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Why You Must Think Twice Before You Refinance Your Home To Pay The IRS…

by

Steven A. Leahy

Why You Must Think Twice Before You Refinance Your Home To Pay The IRS…

By Steven A Leahy

The housing market is making a come back! That is good news for home owners. It may also be good news to taxpayers. Here’s why. There are only Six Things You Can Do If You Owe the IRS. The first is to Pay the IRS what they claim you owe. I often tell clients it is better to owe anyone else instead of the IRS. The IRS has vast powers of collections. Powers other creditors do not have. Powers like liens and levies. The IRS can take you stuff without a court order!

With the value of property increasing, homeowners may be able to tap into that equity to resolve IRS problems. There is a catch. If you wait too long the IRS will file a lien. The lien covers all your property – everything you own, AND, everything you will own. If you try to refinance after the lien has been filed, the IRS will have a superior right to your property. In real estate law, that is known as “First in Time, First in Right.” Meaning, the IRS lien would pre-date a new loan, so the new loan would be a second lien. Mortgage Companies aren’t likely to give you a loan if they have take a position behind the IRS. There is another problem too. Once the IRS files a lien against you, your credit score is likely to plunge at least 80 to 100 points! Ouch!

The first problem can be solved by paying the IRS in full out of the proceeds of the refinance. You can ask the IRS to provide you a Payoff letter for the closing. If the IRS is paid in full, the lien will be released and the Title Company will insure over the IRS Claim.

But what if the refinance won’t pay the IRS in full? In that case, you can work with the IRS to subordinate their claim to the new mortgage. Subordination is when one party agrees to let another party jump in front of them in order of liens. That way your new mortgage will be in front of the IRS and more likely to agree to fund the loan.

Problem solved, or is it. Remember, the lien will clobber your credit score. So, even if the IRS will release the lien after refinance, or agree to a second position, your new credit score may prevent any mortgage company from providing a loan.

To work around this we may be able to use the new program under the IRS Fresh Start Initiative. This new program allows some taxpayers to have the lien Withdrawn completely, not just released. If the IRS agrees to Withdraw the lien, you can have the lien information REMOVED from your credit report! Like it never existed! A lien Release does NOT have the same effect. Once a lien is released, the blemish on my credit report remains, and continues dragging down your credit score. I have seen a lien Withdraw have a near instant increase in credit scores by 80 – 100 point. The increase in the credit score makes the refinance work, at a much lower interest rate, solving the IRS problem.

In order to get the IRS to Withdraw their lien, you have to follow all the IRS procedures. And it may take some months to accomplish. But it can work. If you are looking to resolve your IRS problem any you have equity in your home, this may be your solution.

Let’s find out. Call me, Attorney Steven A. Leahy and I will provide you with a free in office consultation to review your situation and see it this program is right for you. Call me, the Chicago IRS Answer Man at 312-664-6649 and let us resolve your IRS problem for good.

IRS Telephone Scams

by

Steven A. Leahy
Beware IRS Telephone Scams

By Steven A Leahy

The biggest news about the IRS lately is really NOT about the IRS. I receive at least 5 calls a week about the “IRS” contacting taxpayers and telling them they are under investigation, or about to be sued or about to be arrested because the owe the IRS money and haven’t paid.

These calls are SCAMS – it isn’t the IRS calling! That is NOT how the IRS works. They will NEVER take a payment over the phone, or accept iTune cards as payment. That’s right, iTune cards. I was on David Hochberg’s Home Sweet Home Chicago Radio show last week to address these scams. You see, David received a call himself. We had previously addressed this issue on his show, so he knew it was a scam. He played along to see where it led.

Initially, the caller told him she could not help him – it was too late. But, with a little questioning, said she could talk to her supervisor to see if they could resolve the matter without having him arrested. Sure enough! If he went to Walgreens, CVS or Rite Aid and purchased around $3000.00 in gift cards, the “IRS” would not arrest him. The gift cards are also known as, get this, iTune cards! So, the caller told him to call back when he had the iTune cards and read the numbers on the back of the card.

As silly as this sounds, it WORKS. There wouldn’t be the number of scam calls as there are if there weren’t vulnerable taxpayer’s out there falling for it. The ONLY reason the scam works is the public is scared to death of the IRS and will do just about anything to avoid being a target.

Now, on rare occasions the IRS will call taxpayer. But they will NEVER ask for payment in this manner. If you EVER receive a call from the IRS, or someone claiming to be from the IRS, tell them you need to speak with your attorney, then hang up the phone. Immediately call my office for advise. If you need help, we are the firm to help. But, if you don’t, we will let you know that for FREE.

So, if you have ANY IRS questions, Call me, Attorney Steven A. Leahy at 312-664-6649. I am the Chicago IRS Answer Man.

Chicago Parking Ticket Amnesty

by

Steven A. Leahy
Chicago Parking & Red Light Ticket Amnesty

By Steven A Leahy

Here is some information you probably haven’t heard – The City of Chicago has Parking & Red Light Ticket Amnesty program in effect right now! The last time they had this offer was in 2008 (they also had one in 2002 & 2005). But don’t blink, or the program will be over. Also, it doesn’t cover ALL tickets. But the program does include other fines too, like city taxes and other fines imposed by the Department of Administrative Hearings..

So, here is the nuts and bolts: The Chicago Debt Relief Program of 2015 began November 15, 2015 and runs through December 31, 2015. To be eligible for relief, the ticket must have been issued BEFORE January 1, 2012 AND not part of a payment plan or pending legal action from the City.

To take advantage of the program simply pay amount due on the ticket, less the penalties, interest and collection costs before December 31, 2015. The tickets must be paid in full in order to qualify for the program. You can pay all outstanding tickets, or just one ticket, what ever you can afford. If you can’t pay in full, you can set up a payment plan – But the amount due reverts back to the original amount due.

The City of Chicago has Parking & Red Light Ticket Amnesty program has a short life span and limited applicability – But, it is better than nothing.

If you have questions about debt issues, including IRS, Credit Card, Mortgage Foreclosures or collection actions, call me at Opem Tax Resolutions and The Law Office of Steven A. Leahy, PC at 312-664-6649. I am here to help!

If You Have An IRS Tax Lien – Avoid This Common Mistake Or You Could Regret It Forever!

by

Steven A. Leahy
If You Have An IRS Tax Lien – Avoid This Common Mistake Or You Could Regret It Forever!

By Steven A Leahy

Today I received an email from my friend David Hochberg, the mortgage specialist, asking questions about IRS Tax Liens. I checked my past blog posts, and did not find an article about IRS Tax Liens. So, I thought that I would correct that oversight.

One of the IRS’s collection tactics is filing a tax lien. An IRS tax lien is the government’s legal claim against a taxpayer’s property when a tax debt exists. The lien protects the government’s interest in all your property – what you own now, and what you will own in the future.

A lien automatically comes into existence if a taxpayer fails to pay taxes after receiving the first bill. To publish a lien the IRS files a Notice of Federal Tax Lien with the county where the taxpayer lives. The purpose of the tax lien is to alert creditors that the government has a legal right to your property. IRS tax liens have a detrimental impact on credit scores and limit the taxpayer’s ability to get credit. Taxpayers have a right to appeal the IRS tax lien, called a Collection Due Process hearing. But there are strict time limits to a right to appeal. So, if you receive a Notice of Federal Tax Lien, take action.

Once there is an IRS tax lien, there are several ways to get rid of the lien. The most obvious way to release a lien is to pay the tax debt in full. The IRS must release your tax lien within 30 days after the tax debt has been paid.

If a taxpayer can demonstrate that it is in the government’s best interest to reduce the impact of the tax lien on the taxpayer the IRS may Discharge the property, Subordinate the government’s interest to another creditor or withdraw the tax lien.

A discharge removes the lien from specific property. This option is useful for taxpayers seeking to sell property with a lien attached. If a taxpayer has an IRS tax lien and sells their home, the IRS tax lien remains on the property, unless the lien is paid in full or the IRS agrees to discharge the property from the IRS tax lien. The discharge removes the lien from that specific asset, while maintaining the lien on all other of the taxpayer’s property. This allows the property to pass to the buyers without the IRS tax lien attached. Without discharging the lien, the property is nearly impossible to sell.

Subordination of the lien is a process whereby the IRS allows a creditor to take a superior position over the IRS claim. Subordination is used when a taxpayer wants to refinance or obtain a loan using the property as collateral. Generally, lenders will not loan money on property when the IRS has a tax lien. The old adage: first in time, first in right applies here. If the taxpayer is seeking to borrow money, either through a refinance or a new loan, that will not pay the IRS in full, the IRS may agree to take a second position behind the new lender in order to allow the loan to come to fruition.

A “withdraw” removes the Notice of Federal Tax Lien from public record. The “withdraw,” however, does not release the tax lien or the taxpayer’s obligation to pay the debt. A taxpayer may convince the IRS to withdraw a Notice of Federal Tax Lien if:

The taxpayer’s tax obligation has been satisfied and the taxpayer remains in compliance for the past three years – that means all tax returns and estimated tax payments; or,

A taxpayer owes less than $25,000.00. Has an installment agreement in place with direct debit payments that have been on time for at least 3 consecutive payments, the installment agreement will full pay the IRS obligation and the taxpayer is in full compliance.

A tax lien remains on your credit report for seven to ten years, even after the taxes have been paid in full. However, since 2011, under the IRS Fresh Start Program, a taxpayer can remove the tax lien from their credit report, but it doesn’t happen automatically. The taxpayer must apply using IRS form 12277 “Application for Withdrawal of Filed Form 668 (Y), Notice of Federal Tax Lien.”

If you have an IRS tax lien and are looking to resolve your tax problems, you should find out what your options are. Before you do anything, you should give me a call. We can discuss your all your options. Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Veterans Property Tax Exemption Illinois

by

Steven A. Leahy
Veterans Property Tax Exemption Illinois

By Steven A Leahy

Finally, Illinois legislators proposed a bill that I think everyone can agree. Senate Bill 107 (SB 107) provides tax relief for disabled veterans. This bill sailed through the Illinois house and senate without opposition. That’s right, both chambers voted unanimously to pass this bill and Governor Rauner signed it. So, this bill recently became the law of the land. It’s about time the men and women who have given so much for our country are given some form of relief.

SB 107 (Veterans Property Tax Exemption Illinois) creates a multi-tiered set of exemptions from local property taxes for Illinois homeowners who have a service connected disability. The tiers are based on the U.S. Department of Veterans Affairs certification of disability. If a veteran has been certified as at least 30 percent disabled but less than 50 percent, that veteran would qualify for an annual property tax exemption of $2,500.00. If the veteran is certified as least 50 percent disabled, but less than 70 percent, that veteran would qualify for an annual property tax exemption of $5,000.00. And finally, if a veteran is certified to have a disability of 70 percent of greater, “the property is exempt from taxation.”

Understanding property taxes is almost impossible in Illinois. Determining the property tax is dependant on three factors – The assessed value less exemptions (Adjusted Value), multiplied by the tax rate. The assessed value depends on the market value of the property and determines your share of all the taxes paid in your neighborhood. Our sample Vet has a property worth $180,000.00 with an assessed value of $80,000.00.

Next we subtract allowed exemptions from the assessed value, which gives us the Adjusted Value. This is how it works. SB 107 allows exemptions, the first tier grants an exemption of $2,500.00. Veterans in the first tier can deduct $2,500.00 from the assessed value of their property – in addition to any other exemptions they may be eligible for (e.g. homestead, senior citizens, etc.). The second tier may deduct $5,000.00 and the final tier is totally exempt from all property taxes.

Our sample Vet is certified 51% disabled and eligible for the second tier exemption, or $5,000.00. In addition, let’s assume our sample Vet can subtract another $6,000.00 automatic owner-occupancy exemption and perhaps a senior citizen exemption of $4,000.00 (the maximum senior citizen exemption in Illinois). Added together, this veteran would be eligible for $15,000.00 in exemptions. In our example, an accessed value of $80,000.00 less the exemptions of $15,000.00, or an Adjusted Value of $65,000.00.

Finally, we multiply that Adjusted Value by the tax rate of that neighborhood. Our sample Vet lives in Cook County and faces a tax rate of 9.964%. Tax rates differ by communities, depending on all the local governments providing services in your neighborhood. Taxing bodies include municipalities, School Districts, Park Districts, Sanitary Districts, and libraries (there may be others).

Veteran is certified second tier disabled, total exemptions of $15,000.00 with a total Adjusted Value of $65,000.00, multiplied by the tax rate of 9.964%, for a tax bill of $6,476.60, compared to the property tax bill without the SB 107 exemption of $6,974.80. Our sample Vet would realize a total savings of $498.20.

There are nearly 28,000 veterans with service related disabilities in Illinois. This new law (Veterans Property Tax Exemption Illinois) will help those veterans – and we should all be grateful to the veterans and this new law that recognizes their contributions to all of us. If you have questions about how this new law can work for you call Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

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