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IRS Lien vs Levy

February 26, 2015 by admin

Steven A. Leahy
IRS Lien vs Levy

By Steven A Leahy

On the IRS Radio Hour I often talk about the way the IRS works. The most important aspect of how the IRS works goes directly to how the IRS can collect assessed taxes from taxpayers, outside of voluntary agreements, like installment agreements, offers-in-compromise, currently not collectible, and bankruptcy. When a taxpayer ignores, or otherwise fails to negotiate a work out with the IRS, the IRS may take some drastic actions. The most dramatic action is a levy. This article will clear up IRS Lien vs Levy.

Many taxpayers confuse a levy and a lien. A federal tax lien is the federal government’s legal claim against a taxpayer’s property when a taxpayer neglects or fails to pay a tax debt. The IRS files a public document, the Notice of Federal Tax Lien, with the county recorder to alert the taxpayer’s creditors that the federal government has a legal right to the taxpayer’s property. A lien does not result in seizure of any of the taxpayer’s property.

A federal levy, on the other hand, is a legal seizure of a taxpayer’s property to satisfy a tax debt. If a taxpayer fails to pay the assessed tax, or make satisfactory arrangements to settle the debt, the IRS may seize any type of asset, real or personal.

There is a three-pronged procedure in place the IRS must follow in order to justify a levy. First, after the IRS assesses a tax, they must send a Notice and Demand For Payment. Second, the taxpayer must neglect or refuse to pay the tax. Finally, the IRS must send the taxpayer a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. The Taxpayer has 30 days from the date of that notice to request a Collection Due Process hearing with the Office of Appeals.

Once the IRS fulfills their obligations under the three-pronged procedure, they can seize any property the taxpayer is holding (including, cars, boats, houses), or any property someone else is holding (wages, retirement accounts, bank accounts, rental income, accounts receivables, cash value of life insurance or commissions).

In my practice I have seen levies against rental income – the revenue officer actually visited the taxpayer’s tenants each month to collect the rent before the taxpayer could collect; levies against insurance payments due a doctor – the IRS ordered all insurance carriers to send all payments to the IRS; levies on commissions – the IRS contacted the contract employer and levied, took, all commissions the taxpayer was due. A Taxpayer should never under-estimate the creativity of an IRS Revenue Officer looking to levy assets to collect on an IRS obligation.

The two most common levies involve bank accounts and wages; low hanging fruit. Remember, a bank must report any interest paid of at least $10.00 with form 1099-int. So, the IRS knows where most every taxpayer banks. Once a bank receives a Notice of Levy, the taxpayer’s account is frozen – the bank must hold any money in the account, up to the amount you owe, for twenty-one days. After twenty-one days the bank must send the money, plus interest, to the IRS. Any money deposited in the account after the date of levy, is NOT included in the levy. However, the IRS can issue more than one levy on the same account. I have seen accounts levied each week for months on end.

Finally, the levy most taxpayer’s fear is the wage levy. A wage levy is often referred to as a wage garnishment. The IRS issues a wage levy to the taxpayer’s employer, and the employer is obligated to send all net income, less exemptions, to the IRS CONTINUOUSLY. The more a taxpayer makes, the more the IRS will take. Generally, the exemptions are calculated by determining the standard deduction and the amount deductible for exemptions on an income tax return for the year the levy is served, divided by Fifty-two. The exempt income is designed to provide minimal sustenance – not enough to pay your expense. To do that, the taxpayer must work out an agreement with the IRS.

If you are facing IRS Collection Efforts, you should work with a local law firm that understands the IRS Collection procedures and will work to get you the best deal possible. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: IRS Radio Hour Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

IRS Audits – What are they looking for?

February 26, 2015 by admin

Steven A. Leahy
IRS Audits – What are they looking for?

By Steven A Leahy

The IRS calls an audit an “Examination of Returns.” The IRS accepts most federal tax returns just as they are filed. Some returns, however, are selected for review. The IRS selects returns for audit by computerized screening, random sample, or by an income document matching program. An examination can take place in several ways. Some audits are handled exclusively by US Mail, in the taxpayer’s home or place of business, at an IRS office or at your representative’s office. The time, place, and manner of the audit are negotiable.

Here are nine “red flags” the IRS uses to select a return to audit:

1. Make a mistake on your tax return – Gross errors will bring immediate scrutiny to your return and cause the IRS to audit your return. Simple math errors, not signing a paper return, leaving off or incorrectly listing your social security number are common ways to invite IRS scrutiny.

2. Round off the entries on your tax form – Generally, life doesn’t happen in round numbers. If you use round numbers, it tells the IRS that the numbers may be fictitious, or at least not accurate.

3. File late, or not at all – When you file late, the return is not processed with the hoard of annual filers. Instead, your return will be processed by a person, looking at the details of your return.

4. Be a Tax Protester – Tax protesters don’t believe the IRS has legitimate authority to collect taxes and they thumb their nose at the IRS by filing returns that indicate zero tax owed (if a tax protester files a return at all). Tax protestors can count on the IRS assigning a revenue agent to review it.

5. Have unreported Foreign accounts – Foreign banks have been reporting American account holders to the IRS for some time now. So, even if you don’t report the foreign account, you can be assured that the foreign financial institution will.

6. Don’t report some income – Companies are to issue a 1099 for any payments over $600.00 or W-2s to employees. So, if you don’t report some income, the company that paid you will likely report the payment in a 1099 or W-2 and the IRS will have the paperwork to match against your return.

7. Claim large charitable contributions – This is an easy target for the IRS. The IRS can simply audit you by mail and ask for substantiation for all deductions.

8. Take a repeated loss on a home based business – If a business loses money for 3 out of 5 years, the IRS considers that activity to be a hobby, not a business. If it is a hobby, you can only deduct losses equal to or less than income. You can’t use the losses in a hobby to offset taxes from other income.

9. Use an unscrupulous tax preparer – When the IRS notices a specific tax preparer is preparing returns that generate large refunds the IRS is likely to audit ALL the taxpayers who used that tax preparer. So, be careful whom you hire.

Generally, the IRS has three years from the due date to audit a return. That explains why the IRS will usually conduct an audit for three consecutive years, rather than just one. There are exceptions to the three year rule. For example, if you underreport your income by more than twenty-five percent, the IRS has six years to audit. And, if a taxpayer files a fraudulent or false return, there isn’t a time limit on an audit.

So, if you are facing an IRS audit, or have already been audited, you should work with a local law firm that will work to get you through the audit process and collections in the best way possible. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: IRS Radio Hour Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

IRS – Taxpayer Bill of Rights

December 8, 2014 by admin

Steven A. Leahy
IRS – Taxpayer Bill of Rights

By Steven A Leahy

In June of 2014 the National Taxpayer Advocate, Nina Olson, announced the new “Taxpayer Bill of Rights.” Turns out, this initiative was merely a list of already existing rights – The right to be informed, the right to be assisted, the right to be heard, etc. Ms. Olson thought it important that this list of existing rights be supplied to taxpayers because “taxpayers overwhelmingly do not believe they have any rights.”

The “real” Taxpayer Bill of Rights (TBOR) are three pieces of legislation creating never before existing rights. Known as Taxpayer Bill of Rights I, II and III, these new laws were passed between 1988 and 1998, after nearly 20 years of Congressional Hearings. These changes to the tax are “[p]erhaps the most significant tax legislation in the history of tax administration.” This article will review those three historic pieces of legislation and the changes to the tax law each implemented.

Before 1988, the IRS pretty much had free reign for seizures and liens. “Without a court order, the tax code allows them the power to completely wipe out a bank account, attach almost an entire paycheck, and seize almost anything of value.” For example, the IRS only had to provide a 10 day notice before seizing property. The 10 day period didn’t give taxpayers enough time to raise money to pay the IRS. The result was – lots of seizures. Also, the only way to appeal an IRS decision was after you paid the tax the IRS insisted you owed – even if it turned out they were wrong.

The 1988 Congress passed the Technical and Miscellaneous Act of 1988, now known as the Taxpayer Bill of Rights 1 (TBOR 1). TBOR 1 was a modest first step. Senator Mark Prior, then chairman of the Senate Sub-Committee on Oversight of the IRS, introduced TBOR 1 and strongly supported it passage. He said “[this law] will stem the abuse of taxpayers by the IRS and provide redress when abuse does occur. It marks a victory for the little taxpayer. It levels the playing field.”

There are some Highlights of TBOR 1. It created the position of ombudsman, with the authority to stop certain IRS actions against taxpayers. Created an installment agreement option. But only required the IRS to “fairly consider the request.” The taxpayer was granted the right to assistance of a tax professional – an attorney, CPA or enrolled agent. Also permitted the taxpayer to stop an interview or audit to get advise of a tax professional. TBOR 1 also increased the time of Notice of Levy from 10 days to 30 days and created the right to audio record most meetings with the IRS.

Taxpayer Bill of Rights 2, or T2, was signed into law on July 30, 1996. T2 did not replace TBOR1, it merely supplemented it. T2 created a process to formally appeal liens, levies and seizures through the IRS Appeals Office, created to be totally independent of the collections department. The appeals office can stop these actions if the IRS collectors did not follow the correct procedures. T2 also created additional notice requirements for IRS actions relating to the Trust Fund Recovery Penalty, joint liabilities of married and divorced persons, and how the IRS applies credits. Finally, T2 made it easier for a court to award attorney fees and court costs to taxpayers who battle the IRS in court.

The biggest changes happened with the Internal Revenue Service Restructuring and Reform Act of 1998, better known as the Taxpayer Bill of Rights 3 (TBOR 3). The biggest changes involved IRS collections activities and the individual rights of each taxpayer. TBOR 3 created Innocent Spouse relief, the Offer-in-Compromise, required supervisor permission for any lien, levy or seizure, limited the IRS ability to seize a residence, created the right to a Due Process appeals in all IRS collections actions, release of levies if there is a determination that the tax obligation is currently not collectible, increased the dollar amount of exemptions to levy and garnishment actions. There were also changes to interest rates, and penalties applied while in an installment agreement, and disallowed interest and penalties without at least yearly notice.

The Tax Payer Bill of Right 1 – 3 has turned out, less then expected – there is still room for improvement. But we are worlds apart from where we were before TPBR. If you owe the IRS money, or have unfiled returns these changes can help you. To find out, you should give me a call. We can discuss 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.

Filed Under: Uncategorized Tagged With: “Tax Relief Chicago”, Chicago Tax Help, currently non collectible, Help With IRS, IRS Lien, IRS problem, Offer in Compromise IRS, tax attorney chicago, tax resolution chicago

IRS Installment Agreement: Making Payments to the IRS

June 19, 2014 by admin

Steven A. Leahy

IRS Installment Agreement: Making Payments to the IRS

By Steven A Leahy

In Chicago and Considering An Installment Agreement as a Solution to Your IRS Tax Problem? You have several options for dealing with a tax problem with the IRS. An Installment Agreement is one of them. In this video we’ll tell you what an Installment Agreement is and information on it works.

An installment Agreement is just what it sounds like… You agree to pay your tax Debt to the IRS in a monthly payment. There are some restrictions on installment agreements, but many times this is a good option for both businesses and individuals who owe taxes to the government.

There is a downside though; if you owe alot in taxes, the required payments on the installment plan can quite often be very high and can interfeer with paying your monthly bills. In addition, you may still be subject to interest and penalties on the debt that you owe.

The good news is: It is possible to negotiate lower payments with the IRS. To determine if this option is good for you, and to discover other strategies on how you can break free from the IRS and reclaim your life, Call Opem Tax Resolution – The Law Office of Steven A. Leahy, PC (312) 664-6649. Call to schedule your FREE 1 hour Consultation!

Filed Under: Uncategorized Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

What is Compliance And Why Is It Important?

June 19, 2014 by admin

Steven A. Leahy

What is Compliance And Why Is It Important?

By Steven A Leahy

When I meet with new clients I often begin our discussion on how our office goes about resolving tax issues by writing “Compliance” at the top of the screen in BIG letters. Compliance, to the IRS, means complying with all tax obligations – payment compliance; filing compliance; and reporting compliance. Filing compliance refers to filing of tax returns. Reporting compliance refers to accuracy of the filing. Finally, payment compliance refers to the payment of the reported taxes.

In order to resolve a tax problem the taxpayer must be in filing compliance. In addition, if the taxpayer is a 1099 employee or self-employed, the taxpayer must be in payment compliance, at least for the current year. That means that any unfiled returns must be filed, and any quarterly payments must be paid, before the IRS will agree to stop any collection efforts. The IRS will generally begin collection efforts by sending notices, applying a previous tax year’s refund to tax due, filing liens and, finally, seizing your property and assets.

If a taxpayer receives a Notice of Levy on Wages, Salary, and Other Income and has unfiled returns and/or unpaid quarterly payments, it will be very difficult to stop the levy before the taxpayer can get into compliance. That is why it is so important to work to resolve your tax problems before levies are issued. If you ever receive Form CP 297 – Notice of Intent to Levy and Notice of Your Right to a Hearing you need to act immediately – that may be your last chance. So, OPEN ALL MAIL YOU RECEIVE FROM THE IRS.

The Notice of Intent to Levy and Notice of Your Right to a Hearing is a form that alerts the taxpayer that the IRS intends to begin taking assets from them – normally it begins with bank accounts and wages. The notice will include the balance due, and the taxpayer’s right to appeal that action. You must request an appeal (Collection Due Process) within 30 days from the date of the Notice of Intent to Levy and Notice of Your Right to a Hearing. If the appeal is filed within the 30 days, IRS collection efforts are stopped while the appeal is pending. The appeal will give the taxpayer an opportunity to get into compliance and work out a resolution with the IRS.

Compliance is also important once a resolution has been reached. If a taxpayer is granted an Installment Agreement, Offer in Compromise or Currently Not Collectible status, part of the agreement between the IRS and the taxpayer is for the taxpayer to remain in compliance with all tax obligations going forward. That means the taxpayer can’t be late filing future returns – an extension is NOT compliance – all taxes must be paid in a timely manner. The tax reported on your tax return and all quarterly payments must be paid as they come due. If a taxpayer defaults on that agreement, the IRS will cancel the agreement and begin collection efforts again, taking the taxpayer right back where they left off.

So, if you are facing IRS problems, you should work with a local law firm that will work to get you in compliance with IRS tax obligations AND help you stay in compliance after you reach a resolution. You should give me a call – Opem Tax Resolutions & The Law Office of Steven A. Leahy, PC (312) 664-6649. Call NOW to set up your FREE Consultation.

Filed Under: Uncategorized Tagged With: “Owe Taxes”, back taxes, Chicago Tax Help, Help With IRS, IRS Levy, IRS Lien, irs options, IRS Options Help, IRS problem, IRS Tax Debt, Offer in Compromise IRS, Tax Debts, Tax Help Chicago, tax options Chicago, Tax Problem Help, tax resolution, taxes and bankruptcy

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