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Who Files Bankruptcy – The Answer Will Surprise You

by

Steven A. Leahy

Who Files Bankruptcy – The Answer Will Surprise You

By Steven A Leahy

With the Trump Bankruptcies in the news lately, you may be wondering “Who Files Bankruptcy?” The answer may surprise you. Bankruptcy is a Federal Law and is administered by the Federal Court System under the rules of the U.S. Bankruptcy Code. “The primary purposes of the federal bankruptcy laws are to give an honest debtor, either a person or a business, a ‘fresh start’ in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has property available for payment.”

In the first three months of 2016, 201.906 bankruptcy cases were filed nationwide – a vast majority (195,679) were consumer cases. There are 90 Bankruptcy Courts – each a unit of a U.S. District Court. The Northern District of Illinois is comprised of the Eastern and Western Divisions, and has 10 bankruptcy judges. 11, if you count the retired Judge that handles a limited case load. The Northern District of Illinois encompasses 18 counties – with court locations in Chicago, Joliet, Rockford, Lake County and Geneva.

The Northern District of Illinois leads the nation in bankruptcy filings with 47,535 case filings over the 12 month period ending March 2016. That is actually a decrease of 6.6% compared to the previous 12 month period. A recent study revealed the top reason people file for protection under the bankruptcy code is – Medical Bills! The second reason is – Job loss! Both of these reasons may have nothing to do with the person filing bankruptcy.

I help people resolve their IRS problems. As I have mentioned many times – there are only 6 things you can do if you owe the IRS money. One of those six things is bankruptcy. Many of my clients are reluctant to even consider bankruptcy as a remedy. They believe it isn’t morally available to them. They have always paid their debts, and filing bankruptcy would go against that value.

First, often a tax debt includes an unreasonable amount of penalties and interest. A debt that may not hold the same moral obligation as the underlying debt. Second, as I explain to my clients, bankruptcy does not protect you from your moral obligations. Bankruptcy only protects you from some legal obligations. My favorite example is Abraham Lincoln. That’s right Honest Abe sought protection under the bankruptcy laws. You see, he had creditors taking legal action against him after a failed partnership in a General Store.

The Bankruptcy Code protects a person from their creditors. Most creditors are prohibited from collecting on the debt. It does not, however, prevent that person from repaying their creditors if they elect to do so. Honest Abe is a good example of this concept. Once granted legal protection from his creditors, Abraham Lincoln felt he still had moral obligations to repay his creditors. He paid every creditor back. It took some time to accomplish this – but in the end, his creditors were paid.

If you were to seek legal protection from your creditors, like the IRS, you could still repay the debt, at your convenience, should you feel a moral obligation to do so. Maybe you feel a moral obligation to pay the underlying debt, but not the unreasonable penalties and interest. You could do that. The IRS would accept the money!

If you have IRS problems and need the help of a professional to resolve it – I encourage you to call my office. Opem Tax Resolutions and the Law Office of Steven A. Leahy, PC helps taxpayers resolve their IRS problems

IRS Problems: Know Where You Are Before You Can Get Where You Want To Be

by

Steven A. Leahy

Find Out Where You Are So You Can Get Where You Want To Be

By Steven A Leahy

Too often clients come to see me with IRS problems and tell me how to solve their problem. When I ask, how much they owe? How old is the debt? How much is penalties? How much is interest? They don’t have an answer.

How can you know how to solve a problem, if you don’t even understand what the problem is? IRS problems are no different from any other problem. Understanding the problem goes a long way to figuring out how to solve the problem Radio and television ads always push to pay the IRS pennies on the dollars – an offer-in-compromise. So, that’s the remedy clients want. They want to pay pennies on the dollar. The problem is, an offer-in-compromise is NOT the right answer for every case. In fact, putting an offer-in-compromise forward may be exactly the wrong way to solve your IRS problem.

Begin with an Investigation

So, let’s start at the beginning. First learn exactly where you are. Only then can you chart a course to get you where you want to be. To learn where you are, my office completes an complete investigation. The investigation begins by gathering all of the information we can from the IRS. The IRS has account transcripts for every year, wage Transcripts, tax return transcripts, just to name a few. These transcripts contain lots of information about your IRS problem. At my office, we have access to a a propitiatory software package that takes all that IRS information and puts it into a form we can use to understand it.

The report will detail how much you owe; how much is penalties, and how much is interest. The report will analysis the dates of assessments, the number of tolling days, the Collection Statute Expiration Dates, and the important dates concerning the dischargability of taxes in bankruptcy. The report also provides a breakdown of every payment the taxpayer has made and how they were applied. The report will also reveal if the IRS prepared a tax return for the taxpayer (known as a Substitute for Return, or SFR) or if some returns are still unfiled.

Once we know where the IRS puts you, we gather information about your particular financial situation. We gather this information on IRS Form 433. This form collects the taxpayers income, assets, liabilities, income and expenses. Only after we have all this information can we compose a strategy to solve your IRS problems.

The Six Things You Can Do If You Owe The IRS

Remember, there are only six things you can do if you owe the IRS money. You can pay the IRS what they claim you owe. You can enter into one of several kinds of installment agreements. You can submit an Offer-in-Compromise (offer a lump sum settlement). You can have the IRS place you in a Currently not Collectible status (get the IRS to leave you alone for a time without payments). You can seek protection under the bankruptcy code. Or, finally, you can do nothing and let the IRS have their way with you.

Don’t let someone tell you they know how get you where you want to be (solve your IRS problem) – unless they know where you are now. That’s why a complete investigation is so important.

If you are facing IRS Problems, call Opem Tax Resolutions at 312-664-6649. If you mention this blog post, we will complete the first step, the IRS analysis report, for FREE.

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.

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.

Time Limits to IRS Collection Efforts

by

Steven A. Leahy
Time Limits to IRS Collection Efforts

By Steven A Leahy

One of my clients recently experienced a wonderful event. Something he has been waiting a number of years for – an IRS claim for more than $900,000.00 in back taxes, penalties and interest along with the IRS Tax Lien that went along with it, has expired. That means he and his wife can sell their house, free and clear of the IRS claim. Great news!! But to understand this we have to go back to the beginning.

This client ran a company with a number of employees. The manager of the company failed to pay payroll taxes for two quarters. Instead, the manager took that money for himself. The IRS obligation totaled more than $900,000.00! The resulting effects cost my client his business – and a personal tax obligation in the form of the Trust Fund Recovery Penalty for more than $500,000.00.

He battled the IRS for a number of years before he contacted my office. He insisted that an Offer-in-Compromise was his best option. I never reach a conclusion until we gather all the facts and complete an investigation. First thing we did was protected him from IRS collection efforts – so the IRS could not attach his bank account or levy his social security any more. Next, we conducted an investigation and determined the best course of action. He was already 5 years into his battle with the IRS, and he had some equity in his home, that made an Offer-in-Compromise unattractive.

What many don’t know is the IRS has a time limit to collect IRS obligations; a sort of Statute of Limitations. Each tax assessment has a Collection Statute Expiration Date (CSED) – a date after which the government’s right to pursue collection ends. Normally the CSED date is 10 years from the date of assessment of a tax liability.

There are numerous events that can delay, suspend and/or extend the CSED. For example, an Offer-in-Compromise, Bankruptcy, entering a combat zone, moving out of the country and a Collection Due Process Appeal stay the tolling of the CSED, adding time for the IRS to collect. That’s why a full investigation should be completed to deduce the actual CSED date.

For my client, trying to resolve the IRS obligation through other means, such as an Offer-in-Compromise may have worked against him. As it turned out, he was granted Currently Not Collectible status with an outstanding balance at the time of more than $800,000.00! Then he rode out the remaining CSED time. In the interim, the IRS did come back, several years later, and required us to re-establish his Currently Not Collectible Status. But all in all, not a bad result – he walked away from more than $900,000.00 in taxes, penalties and interest.

Now, the IRS can bring an action to collect a tax obligation in court. Once a judgment is entered, the CSED date is no longer applicable. Judgments do not have a statute of limitations. But, in most cases, the IRS does not pursue court action against taxpayers. Court is generally reserved for those egregious cases you may read about in the news. Also, depending on the case, the IRS may ask a taxpayer to waive the CSED date – sometimes that’s a good thing – sometime it isn’t. That should be determined on a case by case basis after consultation with your IRS attorney. That isn’t the kind of decision a taxpayer should make without a complete understanding of the consequences.

So, if you have an IRS problem, you should consult with a local attorney. The strategy you use will make ALL the difference in how your life progresses. Before you do anything, you should give me a call. We can discuss your options, complete your an investigation and determine the best course of action. – 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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