I just released a new e-book titled, “Emergency Tactics to Stop the IRS from Taking Your Paycheck.” This is a great manual that will lead you step-by-step through the process of getting the IRS to release your wage levy immediately so you can get your life (and your paycheck) back to normal. Visit the product page to learn more about stopping your IRS wage garnishment and to get immediate access to this excellent resource as well as saving yourself a lot of money on professional fees.
QUESTION:
I set up an installment agreement a couple of weeks ago to pay off my tax liability. I understand that it is going to take a while before my taxes are paid in full, but I thought once I set up the installment agreement, the IRS cannot come and try to levy my wages. I just received an "Urgent" notice stating the IRS is going to levy my wages or bank accounts. HELP!
ANSWER:
You are correct. Once you have an installment agreement set up, as long as it is valid, the IRS cannot levy your wages. What I believe is going on in your case is that the IRS "machine" simply has not caught up with your installment agreement yet. You hear this a lot about organizations as large as the IRS - "the right hand doesn’t know what the left hand is doing." I think that is the case here. You have an installment agreement, but the computers that issues the levy notices and other collection notices do not seem to catch up for a few weeks.
You should feel at ease knowing that as long as you are making your payments on time and you are current the IRS cannot levy your wages. I would recommend that you send a letter back to the IRS office that sent you the collection notice and let them know you have already set up an installment agreement. Remember to always send correspondence to the IRS by Certified Mail, Return Receipt Requested. You should enclose a copy of the letter you received from the IRS confirming your installment agreement as proof. You can also call the 800 number on the notice and speak with someone at the IRS.
Finally, as a disclaimer, I need to do my ethical duty as an attorney and let you know that this blog is meant to provide general tax and legal information and not specific information for your particular situation. Before relying on any tax advice from this site, you should consult a competent tax professional to discuss the specifics of your case.
Question:
I have heard a lot about the federal stimulus package and the government sending out rebate checks to taxpayers. I’m eligible for a payment but I still owe federal income tax from a prior year. Will I still receive my rebate check?
Answer:
The stimulus payment is treated like any other tax refund. This means that part or all of your payment can be used to pay past-due federal or state income taxes or non-tax federal debt such as student loans and child support. So, unfortunately, if you owe any past due income taxes or other non-tax federal debt then the IRS will be reducing the amount of your rebate check. If the IRS reduces your check, they will send you a letter explaining how the stimulus payment was applied.
Last week we listed the Top 5 Reasons Your Offer in Compromise Won’t Be Accepted, and this week we look at the Top 5 Disadvantages to the Offer in Compromise program.
- Having to stay compliant for five years in order for the Offer in compromise to be final. After getting your taxes settled with an offer in compromise, the IRS makes sure you stay compliant for at least five years. If you so much as owe one penny for a particular period, you have breached the offer in compromise agreement and the IRS has the right to revoke your offer in compromise and seek the entire tax liability from you.
- Suspending the Statute of Limitations for the IRS to collect against you. Many people know that the IRS only has ten years from the date of assessment to collect the taxes from you. This statute of limitations is suspended, however, when several events happen. One of those events is an offer in compromise. What does it mean when the statute of limitations is suspended? It means that if it has been five years since the IRS assessed the taxes against you, there are five years left for them to collect. If you file an offer in compromise now and it is being considered for one year, the IRS will still be able to collect against you for five years if your offer in compromise is rejected.
- After the offer in compromise is accepted, the taxpayer loses their opportunity to further contest the amount of the compromised liability in court. This one isn’t quite as bad as the others. If you have an offer in compromise accepted, the you lose the right to contest the original amount they say you owe. If you have an acceptable offer in compromise accepted by the IRS, then keep your nose clean for five years and don’t worry about this.
- The IRS can keep all previous payments. This works against you a couple of ways. First, when you file an offer in compromise you are required to make a down payment or begin making the monthly payments depending on the type of offer in compromise you submit. If your offer in compromise is rejected in the long run, the IRS will be able to keep all of the money you paid in during the review of your offer in compromise - IF the payments were required. I have done a post on what a required offer in compromise payment is before and whether offer in compromise payments are refundable. The second way this bites the taxpayer is that if you are due a tax refund in the year your offer in compromise is accepted, the IRS keeps that money and it is not credited toward the amount you owe for the offer in compromise, but rather it goes against your past due tax liability.
- A taxpayer considering bankruptcy may transform some of their compromised tax into non-dischargeable tax. Filing an offer in compromise may cause a tax liability to become non-dischargeable unless the prescribed time for the taxes having been assessed has expired. If an offer in compromise is submitted, the normal rules that any taxes assessed within 240 days of filing bankruptcy are non-dischargeable is expanded to 270 days plus the number of days the offer in compromise is pending.
While some of the disadvantages may turn out to be big deals down the road if you don’t take care of business after your offer in compromise has been accepted, the benefits to filing an offer in compromise far outweigh the potential disadvantages (at least in my opinion). To learn more about getting a fresh start with the IRS, check out the rest of the tax resolution and offer in compromise blog.
I have many clients who come in with tax problems and they have not filed returns in many years. The first step to getting on the right track with the IRS is to get those returns filed (at least for the last six years). But you say, "how can I file my tax returns when I don’t have copies of my W-2’s and other financial information?"
The answer is, just ask the IRS for that information. You can call the IRS 800 number to get that information, or if you don’t want to spend half of your waking hours on hold with the IRS, you can mail in a request form for the years you need. The form number you need is 4506-T. If you need wage and income information you will just fill out your personal information at the top of the form and, check the block next to number eight requesting Form W-2, Form 1099 series, Form 1098 Series or Form 5498 series transcript. Then under section nine, fill in the years you need this financial information for. For example, if you did not file a 2002 tax return and need that information, you would put 12/31/2002 in the first box.
This procedure will provide you with all of the information you need to get all of the forms your employers, banks, governments would have sent you during those years.
The next problem you are going to run into is not having the proof of your business expenses, etc. Unfortunately, there is no magic form to bring that data back to life.
QUESTION:
I already owe the IRS about $25,000 and I will owe about $4,000 this year. I want to try to get the IRS to settle for less money as soon as possible. Can I include this year’s taxes that I will owe?
ANSWER:
What you are asking is for the IRS to accept an offer in compromise where you offer to pay less than what the IRS says you owe for a full and final settlement of your tax liability. The IRS is required to compromise ALL of your assessed tax liabilities when they agree to an offer in compromise. In your case, however, you are asking that the IRS compromise taxes that you will owe for this year, but they have not yet been assessed because the taxes are not assessed until April 15, 2008. I also like to point out that an offer in compromise is a contract between the taxpayer and the IRS. You, as the taxpayer, agree to stay current with estimated tax payments so you will not owe any additional money each year for at least five years. Even if you file an offer in compromise right now, the IRS will not accept it because you will automatically default on your agreement in April when taxes are assessed and you have a balance due for the current year. If you want to file an offer in compromise immediately, you will need to get your current year taxes paid somehow and get on the right track for next year immediately.