Atkins Law Firm, P. A. » Tax Q&A

Can You Get the IRS To Release A Levy if I Have Unfiled Returns

Tripp — Wed, 04 Mar 2009 03:45:39 +0000

I was recently contacted by someone who just received notice from their employer that their wages were going to begin being garnished by the IRS. Basically, we were on a deadline of the next payday (about 5 days away) to get the levy released before payroll was sent off so the client didn’t see any change in her paycheck.

When we spoke about the case, I thought we were clear that all returns had been filed, but the client just owed the IRS money for a few years. Upon calling the IRS to negotiate the release of the levy, I was informed that there were, in fact, outstanding tax returns that must be filed.

Before the IRS will negotiate with you whether it is to negotiate the release of a wage garnishment or to ask them to accept an offer in compromise, you must have at least the last six years tax returns filed. If you do not, the IRS will not begin to negotiate with you.

I always urge my clients to go ahead and file their tax returns on time every year whether they can afford to pay the tax or not. Why? For two main reasons. First, by filing you immediately avoid the failure to file penalty that the IRS assesses. This can add up quickly. The failure to file penalty is 5% of the tax owed per month up to a maximum of 25%. Yuck!

Second, by filing, you begin the statute of limitations clock running for how long the IRS to collect the tax that you owe. If you never file the clock never starts and you are stuck with the IRS for the rest of your life or until you finally pay off the tax, penalties and interest.

Can the IRS Levy My Wages when I submit an Offer in Compromise

Tripp — Mon, 09 Feb 2009 19:47:58 +0000

When you submit an offer in compromise to the IRS future active collections against you will be stopped and the IRS will not come after you to collect what you owe. The IRS will let you work on trying to get the offer in compromise accepted before they begin levying you. This rule only applies to those collections when you do not already have a levy in progress when your offer in compromise is submitted to the IRS.

Usually, the IRS will release a levy that is in place when you submit an offer in compromise. However, they are not required to and if a levy is already in place it may take several weeks before a release can be obtained. The first thing that has to be done is that we have to wait for the IRS to receive your offer in compromise and we have to receive a letter back from them that states the offer in compromise has been received. This will be our proof to the IRS that an offer has been submitted when we call and request the levy to be released. It usually takes at least 30 days from when we submit the offer in comproimse to receive this letter.

Our first attempt will be to call the collections department of the IRS and ask them to release the levy. This used to be pretty easy; however, in the past several months we have noticed the IRS getting much stricter and not releasing these levies even after the offer in compromise has been received. Technically, they do not have to and they are sticking with this. I have appealed it to their managers and supervisors and have not had any luck. Where we have had some luck is in contacting the Taxpayer Advocate Service in this situation. A levy is supposed to be released when it causes an economic hardship on a taxpayer and that is generally our best argument along with the fact that the offer in compromise has been submitted.

So, if you are receiving collection notices from the IRS and contemplating an offer in compromise, I would recommend that you go ahead and get moving with the offer because once the IRS begins collecting through a levy on your wages it is much more difficult (and definitely not a guaranteed thing) to get released.

IRS Lien Releases

Tripp — Tue, 03 Feb 2009 13:31:45 +0000

QUESTION: I owe the IRS a substantial amount of money, but I do not have any money left over at the end of the month after I pay my bills to be able to afford to pay anything on my taxes. I could refinance my house since the rates are a lot lower now and save a few hundred dollars per month, but the IRS has a lien. Can you help me?

ANSWER: Yes, it is possible to work with the IRS to have the lien either released or subordinated beneath the lender’s mortgage so you can refinance your home. In fact, due to the state of the economy there are some new rules where the IRS is expediting the process of releasing or subordinating liens for taxpayers so they can refinance their homes to take advantage of the low mortgage interest rates. They are especially excited to be able to subordinate a lien when you will be able to take some money out of the equity in your home to pay your tax debt, but that is not always necessary.

What Can I Do to Stop an IRS Levy?

Tripp — Tue, 16 Dec 2008 13:14:39 +0000

QUESTION:
The IRS has placed a levy on my wages. What can I do to stop it?
ANSWER:
Getting the IRS to release a levy is not an easy task. If you act quickly enough there are several ways we can help you prevent a tax levy. The type of action you must take depends on whether the levy is against your wages or a bank account. Although your employer or bank has to withhold funds from you immediately after receiving Notice of Levy, they are instructed to hold the money for 21 days (up to 45 days if you file an appeal). If your wages are levied, you must request a CAP (Collection Appeals Program) hearing within ten days of the levy. This will be decided within five business days. You may also file a Collection Due Process appeal within thirty days of the levy. Even if the levy originates from the Automated Collection System in Philadelphia, we can usually get it released. Generally, an Installment Agreement can be negotiated which results in the levy being lifted. If you miss the thirty-day deadline for an appeal, you can still request an equivalent hearing, but this will take longer. Again there are several avenues we can explore to help you. I will be happy to talk with you about your situation and tell you how I can help. Your initial consultation is free and you will be under no obligation. The sooner you take action, the sooner you can rest easy and cease worrying about those taxes and levies! Please call today for a free consultation. For all of my readers, if you have any legal problems, such as unpaid taxes, real estate, probate, domestic and personal injury matters, I can help. If you need help with any legal matter, please call today for your free consultation.

What Documents Do You Need for an Offer In Compromise?

Tripp — Tue, 09 Dec 2008 13:53:11 +0000

Question: I would like to submit an offer in compromise, but I have heard that the process is similar to an audit and that I will have to provide a lot of documents to the IRS. What kind of information would I have to provide if I file an offer in compromise?
Answer: There are three types of offers in compromise, but the offer based on doubt as to collectability is the most common and is what we will address here. Basically, an offer in compromise based on doubt as to collectability means that you know you owe the taxes, but you do not have the money to pay the taxes to the IRS and you want them to accept a smaller amount. When you file this type of offer you will need to provide a Form 433-A that is a financial document listing all assets that you own and your income and expenses. This form also asks for proof of the values you listed so you will need to provide documents like a recent appraisal of the real estate that you own, Blue Book sheets for your vehicles, three months of account statements from banks and other financial institutions. You also need to provide proof of medical expenses such as doctors’ bills, a printout from the pharmacy showing how much you have spent this year on medications, mortgage statements, and utility bills. This information all has to be sent with your offer in compromise application and usually is required to be updated throughout the offer in compromise process. We would use this information to determine if you qualify for an offer in compromise and the IRS will use the information to determine whether they will accept your offer. If you would like to discuss your case, we offer a free, no obligation consultation. Please call our office today to schedule that meeting. We can also assist you with estate planning, probate and real estate matters. Please call today for your free consultation.

Will I Get My Refund Back?

Tripp — Fri, 05 Dec 2008 14:33:44 +0000

Question: I owed the IRS taxes in 2007 and have set up a payment plan. When I file my 2008 return next year I will be due a refund. Will I get my full refund since I am on a payment plan for my 2007 taxes?

Answer: The short answer is no. Whenever you have a tax liability with the IRS they are going to keep any funds that you are due whether it is from a tax refund or a payment like the recent stimulus check that went out to many taxpayers. The good news is that the money will be applied to your 2007 liability and reduce that so you will not have to make your payments as long.

If you still owe a significant amount for 2007 and you are going to be on a payment plan for several years I would suggest that you adjust your W-4 with your employer so that only your tax liability will be withheld and not extra so you will not be entitled to a refund at the end of the year. That way, the IRS gets only the tax you owe and you keep the money during the year rather than waiting on a refund at the end of the year.

Too Late to File a Return?

Tripp — Wed, 03 Dec 2008 14:25:34 +0000

Question: My son did not file a 2006 income tax return. He earned about $12,000 and taxes were withheld from his income. Is it too late for him to file a return?

Answer: It is not too late to file a 2006 1040 income tax return. If your son were to owe the IRS for taxes then there would be no statute of limitations for the IRS to collect the tax if he did not file a return. However, in your son’s case, it is very likely that due to his income level and that he had income tax withheld that he would be entitled to a refund for some of his income tax that was withheld. In this case it is important that he file this return pretty quickly because you can only get credit for tax returns three years old. That means, that today he could file 2005, 2006 and 2007 and get a refund that would be due to him. 2004 and prior returns would not be given credit and he would not receive a refund.

What Happens to Taxes After Divorce

Tripp — Tue, 02 Dec 2008 14:05:58 +0000

Question:
My mother and father divorced in 2002 and because they filed Married Filing Jointly they owed over $100,000.00 in taxes to the IRS. My mother does not have a job and has never worked outside of the home. My father agreed to pay all of the taxes in the divorce, but now the IRS is trying to make my mother pay. What should she do?
Answer:
Thanks for your question. Unfortunately, since you parents filed jointly they are both individually liable for the entire amount of tax due, and even though your father retained liability for the entire tax amount in their divorce action the IRS does not recognize the divorce decree as removing her liability. There are a couple of ways your mother can negotiate her liability with the IRS. Since she is still not working outside of the home, I would assume that she is receiving some sort of alimony as income. She may be a very good candidate for an offer in compromise. An offer in compromise is an agreement between your mother and the IRS for the IRS to accept less than the tax, interest and penalties due. It is based on your mother’s income, expenses, and realizable equity that she has in her property and there are several methods of arranging the offer in compromise so we can find one that suits your mother best. We also handle estate planning, real estate and probate matters. Please call our office today to set up your free consultation.

How Long can the IRS Collect?

Tripp — Tue, 25 Nov 2008 14:05:57 +0000

Question: I’m paying the IRS tax 1040 for 1997 and 1998. How long do I have to pay theses taxes? Is there a time limit? I thought it was only ten years. Why amd I still paying?

Answer: This is a great question. You are correct, that after you have filed your tax returns and the IRS has assessed a tax against you they can only collect that tax for ten years. That is the collection statute of limitations. So, if you filed your 1997 tax returns on time on April 15, 1998, then the IRS would have assessed those taxes effective April 15, 1998 and if you owed a balance and have been paying on them since 1998 you would have to continue paying through April 15, 2008. The same is true for the 1999 taxes, except that you will have to pay those until April 15, 2009.

In some cases that is the end of the answer. However, you can do certain things that cause the statute of limitations to be put on hold. If you filed bankruptcy, an offer in compromise or filed a collection due process hearing appeal then while those events were taking place or being considered by the IRS the collection statute was placed on hold. That means the ten year countdown stopped and picked back up when the triggering event was over. Need an example? Lets say you decided to file an offer in compromise which you filed on February 1. It was considered for six months and on September 1 your offer was rejected on appeal and the account was returned to collections. On September 1, you account would pick back up counting down the ten years and effectively the statute of limitations was extended by six months.

Now, the question is, how do you know if something has come up or when the taxes were assessed so you can determine when the statute of limitations will expire? You can fill out a Form 4506-T and ask for a Record of Account for the years in question. The Record of Account reads much like a bank statement and is arranged in chronological order so you can see when the tax was assessed and if there were any triggering events like a bankruptcy filing, when the IRS was notified that the bankruptcy was discharged, etc.

Hope this helps answer your question!

Getting On Course After Not Filing Taxes Since 2001

Tripp — Tue, 04 Nov 2008 13:21:46 +0000

Question:I stopped paying taxes in 2001, when my long-time employer bankrupted. I have worked on and off as a sub-contractor since earning about $30K/year but have no assets of value. I’m getting letters from the IRS. What can they do except throw me in jail?

Answer: When you owe the IRS money it can be very intimidating to say the least. They will send you many letters demanding payment and threatening all sorts of things. However, you do not have to worry about going to jail just for owing the IRS – unless you have fraudulently filed your tax returns or if you have been evading the IRS and your tax liabilities. Assuming you have not done those things then we can work with the IRS regarding your tax problems and help you through this tough time.

You stated that you haven’t paid taxes since 2001. I assume that means you have not filed your tax returns since that time as well as not paying the tax due. So your first step should be to file all of your tax returns due since 2001. This should help you out all by itself because when you do not file your tax returns, the IRS will prepare one for you. When the IRS prepares a return for you they do not give you the full benefit of all of the deductions and tax credits that you would be entitled to. So, generally, when you file your own tax returns you will owe less than the IRS says you do.

Next, we would need you to fill out a form 433-A (or B) so we can get an idea of your current financial situation. Depending on your personal financial situation you may qualify for an offer in compromise where you can settle your tax debt for less or we may have to look into other tax problem resolutions such as an installment agreement or possibly even currently not-collectible status.