benjamin. Thank you for contacting us. I'd be happy to review all of your information and see if an offer in compromise is a possible solution for you.
Brent: Which year is unfiled?
Benjamin:last year only. all other years are filed. i have about 12 000 dollars in back taxes from other years. I have a payment plan set up but i owe 8000 (about) from last year. It's because I fell on hard times and changed my deductions on my pay check.
Brent: Okay. So the additional 8,000 owed is from 2008 right?
Benjamin: yes
Benjamin: which is unfiled.
Brent: do you have an extension to file?
Benjamin: no
Brent: Okay. The first thing we would need to do is to file that return so that we can either renegotiate a new payment plan or if possible apply for an offer in compromise.
Brent: I will tell you that an offer in compromise is very difficult to get approved by the IRS. Only 24% are accepted by the IRS each year. However we will always take a look to see whether or not you're a candidate for it.
Benjamin: i got you well honestly i'd like it all.. the whole debt moved into one payment plan. I'm back on my feet so I know the irs will keep any tax over payment so i know that will go directly to what i owe.
Brent: Right. What we need to do in order to determine what options you have and what type of payment plan we could negotiate is to go through a list of financial questions with you.
Brent: Is that something we could do over the phone for you?
Benjamin: Yes. I cannot call right this moment. Is there anyway you could email me your company information so that i can call.
Brent: Absolutely. My name is Brent and I'm a Tax Consultant here so you can call me directly and we can go through it together. My contact details are...
Brent: Direct Line: 336-369-5423 or Toll Free 877-477-2873 ext 4401, Email- bpilson@effectur.com
Brent: I'll be here until 9pm Eastern Time tonight so I will look forward to hearing from you.
Benjamin: ok great. thanks. have a good day.
Brent: Thank you for contacting me. You have a good day as well!
Go ahead! Contact me today.
Tuesday, June 30, 2009
Did you make a mistake on your 2008 tax return?
If you've made a mistake on a return you've already filed, you'll need to file an ammended return to fix it. If you've claimed a deduction you shouldn't have, you should pay careful attention to fixing the error as soon as possible. If you don't correct it and the IRS catches your mistake, you can get hit with an underpayment penalty. Below is information from the IRS website regarding an ammended return. This information can also be found by copying and pasting the link below it.
Topic 308 - Amended Returns
If you discover an error after your return has been mailed, you may need to amend your return. The service center may correct errors in math on a return and may accept returns with certain forms or schedules left out. In these instances, do not amend your return! However, do file an amended return if your filing status, your income, your deductions or credits were incorrect.
Use Form 1040X (PDF), Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (PDF), Form 1040A (PDF), Form 1040EZ (PDF), Form 1040EZ-T, Form 1040NR (PDF), or Form 1040NR-EZ (PDF). If you are filing to claim an additional refund, wait until you have received your original refund (you may cash that check). To avoid penalty and interest, if you owe additional tax for a current year amended return, file Form 1040X and pay the tax by April 15 of the current year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. The Form 1040X Instructions list the addresses for the service centers.
File a separate Form 1040X for each year you are amending. Mail each form in a separate envelope. Be sure to enter the year of the return you are amending at the top of Form 1040X. The form has three columns. Column A shows original or adjusted figures from the original return. Column C shows the corrected figures. The difference between Columns A and C is shown in Column B. There is an area on the back of the form to explain the specific changes being made and the reason for each change. Attach any forms or schedules that are affected by the change. Generally, to claim a refund, Form 1040X must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date.
Attach copies of any forms or schedules that are being changed as a result of the amendment including any Form(s) W-2 received after the original return was filed.
Tax forms can be obtained by calling 800–829–3676 or visiting www.irs.gov
Normal processing time for Forms 1040X is 8 to 12 weeks from the IRS receipt date.
Please Note: Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency.
http://www.irs.gov/taxtopics/tc308.html
Topic 308 - Amended Returns
If you discover an error after your return has been mailed, you may need to amend your return. The service center may correct errors in math on a return and may accept returns with certain forms or schedules left out. In these instances, do not amend your return! However, do file an amended return if your filing status, your income, your deductions or credits were incorrect.
Use Form 1040X (PDF), Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (PDF), Form 1040A (PDF), Form 1040EZ (PDF), Form 1040EZ-T, Form 1040NR (PDF), or Form 1040NR-EZ (PDF). If you are filing to claim an additional refund, wait until you have received your original refund (you may cash that check). To avoid penalty and interest, if you owe additional tax for a current year amended return, file Form 1040X and pay the tax by April 15 of the current year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. The Form 1040X Instructions list the addresses for the service centers.
File a separate Form 1040X for each year you are amending. Mail each form in a separate envelope. Be sure to enter the year of the return you are amending at the top of Form 1040X. The form has three columns. Column A shows original or adjusted figures from the original return. Column C shows the corrected figures. The difference between Columns A and C is shown in Column B. There is an area on the back of the form to explain the specific changes being made and the reason for each change. Attach any forms or schedules that are affected by the change. Generally, to claim a refund, Form 1040X must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date.
Attach copies of any forms or schedules that are being changed as a result of the amendment including any Form(s) W-2 received after the original return was filed.
Tax forms can be obtained by calling 800–829–3676 or visiting www.irs.gov
Normal processing time for Forms 1040X is 8 to 12 weeks from the IRS receipt date.
Please Note: Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency.
http://www.irs.gov/taxtopics/tc308.html
If someone owes money to the IRS and then dies, what happens to the debt?
If someone dies and owes money to the IRS, the Executor (the person who takes responsibility for the deceased person's estate) is then responsible for collecting and arranging for payment of debts of the estate (not with their own money though!).
It is the money in the estate that must be used to pay off the person's debt. If, however, the deceased person does not have any money in the esate to be able to pay off the tax liability, the debt DOES NOT transfer to the Executor UNLESS there was a joint liability with the deceased (if the Executor is the widow or widower of the deceased, and the two had filed joint returns, the liability will be assessed to the Executor). Otherwise, the Executor will need to contact the IRS, provide a death certificate and evidence that the estate is unable to pay off the liability. The debt should then be canceled once and for all.
For information on claiming a refund for a deceased person, you'll need to file a Form 1310. You can visit the following link to the IRS website for more information:
http://www.irs.gov/taxtopics/tc356.html
It is the money in the estate that must be used to pay off the person's debt. If, however, the deceased person does not have any money in the esate to be able to pay off the tax liability, the debt DOES NOT transfer to the Executor UNLESS there was a joint liability with the deceased (if the Executor is the widow or widower of the deceased, and the two had filed joint returns, the liability will be assessed to the Executor). Otherwise, the Executor will need to contact the IRS, provide a death certificate and evidence that the estate is unable to pay off the liability. The debt should then be canceled once and for all.
For information on claiming a refund for a deceased person, you'll need to file a Form 1310. You can visit the following link to the IRS website for more information:
http://www.irs.gov/taxtopics/tc356.html
Friday, June 26, 2009
Pennies on the Dollar?
The Truth about an Offer in Compromise...
According to the IRS an Offer in Compromise (OIC) is “an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement”.
The IRS goes on to state that “in most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses”.
There is a lot of talk about Offers in Compromise and many tax resolution companies have been successful gaining clients by advertising, “pennies on the dollar” by settling through the Offer in Compromise program. The IRS warns taxpayers to beware of these claims as I've posted in a previous blog below.
The reality is that over 75% of OICs are rejected each year by the IRS. Part of the reason for this is that the reasonable collection potential or RCP, is not at all what most people would consider “reasonable”.
The IRS sets a standard of living for the county in which you live. For example, they may set a standard of $950 for housing and utilities for your county. If your housing and utilities cost $1100, the IRS will accuse you of living above the standards, spending excess money so that you can live a lavish lifestyle. In the eyes of the IRS, that $150 over the standard that you’re spending should be going to pay off your tax liability. Of course it doesn’t make sense to you because you know that you’re not living a lavish lifestyle, and that if you were in fact only spending $950 for housing and utilities that you’d be living in a low-income, dangerous neighborhood with drug attics and high crime. This doesn’t matter to the IRS though, because their only goal is to collect from you what is theirs.
Besides this, there are a number of other things that can disqualify you from getting an OIC approved. Many clients I’ve spoken to, with the recent changes in the economy, have become unemployed and want to try to settle their tax liability with an OIC. The problem in many cases is that if an individual has a decent education and had a good paying job a year ago and has the future potential to get another good paying job, it wouldn’t make sense for the IRS to settle with that person. If they settle with him or her just because the person has been unemployed the past year, and then in another few months that person finds a new job and begins making decent money, the IRS is out of luck because they’ve already settled the debt! And believe me, they’re much more intelligent and cautious with granting OICs than to make that mistake.
So you might be wondering who is a good candidate for an Offer in Compromise? An ideal candidate is someone who either doesn’t have any income or doesn’t have an income beyond what is necessary to cover the basic “standard” living expenses set by the IRS. This person would not have any assets or any accessible equity. Their income in the past several years should not be significantly higher than what it presently is, nor should they have a reasonable potential to begin making more money in the future. In many cases an ideal OIC candidate is either disabled or retired so that they’re not in a position where they could begin making more money sometime in the future.
The IRS will be very thorough in investigating all of these things and more before granting an OIC. Any tax resolution company should be equally thorough before offering this service to a client. Effectur Inc is the only tax resolution company that offers a money back guarantee on its fee to file an OIC for a client.
The following link to the IRS website provides more information on the three types of OICs as well as payment options available to those whose requests are accepted.
http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
According to the IRS an Offer in Compromise (OIC) is “an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement”.
The IRS goes on to state that “in most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses”.
There is a lot of talk about Offers in Compromise and many tax resolution companies have been successful gaining clients by advertising, “pennies on the dollar” by settling through the Offer in Compromise program. The IRS warns taxpayers to beware of these claims as I've posted in a previous blog below.
The reality is that over 75% of OICs are rejected each year by the IRS. Part of the reason for this is that the reasonable collection potential or RCP, is not at all what most people would consider “reasonable”.
The IRS sets a standard of living for the county in which you live. For example, they may set a standard of $950 for housing and utilities for your county. If your housing and utilities cost $1100, the IRS will accuse you of living above the standards, spending excess money so that you can live a lavish lifestyle. In the eyes of the IRS, that $150 over the standard that you’re spending should be going to pay off your tax liability. Of course it doesn’t make sense to you because you know that you’re not living a lavish lifestyle, and that if you were in fact only spending $950 for housing and utilities that you’d be living in a low-income, dangerous neighborhood with drug attics and high crime. This doesn’t matter to the IRS though, because their only goal is to collect from you what is theirs.
Besides this, there are a number of other things that can disqualify you from getting an OIC approved. Many clients I’ve spoken to, with the recent changes in the economy, have become unemployed and want to try to settle their tax liability with an OIC. The problem in many cases is that if an individual has a decent education and had a good paying job a year ago and has the future potential to get another good paying job, it wouldn’t make sense for the IRS to settle with that person. If they settle with him or her just because the person has been unemployed the past year, and then in another few months that person finds a new job and begins making decent money, the IRS is out of luck because they’ve already settled the debt! And believe me, they’re much more intelligent and cautious with granting OICs than to make that mistake.
So you might be wondering who is a good candidate for an Offer in Compromise? An ideal candidate is someone who either doesn’t have any income or doesn’t have an income beyond what is necessary to cover the basic “standard” living expenses set by the IRS. This person would not have any assets or any accessible equity. Their income in the past several years should not be significantly higher than what it presently is, nor should they have a reasonable potential to begin making more money in the future. In many cases an ideal OIC candidate is either disabled or retired so that they’re not in a position where they could begin making more money sometime in the future.
The IRS will be very thorough in investigating all of these things and more before granting an OIC. Any tax resolution company should be equally thorough before offering this service to a client. Effectur Inc is the only tax resolution company that offers a money back guarantee on its fee to file an OIC for a client.
The following link to the IRS website provides more information on the three types of OICs as well as payment options available to those whose requests are accepted.
http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
Thursday, June 25, 2009
Did you forget to file your taxes?
If you forgot to file your return this past year and you know that you’re going to owe money to the IRS, it is in your best interest to file as soon as possible to avoid failure-to-file penalties. The IRS may file the return for you, which will never be in your favor. This is called an SFR- Substitute for Return. If you don’t pay what you owe, keep in mind that on top of interest charged, you’ll also have to pay failure-to-pay penalties, which can very quickly add hundreds or even thousands on top of what you owe.
Of course you may be in a situation where it is not necessary to file a return. The questions below, which come directly from the IRS website, will help you determine if you need to file a Federal Income Tax return.
Keep in mind that in many cases you may be eligible for a refund, so though it is not required that you file, it is in your best interest so that you can receive the refund.
To determine if you need to file a Federal Income Tax return for 2008 answer the following questions, also found on the IRS website at this link:
http://www.irs.gov/individuals/article/0,,id=96623,00.html
Occasionally, individuals have one-time or infrequent financial transactions that may require them to file a Federal Income Tax return. Do any of the following examples apply to you?
• Did you have Federal taxes withheld from your pension and wages for this tax year and wish to get a refund back?
• Are you entitled to the Earned Income Tax Credit or did you receive Advance Earned Income Credit for this tax year?
• Were you self-employed with earnings of more than $400.00?
• Did you sell your home?
• Will you owe any special tax on a qualified retirement plan (including an individual retirement account (IRA) or medical savings account (MSA)? You may owe tax if you:
o Received an early distribution from a qualified plan
o Made excess contributions to your IRA or MSA
o Were born before July 1, 1937, and you did not take the minimum required distribution from your qualified retirement plan.
o Received a distribution in the excess of $160,000 from a qualified retirement plan.
• Will you owe social security and Medicare tax on tips you did not report to your employer?
• Will you owe uncollected social security and Medicare or Railroad retirement (RRTA) tax on tips you reported to your employer?
• Will you be subject to Alternative Minimum Tax (AMT)? (The tax law gives special treatment to some kinds of income and allows special deductions and credit for some kinds of expenses.)
• Will you owe recapture tax?
• Are you a church employee with income in wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security or Medicare taxes?
If you're still unsure of whether or not you need to file, contact a Tax Professional, or look further on the IRS weblink provided above.
Of course you may be in a situation where it is not necessary to file a return. The questions below, which come directly from the IRS website, will help you determine if you need to file a Federal Income Tax return.
Keep in mind that in many cases you may be eligible for a refund, so though it is not required that you file, it is in your best interest so that you can receive the refund.
To determine if you need to file a Federal Income Tax return for 2008 answer the following questions, also found on the IRS website at this link:
http://www.irs.gov/individuals/article/0,,id=96623,00.html
Occasionally, individuals have one-time or infrequent financial transactions that may require them to file a Federal Income Tax return. Do any of the following examples apply to you?
• Did you have Federal taxes withheld from your pension and wages for this tax year and wish to get a refund back?
• Are you entitled to the Earned Income Tax Credit or did you receive Advance Earned Income Credit for this tax year?
• Were you self-employed with earnings of more than $400.00?
• Did you sell your home?
• Will you owe any special tax on a qualified retirement plan (including an individual retirement account (IRA) or medical savings account (MSA)? You may owe tax if you:
o Received an early distribution from a qualified plan
o Made excess contributions to your IRA or MSA
o Were born before July 1, 1937, and you did not take the minimum required distribution from your qualified retirement plan.
o Received a distribution in the excess of $160,000 from a qualified retirement plan.
• Will you owe social security and Medicare tax on tips you did not report to your employer?
• Will you owe uncollected social security and Medicare or Railroad retirement (RRTA) tax on tips you reported to your employer?
• Will you be subject to Alternative Minimum Tax (AMT)? (The tax law gives special treatment to some kinds of income and allows special deductions and credit for some kinds of expenses.)
• Will you owe recapture tax?
• Are you a church employee with income in wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security or Medicare taxes?
If you're still unsure of whether or not you need to file, contact a Tax Professional, or look further on the IRS weblink provided above.
Wednesday, June 24, 2009
Certified Letters from the IRS?
If you're receiving certified letters from the IRS, it is definitely in your best interest to carefully read these letters and respond quickly. These letters may mean that you are in the Automated Collection System (ACS) of the IRS. The ACS is a computerized collection process which communicates with taxpayers who owe money to the IRS, which is a problem you should never ignore.
If you've been receiving certified letters but have not yet picked them up, don't be deceived into thinking that the problem will go away. Whether you read the letters or not, the IRS will continue to send them and will not wait for your response before they take action to collect from you.
As far as the process involved, after the IRS sends out a series of letters stating the amount that you owe them, asking for payment within 10 days to avoid penalties and interest, the ACS will begin sending out collection letters. The first of these certified letters is the CP504 which says “Urgent,” and states their intention to levy on your assets.
If you don’t take action at this point, you’ll soon receive another letter, Letter 1058, stating a “Final Notice of Intent to Levy”. If you do not take action within 30 days of the date on the letter, the IRS will begin to levy on your assets and will file a lien against you.
It is extremely important to contact a Tax Professional before you begin to get these collection letters. If you are already receiving certified letters from the ACS, a Tax Consultant can still help you resolve the matter and possibly prevent the levies. Remember that the IRS can levy against your bank accounts and/or your paycheck. For w-2 employees, the IRS can take up to 85% of your paycheck. For 1099 employees, they can levy 100%!
To read more about levies see my entry below titled, “Can I get my levy released?”.
Additionally, below is information directly from the IRS website regarding levies. I’ve also copied the link to this webpage at the bottom.
From the IRS...
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance,
We [the IRS] could seize and sell property that you hold (such as your car, boat, or house),
or
We could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).
We usually levy only after these three requirements are met:
We assessed the tax and sent you a Notice and Demand for Payment;
You neglected or refused to pay the tax; and
We sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. We may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. Please note: if we levy your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.
You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice. Some of the issues you may discuss include:
You paid all you owed before we sent the levy notice,
We assessed the tax and sent the levy notice when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
We made a procedural error in an assessment,
The time to collect the tax (called the statute of limitations) expired before we sent the levy notice,
You did not have an opportunity to dispute the assessed liability,
You wish to discuss the collection options, or
You wish to make a spousal defense.
At the conclusion of your hearing, the Office of Appeals will issue a determination. You will have 30 days after the determination date to bring a suit to contest the determination. Refer to Publication 1660, Collection Appeal Rights (PDF), for more information. If your property is levied or seized, contact the employee who took the action. You also may ask the manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the Office of Appeals.
If we levy your wages, salary, or federal payments, the levy will end when:
The levy is released,
You pay your tax debt, or
The time expires for legally collecting the tax.
If we levy your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve any issues about account ownership. After 21 days, the bank must send the money plus interest, if it applies, to the IRS. To discuss your case, call the IRS employee whose name is shown on the Notice of Levy".
http://www.irs.gov/businesses/small/article/0,,id=108341,00.html
If you've been receiving certified letters but have not yet picked them up, don't be deceived into thinking that the problem will go away. Whether you read the letters or not, the IRS will continue to send them and will not wait for your response before they take action to collect from you.
As far as the process involved, after the IRS sends out a series of letters stating the amount that you owe them, asking for payment within 10 days to avoid penalties and interest, the ACS will begin sending out collection letters. The first of these certified letters is the CP504 which says “Urgent,” and states their intention to levy on your assets.
If you don’t take action at this point, you’ll soon receive another letter, Letter 1058, stating a “Final Notice of Intent to Levy”. If you do not take action within 30 days of the date on the letter, the IRS will begin to levy on your assets and will file a lien against you.
It is extremely important to contact a Tax Professional before you begin to get these collection letters. If you are already receiving certified letters from the ACS, a Tax Consultant can still help you resolve the matter and possibly prevent the levies. Remember that the IRS can levy against your bank accounts and/or your paycheck. For w-2 employees, the IRS can take up to 85% of your paycheck. For 1099 employees, they can levy 100%!
To read more about levies see my entry below titled, “Can I get my levy released?”.
Additionally, below is information directly from the IRS website regarding levies. I’ve also copied the link to this webpage at the bottom.
From the IRS...
A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your debt), the IRS may seize and sell any type of real or personal property that you own or have an interest in. For instance,
We [the IRS] could seize and sell property that you hold (such as your car, boat, or house),
or
We could levy property that is yours but is held by someone else (such as your wages, retirement accounts, dividends, bank accounts, licenses, rental income, accounts receivables, the cash loan value of your life insurance, or commissions).
We usually levy only after these three requirements are met:
We assessed the tax and sent you a Notice and Demand for Payment;
You neglected or refused to pay the tax; and
We sent you a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy. We may give you this notice in person, leave it at your home or your usual place of business, or send it to your last known address by certified or registered mail, return receipt requested. Please note: if we levy your state tax refund, you may receive a Notice of Levy on Your State Tax Refund, Notice of Your Right to Hearing after the levy.
You may ask an IRS manager to review your case, or you may request a Collection Due Process hearing with the Office of Appeals by filing a request for a Collection Due Process hearing with the IRS office listed on your notice. You must file your request within 30 days of the date on your notice. Some of the issues you may discuss include:
You paid all you owed before we sent the levy notice,
We assessed the tax and sent the levy notice when you were in bankruptcy, and subject to the automatic stay during bankruptcy,
We made a procedural error in an assessment,
The time to collect the tax (called the statute of limitations) expired before we sent the levy notice,
You did not have an opportunity to dispute the assessed liability,
You wish to discuss the collection options, or
You wish to make a spousal defense.
At the conclusion of your hearing, the Office of Appeals will issue a determination. You will have 30 days after the determination date to bring a suit to contest the determination. Refer to Publication 1660, Collection Appeal Rights (PDF), for more information. If your property is levied or seized, contact the employee who took the action. You also may ask the manager to review your case. If the matter is still unresolved, the manager can explain your rights to appeal to the Office of Appeals.
If we levy your wages, salary, or federal payments, the levy will end when:
The levy is released,
You pay your tax debt, or
The time expires for legally collecting the tax.
If we levy your bank account, your bank must hold funds you have on deposit, up to the amount you owe, for 21 days. This holding period allows time to resolve any issues about account ownership. After 21 days, the bank must send the money plus interest, if it applies, to the IRS. To discuss your case, call the IRS employee whose name is shown on the Notice of Levy".
http://www.irs.gov/businesses/small/article/0,,id=108341,00.html
Thursday, June 18, 2009
Can I get my levy released?
If you currently have a wage or bank levy in place, you do have options to deal with it. Getting a levy released requires working with the IRS to negotiate a complete resolution to deal with your liability. In some situations though, a levy can be released due to documented financial hardship.
As a Tax Professional part of what I do is to advise clients as to whether or not they would qualify for financial hardship as the IRS defines it. Also important to consider is the type of levy in place. The type of levy will determine the ability to have the levy released, partially released or not released at all.
Wage Levy: this type of levy is sent to the taxpayer’s employer and can garnish the employee’s wages up to 85% of the take home pay. This is a continuous levy but can be released once negotiations take place.
Retirement Income Levy: similar to a wage levy, except the IRS only garnishes 15% of the take home pay. An example would be a levy on Social Security income. Again this is a continuous levy which can only be released after an arrangement is made with the IRS.
Bank Levy: a one-time levy that secures the funds in a bank account, up to the amount owed by the debtor. Most bank levies are highly unlikely to be released.
Accounts Receivable Levy: normally a levy for business owners or Form 1099-MISC recipients. This can prevent employers from paying 1099 employees any amount of money. In other words, in this case, up to 100% of the pay can be taken! For business owners, it is important to act quickly to resolve the situation so that the business isn’t forced to close due to lack of funds.
Keep in mind that states can also issue wage and bank levies and often these are much more difficult or even impossible to have released. You should do everything possible to avoid them. Some states require that wage levies remain in place until the entire liability has been paid, regardless of whether or not the debtor has made arrangements to pay or has negotiated a solution.
As a Tax Professional part of what I do is to advise clients as to whether or not they would qualify for financial hardship as the IRS defines it. Also important to consider is the type of levy in place. The type of levy will determine the ability to have the levy released, partially released or not released at all.
Wage Levy: this type of levy is sent to the taxpayer’s employer and can garnish the employee’s wages up to 85% of the take home pay. This is a continuous levy but can be released once negotiations take place.
Retirement Income Levy: similar to a wage levy, except the IRS only garnishes 15% of the take home pay. An example would be a levy on Social Security income. Again this is a continuous levy which can only be released after an arrangement is made with the IRS.
Bank Levy: a one-time levy that secures the funds in a bank account, up to the amount owed by the debtor. Most bank levies are highly unlikely to be released.
Accounts Receivable Levy: normally a levy for business owners or Form 1099-MISC recipients. This can prevent employers from paying 1099 employees any amount of money. In other words, in this case, up to 100% of the pay can be taken! For business owners, it is important to act quickly to resolve the situation so that the business isn’t forced to close due to lack of funds.
Keep in mind that states can also issue wage and bank levies and often these are much more difficult or even impossible to have released. You should do everything possible to avoid them. Some states require that wage levies remain in place until the entire liability has been paid, regardless of whether or not the debtor has made arrangements to pay or has negotiated a solution.
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