Articles Tagged with IRS collections

Due to the ongoing COVID-19 Pandemic, the IRS has provided relief to taxpayers by extending filing and other deadlines. Now, in an internal memorandum from Fred Schindler the Director of Headquarters Collection (SBSE), the IRS continues to provide relief to taxpayers with tax debt by suspending most tax collection activities. These changes mirror the previous relief provided by the IRS, and restates the relief contained in the People First Initiative.  Our tax litigation attorneys are advising our clients that they can expect enforced tax collection activities to be suspended unless there is an exigent circumstance including the loss of the opportunity for the government to collect taxes due. The expiration of the statute of limitations is one example.

The importance of the memo is that while it mostly repeats and fleshes out the People First Initiative, it is a direct “order” from the head of SBSE Collection to all Collection Executives. The People First Initiative is a bit more nebulous in terms of its actual impact on the activities of rank and file employees.  The collection activities outlined in the memo include most activities related to the collection process such as meeting with taxpayers, filing new Notices of Federal Tax Liens (NFTL), issuing levies, taking or scheduling seizures actions, and pursuing civil suit proceedings. Automated tax levy programs are also suspended. The memorandum also directs Collections not to default installment agreements for missed payments due between April 1 and July 15, 2020 (the suspension period).  Due to the ongoing and ever changing nature of the COVID-19 epidemic in the United States, the IRS may extend the suspension period and the incorporated relief provisions further.

It is important for taxpayers and their advisors to remember that even though collection enforcement activity will be rare from now through July 15th, once the suspension period ends the IRS may begin filing liens and levies with a vengeance. Our tax lawyers are therefore recommending to our clients that, to the extent practicable, they position themselves to take appropriate action to forestall collection after the suspension period ends. This includes submitting offers in compromise, and requesting installment agreements now.

Is There Anything I Can Do to Stop an IRS Wage Garnishment?
It’s best to try to stop a wage garnishment before it happens. If you owe the IRS back taxes and do not have any arguments for why the tax assessment is improper or incorrect, you should consider entering into an installment agreement or negotiating an Offer in Compromise. This will prevent any collection actions—such as a wage garnishment or bank account levy—as long as you fulfill your end of the agreement.

However, you may reach the point where a wage levy is imminent and you don’t have much time to stop it from happening. Fortunately, the IRS is required to give you a Collection Due Process (CDP) notice before initiating a wage garnishment against you.

Stop Wage Garnishment at a Collection Due Process Hearing

What Happens After I Receive an IRS Notice?
The IRS sends taxpayers millions of notices per year. Whenever you receive correspondence from the IRS you should read it carefully and attempt to understand what the IRS is trying to tell you. This can be difficult because some notices are unclear to those who do are not familiar with tax laws or IRS procedures.

IRS notices can be informational, such as when you are notified that your tax return is going to be adjusted. However, you may still disagree with this notice, and you can attempt to take action to dispute the mistake by the IRS.

Other notices will warn you that the IRS is about to take a specific action. This could a Notice of Intent to Levy, which means that the IRS is about to seize some of your assets, including the funds in your bank account or a state tax refund. Another common notice is the Notice of Deficiency, which states that the IRS is planning to assess a tax liability against you, and gives you one last chance to dispute the amount in Tax Court before the IRS begins to collect it.

How Does the IRS Collect FBAR Penalties?
The IRS imposes severe penalties on taxpayers who fail to file a Report of Foreign Bank and Financial Accounts (FBAR). Those who are required to file an FBAR and fail to do so can face the following penalties:

  • a civil penalty not to exceed $12,459 per violation for non-willful violations that are not due to reasonable cause
  • a penalty equal to the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each willful violation

Can the IRS Take My House or Car?
The IRS may seize your real estate, car, or other property to satisfy delinquent tax debt. The IRS will sell your interest in the property and apply the proceeds, after the costs of the sale, to your tax debt.

Before selling your property, the IRS will calculate a minimum bid price. You will be given the chance to challenge the fair market value determination of your property.

Then, the IRS will notify you and the public of the pending sale, and wait at least 10 days before proceeding with the sale of your house or other property. If there is money left over after the costs of the seizure and sale and your tax debt has been satisfied, you should receive a refund.

What To Do When You Receive an IRS Notice
Receiving a notice from the IRS is not something most people look forward to. You may be confused as to what the notice is saying, and afraid of the possible consequences, such as owing substantial back taxes, interest, and penalties.

However, there are two important things to know about most IRS notices:

  1. You may have the right to challenge or appeal the action the IRS is taking, and

Will the IRS Ever Return Seized Property?
The IRS is generally required to send you a notice before levying or seizing your property. You may be able to prevent a levy by timely requesting a Collection Due Process (CDP) hearing, and negotiating a payment plan or otherwise contesting the levy. You have 30 days from the date of the notice to request a CDP hearing.

There are situations where the IRS is not required to send you a pre-levy notice, and can take your property without giving you a chance to contest the levy. State tax refunds can be taken without notice, and the IRS can levy without notice if they believe that collection of the tax is in jeopardy.

There are also other situations where you may not get the chance to contest the levy until after your property has been seized. The IRS sends notices to your last known address, and you may never receive these notices if the IRS does not have your current address. You may also simply be unaware of your CDP rights or the 30-day deadline, and miss your chance to request a CDP hearing. Payroll taxes are also subject to different rules.

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